The Indian real estate market has witnessed a steady growth over the past decade, but developers and investors are now looking to diversify their business strategies. With rising rates of inflation and more stringent government policies on real estate, it is important for you to analyze the markets in India so that you can plan your future accordingly.
Sub Sectors of Indian Real Estate Market viz:
Construction Sector
The construction sector is expected to grow by 5% in 2023, driven by the residential and infrastructure construction.
Source: India Budget
The cement sector is the largest contributor to India’s overall industrial output and accounts for about 40% of total production. A majority of Indian cement manufacturers are located in Andhra Pradesh, Karnataka, Maharashtra and Tamil Nadu (MPT). These states also have a large base of skilled workers who are trained in various aspects such as brick-making process or supervisory roles in factories. Some major players include Balaji Cements Ltd., Jain Irrigation & Cements Pvt Ltd., Madhya Pradesh Minerals & Industries Company Limited (MPMIC), National Fertilizers & Chemicals Limited (NFFCL), National Thermal Power Corporation Limited (NTPC) etcetera. With the assistance of the newly established Infrastructure Finance Secretariat, more private investment will be made in infrastructure like railways, roads, urban infrastructure, and power, which are primarily reliant on public finances.
Finance Sector
The Indian banking system is one of the largest in Asia, with a total of over 635 million accounts as on March 31, 2018. It has a network of over 29000 branches and 78500 ATMs across the country. The real estate industry has been traditionally dominated by private banks such as HDFC Bank Ltd., ICICI Bank Ltd., Axis Bank Ltd., Kotak Mahindra Bank Ltd., etc., but now there are some newer entrants who want to tap into this growth market. Non-banking financial companies (NBFCs) provide financial services that are not related to banking such as leasing equipment or offering payroll processing services.
NBFCs have been the driving force behind the financial services industry in India. Over the last few years, they have become a major player in both retail and corporate lending. However, they are still not at par with other financial institutions when it comes to their technology capabilities, sophistication and efficiency. For example, NBFCs perform many of their functions manually which leads to delays in processing applications for loans or insurance policies. In this article we will discuss some trends that are likely to affect NBFCs over the next five years:
Manufacturing Sector
The manufacturing sector is expected to grow by 7.8% in 2023, driven by the demand for construction raw materials such as cement and steel, readymade walls and other building materials.
A large part of the growth will be driven by the housing sector, which is expected to grow by 8.5% in 2023.
The construction of residential projects and infrastructure are expected to drive growth in the building materials market. The construction industry is expected to grow by 8.8% in 2023, driven by the demand for construction of residential projects, infrastructure development and commercial buildings.
The housing sector is expected to grow by 9% in 2023, driven by the increasing population and urbanization rate in India.
Housing Finance
Housing finance is the most popular form of housing finance accounting for 90% of the total housing finance. It has been growing at a CAGR of 16% over the last 5 years, mainly due to increased demand for home loans and improvement in terms offered by banks.
In Indian real estate market, there are three major types of home loans viz.
- Project-based (construction) housing loan :-Project-based loans are usually given to builders who have completed land acquisition or architectural work on their projects and need funds immediately to get construction started
- Self-employed (business) housing loan:- Self-employed individuals can take out these loans as well; however they must ensure that they have sufficient collateral security before applying for such a loan as lenders may reserve 50 percent interest rate against this security if it is available with them (this leaves only 25%).
- Normal residential housing loan:- Normal residential mortgages too have limited eligibility criteria but these tend not be available in rural areas due to high interest rates being charged by banks on such purchases which further reduces demand.
Infrastructure, rural areas and education.
The Indian government is planning to invest in infrastructure, rural areas and education. In the 2019-20 budget, the government announced that it would allocate INR 1 lakh crore over five years for building roads, which will be spent on developing highways as well as flyovers. The funds will also go towards strengthening transport systems across India’s states and districts.
In addition to this, the central government has allocated additional funds for constructing new hospitals in both urban areas (that have populations above 50 lakhs) and rural ones (with less than 50 lakhs). This means that there will be more healthcare services available at affordable prices for everyone who requires them!
Indian Real Estate market Speculations
Indian real estate market speculation is one of the most popular ways to invest in real estate. It is also one of the most volatile segments of Indian real estate industry. The market for such projects has been growing rapidly, with many investors looking at it as an opportunity to make a quick buck by investing in properties that may not be worth much initially but could turn out to be profitable later on. Speculation can take place both online and offline; however, online speculations are considered more risky because there is no way for you to check whether or not your investment will yield results since there are no physical documents involved with these types of investments (unless you’re buying shares).
Indian Government Budget for 2023
- The government is committed to provide affordable houses for all, with a focus on rural housing. It aims to achieve this by 2022-23 in the upcoming Five Year Plan.
- It has also launched several initiatives such as “Neechay” (Housing for All), “Aawas Yojana” (Affordable Affordable Housing Scheme), National Mission on Urban Development etc., which will help in achieving this goal.
- To improve healthcare facilities across India, the government intends to invest Rs 20 lakh crore over 10 years by 2022-23 under a healthcare sector reforms program called “Saubhagya” (Wellness). This means, there is going to be a boom in the healthcare infrastructure development part of the real-estate inductry.
- This includes increasing public expenditure on health care services from 1% of GDP at present level to 2%, improving coverage rate from 74% currently down further by 10 percentage points during 2021-22 itself; reducing maternal mortality ratio by 35% over next four years; providing 200 new AIIMS every year until 2026; building 50 more medical colleges under Ayushman Bharat programme among other things so that Indians can get quality medical treatment at affordable prices anytime anywhere in country irrespective whether they have money or not!
- The Government of India proposed capping the deduction from capital gains on investment in residential property under sections 54 and 54F at INR 10 crore in order to properly tax concessions and exemptions.
Source: India Budget
Conclusion
As you can see, there are many different sectors that have their own unique trends that will continue to shape the Indian real estate market over the next few decades. These trends will help determine which industries and companies will thrive in India, so it is important for investors to keep an eye on them.