The real estate sector, one of the largest employers after agriculture, has the potential to contribute as much as 15% to 18% of the country’s GDP by 2030 and will play a key role in achieving India’s goal of a 5 trillion-dollar economy. The real estate sector also creates indirect employment in associated sectors such as plastics and petrochemicals, steel, cement, infrastructure, etc. The Government’s thrust on affordable housing has come as a booster to developers and added impetus on policy-related issues would help further strengthen the real estate sector.
Increasing Demand
India accounts for 16% of the world’s population but only 2.6% of the land. Productive and efficient use of land, therefore, becomes a priority. Also, most land parcels are fragmented small pieces of land under private ownership. This comes as a hurdle for integrated projects involving large land parcels. On the other hand, rapid urbanization is generating a huge demand, especially for affordable housing. It is estimated that by 2030, 25 million units of affordable housing units will be required. This means that developers will have to increase land acquisition and construction activity to cater to the demand.
Government Initiatives
Real Estate has been one of the few sectors that were able to withstand the blow dealt by the pandemic and in fact, was even able to show growth, while most other sectors were tottering. This was possible due to the Government of India’s introduction of several initiatives such as the reduction of major input costs, RERA, and GST to promote housing for all. By lowering excise tax on petrol and diesel, import duty on key raw materials along with other measures to restrict exports, the government has effectively reduced input costs. With the introduction of RERA, the government has brought transparency and reform to the real estate sector, making developers accountable. While the introduction of GST has simplified a complex process of taxation, it has also placed the sector on a steady growth path.
Recommendations
The demand for housing is still high and with a little more thrust on the sector, the government can easily fulfill its plan of housing for all. It would be highly beneficial if the government could introduce additional policies to benefit all stakeholders. With regards to GST, the government can consider the restoration of input tax credit which will make housing prices more competitive and allow developers to pass on benefits to customers. Setting up single window clearance will simplify the entire approval process as it will bring everything under one umbrella. The government should also consider increasing the upper cap limit for affordable housing in metro cities to attract more homebuyers. An increase in the cap would result in affordable housing benefits being extended to a larger buyer base and accelerate the PM’s vision of housing for all. Incidentally, increased housing demand would also translate into additional revenue for the government.
The real estate sector is facing a shortage of skilled labour. Most skilled labour come from north Karnataka, Bihar, Tamil Nadu, Rajasthan, Orissa, Uttar Pradesh, and West Bengal. It would be of great help if the government could create an inclusive skill development program specific to construction in partnership with the real estate sector to address this issue. Developers on their part should adopt newer technologies in order to reduce complete dependence on labour.
Consolidation of the real estate sector with large and established players being the preferred choice for potential home buyers added to the increased hiring in the IT / ITES sectors has translated into a steady rise in demand for quality housing projects. The real estate sector will continue to remain one of the key contributors to the economy and therefore, added thrust on the real estate sector would be a win-win situation for developers, the government, and home buyers in general.
