As India walks one step closer to the futuristic concept of 100 smart cities project, the nation is seeing it as a growth driver in coming few years. Add to it the newly launched programmes like Atal Mission for Rejuvenation and Urban Transformation(AMRUT) and housing for all by 2022, India is looking forward to add 2 crore more homes to its kitty.
At this stage, when plans are on papers the figures are more of an estimates than reality, it is likely that the lives of most of the countrymen will get positively impacted. This in turn will lead to a better growth story running onto atleast a decade from hereon.
Conservatively speaking, even if 2 crores of the houses were to be spread all over the country, the average house would be about 800 sq feet. If one were to take into consideration the cost of land and constructions and taxes the cost of each such unit would average out to about 20 lakh rupees. The sum total of such estimation would go somewhere around 40 lakh crore rupees. The figure looks humungous on its own and if this was to be averaged out over next 7 years then the annual number comes to about 5.71 lakh crores.
At present the estimated market size of housing is about 4 lakh crore rupees pfer year with an annualized growth rate of 7-8 %. As a result of latest policy infusion the CAGR may now go upto 11-13%. As per the global trend, the new housing merits an equal amount of investment in infrastructure. Combined together they create a magnanimous image of progress, which may go on for atleast a decade.
The Multiplier Effect
The theory as propounded by John Maynard Keynes, ‘a penny spent is a penny earned’ has the highest coefficient for the housing sector. Due to the number of ancillaries dependent on the construction like cement, steel, timbre, brick etc,
here a rupee spent is benefiting people 4.7 times over. This factor alone means, that 5.71 lakh crores would multiply and circulate in the economy to the tune of about five times benefiting people at multiple levels. Just to compare, this amount is much more than the planned outlay of 4,65,277 crores as projected in the annual budget of 2015-16. In simple words the booster dose to the housing sector would result in faster circulation of money and enriching sectors, which are directly and indirectly linked with the sector.
Stimulus for Employment Generation
If 350 is the average number of direct employees hired for a 1000 unit new project then 70 lakh is the magic figure for manpower requirement in till the said projects go on. Real Estate sector by the virtue of its structure also has an indirect employment ratio of 1:8 evenly distributed over in over 300 ancillary units providing products like cement, steel, bricks, tiles etc and services like transportation, advertising & promotion and so on. It essentially translates into income for more than 6 crore households in next few years.
The Union government has indicated timelines for its smart city project to take off. The First list of 20 such cities to be chosen are expected to be finalized this year. Another 40 cities will be selected in 2016-17 and 40 more in 2017-18, if things go by the plan.
Similarly in case of AMRUT dedicated towards the betterment of urban facilities the government has a target of rejuvenating about 500 cities boosting their existing infrastructure and facilities over next five years.
Enriching Urban Lives
By virtue of its definition the Smart Cities are the ones that enrich lives of those who live in. Such cities will be complete in day-to-day functioning. World class work centres, schools, colleges, transportation, hospitals, malls, entertainment solutions and other civic amenities will be available to each and every citizen in these new age clusters. This essentially means that the standard of living goes up drastically. As rightly said by the Prime Minister Narendra Modi, “Every person dreams of having his or her own home. It is not merely about a roof and four walls; it is beyond that.”
Spreading out Development
With atleast one Smart City in each state the country will now witness development across its length and the breath. Few of the states to get their share in first leg are expected to be Uttar Pradesh, Tamil Nadu, Maharashtra, Madhya Pradesh, Gujarat, Karnataka, Andhra Pradesh, Rajasthan, Punjab, Haryana, Telangana and Chattisgarh.
The Indian Economy as of now is the seventh-largest in the world and is the second fastest in terms of growth. In last 2 decades it progressed around 7% on annual basis. Thanks to the pro-growth stance taken by the present government, the reforms push will further launch it in the orbit of 8% plus.
The long-term growth prospective of the country also remains positive due to its young population and corresponding low dependency ratio, healthy savings and investment rates, and increasing integration into the global economy. And with all the right noises, India even has a potential to become world’s 3rd-largest Economy by the time housing for all becomes a reality.