|
|
|
Trends In The Indian Real Estate Market
hen Ram Kumar, a the next 10 years.
Non-Resident Indian
brought a 1000 sq feet Since the September 11th attack
flat in Delhi, India for Rs 30 in the US, investments in Indian
Lakhs in 2004, he thought he was markets have gathered pace. India
over-paying for it. Today, not has encouraged Non Resident
only has the value of the flat Indians (NRIs) and Foreign
more than doubled, but Ram, who Investors with tax incentives and
is based in Austin, Texas, is relaxation of foreign direct
truly estatic, that for the first investments (FDI) rules. The
time, his real estate investments dramatic change in sentiments is
are giving him such a return. He clearly visible in India’s
has not only brought into bulging foreign exchange
upcoming projects but is also reserves, which are at a record
scouting for more. Says Ram “ high of over 120 billion US
This market have not even reached dollars. And the Reserve bank of
20% of it’s potential. Any India has further relaxed the
investment in real estate here is rules for NRIs with respect to
bound to be profitable.” That repatriation of foreign exchange
statement clearly sums up the on real estate investments.
Indian Real Estate Market. Besides being a safe destination,
India offers 15 to 25 per cent
Going by recent trends the India returns, perhaps the highest in
properties market, is not only the world. 30 per cent of all
booming, but growing by leaps and high major real estate
bounds. Research data estimates transactions in Mumbai are
that the Indian Real Estate accounted by NRIs.
Market is expected to grow from
the current 14 billion dollars to Moreover, with increasing
a whopping 102 billion dollars in volatility in stock markets and
falling interest rates, many sectors. The commercial real
investors have started estate sector is led by the
considering investment in booming information technology
commercial and residential and information technology
properties. The bottom-line is enabled services industry.
that this is the time to go Estimated demand from this sector
shopping for property; as the alone is estimated to be 150
market has started firming up million sq feet of space in
already. As the organised market cities throughout India by 2010.
develops, real estate as an
investment is one of the better In residential real estate there
options available today. In fact is a shortage of almost 20
the main growth thrust is million units, of which 7 million
happening due to faourable are in urban India. The
demographics, increasing increasingly organized retail
purchasing power, existence of sector is also a magnet for
customer friendly banks and growth. With Mukesh Ambani
housing finance companies, controlled Reliance Industries
professionalism in real estate and many other top industrial
and favourable reforms initiated houses entering into organized
by government to attract global retail in a big way, the growth
investors. potential is enormous. There has
been a mushrooming of retail
So which would be the potential projects all over the country.
growth areas to look for ? The The real estate investment sector
main growth sectors include has never had it so good. But it
residential real estate, was not always like this.
commercial real estate, retail
sector, industrial sector Ever since India started
hospitality and healthcare liberalizing its economy, the
international property investors' 100% FDI stake in a venture -
refrain has been that though the which, incidentally, is allowed
country opened up its most in few sectors - there are
crucial infrastructure sectors to stumbling blocks in the form of
foreign investments, it is still clauses, such as a minimum
reluctant to allow FDI in the lock-in period of three years
property market. The government before original investment can be
justified this by citing repatriated, and a project
political and security completion mandate that a minimum
compulsions. However, realizing of 50% must be completed within
the huge investment potential in five years of possession of land.
India, Chesterton Meghraj This is why there were few
estimates that the country will proposals in the initial years.
require investments of $24 But over the last six months, a
billion over the next five years slew of foreign construction
and that development of the real groups have been seeking
estate segment is crucial for its government clearance to invest in
economic growth. The same belief the country. A few major FDI
led the erstwhile National proposals that have taken place
Democratic Alliance government to include :-
permit as a part of the budget
proposal, FDI in township • Dubai-based Emaar Group has
development, information invested $100 million in a
technology parks, special township project in Hyderabad
economic zones and hospitality that includes a hotel and a golf
sectors. course.
