indian realty boom

Real estate has always been about location. Nevertheless, over the years, it’s becoming more about name. Driven by optimistic growth in the economy, real estate in India is booming. India has been one of the great places for such a thing to happen. Cities lying lifeless or inactive for decades are suddenly coming alive with sounds of giant hammers striking at old structures to pull them down and making space for new buildings to come up.
The government was devoid of the funds or the facilities to meet the escalating demand for houses for all the people. Thus the government of India has momentum to the construction and development sector by allowing 100% foreign direct investment (FDI) under the automatic route in order to induce investment in the vital infrastructure sector.
Real estate development in India focuses on two primary areas: retail and residential. Analysts have said that the size of the Indian real estate market is about $15bn, and that it’s currently growing at a pace of about 30% annually. Much of the growth is due to the boom in IT and IT-enabled services, which need fully developed properties. This sector is also projected to require more than 66m square feet of space over the next five years.
The commercial property market has also been growing fast, almost at a compounded annual growth rate of over 30% in the past five years, with the demand for office space estimated to rise to over 15m sq feet in ‘05, from over 3m sq feet in 1998.A major boost received by the Indian realty sector is that the global real-estate consulting group Knight Frank has ranked India 5th in the list of 30 emerging retail markets and envisaged a remarkable 20% growth rate for the organized retail segment by 2010.
Various developers and builders are working overtime to satiate the demand for all breeds of property — residential, commercial and retail. Triggered by a robust economy, middle class disposable income, credit friendly environment, and sunrise sectors like retail, favourable income tax treatment of home loans and the government’s infrastructure friendly policies, they all want to leverage the current property boom.
Just look at the real estate stocks, viewed with trepidation until two years ago, going through the roof.In the same period, Mahindra Gesco surged from Rs 140.70 to close at 740.30 (september16th), despite a 6.20% drop from the previous day’s close.
The current cumulative demand for real estate ranges from 120 - 151 million sq ft, and is likely to touch around 1,055 million sq ft by 2010. By then, the capital requirement will have bloated to $68 billion.
The C&W(cushman and wakefield) study says that urban India alone requires 12 million housing units with scope for 400 townships in 5 years across 30-35 cities, each with a 5 lakh population. Property consultants say that last year, around 24 million sq ft of new commercial land was absorbed nationally, accounting for almost Rs 6,600 crore of capitalisation.

An even more heartening fact is that mortgage credit is only 6% of India’s gross domestic product (GDP). Compare this with 18-25% in Hong Kong and Malaysia and 65% in the US. Also, the average age of the Indian home owner has slid from 45 years to 27 years. And the mortgage has gone up from 10 to 20 years.
A recent study has revealed that more than 60 percent of the Fortune 1000 corporations are off shoring to India either directly or indirectly. L.N Mittal known as the (steel numero uno) who has just pulled of a historic deal with Arcelor (the second largest steel company in the world) to establish the first 100 million ton capacity steel company in the world cant resist the temptation of taking a plunge into the Indian realty market. LNM IV Ltd will acquire a 10-15-pct stake in India bulls Housing Finance, a fully owned arm of India bulls.
US-based real estate company Hines plans to invest over $300 million (over Rs 1,300 crore) over the next 4-5 years to develop projects in association with local partners. Hines, which manages about $12.5 billion of property across various countries, is targeting to develop various residential as well as commercial projects in the country.
Indian real estate industry has received a positive complement of sorts. India’s real estate industry has made impressive strides in becoming a more transparent sector over the past 2 years said Jones Lang LaSalle's in its latest edition of Real Estate Transperency Index (RETI). India has moved up from low transparency market to semi-transparency market. India's legal regulatory framework, professional standards and transaction process have been counted as positives. Jones Lang laSalle's RETI places India among the top 10 globally improved real estate markets.
IT-BPO companies account for 78% of total commercial space absorption in India. IT-ITeS companies acquire currently about 130 million square feet and the demand by them is expected to shoot up to 500 million sq ft by 2010. Several big BPO-Ites firms have closed huge property dealings that include lucent technologies, which acquired 350,000 square feet in Bangalore; TCS closed a 300,000 sq ft deal in Chennai, Satyam (200,000 sq ft-Chennai), Wipro (154,000 sq ft-Chennai) and CSC (125,500 sq ft-Gurgaon).
According to Nasscom-McKinsey data, over 1 million more people will be added in the IT-ITeS sectors by 2010. This will result in a demand for over 100 million sq ft of office space by 2010.
A population of 1.1 billion and a workforce of 496.4 million serve a great potential for real estate investors in India. The talent pool of intellectual capital and cost effectiveness gives India a competitive edge in the real estate scene. Relaxation of FDI rules and tax incentives for NRI s, the Government has for sure encouraged increase in foreign capital. Global investors investing in real estate India can certainly look for a 25% ROI.
Increase in mass consumption, shifting trends in the pattern of consumption of luxury goods and purchasing power ,corporate houses have ventured into retail in a big way. Take the case of RPG Spencer’s largest presence in South India with FoodWorld, MusicWorld and Health and Glow. Apart from this there have been other major players like Birlas, Tatas and now Reliance is thinking on similar lines.
There has been more than 40% rise in realty prices in the past year.in markets like bangalore,kolkata,chennai and pune, property prices have gone up by 50%.several BPO companies have moved operations to tier II cities like hyderabad and kochi to cut costs. Properties with great potential are being leased out to multinationals, large corporates, banks or embassies are the most in demand. In Mumbai and Delhi, lease rentals are as high as 10-13% of the value of a residential property and 13-14% for furnished apartments and offices. Residential property prices have gone up by 30-100% in Delhi.
Kolkata, Gurgaon, Bangalore, noida, Chennai and hyderabad steer the business process outsourcing (BPO) boom in the country with several towers in their heart. Gurgaon, for instance, is peppered with abundant office buildings, shopping malls and residential highrises in various stages of completion to cater to the ever-rising demand of the succesful middle class. Multiple expanse of land in Noida and Gurgaon, which were lying in vain just a year ago, have unexpectadly sprung to life, being transformed into residential or commercial property.
The construction growth is at an unparalled scale in India to meet the mounting requirements of India's high-tech sector. It's a building boom where 70-80% of the demand is being led forward by software services and (BPO)business and process outsourcing companies.
To top it all, a US $I billion project that is slated to put india on the pinnacle of the world. The world’s tallest building with 135 stories at noida on the outskirts of delhi is a great essence of a rapidly growing and resurgent india and also states the condition of the energetic indian real estate sector.It is to be built on a 140 hectare plot and it would be 710 metres high which would easily surpass the 508 metre high Taipei 101 by 202 metres.this US $1 project is slated to be open for business by 2013.