Real estate sector covers residential housing, commercial offices, retail outlets, trading spaces such as theatres, hotels and restaurants, industrial buildings such as factories and government buildings. It involves the purchase, sale, and development of land as well as residential and non-residential buildings. The activities of the real estate sector encompass the housing and construction sectors also.
In India, the real estate and construction is a $16 billion (2006) (by revenue) industry. It 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. But, 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.
Directorate of Estates is an attached office of the Ministry of Urban Development, Government of India. It is responsible for the administration and management of the office buildings for the various organisations of the Government of India as well as residential accommodation for the Government employees in the metropolitan cities of Delhi, Mumbai, Kolkata, Chennai and five other cities namely Shimla, Chandigarh, Ghaziabad, Faridabad and Nagpur. The Central Government Estates in the remaining cities and towns are managed by the Central Public Works Department (CPWD).
CREDAI (Confederation of Real Estate Developer's Associations of India) is the apex body of the organized real estate developers/builders across India. 20 State/city level associations, namely, Andhra Pradesh, Chhattisgarh, Delhi-NCR, Goa, Gujarat, Jharkhand, Himachal Pradesh, Karnataka, Kerala, Madhya Pradesh, Maharastra, Odisha, Punjab, Rajasthan, Tamilnadu, Uttar Pradesh and West Bengal spread over across 18 States of India are members of CREDAI with over 3,500 individual members developers encompassing over 60% of the organised private state/cities in the country.
The Central laws governing real estate include:-
While each State has its own set of laws, which govern planned development, the two laws that exist in every State are the stamp duty and rent laws.
The sector has assumed growing importance with liberalisation of the Indian economy. Developments in the sector are being influenced by the developments in the retail, hospitality, entertainment industries, economic services and information technology (IT)-enabled services, etc. and vice versa.
Foreign Direct Investment (FDI) in real estate is being permitted since January 2002. Previously, only NRIs and PIOs were allowed to invest in the housing and the real estate sectors. Foreign investors other than NRIs were allowed to invest only in development of integrated townships and settlements either through a wholly-owned subsidiary or through a joint venture company along with a local partner.
India fully opened up the sector to FDI in 2005. However, norms issued later made a minimum capitalization of $10 million for wholly-owned subsidiaries and $5 million for joint ventures mandatory. Besides, minimum area requirement were also imposed by the Government. At present, foreign institutional investment (FII) is not permitted in the real estate sector.
India's real estate sector is witnessing an unprecented high. Enabling regulatory changes, high industrial growth, easier financing options and steady growth in equity markets have resulted in an upturn in the real estate investment activity. This, coupled with the Government's relaxation of FDI policies have made the real estate an attractive investment option.