This article is written by Paritosh Patel pursuing Diploma in Entrepreneurship, Administration and Business law from LawSikho, He is BBA, LLB graduate from Auro University, Surat and currently practicing at District, Sessions, Fast-Track, Family and Consumer Courts, Surat. Here he has discussed the top 5 cities in India in terms of real state transaction.
Before heading straight to real estate transactions, first, we need to look at how the real estate sector became one of the most globally recognized sectors. There are mainly four types of sub-sectors:
Even though all the sub-sectors are differently operated, they go along hand in hand. The rise of any one sector is accompanied by the rise of other sectors. The real estate sector is third of the 14 major sectors that contribute towards the nation’s economy. This sector also brings in most non-resident Indian (NRI) investments, be it for the long-term or short term. Cities preferred by this NRI are ranked below:
It is expected that the real estate sector in India will race to a market size of US$ 1 trillion by the end of 2030 from currently US$ 120 billion and contribute a total of 13 percent of the country’s economy. Major sectors like retail, IT, e-commerce and consulting are known to have registered huge demand for commercial space in the last couple of years. According to data released by Department of Industrial Policy and Promotion (DIPP), the construction development sector in India has received Foreign Direct Investment (FDI) equity inflows to the tune of US$ 24.87 billion in the period April 2000-June 2018.
Here are the major developments and investments in the real estate sector:
- The new government initiative of launching new houses among the major seven cities will increase 32 percent year on year by 2019 end.
- The Embassy Office Parks announced in September 2018 that they would generate approx. Rs 52 billion through India’s first Real Estate Investment Trust (REIT) listing.
- One Indiabulls in Chennai of Indiabulls Real Estate was acquired by Blackstone Group in May 2018 for Rs. 900 Crore.
- DLF invested a huge amount of money acquiring 11.76 acres of land in February 2018 for an estimated amount of Rs. 15 billion for its expansion in Gurugram, Haryana.
The state governments along with the full support of the Government of India have taken up many initiatives and schemes to encourage the development of the real estate sector. The biggest among this initiative might be the Smart City project and the plan is to build a total of 100 smart cities, this obviously generates ample of opportunities for the real estate companies.
Some other initiatives by the Govt. of India to encourage the real estate sector are mentioned hereinafter:
- More than 6.85 million houses are directly sanctioned under the Pradhan Mantri Awas Yojana (PMAY).
- An outlay of Rs 60,000 crore was approved for the creation of houses under the National Urban Housing Fund in February 2018.
- The Govt. of India enforced Real Estate (Regulation & Development) Act, 2016 from May 2016. This act has changed the dimensions of how the real estate sector previously functioned. The act has brought transparency and has norms to protect all the stakeholders. Additionally, the Act has ensured speedy execution of disputes. The image below shows RERA’s current footprint on the nation
- Deduction till 100 percent in profits for affordable housing construction:
The finance minister proposed this scheme for a 100 percent reduction in profits for flats till 30 square meters in the four major cities and till 60 square meter in other cities. This projects should be completed within a span of three years after the approval is granted.
The latest Union Budget gave direct tax exemption to the lowest (most needy) income earners. The Government of India also came up with the new Credit Linked Subsidy Scheme (CLSS) for middle-class people with a provision of Rs. 1000 Crore.
1.Subsidies for first-time buyers
The Union Budget proposed an additional deduction in the interest of up to Rs. 50,000 per year for the first time buyers in loans amounting to Rs. 35 lakhs. This scheme has influenced sales of the home in non-metro cities.
2. Changing arbitration norms
The Government of India has cleared reforms for speedy resolutions of disputes. The speedy resolutions are aimed to improve the cash flow for large developers who are exposed to infrastructure and government contracts.
- Exemption from service taxes on affordable houses.
- Goods and Services Tax (GST) implementation:
GST has simplified the entire Indian tax system. The sector is still awaiting for norms over which items will fall under “sin” and “common use”.
3. Demonetisation of currency notes
Demonetisation of the currency notes of Rs. 500 and Rs. 1000 notes by the government have seen significant reforms. If we look at the positive aspects of this move in the long term, this move along with RERA will bring India to the international level for doing business which will result in more cash flow.
I hope now it is clear over what are the factors that have influenced the real estate sector. Now let’s have a look over the top 5 cities in India in terms of real estate transactions.
In the past couple of decades, India has witnessed an upward trend in the service sectors, like Telecom, Insurance, IT and ITES, Banking and Finance. This has grown demand for offices and commercial places in the country. Given below are the top 5 cities in their ranking order:
The Silicon Valley of India is the biggest hub of the IT sector. Areas like Bommasandra, Peenya, and Malleswaram are the manufacturing hubs. The metro and monorail developments have seen reduced in travelling time of the people. All in all, the growth in IT parks, manufacturing hubs, SEZ and good transport facilities have seen developers coming up with new projects for residential purposes.
Hyderabad has the largest workforce and the best-suited climate for workers. Sectors like pharma, IT, telecom and manufacturing sectors have seen immense rise which has resulted in the growth of demand for residential property and this has made it one of the top cities. Gachibowli, Hafeezpet, Manikondam Nanakramguda are the most recognized areas among investors.
The capital of Tamil Nadu is well connected by air, road, and sea. This has always been an advantage for businessman, and so Chennai is considered as the trade hub. Sectors like Automobile, Education, IT are very well established here. Chennai is the biggest city in South India and has seen a constant migration over the years. Chennai has witnessed a steep growth in terms of real estate and promises good Return on Investment (ROI).
Over the last couple of years, the city has witnessed many transactions in the fields of Automobile, IT and ITes and Finance sectors. Pune is considered to be the next big automobile, education and IT hub. Growth in various sectors has seen a steady growth in demand for residential and commercial accommodations.
Another growing city riding on the back of older textile, chemical industries, automobile sector along with the new manufacturing and IT sectors. The newly proposed Outer Ring Road along with the hugely anticipated GIFT city project is seen as a new investment destination.
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