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  1. Economic Survey 2017-18: Real estate – Signs of improvement! FDI, PE flow increases

Economic Survey 2017-18: Real estate – Signs of improvement! FDI, PE flow increases

Budget 2018: Private equity investments in the real estate sector have also increased from $0.9 billion in 2013 to over $5.9 billion in 2016, recording more than six-fold jump during this period, it said.

By: | New Delhi | Published: January 30, 2018 5:26 AM
budget 2018, india bugdet 2018, real estate, Private equity investments. foreign direct investment Budget 2018: The strength of the Indian economy and favourable demographics, coupled with the introduction of several growth-oriented reforms, are aiding real estate sector to attract higher investments. (PTI)

Budget 2018: The strength of the Indian economy and favourable demographics, coupled with the introduction of several growth-oriented reforms, are aiding real estate sector to attract higher investments. Indian real estate sector has begun to show signs of improvement with the total foreign direct investment (FDI) of $257 million in the first half of 2017, which is more than double the total FDI in the sector in the whole of 2016, according to the Economic Survey 2017-18. Private equity investments in the real estate sector have also increased from $0.9 billion in 2013 to over $5.9 billion in 2016, recording more than six-fold jump during this period, it said. The Economic Survey also stated that the real estate and construction sector will provide around 15 million jobs in next five years. The sector employed over 40 million workforce in 2013, and as per projections, it is slated to employ over 52 million workforce by 2017 and 67 million workforce by 2022.

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“This implies that it will generate over 15 million jobs over the next five years, which will translate to about three million jobs annually,” the survey report said. Nearly 90% of the workforce employed in the real estate and construction sector are engaged in construction of buildings, while the rest 10% workforce is involved in building completion, finishing, electrical, plumbing, other installation services, demolition and site preparation. “This positive sentiment was attributed to a host of factors including regulatory environment, enhanced infrastructure, and amendments to Real Estate Investment Trusts (REITs). These policy initiatives are expected to lead to higher transparency, accountability and make the sector better organised and structured, thereby increasing the investment,” the Survey said.

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While residential real estate market saw sales of only 58,000 units in the first half of 2017, new home sales fell to a five-year low of about 101,850 units during this period. Sales during the first half declined by over 38% when compared with the same period a year earlier, while unit launches fell by over 56% during the same period, the Survey said. Admitting that the enforcement of the Real Estate (Regulation and Development) Act (RERA), as well as the Goods and Service Tax (GST) — both of which were brought in last year — have had an effect on the residential market, the Survey said that it was just for a short period as these reforms helped in bringing down the unsold inventory levels from 888,373 units in April 2016 to about 807,903 units in October 2017. The share of bank lending to real estate sector has fallen sharply to 17% in 2016 from over 68% in 2013 as banks are reluctant to provide credit to this industry due to rising non-performing assets (NPAs) and lower profit in property business.

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