Economics for Built Environment

REAL661
Presented By:
Sub Group 1, CPM, Sec – C
1. Pulkit Choudhry - A13559019004
2. Ayush Bijalwan - A13559019026
3. Pranjula Sanghi - A13559019083
4. Sabarish - A13559019098
Presented To: 5. Nitish Katre - A13559019103
Prof. Nihar Nanyam 6. Snigdh Kumar - A13559019118
Trends in Real Estate during 2010-2018
MARKET SIZE OF REAL ESTATE INDUSTRY

► Increase in market size or sales revenue

from FY2010-2016

► Dip in market size in 2017 due to demonetization

and GST

► By 2025, the market size is expected to reach

650 million $ USD

► By 2030, the real estate market size is expected

to reach 1 trillion (KPMG, 2018).
Trends in Real Estate during 2010-2018
AVERAGE COMMERCIAL RENTAL VALUE IN INR/SF/MONTH

► Mumbai - commercial rental space having

a high rental value

► Delhi - office spaces

► Mumbai is the best place for real estate

investments with returns of 15-19%
(Mirror, 2019)

► Minor changes in the rental value after the

GST depicting the inelastic supply

► The inelastic supply is due to the

unsold inventory.
Trends in Real Estate during 2010-2018
CONTRIBUTION BY REAL ESTATE TO GDP

► Several ups and downs due to changes in Supply-demand and due to government
► Decrease in the contribution in the year 2017 due to demonetization and GST
► Increase in contribution in 2018 depicts market stability
► By 2025, the real estate industry is expected to contribute 13 % of India’s GDP (Mirror, 2019).
 Analysis of the Construction Industry
MICRO AND MACRO ECONOMIC ANALYSIS

► The Infrastructure and Construction Services has major contribution in the GDP of India. (Wiki, 2019);

► GDP contribution 2017: USD 1438.5 Bn (GoI, 2019);

► “India is expected to become the 3rd largest market in construction sector in the world by 2025” (Elizabeth Montgomery, 2008);

► This sector has maximum number of FDIs in FY17 and FY18 (GoI, 2019);

► Number of firms Corporate Sector: 200 (GoI, 2019);

► Number Class A Contractors Registered with PwD: 120,000 (PwD, 2019);

► Lakhs of small contractors present in the market (Wiki, 2019);

► FDI Inflow in 2017-18: USD 24.87 Bn (GoI, 2019).

Analysis of the Construction Industry
MICRO AND MACRO ECONOMIC ANALYSIS

► The GDP share took a rise in the years 2012 and then took a
blow

► From the year 2013 to 2017, the GDP Share steadily increased
from 7.4 to 9

► The average of the GDP share has been 8

Analysis of the Construction Industry
MICRO AND MACRO ECONOMIC ANALYSIS

► In 2015, Infrastructure Market Revenues were USD 1365.6

Bn;

► By 2021, Infrastructure Market Revenues are expected to

reach USD 2552.4 Bn;

► As per economic survey of 2017-18 by GoI, USD 4.5 Trillion is

required in India to fully develop the infrastructure of the
country.
Analysis of the Construction Industry
MICRO AND MACRO ECONOMIC ANALYSIS

► In 2014, 4260 KMs of Highway was constructed in India;

► In 2015, 4410 KMs of Highway was constructed in India;

► Subsequently, in 2016, 2017, 2018 and till June 2019, 6061

KMs, 8231 KMs, 9829 KMs and 2345 KMs of Highway
Construction took place;

► According to this progression, the development of Highways

is going at par since the development of the economy
depends on the development of connectivity, this will boost
the growth of the GDP further;

► The Government is about to complete a total of targeted

300 highway projects.
Analysis of the Construction Industry
SUPPLY DEMAND CURVE FOR STEEL

► With increase in demand, price of steel decreases;

► With decrease in demand, price of steel increases;

► With increase in supply, price of steel increases;

► With decrease in supply, price of steel decreases;

► Equilibrium is achieved at 78 Million Tonne of Steel and INR

40400.
Outputs of Construction Industries in the Last 3 Years

► 2016: The output was around US$ 442.3 billion;

► 2017: The output of construction in 2017 was about US$ 464.9

billion. Which was a normal percentage increase of about 4.9%
approx.(demonetization being a major factor);

► 2018: The output increased to US$ 505.7 billion. An increase of

9.05% approx. (Monetarily settled market).
Outputs of Construction Industries in the Last 3 Years

► REASON FOR GROWTH IN 2016

For the first three quarters the growth in construction industry was
substantial.

