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Illusion or Realty


Illusion or Realty

Last updated: February 3 2007
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  • Illusion or Realty

    The Indian real estate sector, in the past, had endured financial paucity mainly due to wary investors who maintained a distance. Developers were eyed with suspicion and regarded as dubious and unscrupulous with large amounts of unaccounted money, which lacked transparency. Therefore, while there were abundant prospects in the Indian real estate sector, insufficient organised funds meant that most of these opportunities remained unsatiated.

    Growing at a rate of 30 percent per annum, the Indian real estate sector is metamorphosing into a very lucrative investment market offering attractive returns. At present, the sector is estimated to be around $15 billion and is projected to reach $102 billion over the next 10 years. By 2010 there is going to be 200 million sq ft for organised retail and furthermore, we are going to see about 5 times increase in office space and over 50,000 new hotel rooms being added over the next 5 years. The total foreign direct investment (FDI) inflows into India in fiscal 2006-07 stand at $7.5 billion. Real estate attracted a record FDI worth $3 billion in the first half of 2006. The largest inflow came from the Dubaibased Emaar Group, with the bulk of its $ 850 million investment coming in the first half of 2006.

    The flip side in this Cinderella story is that India is expected to experience a demand- supply gap of around 18 million housing units by 2010. Moreover, commercial real estate demand is expected to be around 350 million sq ft., out of which IT/ITES and organised retailing sector would demand around 300 million sq ft. Estimates also show that 42 million sq ft of space will be required every year until 2008, and this is just in I.T. and I.T.-enabled services. Seeing this demand and supply gap existing in the industry, the Government of India, in its 10th Five-year plan (2002-07), has called for an investment of Rs. 7,26,300 crore.

    Leaving no stones unturned, the sector has witnessed a phenomenal growth in activities across key segments including commercial, residential, retail and hospitality. The upsurge has aroused mixed reactions from industry experts and has lead to an ongoing debate on whether the sector is witnessing a genuine sustainable growth or whether it is a dangerously expanding bubble about to burst.
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