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Real Estate – The Backbone of Indian Economy

The ‘out of box thinking’ of the Indian real estate developers has made it possible to bring a change in the face of India – from being an under-developed country to a emerging country by developing the nation of art infrastructure developments. And now, it has become the new backbone of Indian Economy.

Real Estate – The Backbone of Indian Economy

The real estate sector has been a major contributor in the economic growth and thus is known as the new backbone of Indian Economy. The new ideology, approach and government’s role has played a key role in bringing the real estate industry at the top. Today, the real-estate sector contributes about 6.3 percent to the nation’s GDP and is a major source of revenue for Central, state and local governments. Not only this, it also a source of employment for more than 50 million people (along-with construction sector). In addition, it also supports about 300 auxiliary industries, including cement, steel, building material, paint and transport.

According to a study by ICRA, the real estate industry today ranks third among the 14 major sectors of the economy.

Have a look at why the real-estate industry is so much in hike today.

Market Size

It is believed that the Indian real estate market size will touch US$ 180 billion by 2020. This may be because:

  • The housing sector alone contributes 5-7 per cent to the country’s gross domestic product (GDP).
  • In the period FY08-20, the real estate market is expected to rise at a compound annual growth rate (CAGR) of 11.2 per cent.
  • As a helping hand, retail, hospitality and commercial real estate are also increasing significantly, which is needed to satisfy India’s growing needs.
  • In the last 10 years, the real estate industry has significantly emerged as the second most active sector, raising US$ 1.2 billion from private equity (PE) investor.
  • Foreign investors have bought rented office space worth over US$ 2 billion in India in 2014. This is a four-fold rise compared to the previous year, in order to increase their rent-yielding commercial assets in Asia’s third largest economy.

Trend in Hospitality Market

Investments

Besides a rise in its market, the Indian real estate sector has also witnessed high growth with a rise in demand for office and residential spaces, in the last few years.

As an example, Blackstone Group Lp is all set to become the largest owner of commercial office real estate in India after a three-year acquisition drive. Many large scale companies are planning to invest in several luxury and cost-effective projects.

The construction development sector in India has received foreign direct investment (FDI) equity inflows to the tune of US$ 24,012.87 million in the period April 2000-December 2014, according to a data released by Department of Industrial Policy and Promotion (DIPP).

Government Initiatives

The Indian Government also strives to offer a helping hand in upbringing the Indian real estate industry. Several schemes and initiatives have been planned such as the housing plans for the non-capable. Over 30 million houses will be built by 2022, under the Sardar Patel Urban Housing Mission, primarily for the economically weaker sections and low-income groups, through public-private-partnership (PPP), interest subsidy and increased flow of resources to housing sector’, according to the Union Minister of Urban Development, Housing and Urban Poverty Alleviation and Parliamentary Affairs, Government of India. 

The Future

In response to the progressively well-informed buyer and keeping in mind the globalization of the Indian business, real estate developers have accepted fresh challenges.

Among the most noticeable change is the shift from family owned businesses to professionally managed ones. Also, the rising flowing flow of FDI into Indian real estate is encouraging increased transparency. In order to attract funding, developers have refurbished their accounting and management systems to meet due industry standards.

The huge potential, saturation point and a decline in the price and demand of the developed countries, India has immense capabilities to attract large foreign investments into its real estate. As such, India is its complete rise to be at the top in the future.

 

 

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