Tuesday, 31 May 2016

How far does Realty Sector affect Indian Economy?

Being a vital component in the Indian economic ecosystem, real estate has been appreciated as the second largest sector that generates employment, after agriculture. With a great potential to drive the economy forward, it is estimated to expand at a rate of approximately 20% annually, by contributing nearly 5-6 % to the GDP, which is further expected to touch USD 180 billion by 2020. Apart from the direct impact on employment generation, this precinct enables the development of its ancillary industries such as cement, steel, paint, bricks and other building materials. Taking the quantum of homeless people and the government’s initiatives in providing them shelter by 2022, this sector is all set to have a long ride. 

Since 2004, real estate has been witnessing tremendous ups and downs. When the developed nations observed saturation in its infrastructure segment, India exhibited unfathomable potential in the respective sector.  This, followed by government’s approval for private FDI, gave nerve to many real estate investment companies to enter into the Indian market, which became an impetus for further expansion of the real estate sector in specific, and economy in general. This developmental approach spurred the country’s expedition from a developing to a developed one by expanding the state of infrastructure development, buildings, townships, shopping malls, residential and commercial complexes etc. 

The sector touched its pinnacle in 2007, by displaying an extensive blooming in foreign investments than ever before. In 2008, the recession that hit the globe literally collapsed almost all developed and emerging economies. As Indian economy is more or less insulated from the repercussions in the international market, we were stationed at a safer haven. Nevertheless, Indian real estate took a reverse gear for not getting entangled in the labyrinth of economic crisis, which was followed by a drop in the regular inflow of FDI.
By 2010, union government started taking efforts in constructing affordable houses for all. Currently, the trend of owning apartments or houses are in rise, rather than staying on rent; and this gave the demand for residential segments yet another boost. In terms of FDI inflow, real estate emerged as the fourth largest sector, with the government’s progressive efforts for the embellishment of this segment. With the announcement of 100 Smart City projects; raising of FDI limits for townships, settlements development projects and the real estate projects within Special Economic Zone (SEZ) to 100 percent; guidelines for investing in Real Estate Investment Trusts (REIT) in non-residential segment; higher allocation of fund for housing and urban development etc. gave extra momentum to the field.

All the positive indications in the domain, along with the emergence of nuclear family, rapid urbanisation and rising level of household income are probably the decisive drivers for the growth of real estate in India. According to National Skill Development Corporation (NSDC), real estate and construction sector is discerned as the prime employment generator in India, with the maximum rise in human resource requirement during 2013-2022. Having profound backward and forward linkages to more than 250 ancillary industries, the sector continues its perpetual transformation from being a disintegrated to an organised sector. The growing stature of India in the global platform stipulates the sector to hold denser responsibilities on its shoulder in the years to come.

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