The Real Estate Economics of India

Introduction

The real estate sector is one of the most recognizable in the world. It has four sub-sectors – housing, retail, tourism and trade. The growth of this sector is accompanied by the growth of corporate status and the need for office space and urban and central residential areas. The construction industry is ranked third among the 14 major sectors in terms of direct, indirect and resulting outcomes across all sectors of the economy.

In India, the real estate sector is the second largest producer of human production, following the agricultural sector. It is also expected that the sector will enter into more Indian (NRI) non-citizen investments, in the short and long term. Bengaluru is expected to be a popular investment destination for NRIs, followed by Ahmedabad, Pune, Chennai, Goa, Delhi and Dehradun.

Market Size

By 2040, the real estate request will grow to Rs. 60000 crore (US$9.30 billion) from Rs. 8500 crore (US$1.72 billion) in 2019. The casing sector in India is expected to reach a size of US$ 1 trillion by 2030 from the current US$ 120 billion in 2017 and contribute to the country’s GDP by 2025. trippers, as well as affordable casing, also give important- demanded structure for India’s growing requirements.

According to ICRA estimates, Indian enterprises are anticipated to raise>Rs.3.5 trillion (US$ 48 billion) on structure and investment investments by 2022, compared to$ 29 billion in collections to date.

The office request in the top eight metropolises recorded22.2 msf deals from July 2020 to December 2020, while the new completion was recorded at17.2 msf at the same time. In terms of original population allocation, the Information Technology (IT/ ITeS) sector had 41 shares in the alternate half of 2020, followed by BSFI and the Manufacturing assiduity at 16 each, with the Other Services and Hookups counting for 17.. and 10, independently.

According to Savills India, the demand for real estate for data centers is anticipated to increase by 15-18 million sq. Km.ft. in 2025.

By 2020, the manufacturing sector reckoned for 24 of the5.7 million square cadence office space. SMEs and manufacturers of electronic factors rented substantially between Pune, Chennai and Delhi NCR, followed by auto reimbursement in Chennai, Ahmedabad and Pune. The 3PL,e-commerce and retail parts reckoned for 34, 26 and 9 of office space reimbursement, independently. In the case of PE investment in real estate in Q4 FY21, the office member attracted 71 shares, followed by deals of 15 and domestic and storages at 7 each.

The retail and storehouse member has attracted private investment (PE) investment of$ 220 million and$ 971 million, independently, by 2020. The placement of the Grade A office space is anticipated to exceed 700 msf by 2022, with Delhi-NCR furnishing the maturity of this need.

The launch of casing was units in the top eight metropolises of India in the alternate half of 2020. The number of real estate deals in eight major metropolises in India has increased by 2x to units from October 2020 to December 2020, compared with units in the former quarter, i.e. Healthy recovery after tight check assessed in the alternate quarter due to the spread of COVID-19 in the country.

According to the Economic Times Housing Finance Summit, about 3 houses are erected per people a time compared to the needed rate of construction of 5 houses per people. The current deficit of casing in civic areas is estimated at ten million. An fresh 25 million homes are demanded by 2030 to meet the growing civic population in the country.

Perks of investing in real estate in India

I.Robust Demand

Real estate demand for data centers is anticipated to increase by 15-20million sqft by 2024. (Savills India,2020)

Residential sector is anticipated to grow two folds by the end of 2023 as the central govt is planning tu build 20 million households under the Pradhan mantri awas yojana(PMAY).

II.Attractive opportunities

The minimum application value for rental estate investment trust has been lowered from Rs 50000 to Rs 15000 by the securities exchange board of india to make it more accessible for investors.

For leading people, investing in real estate in India can help you save significantly on income tax. If you get a loan, you can get an IT discount on annual interest paid, part of the principal loan amount, stamp tax and registration fees, and other additional deductions under Section 24, sections 80C, 80EE etc.

III.Policy Support

Indian real estate market got $5 billion in beaurocratic investments in 2019 that’s equal to 93% transactions in the last year.

It attracted a private equity investment of around 23946 crores across 18 deals in 2018.’

IV.Investment Opportunities

There is a huge surge in the private equity investments because of increased transparency and huge returns.

India registered investments worth around $2.5 billion in first quarter of 2021.

FDI in the sector was at $51.5 billion between April 2000 and may 2020.

