Real Estate In India
Author- Akash Ajit Gaikwad
The Effect of Covid-19 on the Real Estate Industry in India
Sanchaniya (2021) Presented the COVID-19 pandemic, declared a global emergency in March 2019, had a severe impact on the global economy, including India’s real estate market. The pandemic caused widespread disruptions, such as halted construction, reduced labor, and supply shortages, leading to delays in both residential and commercial projects. The real estate sector, already struggling with issues like policy changes and a liquidity crisis, saw a significant drop in new property launches, with some areas experiencing a 97% decrease in new launches in 2020. As a result, the market faced slower sales, reduced demand, and uncertain prospects. The Indian real estate sector, which employs millions, especially in construction, was heavily affected, leading to job losses and financial strain. Despite the setbacks, some analysts predict a gradual recovery as the sector eventually rebounds. The research focuses on understanding the pre-pandemic real estate conditions, the impact of COVID-19, and the opportunities and challenges faced by mortgage holders, builders, and workers in the industry.
Opinion Leaders in Real Estate Markets
Sanjay (2011) Presented the real estate market in India has seen significant growth, but the role of opinion leaders in influencing consumer decisions has not been extensively studied. Opinion leaders are individuals with more expertise and experience in specific areas, such as real estate, and they influence others’ buying behaviors through advice and guidance. These leaders are typically well-informed, active in social and professional circles, and frequently consume media related to their field. Research shows that opinion leaders are more knowledgeable, stay updated on new products, and are more involved in social interactions compared to non-leaders. This makes them key players in shaping marketing strategies, especially in a rapidly developing market like India’s real estate sector.
Market leverage of real estate firms in India: Empherical study
Bag (2014) Presented the demand for modern housing and commercial real estate in India has grown due to factors like an expanding middle class, rising income levels, smaller households, and increasing consumer spending. The real estate market has been boosted by the growth of sectors like IT, ITES, and hospitality, along with demand from Non-Resident Indians (NRIs) and foreign investments. However, financing for real estate projects is challenging due to high risks, long-term nature, and limited access to capital. The Reserve Bank of India’s policies and legal hurdles on foreign land ownership have also impacted investment. Real estate firms in India face difficulties in accessing debt and equity markets, with few issuing debt. This study explores how the capital structure of Indian real estate firms is influenced by factors like market leverage, operational efficiency, and macroeconomic conditions. The research shows that real estate firms rely on their previous leverage and market characteristics rather than traditional factors like firm size or profitability to determine their capital structure.
Real Estate and Infrastructure Resolution
Varma et al (2019) Presented the proposed resolution mechanism aims to address the crisis in India’s real estate and infrastructure sectors, which are causing significant financial distress due to non-performing loans (NPLs) in banks. Unlike traditional methods, this approach involves pooling distressed assets into a Special Purpose Vehicle (SPV), which can be auctioned to determine fair value. The government would absorb the tail risks, such as regulatory uncertainty and non-tradability of these assets, ensuring that the financial burden does not fall on taxpayers. By pooling assets and making targeted investments, the mechanism can unlock value and distribute gains among investors, lenders, and the government. The government would provide a safety net against potential losses and manage the assets through an independent operating agency, with the aim of stabilizing the economy and the financial sector while protecting homebuyers and public interests.
Factors that Influence Indian Propensity to Invest in the Real Estate Market
Amarjit et al (2012) Presented this study explores the factors influencing Indian investors’ decisions to invest in the real estate market. It focuses on aspects like investment expertise, knowledge of neutral information, and advice from family or advisors. With India’s growing population and booming real estate sector, understanding these factors is crucial. The study uses a survey approach, gathering data from investors in Punjab, India. The research extends previous studies by Gill and Biger, which focused on Canadian investors, to provide insights into Indian investor behavior. It examines how knowledge, risk perception, and external advice impact investment choices. The study also ensures participant confidentiality and ethical considerations throughout the data collection process.
Review of Various Delay Causing Factors and Their Resolution by Application of Lean Principles in India
Deep et al (2017) Presented this study focuses on understanding and reducing delays in construction projects in Northern India by applying the Toyota Way model. Delays are common in construction and can lead to cost overruns and dissatisfaction among stakeholders. The research analyzes 100 real estate projects by comparing their planned and actual schedules to identify key causes of delays, such as changes in project scope, contractor-related issues, and lack of equipment. The study suggests that implementing Toyota Way principles, which focus on efficiency and continuous improvement, can help construction firms better manage projects and reduce delays. The findings provide practical recommendations for improving project management, team collaboration, and overall efficiency in the industry.
Issues in Real Estate and Urban Management – A Note
Morris (2010) Presented the real estate sector in India has become a key driver of growth, contributing 5% to the GDP and employing millions. However, it faces several challenges, including outdated laws, lack of transparency, high land prices, and limited availability of housing, especially for middle and low-income groups. The sector is also constrained by poor urban planning, dysfunctional governance, and a lack of coordination between land use and transport planning. This has led to overcrowded cities with inadequate infrastructure, such as poor water supply, sanitation, and roads. Additionally, the sector is underdeveloped in terms of financial instruments like real estate mutual funds and mortgage-backed securities. Addressing these issues requires a more integrated approach involving various fields like economics, public administration, and urban planning.
