Realty sector will generate 75 million jobs by 2030, says KPMG report
Expected to grow to be the third largest globally by 2030, contributing over 15% to Indian GDP. Size of construction market expected to grow to more than $1 trillion
The real estate and construction sector in India is expected to grow to be the third largest globally by 2030, contributing over 15% to the Indian GDP, emerging as the largest employer in India providing employment opportunities to over 75 million people, a report by KPMG has said.
The size of the construction market is also expected to grow to more than $1 trillion by 2030.
KPMG India and the National Re a l E s t at e D eve l o p m e n t Council (Naredco) at a recent event in Capital Delhi released a background paper giving an overview of programmes launched by the Central government to address the key challenges in urbanisation and the real estate sector.
Strict and prolonged regulatory processes leading to delays in project completion is one of the biggest hurdles before the sector. Also, there are numerous land-related issues such as limited funding from banks, and limited long- term funding which hamper the sector’s growth. Lack of manpower coupled with conventional usage of technology and lack of stable and predictive tax regime, are also some of the core afflictions of the sector.
According t o t he report, nearly 110 million houses would be required by 2022 in urban as well as rural India to provide housing to all citizens. This includes the current shortage of over 60 million houses, out of which around 20 million exist in urban areas. Accommodating the India’s urban population, which is forecast to increase about 40% to over 580 million by 2030 from 420 million in 2015, will be a problem.
Keeping this in mind the government had launched several large programmes (such as Smart Cities, Housing for All, AMRUT, HRIDAY etc.) along with policy support (Real Estate Act, REITs, GST) to accommodate such a vast population base.
Projects required big investments and also had huge revenue earning potential. The ‘ Housing for All’ initiative required an i nvestment of $ 2 trillion by 2022. Also, the potential value of commercial office assets which could come under REIT (real estate investment trust) was more than 400 million sq ft, worth around $50 billion. Infrastructure projects in the pipeline included 432 projects worth ₹ 6.5 trillion for roads; more than 400 projects worth ₹ 6 trillion in railways; 70 projects worth ₹ 670 billion for the development of airports and 75 projects worth ₹ 551 billion for the ports.
“With every sixth person getting urbanised globally being an Indian, the real estate and construction sector holds significant opportunity for both global and domestic companies engaged across the value chain (design, development, construction, finance etc),” said Neeraj Bansal, partner and head, building, construction and real estate sector, KPMG India.
Senior government officers who spoke at the Naredco conference called upon developers to live up to their promises, and ensure consumers do not suffer endless delays in possession.
“There is a huge responsibility on all of you to be equally responsible to ensure that consumers don’t suffer. Consumers have suffered at the hands of many real estate companies across India. They promised houses, and did not deliver in time,” NITI Aayog chief executive officer Amitabh Kant said.
Asking the industry to work with “self discipline”, he said “if consumers suffer, the credibility of industry goes and nobody will trust the industry in future. That is why, it is important that we live up to our words... We ensure that there is greater level of professionalism,” he added.
Echoing the sentiment law minister Ravi Shankar Prasad said given that India’s aspirations and expectations were changing, not sticking to delivery timelines would lead to “complications”.
“Therefore, the most import ant point I would l i ke t o highlight for your consideration is to reclaim the credibility quotient of the segment,” Prasad said and lauded the role of developers who had done “very well” in meeting the expectation of the consumers, but said that a handful of black sheep brought a bad name to the sector. “There needs to be an honest introspection,” he said.
In his address, Nitin Gadkari, union minister for road transport and highways, urged developers to cut construction costs and avail dollar loans. He also announced t hat pending work on t he 18-km Dwarka Expressway in the National Capital Region would start in the next three to four months.
“I nterest cost i s high i n our country. At one time, the rates were as low as 6.25%. The government is taking steps to lower the interest rates. But it will take time to reach that level,” Gadkari said.
If all goes as planned by the Haryana Urban Development Au t h o r i t y ( H U DA ) , t h e Souther n Peripheral Road ( SPR), connecting Faridabad Road and Sohna Road to the Delhi Gurgaon Expressway will become motorable by t he middle of Se ptember. Completion of the 16-km, 150 metre wide road is likely to open up upmarket real estate space from Golf Course road to the Delhi-Gurgaon Expressway. SPR starts from the FaridabadGurgaon Road near Ghata, passes through Sohna Road at Vatika Chowk, and connects to the Delhi Gurgaon Expressway near Kherki Daula. However, as HUDA could not acquire a 300metre stretch, a part of the road has not been completed. Draw of lots to provide accommodation for people ousted from their homes was done at the HUDA office in Gurgaon on Tuesday.
Once SPR becomes operational, uptake in absorption of hundreds of residential and commercial properties could be expected in an area. This will definitely come as positive news for the NCR market as a slowdown has impacted both sides of National Highway 8 because of non-completion of major roads, including the SPR and NPR.
H U DA a d m i n i s t r a t o r Yashpal Yadav, who oversaw the draw of lots on August 16, said the authority was planning to make the road motorable by September 16, and in the interim a 16-metre revenue road would be repaired to enable vehicles to cross the 300-metre stretch of Rambir ki Dhani. “We have asked the allottees to pay the earnest money within a week so that the allotment process can be completed at the earliest. The letters will be issued soon,” Yadav said.
The importance of this road can be gauged from the fact that large real estate projects by DLF, Tata, Raheja Developers, Ireo, Parsvnath, BPTP, Vipul and Emaar MGF, and Unitech have come up along this road. Work on more than 25,000 units is nearly complete and many more projects have been launched. However, lack of connectivity, and heavy congestion on Sohna Road has put off many buyers.
The completion of the 16-km long SPR was stuck because HUDA could not acquire Rambir Ki Dhani, a small chunk of land with houses, whose owners had sought legal recourse, after HUDA sought to acquire their properties. After much effort, the urban authority has somehow convinced the owners to take alternative plots in Sector 49 under the Relief and Rehabilitation policy of the government, which will pave the way for completing the road, with the caveat that no one seeks judicial recourse again.
“There are some allottees who want HUDA to give the plots free of cost or under the Final Terms of Settlement like the NPR but this is not possible. This case comes under R&R policy whereas the NPR issue was decided by the court as a one off case,” said Yadav.