Property :
The Booming Indian Real Estate

Real Estate in India has seen a tremendous positive change in the last decade. Today, Indian construction industry enjoys a substantial presence in the world and has reached to a niche where there is no going back. Escalating GDP, improving demographics, growing affordability, and rising impact of IT and ITes are some of the factors that are believed to have fuelled the growth.


The Indian Real Estate Industry is on a roll be it in the country or outside. The sector has witnessed immense growth in the past couple of years. The phenomenal increase in the Real Estate demand and access to funds were the key drivers for propelling the Indian real estate market into an overdrive.
The industry received the much requisite first shot of funding in 2005 wherein the foreign direct investment (FDI) route was opened up for Indian real estate. Since then there has been no looking back, the real estate sector has transformed to reach $57 billion in 2007, and has a potential to reach $90 billion by 2012 according to the Eleventh Five Year Plan.
The ever increasing momentum has paved the way for exciting opportunities for both domestic as well as international investors. The real estate industry has multiple stakeholder’s right from developers to investors (including private equity funds), financiers, buyers (including Real Estate Investment Trusts) and service providers such as property consultants, contractors and project management companies. A typical consolidation may be triggered by any of these stakeholders.
The booming Indian realty sector is all set to witness a cumulative investment inflow of around $435 billion in the next approaching years. Further, data showcased by known property surveys have come up with results that the country is all set to see an average annual addition of 2.3 billion sq ft in residential, 61 million sq ft in office and 25 million sq ft in retail space. This makes a total of 33% increase in total constructed area five years down the line.
There are going to be several factors that are likely to pave the way for large scale capital inflow from FDI, private equity and real estate funds. The list of features includes chunks of large scale land acquired by some known names in the real estate sector, government incentives for public private partnership models and high amount of bank finance.


An estimated investment of approximately $396 billion for the housing segment alone over the next few years, with a yearly investment of $83 billion. Likewise, the expected investment for the commercial sector is for around $27 billion with an annual investment of $5 billion and retail with $13 billion (annual investment of $3 billion), resulting in a total investment of $435 billion.
Standing for 91% of the overall Indian real estate activity in India, Housing sector alone acts as the principal growth driver. The next biggest segment is commercial space, with 80% of the demand sprouting from mushrooming IT/ITes sector. Stating that the capital values of the commercial office space have increased by 40 per cent in last two years. Office property market in India will witness a further boom owing to huge demand. The Indian property market, which is growing at 30 per cent per annum, is offering maximum return to investors.

The requirement for office space will grow to over 19 million sq ft in 2006-07 from four million sq ft in 1999-2000. By 2010, IT and BPO sectors alone would require 200 million sq ft of space in major metros.
The total foreign direct investments into India would be about eight billion dollars, of which the share of the real estate sector is estimated at 26.5 per cent. Rising demand of office space from IT and ITEs sectors is attracting overseas investors to pump money into India. The overseas investments will also be finding larger space in Indian SEZs and shopping malls.
The massive flow of FDIs in India’s property market to China’s real estate market reaching its saturation level. Besides, foreign investors prefer to invest on freehold land, which is available more freely in India. More and more foreign investors are lining up to make investments in Indian Real Estate. They are believed to have raised $3.5 billion and above $2.5 billion have already been invested by overseas real estate funds in India till date.

The change in policy of February 2005 has paved ways for foreign investments in construction projects with fast approvals. The major attraction is returns of 25% offered by realty project in India that certainly appears hard to come by the US and Western Europe.
India’s urban office space market is what attracts investors. Speyer- ICICI Venture has signed memorandum of understanding for two construction projects in India. One is a $200 million project for residential and commercial development on 42 acres in Bangalore’s prime Whitefield suburb. Another project is in Karnataka’s Devanahalli, where Tishman Speyer and ICICI Venture Funds are purchasing a 25 acre plot whose final use has not yet been decided.
The booming Indian Real Estate has made Property developers billionaires overnight, with profit overflowing in the sector. Office and shopping mall rentals continued their upward trend. The real estate industry has been largely contributing to the GDP. The market is large and demand driven. It has been making appreciations in value over the years.
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