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Real estate: A significant contributor to the Indian economy

Real estate: A significant contributor to the Indian economy
IndiaIndia3 min read
8% decline in unsold inventory in Mumbai in last quarter ushers the probability of price rise. The real estate sector is one of the most recognised sectors across the world and a significant contributor to the Indian economy. India’s real estate sector has witnessed immense growth over the years due to infrastructure development in the form of residential, office spaces, commercial real estate, retail growth and factory spaces.

The digital summit was held on April 22, 2021.

Presently contributing 6-7% to the country’s total Gross Domestic Product (GDP), real estate sector in India is expected to reach a market size of $1 trillion by 2030 and contribute 13% to the country’s GDP by 2025, according to India Brand Equity Foundation (IBEF) recent report.

Mumbai real estate continues to contribute largely to the growth story

With Mumbai being the entertainment, fashion and financial capital of the country, it accounted for 6% of India’s GDP. With population of ~20mm in the urban agglomeration, the demand for housing, especially in the affordable and mid-income segment, is bound to rise. The real estate industry is at an inflection point and could potentially see a disproportionate growth vs. expectation.

As reported by ANAROCK Property Consultants, Mumbai and Pune collectively led the pack in driving housing sales in the first quarter of 2021, accounting for 53% of the total sales of top seven Indian cities. The report also advocated that Mumbai region saw the highest yearly decline (8%) in total unsold housing stock by the same period. In early 2020, the sector was impacted due to Covid-19, but post easing of lockdown, the sector witnessed great momentum. With the significant drop in unsold inventory due growing sentiments towards home-ownership and continued sales momentum, the supply-demand mismatch will drive possibility of price appreciation.

Greater Mumbai, in the month of December last year, broke a five-year record for the month. A record 14,783 sales were registered in December 2020 as per a Liases Foras report. Experts believe that existing and planned infrastructure will further fuel the city’s growth and it will continue to be top choice for job seekers from across the country.

Growth prospects:

There was a time when cheap money flowed into the real estate sector which led to poor quality of projects. Since those stocks were not sold, inventories piled up, leading to a situation of excess supply. The situation corrected following the NBFC crisis of 2018 as the cheap money flow was restricted. NBFCs started facing liquidity crunch after commercial banks stopped lending to them. The NBFC crisis led to reduction in supply of homes, consolidation among developers and a marked change in consumer preferences in favour of properties from A grade developers because of quality and certainty of timely delivery.

Basis the sales momentum in the second half of fiscal 2021, experts believe that real estate sector is set to register robust growth in the current financial year. With demand gaining pace – both from first time home buyers as well as those looking to upgrade their property or scouting for a second home, prices will soon start to head north, if not already started in certain pockets.

Additionally, this demand was also helped by the reduced home loan interest rates, which was also the lowest in last two decades. It was also aided by the concept of work from home and families now looking out for an upgrade as individual space becomes a crucial factor. Buyers are no longer hesitant to pay a premium for homes constructed by some of the leading names in the business, as they don't want to compromise on quality and delivery time. Integrated developments are now being seen as a key for holistic living.

Disclaimer: This is a sponsored post in partnership with Lodha Group


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