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A change in market sentiment, bolstered by rapid infrastructure development, would bring more foreign direct investment (FDI) in the real estate sector and create jobs in the hinterlands, the Economic Survey 2017-18 said.
The sector has been in the doldrums for some time now, registering a five-year low in sales. The Survey said the government’s initiatives would boost the infrastructure sector. India would need about $4.5 trillion in the next 25 years for infrastructure development, of which it would be able to garner about $3.9 trillion, the Survey said.
While the residential market witnessed sales of only 58,000 units in the first half of 2017, new residential sales fell to a five-year low of 101,850 units during this period in the top 14 cities.
Admitting enforcement of the Real Estate Regulatory Act (RERA) and the goods and services tax (GST) — both of which were brought in last year — have had an effect on the residential market, the Survey said the hit would be only for a short period.
While the Survey seemed bullish on FDI in real estate, 2017 closed with a fall in on-boarding of foreign funds, from $5.9 billion in 2016 to $5 billion last year. “This positive sentiment was attributed to a host of factors, including regulatory environment, enhanced infrastructure, and amendments to Real Estate Investment Trusts,” the Survey said.
Sector experts said relying on a change in sentiment and FDI would not do much; change was needed on the ground. “We need single-window clearances. A company has to take as many as 30 different approvals to get clearance for construction, which takes around three-four years at times,” said Parveen Jain, vice-chairman, Naredco.
Impressed by the work done by the roads and transport ministry, the Survey said highway connectivity to hinterlands would lead to creation of jobs. It pointed to the need for last-mile connectivity by building district roads to provide better access and improving economic activities. “There is a need for developing Other Public Work Department roads, including district roads, so as to provide better access, thereby enhancing economic activities,” it said.
As of September 2017, the length of national highways was 115,530 km, which accounted for 2.1 per cent of total road length. On the other hand, the length of state highways was 176,166 km as on 2015-16.
According to the Survey, the $160-billion logistics industry provides employment to more than 22 million people. E-commerce, which is a burgeoning sector in India, relies heavily on the logistics sector, making it a key sector for growth and jobs creation.
“Last-mile connectivity would not just provide overall benefit to infrastructure projects but improve the logistics sector. At present, there is no cold chain network in the country for perishable goods,” said Vishwas Udgirkar, partner, Deloitte Touche Tohmatsu India.
The logistics sector was granted infrastructure sector status last November.