Professional Documents
Culture Documents
From:
Equit-I Finance Club, IIM Indore
Introduction
Overview
15.0
34,833
9.0
7.8
21,825
6.1
10,000
24,299
5.0
9.0
6.0
3.0
0.0
2010-11
2011-12
2012-13
2013-14
12.0
600
Demographics
500
400
Factors affecting
Real Estate
State of the
Economy
300
Government Policy
100
0.322
0.3
0.382
0.4
0.3
0.2
286
357
432
534
2011
2021
2026
0.1
2001
0.278
200
Interest Rates
0.5
350,000
290,000
300,000
200,000
250,000
160,000
156,000
123,000
100,000
0
Rural
Urban
2009-10
2015-16
All India
Emerging Trends
23%
Distribution of
Investments
(H1 2014)
Source: CII & CBRE Realty 2014, Census India, CMIE Website, CREDA Website, Press
38%
32%
6%
Office
Residential
Development Sites
Others
Economic Impact
Overall economic impact of the real estate sector in the year 2013
The following is the broad estimate of the economic footprint of the real estate construction sector in the year 2013:
Total estimated real estate supply (2013)
Organised investment grade commercial office, retail and residential space (2013)
200 million sq ft
415 million sq ft
Iron &
Steel
Cement
Bricks
Glass
Sand
Wood
Others
1,03,000
78,000
47,000
34,000
15,000
45,000
48,000
87,000
70,000
18,000
4,000
7,000
35,000
33,000
1,57,000
1,00,000
16,00,000
2,000
1,05,000
1,29,000
350,000
Potential employment generated on the building site during the construction of 3.6 billion sft in 2013
5,100,000
o Built-up area and minimum capitalization requirements for FDI in real estate sector
proposed to be reduced from 50,000 sq. meters to 20,000 sq. meters and from
US$10million to US$5million respectively with a three year post completion lock-in
o Exemption from minimum built-up area and capitalization requirements for projects
committing atleast 30% of the total project cost for affordable housing
o Real Estate Investment Trusts (REITs) to be allowed with pass-through tax status
o Deduction of home loan interest increased from INR1.5 lacs to INR2.0 lacs and for
home loan repayment increased from INR1.0lacs to INR1.5 lacs
Outlook
Estimated share of the Real Estate Sector in Indias GDP
The economic contribution of the real estate sector is projected to increase significantly during the period,
from 6.3% in 2013 to almost 13% in 2025
This spiralling of growth can be attributed to the significant construction opportunities offered by the
housing sector, largely accentuated by the intensifying demand for residential space in the expanding urban
city limits
6.3
2013
13.0
2025
CRISILs view
With an improvement in economy, residential demand is expected to pick up
o But the pick up is likely to take 2-3 quarters ( 6% in 2015 and 8% in 2016)
o Consequently, growth in capital values will be moderate (3% in 2015 and 5% in 2016)
Commercial and retail real estate industry to remain subdued
Funding requirement is expected to remain high over the next 2 years; developers to sustain this period
o Going forward, developers will continue to adjust construction to avoid further liquidity pressure
o Funding to be mainly supported by banks; alternate sources to also gain momentum
Source: CBRE Research, CREDAI, CRISIL
Outlook (Contd)
Measures announced in Budget 2014-15 will help ease the liquidity crunch that the
sector is battling, and simultaneously promote large-scale investments in the
infrastructural sector
Also, the tax exemption measures announced will boost household savings, leading to
a revival in demand for real estate
Recent policy-based efforts and progressive reforms initiated in mid-2013 in the form
of Real Estate Regulatory (RER) Bill and new Land Acquisition Act will collectively
make the real estate sector more transparent and appealing for developers, investors
and buyers.
Economic and political stability are the vital catalysts for revival of the real estate
sector in India. A stable government at the helm, prospects of revival in GDP growth
and strong expectations regarding the introduction of developer and buyer friendly
policies, indicate a promising outlook for the real estate sector in 2014