New Delhi, 4 March 2023: Indian Real Estate Industry is expected to reach USD 1 Trillion by 2030, given its potential which is so huge and wide, according to a joint report prepared by Naredco and ENY.
The report released here today at Naredco Finance Conclave on the 3rd of March highlights that the Indian Real Estate Industry was valued at USD 200 Billion in 2021 and would move to the projected label of USD 1 Trillion in the next 7 years on account of its huge potential. The sector is likely to contribute 18-20% to India’s GDP by 2030.
The report further states that there is a favorable demand-supply gap which will propel the growth of this sector even though the current shortage of housing in urban areas is estimated to be 10 million units. “Additional 25 million units of affordable housing are required by 2030, highlights the Naredco and EY joint report.
However, it points out that Landmark changes in regulations are called for. These include land acquisition, rehabilitation, and the resentment bill 2011. The introduction of RERA, IBC, GST, and National Urban Rental Housing policy are some of the ways forward.
In order to take Real Estate Industry to the size of USD 200 Billion Paradigm Shift in Industry dynamics leads to increased discipline and transparency need to rethink financing projects.
The report points out that funding options available for Real Estate projects in India comprise equity, private equity, AIF/ Mezzanine financing, and Pre-sales including bank financing are largely restricted to construction finance with low flexibility.
On term loan and construction finance, the report points out that generally, a term loan is available to 30-35% of the project. It is difficult to fund cost overruns in case of project delays and repayments begin prior to the generation of surplus cash flows. Extension of the tenor is not possible without restructuring therefore focus is called for here. Construction completion is highly dependent on funding through a combination of equity and Pre-sales. Thus, the report concludes that limited variation in banking products nessesciate borrowing from alternate channels in case of change in product dynamics.
The report also highlights that representative reasons for delays include delays in approvals, land acquisition, and low pre-sales. Supply Chain disruptions and changes in market dynamics, environmental factors litigation play a critical role.
NAREDCO President Mr. RajanBandelkar appreciated the efforts of ENY and NAREDCO Team in bringing out such a comprehensive report that will help even the policymakers in addressing issues that relate to and concern the horizontal and vertical growth.
