India’s real estate sector is expected to expand to a $1 -trillion industry by 2030, says a joint report prepared by developers’ body Naredco and E&Y. According to the report released during the Naredco Finance Conclave on March 3, 2023, the sector was valued at $200 Billion in 2021, and would move to the projected label of $1 trillion in the next 7 years on account of its huge potential. The sector is likely to contribute 18-20% to India’s GDP by 2030.
The report further states that there is a favorable demand-supply gap which will propel the growth of this sector even though the current shortage of housing in urban areas is estimated to be 10 million units.
“Additional 25 million units of affordable housing are required by 2030, says the report.
However, it points out that landmark changes in regulations are required to support this growth. In order to take the sector to the size of $1 trillion, a paradigm shift in industry dynamics in terms of discipline and transparency are required, said the report.
The report points out that funding options available for housing projects in India comprise equity, private equity, AIF/ mezzanine financing, and pre-sales, including bank financing, are largely restricted to construction finance with low flexibility.
On term loan and construction finance, the report points out that generally, a term loan is available to 30-35% of the project. It is difficult to fund cost overruns in case of project delays and repayments begin prior to the generation of surplus cash flows.
“Extension of the tenor is not possible without restructuring, therefore focus is called for here. Construction completion is highly dependent on funding through a combination of equity and pre-sales,” points out the report, adding that limited variation in banking products forces borrowing from alternate channels in case of change in product dynamics.
The report also highlights that representative reasons for delays include delays in approvals, land acquisition, and low pre-sales. Supply chain disruptions and changes in market dynamics and environmental factors litigation also play a critical role.
Housing News Desk is the news desk of leading online real estate portal, Housing.com. Housing News Desk focuses on a variety of topics such as real estate laws, taxes, current news, property trends, home loans, rentals, décor, green homes, home improvement, etc. The main objective of the news desk, is to cover the real estate sector from the perspective of providing information that is useful to the end-user.
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