Real estate is a fascinating industry. Abundant and exciting, it can also make the news for the wrong reasons. From the uncharted boom in property prices to the spectacular collapse of an over-leveraged firm in China recently, it must contend with several extremes. That is why the true value of real estate as an industry lies in the quiet times in between. It is only then that its potential as a vital part of the economic development of a nation is seen.
Take the case of the Sri Lankan economy in particular. The nation’s real estate sector has been receiving immense attention since the past few years. Being on a strong growth trajectory, it is said to sustain this momentum due to the large market, strong consumption patterns, and rapid urbanisation. The Sri Lankan Government is expecting an increased urbanisation rate of 3-4% per annum. Continued real estate expansion is fueling the demand for housing, higher investments opportunities, and employment generation. At this turning point, it’s worth exploring some ways in which real estate contributes to a nation’s economy.
Offering value for a civilised society
Real estate provides a country with its most basic of necessities – a home. Through a thorough understanding of shifting market forces, real estate developers sense the needs of the population. They have their fingers on the pulse of buyers – whether they’re looking for affordable homes, suburban escapes, or swanky office spaces. And so the nature of development constantly adjusts to the ebbs and flows of customer demand, making it a highly dynamic and powerful industry.
Creating a desirable and strong workforce
A major building block of a growing nation is its people – its workforce. In many ways, real estate fuels the growth of this educated and talented workforce, strengthening a nation at its foundation. By facilitating the growth of urban clusters, the real estate sector introduces the right manpower and talent to the right jobs. In concert with the development of the transport infrastructure, this industry also successfully creates that which drives the economic growth of societies. An elevated way of living also paves the way for secondary industries like restaurants, entertainment, shops, laundromats, and so much more, creating a virtuous cycle of growth.
Generating employment opportunities
Sri Lanka is touted to be an attractive market with a considerable ROI on real estate. This industry has been recognising and rewarding investors who have invested in properties in Sri Lanka with strong returns. Yet, the lack of transparency, no access to property registration data, and lack of professionalism have caused severe hindrances for the real estate market in general. Over a course of time, this sector has generated massive employment opportunities for people from all walks of life.
For example, nearly 1,000 workers were employed directly or indirectly at 110 Parliament Road for a four-year construction project. Once the construction was completed, the 172 families that shifted employed 200+ workers for various jobs. This move not only created a lively atmosphere in the Rajagiriya neighbourhood, but also witnessed a notable increase in the establishment of shops, gymnasiums, restaurants, and other vital facilities. This created a multiplier effect; a shining example of how real estate can result in the creation of countless jobs and community building too.
Creating assets for a lifetime
For individual citizens of a nation, real estate is a reflection of their hard-earned wealth. For those who buy them, it is a tangible and physical asset to cherish for a long time to come, often their entire life. It’s a value that is reaped consistently, over the long-term and with pride: seen as a reservoir of their savings. However, one of the deepest values of owning a home is seen in its capability to be passed down to the next generation. Thus, in many ways, it is symbolic of larger family duties and parental obligations, binding society together.
Surviving extreme events and disasters
Often a safe long-term investment, real estate doesn’t cause direct or indirect losses during a natural calamity. It generally represents a very safe long-term investment for individuals. Outside of bubbles or disasters, properties rarely drop in value. Instead, the prices remain the same or pick up as the surrounding area goes through continuous development over a course of time - giving the industry the stability it needs to grow.
Real estate markets often work as a double engine for job creation and prove to possess a certain wealth preservation factor. Like any industry, it goes through its own set of highs and lows, but is least likely to experience a sharp downward spiral over time: a core strength that makes it a vital part of a growing economy.
(Rohan Parikh is the Managing Director of Iconic Developments and an alumni of the Wharton School of Business and INSEAD. The printed version of this article says that the writer is the Managing Director of The Green Acres Academy which is a misprint.)
Real estate: A key driving factor shaping the nation’s economic output
09 Jan 2022
Real estate: A key driving factor shaping the nation’s economic output
09 Jan 2022