Impact of Merger and Acquisition on Financial Performance: Evidence from Construction and Real Estate Industry of India
Isha et al (2023) presented the indian economy has undergone significant transformation since the 1991 economic reforms, with mergers and acquisitions (M&As) becoming an important strategy for businesses to adapt to changing market conditions. The construction and real estate sectors, contributing significantly to India’s GDP, have seen remarkable growth due to government initiatives and rising demand. However, M&A research in this sector, especially in India, remains limited compared to other industries like banking or pharmaceuticals. This study aims to examine how M&As impact the financial performance of companies in the construction and real estate sectors, using various financial ratios such as profitability, efficiency, liquidity, and leverage. The research involves analyzing secondary data from 2011 to 2020, focusing on M&A deals in the construction sector, and aims to shed light on the financial outcomes of such mergers, contributing to the understanding of their effectiveness in this particular industry.
Assessment of the Financial Competitiveness of Publicly Listed Indian Real Estate Companies Using the Entropy Method
Ritji et al (2024) Presented this paper examines the financial competitiveness of Indian real estate companies, focusing on profitability, solvency, and operational capacity. It highlights how the industry has been impacted by regulations like RERA, GST, and demonetization, which have slowed down demand and increased financial pressure on companies. The study uses a comprehensive set of financial indicators, including profitability metrics, debt management, and operational efficiency, to assess the financial health of over 50 publicly listed real estate companies. The entropy method is employed to calculate the weights of various indicators, with top-performing companies showing strong profitability, cash flow, and operational efficiency. The results show significant correlations between key financial metrics, emphasizing the importance of these indicators in determining a company’s competitiveness.
The Development of Corporate Real Estate Practices in India: A Survey of CRE Professionals
Kiran et al (2006) presented that Business process outsourcing (BPO) has significantly impacted corporate real estate (CRE) in India, leading to rapid changes in the market. As many global companies outsource to India, there has been an increase in demand for high-quality office spaces, especially in cities like Mumbai, Chennai, Bangalore, and Hyderabad. This demand has spurred improvements in infrastructure and construction, with a focus on large, efficient buildings and modern facilities. The rise of IT and IT-enabled services has driven the growth of commercial spaces, especially in suburban areas due to lower costs and availability of land. New real estate practices and services, such as project and facility management, have emerged, making the CRE market more professional and competitive. The future of Indian CRE looks promising, with continued growth expected as long as outsourcing to India remains strong, although challenges like competition from other countries and political instability could affect its progress.
Conclusion
The indian real estate industry has undergone significant transformations, influenced by various economic, policy, and market dynamics. The COVID-19 pandemic had a severe impact, causing construction halts, labour shortages, and financial strain, though a gradual recovery is expected. Opinion leaders play a crucial role in shaping consumer decisions, while market leverage and financial constraints continue to challenge real estate firms. Proposed resolution mechanisms, such as asset pooling, aim to address financial distress in the sector. Investment decisions in real estate are driven by expertise, risk perception, and external advice, while project delays remain a persistent issue that can be mitigated through lean principles. The sector also faces urban management challenges, including outdated laws and poor infrastructure. Mergers and acquisitions have played a role in reshaping the industry, but their financial impact requires further study. Regulations like RERA, GST, and demonetization have influenced the financial competitiveness of firms, and the rise of corporate real estate, driven by outsourcing, has led to increasing demand for commercial spaces. Overall, while the sector faces challenges, it continues to evolve, with financial strategies, policy reforms, and market innovations shaping its future.
References
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Bag, Dinabandhu, 2014. “Market leverage of real estate firms in India: empirical study,” EconStor Conference Papers 272924, ZBW – Leibniz Information Centre for Economics.
Deep Shumank & Asim Mohd & Khan Mohd Kashif, 2017. “Review of Various Delay Causing Factors and Their Resolution by Application of Lean Principles in India,” Baltic Journal of Real Estate Economics and Construction Management, Sciendo, vol. 5(1), pages 101-117, November.
Isha Gupta & T. V. Raman & Naliniprava Tripathy, 2023. “Impact of Merger and Acquisition on Financial Performance: Evidence from Construction and Real Estate Industry of India,” FIIB Business Review, , vol. 12(1), pages 74-84, March.
Kiran Kumar Naidu & Chris Heywood & Richard Reed, 2006. “The Development of Corporate Real Estate Practices in India: A Survey of CRE Professionals,” International Real Estate Review, Global Social Science Institute, vol. 9(1), pages 153-166.
Morris, Sebastian, 2010. “Issues in Real Estate and Urban Management – A Note,” IIMA Working Papers WP2010-11-01, Indian Institute of Management Ahmedabad, Research and Publication Department.
P. Sanjay Sarathy, 2011. “Opinion Leaders in Real Estate Markets,” International Real Estate Review, Global Social Science Institute, vol. 14(3), pages 354-373.
Ritij Saini & Aditya Deora & Kirtesh Gadiya, 2024. “Assessment of the Financial Competitiveness of Publicly Listed Indian Real Estate Companies Using the Entropy Method,” Papers 2410.06772, arXiv.org.
Sanchaniya Rashmi Jaymin, 2021. “The Effect of Covid-19 on the Real Estate Industry in India,” Baltic Journal of Real Estate Economics and Construction Management, Sciendo, vol. 9(1), pages 122-129, January.
Varma, Jayanth R. & Morris, Sebastian, 2019. “Real Estate and Infrastructure Resolution,” IIMA Working Papers WP 2019-09-01, Indian Institute of Management Ahmedabad, Research and Publication Department.