Real estate sector in India is expected to reach a market size of US$ 1 trillion by 2030 from US$ 120 billion in 2017 and contribute 13 per cent of the country’s GDP by 2025.
Residential segment contributes ~80 per cent of the real estate sector. Housing launches across top eight Indian cities increased 75 per cent in 2018 to 182,207 units. The key drivers were
- Rapid urbanization
- Growth in population
- Rise in the number of nuclear families
- Easy availability of finance
- Repatriation of NRIs and HNIs
- Rise in disposable income
Real Estate (Regulation and Development) Act (RERA) 2016 has made the sector more transparent. Indian real estate developers have shifted gears and accepted fresh challenges. The most marked change has been the shift from family owned businesses to that of professionally managed ones. Real estate developers, in meeting the growing need for managing multiple projects across cities, are also investing in centralized processes to source material and organize manpower and hiring qualified professionals in areas like project management, architecture and engineering.
The Real Estate Sector was plagued with issues of non-performance of developers in the past. The name of the game at that time was to acquire land banks. This is no longer the case. Developers are now entering into Joint Ventures with land owners instead of amassing land banks. Agreements will cover items like revenue, area and profit sharing with the land owner.
Some of key policy initiatives of the government positively impacting this sector are:
• Real Estate Regulatory Act
• Benami Transactions Act
• Boost to affordable housing construction
• Interest subsidy to home buyers
• Change in arbitration norms
• Service tax exemption
• Dividend Distribution Tax (DDT) exemption
• Goods and Services Tax
Overhang from past experiences, before the above changes, may be the reason for some not to invest in this segment in India, However, this segment has experienced several positive changes and should be one’s radar as an investment option.
It is expected that 200 million square feet of area is going to be added in 2019. A wise investment would be to own part of this.
You can learn more about opportunities in Indian property at the Indian Property Fair,happening on the 4th and 5th of May. See below for more details.