The Economic Survey has projected a positive outlook for the real estate sector with housing demand set to rise on rapid urbanisation, but described legacy stalled projects as a “challenge”.
“Real estate and ownership of dwellings have accounted for over seven per cent of the overall GVA (gross value added) in the past decade, highlighting their integral role in the economy,” the survey said, which was tabled in the Parliament by Union Finance Minister Nirmala Sitharaman.
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“The outlook for the real estate sector is encouraging. With increasing urbanisation, the housing industry is poised for a significant transformation,” the survey document said.
Stating that half of India’s population is projected to dwell in urban regions by 2050 compared to 31% in 2011, the survey stressed the need to adapt strategies and policies to meet the rising demand for housing and offer viable, cost-effective and sustainable solutions.
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The survey also pointed out that “the legacy stalled real estate projects is a challenge.” Approximately 4.1 lakh stressed dwelling units, involving ₹4.1 lakh crore, are affected as estimated by the Indian Banks’ Association (IBA).
The Ministry of Housing and Urban Affairs established a committee to recommend solutions for completing stalled projects to address this issue. The committee identified the primary cause of stress as lack of financial viability, resulting in cost overruns and delays, and has suggested various recommendations.
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The document mentioned that the real estate sector has witnessed a “robust recovery” after two challenging years of pandemic-induced lockdowns and economic instability.
The survey noted that the COVID pandemic has shifted homebuyers’ preferences toward larger, sustainable spaces with additional amenities, driven by remote and hybrid working trends.
“Factors contributing to the sector’s growth include rapid urbanisation, rising income levels, the emergence of nuclear families, new entrants in the market, and improved financial options for developers and homebuyers,” it said, adding that the strong desire for home ownership was reinforced during the pandemic.
Quoting housing brokerage firm PropTiger data, the survey highlighted that residential real estate sales in the 2023 calendar year were at their highest since 2013, witnessing a 33% annual growth, with a total sale of 4.1 lakh units in the top eight cities. The new supply witnessed an all-time high, with 5.2 lakh units launched in 2023 against 4.3 lakh units a year ago.
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The momentum continued in January-March of 2024, witnessing record-breaking sales of 1.2 lakh units, clocking a robust 41 per cent Year-on-Year (YoY) growth.
Further, the rising demand for housing loans reflects the underlying demand for real estate. Housing loans as a percentage of GDP increased from FY12 to FY24.
Traditionally, banks have been the most significant players in the housing finance sector.
However, Housing Finance Companies (HFCs) have significantly contributed to this landscape over the years. They played a complementary role with banks in providing housing credit to the bottom of the pyramid. The share of outstanding housing loans as a percentage of total loans of HFCs stood at 70.8 per cent as of March 31, 2024.
The Survey listed various factors that have led to the growth in the housing sector, including the Pradhan Mantri Awas Yojana-Urban (PMAY-U), launched in 2015, has sanctioned over 1.2 crore houses for urban beneficiaries, ensuring durable housing.
Policy reforms like the Goods and Services Tax, Real Estate (Regulation and Development) Act, and the Insolvency and Bankruptcy Code have boosted transparency and investor confidence in real estate.
Initiatives like the Affordable Housing Fund and Special Window for Affordable and Mid-Income Housing (SWAMIH) Investment Fund have supported affordable housing projects. PMAY(U)-Credit Linked Subsidy Scheme interest subvention has been a primary demand-side driver. The National Housing Bank (NHB) has released ₹49,460.1 crore in subsidies benefiting over 21.1 lakh households by March 2024.
The Survey believes that the digitisation of land records is poised to improve transparency in land transactions, diminish property ownership conflicts, and enhance the efficiency of land management.
Implementing a single-window clearance system for construction approvals will also accelerate construction processes, minimising delays and uncertainties, it said.
“Going forward, the demand for housing is expected to be driven by affordability and increased access to credit,” it added.
As of March 2024, the shares of Southern, Western and Northern states in the individual housing loans outstanding are 35.4%, 31.2% and 26.2%, respectively.
“The Eastern States at 6.9% and the eight North-eastern and Hilly states combining to 0.95% share present an opportunity for undertaking initiatives for improving penetration,” the survey said.
Stating that sustainability and technology have emerged as significant disrupters for the real estate sector, the document said that sustainability would influence green construction practices and energy-efficient designs while technology will revolutionise smart homes and data-driven insights.
With more significant environmental concerns, the focus will be on energy-efficient systems, rainwater harvesting and smart building technologies, it said.
