Real estate and construction sector in India is expected to be the third largest globally by 2030, contributing over 15 per cent to Indian GDP and emerging as the largest employer in India providing employment opportunities to over 75 million people, a background paper by consultancy firm KPMG in India and the National Real Estate Development Council (NAREDCO) said.
The paper provides an overview of the key programmes launched by the central government in the recent past to address the key challenges in urbanisation and the real estate sector, and throws light on the policy reforms undertaken by government to address these concerns.
“India’s urban population is forecasted to increase by about 40 percent from 420 million in 2015 to over 580 million by 2030. The government has launched several large programmes such as Smart Cities, Housing for All, AMRUT, HRIDAY along with policy support Real Estate Actto accommodate such a vast population base,” the paper said.
According to the paper, nearly 110 million houses would be required by 2022 alone in urban as well as rural India to provide housing to all citizens. This includes the current shortage of over 60 million houses, out of which around 20 million exist in urban areas.
“There are a number of solid infrastructure projects in the pipeline. These include 432 projects for roads, more than 400 projects in railways, 70 projects for the development of airports and 75 for the ports,” the report said.
The paper attempts to analyse the construction development sector as a whole. The sector has attracted over $24 billion Foreign Direct Investment (FDI) between 2000 and 2015.
“India will need to construct 43,000 houses every day until 2022 to achieve the vision of ‘Housing for All’ by 2022. The sector is expected to contribute 15 per cent to the Indian economy by 2030, become the largest employer by 2022 – employing about 75 million people or more than 13 per cent of the total estimated workforce of India, remain the largest contributor to the state exchequer and will consume almost a quarter of India’s total electricity need by 2030,” Neeraj Bansal, Partner and Head, Building, Construction and Real Estate Sector – KPMG in India.
According to the KPMG-NAREDCO report strict and prolonged regulatory processes leading to delays in project completion is one of the biggest hurdles the sector is facing. Also, there are numerous land-related issues with limited funding from banks, limited availability of long-term funding also posing tough times for growth on the real estate sector.
Lack of manpower coupled with the conventional usage of technology followed by the lack of stable and predictive tax regime, are also some of the core afflictions of the sector.
No immediate possibility of interest rates subsiding
Minister for Road Transport, Highways and Shipping, Nitin Gadkari on Friday ruled out the immediate possibility for interest rates to subside but exuded hopes that reduction in interest rates would happen in next few months ant till then asked the construction and real estate industry to woo their NRIs friends and other such individuals and institutions to arrange for loans in dollars for their projects as an alternate for higher interest rates.
“Loans in dollars currency for projects stuck up for want of money would work out much cheaper as their repayment should happen in the same currency until interest rates begin to subside in next few months as currently, it is highly unlikely that the relevant institutions can tame with the status quo of prevailing interest rates”, said Gadkari.
The minister also anticipated emphasizing that the prevailing sad scenario of cement and steel industry would turn for better in next few months as the government has taken several corrective measures to improve their plight, especially by imposing duties on imports from China on steel.
“Until the situation improves in real estate and construction sector in next few months, the twin industry should diversify their operations into the highways sector by coming forward to pour their contribution to it to make up for the lost time as this sector presently offers huge opportunities with government focusing on it with utmost priority,” he said.
Gadkari also called upon the real estate and construction industry to explore possibilities for their participation through joint ventures operations in the Delhi-Jaipur express highway project on both side of which nearly 10 big townships are proposed to come up as an immediate solution to their ongoing problems.
Referring to congestion that the NCR faces as of now, Mr. Gadkari said that the NDA government has decided to shift all the godowns and other logistics storages facilities outside Delhi to cleanse it from pervasive traffic. With this on cards, the NCR would decongest itself for smoother traffic movement.