Why is the real estate industry important for the Indian economy?
Real estate includes a variety of segments dealing with land and the buildings on it as well as related resources if necessary. Along with the economic boom in India after market liberalizations of the early 1990s there was a high demand in nearly all real estate segments. Those are commercial, industrial, retail, warehouse, hospitality and residential real estate. Not to underestimate the construction industry which is closely interconnected with real estate, providing the largest share of workforce. During the years of high GDP-growth rates, the real estate industry created a profitable circle of attracting investments, creating jobs for largely unskilled workers, and providing the property that other industries needed as office space or for commercial and residential purposes.Office is the champion
Even before the coronavirus-pandemic, the residential segment slightly declined, in terms of sales and occupancy. New governmental regulations as well as a gap between demand and supply of housing, especially for the low-income group, could be some reasons. Thereby, the key driver for the real estate industry in recent years has been the office and the retail segments. The office segment is driven by a demand from tech companies and has, by far, attracted the highest investments in 2020. The retail segment profits from the growth in the e-commerce market.Affordability in housing
Central government policies since 2014, like the demonetization in 2016 and the implementation of the Goods and Services Tax (GST) in 2017, also affected the real estate industry. On the other hand, the “housing for all” program in 2015 or the introduction of Real Estate Regulation Authorities (RERA) in 2017, were directly targeted at the real estate sector. The overall aim was to reduce corruption and illegal property development across the country, as well as enhance affordability for housing and strengthen the rights of buyers. As housing was most affordable in financial year 2020 compared to the previous decade, the main challenge for policymakers was now to convince the industry of focusing on the demand. Steps in this direction were taken in the latest Union Budget with tax reductions and further investments in affordable housing.
