Prime Minister Narendra Modi envisions 100 smart cities by 2020. To realise this vision, the government has undertaken a few encouraging steps such as relaxation of foreign direct investment (FDI) norms in the construction sector and issue of long-term infrastructure bonds to facilitate easier flow of foreign and local capital. Once these smart cities are ready, several businesses will migrate there due to availability of cheaper land, labour and property. People will become mobile as jobs get created, leading to a distribution of people over a wider area. According to some statistics, the top 100 cities in India at present take up only 0.24 per cent of its area, have about 16 per cent of the country’s population living in them and contribute 43 per cent to the GDP. If 0.24 per cent can generate 43 per cent of GDP, imagine what a leap the GDP will take if land is utilised more effectively to build more cities and towns! Real estate, the second-largest employer in the country after agriculture, plays an important role in the Indian economy and affects 269 industries directly and indirectly. A report submitted by the technical committee of the Ministry of Housing and Urban Poverty Alleviation put India’s urban housing shortage at an estimated 18.78 million units in 2012. This shortage offers an opportunity for real estate to grow at a faster clip over the next few years. Life Beyond Metros With housing for all acquiring top-priority status for the government, affordable housing has become the mantra and leading developers have launched projects catering to this segment in metros as well as tier-I and -II cities. However, with land a scarce commodity in metros — commanding a premium — and construction expenses being high, demand fundamentals in the Indian real estate sector have shifted the focus to tier-II and -III cities, where there is sufficient economic activity. Industrial progress has led to real estate demand rising in places like Ahmedabad, Surat and Vadodara. Baddi in Himachal Pradesh and Pantnagar and Rudrapur in Uttarakhand have attracted real estate developers due to proactive government policies. In the south, Coimbatore, Visakhapatnam and Kochi have emerged as real estate hotspots due to the presence of a large investor segment and good economic activity. In the west, Pune, Nasik and Nagpur are noteworthy examples. Thanks to urbanisation, India’s urban population has risen by 71 million between 2001 and 2011. Around 534 million people will be city dwellers by 2026. This translates into an opportunity for real estate development, particularly housing, with demographics, the trend of nuclear families, employment and potential GDP growth playing a key part. Last year, Pune, Bangalore and Chennai bucked the slowdown trend and witnessed robust launches for affordable as well as luxury projects. The political scenario in Hyderabad improved with the formation of Telangana, leading to more project launches, better demand and higher property prices. On the other hand, Mumbai and parts of Delhi have high inherent demand and constrained supply. Homes For All The Budget gave ample hints to the government’s commitment to provide housing for all by 2022. This was echoed by tax sops for housing loans, an increase in allocation for rural housing schemes and the announcement of incentives to promote affordable housing. The allocation of Rs 7,000 crore for development of 100 smart cities is also indicative of an emphasis on creating adequate infrastructure. The Budget made the purchase of homes more attractive for the middle class by raising the deduction against interest payment on home loans from taxable income to Rs 2 lakh from Rs 1.5 lakh. The increase in tax deduction under Section 80C from Rs 1 lakh to Rs 1.5 lakh allows the saving of a further Rs 16,950. A hike in the basic tax slab from Rs 2 lakh to Rs 2.5 lakh puts more money in the hands of a person whose annual salary falls in that bracket. These tax sops lead to considerable savings and an enhanced loan eligibility. To attract foreign investments, the government allowed 100 per cent FDI through the automatic route and reduced the minimum built-up area from 50,000 sq. metres to 20,000 sq. metres of construction. The capital requirement cap has been set at $5 million, down from $10 million. Exit norms have been relaxed by removing the three-year lock-in for repatriation of investments. These rules will help developers raise funds and usher in FDI. The introduction of Reit (Real Estate Investment Trust) is a progressive move, as it will help developers (through better financing) and investors (more investment options), though at present it is restricted to non-residential real estate. The Indian real estate sector is one of the most recognised globally. Data from the Department of Industrial Policy and Promotion shows that the construction sector received an FDI equity inflow of $23.8 billion between April 2000 and September 2014 and it is likely to touch $180 billion by 2020. Real estate seems to be in a sweet spot. With crude prices nosediving, inflation easing, interest rates softening in the next few months, property prices stabilising, institutional housing finance becoming easier to obtain, professionalism in the market, emphasis and support on the policy front and, most importantly, the return of confidence and positive sentiment, I see great opportunity for people to buy property or, at least, start exploring the option. Prices may not correct sharply due to pent-up demand, which again is a positive as it points to confidence in the economy owing to a strong government at the Centre. Renu Sud Karnad is Managing Director, HDFC Ltd Views expressed are the author's.