In the fourth quarter demonetization came into effect which

slowed down the rate.
Outputs of Construction Industries in the Last 3 Years

► REASON FOR GROWTH IN 2017

Economy is wandering off due to less cash in the market.

All the factors including labor, land and capital are adversely
affected.

Hence the economy witnessed a snail progress.

Outputs of Construction Industries in the Last 3 Years

► REASON FOR GROWTH IN 2018

Market was stable and monetary units were again in substantial

amount
Outputs of Construction Industries in the Last 3 Years

► For public sector the growth rate from 2016-2017 and

then from 2017-2018 has a constant increase. Monetary
situation had a little or no impact;

► For private sector as indicated in graph the growth rate

from 2016-2017 is on a down side reason being
demonetization.

► But from 2017-2018 in a settled market the growth again

climbs;

► The worm shows constant growth of construction

market in Indian economy.
SWOT Analysis
STRENGTHS
• Easily available resources, manpower
and technology in the country
• Provides employment and training
opportunities (GOI, 2019)
• Availability of skilled and cheap work
force
• New townships, commercial buildings
and infrastructure development projects
• Well-structured transportation network
THREATS
•  Change in prices of raw materials
•  Instability in the market
•  Improper planning
• Lack of support from the legislation
WEAKNESSES
• Huge investments or capital is required
• Unorganized sector
• Constant change in staff and new joiners
leading to delay in projects
• Banks are not willing to give loans to
construction companies.
• Unproductive labor
OPPORTUNITIES
• Catering the need of growing population
• Policies by the government to attract
investors
• Country is heading towards a sustainable
economy
• Various initiatives by the Government
Effect of GST on Indian Construction Industry

► Taxes have decreased after implementation of GST

Effect of GST on Indian Construction Industry

► Taxes have increased after implementation of GST

Effect of GST on Indian Construction Industry

BENEFITS OF GST ON INDIAN CONSTRUCTION CONSTRAINTS OF GST ON INDIAN CONSTRUCTION

INDUSTRY INDUSTRY

► Transparency and Accountability ► Stamp Duty and Registration

► Seamless Flow of Credits ► Digitization

► Compliance and Efficiency ► Delayed deployment of IT infrastructures

► Double Taxation ► Anti - profiteering clause

Recent Developments planned by GoI

► There are many schemes, mission, rules and regulations Government has planned or
planning for future to be implemented to give a boost to the sector.

► Some major schemes are:

• HRIDAY- Heritage City Development and Augmentation Yojana;

• PMAY-Pradhan Mantri Awas Yojana-Housing For All by 2022;

• Smart Cities Mission;

• AMRUT – Atal Mission for Rejuvenation and Urban Transformation.

 Recent Developments planned by GoI
HRIDAY- Heritage City Development and
Augmentation Yojana
► Aim: To protect and flourish tourism in different
heritage cities across India.
► Status: Approximately a total of 500 crores are spent
under this scheme for the development of the
heritage sites.
PRADHAN MANTRI AWAS YOJANA (PMAY)-
HOUSING FOR ALL BY 2022
► Aim: 20 million houses for people below poverty line
► Status: As of August 2019, 88 Lakhs houses with a
monetary value of approximately 1.12 crore have been
sanctioned (Wiki, 2019) (Construction Sector, 2019).
SMART CITIES MISSION
► Aim: Smart cities mission is to develop the existing cities
by improving the facilities like proper water supply,
electricity, safety of citizens, improved health service,
solid waste management,
► Plan of Action: Planned funding of Rs 98,000 crore. The
cities for the mission were selected by a competition held
nationwide and a total of 100 cities are selected
AMRUT – Atal Mission for Rejuvenation and
Urban Transformation
► Aim: AMRUT mission aims to provide basic facilities like
water supply, sewage discharge, and urban transport to
the people
► Status: only 20% of the total projects has been completed
with only one year left in the completion of the project.
 References

► Ministry of Finance Website,

► Ministry of Planning Website,
► Economic Times,
► HT,
► Livemint,
► Government of India Press Releases, etc
Any Questions?
Thank You.