March 15, 2018

MUMBAI : Indian real estate sector is projected to reach a market size of $180 billion by 2020, a sharp rise from $126 billion in 2015. The housing sector's contribution to the Indian GDP is expected to almost double to more than 11% by 2020 up from estimated 5%-6%, showed a joint report by realty developers' body CREDAI and JLL India.

Regulatory reforms, steady demand generated through rapid urbanization, rising household income and the emergence of affordable housing and nuclear housing are expected to be key drivers of growth for the sector, the Confederation of Real Estate Developers' Association of India (CREDAI) and JLL India said.

"Game changing developments like RERA and GST have created a strong base for the sector to grow, which coupled with India's strong economic advancement have provided a perfect spring board," said Ramesh Nair, CEO and Country Head, JLL India.

Real Estate (Regulation & Development) Act, 2016 RERA is expected to consolidate the Indian Real estate industry with unscrupulous developers to be shunted out. Smaller developers in tier 2 and 3 cities could tap into institutional funding, if they follow higher disclosure norms and efficient financial management. Sales figures are also projected to improve with RERA bound to rebuild the trust deficit between buyers and developers, the report added.

The cost savings on account of the Goods and Services Tax (GST) is expected to between 3 to 4% in the near future as estimated by development community. Prices will continue to remain dependent on demand and supply dynamics within micro-markets.

"Having displayed extreme resilience throughout the course of the past 18 months, the Indian real estate sector is now quite evidently on an upward trajectory backed by the efforts of industry stakeholders and the Government of India," said Jaxay Shah, President CREDAI.

CREDAI and JLL expect affordable housing to be a major theme among investors as with ample policy support, numerous such projects are being launched and Foreign Direct Investment (FDI) will flow towards this segment.

Warehousing and logistics destinations in the country will also be attractive to foreign investors as post GST the sector is getting more organized. The office segment is likely to remain active in terms of attracting investments.

According to the report, India is expected to see over $20 billion Real Estate Investment Trust (REITs)- able office stock with potential rental yield up to 7.5% make Indian real estate very attractive by 2020. Office REITs may pave the way for retail asset REITs in the second phase.

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Source: magicbricks.com