Real Estate: The Second Largest Employment Sector in India

real-estate-the-second-largest-employment-sector-in-india
Sep 13, 2019 Share

Real estate, one of the most flourishing and recognized sectors in the world, is the second largest employment sector in India after agriculture. The Real Estate in India contributes nearly 7 percent to the Gross Domestic Product (GDP) of the nation. Owing to the surging demand for real estate investment, it is considered as one of the largest sectors supporting economic growth in the country. The magnification of realty sector directly or indirectly depends upon the growth of corporate sector and infrastructural development. A report by Economic Times released in February 2017, says that there are nearly 248,408,494 houses in India, which is more than the average population of countries in the world.

What is Real Estate?
Real estate can be defined as a piece of immovable land i.e., physical property that includes buildings, garden, landscape, water resources, food crops and other utility elements and offers the rights to make use of the same. Real estate is divided into three main categories namely, residential, commercial and industrial. Residential real estate comprises the housing sector (residential plots, apartments, row houses, villas, bungalows, condominiums, etc.), while the commercial sector includes educational, institutional, hospitals, malls, retail stores and other workspaces. The industrial real estate sector deals with providing the land to set up manufacturing unit for various industries. Any investment in real estate is sure to give you a better return on investment (ROI) provided you study the market trend thoroughly.

Real Estate Market:
According to a report by Civil Service India, the real estate industry is set to grow further by 20 percent in the coming decade. Another report by Indian Brand Equity Fund (IBEF), states that the Indian real estate market has the potential to reach a landmark of USD 180 billion by 2020. As per the same report, this sector is said to flourish at a Compound Annual Growth Rate (CAGR) of 11.2 percent during the financial period or financial year (FY), from 2008 to 2020. The rapidly developing infrastructure (also in the inner parts of villages and towns) has been one of the driving factors for overall growth in the realty sector. The demand for commercial spaces (retail, e-commerce, IT and other workspaces) has significantly increased in the past few years. According to a report by IBEF, in 2017, nearly 18 million square feet was occupied by office spaces across top 8 cities in the country. Private equity inflows witnessed an ascent by 150 percent between 2014 and 2017, in office and IT sector real estate. A research by officials at Business Standard states that nearly 39 million square feet will be occupied by retail space and commercial spaces between the financial period 2019 and 2022. Out of the total area, 71 percent is estimated to be occupied by metro and tier-1 cities while the remaining 29 percent will be occupied by tier-2 and tier-3 cities. This rate of development is tremendous as compared to the growth in the previous decade.

Real estate deals with all the aspects related to an immovable property right from planning, architecture, designing, engineering, local and state allowances and approvals, execution, marketing, etc. The entire process for successful development of a project needs a lot of manpower. Architects, project managers, project supervisor, site supervisor, site workers, channel partners or brokers, material suppliers (concrete, cement, glass, steel, copper, tiles, etc.), electricians, gate keepers, etc. are required for successful completion of a venture. There are a number of people (especially, college interns and those who need to make ends meet) who work for the assigned people and work on the designated project. Additionally, a back-up team is also hired to prevent delay in delivery of projects. A back-end team is required to closely monitor the progress in construction of the project. Owing to the advancement in the technology and everything available at your fingertips, each project today has an independent website dedicated to the project. This, in turn, calls for web developers. Graphic designers play a key role to advertise a project (print ads). Also, no matter how brilliantly structured a project is, it needs to be advertised whether through a word of mouth, print ad, site visit, attractive discounts, etc. And that’s where channel partners or brokers play a key role. Channel partners or brokers have core teams dedicated to each segment of real estate, social media marketing, pre-sales department and sales department. These core teams further carry out the procedures to sell the spaces. Builders collaborate with a number of brokers to sell their spaces. Around 250 or more people are required to run a project successfully. This number of people is limited to a single project and there are thousands of such ongoing projects. Considering all these facts, it is no wonder the real estate sector is the second largest employment sector in India.

Scope of Development:
Recently, the government of India has allowed 100 percent of Foreign Direct Investment (FDI) in township and other development projects. This step will rationally increase FDI in India. The Smart City Project, an initiative by the government of India, to develop 100 smart cities is a golden opportunity for builders across the country. ‘Housing for All’ scheme by Pradhan Mantri Awas Yojana (PMAY), is reportedly said to construct 60 million houses and fetch investment around USD 1.3 trillion in the realty sector by 2025. In case of infrastructural development, today, highways are constructed with a rapid speed of 27 kilometres per day. Infrastructural development attracts establishment of corporate sectors and growth in the commercial and corporate sector demands availability of residential or housing segments. These are constitute various segments of real estate and are mutually dependent on each other. All of these factors have led a significant increase in the cross-border capital flows to India’s real estate sector by 600 percent, as per a report by IBEF.

The current finance minister of India, Nirmala Sitharaman, in August 2019, announced a total of Rs 20,000 crore liquidity support to the struggling housing finance companies (HFCs). Merger of 27 banks into 12 public sector bank (PSB) was declared in the same month. Both the announcements are said to fetch more FDI, reduce interest rates on secured loans and encourage more people to invest in PSBs. Owing to all of these factors, real estate sector in India is expected to contribute 13 percent to India’s GDP by 2025.

Also, we should not overlook the fact that this amount of development needs huge manpower, thus, this will increase the number of employed individuals in the country. Thus, real estate is the second largest employment sector in India.

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