Realty will power economy into 'big' league

Globally, real estate development is an important parameter to measure economic growth. If one just looks at the demand for homes in India, the growth potential is huge.

Initiatives by the Government, including 'Housing for All by 2022' offer major growth potential, not just for the industry but also for economic development and GDP growth.

Indian real estate is the engine which will power the Indian economy into the 'big' league.

From the ancillary industries that it supports to job creation – easily, the next in line after agriculture and manufacturing – Indian real estate has the potential to reach the magic figure of 'trillion dollar'.

That is the destination; let us look at the route map to achieve this. A KPMG Report released at Naredco and APREA's Real Estate & Infrastructure Investors' Summit in Mumbai last year says Indian real estate will be a $1 trillion industry by 2030.

This will propel it to being third largest globally – and this growth will be driven by not just the huge demand for homes, but also new and emerging asset classes within real estate, such as affordable housing, co-working spaces, warehousing and logistics among others.

The 'grease' which will ensure this happens easily is the post-RERA transparent regulatory environment powered by the economic and taxation reforms.

Estimates suggest that from $120 billion in 2017, the sector should grow to $650 billion by 2025. During this period, the sector's contribution to GDP is estimated to go up from the present 7 per cent to 13 per cent.

Even as the new paradigm in post-RERA scenario ensures this does happen, we also need to factor in ground realities that will play a major role.

A major role is being played by infrastructure growth, which is opening up peripheral areas as also creating satellite cities, the new growth centres of real estate.

The figures speak for themselves - from an average highways road construction pace of 3 km/day in May 2014, the figure now stands at 27 km/day.

The National Highways, earlier a stretch of 96,000 km, are now in the process of being doubled.

Infrastructure development work undertaken over the last four years is nothing short of an infrastructure revolution.

It is this revolution which will power growth in India's economy as also create growth opportunities for real estate.

Creating jobs is another aspect where real estate powers the economy and will help achieve the 'trillion' target.

The third largest employer after agriculture and manufacturing, it employs over 50 million at present. The National Skill Development Council estimates this to grow to over 66 million people by 2022.

While the initial days of the new regulatory environment saw Indian real estate going through a phase of transition, now the story is largely about enhanced growth potential.

Over the past year, we have seen real estate post higher numbers, while also evolving and adopting Global Best Practices.

From being an unorganized sector traditionally, Indian real estate has become more organized, transparent and now offers a safe and secure environment – ideal for investment that drives growth.

A major sector of the Indian economy, it witnessed implementation of landmark reforms which impacted it directly as also indirectly, be they GST, RERA, Insolvency and Bankruptcy Code and Benami Property Transaction Act, among others.

While the initial pain did exist, these reforms have taken the industry towards a healthier ecosystem and makes the trillion-dollar economy target sound feasible.

The biggest impact of all these efforts is financial discipline in the sector; which has also created a better perception for India as a global hub for investments.

Real estate sector has been recognized as the second major contributor for GDP growth after agriculture, is witnessing a gush of foreign investments in not just residential, but also the commercial segment, in the post-reform era.

Private equity investments in Indian real estate have improved 15 per cent year-on-year in January-March 2018, reaching $3 billion.

Overall, strong economic ground rules, proactive reforms and the use of technology will continue to boost the sector.

A number of new asset classes—such as co-working spaces, affordable housing, rental housing, and warehousing realty—have mushroomed in the country, and are fast gaining traction.

Powered by regulatory changes, the growth story of Indian real estate has been co-scripted by rapid urbanization, increasing levels of income and growth in Foreign and Domestic Investment, entry of international real estate players, investors and Indian corporate houses.

This suggests that real estate in India will witness phenomenal growth, making the '1 trillion' target easy to achieve.

Dr Niranjan Hiranandani (The author is president of Naredco. Views expressed in the article are his own)