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The Indian real estate sector, has witnessed several ups and downs in the 69 years since independence. Despite its long journey, this industry still needs several reforms, while many challenges continue to hinder the development of the realty sector.
Challenges faced by the Indian realty market
According to Sumit Jain, national director – residential services, at Colliers International, “The key challenges faced by the Indian realty sector are:
Need for policy clarity from the government: Implementation of the RERA (Real Estate Regulatory Authority) and GST (goods and services tax), should introduce greater transparency and prevent taxation overlap.
Absence of single-window clearances: Single-window clearance, would facilitate timely approvals and hence, allow builders to hand over their projects on time.
Ardent need for parallel infrastructure growth: Cities need to be de-cluttered, to allow new residential clusters on their outskirts to bloom. For this, accessibility through roads, highways and flyovers, is critical.
High construction cost: Construction costs remain high, owing to the rise in the cost of labour, freight, transportation, steel and cement. This doesn’t allow property prices to stabilise, even when the demand is low.
High cost of finance: Banks’ lending to real estate hasn’t shown enough growth. Moreover, the cost of funds from NBFCs have increased, resulting in price rise and delays.”
Nevertheless, experts remain optimistic about the future prospects of the Indian realty sector and point out that transactions involving the end-users and occupiers, have been on the rise. This indicates that the industry is moving from being speculative, to more end-user driven. The introduction of RERA promises transparencies and ensures that the industry gets on a high growth trajectory.
“The country has witnessed a phenomenal growth trajectory in the last 70 years and the real estate sector has contributed nearly 6% to the GDP growth,” points out Aman Agarwal, director of KV Developers and governing council member of NAREDCO. Our country has transformed significantly and the real estate sector has gone through several ups and downs in the past few years, he adds. The government is trying to boost the infrastructure and realty development in the country, via the PPP (public-private partnership) mode. Recent initiatives, such as the ‘Housing for All by 2022’ and the building of 100 smart cities, augur well for realty growth in India,” feels Agarwal.
Experts add that there is an urgent need to provide clarity, vis-à-vis the policies pertaining to real estate businesses. It is also crucial to allocate more funds towards setting up support infrastructure to improve power and accessibility, to reduce the load on central locations. Introduction of infrastructure bonds and debt funds, should also help, by reducing dependence on the banks to infuse funds.
The Indian real estate sector, is well on its way to becoming a strong force, in the domestic, as well as global market, maintains Santhosh Kumar, CEO – operations and international director, JLL India. “Various new policies and regulations are now being unleashed, to make the market more transparent and therefore, easier to deal with. We are now at a crucial juncture, where Indian real estate is beginning to shed its opacity to become more interesting for foreign investors. The incumbent government has undertaken various important policy-level measures, which will directly or indirectly benefit the sector,” Kumar elaborates.
5 things that will propagate growth in the Indian realty market
- Maturing of the Indian economy.
- Faster deployment of highways, roads and other infrastructure, leading to increased connectivity between cities, outlying areas and urban areas.
- Fast growth of the manufacturing and IT/ITeS sectors.
- Availability of housing loans with greater financial inclusiveness.
- Improving policy and regulatory environment.