How re­alty can con­trib­ute to the econ­omy’s vi­sion

Hindustan Times (Chandigarh) - Estates - - Front Page - Anuj Puri let­[email protected]­dus­tan­times.com ■ The author is Chair­man – ANAROCK Prop­erty Con­sul­tants

Union Bud­get 2020-21’s al­most pointed neg­li­gence of the real es­tate sec­tor was most puz­zling es­pe­cially since the pre­vi­ous bud­get had en­vis­aged an am­bi­tious blue­print for the coun­try’s eco­nomic fu­ture. For real­iz­ing the vi­sion of mak­ing In­dia a USD 5 tril­lion econ­omy by FY 2024-25, the de­vel­op­ment and growth of its real es­tate sec­tor is im­per­a­tive. Across de­vel­op­ing and de­vel­oped economies, real es­tate and eco­nomic growth are in­sep­a­ra­ble con­cepts.

Real es­tate is a key driver of eco­nomic growth, and by lay­ing the ground­work of mak­ing it more or­gan­ised and trans­par­ent, the gov­ern­ment has al­ready made it a more se­cure and at­trac­tive in­vest­ment en­vi­ron­ment. The fact that the lat­est bud­get gave no more than a cur­sory glance at real es­tate is a missed op­por­tu­nity to build fur­ther on this ground­work.

To pro­pel the In­dian econ­omy into the top league of global economies, the growth en­gine of real es­tate can­not be ig­nored.

RE­ALTY’S CON­TRI­BU­TION TO GDP TO DOU­BLE

De­spite global head­winds and slow eco­nomic growth in the coun­try, the In­dia Brand Eq­uity Foun­da­tion ex­pects In­dia’s real es­tate sec­tor to grow to a mar­ket size of USD 1 tril­lion by 2030. It is also likely to con­trib­ute 14% of the coun­try’s GDP by 2025 al­most dou­ble its cur­rent con­tri­bu­tion of 7-8%.

Over the years, real es­tate growth - par­tic­u­larly in hous­ing - has been cru­cial in driv­ing the In­dian econ­omy.

Reg­u­la­tory re­forms such as RERA, GST and IBC and re­lax­ation in for­eign di­rect in­vest­ment have al­ready made the in­dus­try more trans­par­ent and cred­i­ble, lead­ing to in­creased end-user de­mand.

It was ex­pected that Union Bud­get 2020-21 would aim to keep this mo­men­tum go­ing and thereby em­pha­sise eco­nomic growth. To achieve this, rad­i­cal changes in the tax­a­tion sys­tem and as well as reg­u­la­tory poli­cies are of para­mount im­por­tance.

IN­FRAS­TRUC­TURE CRE­ATION - DRIV­ING GROWTH

While the lat­est Union Bud­get did not pro­vide any real boosts to real es­tate other than in terms of af­ford­able hous­ing, it did con­tinue to fo­cus on in­fras­truc­ture. Real es­tate de­vel­op­ment goes hand-in-hand with in­fras­truc­ture as the lat­ter opens up pe­riph­eral ar­eas and cre­ates new av­enues of growth. Ear­lier, the gov­ern­ment had al­ready al­lo­cated INR 100 lakh crores for in­fras­truc­ture in­vest­ments to im­prove trans­port ef­fi­ciency over the next five years. Mul­ti­modal in­fras­truc­ture de­vel­op­ment such as roads, rail and metro im­proves liv­ing con­di­tions and spurs de­mand for res­i­den­tial, com­mer­cial, re­tail and ware­hous­ing real es­tate.

SUP­PORT­ING JOB CRE­ATION

Union Bud­get 2020-21 failed to give clar­ity on the de­ploy­ment of the pre­vi­ously-an­nounced INR 25000 Cr al­ter­nate in­vest­ment fund.

Com­plet­ing and hand­ing over these stuck projects will in­crease buyer and in­vestor con­fi­dence and help usher in a strong re­vival for the hous­ing sec­tor. Im­proved sales will lead to a strength­ened hous­ing sup­ply pipe­line and cre­ate jobs across the en­tire whiteto-blue-col­lar seg­ments of real es­tate de­vel­op­ment.

