Real estate market to touch $90 bn by 2015

Base of Indian real estate market, growing at 30%, is estimated to touch $90 billion by 2015 from current levels of $14 billion. This will help the economy to continue growing between 9-10% according to a survey carried out by industry chamber, Assocham.

Additional requirement of 370 million sqft space in urban areas by 2010 by IT, ITeS, financial services and organized retail alone has made real estate most lucrative, providing returns ranging from 20 to 30%.
Organized retail in India has the potential to add business worth $48 billion by 2010, thereby pushing up demand for at least 220 million sqft of retail space by 2010. While $10 billion is expected to flow into the sector by end 2008, by 2010, it is projected to touch $15 billion.

Factors contributing to the boom

* Repealing Urban Land (Ceiling & Regulation) Act 1976, rescind of Rent Control Act and increasing floor-area-ratio

* Greater transparency has brought in new players like High Net Worth Individuals (HNIs), FIIs and more than 100 private equity companies

* IT and ITES, banking and financial services have created huge demand for office space

* IT and ITES alone will need 150 million sqft across urban India by 2010. Services will clock double-digit growth, keeping demand of office space robust. Analysts have pegged total demand for commercial office real estate in Bangalore, Chennai, Delhi-NCR, Mumbai, Pune, Hyderabad and Kolkata to cross 25 million sqft in 2006

* 2006-07 witnessed organized retail growth at 25-30%, experiencing capital appreciation of 25-35%. Nearly 96% of India’s retail sector is still unorganized, which is propelling interest of domestic majors such as Reliance, A V Birla Group, Bharti and global biggies including Wal Mart and Texas

* Government is spending heavily on infrastructure development (express highways, airports, hi-tech construction in power plants etc); Indian Infrastructure is estimated to cross $400 billion and programmes like Jawaharlal Nehru Urban Renewal Mission, Bharat Nirman and the National Highways Development Programme will create high momentum in real estate sector.

Future projections

* Hospitality industry has seen high growth. Global players like private equity funds and JVs between Hilton-DLF, Emaar-MGF-Accor and Nirmal Lifestyle-Accor will mature with 175 plus hotels being constructed within next five years

* Upcoming SEZs will be new avenues of land development. Total land requirement of about 33,808 hectares for the 234 formally approved SEZs indicates amount of land that would be available for development. Total number of SEZs notified under SEZ Act and Rules was 132 as of July 23, 2007. Though concept is mired in too many controversies, it is a matter of time that consensus would be arrived among all stakeholders.