A Reality Check of Real Estate Sector in India

The real estate sector in India is looking forward to a better future in the coming years

Pradeep Kumar Biswal

The real estate sector in India is looking forward to a better future in the coming years. While the contribution of the sector to GDP was around seven percent in 2021, it’s expected to reach thirteen percent in 2025 and fifteen percent by 2030. In terms of employment it also stands next to agriculture. Two big interventions by Government of India in the recent years gave a push to the sector. First is the enactment of Real Estate (Regulation and Development) Act, 2016 which was implemented from 1st May, 2017 and the second is the introduction of Real Estate Investment Trust. Both these reforms facilitated a structural shift in the sector and created an opportunity for investment intended to improve growth and stability.

There has been a perceptible improvement in the ranking of Tier I cities like Delhi, Mumbai, Bengaluru in the global real estate transparency index. While it stood at 36th in 2022, it has jumped to 31st in 2024 out of 89 countries. By no means it’s a small achievement. The scenario in Tier II cities is no bleak. There’s ample opportunity for the sector in these cities in view of their potential for growth and sustainability. The demand for affordable housing is growing in small cities for middle and lower income households. This has to be addressed in a more inclusive policy framework.

There’s an absence of policy by the state governments so far real estate sector is concerned. Perhaps Madhya Pradesh is the only state to have a Real Estate policy in place. Other states need to follow the example. The biggest challenge for the sector is in terms of availability of land parcels in urban areas. Some states have come forward to provide government land for real estate development. The New Town in Kolkata and Dwarka in Delhi are bright examples. There government agencies acquired and developed land and allotted to the real estate enterprises in a transparent process. Today I came across one advertisement in Economic Times by New Okhla Development Authority in UP offering plots for hotels through e-Auction.

Needless to say hospitality sector and real estate sector go side by side. The same model can be followed in other states. While NAREDCO, the apex body of real estate sector, demands MSME status for the sector, there is enough justification for the government to treat it at par with MSME sector and provide equal incentives. If land is provided at a concessional rate it will go a long way in reducing the cost and increasing the affordability for the homebuyers.

Now Government of Odisha is contemplating to develop a new city in the outskirts of Bhubaneswar in Gothapatna area. This is a welcome step. It will ease the infrastructure gap in the capital city. However, spatial planning by the city planners need to take into account the eco sensitivity of the area since it is located close to a reserve forest and the infrastructural deficiencies in that region. While it should earmark dedicated areas for public utilities like urban transport, healthcare, education, amusement and commercial facilities it will be desirable to design it more in a vertical expansion mode instead of horizontal expansion since availability of land for future expansion will be a Herculean task. If space is provided for more and more multi-storey buildings then there will be economic and efficient use of the land.

Moreover, it will induce private investment by real estate enterprises and save money for the public exchequer. The government can develop the land with provisions for required amenities of a model city and then involve the private investors to develop the city both in residential and commercial areas. The needs of the middle income and lower income groups can also be safeguarded by appropriate measures.

(The author is a poet & columnist and a former bureaucrat. Views expressed are personal)