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| Indian Real Estate Sector Reflections |
 Year 2007 was good for real estate market. Because of the rise in the interest rates, the prices of residential real estate corrected by 10% to 15% in most of the suburb markets of National Capital Region (NCR) of Delhi, Mumbai, Bangalore, Chennai , Hyderabad, Pune and Kolkata. Consultants feel that as the economic growth will continue to be strong, demand will outstrip supply in 2008. The sector is currently on a high mainly because of the high economic growth, shortage of residential spaces, growth in IT/ITeS and retail. The focus though would now shift more towards smaller cities since the metros are getting saturated.
Measures such as SEBI formulating the draft guidelines for Real Estate Investment Trusts (REIT) and scrapping of the Urban Land Ceiling and Regulation Act (ULCRA) were definitely some of the high points of 2007 which are sure to reap benefits this year. A fresh emphasis on professionalism in the industry may also be in the offing with most realty players imparting specialised training to their staff.
Simultaneously, the rapid growth of the Indian economy has had a cascading effect on demand for commercial property to help meet the needs of business, such as modern offices, warehouses, hotels and retail shopping centres.
Growth in commercial office space requirement is led by the burgeoning outsourcing and information technology (IT) industry and organised retail. For example, IT and ITES alone is estimated to require 150 million sqft across urban India by 2010. Similarly, the organised retail industry is likely to require an additional 220 million sqft by 2010
There will be demand for over 24.3 million new dwellings for self-living in urban India alone by 2015. Consequently, this segment is likely to throw huge investment opportunities. In fact, an estimated US$ 25 billion investment will be required over the next five years in urban housing. With the significant investment opportunities emerging in this industry, a large number of international real estate players have entered the country. Currently, foreign direct investment (FDI) inflows into the sector are estimated to be between US$ 5 billion and US$ 5.50 billion.
Jones Lang LaSalle (JLL), the world's leading integrated global real estate services and money management firm, plans to invest around US$ 1 billion in the country's burgeoning property market.
Dubai-based DAMAC Properties would invest up to US$ 4.5 billion to develop properties in India.
Merrill Lynch & Co bought 49 per cent equity in seven mid-income housing projects of India's largest real estate developer DLF in Chennai, Bangalore, Kochi and Indore for US$ 375.98 million.
UAE-based real estate company Rakeen and Chennai-based mineral firm Trimex Group have formed joint venture company - Rakindo Developers - which would invest over US$ 5 billion over the next five years.
Dubai-based Nakheel and Hines of the US have tied up with DLF to develop properties in India. DLF has also formed a joint venture with Limitless Holding, a part of Dubai World, to develop a US$ 15.23 billion township project in Karnataka.
Gulf Finance House (GFH) has decided to invest over US$ 2 billion in a greenfield site close to Navi Mumbai.
Favorable demographics, rising purchasing power, availability of cheap finance, professionalism in real estate and reforms initiated by the government are some of the major drivers of this spectacular growth. The real estate sector, currently estimated at 15 billion dollars, will continue to grow at the same pace with major expansion taking place across verticals. The major expansion drive in tier II and tier III and even tier IV cities will contribute to the boom in the sector. With more FDI, PPP formats and venture capitalists coming into the picture the year 2008 will be a year to watch out for.
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