Real Estate Sector Sees Encouraging Outlook Despite Legacy Challenges
The Economic Survey highlights India's real estate sector's recovery, driven by urbanization and government schemes, but notes that legacy stalled projects pose a challenge.
Real EstateEconomic SurveyUrbanizationHousing DemandStalled ProjectsReal Estate MumbaiJul 22, 2024
The survey projected a positive outlook for the real estate sector, with housing demand set to rise on rapid urbanization. However, it noted that legacy stalled projects were a 'challenge.' Real estate and ownership of dwellings have accounted for over seven per cent of the overall GVA (gross value added) in the past decade, highlighting their integral role in the economy.
In 2023, residential real estate sales in India were at their highest since 2013, witnessing a 33% YoY growth, with a total sale of 4.1 lakh units in the top eight cities. The new supply witnessed an all-time high, with 5.2 lakh units launched in 2023, as against 4.3 lakh units in 2022. The momentum continued in Q1 of 2024, witnessing record-breaking sales of 1.2 lakh units, clocking a robust 41% YoY growth.
The survey stressed the need to adapt strategies and policies to meet the rising demand for housing, as half of India's population is projected to dwell in urban regions by 2050 compared to 31% in 2011. The legacy stalled real estate projects are a challenge, with approximately 4.1 lakh stressed dwelling units, involving ₹4.1 lakh crore, affected as estimated by the Indian Banks' Association (IBA).
New housing supply has consistently exceeded one lakh units since Q2 of 2022, underscoring persistent demand-supply dynamics in the housing market. Further, the rising demand for housing loans reflects the underlying demand for real estate. According to a report by Crisil, the housing loan market in India grew at a CAGR of approximately 13% from FY18 to FY23.
The National Housing Bank (NHB) has introduced a Residential Mortgage-Backed Securities (RMBS) platform to address funding options limitations. This platform aims to attract long-term resources from diverse investor groups, including Pension Funds and Insurance Funds, to support the expansion of housing finance and deepen the debt market for primary mortgages.
Factors that contributed to the housing sector's growth include the Pradhan Mantri Awas Yojana-Urban (PMAY-U), policy reforms like the Goods and Services Tax, Real Estate (Regulation and Development) Act, and the Insolvency and Bankruptcy Code, and initiatives like the Affordable Housing Fund and Special Window for Affordable and Mid-Income Housing (SWAMIH) Investment Fund.
The outlook for the real estate sector is encouraging, with increasing urbanization, the housing industry is poised for a significant transformation. Digitization of land records is poised to improve transparency in land transactions, diminish property ownership conflicts, and enhance the efficiency of land management. Implementing a single-window clearance system for construction approvals will also accelerate construction processes, minimizing delays and uncertainties.
Sustainability and technology have emerged as significant disrupters for the real estate sector. Sustainability will influence green construction practices and energy-efficient designs, while technology will revolutionize smart homes and data-driven insights. With more significant environmental concerns, the focus will be on energy-efficient systems, rainwater harvesting, and smart building technologies.
Frequently Asked Questions
What is the current growth rate of the real estate sector in India?
The real estate sector in India is growing at a rate of 41% YoY, with record-breaking sales of 1.2 lakh units in Q1 of 2024.
What is the main challenge facing the real estate sector in India?
The main challenge facing the real estate sector in India is the legacy stalled projects, with approximately 4.1 lakh stressed dwelling units, involving ₹4.1 lakh crore, affected as estimated by the Indian Banks' Association (IBA).
What are the factors contributing to the growth of the housing sector in India?
The factors contributing to the growth of the housing sector in India include urbanization, government schemes like PMAY-U, policy reforms like GST and RERA, and initiatives like the Affordable Housing Fund and SWAMIH Investment Fund.
What is the projected demand for housing in India by 2050?
By 2050, half of India's population is projected to dwell in urban regions, compared to 31% in 2011, underscoring the need to adapt strategies and policies to meet the rising demand for housing.
What is the role of technology in the real estate sector in India?
Technology is expected to revolutionize the real estate sector in India, with a focus on smart homes, data-driven insights, and energy-efficient systems, influencing green construction practices and sustainable development.
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