Double-Digit GDP growth imperative for real estate in India
Aug 29th, 2023
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India’s economic growth has been a focal point for the government, intending to achieve double-digit growth in the GDP. External concerns such as extended geopolitical hostilities, tightening global financial conditions, declining external demand, and an uncertain trajectory of global commodity prices have drastically slowed the growth of many key international markets. Despite these unpredictable global developments, the Indian economy has remained resilient and is projected to rise to 6.9% in the following two financial years – 2024-25 and 2025-26 and 7.1% in 2026-27. That said, India’s GDP should strive to achieve double-digit growth (at least 10%) to fulfil our vision of becoming a USD 5 trillion economy and, thereby, a global economic superpower powered by the triple growth engines of rapid financial regulations, clean energy transition and digital revolution. Such robust economic expansion fuels overall development and significantly benefits key industries, including the country’s real estate sector.
To achieve this growth, the Indian government should look at:
Double down on infrastructure projects:
A 33% increase in capital expenditure on infrastructure investment, i.e., INR 10 lakh crore for 2023-24, representing 3.3% of GDP, will significantly stimulate the economy and create new job opportunities. Infrastructure and real estate are inextricably linked and are the foundation for generating demand and creating new growth opportunities. For example, the ongoing Delhi-Mumbai Motorway project is expected to stimulate growth corridors along its path in several cities, leading to new logistics parks, commercial establishments, data centres and townships. Investments in roads, highways, airports, ports, and urban infrastructure would develop new growth centres, fostering real estate development and investment prospects.
The overall allocation for the road ministry in 2015-16 was INR 46,913 crore which has increased significantly to INR 2.7 lakh crore in 2022-2023, which is more than five and a half times more.
India is constructing over 24 KMs daily for National Highways and over 70 KMs in rural areas. This increased connectivity will strengthen the local economy with more commercial, residential, and retail development proposed for tier II and III cities. Municipal governments will also be able to raise additional revenue, which will have a cumulative effect in the growth cycle.
Invest in Technology & Digitisation:
India has one of the youngest, if not the youngest, working populations in the world, presenting a great opportunity for the country’s economic growth if it can harness the potential of its large workforce. This young working population has already elevated India into the digital revolution, and the country is quickly establishing itself as a significant player in the digital economy, with the IT and digital industries at the forefront.
The Indian IT industry has pushed its boundaries and increased at a CAGR of more than 15%, from $196 billion in FY16 to over $225 billion in FY22. If present growth rates continue, the IT industry will be worth $394 billion by 2027.
The Digital India framework has served as a guidepost for digital transformation in manufacturing, logistics, healthcare, BFSI, retail, education, and agriculture. Furthermore, the country has over 27,000 tech-driven startups registered with DPIIT, with an additional 1,300 launched yearly.
With India on the path to becoming the world’s startup capital, the demand for warehousing and commercial spaces would increase rapidly. Double-digit growth will accelerate the launch of new startups and increased demand, leading to the development of logistics hubs, fulfilment centres, and modern commercial complexes.
How would this impact the real estate sector?
The Indian real estate market is predicted to grow to Rs.65,000 crore (US$ 9.30 billion) by 2040, from Rs.12,000 crore (US$ 1.72 billion) in 2019. By 2030, the Indian real estate market is expected to be valued $1 trillion, up from $200 billion in 2021, and to contribute 13% of the country’s GDP by 2025.
While this growth is impressive, a double-digit GDP growth rate would further propel multiple employment opportunities and substantially increase the spending power of the Indian population.
With over 270 associated sectors relying on the real estate sector for business sustainability, this vital sector significantly impacts the whole supply chain. Steel, cement, lumber, and construction materials are key examples of related service industries such as design, contracting, facility management, leasing, broking network, and property consultation. As the real estate sector expands, there will be a broader positive multiplier effect on related industries and persons involved.
By targeting double-digit GDP growth, India can unleash the true potential of its real estate sector, fostering economic growth, creating employment opportunities, and fulfilling the aspirations of its citizens.
Source: timesofindia.indiatimes.com
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