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Realty to see price rise from March 2012 onwards


Realty to see price rise from March 2012 onwards

Last updated: December 14 2011
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  • Realty to see price rise from March 2012 onwards

    Better days for real estate sector are ahead: Ernst & Young report

    Economic Times, 14.12.11
    The Indian real estate industry has been on a roller coaster ride since 2007, riding through many highs and lows. The industry reached new heights with increased development activity during 2007 and early 2008, characterised by growth in demand and increased foreign investments. However, by mid-2008, this scenario took a Uturn , as the industry witnessed a decline due to the ripple effect of the global economic slowdown.
    The Indian real estate industry is witnessing some vibrancy and upbeat market sentiments after the steep corrections during the global financial crisis in 2008-09. Global economic performance is improving and so are the prospects of Indian businesses. With the Indian economy expected to grow at the rate of approximately 8% to 8.5% during the current year the real estate sector in India is now on a gradual improvement curve.
    The residential segment makes up most of the real estate industry in the country. Growth in this segment is primarily driven by increasing urbanisation, rise in the number of white-collar professionals and rising incomes, etc. The residential segment is again witnessing growth in demand for luxury and superpremium homes among the globe-trotting executives, new and successful businessmen, non-resident Indians (NRIs), etc. However, this sub-segment is currently experiencing low volumes due to steep price rise and hike in interest rates; this may be a short-term lull and with minor corrections the segment may continue to grow.
    The commercial real estate segment (primarily office space) is growing in tandem with the country's booming economy. The demand for office space is driven by the influx of multinational companies and growth in services sector. Overall, on pan-India basis, the demand for office space is expected to total 180 million sqft by 2013, with seven major cities (Bangalore, Chennai, Hyderabad, Kolkata, Mumbai, the NCR and Pune) catering to 75% of the total demand.
    Although the retail real estate segment has the smallest pie in the real estate industry, it is growing rapidly and the demand for good quality mall space is fuelled by the growth in organised retail and the entry of international retailers into India. Over the past few years, retail has become one of the fastest growing industries in the country.
    Increasing disposable incomes, rising consumption and shopping convenience have been driving the growth of organised retail. The retail industry is expected to reach US$637billion by 2015, with organised retail accounting for a 14% to 18% share. However, the rental market in the Indian retail segment is yet to stabilise as the supply continues to outstrip demand.
    The hospitality segment has also been witnessing a robust demand, primarily due to a strong growth in tourism, including business and leisure travel. According to research conducted by the World Travel & Tourism Council, travel and tourism in India is expected to grow at 12.7% till 2019. India is emerging as a major tourist destination for international tourists.
    The foreign tourist arrivals (FTAs) in India have increased at a CAGR of 7.7% between 2000 and 2010 to reach 5.5 million. During the same period, foreign exchange earnings from tourism increased by a CAGR of more than 15% to Rs 648.8 billion. FTAs during the period January-June 2011 were 2.9 million with a growth of 10.9%. Fee from tourism during the same period was Rs 35.1 billion with a growth of 12.1%.
    In 2010, the Government of India introduced the visa-onarrival (VoA) scheme for tourists from five countries, namely Singapore, Finland, New Zealand, Luxembourg and Japan.
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