scorecardRecovery in real estate sector likely to boost household income, says ICICI Securities
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Recovery in real estate sector likely to boost household income, says ICICI Securities

Recovery in real estate sector likely to boost household income, says ICICI Securities
Business3 min read
  • Rise in investments in residential real estate coincides with a rise in the aggregate disposable income of households, says a report by ICICI Securities.
  • For every square foot that’s built, the realty sector helps generate income anywhere between ₹2,000-6,000, depending on the type of building.
  • The average income of a construction worker in rural India as per the Labour Bureau statistics is around ₹500-600 per day while for those in the urban areas it is usually higher.
There is a direct correlation between growing household incomes and a vibrant real estate sector. The signs of recovery in the real estate industry are expected to support aggregate household income considering it is the second-largest employer in India after agriculture, says a report by ICICI Securities.

The sector generates a variety of jobs including for construction workers and other informal jobs for masons, plumbers, concrete workers, electricians, carpenters, painters, drivers, helpers, loaders, etc.

For every square foot that’s built, it helps generate income anywhere between ₹2,000-6,000, depending on the type of building — ranging from basic to high-rise luxury skyscrapers.

“Incremental value additions done to the builder-finished construction by end-users can go up to several thousand rupees per square foot depending upon the taste and capability of the end-user,” ICICI Securities says.

How much does construction pay?
The construction sector is also a better paymaster than agriculture, the report adds. The average income of a construction worker in rural India as per the Labour Bureau statistics is around ₹500-600 per day. In urban areas, it gets higher.

“Anecdotal evidence for larger cities indicates the wages are at least 30-40% higher for construction workers with higher skills and experience,” the report says.

Another group of professions to benefit from real estate development are mortgage lenders, material suppliers, contractors, architects, designers, engineers, lawyers, real estate brokers, etc.

In addition, allied sectors involved in labour-intensive manufacturing activity in the unorganised segment — such as furniture, ceramics, glassware, lightings and other decorative products – also benefit from an upcycle in real estate. Large-scale organised manufacturing like cement, steel, ceramics, plywood, paints, adhesives, etc are also beneficiaries.

“Household real estate investment cycle is rising after a decade of stagnation during which its share in gross fixed capital formation (GFCF) dipped from 37% in FY12 to 25% in 2021. The cyclical recovery in residential real estate will boost income growth of related stakeholders mentioned above. Workers involved in the leisure segment, which again is dominated by the unorganised segment, are also likely to see buoyant income growth,” said the report.

However, the report mentions that agriculture wages remain a key risk to aggregate income growth, given its large weight within the aggregate workforce. And the prospects of it will depend on how monsoon and agriculture output pans out in FY24.

Wage bills to rise all across
ICICI Securities also says that the aggregate wage bill of the private corporate sector has been expanding more than the nominal GDP growth over the past decade.

“The trend is likely to continue in FY24 going by recent salary surveys and hiring trends in the formal segment although IT services, with its large weight, is expected to lag,” the report said.

According to a survey by Aon, salaries in India are expected to go up by 10.3% in 2023, in spite of concerns around economic volatility. This could be in response to a high attrition rate of 21.4% in 2022. In 2022, the actual salary increase was slightly higher at 10.6%.

The projected salary increase for India is the highest among major world economies like China, US and UK, Aon said.


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