According to Economic Survey 2017-18, though the Indian economy decoupled from rest of the economies of the world for some time in 2017-18, it has remained the second-best performer amongst major countries, with strong macroeconomic fundamentals. “.. there are indicators that have emerged in the last few days like manufacturing and services PMI, growth of industrial sector as reflected by higher IIP, automobile sales etc. which seem to suggest that the GDP growth could be a little higher than CSO’s estimates and for 2017-18, (it could be in the range of 6.5 to 6.75 per cent). The growth during 2018-19 could be higher, depending on a number of factors,” says the Survey.
The Survey has pointed out that household’s investment in dwellings has declined considerably, which is possibly linked to reduction in the share of household’s savings in the form of physical assets. On the other hand, nearly the entire increase in the share of fixed investment of public sector is on dwellings.
The Survey admits that the growth of real estate sector decelerated in the last three years from 7.5 per cent in 2013-14 to 4.4 per cent in 2015-16. According to the Survey this was mainly due to growth of the ownership of dwelling segment decelerating from 7.1 per cent in 2013-14 to 3.2 per cent in 2015-16. As per NHB’s RESIDEX Index, housing prices increased in 36 cities during April-June 2017 out of 50 major cities, while 13 cities witnessed a decline.
It is also pointed out that in urban areas, while food was the main driver of inflation during April-December last year, housing sector has contributed the most to Consumer Price Index (Urban) inflation during April-December in the current financial year.
Talking about India’s housing requirements the Survey says that “…till now policies have been mostly focused on building more homes and on home ownership.” It also suggests the need to take a more holistic approach that takes into account rentals and vacancy rates. In turn, this needs policy-makers to pay more attention to contract enforcement, property rights and spatial distribution of housing supply vs. demand.