The Chronological Ascent of Real Estate in India

The Chronological Ascent of Real Estate in India

By Rahul Shah, CEO, Sumer Group   |   Monday, January 22, 2018
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Steady rise over the last decades, the demand for commercial sector including corporate parks, offices and urban accommodations has increased in recent past.

Investments in Realty 
After the Indian Government announced 100 percent foreign direct investment (FDI) in India, the real estate industry underwent a boom. While the global capital flow through FDI in 2016 soared to $5.7 billion as reported by the Economic Times, the Indian real estate market has been attracting to business bees across the globe at a rapid pace.

Warburg Pincus, Goldman Sachs, Peninsula Brook field Investment Managers Private Limited, Piramal Fund Management, Macquarie Infrastructure & Real Assets(MIRA)and Altico Capital are some of the major investors in the Indian real estate scenario. In the recent times, companies like Nest Away and Quikr are investing in the real estate landscape by using digital modes to ensure competent growth.

Government Reforms 
Since liberalisation of the Indian economy, the real estate sector has witnessed rapid expansion, with increase in business opportunities, investments and consequent rise in labour force. Government reforms have a strong role to play in the given scenario. The government's initiative to build 100 smart cities also presents a principal opportunity for real estate giants to contribute and expand exponentially across the country.

Other noteworthy contributors to the real estate industry are the Cabinet Committee on Economic Affairs (CCEA) that instilled measures to release funds for revival of stalled projects, the Security and Exchange Board of India(SEBI) that liberalised reforms to attract more foreign investments, the Rajya Sabha that passed the Real Estate Regulation and Development Bill to protect consumer interests for improving accountability of real estate developers, so on and so forth.

Trends in Real Estate 
As much as government reforms impact the chief stake holders in realty, the ebb and flow of demand-supply also leave footprints on different sub segments. Certain trends that have influenced or are predicted to influence the real estate industry are listed further in this article.

● Real Estate Regulation Bill (RERA) implemented since May 1, 2017 aims to introduce unparalleled transparency and increased accountability of developers. It will bring about necessary discipline by making the real estate sector more competitive, hassle-free and consumer friendly. Across various states, real estate businesses have begun moulding current business models to suit the potential positive impacts of RERA on not only consumers, but also developers.

● The Goods & Services Tax (GST): With GST, while abatement enjoyed under service tax laws will be diminished, there will still be a notable reduction in tax management expenses. The abolishment of VAT, Service Tax and other indirect taxes is expected to make value of property cheaper than the past. However, with introduction of hassle-free, transparent transactions, GST is expected to be a boon for both buyers and builders.

● Affordable Housing: Affordable housing is soaring to unprecedented heights in terms of increasing public as well as private investments. Apart from the public policies mentioned earlier, one crore houses in totality are proposed to be built by 2019, aided by cheaper sources of finance including external commercial borrowings(ECBs). Housing loans, credit subsidies, schemes such as Pradhan Mantri Awas Yojana, and demonetisation, will lead to controlled prices increasing demand for affordable housing in the near future.

● Luxury Housing: Although the storm of demonetisation had slowed down the upright strides of mid-income houses, it did not leave irrevocable impacts on the luxury housing sectors. As opposed to loans, personal wealth is a major driver for this niche market comprising a specific segment of consumers. As investors pour in money and builders churn out properties at par with the rising demands for excessively well- designed homes in prime locations, the fat margins prevalent in such segments will not deteriorate. In 2016, over 45,000 luxury housing units were launched across nine cities that have not seen any significant reduction in costs, affirming the thriving luxury housing segment of realty.

Thus, Real Estate has evidently been the catalyst of growth by placing India on the global pedestal for quality housing, corporate and retail infrastructure. With increasing demand, heightened liberalisation and disciplinary reforms, real estate can contribute magnanimously to the country’s economy in the near future by making realty affordable as well as opulent for overall inclusion of consumers from all economic backgrounds.

 

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