The evolution of real estate in the last 10 years in India
Over the last decade, India has evolved into an attractive destination for real estate investments around the globe. The real estate sector is also one of the largest employers in India which has grown exponentially over the last 10 years. Apart from the primary players like developers, buyers, sellers, real estate agents, landlords, and tenants, the sector also supports more than 200 ancillary industries like steel, cement, timber, brick, etc. Today, we will look at the factors that led to the evolution of the Indian real estate sector over the last decade.
100% FDI in real estate
While the Indian Government announced that it would start allowing 100% foreign direct investment (FDI) in India in 2005, the last decade saw a sizeable foreign investment in the sector. In fact, between 2000 and 2020, the real estate sector received around USD42.50 billion in FDIs.
Real Estate Regulation Bill (RERA)
In 2017, the Government implemented the Real Estate Regulation Bill (RERA) to make developers accountable for projects and boost transparency in the sector. RERA was also designed to help make the sector more competitive, induce discipline, and make it customer-friendly. This bill has helped build trust between developers and buyers and create a structure around under-construction projects.
The Goods and Services Tax (GST)
The Goods and Services Tax came into effect in July 2017. This is a unified tax system designed to usher in a major change in the way businesses levy and pay taxes to the government. GST rates were declared for various ancillary industries like steel, cement, etc. that had a direct bearing on the cost of construction.
The GST also resulted in the abolishment of various taxes like service tax, VAT, and various other indirect taxes. This has resulted in a decrease in the cost of construction and helped boost demand in the sector.
Increase in the demand for affordable housing
The last decade was characterized by a marked increase in the demand for affordable housing in India. With private and public investments pouring into this segment, the demand for affordable homes has experienced a meteoric rise. Thousands of affordable homes are being built across the country to cater to this increased demand. Also, various housing schemes like the PradhanMantriAwasYojana, credit subsidies, and housing loans have led to the growth of the affordable housing segment.
When the government announced the demonetization of Rs.500 and Rs.1000 currency notes in 2016, there was a lot of panic among people. As a result, many people decreased spending leading to a drop in the demand for homes. Property registrations dropped and developers started putting projects on hold to avoid losses.
While the impact of demonetization reduced with time, as the demand increased, people started looking for small houses at affordable prices.
Real Estate Investment Trust (REIT)
Real Estate Investment Trusts (REITs) in the non-residential segment opened channels for both the commercial and infrastructure sector. In March 2019, Embassy Office Parks, India’s first REIT, went public. It raised Rs 4,750 crore (US$ 679.64 million) and was launched in early 2019 by global investment firm, Blackstone, and realty firm, Embassy group.
Land Acquisition Bill
In December 2014, the Government passed an ordinance amending the Land Acquisition Bill. It was intended to speed up the process for industrial corridors, social infra, rural infra, housing for the poor, and defence capabilities.
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