Real estate has been a major contributor to the economic growth of India and this is very much evident from the estimated fact that it contributes 6.3% to the total GDP.
India is a developing country. Since independence India has come a long way in terms of development in various sectors. Among various sectors that contribute to the economy of India, the real estate sector is one such sector which has flourished tremendously in last decade. It is said that after agriculture, real estate sector is the backbone of the country and is slated to grow 30 per cent over the next decade.
The growth of the real estate sector and its downfall both affects the economy of the country. Therefore, to ensure uniformity in growth of the sector, the government keeps a proper track of the development in this sector. And every year, new policies and laws are made and implemented by the government in order to bring in growth in the real estate sector.
As per various government sources, the size of the Indian real estate market was around USD 16 billion in 2006 and it is estimated to reach USD 90 billion by 2015, growing at a CAGR (Compound Annual Growth Rate) of 21% during this period . Further, it is expected to touch USD 180 billion by 2020, registering a CAGR of around 19% from 2006 to 2020.
Factors responsible for the growth of the real estate sector
The growth in infrastructural development is the biggest sign of growth in the real estate sector. And to initiate this growth many private developers have joined hands with the government. Many projects are undertaken and are on its way to completion.
The demographic factor
With the increase in population the demand for residential and commercial properties increase. And seeing the rapid growth in India’s population it is the need of the hour. And with this increase in population, the employment opportunity has also increased, thereby giving rise to the demand for office spaces.
India’s current GDP is approximately 8%, which is making the country highly attractive for investors across the globe. A rise in per capita GDP signals growth in the economy and tends to increase the productivity. Thereby hinting a substantial rise in the purchasing power of an individual. The economy of the country is still dependent on agriculture but only 17 per cent. However, the service sector has picked up in recent years and now accounts for 57 per cent of the GDP, while the industry contributes 26 per cent.
The driving factor for real estate sector
Most importantly, the initiatives being taken by the Government, Financial Institutions and the Real Estate Development companies are majorly responsible for the development of this sector and these are being discussed below:
Various initiatives taken by government for the real estate sector
1. The Real Estate (Regulation and Development) Bill, 2013
This bill is an inventive step to protect the interest of consumers, in order to promote transparency in real estate transactions, timely implementation of the planned projects, maintain uniformity in the growth of real estate sector and help quick settlement of disputes related to the properties.
The Bill also contains provisions of registration of real estate projects and registration of real estate agents with the Real Estate Regulatory Authority. It is expected that this Bill will reduce the rate of fraudulent activities and delays. And thereby ensuring a great responsibility towards the customers.
2. Housing for all by 2022
This scheme was introduced with a view to provide affordable housing for all. The basic features of the scheme are:
Promotion of affordable housing for weaker section through credit linked funding.
Affordable housing to be provided in partnership with Public and Private Sectors.
Subsidy for beneficiary-led individual house construction or enhancement.
Slum rehabilitation of slum dwellers with participation of private developers using land as a resource.
3. Make in India
It is an initiative to strengthen India’s manufacturing sector, which currently account for less than 30% of the economy. And thereby creating job opportunity in the sector for skilled and unskilled labours. This will ensure a high growth in share of office space occupancy.
Real Estate was one of the first categories that embraced digital way. Digitalisation in some ways added to smoothness in the real estate sector and transparency in a business that was mostly grey. The websites gave buyers everything that they wanted, such as- the site plans, proposed look, amenities, exact location, development around that area and much more.
5. Smart Cities
This initiative is taken to provide better opportunities to improve lives. Basically to create cities that can provide employment opportunities for a large number of residents.
Apart from these, there are other initiatives taken in order to attract more domestic and foreign investors.
Reserve Bank of India has come out with different concessional schemes. For increasing the growth graph of real estate sector, RBI has given banks the authority to plan out new schemes that will benefit this sector.
Increase in the share of FDI. In reality projects, 100% FDI is allowed but through automatic route, which has increased the amount of investors.
The ULCRA i.e. Urban Land Ceiling and Regulation Act has been repealed by various states thereby bringing in hike in the real estate sector.
The minimum area that can be developed in terms of integrated townships has been reduced to 25 acres from 100 acres. This has greatly helped the developers in making more profits and thus augmenting the real estate growth.
Funds for the urban development has increased, hinting a substantial growth in the real estate sector in near future.
The changing face of Indian realty
The Indian real estate sector is one of the highest investment sector of the country. And is one of the highest contributor to the Indian economy. Today, the changing trends and development has led to the growth of the sector. Some of the major factors contributing to the growth of this sector are as follows:
Increase in the rate of Foreign Direct Investment (FDI): The Increase in the rate of foreign direct investment up to 100 %, led to the boom in investment and development activities of the country. Today, the real estate sector of India is the fifth largest sector for foreign investment, and third most popular real estate destination among emerging economies. The huge investment opportunities and high returns on investment has attracted many foreign real estate investment companies including private equity funds, pension funds and development companies. Apart from this, the real estate sector also saw the arrival of many domestic realty players.
Improved corporate environment: With increased investment opportunities there was a substantial increase in corporates and MNCs thronging the Indian realty market. This has increased the demand for office space and thereby an increase in commercial property sector. This has also provided better employment opportunities to the people of India and thus helping in the overall growth of the Indian economy and subsequently in the growth of the real estate.
