Media How MSMEs Can Drive Growth in India’s Real Estate Market

How MSMEs Can Drive Growth in India’s Real Estate Market

25 June 2024
How MSMEs Can Drive Growth in India’s Real Estate Market

MSMEs have a phenomenal influence in shaping India's future and are a pivot of innovation, employment, and growth. Having a remarkable contribution of over 30% of India’s total GDP, this sector is further set to transform the economic landscape and growth potential of India.

According to a report, there are more than 14 crore people currently employed in the MSME sector. Furthermore, experts predict the MSME sector to be worth one trillion by 2028, presenting a huge market waiting to be tapped for many possibilities.

Given the burgeoning numbers and positive statistics, the spotlight is now on how MSMEs will reshape the real estate market and why one should not ignore its potential reach.

Role of MSMEs in the Real Estate Sector

Construction firms, contractors, consultants, and suppliers all come under the ambit of MSMEs. The construction sector accounts for about 8% of India’s GDP and is predicted to become the third largest over the next few years.

As several firms in this sector are unorganized, there is an opportunity to register officially as MSMEs. Despite universal headwinds and inflationary pressures, the real estate sector has shown potency to achieve sustained growth, and you can't deny the role of MSMEs in this spurt for growth.

Trends in the MSME Sector in India

Low interest rates, the exception of electricity consumption, and zero collateral loans are some benefits that real estate MSMEs can provide. Additionally, for real estate MSMEs, it's significant to maintain a track record of executing projects on time with cash flow management and a formal documentation process.

In the real estate sector, established developers seek finances from commercial banks, private equity, etc., and small developers can face challenges in attaining project funding. Upgrading MSME infrastructure and digitalizing the company will be critical for this sector’s development.

The construction sector can benefit from MSME registration as well. The growth in the construction industry can benefit a firm if it registers as MSMEs. These firms can supply goods and services to large-scale companies involved in construction activities.

Moreover, in the union budget 2023-2024, the government raised the infra budget by 33%, recognizing infrastructure as a key contributing factor to sustainable growth. MSMEs can aid big construction firms that are involved in these domains. Plus, MSMEs can reach steel, cement, and other building materials suppliers.

Registering as MSMEs: For Real Estate

With MSME registration, financial institutes and banks offer credit for developers without pledging assets as security. Also, registered developers can benefit from reduced interest rates and free ISO certification. ISO certificates can provide Udyam-registered MSMEs with financial aid for obtaining certification. Registered MSMEs can protect their innovations with a 50% subsidy on the total registration cost.

Significance of MSMEs

MSMEs work on an agile approach and cater to the great Indian middle class. The flexibility and adaptability of the sector are laudable. Most firms work based on client needs and preferences, so the personal connection is high.

MSMEs in India are one of the largest employers outside the rural domain. They employ over 40% of workers and have low technology and capital requirements. Ideally, it is one of the pillars of the 'Make in India' mission. Given India's middle-class approach, they offer the flexibility of starting with few resources. As a result, making long-term decisions becomes efficient.

Moreover, they support capacity building and resource mobilization, giving small business owners a chance to develop innovative products. The best part is multinational companies depend on these firms for auxiliary and semi-finished products. MSMEs can help create a suitable and inclusive society. They can become the growth engine of the nation.

Future Outlook: MSMEs and Real Estate

Over the next few years, lending to MSMEs in real estate will broaden, with more private firms increasing their exposure to this sector. Ideally, financial companies that use AI-powered credit scoring and predictive analysis would modernize the lending landscape. The construction companies would benefit by scaling up their projects.

Upgrading the MSME infrastructure is also one vital aspect of powering the sector. From the physical infrastructure standpoint, project-specific incentives such as power consumption and rebates on land cost will provide strong incentives for developers.

Moreover, the 75,000 crore proposal for transport infra projects (India) will help MSMEs in the manufacturing space. Incentives for setting up different skill-developed centers and business mentoring services for aspects such as complying with RERA in the real estate sector will promote professionalism among small developers.

Lastly, real estate MSMEs will reap the benefits from different policy incentives announced by the State and Central Government of India. The evolving MSME landscape in India will provide many opportunities in the next ten years.

With streamlined regulations and increased credit access, MSMEs can boost the economic growth and prosperity of India. The government has been supporting MSMEs and its initiatives, but the focus should be on realizing the outcomes. Get ready for the revolution in the real estate sector powered by MSMEs.

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