India, home to 1.4 billion people, has become self-reliant over the past few decades when in two of the three basic necessities of life -- food and clothing. But when it comes to the third basic need, shelter, the country is still lagging. With rapid urbanisation in recent decade, a trend which is likely to intensify over the next decade-and-a-half, the need for housing looks set to rise. The early signs are already visible as India's major urban centres are witnessing a surge in home sales, implying the potential beginning of an up-cycle in housing.

Various factors indicate that housing stands to gain in the times ahead. So, for a savvy investor, housing as a theme emerges as a promising investment opportunity which is worth considering given the opportunities the sector offers at this stage. Moreover, the current reasonable valuations given the muted gains from land and buildings since 2013 has led to time-correction of physical assets further making the sector attractively valued.

Apart from this, following are some of the growth drivers for the housing sector:

Population Growth:

India's population is expected to grow till 2050 to over 1.7 billion. It simply means more houses would be required. Also, a rising trend of nuclear families may further push the demand for homes.

Also read: Residential property demand revival propels fresh housing supply by 43% across 6 cities: Report

Urbanisation: Against the world's average of 54 percent, the urban population in India is merely 35 percent. Even relative to emerging economies like Indonesia (57 percent), China (61 percent) and Brazil (87 percent), India lags far behind. This indicates there is immense potential in rise in urban population. The driving force behind this trend is access to higher education, un-remunerative agriculture and infrastructure development.

Over the last decade, India's urban population grew at 3.4 times the growth in rural population. This is estimated to accelerate at over fivefold in the next decade. From the current 400 million, urban population is expected to hit 525 million by 2025 and 600 million by 2036.

Government Push: The government's focus on affordable housing under the ambitious Pradhan Mantri Awas Yojana (PMAY) is an attempt to provide housing for all. For the current fiscal, the allocation under PMAY has increased 75 percent to Rs 48,000 crore against Rs 27,500 crore in the previous financial year. Further, capex for infrastructure development has been substantially raised to Rs 7.5 lakh crore from Rs 5.54 lakh crore. These stimulating factors are likely to boost the housing sector.

Also read: Affordable housing finance cos' loan books may grow 17-20% in FY23: ICRA

Demography: India's strong demography is favourable for housing growth. The country is expected to enjoy a higher working population and lower dependent population over the next three decades. This implies a rise in household income. The impact of favourable population demography is likely to support the housing theme in the coming years.

Demand outpacing supply: The surge in housing sales across seven major Indian cities by a whopping 113 percent signifies a recovery in housing cycle. It also indicates that the oversupply situation of 2008-12 in real estate sector is being digested as demand dwarfed supply since 2017. The trend may lead to less pressure in real estate prices which would act as a catalyst for housing theme.

Easy finance amid low penetration: India's low penetration of mortgage loan segment which is a mere 10 percent of the nominal GDP against 30-90 percent of its global peers suggests the vast growth potential available. The easy finance availability coupled with historically low housing loan rates may play a vital role in increasing the mortgage loan segment which in could drive the housing demand.

Also read: Share of affordable segment in total housing sales falls to 43% in 2021: Report

Wealth fffect and affordability: Real estate is no longer perceived as the elite's choice. The substantial increase in earnings capability among individuals has made housing affordable to masses.

The accumulative benefits of all these factors will push India's real estate to new highs. The sector is estimated to surpass the $500 million mark by 2025 and cross the $1 trillion mark by 2030. It is worth noting that housing is a broad theme which fuels growth of several other sectors like cement, steel, electrical goods, paints, pipes, sanitary wares, tiles, housing finance, education and pharmaceuticals, among others.

In a nutshell, the housing theme is set to throw numerous investment opportunities which should be capitalised upon through the ICICI Prudential Housing Opportunities Fund. The fund aims into invest in all those sectors which stand to gain from the uptick in housing cycle. In effect, this fund is a single point investment wherein an investor can make the most of the revival in housing cycle.

— The author, Pankaj Ladha, is Founder, InvestAajForKal. Views expressed in this article are personal.