Livemint
03/Dec/2007

The Associated Chambers of Commerce and Industry of India (Assocham) has projected that the foreign direct investment component in the domestic real estate market is likely to be $30 billion (Rs118,796 crore) as against its total size of $102 billion in next 10 years as the real estate sector growth will pick up at more than 30%.

Presently the domestic real estate market is expected to be of $14 billion in which the foreign direct investment contributions is estimated to be somewhere between $5 to $5.50 billion. The bank credit to this sector in 2005-06 has been estimated around Rs2,61,000 crore which will multiple substantially in the coming years in view of the growth that the sector has been registering, adds the Assocham analysis.

“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 to the extent of between $ 5 billion to $ 5.50 billion,” said Venugopal N Dhoot, president, Assocham, while releasing the analysis.

The analysis said that the government would lift the ceiling of 50,000 sq. ft. 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, resulting in a higher foreign capital absorptions.

An approval for setting up townships has been cited as the only problem in the analysis as it has the involvement of center and a number of state agencies. Assocham has said that as the real estate sector opens up the multiple approvals will have to be done away with.

One of the interesting points, which Assocham has projected, is that the foreign component investors part for the real estate development will come through private equity instead of institutional mechanism.

Key findings of Assocham

1)Nearly 30 million sq. ft. of organized retail space available
2)Another 90 million sq. ft. is likely to be added by 2008
3)20 million sq. ft. 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
4)The biggest mall in the world – Mall of India – is planned by DLF along NH8 and it will be built on 32 acres of area
5)IT sector alone is expected to require about 200 million sq. ft. space
6)Housing shortage is around 20 million units of which nearly 7 million units are estimated for urban India
7)Increase in purchasing power and exposure to organized retail formats have also redefined the consumption patterns for dwelling units
8)Retail market is likely to grow at around 35% creating scope for real estate developers
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