The Indian Real Estate Industry
The real estate sector comprises four sub sectors - housing, retail, hospitality, and commercial.
The real estate sector is one of the most globally recognised sectors. In India, after agriculture
the real estate is the second largest employer which is lined up to grow at 30 per cent over the next decade.
Property Investments in India have normally been a gold mine for most investors. The growth
and development of cities across the country have added fuel to the rise in prices across the
country. The construction industry ranks third among the 14 major sectors in terms of direct,
indirect and induced effects in all sectors of the economy.
Market size and Investments
The Indian real estate market is expected to touch US$ 180 billion by 2020. In the period
FY2008-2020, the market size of this sector is expected to increase at a Compound Annual
Growth Rate (CAGR) of 11.2 per cent.
The private equity investments in real estate increased 26 per cent to a nine-year high of nearly Rs 40,000 crore (US$ 6.01 billion) in 2016.
The real estate sector in India is expected to attract investments worth US$ 7 billion in 2017,
which will rise further to US$ 10 billion by 2020. India has been ranked fourth in developing Asia for FDI inflows as per the World Investment Report 2016 by the United Nations
Conference for Trade and Development.
Sales across India’s top 9 cities increased by 19% to 51,715 units in the January-March 2017
period compared to a fall of 20% the previous quarter, as per the reports of PorpTiger.
The Government of India along with the governments of the respective states has taken several
initiatives to encourage the development in the sector. The Smart City Project, where there is a
plan to build 100 smart cities, is a prime opportunity for the real estate companies. Below are
some of the other major Government Initiatives:
●The Delhi Government has declared 89 out of 95 villages in Delhi as urban areas which
will ease the operationalising of the land pooling policy, thereby giving a boost to
affordable housing in Delhi.
●The Reserve Bank of India (RBI) has proposed to allow banks to invest in real estate
investment trusts (REITs) and infrastructure investment trusts (InvITs) which is expected
to benefit both real estate and banking sector in diversifying investor base and
investment avenues respectively.
●The Ministry of Housing and Urban Poverty Alleviation has sanctioned the construction
of 84,460 more affordable houses for urban poor in five states, namely West Bengal,
Jharkhand, Punjab, Kerala and Manipur under the Pradhan Mantri Awas Yojana (Urban)
scheme with a total investment of Rs 3,073 crore (US$ 460 million).
Future Trend and the Road Ahead
Indian real estate developers have shifted gears and accepted fresh challenges, bearing in
mind the aspect of globalisation and responding to an increasingly well-informed consumer base. The most marked change has been the shift from family owned businesses to that of professionally managed ones. Real estate developers, in meeting the growing need for managing multiple projects across cities, are also investing in centralised processes to source material and organise manpower and hiring qualified professionals in areas like project management, architecture and engineering.
The growing flow of FDI into Indian real estate and the implementation of RERA is encouraging increased transparency. Developers, in order to attract funding, have revamped their
accounting and management systems to meet due diligence standards.
The Securities and Exchange Board of India (SEBI) has given its approval for the Real Estate
Investment Trust (REIT) platform which will help in allowing all kinds of investors to invest in the
Indian real estate market. It would create an opportunity worth Rs 1.25 trillion (US$ ) in the
Indian market over the years.
References: Media Reports, Press releases, IBEF report.