Housing Sector in India, GDP and Growth

By | April 11, 2015

Housing Sector in India, GDP and Growth, shridev sharma

 The Economic Survey 2015, has focused on creation of Real Estate Investment Trust. A study by NCAER shows why policy intervention to resolve various problems currently faced by the housing sector in India is an urgent need.

 The National Council of Applied Economic Research (NCAER) has conducted a study on “the impact of investments in the housing sector in India on GDP and employment in the Indian economy”. The study was supported by DFID and Ministry of Housing and Urban Poverty Alleviation.

According to its context of study, the urban population has increased from 286.1 million in 2001 to 377.1 million in 2011. The number of towns in the corresponding period increased from 5161 to 7935. No appropriate government has planned to meet this demand. This resulted in unauthorized hosing in various forms.

The National Council of Applied Economic Research - Housing Sector in India

Referring to the report of the Technical Group for 2007-2012 for 11th Five Year Plan, the study notes that during this period, a shortage of 24.71 million housing units was estimated, whereas the Technical group for 12th plan 2012-2017 estimated that during the period shortage may not increase if the rate of growth in housing stock continues to be higher then the growth in number of households.

As per national accounts prepared by the Central Statistical Office for 2009-2010, the contribution to GDP by the construction sector was 8.2 per cent, and real estate, ownership of dwelling units, and business services contributed to another 11.4 percent thereby contributing to nearly one -fifth of India’s GDP. The study assessed the inter-industry linkages of housing investment, impact of housing investment on income and employment generation, inter linkages between housing, construction, and construction material and to the practicable extent the real estate sector.

Key findings of this most valuable study suggests residential construction (housing sector in India) accounts for 1.24 percent of economy, 1 percent of GDP, and 6.86 per cent of employment.

Housing sector in India is fourth largest employment generator.

For every lakh invested in this sector, 2.69 new jobs are created in the economy. A unit of increase in the final expenditure in the housing would generate additional income as high as three times the income generated within the housing sector in India itself. Every additional rupee invested in the housing sector will add Rs. 1.54 to the GDP and with household expenditure considered, this is going to add Rs. 2.84. For every rupee invested in creation of housing, Rs 0.12 gets collected as indirect taxes.

Surprisingly this study seems to have escaped the attention of the Economic Survey 2015, which only focused on creation of real estate investment trust and did not attempt at any policy intervention to resolve various problems currently faced by the housing sector.

SHRIDEV SHARMA’s note to readers: The above extends from my study of the Act, to better understand its objectives, its implementation and impact on the Real Estate industry, the government and society at large. It is not, and does not attempt to be an analysis. To read the complete text of the Act, and news about related events, please see Related Links.