Residential realestate: An investible asset | KPMG | IN

Residential real estate: An investible asset

Residential real estate: An investible asset

Building, Construction and Real Estate sector

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Residential realestate: An investible asset

The real estate sector in India has been undergoing through a major transformation, owing to host of reforms undertaken by the central and the state governments, the Reserve Bank of India (RBI), and the Securities and Exchange Board of India.

India has one of the largest housing market in the world, and contributes nearly six per cent to the Indian gross domestic product (GDP). The residential prices in India have more than doubled over the past decade (2007-16), and have outperformed many of its key global peers from developed as well as developing economies during this period.[1]Residential real estate: An investible asset’, a report prepared by KPMG in India, in association with Magicbricks Realty Services Ltd, aims to decipher and highlight the key demographic, economic, and regulatory factors responsible for significant growth in residential property prices. These factors coupled with the development of physical, social infrastructure and employment hubs have supported this growth. The report would enable the home buyers to understand these factors and take an informed decision before putting in their lifelong savings in this physical asset, which to some is a basic necessity and to others may be an investment alternative. Further, through the findings of this report, we have tried to present key recommendations to the policymakers, and to the real estate fraternity, to undertake initiatives and make strategies which would be beneficial for all the stakeholders in the long-term.

Though, the institutional credit to the housing sector is estimated to have grown by about 19 per cent during FY2011-16.[2] There is still significant potential for credit growth as mortgage to the GDP ratio in India is only 9, far below than in the developed countries, such as U.S. (68 per cent) and Germany (42 per cent).[3] Further, the potential for growth in residential real estate is significant, as India would need to develop over 170 million houses until 2030 to meet the needs of the rapidly urbanising population.[4]

1 Property Price Index for Country, 2015, Numbeo.com, accessed on 17 December 2016

2 Indian Mortgage Finance Market Update for FY2016, ICRA, August 2016

3 Statistics, Housing Finance Network, assessed in November 2016

4 Global Construction 2030, GCP Global and Oxford Economics, November 2015

© 2017 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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