If you read NAMO’s election manifesto and also listen to his speeches and that of his top brass, you will find that he/ they repeatedly talk about the great “100 cities” plan. It is clearly his/ their pet project. Knowing NAMO, there is not much time spent before conceptualizing an idea on the drawing board and implementing it at the ground level.
There is potential of great profit in this for us. So, we should understand the concept and how to profit from it.
What Is NAMO’s 100 cities idea?
Nobody explains the concept better than NAMO himself in the embedded youtube video. NAMO believes that urbanization is the path to progress. He sees it as a great opportunity to send the GDP growth soaring. His dream is that unlike the present congested cities that we live in, there must be well planned and self-contained cities with the “walk-to-work” concept. There should also be a network of smaller “satellite” cities surrounding a mega-city. All cities should be connected with high-speed trains and buses etc. There should be affordable housing for the masses.
(You can see another impressive speech of NAMO where he talks about the new Green, White, Saffron & blue revolutions that he will implement for India, which includes the 100-cities concept.)
The other ministers in the Government are also beginning to talk the same language. M.Venkaiah Naidu, the Urban Development Minister, made it clear that his main agenda was to provide affordable housing to the people in the next five years.
Naidu also referred to NAMO’s concept of building 100 smart new cities in the country. He said, “The smart cities will have better facilities, better connectivity and better environment. And then, we will also create twin cities wherever possible like say Hyderabad-Secunderabad. Satellite towns will also be our priority.”
Also, there is clamour amongst State Governments to implement the 100-cities concept. Naya Raipur in Chattisgarh is the first integrated township of the 21st century and wants to be included in NAMO’s flagship project of developing 100 new modern cities.
What’s In This For Us?
To understand the implications of NAMO’s vision, we have to turn to Milind Sarwate, member, Strategy-Management Centre, DHFL.
Milind Sarwate has pointed out that this is a very significant development for the industry. He explained that the size of the housing finance industry today is about Rs 8 lakh crore and that there is already a giant opportunity available. With the 100 cities idea, there will be a quantum expansion of the demand. Assuming a population of about five lakh per city and household ratio of five people per household, there will be 1 lakh new households for every city. That is about one crore new households coming up. Also, as people move into these houses they would also vacate their second ones creating a secondary demand. All of this will create a very significant force multiplier for the entire real estate and housing industry, he added.
What stocks to buy?
NAMO gave a hint of this in the youtube video. It is clear that all segments of the economy will benefit. One can load up on stocks of real estate, cement, steel etc.
Pathik Gandotra of Dron Capital Advisors was emphatic that “real estate as a pack will do exceptionally well over the next two-three years and one should be invested in real estate”.
He also picked Sintex Industries as a stock to buy because it has ready-to-fit projects & monolithic constructions which can be implemented in a very short span of time.
Personally, I think the best way to play this is to load up on the housing finance stocks. Repco Home Finance and Dewan Housing are the best placed. Dewan appears to be well prepared if you go by their decision to open 100 branches across the Country (See also Why We Need To Grab A Chunk Of Housing Finance Stocks Soon).
How soon will the action start?
There is not much time left. The Union Budget for 2014-15 is expected to be presented by 11th July.
It is almost certain that big-ticket announcements regarding housing/ low-cost housing and various subsidies etc will be made in the Budget as part of implementation of the 100-cities plan. When that happens, you can be sure that real-estate and housing finance stocks will be on fire and fly into orbit.
So, it is best to position ourselves in advance in our chosen stocks before the action starts.