Real Estate in India - Safe and Secured Destination of Investment

The real estate in Indian market is constantly changing and developing at a rapid pace. The most preferred destinations of last year may not be the better options this year, while next year might bring certain unparallelled set of investment destinations in the real estate market of India. As such nothing can be predicted in advance in this sector.

The basic reason for this changing situation is that the real estate is booming which is causing most of the country's metros and also certain previously popular Tier II towns to modify at an unequalled pace.The prices of the immovable property have actually reached sky heights which might be beyond the reach of the middle class group, but it still forces them to expect a little more abroad each year. The investors assess these trends of migration, examine the magnitude and range of growth and determine certain new towns as the next destination.

The Information technology (IT) companies, are these days the capital growth drivers in the real estate market of India and are stunningly not dependent on the central business locations. The core of the entire boom of outsourcing is that it sorts more awareness for the multi-nationals to transfer the functions of back-office and even undergo extensive research processes to India rather than undertaking them in their home countries.

As a matter of fact both the end buyers and sellers of the IT-based services and products are based overseas anyway. This basically means that the IT/ITEs (information technology enabled services) establishments have the potential to function from anywhere in India, as far as there is accession to skilled work force and other required infrastructure.

In fact, these companies can conveniently profit from the asset of cheap real estates while the prices in small towns have made-up the way for the city boom of Tier II/III. However, the IT/ITEs companies basically serve as catalyst for almost every sector of real estate in India and as such the retail, infrastructure and residential sectors would very soon start perking up in those particular localities too.

The main mantra of the real estate investment is however, the emerging localities are actually more preferable than the established and the saturated ones. The established regions sooner or later would reach a eminent altitude in terms of apprehension potential, no matter after that the growth rate may either stagnate or slow down.

It has also been witnessed there is quite a little scope for the new and latest market drivers like malls to get a preferred place in concentrated regions - while, the prices remain high.

However, it can be elaborated that this is actually not a preferable scenario from the profitable investment point of view as the best investments need low entry levels and considerable growth and that also in a realistic time-frame. As such it has been witnessed that though one or more than one destination reaches their peak potential on almost all the accounts, the new destinations obviously come into limelight instantly.

It is also quite worth mentioning that in this quite unstable financial market where unsecured and personal loans charge the sky rocketing interest rates, the rates of interest in loan against property are following the reverse path. This particular situation has geared the growth of real estate in India.

The boom in the retail market actually has a significant impact in the commercial real estate market. In fact, the actual size of the wholesale sector in India is about Rs. 8,10,000 crores (US $162 billion) and amazingly out of it just 2 percent is unionised or comply corporate constitution. However the Indian retail sector is steadily growing at a pace of 20% per annum and what is more important, the unionised pie of this sphere was calculated to grow from 2% of the whole wholesale market in 2001 to 22% in 2005.


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Real Estate in India - Growing Towards New Heights

The factors such as booming economy, favourable demographics and liberalised foreign direct investment (FDI) regime, the Indian real estate sector has witnessed a revolution. The real estate in India is growing at 35 per cent. This sector is estimated to be worth US$ 15 billion and anticipated to grow at the rate of 30 per cent annually in the coming decade. India has become a new market for foreign investors due to its potential economical growth rate. As a matter of fact, this sector is attracting foreign investments worth US$ 30 billion in number of IT parks, hotels, medical, telecom and residential townships which are being constructed across India.

Real estate in India is the second largest employing sector including construction and facilities management. This sector is linked to about 250 supportive industries such as cement, brick, transport, steel, etc through backward and forward linkages. Accordingly, a unit increase in expenditure has a multiplier effect in this sector, as capacity to generate income is as high as five times.

Rising income levels of a growing middle class is the main reason for growth in the real estate. Apart from the income, other factors such as increase in nuclear families, low interest rates, modern attitudes to home ownership and a change of attitude amongst the young working population are responsible for real estate development. Therefore, it can be said that real estate property have changed the attitude from 'save and buy' to 'buy and repay' to boost housing demand.

As per the information by 'Housing Skyline of India 2007-08', a research firm Indicus Analytics, it has predicted that there will be demand for over 24.3 million new dwellings for self-living in urban India by 2015. Moreover, rapid growth of the Indian economy has faced a cascading effect on demand for commercial property to meet the needs of business such as modern offices, warehouses, hotels and retail shopping centres.

With the significant investment opportunities emerging in this sector, international real estate players have entered in the country. Effective participation from large local and international industrialists have resulted in potential economical growth of India which is moving towards maturity. Currently, foreign direct investment or FDI inflow into this sector is estimated to be between US$ 5 - 5.50 billion. A unit of Deutsche Bank for instance, aims to invest more than US$ 1 billion over three years in Indian construction and real estate property projects. Russian conglomerate Sistema plans to develop hotel, offices and residential complexes in major cities of India with an initial investment of US$ 100-200 million.

The boom in this industry has attracted large number of realty funds to step into this market. Prominent global players such as Carlyle, Blackstone, Morgan Stanley, Trikona, Warbus Pincus, HSBC Financial Services, Americorp Ventures, Barclays and Citigroup among others have all already checked into the Indian realty market.

Among international players, the many Indian realtors are going global by making their name in the international market through significant investments in foreign markets. Prudential Real Estate Investors for instance, has acquired Round Hill Capital Partners Kabushiki Kaisha, a Japanese asset management firm. Embassy Group has settled a deal with the Serbian government to construct a US$ 600 million IT park in Serbia. Parsvnath Developers in collaboration with the Al-Hasan Group in Oman.

Importantly, government has introduced many innovative reform measures to discover the potential of the sector. 100 per cent FDI is allowed in realty projects through the automatic route, for instance. 51 per cent FDI permitted in single brand retail outlets and 100 per cent in cash and carry through the automatic route. With growing economy in India, the demand for all segments of the real estate sector are likely to continue.


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