Real estate sector gains momentum despite challenges with stalled projects: Economic Survey 2023-24

The outlook for the real estate sector is “encouraging”, the Economic Survey 2023-24 said. But a high number of stalled projects is “challenging”.

With increasing urbanisation, the housing industry is poised for a significant transformation, it noted.

As per the United Nations, by 2050, half of India’s population is projected to dwell in urban regions, compared to 31 per cent in 2011. This underscores the need to adapt strategies and policies to meet the rising demand for housing and offer viable, cost-effective, sustainable solutions.

In 2023, residential real estate sales in India were at their highest since 2013, witnessing a 33 per cent YoY growth, with a total sale of 4.1 lakh units in the top eight cities. New supply witnessed an all-time high, with 5.2 lakh units launched in 2023, as against 4.3 lakh units in 2022, it was noted.

“The momentum continued in Q1 of 2024, witnessing record-breaking sales of 1.2 lakh units, clocking a robust 41 per cent YoY growth,” the Economic Survey said. New supply has consistently exceeded one lakh units since Q2 of 2022, underscoring persistent demand-supply dynamics in the housing market.

Further, the rising demand for housing loans reflects “underlying demand for real estate”.

Housing loans as a percentage of GDP increased from FY12 to FY24, from 6.6 per cent to 11.2 per cent, almost doubling.

“Traditionally, banks have been the most significant players in the housing finance sector. However, Housing Finance Companies (HFCs) have significantly contributed to this landscape....played a complementary role with banks in providing housing credit to the bottom of the pyramid,” the Survey said adding that the share of outstanding housing loans as a percentage of total loans of HFCs stood at 70.8 per cent as on March-end (2024).

The Pradhan Mantri Awas Yojana-Urban (PMAY-U), launched in 2015, has sanctioned over 1.2 crore houses for urban beneficiaries while policy reforms like the Goods and Services Tax, Real Estate (Regulation and Development) Act, and the Insolvency and Bankruptcy Code have boosted transparency and investor confidence in real estate.

Initiatives like the Affordable Housing Fund and Special Window for Affordable and Mid-Income Housing (SWAMIH) Investment Fund have supported affordable housing projects. PMAY(U)-Credit Linked Subsidy Scheme interest subvention has been a primary demand-side driver, the Survey noted while adding that the National Housing Bank (NHB) released Rs 49,460.1 crore in subsidies benefiting over 21.1 lakh households by till FY24-end.

“The co-lending model, combining bank liquidity with HFCs aims to extend housing credit to a broader segment, including low-income groups. The Urban Infrastructure Development Fund, managed by NHB with an initial corpus of Rs 10,000 crore, is expected to improve urban infrastructure, attracting real estate investment,” the Survey said.

Further Digitisation of land records is poised to improve transparency in land transactions, diminish property ownership conflicts, and enhance the efficiency of land management. Implementing a single-window clearance system for construction approvals will also accelerate construction processes, minimising delays and uncertainties. The streamlining of approvals is set to consolidate and systematise India’s residential real estate sector further.

Stalled Projects

“The legacy stalled real estate projects is a challenge,” the Economic Survey said.

Approximately 4.1 lakh stressed dwelling units, involving ₹4.1 lakh crore, are affected.

The Ministry of Housing and Urban Affairs (MoHUA) established a committee to recommend solutions for completing stalled projects. Lack of financial viability, resulting in cost overruns and delays are seen as a prime cause.

Work is on restart these projects with some of the recommendations being mandatory project registrations with RERA, execution of registration and sub-lease deeds for occupied units, ensuring possession of substantially completed projects, proposing state government rehabilitation packages for promoter-led resolutions, financing stalled projects, among others,

“...utilising IBC as a last resort for resolving projects,” has been suggested.

According to a report by Crisil, the housing loan market in India grew at a CAGR of 13 per cent from FY18 to FY23. It is expected to continue growing at a CAGR of 13 to 15 per cent reaching ₹42 lakh crore to ₹44 lakh crore by FY26.