The construction of commercial houses, residential housing, and business spaces, such as hotels, restaurants, theaters, and industrial buildings, namely factories and government buildings, are all covered by the real estate sector. Real estate also involves activities such as the purchase, sale, and development of land. Thus the real estate activities encompass both construction and housing sectors.
The Indian real estate industry, which is currently worth about US$ 12 billion, plays a significant role in contributing to the economy of the country. The real estate industry in India ranks second in the world in terms of generating employment for the people of India and contributing to the Gross Domestic Product of the country. Presently real estate accounts for about 5% of India’s GDP; in the next five years it is expected to rise up to 6%.
The real estate sector of India is flourishing at a fast pace. Over the years the industry graph has shown an upward trend. The industry has shown a growth rate of about 30% each year. The recent surge in Indian outsourcing business houses, including technical consultancy services, medical transcription, and call centers, has constituted about 10 million square feet of growth in real estate.
Today, several multinational corporations have shown great confidence in investing in Indian real estate sectors for its promise to gain tremendous returns on investments in India. Another reason why foreign investors are keen to invest in the Indian real estate sector is the easy and cheap availability of skilled workforce and the considerably low cost of operations. This adds up to higher returns on investments.
The unprecedented growth in the Indian industrial real estate sector is fuelled by two important forces. First, the fast expansion of the Indian industrial sector has created a large demand for manufacturing and office buildings. Second, the liberalization policies of the government of India have simplified the investment process by reducing the need for permissions and licenses for starting any large construction project. The government thus opened the doors for foreign investment in the real estate sector of India, which gave a further push to the development of the real estate industry in India.
The main reason for the government of India to allow FDI in Indian real estate was to make the sector more organized and inject a sense of professionalism into the real estate industry. As a result of the FDI, the villages adjoining the metropolises have experienced an upsurge in the land prices. This in turn has forced several farmers to sell their land and get good money in return.
Thus, the real estate sector in India by riding the back of the overall economic growth of the county is witnessing an unparalleled growth and has brought about several regulatory changes. High industrial growth, favorable demographics, rising purchasing power of people, easier financing options, a sharp increase in global liquidity, looser credit policies, a greater availability of leverage, an increase in mortgage lending, a selective capital account, and consistent growth in equity markets have resulted in an upturn in the real estate investment sector. These along with the government’s relaxation of FDI policies have made the Indian real estate industry an attractive investment option.