INDIAN REAL ESTATE MARKET

The term real estate refers to land and any physical property or improvements affixed to the land, which includes houses, buildings, landscaping, fencing, wells, etc. 

The real estate sector in India has come a long way by becoming one of the fastest growing markets in the world. It comprises four sub sectors- housing, retail, hospitality, and commercial. While housing contributes to five-six percent of the country’s gross domestic product (GDP), the remaining three sub-sectors are also growing at a rapid pace, meeting the increasing infrastructural needs. The real estate industry’s growth is linked to developments in the retail, hospitality and entertainment (hotels, resorts, cinema theaters) industries, economic services (hospitals, schools) and information technology (IT)- enabled services (like call centres) etc. and vice versa. 

The real estate industry in India is in a promising stage. The sector happens to be the second largest employer after agriculture and is expected to grow at the rate of 30 per cent over the next decade. A growing migrant population due to increasing job opportunities, together with healthy infrastructure development, is underpinning demand in the region’s residential real estate market.

Real estate contributed about 6.3 per cent to India’s gross domestic product (GDP) in 2013. The market size of the sector is expected to increase at a compound annual growth rate (CAGR) of 11.2 per cent during FY 2008-2020 to touch US$ 180 billion by 2020. 

The Government of India has allocated US$ 1.3 billion for Rural Housing Fund in the Union Budget 2014-15. It also allocated US$ 0.7 billion for National Housing Bank (NHB) to increase the flow of cheaper credit for affordable housing for urban poor.

The residential segment of real estate has seen tremendous growth in recent years owing to the continuous growth in population, migration towards urban areas, ample job opportunities in service sectors, growing income levels, rise in nuclear families and easy availability of finance. 

Recent years have seen the Indian real estate sector grow, especially the commercial real estate segment. According to a study by Knight Frank, Mumbai is the best city in India for commercial real estate investment, with returns of 12-19 per cent likely in the next five years. Bangalore and Delhi-National Capital Region (NCR) come second and third on the list, with returns of 12 per cent and 8-11 per cent respectively. Delhi-NCR was the biggest office market in India with 110 million sq ft, out of which 88 million sq ft were occupied.

With the government allowing 100 percent foreign direct investment (FDI) in this sector, the number of foreign firms owning real estate projects in India has also increased. 

The Indian real estate sector continues to be a favored sector for investments from international as well as private investors. In the upcoming years, the residential as well as commercial segments of the real estate industry is set for major growth, aided in no small part by the government’s plans and initiatives to boost this sector. 

Excise duty reduction on cement and steel will lower project costs and expansion of the interest subsidy on loans will boost developers’ interest in this segment. Moreover, tax measures such as increasing the limit of interest deduction on home loans will provide necessary motivation to consumers to increase buying activity and revive demand in the value and affordable segment. Further, demand for space from sectors such as education and healthcare has opened up ample opportunities in the real estate sector.

Emergence of nuclear families and growing urbanization has given rise to several townships that are developed to take care of the elderly. A number of senior citizen housing projects have been planned, and the segment is expected to grow significantly in future. 

Growth in the number of tourists has resulted in demand for service apartments. This demand is likely to be on the uptrend and presents opportunities for the unorganized sector.