Strong government support behind India's residential construction sector: Fitch

Driven by the sustained demand for housing and supportive government policy, residential building will see a strong rebound in 2021 and robust growth over the coming decade, according to Fitch Solutions.

This growth will be a key driver of the robust recovery of India's residential and non-residential construction industry overall which Fitch forecast will expand in real terms by 7.9 per cent in 2021 followed by average yearly growth of 6.5 per cent up until 2030.

Underpinning the positive outlook on residential building in India, Fitch noted strong government support at the national level for housing sector, reflected in allocation of sizeable funding for housing with national 2021 Budget including Rs 50,000 crore allocated to the Ministry of Housing and Urban Development (MoHUA) as well as creation of 3.5 billion dollar (about Rs 25,300 crore) fund to support completion of stalled housing projects.

Fitch also expected Pradhan Mantri Awas Yojana (PMAY) programme, which aims to provide affordable housing to all urban poor by 2022 through initiatives like financial support, to continue to be a driver of growth.

"While we do not expect the project to be completed by the 2022 deadline, it will contribute to the wider goals of the MoHUA and is indicative of the strong government support for residential construction."

Among policy initiatives to be advanced with government support is the Smart Cities Mission, said Fitch, an urban renewable programme designed to build new infrastructure to improve management and safety which will benefit from considerable funding in the 2021 national Budget.

Launched in 2015, the Smart Cities Mission aims to develop 100 cities in India with comprehensive infrastructure including adequate water supply, affordable housing, efficient urban mobility as well as the use of technology in improving security and safety.

By the end of 2020, only 53 out of the planned 100 smart cities had functional integrated command and control centres which act as the main administrative hub managing day-to-day actions and disaster management.

Fitch said it expects that the potential for reforms to Foreign Direct Investment (FDI) system in regards to housing presents upside risk to its outlook for residential building in the market.

While not yet reflected in policy, the Ministry of Commerce and Industry is currently reviewing FDI policy in real estate, and a recent government proposal suggests moving to allow 100 per cent foreign investment in completed projects.

( With inputs from ANI )