6 Key Factors Impacting Real Estate Industry
Factors Impacting Real Estate Industry
1. Bank Lending Rates: Policies related to Lending Rates, Tax Rates, Subsidies, Deductions and Rebates, etc. are directly responsible for the fluctuations in demand for the real estate market. Higher interest rates make lending money more expensive for owners, which can have a constraining effect on the real estate market. Similarly, a subsidy/ lower lending rates acts as an incentive to buy a home. As a result, the Lower the bank lending rates, Higher the amount injected into the economy. Which directly contribute to bringing stability and growth to the Indian Economy.
2. Impact of GDP: With a rise in GDP, employment increases due to investment in infrastructure and business. This leads to an increase in the per capita income and purchasing capacity. The further fuels demand Real Estate. On the other hand, real estate growth also contributes to GDP growth. Secure and affordable housing increases employment and educational opportunity for individuals. It also augments communities leading to a better civil society and quality of life. INDIA’S REAL ESTATE SECTOR CONTRIBUTION TO GDP GROWTH IS 6-7% AND WILL GO UP TO 13%. As a result, of the growth of GDP, Indian Real estate plays an important role.
3. Impact of FDI: The real Estate of India is the second-largest sector generating Foreign Direct Investment (FDI) Inflows. Higher FDI Inflows leads to the higher construction and development of new properties. Also, drop-in FDI results in lower private equity which is a major source of funding in the real estate sector of India. To boost foreign investment in the sector, in 2015 the Indian government announced the decision to allow 100% FDI inflow through automatic route in construction and development projects.
[Anuj Puri, Chairman and country head at JLL India in his blog, “Globally positioning India as an investment destination and improving India’s diplomatic and trade relation, Narendra Modi’s foreign stints have helped India attract more FDI. From the nations he visited during the financial year 2014-15, India received an FDI of USD 19.78 billion. Moreover, FDI in India increased by 27% in 2014-15 to USD 30.93 billion”. (source ET Realty)]
Here are the 10 Biggest Investing countries as per DIPP (Department for Industrial Policy and Promotion) 2018 -2019 data.
- Singapore : 1,12,362 Cr.
- Mauritius : 57,139 Cr.
- Netherlands : 27,036 Cr.
- US : 22,335 Cr.
- Japan : 20,556 Cr.
- UK : 9,352 Cr.
- UAE : 6,356 Cr.
- Germany : 6,187 Cr.
- France : 2,890 Cr.
- Cyprus : 2,134 Cr.
4. Favourable Government Policies: Real Estate touches everyone’s heart. It has always been a long-term focal point in urban development, social and economic policy. In the past decade, India has made tremendous progress in meeting housing needs. Some of the Key policies which impact directly or indirectly to Indian Real Estate.
- Smart City Projects.
- PMAY. (Pradhan Mantri Was Yojana)
- Make in India Campaign.
- RERA. (Real Estate Regulation and Development Act)
- REIT. (Real Estate Investment Trust)
- Service Tax Exemption on Construction of Affordable Housing.
- Interest Subsidy for the First-time Homebuyers.
- Permanent Residency status for Foreign Investors with some Terms & Conditions.
- (HRIDAY) National Heritage City Development and Augmentation Yojana. (As of now Karnataka has not been included in this scheme)
