industry overview
Real estate in India is expected to reach $1 trillion by 2030. By 2025, it will account for 13% of the country’s GDP. The rise of nuclear families, rapid urbanisation, and rising household income are likely to continue to be the primary drivers of growth in all sectors of real estate, including residential, commercial, and retail. The country’s rapid urbanisation is driving the growth of real estate. By 2020, urban areas will contribute 70-75 percent of India’s GDP.
93 percent of the transactions reported in India in 2020 were for by institutional investing, at $5 billion. Private equity (PE) and venture capital (VC) funds invested a total of $4.06 billion in 2020.
New completions in top eight cities reached 17.2 MSF (million square feet) during the same period. In terms of share of sectoral occupiers, Information Technology (IT/ITeS) sector dominated with a 41% share in second half of 2020, followed by BSFI and Manufacturing sectors with 16% each, while Other Services and Co-working sectors recorded 17% and 10%, respectively.
From October 2020 to December 2020, home sales volume in India’s eight major cities increased by twofold to 61,593 units, up from 33,403 units in the previous quarter, indicating a healthy recovery following the strict lockdown imposed in the second quarter due to the spread of COVID-19 in the country.
According to the Economic Times Housing Finance Summit, about 3 houses built per 1,000 people per year in contrast with the necessary construction rate of five houses per 1,000 population. The current shortage of housing in urban areas estimates to be ~10 million units. To meet the country’s growing urban population, 25 million additional affordable units built by 2030.
Real estate in India
The Indian government has been supportive of the real estate sector. The Union Cabinet approved 100 Smart City Projects in India in August 2015. The government has also increased the FDI (Foreign Direct Investment) limit for township and settlement development projects to 100%. Real estate projects located within Special Economic Zones (SEZ) are also eligible for 100 percent FDI. In terms of FDI inflows, construction is the third-largest sector. Between April 2000 and September 2020, FDI in the sector (including construction development and construction activities) totaled US$ 42.97 billion. SEZ exports totaled Rs. 7.96 lakh crore (US$ 113.0 billion) in FY20, a 13.6 percent increase from Rs. 7.1 lakh crore (US$ 100.3 billion) in FY19. By FY22, Indian real estate will attract US$ 8 billion in FDI, a significant amount of foreign investment.
The union Budget 2021-22 provides for a tax deduction of up to 1.5 lakh (US$ 2069.80) on interest on housing loans, as well as an extension of the tax holiday for affordable housing projects until the end of fiscal year 2021-22.
Real estate in India aims to reach US$ 650 billion by 2025, accounting for 13% of India’s GDP. Growing demand for space in sectors such as education and health care, E-commerce and logistics, the Co-living market in India’s top 30 cities is expected to more than double to US$ 13.92 billion by 2025, up from US$ 6.67 billion today.
Housing for All initiative
The Government of India’s Housing for All initiative aims to attract US$ 1.3 trillion in housing investments by 2025. As of December 2019, 1.12 crore houses had been sanctioned in urban areas under the Pradhan Mantri Awas Yojana (Urban) [PMAY (U)], with the potential to create 1.20 crore jobs. The scheme expected to boost affordable housing and construction in the country, as well as the real estate sector. The Union Cabinet approved the development of Affordable Rental Housing Complexes (AHRCs) for urban migrants and the poor as a sub-scheme under PMAY–U on July 9, 2020.
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The government has also released draft guidelines for Real Estate Investment Trusts (REITs) to invest in the non-residential sector.
Increased transparency and returns are driving a surge in private investment in the sector; In 2020, institutional investors invested US$ 5 billion in Indian real estate, accounting for 93 percent of all transactions.
There are recommendations that stamp duties decrease in order to stimulate the housing market.