Over the past several years, real estate investment in India has flourished. With a growing economy, a burgeoning middle class, and a rapidly urbanizing population, India ranks among the top 10 price-appreciating housing markets internationally.
The Global Real Estate Transparency Index assesses 94 countries and 156 urban regions based on 254 metrics related to regulatory certainty, market governance, transaction oversight, data availability, and ESG factors. According to their composite scores, the top countries in the Global Real Estate Transparency Index 2022 are the United Kingdom in the first place, France and the United States in second place, and Australia in third place. The Canada real estate market ranks 4th, rounding up the top 5 countries globally. India’s real estate market transparency has experienced a significant improvement, placing it among the top ten most improved markets globally.
Booming Real Estate
The Indian real estate industry is experiencing a significant growth trend, with demand for both residential and commercial properties increasing steadily. The market size is projected to reach $1 trillion by 2030, and the government is implementing initiatives such as tax breaks and subsidies to encourage affordable housing construction.
The Indian middle class, one of the largest in the world with an estimated 300 million people, has been a major contributor to the demand for residential properties. This has led to an increase in affordable housing projects, attracting domestic and international investors.
Moreover, the country’s rapidly urbanizing population has also been driving demand for real estate, particularly in major cities like Mumbai, Delhi, and Bangalore. As more people move to cities, the need for housing and commercial properties has risen exponentially, leading to a surge in construction activity.
Investors interested in the Indian real estate market can explore various options, including Real Estate Investment Trusts (REITs) or direct investment in real estate projects through developers or purchasing land. However, investing in this market involves certain risks, such as regulatory risks and possible delays or increased costs in construction projects. Despite the industry’s significant growth and development, it still faces some challenges. Presented below are some obstacles the Indian real estate industry is trying to overcome.
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The Indian real estate industry lacks transparency, which is a major obstacle for buyers and investors when making informed decisions about pricing and the quality of projects. India has been implementing measures such as digitizing land records and providing better access to data and information using technology to tackle this.
Various initiatives are being taken at the national and local levels to encourage responsible and transparent practices among companies. Beginning in 2022-23, the top 1,000 companies by market capitalization must disclose their compliance with the National Guidelines on Responsible Business Conduct. The rising number of publicly listed Real Estate Investment Trusts (REITs) and better corporate governance are also expected to lead to greater market transparency through improved data availability.
The complex regulatory framework in the Indian real estate industry is another significant obstacle. Varying standards are set at regional and national levels, leading to slow and bureaucratic regulatory approvals for real estate projects. Consequently, real estate projects may face significant delays, sometimes for years, due to various issues, including regulatory problems, land acquisition challenges, and construction delays.
In recent years, India has implemented several regulatory initiatives to enhance transparency across various sectors, namely, the Real Estate Regulation and Development Act of 2016 (RERA), the Goods and Services Tax (GST), the Benami Transaction Prohibition (Amendment) Act of 2016, and the Insolvency and Bankruptcy Code. These initiatives aim to facilitate informed investment decisions and promote responsible practices within the industry.
The Indian real estate industry relies heavily on funding from banks and financial institutions, but lending has slowed due to the increase in non-performing assets over the last decade. Despite this, foreign investments have become a significant driving force in the industry’s growth in recent years. These investments, attracted by the potential for long-term growth, have fueled demand, supported the development of new properties and infrastructure, and strengthened the sector.
India’s efforts to promote better professional standards for property agents and enforce stronger anti-money laundering regulations have also helped prevent illicit finance. In 2022, real estate investments in India reached an all-time high of US$ 7.8 billion, a 32% increase yearly, according to CB Richard Ellis (CBRE) South Asia Private Limited.
The surge in demand for property is driving the need for more skilled professionals in the real estate industry. Developing academic courses that can produce industry-ready professionals is essential to address this shortage.
To meet the demand for skilled professionals, the real estate industry must invest in academic courses and training programs incorporating the latest trends and technology. Collaboration with industry bodies and associations can also promote knowledge-sharing and best practices.
The Indian real estate industry faces challenges in meeting the demands of a well-informed consumer base. Developers must embrace technology and become more customer-centric to provide better services and improve communication. With foreign investors and buyers showing interest in the Indian market, developers must also meet global quality and regulatory measures to stay competitive. To improve transparency, India needs to improve sustainability tracking and move up the Global Real Estate Transparency Index.
By Hema Chandrashekar,
Sr. Content Editor, Save Max Real Estate