NEW DELHI (INDIA): Maharashtra, Uttar Pradesh (UP) and Gujarat together account for over half of the total investments attracted by real estate and construction sector in India as of December 2016, noted a recent study by apex industry body ASSOCHAM.
“There are about 3,489 projects worth Rs 14.5 lakh crore in the construction and real estate sector that are currently live across India,” according to the study titled ‘Construction and real estate investment: State-level analysis,’ conducted by ASSOCHAM.
While Maharashtra alone accounts for lion’s share of about 25 per cent in total investments attracted by real estate and construction industry in India as of December 2016 followed by UP (13 per cent), Gujarat (13 per cent), Karnataka (10 per cent) and Haryana (nine per cent).
“The centre and state governments must introduce a single-window clearance system at the earliest to avoid time and cost overruns that are impacting the growth and development of real estate sector in India,” said Mr D.S. Rawat, national secretary general of ASSOCHAM while releasing the findings of the chamber’s study.
“Government should also grant industry status to the sector to counter the apathy of banks in financing realty projects,” said Mr Rawat.
“As for the sector, the companies in the real estate space must keep looking for long-term financial resources to become independent,” he added.
The study prepared by ASSOCHAM Economic Research Bureau (AERB) highlighted that almost 90 per cent of construction and real estate investments are concentrated in top 10 states.
So far as the investment growth trend in this sector is concerned, the sector touched highest rate of 13.5 per cent in 2010 but recorded sharp downfall till 2013 whereby it recorded negative growth of about eight per cent but it picked up in 2014 to reach about three per cent and again fell to (-) 2 per cent in 2015.
However, the real estate and construction investments recorded a positive growth rate of 2.5 per cent in 2016 as such the sector clocked compounded annual growth rate (CAGR) of (-) 0.7 per cent between 2011-16.
Among states, Odisha has recorded highest CAGR of about 37 per cent in investments attracted by realty sector during 2011-16 followed by UP (nine per cent), Maharashtra (three per cent), Kerala (1.6 per cent) and Andhra Pradesh (1.4 per cent) while rest all top states clocked negative growth in this regard.
It is worrisome to note that 70 per cent of construction and real estate investment projects remained non-starter in India since 2013.
Secondly, significant growth has also been recorded in projects that remained under different stages of implementation i.e. from 63 per cent in 2009 to about 77 per cent in 2015 which moderated to 72 per cent in 2016.
Among states, over 95 per cent of realty investment projects are under implementation in West Bengal followed by UP (90 per cent) and Punjab (88 per cent).
High under-implementation rate leads to time and cost overruns. As such of over 2,300 construction and real estate projects that are under-implementation, 886 projects are facing an average delay of 39 months and about 93 per cent of these projects are in the housing sector while rest are commercial complex.
More than 95 per cent of delayed 886 projects i.e. 845 projects are accruing to private sector ownership while public sector ownership has only 41 such projects.
Real estate projects in Punjab are facing maximum delays to the tune of 48 months followed by Telangana (45 months), West Bengal, Odisha and Haryana (44 months).
On a positive note, while the new investment activities in real estate and construction sector have recorded negative growth between 2011 and 2015, it recorded a significant spike in 2016 (32 per cent).