After a long run, Indian real estate sector has begun to show signs of slump. In fact, the present changes that Indian economy and real estate sector is going through can also been seen as the test of the resilience of the economy and our real estate sector.
In fact, real estate sector is a vital driver of growth of our economy. It is the 2nd largest employer; it provides employment to the real masses and unskilled workers besides skilled workers, with a vast majority of them below poverty line. The sector supports multiple industries, ranging from steel, cement, paint, sanitary ware, light fixtures, glass, aluminum etc. The sector also contributes towards urban development by undertaking public private partnerships including slum rehabs and is a significant contributor to government revenue.
The present situation of the Indian real estate sector reminds the challenging times that the sector faced in the mid nineties. Much of the demand in the early nineties was created by speculative property investors expecting their assets to appreciate in value – an ‘irrational exuberance’ over the short term, without there being a sufficiently wide and deep class of actual buyers of property.
But this time around, the demand was driven by the booming economy. In the last five years, India has grown at a compound annual rate of 8.9%. The high rate of growth dramatically improved the income level of urban Indians and the middle class today has significantly greater buying power than a decade ago. The overall economic development in India has stimulated demand for more and better housing, increase in office space, development of modern retail formats, and demand for more hotel rooms and the need for improved forms of entertainment.
