To achieve 'Housing for all', real estate requires investment twice India's GDP

In order to achieve Modi’s vision of ‘Housing for All’, India needs nine crore houses, which means a whopping $2 trillion investment in real estate, another $ 2 trillion in urban infrastructure(roads, sewerage, water etc.) andcommercial real estate development(offices, retail, according to a report byKPMG-National Real Estate Development Council.

In essence, in the next eight years, India’s housing sector requires an investment which is twice India’s current GDP.

According to the report, around Rs 9.5 lakh crore($150 billion) is now being invested annually in the real estate sector, of which around 80 percent or Rs 7.5 lakh crore is deployed in the housing sector.

“The government’s vision of ‘housing for all by 2022’, requires more than $2 trillion to be spent in the next eight years to build nine crore houses. The investment in the sector, which has grown at less than two percent per annum in recent years, needs to grow at about 12 to 13 percent per annum (unadjusted for inflation),” Neeraj Bansal, partner and head - Real Estate and Construction, KPMG India was quoted as saying in a statement issued by the firm.

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According to him, reforms targeting higher flow of funds from lending institutions, households, private savings and foreign capital are needed.

He said these could be achieved by developing long-term financial instruments for the real estate sector, opening up external commercial borrowings, giving incentives forhousing investment, developing public-private-partnership (PPP) mechanism, streamlining approval mechanism, and reforming the Rent Control Act.

The report also states that the banking and the financial system in India are expected to play a vital role in providing housing to all by 2022, and the Reserve Bank of India (RBI) has to carry out required reforms.

The report indicates new mechanisms such as External Commercial Borrowings (ECBs), which currently the RBI has allowed for $1 billion annually (only for affordable housing development), needs to be raised to $10 billion.

The report also suggests that the government should work towards streamlining the approval mechanism, which currently takes about two to three years.

According to the World Bank, on an average, it takes about 34 procedures over a period of 196 days for obtaining construction permits in India.