Resurgence in Indian Real Estate Driven by Construction and Low Home Loan Rates
The Indian real estate sector has witnessed a significant revival in recent months. This resurgence is primarily attributed to a substantial increase in the construction of affordable housing, coupled with historically low home loan rates. These factors have combined to create a favorable environment for growth within the sector.
Increased Supply and Development Activity Fuel Optimism
A study conducted by Boston Analytics reveals a notable rise in both the supply and pace of development activity within the Indian real estate market. This heightened activity has consequently improved market sentiment, mitigating the previously prevalent pessimism surrounding real estate prices. Government initiatives driving lower interest rates on home loans have further incentivized prospective Indian homebuyers.
"Increased supply, improvement in pessimism related to realty sector rates, and low rates of interest on home loans seems to be encouraging Indian consumers to firm up their home purchase decisions," commented Shirin Bagga, Economist at Boston Analytics.
Survey Methodology and Key Findings
The data underpinning these observations was gathered through a comprehensive monthly survey encompassing 10,000 respondents across fifteen major Indian cities: Delhi, Mumbai, Hyderabad, Kolkata, Chennai, Bangalore, Chandigarh, Nagpur, Ahmedabad, Kochi, Jaipur, Lucknow, Bhubaneswar, Patna, and Visakhapatnam.
Recent reports indicate that the observed increase in construction activity generates greater anticipation, particularly in Tier II and Tier III cities, compared to their Tier I counterparts. Ongoing real estate projects, irrespective of their stage of completion and location, seem to be fostering optimism regarding the anticipated changes in construction activity across all tiers of cities, as noted in the report.
Real Estate's Growing Contribution to the Indian Economy
The Economic Survey of FY 2009-10 highlighted the increasing significance of the construction and real estate sector's contribution to both financial and physical asset creation in India. The construction sector's share of GDP, measured at constant prices, has expanded to approximately eight percent, registering growth from 7.7% in 2004-05. Furthermore, the contribution of real estate ownership of dwelling and business services to the overall GDP witnessed an uptick, reaching 9.2 percent in FY 2008-09, compared to 8.9 percent in 2004-05.