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How do Real Estate sales contribute to bringing up the GDP of India?

  • By Akash Sejwal
  • On Aug 03 2022
  • Business

How do Real Estate sales contribute to bringing up the GDP of India?


One of the sectors with the highest level of recognition on a global scale is real estate. Housing, retail, hotel, and business are the four sub-sectors that are included in this industry. The expansion of this industry is nicely complemented by the expansion of the corporate environment and the demand for office space as well as urban and semi-urban housing, all of which are growing at a rapid rate. When looking at the direct, indirect, and induced effects across all areas of the economy, the construction industry comes in at number three out of the 14 major economic sectors.


The agricultural industry is the one that creates the most jobs in India; the real estate industry is the one that creates the second most jobs. Additionally, it is anticipated that this industry will attract a greater amount of investment from non-resident Indians (NRIs), both in the short term and the long term. After Bengaluru, Ahmedabad, Pune, Chennai, Goa, Delhi, and Dehradun are anticipated to be the most popular places for non-resident Indians to invest in real estate.


There was a moment when the real estate industry was flooded with low-cost capital, which resulted in the production of low-quality developments. Because those stocks were not sold, an accumulation of inventory took place, which resulted in a situation in which there was an excess supply. As a result of the NBFC crisis that occurred in 2018, the flow of easy money was stopped, which caused the situation to improve. After commercial banks stopped lending to non-bank financial companies, NBFCs began to experience a shortage of liquid assets. The NBFC crisis caused a reduction in the supply of homes, a consolidation among developers, and a noticeable shift in consumer preferences toward purchasing real estate from A-grade developers due to the higher quality of these properties and the assurance that they will be delivered on schedule.


The experts predict that the real estate sector is going to show significant growth in the current financial year. This belief is based on the sales momentum that was seen in the second half of the fiscal year 2021. Prices will soon start to go up, if they have not already done so in certain areas, as a result of the growing demand coming from first-time homebuyers, as well as those trying to update existing property or scouting for a second home. This demand comes from all segments of the housing market.


In recent years, the real estate market has been witnessing a boom on a scale that has never been seen before. In 2017, the number of transactions crossed the million mark for the first time ever. This pattern persisted all the way up to 2019 when it surpassed 2 million units. According to the opinions of industry professionals, there is no shortage of prospective purchasers in the nation's cities, particularly in tier II and III towns. However, there is a shortage of housing that is priced affordably, which is slowing down the expansion of the industry.


In addition, this demand was aided by the reduced house loan interest rates, which were likewise the lowest they had been in the previous two decades. It was also helped by the idea of working from home, as well as the fact that families are now looking to enhance their homes as personal space becomes an increasingly important issue. Buyers are no longer reluctant to pay a premium price for houses built by some of the most well-known companies in the industry because they do not want to compromise on the level of quality or the amount of delivery time they receive. Integrated development is increasingly considered an essential component of holistic lifestyles.


Not only is there a significant amount of pent-up demand that will drive expansion, but the housing market in our country is also undergoing a structural shift right now. This is due to both first-time homebuyers as well as consumers who are rising up the property ladder in order to move into larger homes or acquire a second home in another region. Both of these factors are in play, which explains why this is the case. In addition, the focus of the government on the provision of housing at reasonable prices is also helping to stimulate demand.


This pattern may carry on for a few more quarters before the market experiences a correction of some kind. The general attitude has not changed, and the government should maintain its efforts to make housing more accessible for all segments of society.


According to a recent report by the India Brand Equity Foundation (IBEF), the real estate sector in India, which contributes 6-7 percent to the country's total Gross Domestic Product (GDP), is expected to reach a market size of $1 trillion by 2030 and contribute 13 percent to the country's GDP by 2025. At the present time, the real estate sector in India contributes to the GDP of the country. In addition, the industry is responsible for the direct and indirect employment of approximately 8 crore people in numerous subsectors such as construction, banking, and legal services, amongst others.


IBEF proposes that the government adopt a number of initiatives, including the following ones, in order for it to be able to accomplish these goals.


  •  Raise the maximum permissible level of foreign direct investment (FDI) in the real estate market to 49 percent while simultaneously relaxing the regulations that apply to foreign investors.

  • Offer financial incentives to builders who construct housing that is within reach of lower-income families;

  • Make land available for use in the construction of low-cost dwellings;

  • Make it possible for more people to find work in the real estate industry;

  • Maintain openness and honesty throughout the approvals and implementation of projects;

  • Create a standardized method for the clearance of windows in residential construction projects;

  • Adopting stricter building codes and strengthening existing ones;

  • Incentivize private investors to put money into low-cost housing projects;

  • Place a greater emphasis on strictly adhering to the laws and regulations that are already in place.


The research goes on to claim that the present real estate market in India is being pushed by three primary factors: the availability of financing, liquidity, and affordability. Although affordability is getting better as a result of falling interest rates, it is still one of the industry's major difficulties despite these improvements. Since 2016, when banks began lending again following a break of five years, there has been a discernible increase in the quantity of credit that is available. Despite this, the rate of improvement has been very sluggish, particularly in Tier II cities. Despite the Reserve Bank of India (RBI) outlining a number of measures to help ameliorate the situation, the level of liquidity has not improved at all.