Enhanced purchasing power of an individual: With the increase in GDP rate the purchasing power of an individual also increases, and hence more demand for residential properties. The time has changed, people now prefer to buy a home than to stay in a rented apartment. And this led to a rise in demand for luxurious homes with world class amenities.
Accessing loans is easier: With lucrative interest rates and other offers offered by various banks, availing home loans is no more a difficulty. Today, loans have become accessible even for a person belonging to a middle class income group. And this has therefore led to the growth of the real estate sector of the country.
Growth in Indian economy: India is the fastest growing economy and it is the third most popular real estate destination among emerging economies of the world. The growth of the economy directly influences the real estate sector of the country. There is an increase in the demand for commercial, residential and industrial properties of various developed cities like: Delhi NCR, Mumbai, Kolkata, Hyderabad, Chennai, Bangalore and Pune.
Increase in the non-resident investors: Seeing the growth rate in the realty sector, lots of NRIs are attracted to invest in India. It is expected that the sector will incur more non-resident Indian (NRI) investments in both the short term and the long term.
Demand for industrial and manufacturing sector: The demand for an industry is dependent on the availability of labour, natural resources and infrastructure. India has abundant natural resources with availability of low cost labours. This factor of the country has attracted not only domestic investors but also foreign investors. Thereby leading to a sharp rise in demand for industrial sector. The government’s initiative of Make in India and a rise in the retail business has generated enormous demand for warehousing and logistics space. There are plans to start many projects and many projects are undertaken to overcome the infrastructural deficiency of the country. It is expected that in next five years the demand for industrial, manufacturing and logistics will witness immense growth and demand.
Office space demand: The demand for office space seems to rise in near future. With so many foreign investors and corporates entering the Indian market, the demand for office space has ultimately increased. As corporates look to expand business, the office space absorption is likely to rise this year in India’s major cities like- Delhi NCR, Bengaluru, Mumbai, Pune, Chennai, Hyderabad and Kolkata. Apart from this, the improvement in financials, macroeconomic scenario and real estate transparency is likely to increase the demand for office space.
Emerging investment hot spots of India
The real estate sector in India is growing and attracting investors across the globe. Today the investors are not only interested in investing metros but also eyeing for the growing cities across India as well. Some of the emerging hot spots for investment in real estate sector of the country are:
USP of East Bangalore
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Bangalore is the IT hub of the country and is known as the Silicon Valley of India. With huge number of corporates entering the city, Bangalore has become the most desired city for investment. Read on to know more about various aspects of the city that makes it the most desirable for the investors. Click Here To Know More
Chennai is ranked as the fifth-largest economy in India. The city is host to the third largest expatriate population in India after Mumbai and Delhi, and is one of the fastest growing economy of the country. It has huge opportunities to invest and assures good returns. Read on to know more about Chennai, the growing investment hot spot of India. Click Here To Know More
The capital of the country is the emerging city for investments. The huge expansion in Delhi’s infrastructure has attracted not only corporates but also multinationals from various corners of the world. Read on to know what makes Delhi a hot spot for investment Click Here To Know More
Owing to its proximity to Delhi and availability of vast undeveloped plots, Gurgaon became the ideal choice for investment. Moreover, over the time, the government’s tax reforms, close proximity to the Delhi International Airport and the Delhi-Gurgaon expressway attracted huge investments in the real estate market of Gurgaon. Read more about this growing city of the country and what makes it the hot spot for investment. Click Here To Know More
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Being a tourist spot the improvements in the infrastructural facilities is a regular feature in Goa. And due to this feature investing in the state has always been fruitful and assures to give good returns. Read on to know what makes Goa an ideal place of investment. Click Here To Know More
With the growing Centre of retail, commerce, administration, education, production and marketing, Jaipur offers countless options and varied opportunities in terms of both employment and lifestyle. From the horde of new projects coming up in Jaipur and from its ever changing skyline, it is evident enough that the city is growing tremendously. Learn more about the various aspects of the city that makes it a good place for investment. Click Here To Know More
The Real Estate dynamics of Kolkata is changing at a very fast pace. The realty market is on a high due to a combination of factors such as the arrival of reputed MNCs and big corporates looking for the right assesses and a sudden increase in the number of developers of upmarket property. For more details about the investing options in the city, read on Click Here To Know More
Lucknow is flourishing economically and is one of the liveliest city of the country. It is also one of the fastest growing cities in India with growing manufacturing, commercial and retail segments. There are various other aspects of the city that makes it a good place for investment, read on Click Here To Know More
Mumbai is one of the world’s top ten centres of commerce in terms of global financial flow, generating around 6.16% of India's GDP and accounting for 25% of industrial output. And it is therefore, the financial capital of the country. Investors are eyeing Mumbai in desire of profitable returns and the city has not disappointed them. The city of opportunities has become one of the hot spots for investment in the country. Know more about the various factors of Mumbai that make it a hot spot for investment. Click Here To Know More
Pune has seen tremendous growth in infrastructure field in the last decade with world-class residential and commercial projects being set up in and around the city which gave the city a global stature. Today, with increase in expatriates, who have settled in Pune for job location, the population in the city has also increased, thereby giving rise to substantial demand in real estate. Know more about the various areas of the city that has developed and makes the city a perfect destination for long term investment. Click Here To Know More