Real Estate-Relevance and Changes

Real Estate-Relevance and Changes

Real estate refers to Property comprised of land and the buildings on it as well as the natural resources of the land including uncultivated flora and fauna, farmed crops and livestock, water and minerals.However,based on its use it is divided into three broad categories-residential, commercial and industrial.High growth in services and manufacturing sector has led to high demand for commercial and real estate.

There are different factors that act as drivers for the growth of real estate:

  • Rise of middle class
  • Decline of joint families
  • Easy availability of finance
  • Increasing tourism
  • Fiscal policies and rising FDI
  • Strong demographics
  • International and medical tourism
  • Developments of new streams of business.

Special economic zones have been set up to promote real estate businesses.Their main objectives are-

  1. Generation of additional economic activities
  2. Promotion of exports of goods and services
  3. Promotions of investments from domestic and foreign sources
  4. Creation of employment opportunities
  5. Development of infrastructure facilities in the country.

Various initiates have been taken by the government in order enhance real estate sector activities and therefore a number of policies have also been framed.There has been a drastic curtailment in the restrictive policies such as the Urban Land Ceiling and the Regulations Act over the years.Also,there have been reforms in the Integrated Township Policy.Liberalization of FDI rules,emergence of real estate funds and the range of government benefits and incentives including residential tax breaks has further provided aid to the sector for its growth and development.

Some of the major players in the real estate business are-

DLF Group, Ansals, Parsavnath Developers,Unitech Group and K Raheja.

Subprime crisis is a situation starting in 2008 affecting the mortgage industry due to borrowers being approved for loans they could not afford. As a result, a significant rise in foreclosures led to the collapse of many lending institutions and hedge funds. The financial crisis in the mortgage industry also affected the global credit market resulting in higher interest rates and reduced availability of credit.

Development of Real Estate in India includes development of temples of modern India,townships,programming houses and green buildings.However, there have been certain barriers to the growth of real estate in India.They are-

  • Skill shortage
  • Non availability of statistics
  • Overvaluation of property
  • High Fragmentation
  • Lack of transparency.

Recession has also largely impacted real estate.The key issues that led to recession are incomplete previous projects,bad debts,less demands in all segments and cash starvation.Companies like DLF which is a major player has taken certain steps to overcome these issues-

  1. Launching affordable housing projects
  2. Paying short term debt by raising long term debt
  3. Sale of properties for liquidity preservation
  4. Terminated projects with long gestation period
  5. Tight cash flow that would help in cost reduction.

Measures taken to tackle the challenges have reaped results but India still needs to go a long way in facing and overcoming the new challenges by making a shift in its strategies and policies.Future expectations are that close to $8 Billion would flow into the Indian real estate market.There would be a significant increase in project execution through Public-Private partnerships.The demands for office and industrial space would increase and hence,the current levels of investments made are insufficient to bridge the gap between demand and supply.

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