Real Estate In India

In India, the real estate sector has been growing exponentially and is considered to be one of the best investment sectors in the country. Real estate sector comprises of four sub sectors - housing, retail, hospitality and commercial. The growth of this sector can be attributed to the growth of corporate culture and the rising demand for office spaces. The housing sector is on the rise to accommodate people who are gradually moving to urban areas in search of jobs. The other sectors like retail and commercial are also flourishing to provide much needed infrastructure to match India’s growing needs. The construction industry ranks third among the 14 major sectors in terms of direct, indirect and induced effects in all sectors of the economy.

In the coming years, it is also expected that the real estate sector would attract more Non Resident Indians (NRI) investments. Bengaluru is one of the most favoured property investment destinations for NRIs, followed by cities like Ahmedabad, Pune, Chennai, Goa, Delhi and Dehradun.

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Real Estate In India

Market Size:

It is estimated that the Real Estate Sector in India would contribute to 13% of the country’s GDP by 2025. India’s real estate sector is expected to reach a market size of US$ 1 trillion by the year 2030 from US$ 120 billion in 2017. Not just the housing sector, but the other real estate sectors like Retail, hospitality and commercial real estate are also growing to provide the necessary infrastructure for the population in India.

In the present scenario of the country’s real estate sector the IT, retail, consulting and e-commerce have registered high demand vis-à-vis renting or acquiring office spaces. Commercial office stock in India is expected to cross 600 million square feet by 2018 while office space leasing in the top eight cities is expected to cross 100 million square feet during the year 2018-2020. Grade-A office space absorption is expected to cross 700 million square feet by 2022, with Delhi-NCR contributing the most to this demand.

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Investments/Developments:

The growth of the Indian real estate market has been significant.  Presently, there is a rising demand for office spaces as well as residential apartments. Not only is there a rise in affordable housing units, but also luxury and premium projects like Malls, private hospitals and retail outlets. In the tier 1 and tier 2 cities, the prices are expected to escalate as the private equity investments in real estate would grow to US$ 100 billion by 2026. Private Equity and Venture Capital investments in the sector reached US$ 2.99 billion during January-August 2018.

Real estate seems to be flourishing, considering the rising demand. The sale of housing projects has been affected due to the introduction of GST and RERA. The market trends show real estate has performed poorly in comparison to equity and gold this year. Equity is volatile whereas real estate is not that volatile. Therefore according to the experts, despite lower returns, it is always advisable to invest in assets and real estate as it diversifies investments as well as it’s a safe investment.

Some of the major investments in this sector are as follows:

• Embassy Office Parks made an announcement in September 2018 that it would raise around Rs 52 Billion, through India’s first Real Estate Investment Trust (REIT) listings.
• New housing launches across top seven cities in India increased 50% quarter-on-quarter in April-June 2018.
• In May 2018, PE Firm, Blackstone Group acquired One Indiabulls in Chennai from Indiabulls Real Estate for around Rs 900 Crores.
• In February 2018, DLF bought 11.76 acres of land for Rs 15 billion for expansion in Gurugram, Haryana.

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Government Initiatives:

The Union Government has taken some initiatives towards strengthening the real estate sector in India.

• The government has introduced the RERA act to end malpractices and corruption in the real estate sector. With the implementation of The Real Estate Regulation and Development Act, 2016 or RERA, builders need to register themselves under this act. RERA has a requirement that no project can go to market without approvals and that 70% of the money received from customers has to be spent only on the said projects. The money would be maintained in an escrow account. The main aim of RERA is to sweep away unprofessional builders and bring relief to investors and home buyers.

•  GST accounts for 20% of the property value taking into consideration the service taxes, the ITC returns, the stamp duty charges and the registration fees. This will result in a drop in over-supply in the housing sector.
• Under the Pradhan Mantri Awas Yojana (PMAY)-Urban, 6,028,608 houses were sanctioned up to September 2018.
• In February 2018, creation of National Urban Housing Fund was approved with an outlay of Rs 60,000 Crores (US$ 9.27 billion).
• Under the Pradhan Mantri Awas Yojana (PMAY)-Urban, 1,427,486 houses have been sanctioned in 2017-18. In March 2018, construction of additional 3,21,567 affordable houses were sanctioned under the scheme.

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