This fac­tor can­not be ig­nored. Af­ter agri­cul­ture and man­u­fac­tur­ing, the real es­tate sec­tor has the most po­ten­tial for large-scale job cre­ation. As­so­ci­ated with over 200 al­lied in­dus­tries in­clud­ing ce­ment, steel and sand, hous­ing de­vel­op­ment has a mul­ti­plier ef­fect on sev­eral al­lied sec­tors.

Ac­cord­ing to the Na­tional Skill De­vel­op­ment Coun­cil, there is a re­quire­ment of 109.73 mil­lion skilled man­power by 2022 in 24 key sec­tors.

The build­ing, con­struc­tion and real es­tate sec­tor alone is ex­pected to gen­er­ate 76.55 mil­lion jobs by 2022. The gov­ern­ment’s mega ini­tia­tive of ‘Hous­ing for All by 2022’ it­self prom­ises to be a ma­jor em­ploy­ment gen­er­a­tor and, by di­rect im­pli­ca­tion, an over­all eco­nomic growth dy­namo.

In the se­cond phase of PMAY-G, dur­ing 2019-20 to 2021-22, 1.95 crore houses are ex­pected to be pro­vided to el­i­gi­ble ben­e­fi­cia­ries. This ef­fort alone can and will cre­ate large-scale em­ploy­ment for skilled and un­skilled labour­ers.

THE NEED FOR IN­VESTOR PAR­TIC­I­PA­TION

Ma­jor re­forms such as GST, RERA, In­sol­vency and Bankruptcy Code and Be­nami Prop­erty Trans­ac­tion Act have had a last­ing im­pact on the real es­tate sec­tor. De­spite the ini­tial churn and pain, they have in­creased fi­nan­cial dis­ci­pline and a health­ier ecosys­tem. By in­still­ing re­newed con­fi­dence in home buy­ers and do­mes­tic in­vestors, these land­mark re­forms have im­proved the per­cep­tion for In­dia as a global hub for in­vest­ments.

As per ANAROCK data, pri­vate eq­uity in­vest­ments in In­dia’s real es­tate sec­tor clocked in at over USD 5 bil­lion in 2019, of which com­mer­cial seg­ment com­prised the lion’s share at over USD 3.3 bn, fol­lowed by re­tail sec­tor with USD 970 mn and res­i­den­tial of USD 395 mn. A large chunk of these in­vest­ments came from for­eign pri­vate eq­uity funds like Black­stone, Hines, As­cen­das and Brooke­field.

How­ever, hous­ing re­mains an un­palat­able in­vest­ment cat­e­gory for smaller do­mes­tic in­vestors. The Union Bud­get was an ideal plat­form from which to an­nounce ini­tia­tives to boost pri­vate in­vestor par­tic­i­pa­tion. Cur­rently, In­dia’s hous­ing sec­tor is rid­ing al­most ex­clu­sively on end-user sales, which are not enough to re­vive res­i­den­tial real es­tate and its re­lated ben­e­fits of fur­ther­ing the Hous­ing for All by 2022 goal and gen­er­at­ing in­creased em­ploy­ment.

As the se­cond-largest em­ployer and a ma­jor con­trib­u­tor to the coun­try’s GDP, the real es­tate in­dus­try is one of the In­dian econ­omy’s strong­est pil­lars. It can­not re­main a ne­glected stepchild - it must be­come the ap­ple of the gov­ern­ment’s eye. A con­vinc­ing re­vival of the In­dian real es­tate sec­tor is es­sen­tial for the econ­omy to move out of its cur­rent slow phase and achieve the mam­moth tar­gets - Hous­ing for All by 2022 and mak­ing In­dia a $5 tril­lion econ­omy by FY 2024-25.

MINT/FILE

■ Re­alty is a key driver of eco­nomic growth for In­dia

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