Investments and Developments

The Indian real estate sector has seen huge growth recently with increase in demand for commercial and residential areas. According to Colliers India, real estate consultant, the institutional investment in the Indian real estate sector is expected to increase by 4% to reach Rs. 36,500 crore (US $ 5 billion) by 2021, driven by an increase in the interest of investors in finding attractive prices during the epidemic. According to a recent report by Colliers India, private equity investment in Indian real estate reached US $ 2.9 billion in the first half of 2021, an increase of> 2x from the first half of 2020.

Exports from SEZs amounted to Rs. 7.96 lakh crore (US $ 113.0 billion) per FY20 and grew ~ 13.6% from Rs. 7.1 lakh crore (US $ 100.3 billion) on FY19.

In July 2021, the SEBI (Securities and Exchange Board of India) reduced the least amount of Real Estate Investment application from Rs. 50,000 (US $ 685.28) to Rs. 10,000-15,000 (US $ 137.06 – US $ 205.59) to make the market more reachable to small investors and businessmen.

According “to information provided by the Department of Industry Promotion and Internal Trade Policy (DPIIT), the construction sector is the third in terms of FDI revenue. Construction is the third largest in terms of FDI inflow. FDI in the sector (including infrastructure development and jobs) stood at $ 51.5 billion between April 2000 and June 2021.

Government Initiatives

The Government of India and the governments of various countries have taken a few steps to promote development in this sector. The Smart City Project, which has a plan to build 100 smart cities, is a great opportunity for real estate companies. Below are some of the major Government programs:

• In the union budget 21-22 tax rebate up to Rs 2 lakh on interest on housing loan for economic housing projects have been extended upto 2022.
• Package of Atmanirbhar Bharat 3.0 announced by Finance Minister Mrs. Nirmala Sitharaman November 2020 includes ways to assist homeowners and buyers’ income tax to purchase / sell residential properties (up to Rs. 2 crore (US $ 271,450.60) from, November 10 2020 to June 22, 2021).
• MoHUA launched an inexpensive rental housing complex portal.
• On October 27, 2020, the government announced the implementation of the Real Estate (Regulation & Development) Act, 2016 in the union area of ​​Jammu and Kashmir. This has paved the way for any Indian citizen to buy land and non-agricultural property, contrary to the preferences of local citizens only before.
• In order to revitalize almost 1,600 permanent housing projects in the country’s highest cities, the Union Cabinet approved the establishment of Rs. 25,000 crore (US $ 3.58 billion) is another investment fund (AIF).
• The government has established the Affordable Housing Fund (AHF) at the National Housing Bank (NHB) with a first choir of Rs. 10,000 crore (US $ 1.43 billion) through the short-term lending sector of banks” / financial institutions to finance the HFC’s small loan.
• As of februray 28,2021 India approved 427 SEZs of which 265 were already operational . Mostly SEZs are in the IT/BPM sector.

Conclusion

Road Ahead

The Securities and Exchange Board of India (SEBI) has given its approval to the Real Estate Investment Trust (REIT) platform, which will allow all types of investors to invest in the Indian real estate market. It will create an opportunity that costs Rs. 1.25 trillion (US $ 19.65 billion) in the Indian market in the coming years. Responding to the foundation of increasingly knowledgeable consumers and remembering the aspect of global trade, Indian retail developers have changed gears and embraced new challenges. The most significant change was the transition from family to business. Housing developers, in response to the growing need to manage multiple projects across cities, invest in joint ventures to acquire property and organize staff and hire trained professionals in expanses such as project management, architecture and engineering.

The residential sector is expected to grow notably, as the central government is aiming  to construct 2 crore cheap housing units in urban areas across the country by 2022, under the Pradhan Mantri Awas Yojana (PMAY) initiative of the Department of Housing and Urban Development. The expected increase in the number of houses in urban areas will increase the need for commercial and retail office space.

The current shortage of housing in urban areas is estimated at ten million. An additional 25 million homes are needed by 2030 to meet the growing urban population in the country.

The growth of FDI flows in India’s retail markets encourages open expansion. Engineers, in order to attract funding, redesign their accounting and management systems to meet the appropriate standards of diligence. Indian real estate is expected to attract a significant amount of FDI over the next two years with US $ 8 billion invested in FY22”.

Author: Sagar Chaturvedi, in case of any queries please contact/write back to us at support@ipandlegalfilings.com or IP & Legal Filing

References

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