Investments in Indian real estate sector slumps by 6 percent in the last four years, Assocham survey reveals

DeclineInvestments from various private and public sources in the Indian real estate sector have slumped by 6 percent in the last four years, a survey by Assocham revealed. Investments in the real estate fell from Rs Rs 15.2 lakh crore in 2011-12 to Rs Rs 14.3 lakh crore in 2014- 2015.

As per a poll conducted by Assocham, the real estate projects that grabbed about 76% of the investments remained non-starter during the 2011-12 to 2014-2015 period.

The top 5 states that grabbed the maximum share in total real estate investments are:

  • Maharashtra – 21%
  • UP – 14%
  • Gujarat – 13%
  • Karnataka – 12%
  • Haryana – 8%

Clocking a compounded annual growth rate (CAGR) of about 82 per cent, Assam has recorded maximum growth in attracting investments in the real estate sector during 2011-12 and 2014-15 followed by Bihar (19 per cent), Odisha (17 per cent), Uttar Pradesh (16 per cent) and Uttarakhand (12 per cent) amid top five states in this regard.

The states that registered maximum fall in real estate investments are:

  • Jharkhand – 40%
  • Himachal Pradesh – 37%
  • MP – 29%
  • Haryana – 16%
  • Gujarat – 7%

The survey was based on the feedback taken from 100 big and small realty companies based in top cities such as Pune, Mumbai, Lucknow, Jaipur, Indore, Hyderabad, Delhi, Chennai, Bangalore and Ahemdabad to ascertain the budget implications.

About 75% of the real estate developers were unhappy with the government’s lack of focus on improving demand and supply situation in the real estate sector. The survey also indicated that the realty sector was disappointed with exclusion of 100 Smart Cities plan from the Union Budget.

In addition, the increase in service tax rate to 14% will make the real estate more expensive and impact the sales as well since it would decrease the purchasing power of an average consumer.

Real estate developers are also concerned about increase in service tax on construction and excise duty on input goods, as also increased on petrol and diesel coupled with increase in freight rates on cement will lead to rise in construction costs.

Referring to urgent need for speeding up procedural requirements for real estate sector, the real estate industry has pressed for a single window clearance system for various approvals leading to operational efficiencies and cost saving, along with need for a predictable and stable policy framework. Ownership-wise, private sector accounted for 85 per cent of the total investments attracted by the real estate sector across India while government/public sources accounted for remaining share of merely 15 per cent.

Source: Economic Times