Real Estate Sector in India

An Overview

Real Estate sector is considered to be the backbone of the

Indian economy. It contributes majorly in the growth and

stability of the economy.

India is one of the fast growing economies which are

attracting private domestic as well as overseas funds and is

the fifth largest destination of foreign investment.

This real estate boom in India is linked to country’s economic stability. It contributes to around 8.5% of the

total GDP.

There are a lot of innovative ideas that came up in the real estate

sector some of which completely transformed the face of the

sector.

Owing to these changes India has took a leap from being an

undeveloped economy to a developing one and is fast

approaching towards being a developed economy.

Various construction groups are coming up with up various out

of the box ideas. Apartments in Ghaziabad are a very fine

example of infrastructure development. Buildings and

townships in Projects in Ghaziabad are loaded with facilities.

This sector has been a good employer as it provides large

number of employment opportunities and hence the second

largest employment generator in the economy.

With the rapid growth in population and urbanization there

is a great demand for housing, real estate projects were

launched all across the country especially in high population

density region of NCR.

Some changes apart from infrastructure that brought a

revolution is liberalization of FDI regulations, that is, the

decision to allow foreign direct investment up to 100 per

cent in 2005 in townships which created an environment

friendly atmosphere for foreign investors.

But the global meltdown of 2008 in real estate produced a

downturn in the sector. With the downfall, the capital-

intensive sector started to face a crunch situation and banks

became more cautious with lending money to construction

groups to invest in the sector which resulted in lower loan-to-

property value and lending loans to only those projects which

were nearing their completion.

Further developers were facing problems with sources of

funding such as stock market. The biggest problem the

developers had to face was the delay in payments by buyers

until they had possessions for their property.

Real estate industry took some big and wise decisions to cope

this problem. They targeted the middle income group of the

society and provided them affordable houses and focused on

profits through high-volume and low margins of profit.

This helped the real estate industry to grow and overcome the

hindrances.

The residential sector saw a great boost in the first quarter of

2009. Many new projects were launched with some price

improvements.

The cut in bank interest rates, correction in the prices and

smaller apartment, a shift from luxury to low-cost housing

increased the affordability for homebuyers.

Many new locations which were earlier not very attractive to

homebuyers have come up with townships like the Projects in

Ghaziabad.

The recent trend has shown that the far flung sub-urban

areas which were rather inexpensive came with high

priced projects. With the recent change in attitude of

people from living on rent to buying their houses has

increased the demand of new houses and has resulted in

the development of new townships. Apartments in

Ghaziabad is an example of development in sub-urban

areas.

With banks supporting the real estate sector fully and the

recent cut in repo rates has brought happiness amongst the

developers.

To meet the further demands of the industry the RBI should

plan to reduce the home loans so that more buyers are

inspired to buy homes.

This will help the real estate to flourish and take Indian

economy to next level.