Indian Real Estate on a recovering edge

Indian Real Estate Market

India’s real estate market has seen several rise and fall phases. There have been times when the market up-surged beyond belief and buying property became a dream, then came a time when the market slung back and faced its share of touch times. Such luck has been true for both all sectors in realty including residential as well as commercial property in India.

Incongruously, until few years back, commercial property sector was seen as ‘not so lucrative’ an option where ‘investment’  was concerned. Fortunately now, the scenario has changed and people’s outlook towards investing in commercial real estate has also transformed. As the residential market recovers after the recent slump, the commercial realty market has also taken its stand and is visibly speeding up. Commercial Real estate in India was undervalued for a long time. But development of luxurious office spaces, shopping malls, multiplexes, SEZs has changed the stance altogether. With such developments, maturity of realty through retail and hospitality sectors has also come into a good position.

Commercial properties in India are witnessing a huge market. It has been observed that commercial and retail sector is evolving by opening new aisles of development. This is also because of the fact that the Indian consumer market is expanding and lot of foreign investors are getting attracted to the Indian realty market. As per the initiatives takes by several real estate developers, commercial projects are mushrooming all across the country and are drawing large number of investments from national and international realty players. Among the commercial properties in India the most popular categories are shopping malls, multiplexes, IT spaces and branded retail outlets.

According to the investment report ‘Survival to Revival – Indian realty sector on the path to recovery’ released recently by Cushman & Wakefield in conjunction with GRI India, the pan-india demand for office space for the period 2009-2013 is estimated to be approximately 196 million sq.ft. As stated in the report. The Indian real estate sector has undergone a rapid transformation during 2008-09 due to the global economic crisis. The high growth trajectory of the previous years saw a setback during this period. Inherently strong economic fundamentals, low exposure to debt and state intervention, however, have helped the sector to gradually return to the path of recovery. As per the report, “The pan India cumulative demand during 2009-2013 is estimated to be 196 million sq. ft. for retail. While demand for the hospitality segment is likely to be over 690,000 rooms nights, that for the residential segment is expected to be 7.5 million units for the period under consideration”.

As stated in the report, the pan India demand for office space is estimated to be 196 million sq. ft. by 2013, with seven major cities accounting for approximately 80 percent of the total demand. Hyderabad, Pune and Kolkata are expected to witness the highest compounded annual growth of approximately 28% during 2009-2013, highlighting the growing prominence of tier 2 cities in the India growth story. However, Bangalore is likely to have the highest cumulative demand of 34 million sq. ft. through the period under consideration, followed by Chennai, owing to renewed interest from the corporate sector, post the economic crisis.

As far as the residential market is concerned, the report states that the pan India residential demand is estimated to be over 7.5 million units by 2013 across al categories including Economically weaker sections, affordable mid and luxury segments. The residential demand for top seven cities is estimated to be 4.5 million units by 2013. Of the total expected demand across India, 43% is likely to be generated in tier 1 cities, i.e. Bangaore, Mumbai and Delhi NCR. Mumbai is likely to witness the highest cumulative demand of 1.6 million units by 2013 due to various development projects and increasing urbanization in the city.

One major component in the success of Indian real estate sector is Foreign Direct Investment (FDI). Foreign direct investment (FDI) in India has played an important role in the development of the Indian economy. FDI in india has in a lot of ways – enabled India to achieve a certain degree of financial stability, growth and development. This money has allowed India to focus on the areas that may have needed economic attention, and address the various problems that continue to challenge the country. Ever since the Indian government has allowed the participation of the foreign direct investments in the different sectors of the Indian economy, it is found that there had been 100% FDI involvement in the real estate business.

At present, FDI in India real estate encourages the construction of residential, commercial, as well as recreational projects.

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