REAL ESTATE - MANJU FOUNDATIONS

REAL ESTATE - MANJU FOUNDATIONS

term ‘real estate’ is defined as land,
including the air above it and the ground below it,
and any buildings or structures on it. It is also referred
to as realty. It covers residential housing,
commercial offices, trading spaces such as
theatres, hotels and restaurants, retail outlets,
industrial buildings such as factories and
government buildings. Real estate involves the
purchase, sale, and development of land, residential
and non-residential buildings. The main players in
the real estate market are the landlords, developers,
builders, real estate agents, tenants, buyers etc. The
activities of the real estate sector encompass the
housing and construction sectors also.
7.6.2 The real estate sector in India has
assumed growing importance with the liberalisation
of the economy. The consequent increase in
business opportunities and migration of the labour
force has, in turn, increased the demand for
commercial and housing space, especially rental
housing. Developments in the real estate sector
are being influenced by the developments in the
retail, hospitality and entertainment (e.g., hotels,
resorts, cinema theatres) industries, economic
services (e.g., hospitals, schools) and information
technology (IT)-enabled services (like call centres)
etc. and vice versa.
7.6.3 The real estate sector is a major employment
driver, being the second largest employer next
only to agriculture. This is because of the chain of
backward and forward linkages that the sector has
with the other sectors of the economy, especially
with the housing and construction sector. About
250 ancillary industries such as cement, steel, brick,
timber, building materials etc. are dependent on
the real estate industry.
CURRENT SCENARIO
7.6.4 It is difficult to estimate the exact contribution
of the real estate sector to gross domestic
product (GDP) as it appears in a disaggregated and
dispersed form in the National Accounts Statistics.
Residential housing and real estate services
(activities of all types of dealers such as operators,
developers and agents connected with real estate)
is covered under the category ‘real estate, ownership
of dwellings, business and legal services’. The
gross value added in the ownership of dwellings is
equivalent to gross rental of the residential dwellings
less cost of repairs and maintenance. Gross rental
is estimated as a product of average gross rental
per dwelling and the number of census dwellings
and includes imputed rent of owner-occupied
houses.
7.6.5 The rentals of the industrial/trading
establishments are deductible expenses from the
profits of these establishments but appear as profits
of the business or company renting out the
premises. Similarly, implicit rents on self-owned real
estate is accrued as profits from business and is
difficult to separate from non-real estate profits. The
addition to the stock of real assets with these
businesses appears in the business accounts as
capital addition. In the national accounts it would
appear under the head ‘gross fixed capital formation
– construction’. Value of construction output is the
additions made to the stock of real estate assets in
the public, private and household sectors. The
contribution of ‘construction’ to GDP is the estimate
of value added derived from the corresponding
estimates of this value of construction output.
7.6.6 Further, current data on the sectors such
as ownership of dwellings, real estate services,

• Product: Housing, Real Estate Services and Construction
• (at 1993-94 prices)
• Figures In Rs Crore
• Year 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000
• Housing 43,507 44,706 45,958 47,252 48,585 49,968 51,391
• Real Estate Services 317 333 351 370 390 413 437
• Construction 40,593 42,830 45,496 46,452 51,195 54,342 58,728
• Total 84,417 87,869 91,805 94,074 1,00,170 1,04,723 1,10,556

• Gross Domestic Product : Housing, Real Estate Services and Construction
• (at 1993-94 prices)
• (Share in Per Cent)
• Year 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000
• Housing 5.6 5.3 5.1 4.9 4.8 4.6 4.5
• Real Estate Services 0.04 0.04 0.04 0.04 0.04 0.04 0.04
• Construction 5.2 5.1 5.1 4.8 5.0 5.0 5.1
• Total 10.8 10.5 10.2 9.7 9.9 9.7 9.6

construction are mostly not available and estimates
for the benchmark year is prepared on the basis of
base year data and projected for other years with
the help of relevant indicators.1
7.6.7 To get an idea of the contribution of the
real estate sector to GDP, an attempt is made to
factor in the value added to ownership of dwellings,
which constitute housing, real estate services and
construction.
7.6.8 During the period 1994-95 to 1999-2000
the real estate services, housing and construction
sector grew by 4.6 per cent. The housing sector
grew by 2.8 per cent only while the construction
sector grew by 6.4 per cent. Table 7.6.2 indicates
that the share of real estate services, housing and
construction in GDP declined steadily from 1993-
94 to 1999-2000.

REFORM ISSUES
7.6.9 The Indian real estate market is still in its
infancy, largely unorganised and dominated by a
large number of small players, with very few corporates
or large players having national presence. The
Indian real estate market, as compared to the other
more developed Asian and Western markets is
characterised by smaller size, lower availability of
good quality space and higher prices. Supply of
urban land is largely controlled by state-owned
development bodies like the Delhi Development
Authority (DDA) and Housing Boards leaving very
limited developed space free, which is controlled
by a few major players in each city.
7.6.10 Restrictive legislations and lack of transparency
in transactions are other main impediments
to the growth of this sector. Limited investment from organised sector has also hindered the growth of
this sector. There is a thriving parallel economy in
real estate, involving large amounts of undeclared
transactions, mainly due to high stamp duty rates.
The current legislative framework also leads to
substantial losses to the Government. Some of
these issues are: