Real estate sector in India is witnessing tremendous boom. Real estate industry in India is presently worth $12 billion and is growing at the rate of 30 per cent per annum. The importance of real estate sector in India can be gauged from the fact that it is the second largest employer next only to agriculture. The real estate industry has significant linkages with several other sectors of the economy and over 250 associated industries. According to a study One Rupee invested in real estate sector results in 78 paise being added to the GDP of the country.
Eighty percent share of the real estate market is garnered by
residential sector and the rest is comprised of offices, shopping malls,
hotels and hospitals. The sustained demand from the Information
Technology (IT) sector has fuelled the growth of real estate sector. It
has been estimated that the demand for IT space would be 66 million
square feet over the next five years. Several multinational companies
are shifting their operations to India to take advantage of the
relatively low costs. With human resources being the key element in this
industry, hiring people and housing them assume great importance. The
need to create space for people to work and live triggers the
development of other related infrastructure.
Traditionally, the government's support to housing had been centralized
and directed through the State Housing Boards and development
authorities. In 1970, the Government of India set up the Housing and
Urban Development Corporation (HUDCO) to finance housing and urban
infrastructure activities. In 2002, the government permitted 100 per
cent foreign direct investment (FDI) in housing through integrated
township development. However, FDI rules at the moment are quite
stringent. For FDI in real estate prior approval of the Foreign
Investment Promotion Board is required, which, can be rather tedious and
there is a lock-in period for repatriation of the original capital
invested for a period of three years. On the top of it the rules
stipulate a minimum land holding of 100 acres. Getting 100 acres of free
land in an urban area is almost impossible. Hence the permission of FDI
in real estate hasn't had the desired effect.
The boom in retail industry has also spurred the growth in real estate
sector. India at the moment is witnessing a spurt in extremely large
retail spaces. Shopping malls with over 1 million sq ft of space have
become the order of the day. As the competition in the market
intensifies, builders are going out of their way to be different.
Specialized malls, designer brands and multi-movie options are the order
of the day. With the big players like Reliance, Big Bazaar, and Bharti
entering retail market, real estate sector would be the big beneficiary.
The prospects for real estate industry in India looks buoyant. All the
factors which contributed to the growth of real estate sector-high
disposable incomes, sharp increase in global liquidity, selective
capital account liberalization, looser credit policies, a greater
availability of leverage due to financial liberalization and a
consequent increase in mortgage lending and price increases-look set to
Note: The above information was last updated on 21-07-2007