The Indian real estate should be treated at par
with other sectors like electricity, water, roads and highways within the
scope of ‘infrastructure’ sector, and this will result in lower interest rates on
loans and increased availability of banking and financial institutional funds
to both developers and individuals, leading global real
estate consultant has said.
In
India, power, oil and gas, ports and shipping, roads and bridges, telecommunications,
aviation and dams and irrigation canals are considered a part of the
infrastructure sector. These have some common salient features that are
critical for defining them as part of infrastructural sector. The real estate
sector is quite analogous to infrastructure sector as it has similar
characteristics and faces similar challenges and risks, according to Cushman & Wakefield.
“The
RBI and the Government now must recognize the contribution of the Indian real
estate sector to the economy. As an industry it provides substantial
employment, capital generation and enables economic activities such as
manufacturing, trading, services, etc. Hence, ensuring that the sector is
provided with the similar benefits as provided to other infrastructure sectors
such as roads, dams, airports, etc. will prove very beneficial to the Indian
economy at large.
“The
authorities must at least consider the case for such proactive measures to be
taken to protect and boost the housing sector where their own assessments show
that there is a current shortfall of 18.78 million units in urban India,”
Sanjay Dutt, Executive Managing Director - South Asia.
Real estate construction is labour and capital
intensive and the real estate and construction business is the second largest employer
in the nation after agriculture. Significantly, real estate also forms the
basic input for a variety of other sectors such as IT/ITeS, retail and trading,
manufacturing, etc. and has a substantial multiplier effect on others sectors
of the economy, the agency said, adding, “Therefore, any decline in
construction may lead to adverse impacts on the Indian economy such as
increased unemployment rates, reduced business investments, reduced off-takes
on primary sectors such as mining and steel production, etc.”
The Indian real estate sector at present is facing
challenges like increased land cost, delay in approvals, lack of availability
of funds both at buyers’ and developers’ levels, under-developed infrastructure
and skilled manpower. It has been a pressing demand from all the stakeholders
in the real estate sector for the sector to be given the status of
‘infrastructure.’ Whilst it is the RBI’s prerogative to grant this status, it
is also up to the Government to recommend and push for this.
Listing other benefits of infrastructure status to
real estate sector, the report said, “Though 100% FDI is allowed in the real estate sector, subject to certain norms
and there have been some FDI inflows, this move would attract more FDI into the
sector as investors would take note of the special status given to the sector,
which assures them about the safety of their investments.”
Currently, the real estate sector’s
contribution to the GDP is merely 5%; lower than the average contribution of
developed countries like France, UK and Australia having modern infrastructure
and well developed real estate market. The share of real estate in China is
close to 12%. China has taken large strides in infrastructure and real estate
in the last few decades, which in turn has propelled high GDP growth rates in
the last few years. Following China’s example, developing countries like
Indonesia, Argentina and Spain, to name a few, are consciously striving for a
higher GDP contribution from real estate.
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