But many feel the liberalization • Jakarta-based Salim Group is to
was half-hearted. For instance, invest over $100 million in a
though the new policy allows a 309-acre (124 hectares) township
project in Kolkata. This Rs500 along with the Andhra Pradesh
million ($11 million) project state government, is promoting a
will be developed as a joint township in Hyderabad.
venture between Salim Group and
the Kolkata Municipal Development • Lee Kim Tah Holdings (a
Authority. Singapore-based company) with an
investment of $115 million is
• High Point Rendel of UK, developing a 100-acre mega
US-Based Edaw Ltd and Kikken township along with commercial
Sekkel of Tokyo have teamed up to complex and related social
work on a township development infrastructure near Mumbai.
project in Jharkhand.
• The Andhra Pradesh Housing
• Canada-based Royal Indian Raj Board has approved a 50-acre
International Corporation is township in Vijaywada. CESMA
coming up with $791 million for International will construct
Royal Garden City, a fully houses and apartment blocks here.
integrated township in Bangalore.
The total development will
include 35,000 residential units • Malaysian developer IJM is
with an investment of working on a township spread
approximately $2.9 billion and is across 35 acres in Hyderabad near
scheduled to be completed by 2015 Hi-tech City.
in various phases. This is the
highest FDI investment till date. • Ho-Hup Construction Company
Berhad is coming up with a
125-acre development project at
• CESMA International Pvt Ltd, a Shamshabad in Hyderabad along
subsidiary of the Singapore with the Andhra Pradesh Housing
government's housing agency, Board.
Pte Ltd is associated with a
• SembCorp Engineers and township development project in
Constructors Pte Ltd, Singapore, Visakhapatnam, Andhra Pradesh.
is working on eight projects in
Mumbai, Pune and Bangalore. The More over, land in India is
company has invested $50 million. mostly freehold land. In fact
certain important markets like
Mumbai in Maharashtra are seeing
• Universal Success Enterprise a dramatic increase in land
Limited of Indonesia has signed a availability as textile mills
memorandum with Delhi-based lands in the heart of the city
developer Unitech Ltd for a are opened up to redevelopment.
$155-million information
technology park and housing The other big opportunity, say
project in Kolkata. industry sources, is the
involvement of state governments
• Singapore's fifth-biggest in large-scale government
property group, Keppel Land Ltd, projects like development of the
made its first foray into India surplus land of Mumbai Port Trust
after buying land in India's or that of sick public sector
software capital Bangalore for firms. State governments have
$13 million. Keppel Land, which realized that they can make more
is partnering Puravankara money if they get into joint
Projects Ltd, is developing the ventures with private developers
first phase of a condominium than just selling the land. This
project located in an area known is an ideal opportunity for
for high-tech campuses. It will foreign investors because such
be launched in early 2006. arrangements reduce entry-level
costs.
• Singapore-based Evan Lim & Co
But not all real estate to loosen their purse strings
investments are so easy. In when property prices are rising
India, it is very difficult to because that raises the value of
find large plots near big cities. their collateral, but when prices
Foreign investors prefer to stick fall, they pull out, triggering a
to larger cities because returns bust.
there are more lucrative.
Moreover, a minimum lock-in Still, all agree that the
period of three years from potential of India's real estate
completion of a project is sector is huge. It is one of the
mandated, which nullifies an most attractive markets for two
investor's flexibility to play reasons. One, with a billion-plus
around with the time frame or population, the opportunity is
phasing the project when huge; no other market is going to
circumstances get beyond control. witness this kind of growth both
in commercial as well as
residential and retail markets.
The other problem that acts as a Two, the industry has an average
dampener for foreign investors is rate of return on capital in
the insistence of local financial excess of 30% and it is not
institutions on a personal unusual for local developers to
guarantee from property achieve IRR of as much as 50%.
developers over and above the Clearly, India rocks in real
land as collateral. Another estate. You cannot disagree.
problem is that local banks and
financial institutions also tend
About the Author:
Larry Jone is an associated editor to the website http://www.indiaground.com . Indiaground is dedicated to explain all your related queries for real estate India and Indian properties , with the latest news updates. Your feedback and comments will be highly appreciated at "“larryjone@gmail.com”.
Source: www.isnare.com |
|
