Indian Real Estate Market - Showing an Upward Trend

The real estate sector in India is on a growth path. The development in the real estate market encompasses growth in both commercial and residential spheres. The Indian economy is booming with an annual GDP growth rate of 8.5- 9% creating a class of potential investors with significant disposable income. As housing remains a concern in major metro cities, sufficient demand generators for residential units are there for the next decade and expect prices to rise 10-15% in India in next five years. The Indian Property Market has been growing fast since March 2005, when the current UPA government decided to open FDI in Real Estate. Further, it has been estimated that there would be huge shortage houses in next 7-10 years, which provides a big investment opportunity. The popularity of the Indian real estate sector is also highlighted by a report ‘Emerging trends in Real Estate in Asia Pacific 2011’ published by ‘Price Waterhouse Coopers’ and ‘Urban Land Institute’. The report focuses on various places where developers are building commercial and residential developments. These places include Gurgaon, Jodhpur, Agra, Punjab, Uttar Pradesh, Madhya Pradesh, Rajasthan and others.

Indian Real Estate: Investments

During April-September 2011-12, the Indian real estate and housing sectors received US$ 453 million in foreign direct investment (FDI), according to the Department of Industrial Policy and Promotion India (DIPP).

Further, the industry also witnessed growth in private equity (PE) investments as well. In the current calendar year so far (November 13, 2011), total investment from PEs was around US$ 741 million.

According to a report by Jones Lang LaSalle (JLL), about US$ 15.8 billion has been invested from 2006 till date on various types of assets in the real estate sector in the country. Of which, US$ 2.7 billion went to residential projects and US$ 2.4 billion to township projects. A sum of US$ 2.3 billion went to commercial projects, US$ 2.1 billion to mixed use and US$ 961.4 million to special economic zones (SEZs). During the current year, PEs invested US$ 320 million in commercial, US$ 65 million in mixed use, US$ 44 million in residential, US$ 190 million in SEZs and US$ 122 million in township projects.

Indian Real Estate: Government Initiatives

The Government has undertaken various initiatives to help the sector grow in the recent past. Some of the major government initiatives include:

• Allowing 100 per cent FDI in townships, housing, built-up infrastructure and construction development projects through the automatic route, subject to guidelines as prescribed by DIPP.
• Allowing 100 per cent FDI under the automatic route in development of Special Economic Zones (SEZ), subject to the provisions of Special Economic Zones Act 2005 and the SEZ Policy of the Department of Commerce.
• Allocating US$ 20.03 million for the urban infrastructure development project. The Urban Development Ministry received US$ 1.5 billion, an increase of US$ 68.53 million from the last fiscal 2010-11.
• Increasing allocation for Bharat Nirman to US$ 12.89 billion. Bharat Nirman consists of 6 flagship programs, the Pradhan Mantri Gram Sadak Yojana (PMGSY), Accelerated Irrigation Benefit Program, Rajiv Gandhi Grameen Vidyutikaran Yojana, Indira Awas Yojana, National Rural Drinking Water Program and Rural telephony.

Indian Real Estate: Road Ahead

The affordable housing segment is expected to play an important role in the growth of the real estate sector in India in 2011, on the back of increasing demand for such housing, according to the Confederation of Real Estate Developers' Associations of India (CREDAI).

"Affordable housing will be a key factor in driving the sector and we have already started working on progressive solutions in this area for effective and customized implementation of such projects," CREDAI Chairman Kumar Gera said.

Further, growth in the infrastructure sector is also expected to accelerate real estate activities, in commercial as well as residential segments, during this year.






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