Economic trends that will continue to shape the real estate industry in 2023

The real estate industry is expected to have strong growth in 2023 as a result of technical advancement, acceptance of digitalization, the accomplishment of infrastructure investments in a stable manner, demand, and NRI investments in the nation. Since the real estate sector in India is one of the largest sectors responsible for employment and economic growth, the development of urban and semi-urban accommodation, the expansion of telecommunication services, and the adoption of 5G might all contribute to a significant trend in the sector by 2023 is what experts claim.

Hari Movva, Senior Vice President, SILA said “The Real Estate Industry has been one the fastest growing sectors in India over the past 5 years. It is also one of the leading avenues of employment for both skilled and non-skilled workers. With a wavering economic landscape, the following economic trends will shape the future of real estate industry in 2023 – Government Incentives – The Pradhan Mantri Awas Yojna offers support to the lower income groups for their housing needs by offering concessions in taxes and housing rates. Increasing the limit of their financial incentives and aids, and raising the cap on area of the individual units, can facilitate more affordability and cover a larger economic group, thus boosting adsorption of affordable units in this scheme.”

“Increased costs – The rising cost of raw materials is impacting the real estate industry as a whole. Rising costs and narrowing margins are discouraging developers. A lower GST cost on key construction items can offset the cost increase, allowing developers to maximise project potential and provide better products. Stamp duty reductions for affordable housing units within a size and price threshold would make city living more affordable. Economic Factors – Amidst a global slowdow, India has shown immense potential for growth, if predictions are to be believed – there will be an increase in job creation of 8–9%, a rebound from the current stock market fall, and an 8–9% overall growth which will ultimately impact the spending power, leading to a rise in overall demand and quantitative growth for real estate. Sector Specific Policies – It has been nearly five years since RERA has been introduced. It has revolutionised the industry and brought a lot more transparency and customer accountability. A through benchmarking of RERA guidelines across states will give authorities a clear indication of areas needing improvement. The RERA guidelines can be updated accordingly, so that the best practices can be implemented uniformly across all the states,” said Hari Movva.

Robin Chhabra, Founder and CEO of Dextrus said “Costs, push for sustainability, government subsidies and world events are going to have its effects felt in the real estate industry this year and onwards: We have been seeing rising costs of construction over the last two years but there is a growing sense of prices stabilizing in Y2023. According to the CBRE report, India Construction Cost Trends, input material costs should stabilize and reduce for some materials such as cement, steel and aluminum.

ESG reporting: 2023 will be a year of sustainable and data-centric choices for the integrated real estate sector. This will lead to the potential to innovate with sustainability as its goal across operations over the coming years. Moreover, since a lot of companies are aligning their business goals and CSR vision with social and environmental responsibility, it is imperative for them to take effective steps towards this evolution & increase their contribution towards sustainability.

Government spending on infrastructure has been meritorious with several subsidies for the real estate industry to boost this sector. This includes tax benefits for developers, grants & loans for first time buyers, financial assistance for housing construction, lower interest rates from banks etc.

Something more specific to our coworking industry and commercial real estate, being one of the most attractive sectors in the real estate landscape, it is expected to observe fruitful returns as major IT companies & other enterprises are switching back to more in person work from a virtual work model adopted during the pandemic.”

Niraj Bora, Founder of Surmount Business Advisors pvt ltd said “Simpler ESOP taxability is another thing that needs immediate attention as taxability has to be actually done on the sale of such securities and not on allotment (which is effectively charging tax on notional gains). This is very much needed now that most of the companies and startups have ESOP plans to attract and retain talent. Single window clearances is one of the most important requirements in case of new age sectors, or growing sectors which face issues, delays on account of delays in getting clearances. Single window system has been in place for special projects in the past and has been very effective tool to speed up the pace of work.”

“Segmentation would be more clear than before when it comes to student housing, co-living, senior citizen housing, etc and it would be coupled with more quality services and better infrastructure for each segment. Since co-working and hybrid model has picked up pace after the pandemic, companies have realised that pure work from home model might not be workable for all type of companies. But hybrid model is something many can work with. Hybrid model of work spaces with hot desk concept, etc would pick up in 2023 and related technology would be in place soon enough. This would also enable companies to cut down infra and real estate costs in the midst of global slowdown. REITs and fractional ownership business models have been on the rise in the past, that ensures a common investor to encash on the real estate growth in terms of pricing, etc. I believe real estate appreciation will continue overall (residential and commercial) in line with growth in the Indian economy, in which I think tier 2 and 3 cities would experience more appreciation in line with their growth compares to urban cities,” said Niraj Bora.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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