By Dr. Sanjay Chaturvedi, LLB, PhD.
India has taken an array of monetary and fiscal measures, in quick succession, to contain inflationary pressures – with the annual rate already moderating from around 13 per cent in August to 10.72 per cent by the end of October
Indian Real Estate is having great growth driver, which will last for next fifty years. According to Planning Commission in its reports before 11th Five Year plan, 28.67 million dwelling units are required by the end of the plan. The cumulative and inclusive growth of demand is not accounted for in this figure.
India has opened its door for the world and the process of liberalization started in 1991. By 2001, Union Budget gave maximum amount of attention to the growing demand for housing. Tax exemption in housing finance payments and section 80IB of Income Tax Act inserted to wave off all the profit earned by builders for constructing residential apartments below 1000 sq.ft.
With this, as demand was converted into affordable demand, the market became vibrant. In 2005-2007 the real estate market enhanced to its historical level and fetched the investors almost 800% in capital appreciation, if not less.
Mumbai, Delhi and other metros like Pune witnessed massive construction activities. Supply side increased with quality homes with world class infrastructure. Information Technology being one of the prime factor for massive increased in price and demand have mooted great opportunities in Bangalore, Pune, Hyderabad and Channai.
One hundred and forty-five Special Economic Zones were established or in making during this period which gave avenues for investment and future trading of real estate stock.
Since Real Estate is not an industry in India, recognised, informal transaction on institutional level were not accounted for the total count.
The so called recession may stand as of now because of establishment of Realty funds in the form of Real Estate Mutual Funds by HDFC, ICICI and ILFS besides many other leading fund managers. It may be called as recess rather than recession since price in major metros are still waiting for fall and well kept above board by buying spree. Correction in real estate price can be seen mainly in two and three tier cities where the demand could sustain in the presence of major supply in residential segment.
India has taken an array of monetary and fiscal measures, in quick succession, to contain inflationary pressures – with the annual rate already moderating from around 13 per cent in August to 10.72 per cent by the end of October – and, more importantly, to make available adequate domestic resources to maintain growth in the face of an unprecedented international financial crisis and global economy drifting into recession.
The Reserve Bank had, within four weeks in October 2008, lowered reserve ratios and reduced a key interest rate to provide some 250,000 crores of liquidity for banks to finance businesses and consumers.
Prime Minister Dr. Manmohan Singh remains focused on seeing that the Indian economy does not get unduly affected by the adverse developments abroad. He has appealed to the industry and the country in general to turn the crisis in the world economy into an opportunity to ensure that India comes out of the global crisis with its fundamentals unimpaired, protecting employment.
What gives confidence and strength to the Indian economy is its sound financial sector with its well-regulated and well-capitalised banking system, the sustained growth in deposit accretion and credit flows, and assured safety for depositors, the global competitiveness of its manufacturing and services, high savings and investment rates and a comfortable level of foreign exchange reserves which could be drawn to make up for any shortfalls in capital inflows.
India has to summon all its abilities at macro-economic management because of the extraordinary global situation in which there is weakening of global demand and likely interruption in external capital flows. So far, there have been only ripple effects on the economy and exports in the first half of the fiscal year (April-September) have recorded a robust 35 per cent growth.
While there has been an outflow of foreign portfolio investments of the order of 10 billion dollars, India continues to attract foreign direct investment which totaled an impressive 17.66 billion dollars in the first six months, April to September, compared to 7.25 billion in the corresponding period of last year.