The Indian real estate market is on the path of huge expansion and transition. As it moves towards transparency, it also moves towards large scale developments. The key driving forces are encouraging demographics, availability of cheap housing loans due to the presence of consumer friendly banks & housing finance companies, rising purchasing power, professionalism in real estate and new FDI (Foreign Direct investment) reforms initiated by the Government of India that are spurring the global investor interest. Below are some reasons to think of any place rather be a investor/developer today than India:
Demographics
• POPULATION - 1.02 billion; half under age 25, 75 percent under age 40
• POPULATION GROWTH RATE - About 2 percent or 20 million annually; equivalent to adding the population of Australia every year
• MIDDLE CLASS - 25 percent of population or 250 million
• GDP - US$500 billion in 2004
• GDP GROWTH RATE - 8 percent in 2004 with half the growth in services; forecast to grow at more than 6 percent annually over the next few years
• LANGUAGE OF COMMERCE - English
• GOVERNMENT - Democracy (world’s largest)
• LEGAL SYSTEM AND ACCOUNTING STANDARDS - Similar to United States and Europe
Market potential India is the fifth largest economy in the world (ranking above France, Italy, the United Kingdom, and Russia) and has the third largest GDP in the entire continent of Asia. It is also the second largest among emerging nations. (These indicators are based on purchasing power parity.) India is also one of the few markets in the world which offers high prospects for growth and earning potential in practically all areas of business. India also has a great deal to offer the FDI community: tremendous natural resources, a well-educated & English-speaking professional sector, rapidly & vastly improving infrastructure, and most importantly, a business-friendly government that is committed to making India a major player on the world economic stage.
Landmark New FDI Policies
in February 2005, Indian Government announced liberalized set of guidelines allowing easy foreign direct investment in Indian real estate sector. These new policies are expected to bring in billions of U.S. dollars annually into India’s real estate industry. The new FDI rules permit foreign investors to capitalize on smaller projects. There used to be a 100-acre minimum, and now it’s a 25-acre minimum, and that creates less risk for the investor, and thus broader opportunities.
Booming real estate market
The $50 billion Indian real estate market is booming and expected to grow at 25 per cent annually. According to AT Kearney’s Global investor Confidence Survey ’2004, India has been ranked as the third most favored destination for FDI in the world.
Housing requirement
Indian Government’s Tenth Five Year Plan estimated a shortage of 22.4 million dwelling units and according to FICCI (Federation of Indian Chambers of Commerce & industry) 80 to 90 million housing units over the next 10 to 15 years will have to be constructed for which not just private domestic investment but also foreign investment are required in a major way. The investment required for constructing these and related infrastructure in this period would, thus, be of the order of $666 billion to $888 billion at roughly $33 billion to $44 billion per year.
Commercial Space requirement
According to a report of Ernst & Young, IT & IT Enabled Services (ITES) are expected to require 50 million to 70 million square feet of space over the next two to three years.
Retail Space requirement
India is at the top position in the world in 2005 Global Retail Development index. According to AT Kearney’s recent report, India’s underserved US$330 billion retail market has grown by 10 percent on average per year over the past five years.
Hospitality & Leisure According to a recent study, there is a demand for 30-35 million sq. ft. of space for hospitality-leisure real estate sector between 2005-2009, involving the investment of 8-9 billion US Dollars.