Understand risk management in real estate sector

The real estate sector in India has traditionally been an unorganised sector of the economy. However, over the past few years, with the inflow of FDI and increasing NRI investment, the sector has received a lot of attention from the government leading to increased regulatory norms. As a result, it has metamorphosed from being largely fragmented and unorganised to a structured and organised one like its peers in developed economies.

A study by Investment Information and Credit Rating Agency of India Limited reveals that the real estate sector contributes to 6.3 per cent of the total GDP and is the fifth largest hotbed of foreign investment. However, much like other sectors, companies engaged in the construction and development of properties are also exposed to varying degrees of uncertainty, both at the macro-level, which affects the economy as a whole and at the sector level. Effective risk management is, therefore, crucial for a company to optimise its performance.

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