Real estate: Propeller of growth for Indian economy


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The real estate sector has been the backbone of the Indian economy and has been a major contributor in the economic growth.  It is evident from the very fact that the Real Estate Sector contributes 8.53% of the total GDP and also witnessed growth rate to the tune of 30%. It is also pertinent to note that this sector has emerged as the fifth largest destination of foreign investment. The out of box thinking approach followed by real estate developers have been instrumental in changing the face of India from being an under-developed country towards accelerating its way to a developed country by developing the state of art infrastructure developments, buildings, townships, shopping malls not only in the urban towns of the country but in the Tier II & Tier III towns as well. This effort of developers has not only been useful in changing the face of India but infact has been providing sustenance to 250 ancillary industries. The road doesn’t end here as this sector has also been a good employer, by being the second largest employment generator in the economy where the top five real estate players employ more than 2.00.000 employees at different locations and being the highest employer to the BPL families. Nowadays with the changing attitude of people from living on rent towards owning their property the real estate sector has witnessed huge demand for the residential segment. The demand for commercial development is also growing at a fast pace due to a paradigm shift from unorganized retail towards organized retail coupled with MNC’s interest in establishing offices here in India.  Going forward, the scenario would be no different as at present there is a shortage of almost 27 million dwelling units and the Indian real estate business which is estimated at USD 15 billion is likely to be USD 90 billion by 2015, predicts ASSOCHAM. The housing start-up index, which is now at a pilot stage, shows that new housing units in cities such as Kolkata, Chennai and Bangalore are showing lesser growth than the tier II and III cities like Lucknow, Indore, and Patna etc.  Reason being the growth these cities are posing in terms of their absolute business. As per latest Knight Frank report, since last 2-3 months the Indian economy has witnessed improvement in all the economic parameters be it inflation, IIP, imports, CAD, etc. However, for the second largest populous country, job creation is of utmost importance for it to return to its high GDP growth levels. Job creation primarily depends on the labour intensive manufacturing sector which in turn depends on the investment in this sector. Fresh investments in the economy have been overshadowed by the upcoming general elections despite improved economic conditions. Economic and political stability are the vital catalysts for revival of the real estate sector in India. In addition, revival of this sector also depends on the regional policies like VAT, land acquisition and other regulatory policies. In this current scenario where the Rupee is still on the higher side, inflation is yet to reach comfort level and the Indian financial system is caught amidst liquidity trap, we developers can not meet the burgeoning demand from customers without the government’s support. Thus, in order to meet the growing demand, we require the support of government by relaxation of norms to facilitate the growth of the Indian real estate sector. The RBI should also intervene by reducing Bank repo rates to another 100-200 basis points and to further reduce CRR in order to infuse additional liquidity in the cash starved market. Also for the prosperity of the sector at general and customers at large the government should facilitate the efforts of real estate developers by providing minimum infrastructure guarantee under habitation policy, relaxing guidelines on foreign investing in Indian Realty, reducing risk weightage and by giving the sector industry status coupled with reduction and uniformity in stamp duty.  Immediate need is also to do away with the restrictions on real estate loans. Thus it is my firm belief that with our continued growth driven strategies and activities coupled with due attention and support from all-government, banks, bureaucrats and media we will be able to withstand any type of market conditions and would be playing key role in taking Indian economy to next level.