Economy Updates – Nov-2014

Importance Real Estate Sector in the India Economy

Some Facts

  • Nearly 30% of the country’s population is living in cities and urban areas and this figure is projected to reach 50% in 2030 based on which the present urban housing shortage is 1.87 crore units.
  • Overall housing shortage is of almost 6.3 crore units and the demand for houses are expected to increase by another 2.63 crore units in the next 3 years due to population growth at the current rate of growth.
  • The above figures shows how vital the role of the real estate sector in the Indian Economy. It is also expected that, the Indian real estate market size may touch $ 180 billion by 2020. Further, the activities of the industry are also vital to the achievement of national socio-economic development goals of providing shelter, infrastructure and employment. Following are the points which describe the importance of real estate to the economy of the country.

Importance of the Real Estate Sector for GDP of the Country

  • Real estate investments are the important elements that contribute to the overall economic growth of a country.
  • According to the Economic Survey of India (2013-14), the real estate and ownership of dwelling contributed 5.9% of the country’s GDP in 2012-2013, registering growth of 5.6%. Real Estate in particular grew by 26.1%.
  • As per LIC Housing Finance Limited, 78% of the sum spent on construction of a housing unit in India gets added back directly to the India’s GDP.
  • Housing activity have both forward and backward linkages which not only contribute to capital formation, generation of employment and income opportunities but also to economic growth.

Real Estate Sector – Key source of Employment

  • In India, construction sector is the 2nd largest employment generator after agriculture.
  • This is because of the chain of backward and forward linkages that the sector has with other sectors of the economy. About 250 ancillary industries such as cement, steel, brick, timber and building material are dependent on the construction industry.
  • As per 2013-14 Economic Survey between 2004-05 and 2011-12 work force of nearly 2.5 crore people were added to the employment in the construction sector.

Real Estate – The bringer of the Foreign Direct Investment (FDI)

  • Real Estate sector generates huge inflow of foreign direct investment. Real Estate sector has emerged as the fifth largest destination of foreign investments.
  • Department of Industrial Policy & Promotion (DIPP), funds committed to the construction development sector contributed 11.1% share of the total FDI inflow in 2008. This share dropped to 4% in 2012.

Conclusion :

  • Necessary steps are required to overcome obstacles because as per the World Bank’s Doing Business, 2014 report India ranks 182nd in terms of construction permits, requiring a total 35 procedures to get permits as compared to an average of 16 in South Asia and 13 in OECD (Organization for Economic Cooperation and Development Countries).

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