Construction sector surge fuels economic growth in coming years
ECONOMY & POLICY

Construction sector surge fuels economic growth in coming years

If India required further evidence of its substantial housing boom, it found it in the latest GDP data, raising expectations that the construction industry will remain a driving force for the economy in the coming years.

The construction sector witnessed a remarkable growth of 13.3% in July-September compared to the same period the previous year, a significant increase from the 7.9% growth in the preceding quarter. This performance marked its best in five quarters, as indicated by the data released.

This surge contributed to India's overall expansion, surpassing forecasts at 7.6%, positioning it among the world's fastest-growing major economies. In contrast, Western economies struggled with high interest rates and energy prices, while China faced challenges due to a debt crisis in its property sector.

The awaited boom, which has generated millions of jobs, follows approximately six years of economic downturn influenced by debt and the pandemic. The construction sector began its recovery last year and has gained momentum this year, driven by increased incomes, a significant housing shortage in major cities, and robust population growth.

India, the world's most populous nation, experienced an urban housing shortage of around 19 million units last year, a figure expected to double by 2030, according to government estimates.

"The robust growth in construction has significantly contributed to economic growth and is likely to play the same role in the next couple of quarters," noted Sunil Sinha, an economist at India Ratings and Research, an arm of the rating agency Fitch.

Builders express long-term optimism, with some projecting the boom to last two to three years or even longer. Sanjeev Jain, managing director at Parsvnath Developers, a leading real estate company, believes the housing market could continue its strong performance for another three to four years, emphasising that India is in the initial stages of a housing growth cycle.

Despite an 8%-18% increase in prices, home sales in India's seven largest cities, including Mumbai, New Delhi, and Bangalore, surged by 36% in the July-September quarter from the previous year, totalling more than 112,000 units, according to real estate consultancy Anarock. Additionally, there was a 24% increase in the launch of new residential projects, as indicated by data from the consultancy.

If India required further evidence of its substantial housing boom, it found it in the latest GDP data, raising expectations that the construction industry will remain a driving force for the economy in the coming years. The construction sector witnessed a remarkable growth of 13.3% in July-September compared to the same period the previous year, a significant increase from the 7.9% growth in the preceding quarter. This performance marked its best in five quarters, as indicated by the data released. This surge contributed to India's overall expansion, surpassing forecasts at 7.6%, positioning it among the world's fastest-growing major economies. In contrast, Western economies struggled with high interest rates and energy prices, while China faced challenges due to a debt crisis in its property sector. The awaited boom, which has generated millions of jobs, follows approximately six years of economic downturn influenced by debt and the pandemic. The construction sector began its recovery last year and has gained momentum this year, driven by increased incomes, a significant housing shortage in major cities, and robust population growth. India, the world's most populous nation, experienced an urban housing shortage of around 19 million units last year, a figure expected to double by 2030, according to government estimates. The robust growth in construction has significantly contributed to economic growth and is likely to play the same role in the next couple of quarters, noted Sunil Sinha, an economist at India Ratings and Research, an arm of the rating agency Fitch. Builders express long-term optimism, with some projecting the boom to last two to three years or even longer. Sanjeev Jain, managing director at Parsvnath Developers, a leading real estate company, believes the housing market could continue its strong performance for another three to four years, emphasising that India is in the initial stages of a housing growth cycle. Despite an 8%-18% increase in prices, home sales in India's seven largest cities, including Mumbai, New Delhi, and Bangalore, surged by 36% in the July-September quarter from the previous year, totalling more than 112,000 units, according to real estate consultancy Anarock. Additionally, there was a 24% increase in the launch of new residential projects, as indicated by data from the consultancy.

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