Factors that affect and shape the Construction Industry.

Factors that affect and shape the Construction Industry.

by Editor

Real estate is the second largest employer after agriculture in India and is estimated to grow at 30 percent over the next decade. It is also estimated that this sector will get to see more non-resident Indian (NRI) investments as compared to the Indian resident investments – in both short term and long term. As per the estimation, Bangalore will be the most preferred investment destination for NRIs followed by Chennai, Ahmedabad, Delhi, Pune, Dehradun, and Goa.

The growth of real estate will be largely due to the growth of corporate environment, increasing demand for urban, semi-urban accommodations and need of co-working spaces. As 2017 is about to end, we are here with a small analysis of the trends that would be majorly responsible for reshaping the real estate industry in 2018. Scroll down to know more.

Market size

According to research by Department of Industrial Policy and Promotion (DIPP), Real estate development sector in India has had FDI equity inflows to the tune of USD 23,874.1 mn in the period 2000-2014. Also, in the period FY08-20, the market for this sector is expected to increase at a CAGR of 11.2%.

Indian real estate market is a considerable contribution to India’s GDP. With an average gross value that touches a whopping US$ 180 Billion; it is a 5-6% part of India’s GDP. Indian real estate has attracted the US $32 Billion in equity so far. It is foreseen that the market size of India will increase at 11.2% Compound Annual Growth Rate (CAGR) in the period financial year 2008-2020. With a significant growth in hospitality, retail and commercial real estate, it will be a much-needed supply to India’s demand of infrastructure. This has also helped to establish India’s reputation as an attractive investment destination, as well as has put the Tier1 cities of India on 36th rank in Global Real Estate Transparency Index.

Government Initiatives

Till 2016 the new residential projects were lower than the products sold. With the implementation of RERA act, there will be a new level of transparency and accountability on the part of developers and is thus expected that there will be an increase in the investment from public buyers in the real estate sector. Also with the introduction of GST and the Benami Property Act, the government has forced the businessmen to revamp up if they want to remain in the race. Apart from that, there is the Smart city Project which has planned to build 100 smart cities which are a big opportunity for the real estate sector. Then the government of Delhi has ordered 89 villages as urban areas, thus enabling easier operation on land policies and building of affordable houses. This provides building projects to companies like TATA, GODREJ etc.

building construction

Green Buildings

Green building (also known as green construction or sustainable building) refers to both a structure and the application of processes that are environmentally responsible and resource-efficient throughout a building’s life-cycle: from planning to design, construction, operation, maintenance, renovation, and demolition. This requires close cooperation of the contractor, the architects, the engineers, and the client at all project stages.The Green Building practice expands and complements the classical building design concerns of economy, utility, durability, and comfort. India been the Growing market and with less available natural resources will focus more on energy efficient buildings in 2018.

Developers will revamp their business models

In the last few years, the introductions of new land policies and acts have got the developers on foot. The RERA act, on one hand, has increased transparency of the projects and has given the buyers the right to updated and detailed information regarding their property and construction projects. Then the Benami Property Act, Goods, and Services Tax and the demonetization Act have all shook up the older ways of running a business and forced developers to upgrade their models. These moves have perked up the market on one hand and additionally have also opened new doors to better and numerous opportunities.

Office sector transformation: from REIT to completion

The Real Estate Investment Trust is a company that mostly operates income-producing real estate. The REIT has a list coming in a few months. This list will be a big attraction to smaller investors and institutions as it provides regular dividends at smaller risks. Smaller investors will have especially profited as REIT requires 80% compulsory investment in income-producing properties and an optional 20% investment in development projects. Thus smaller projects like residential complexes and duplexes will be more encouraged. Here Indian REIT is hugely profitable, with approx. 229 million sq. feet office space with REIT compliance. Even if 50% of this is done over the next year, it will account for $18.5 Billion, and so REIT is a sure growth catalyst.

The sun rises on affordable housing

Earlier the investment or even planning of building one’s own property was an expensive job. But with the new land policies as well as the new initiative undertaken by the government, the residential sector has been under a huge boost. The REIT has accounted for over 80% of investment in income-producing properties, which includes housing apartments and residential sectors. Approx one crore houses are planned to be built by 2019, and with further loans by National Housing Banks and investment by External Commercial borrowings, there will be a boost to the sector. The Demonetization act has levelled the prices of lands, especially in Indian metros and Tier 2 and Tier 3 cities. The Housing for All plan look feasible now

Co-working: More of India Inc. will move into ‘hybrid’ spaces

With increasing start-ups in India, co-working spaces are popping up at increasing rates to provide flexible spaces at affordable rents. Although there is limited space, this sector is improving, given the advantages of cost efficiency, enhanced productivity options for companies that want their client teams close to their respective client sites. Hence, working operators and corporate will move into a ‘hybrid’ sort of space.

Though the real estate industry is an unpredictable sector when it comes to investments and benefits, these trends are likely to be seen in the coming year. Also, a lot of start-ups and SMEs will play a major role in this sector. The Indian real estate industry is supposed to give tough competition to the stock market as well. Read our next article to learn more about the better investment opportunities in real estate and the stock market.

To know about sustainable constrction products go here

Tags: Building materialsConstruction companies in 2018Construction companies in India 2018Factors that will affect and shape the Construction Industry in 2018Government Initiatives for Construction IndustryGreen India

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