29 Aug 2022
Conventionally, infrastructure development encompasses creation of robust transport & communication systems, civic amenities, power & energy generation / supply facilities, etc. Major infrastructure development initiatives were undertaken by western block countries through the 50s and 60s. China followed suit, though the 80s and 90s. But India’s story unfolded rather late, mostly after the turn of this century.
Inspite of India being an open society and a market driven economy (unlike China), in some sense, our problems and solutions echo better with those which existed in China some 20-25 years back – very large population, huge diversities & disparities, and a pressing need for ensuring systemic reforms for ensuring growth & development all across. Though we started late, but during the last 10-12 years, owing to determined efforts, strong political will, and emancipated leadership, India’s efforts have resulted in tremendous change in its infrastructure landscape.
Gati Shakti and Industrial Corridors: To address the requirement of timely, cost effective, and efficient implementation of infrastructure projects, the Centre introduced the PM Gati Shakti programme.
Also, the National Industrial Corridor Development Programme has been launched as India’s most ambitious mission to build new industrial cities in the form of ‘Smart Cities’ by converging next-gen technologies across various infrastructural ensembles. These futuristic industrial cities will compete with the world’s best manufacturing & investment hubs, generate employment, and boost socio-economic development. Under this scheme, 32 projects are planned in four phases in 11 corridors across India, with a view to reduce annual logistic costs.
Furthermore, 100 Smart Cities Mission was flagged off by the Hon’ble Prime Minister in June 2015. As an urban renewal and retrofitting scheme, it intends to develop smart cities using more sustainable and citizen-friendly smart solutions with an extremely high liveability quotient.
Next-gen transport infrastructure: As India overhauls its transport infrastructure, the focus is on sustainable, futuristic, green mobility to help decarbonise the transport ecosystem, particularly in public transport and freight movement space, by undertaking rail-based MRTS (Mass Rapid Transport) and LRTS (Light Rail Transit) as well as the BRTS (Bus Rapid Transport) Systems and increasing penetration of Metro rail infrastructure across cities. Similarly, air transport, waterways, and road infrastructure are also being modernised/expanded/overhauled.
Future-proof communication infrastructure: Future-proof fibre-optic broadband networks are being laid across the country, with an emphasis on last-mile connectivity.
Civic infrastructure: The Central and State Governments are working equally hard for providing green civic amenities throughout India.
Power and energy sectors: With India announcing its intention to reach net-zero emissions by 2070, the transition towards renewable energy in the form of solar and wind power is gaining momentum.
Inspite of the above, a lot needs to be further done for making our infrastructure comparable with top 5 economies of the world. Our problem is that even our tertiary infrastructure, which is extremely critical to enable setting up of more industries, businesses, services sector facilities, and providing housing to our ever-growing population and swelling migrant communities in rapidly urbanizing hamlets, is not exactly fully developed and sufficient for realising the vision of our worthy Prime Minister of making India an economic superpower and a 5 trillion economy by 2027. It is, therefore, essential to have sustainable planning for growth & development in even the real estate sector. Let’s contrast this requirement against a few bare facts:
Urban dwellers are slated to soar to more than 600 million by 2030, boosting the growth potential. As urbanisation increases, an estimated 600 to 800 million square metres of urban areas will need to be built each year right up to 2030.[1]
As the office leasing space bounces back from the pandemic, realtors expect the market to witness rising demand. According to estimates, across seven major cities, the office space demand is slated to touch 30 million square feet, registering an increase of 4 million from 2021.[2]
Urban housing shortage in India has risen from 18.78 million in 2012 to 29 million in 2018 – a 54% jump.
Meanwhile, as the ravages of climate change reverberate worldwide, sustainable designs are becoming increasingly imperative for redefining country’s real estate landscape, with sharp focus on green structures having lower carbon footprint. Likewise, green energy and recycling in waste management for achieving zero discharge and minimal carbon trail are fast emerging as the new normal. A recent survey by JLL on sustainable real estate notes that most occupiers (93%) concur they would prioritise locations facilitating a reduction in carbon emissions in the future.[3] Investors (65%) also state that they will prioritise investments in cities that are climate change progressive.
Never mind if these facts appear to be mammoth, and almost insurmountable – because there is also a rosier side to this story. As a country, we also have strengths in plenty – we are a matured democracy having an independent judiciary, our demographics can’t get better since we already have a very large young, educated and English-speaking population, and also, we are a stable economy having huge knowledge-based services sector and a very strong domestic consumption market. Hence, it is not surprising that opportunities keep knocking at our doors – be it in form of investments, exports, trade, or for technology and knowledge insourcing / outsourcing, etc. But the big question is, if together we all are ready to take the next big leap for realising the true potential of our great nation and reaping benefits of opportunities which knock India’s doors.
As India undergoes a digital transition, telecommunications, data centres, co-working spaces and allied infrastructure are all emerging as its core components. According to an April 2022 PwC-Asia Pacific Real Assets Association report, the country will remain the fastest-growing major economy in the world for the next five years, registering a 7% annual GDP growth rate. As urban centres steer two-thirds of output, by the end of the 2020s-decade, Indian cities would match the present size of middle-income nations. By then, India will harbour six of the 30 largest cities in the world.[4]
Institutional Financing and Urban Growth: Such expansive infrastructure development, however, requires massive amounts of sustained long-term funding for further growth. Due to the paucity of public money to fund such growth, other funding channels are required. Two relevant schemes are REITs (Real Estate Investment Trusts) and InvITs (Infrastructure Investment Trusts), which are playing a big role in attracting investments from retail as well as institutional investors in realty and infrastructure development projects apart from funding being received from organised banking institutions. Significantly, the International Financial Services Centre – GIFT City in Gandhinagar, Gujarat has introduced REIT and InvIT regulations, which will give a fillip to these vehicles.
By 2025, the Centre’s NIP expects funding needs to exceed $1.4 trillion. It is in this context that the said two funding mechanisms will be critical for bridging the financial shortfall in the urbanisation mission. Additionally, non-conventional asset classes such as data centres, warehouses, and structures in the renewables space will need funding as demand scales up, particularly from the corporate sector.
On its part, the Central Government has already launched programmes like Housing for All. It plans to provide permanent residences with basic amenities to homeless households and those staying in dilapidated or temporary homes, especially in rural regions. It is in this backdrop that even private enterprises need to step up their efforts for not only participating in nation building but also to grow and benefit from this whole situation.
I am also of considered view that the Centre’s ambitious schemes for infrastructure push must be welcomed and supported with private partnerships, even if some are running behind their timelines because of multiple headwinds, including pandemic-linked disruptions. As the popular phrase goes: ‘Aim for the moon. If you miss, you may hit a star.’ Thanks to the Centre’s ambitious programmes, it now appears to be only a matter of time before new and resurgent India unfolds to the world as an economic superpower.
This article was contributed by Anil Saraf, Chairman, CII NR Committee on Infrastructure & Real Estate & Chairman – ASF Group and was first published in CII Northern Insights, July issue.
[1]https://www.pwc.in/assets/pdfs/research-insights/2022/indias-real-estate-and-infrastructure-trusts-the-wayforward-seventh-edition.pdf
[2]https://www.financialexpress.com/industry/sustainable-real-estate-net-zero-projects-define-new-landscape-for-realty-in-india/2541134/
[3]https://www.financialexpress.com/industry/sustainable-real-estate-net-zero-projects-define-new-landscape-for-realty-in-india/2541134/