Real Estate to Contribute 13% to India's GDP by 2025

Oct 21, 2019 Share

India, being the world’s fastest growing economy, is the seventh largest economy in the world. Gross Domestic Product (GDP) is defined as, ‘an aggregate measure of production equal to the sum of the gross values added of all residential and institutional units engaged in production and services (plus any taxes, and minus any subsidies, on products not included in the value of their outputs)’, by the for Economic Co-operation and Development (OECD). In simple words, GDP is a measure that counts the overall development of a nation.

It tracks the record of all the economic activity in a country.

Development in the real estate sector substantially contributes to measure economic development of a country.

  • Rapidly developing infrastructureconstruction of metros, broadly flourishing IT sector and industrialization, the real estate sector in India is set to contribute nearly 13 percent to India’s GDP by 2025.
  • A at Infrastructure Investors’ Summit, Mumbai, 2018, the real estate sector to reach over USD 1 trillion by 2030 in India. This is potentially said to make India, the third largest economy in the world.
  • The real estate stock is envisioned to reach a landmark of 200 million square feet by the end of the year, over current 3 million square feet, in 2019. This rate of development tremendous as compared to the progress witnessed by India about a decade ago.
  • Demand for residential or housing sector has increased owing to . Thus, the growth in commands surge in commercial, hospitality and retail sector as well.
  • Also, implementation of Real Estate (Regulation and Development Act, has led to transparent communication between builders and buyers.)
  • Real Estate Regulatory Authority (RERA) has digitised the forms of communication like providing buyers with all the details of a project, option to file complaints and it also looks after fast-track dispute resolution for the same. Owing to these factors, various multinational companies (MNC’s) are establishing their base in India, which in turn, boosts the employment sector.
  • Availability of employment opportunities directly or indirectly opens gates for real estate investment. All of these factors are mutually dependent. Construction is the fourth largest sector that encourages Foreign Direct Investment (FDI). And so, the government of India has allowed 100 percent of FDI in township and other development projects in India. This has led to an increase in FDI in India.

‘Housing For All’ scheme under Pradhan Mantri Awas Yojana (PMAY), an initiative by the government of India is reportedly expected to bring investment worth nearly USD 1.3 trillion in the realty sector by 2025.

  • Nearly 60 million houses (40 million in rural areas while 20 million in urban areas) are to be built under the ‘housing for all’ scheme. Considering this speed of development, apparently, urban areas will cover 70 percent of India by 2020 and the rest of the areas will be developed further by 2025. More than urbanisation, it would provide ease of access to basic necessities of life. Thus, over 543 million people are expected to live in urban India by 2025.
  • Along with growth in the residential sector, the demand for co-working spaces, commercial, warehousing and logistics is set to witness a massive paradigm shift. Infrastructural growth has been one of the driving factors for the expansion of satellite cities in peripheral areas. We can consider the example of National Highways.
  • As per a survey, till 2014, on an average, 3 kilometres of highway roads were constructed daily, while, as of 2018, nearly 27 kilometres per day are constructed. The National Highways today constitutes is said to occupy twice the area it constitutes today, which is nearly 96,000 km. This rate of development is a revolution in itself. This revolution will change the course of real estate market in the upcoming years.

Owing to all of these factors, a significant increase has been witnessed by 600 percent in the cross-border capital flows to India’s real estate sector, as per report by Indian Brand Equity Foundation (IBEF).

According to a report by IBEF, the Securities and Exchange Board of India (SEBI) has provided the Real Estate Investment Trust (REIT) platform to aid investors (of all types and different walks of life) to invest in the Indian real estate market. It is said to create an investment opportunity worth nearly USD 19.75 (Rs 1.25 trillion) in the Indian market over the years.

Indian real estate developers have shifted gears and have accepted new challenges to serve well-sound consumers (about the market trends and other aspects of real estate) and ever-evolving globalisation trends. Builders are striving to meet the respective standards.

Real estate developers, with the growing need to manage multiple projects across cities, have started investing more in centralised processes to source material, arrange manpower and hire qualified professionals like project managers, architects, interior designers and engineers. Taking into account all of these factors, it is no wonder that the real estate sector is set to contribute 13 percent to India’s GDP by 2025.

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