The problems of the real estate and the construction sector do not seem to be subsiding and the pressures remain on both demand and supply front. According to the data available in the Mid-Year Economic Analysis 2015-16 released by the Finance Ministry, while there has been a sharp decline in deployment of credit for the construction sector in the first half of financial year 2015-16, there has been a decline in the real estate service activity too.
While the scheduled commercial banks witnessed a credit growth of 27.4 per cent from the construction sector in the first half of the year ended March 2015, the growth numbers declined to a low of 4.1 per cent in the corresponding period this year. While the slowdown in credit off-take is a reflection of the lack of activity and demand within the real estate and the infrastructure space, it also reflects the impact of the high unsold inventory in major markets within the country in the housing sector.
The low activity within the sector also resulted into a decline in the growth rate during the period. While the overall GDP expended by 7.4 per cent in the second quarter ended September 2015, the construction sector expanded by only 2.6 per cent. In the same quarter last year, this segment of the economy expanded by 8.7 per cent.
So there is a clear decline in the construction activity and thus reflects badly upon real estate and the infrastructure sectors.
A look into the services sector growth also reflects badly upon the real estate activity. While the group of financial, real estate and professional services grew by 9.3 in the first half of the year, the mid-year analysis shows that the companies in the real estate sector recorded low growth rates. “The real estate and professional services constitute the bulk of this segment of services. At current prices, the corporate entities in the real estate sector recorded growth rates of 3.0 per cent and 3.6 per cent, while computer related activities grew by 7.5 per cent and 15.6 per cent, respectively during Q1 and Q2 2015-16. The financial sector indicators, viz., aggregate bank deposits and bank credit have shown nominal growth rates of 10.7 per cent, and 9.1 per cent, respectively as on September 2015,” the analysis pointed out.
So there has been a decline in across the value chain of the real estate sector. If the construction activity has slowed down, even the growth on the services related to the real estate sector remains low.