$30 Bln. Foreign Direct Investment Likely In Real Estate In 10 Yrs
The foreign direct investment component in the domestic real estate market is likely to be $ 30 billion as against its total size of $ 102 billion in next 10 years as the real estate sector growth will pick up @ more than 30%, according to projections made by The Associated Chambers of Commerce and Industry of India.
At present, the domestic real estate market is expected to be of $ 15 billion in which the foreign direct investment contributions is estimated around $ 6 billion. The bank credit to this sector in 2006-07 has been estimated around Rs. 3,00,000 crore which will multiple substantially in the coming years in view of the growth that the sector has been registering, adds the ASSOCHAM analysis.
Releasing the assessment, the ASSOCHAM President, Mr. Sajjan Jindal said that currently the foreign developers can undertake construction activities on a minimum space of 50,000 sq. ft. as a result of which Indian real estate sector could achieve FDI’s component around $ 6 billion.
The ceiling of 50,000 sq. ft. would be lifted by the government as it is under constant pressure for increased FDI’s which as per ASSOCHAM estimate will increase to 2 lakh sq. ft. in next 10 years in a gradual manner and result for much higher foreign capital absorptions.
The only problem that the real estate sector is currently confronting is that of approvals for setting up townships as involvement of center and a number of state agencies are there. In view of ASSOCHAM, as the real estate sector opens up, the multiple approvals will have to be done away with. This will be particularly so because in the Asian region, India is the only country which offers return on commercial and residential properties which range between 20-25% against 15-18% in rest of Asia.
Interestingly, the ASSOCHAM has also projected that the foreign component investors part for the real estate development will come through private equity instead of institutional mechanism.
The real estate sector story in India would grow larger as its IT sector alone is expected to require about 200 million sq. ft. space across the major and large townships. It is also estimated that in India’s residential sector, the housing shortage is around 20 million units of which nearly 7 million units are estimated for urban India.
The increase in purchasing power and exposure to organized retail formats have also redefined the consumption patterns for dwelling units. As a result, retail projects have been mushrooming in smaller towns and cities. The retail market is likely to grow at around 35% which will again create scope for real estate developers, further says the ASSOCHAM Chief.
As per estimates arrived at ASSOCHAM, nearly 30 million sq. ft. of organized retail space is currently available. Another 100 million sq. ft. is likely to be added by end of 2008 from over 300 mall projects. Out of these, 20 million sq. ft. is slated to come up in Delhi and Mumbai and around 10 million sq. ft in Ludhiana, 5.8 million sq. ft. in Chandigarh and 3.5 million sq. ft. in Ahmedabad.
With the retail sector experiencing a boom, the country 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. About 20 of these are now at various stages of construction in across the country.
In fact, the biggest mall in the world – Mall of India – is planned by DLF along NH8 and it will have 32 acres spanning a huge entertainment are and large city town squares. Majority of retailers are now planning to expand within the current city and equally large number of them are willing to open new stories in other cities.
