An Overview of the Real Estate Market in India

The real estate market in India has been growing at the pace of 30% for the last few years. The FICCI has estimated the size of this market to be around US$ 12 billion. The reason for this booming market is that the Government has allowed 100% of the foreign direct investment in the real estate sector in India. Further, with the emergence of outsourcing businesses, the demand for office and residential space has increased by many folds. Businesses such as high-end technology consultancy, software-programming houses, call centers, etc. have been accounted for around 10 million sq.ft (in 2003-04) of the real estate development. Also, only 20% of the developed space has been allocated for offices, hotels, shopping malls and hospitals and the remaining 80% has been used for housing purposes.

Now Government is also keen to attract foreign investment and also to develop some adequate infrastructures throughout the country. Right now is the best time to invest in this sector as the industry is fastly growing. INR 0.78 is added to the country’s GDP for every 1INR invested in the construction industry. The real estate sector in India is also undertaking the construction of over 250 other ancillary industries right now. Such a wide coverage has ranked the construction industry as 3rd by rating the agency ICRA among 14 major sectors, which have some direct, indirect and induced effect in various sectors of economy. Also, India’s construction industry ranked 2nd only after agriculture in generating employment in the country.

The rise in demand for space by the IT sector has also affected the urban layout in India. It is estimated that there will be a demand of around 66-million sq.ft space in the next 5 years. Many multinationals have also been relocated in India due to low costs, skilled manpower and logistics. For their workers, these companies tend to require some substantial space for work and residential purpose, which results in the development of other infrastructure as well. The general current trend is to build some world-class business centers. These unique campus-style establishments are also called as temples of modern India because of their extent and high importance. Big hotel groups such as Holiday Inn, Marriott, and Orchid, etc. for the last five years have either started their own real estate company or have tied up with some existing local builders. This has resulted in a major boom in the hotel project developments in the next five years.

Although the prospects of real estate market in India have been incredibly intense, this industry has however its own shortcomings. It has been affected by market uncertainties and inhibitions. The main reason why the real estate sector is not able to grow to its full potential is due to its unorganized and fragmented sector. Small players who have only local presence mostly comprise it. This most promising sector today is affected by very low mortgage penetration. The mortgage to GDP ratio in India is only 2% as compared to this ratio in USA to over 51%. One solution could be to benchmark with one comparable counterpart which will led ratio to range between 15-20% for south east asian countries. Thus, the industry has its own share of problems but in spite of this, its future is very promising.

Article Source: http://www.realestatepropertyarticles.com.

About the Author:
Ann Sommers is a contributing real estate editor at http://www.realestatepropertyarticles.com/. This article may be reproduced provided that its complete content, links and author byline are kept intact and unchanged. No additional links permitted. Hyperlinks and/or URLs must remain both human clickable and search engine spiderable.