Real Estate Sector Forecast: Residential and Non-Residential construction is likely to grow in India.

On December 30th, Fitch Solutions said it expects the residential and non-residential building sector of the country to grow by 6.6% in 2020, led by fiscal support and increased focus on providing affordable housing in urban areas.

“A mix of tax support and government policies supporting the housings market, and enhanced activity within the logistics, retail, and industrial constructions sectors, will drive short-term expansion in the Indian construction sector,” the statement said.

On the other hand, long-term growth will mainly be driven by the large population of the country needing continuing investment in the housing industry, the statement said.

The crisis caused by loan crashes triggered by a series of defaults by non-bank financial companies has risen over 2019, contributing to a decrease in the availability of funding for developers and buyers.

The government approved a package of Rs 10,000 crore on November 2019 to help stalled housing projects, with a further Rs 15,000 crore to be provided by the state-owned financial institutions. With more readily available funds, it expects to resume construction for part of stalled housing projects and this will feed into India’s prediction for growth in the building industry in the short term.

Opportunities for constructing affordable housing units are set to stay high in the next few years, driven by Pradhan Mantri Awas Yojana (Urban) initiative by Prime Minister Narendra Modi.

Pradhan Mantri Awas Yojana, which was first launched in 2015, aims to provide affordable housing for all urban poor by 2022, targeting more than 4,000 state-wide towns. In order to provide the homebuyers with financial support, numerous additional schemes have been put in place alongside Pradhan Mantri Awas Yojana, such as the credit-related subsidy scheme.

“Though we expect that PMAY(U) is to improve residential building sector growth, we believe that, due to the continuing growth of urban population in India, which creates higher demand for affordable housing, and land procurement and construction delays it will not be likely to meet its target within the timeframe specified,” it said.

It also said the “PMAY(U)-linked construction will continue beyond 2022, leading to a short- to a medium-term expansion of the residential housing sector.”

In addition, a large number of unsold housing stocks, mainly medium to high-end luxury units, exist in urban areas that limit the growth potential of the residential high-end industry.