The Indian property market traditionally had been unorganized and fragmented. The absence of industry status made it more of entrepreneurial driven business. The urge for professionalizing the sector lacked with in entrepreneurs. However, the recent past has seen a consolidation of positions in the market as developers are extending their capacities to meet the growing market demand.
Traditionally unorganized realty sector has slowly evolved as organized sector with entrance of professionals embracing specialized standards and transparency with open arms. The real estate sector being a critical sector has additional multiplier effect on the economy leading to an average increased contribution of 12% to India’s GDP.
It is not only second largest direct employment generating sector after agriculture; but also stimulates the demand in auxiliary industries such as cement, steel, building materials, consumer durables etc.
The Real Estate sector comprised of residential, commercial &SEZ, infrastructure at present is growing at a rate of approximately 20 to 25 % p. a. The GDP contribution of construction estimated to grow at a CAGR of 9.5% to 10% till 2022 in real terms. This would augment the overall employment in the industry increasing from the current level of around (36 to over 83 million by 2022).
Growth of India’s realty sector is subjective to various hindrances. Macroeconomics risks such as inflation, interest rates & exchange rates impede its growth.
Also, India lags behind in setting up of single window clearance system; especially in realty sector where clearances are required from various agencies. The absence of transparent system of clearance discourages the investment sentiment .The multiple window operations lead to delays, frauds, and corruption. Hence, govt must ensure that the practice of single window clearance for projects would be executed on priority basis, resulting in cut down of procedural delays. The system will also aid developers to seek all the requisite permissions in a time bound and rationalized manner yielding creation of more housing stock.
Real estate funding is also a demanding issue which needs to be channelized in a more professional way. Post liberalization, government’s policy to allow FDI in the sector has paved the way for huge capital infusion into the market. Consequently, Indian realty sector witnessed boom in investment and developmental activities. Restructuring the funding channels will magnetize the entries of both domestic and foreign realty players like PE funds, pension funds, FII’s, VC and FDI’s.
To conclude, according to me the Indian real estate sector promises to be a lucrative destination for foreign investors into the country. It can monetize the multiplier effect on supplementary sectors through proper channelization and reengineering the mechanism. Maturity of the real estate markets and rationalizing tax structure will lead to adoption of international best practices by real estate players. With conducive environment, realty sector can be driving force for an economic growth and generate high employment.
Mr. Niranjan Hiranandani –MD – Hiranandani Group.