Future of Real Estate Sector Business in India?
The real estate sector is considered as one of the most recognized sectors globally. In India after agriculture, real estate is the second largest employer and in this sector expected growth is about 30 percent over the next decade. In real estate sector, it comprises four sub-sectors such as housing, retail, hospitality, and commercial.
The growth of the real estate sector is correlated with the growth of the corporate environment and demand for office space as well as urban and semi-urban accommodations. It is also expected that short term and long term this real sector will incur more Non-Resident Indian (NRI) investments. For NRIs, Bengaluru is expected to be the most favored property investment destination followed by Ahmedabad, Pune, Chennai, Goa, Delhi, and Dehradun. In the Global House, Price Index India's rank has jumped 13* spots to reach the ninth position among 55 international markets, on the back of increasing prices in the mainstream residential sector.
To allow all kinds of investors to invest in the Indian real estate market “The Securities and Exchange Board of India” (SEBI) has given its approval for the Real Estate Investment Trust (REIT) platform. In the Indian market, it would create an opportunity of worth 1.25 trillion US$.
Real estate developers are also investing in centralized processes to the source material and organize manpower and hiring qualified professionals in areas like project management, architecture, and engineering in meeting the growing need for managing multiple projects across cities. With the growing flow of FDI into Indian real estate is encouraging increased transparency. In order to attract funding real estate developers have revamped their accounting and management systems to meet due diligence standards. In the year 2016, a number of the new residential project was lower in comparison to units sold.
Under the Real Estate Regulation & Development Act (RERA), this will enforce transparency and accountability requirements for real estate developers into the system, and it will also help in increasing consumer confidence.
In India, due to series of reforms, there has been a transitional slowdown in the market demand for housing. Various reforms such as Real Estate Regulator Bill (RERA), FDI Relaxations, GST, Benami Transactions (Prohibition) Amendment Act, Change in Accounting Standards IFRS. With the help of these reforms, Indian Real estate industry will now have more transparent, credible, and attractive organized players in the market. These reforms will certainly boost the amount of trust and faith between Realtors and Investors. It will be beneficial for Residential Properties Market as well. With these reforms, the market has stabilized. In the year 2017, Commercial Real Estate will also hold bright prospects and in coming years, as social infrastructure is going up so is demand for commercial spaces.
In India, by the year 2020, real estate market is expected to touch US$ 180 billion. In India's Gross Domestic Product (GDP) housing sector contributes 5-6 percent alone.
During the period financial year 2008-2020, the market size of this respective sector is expected to increase at a Compound Annual Growth Rate (CAGR) of 11.2 percent. For India's growing needs, retail, hospitality and commercial real estate are significantly growing providing the much-needed infrastructure. Under the Pradhan MantriAwasYojana, Ministry of Housing and Urban Affairs, Government of Indiasanctioned2,17,900 new houses in six Indian states to push affordable housing in the urban areas of the country. In 2016, in real estate private equity investments increased 26 percent to nearly US$ 6.01 billion.
In recent times high demand for office space is increased in IT, retail, and consulting and e-commerce sectors. In India, Mumbai is the best city for commercial real estate investment, with likely returns of 12-19 percent in the next five years followed by Bengaluru and Delhi-National Capital Region (NCR).
In recent times with the rise in demand for office as well as residential spaces, Indian real estate sector has witnessed high growth. In the year 2017 real estate sector in India is expected to attract investments of worth US$ 7 billion which will rise further to US$ 10 billion by the year 2020. According to World Investment Report 2016 by the United Nations Conference for Trade and Development, India has been ranked fourth for FDI inflows in developing Asia.
As per the data released by Department of Industrial Policy and Promotion (DIPP), during the period April 2000-June 2017construction development sector has received Foreign Direct Investment (FDI) equity inflows to the tune of US$ 24.54 billion. In 2017 in Indian real estate sector Private equity (PE) investments are estimated over US$ 4 billion supported by Government of India's regulatory reforms over the past two years.
In 2017, fundraising and investments in India's office space sector have already reached more than US$ 2 billion and are expected to rise higher with further foreign investment of US$ 1.4 billion as local developers and foreign investors expand their portfolios through fresh investments, acquisitions or launch of Real Estate Investment Trusts (REITs) to build and acquire office assets.
Along with the respective states governments, Government of India has taken several initiatives to encourage the development in the real sector. For the real estate companies, Smart City Project is a prime opportunity where there is a plan to build 100 smart cities.
Here are some major Government Initiatives:
By the Ministry of Housing and Urban Affairs, Government of India, a new public-private partnerships (PPP) policy with eight PPP options has been unveiled push for investments in the affordable housing segment.
In Delhi, for giving a boost to affordable housing Delhi Government has declared 89 out of 95 villages in Delhi as urban areas for ease the ope rationalizing of the land pooling policy.
To invest in real estate investment trusts (REITs) and infrastructure investment trusts (InvITs) The Reserve Bank of India (RBI) has proposed to allow banks which are expected to benefit both real estate and banking sector in diversifying investor base and investment avenues respectively.
In five states, namely West Bengal, Jharkhand, Punjab, Kerala and Manipur under the Pradhan MantriAwasYojana (Urban) scheme The Ministry of Housing and Urban Poverty Alleviation has sanctioned the construction of 84,460 more affordable houses for urban poor with a total investment of US$ 460 million.