Real Estate Development


The real estate development sector encompassing the residential townships, commercial offices, IT parks, shopping malls, entertainment centers, multiplexes, hotels and restaurants, industrial buildings, factories and government buildings is witnessing an unprecedented growth. There is a spurt in suburban development of real estate for mixed use of land including residence, office, retail shops, schools etc. Real estate sector in India is the second largest employment generator next only to agriculture. About 250 ancillary industries directly or indirectly depend on real estate activity.

The GDP contribution of this sector at current prices is approx. 6.5% or Rs.1,37,000 crores i.e, over 30 billion US dollars. The steel production in India has recorded an unprecedented rise by 159.01% while Cement production has gone up by 151.64% over the last five years. Indian realty sector is estimated to grow from US$ 15 billion in 2005 to US$ 90 billion by 2015. The estimated demand for IT space is 66 million square feet. Similarly the commercial property market has compounded annual growth rate of over 30% during the last 5 years across major cities in India along with a phenomenal increase in demand for office space.

When India decided to allow 100 % FDI in this sector in construction and serviced land development, foreign developers started eyeing India as one of the best and lucrative destinations for Real estate development and investment. With the partial opening of FDI in retail sector, a buoyant real estate market promises a bright tomorrow for the construction sector in India. The real estate sector continues to receive an ever-increasing influx of funds. While more than 35 big-ticket foreign funds have already entered the real estate market, another 20 funds are likely to enter the Indian markets in 2007. In other words, US$ 10 billion of FDI will be pumped into the real estate sector in India.

Global giants in India's real estate sector :

Global real estate business houses like the Philippines-based Ayala, and Signature group, Och-Ziff Capital, EurIndia and Old Lane from Dubai are keen on sizeable investments in India. And, investors in the UK, US, Israel, Malaysia and Singapore are also eyeing the real estate sector in India.

• Tishman Speyer of USA and ICICI have formed a Special purpose vehicle called TSI ventures and started the real estate development in the south India.

• US-based global investment bank Goldman Sachs and Unitech, the largest listed real estate company in India, will set up a special purpose vehicle (SPV) with a corpus of US$ 208.7 million

• DLF Ltd is forging a 50:50 joint venture with Nakheel, a large property developer of the UAE, for two integrated townships in India at a whopping investment of US$ 10 billion

• Zurich based Credit Suisse, the world's leading financial house, is in the process of finalising on a US$ 1 billion fund to invest in India

• Dawnay Day International, the US$ 10 billion UK-based investment company, plans to invest US$ 1.5 billion in the next couple of years

• Hilton Hotels Corporation (HHC) announced a joint venture company with DLF Ltd to develop and own 75 hotels and serviced apartments over 7 years

Boom in Retail sector:

With the boom in the retail sector, there is a spurt in extremely large retail spaces. Shopping malls with over 1 million sq ft of space have become the order of the day. About 20 such malls are currently under construction across the country. Unitech's Great India Place is coming up In the National Capital Region (NCR), with a million square feet (sq ft) of retail space. Atleast eight malls covering over 1 million sq ft each are coming up In Mumbai. Three malls with 1 million sq ft each are under development in Bangalore. With the cut-throat competition, builders are going out of their way to be different. Specialised malls are coming up at Gurgaon, NOIDA, Bangalore, Kolkata and Udaipur. The `Mall of India’ planned by DLF Universal along NH-8 is the biggest mall of the world. It is proposed to have 32 acres spanning a huge entertainment area and large city town squares offering a total retail experience.

Demand for Housing :

The demand for housing has increased phenomenally in the recent years. With the population crossing 1027 million as per census 2001, over 200 million houses are needed for achieving the goal of ‘Housing for All’, and nearly 30 million houses are to be built in both in urban and rural areas. The real estate has a catalytic role in fulfilling the demand for housing for the various socio-economic classes in the back drop of wealthier populace seeking upgraded accommodation, shrinking household size, improved access to housing finance, tax incentives for own properties, etc.

This responsibility should be shared by large-scale partnerships involving public, private and co-operative sectors.