Investments in realty sector are likely to double in 5 years. About 80% demand for office space is currently coming from IT/ ITeS sectors.
Itâ€™s raining investments in the India real estate, with rising GDP, improving demographics; rising affordability and strong FDI inflows making this sector a haven for money for all. The domestic realty industry is expected to see investments of $ 435 billion in the next five years.
Further, this would attract more than double investments in five year span. Besides, an annual addition of 2.3 billion sq ft of residential space, 61 million sq ft of office space, and 25 million sq ft retail space. This is likely to result in a 33 % increase in total constructed area over the next five years and would require real estate investments of $91.5 billion of 6.8% of GDP annually.
These projections are figured in a research paper, which says nearly 91% of the investments will be in the residential sector. Investments in residential segment are to increase at 18% CAGR to $107 billion by FY11. This is likely to translate into annual requirement of 2.6 billion sq ft in the urban areas in FY11 as against 1.8 million sq ft in FY06.
The next biggest segment is the commercial space, with 80% of the demand coming from the IT / ITES sector. This is unusually high compared with international averages due to higher share of outsourcing to India and lack of a highly developed industrial market. India had 135 million sq ft of office space in FY 06, which grew by a strong 23 % year-on-year.
However, office space in India is far lower when compared with international peers Hong Kong has 176 million sq ft, Manhattan alone has an office space of more than 420 million sq ft, almost thrice the office space in India. India can expect $ 7.1 bn of investment in FY 11 at a CAGR of 28% during the next five years and estimated cumulative 299 mn sq ft of office space construction by FY11 indicates a research study.
The third growth driver is the fast growing organized retail segment. Currently, India has 66 mn sq ft of organized retail space and its total retail market is likely to grow at a CAGR of 6.5% over the coming years. About 3.2 billion of investment in FY 11, a CAGR of 11% over FY 06 levels, is expected, while another $19 billion will be required for SEZ creation.
To part finance these investments, the study points out, $40billion of institutional inflows are available and looking for opportunities in the sector.
It notes that the demand for quality real estate in India is seeing unprecedented growth, adding the existing gap between the demand and supply across all segments of realty; provides tremendous opportunity for real estate development across India.
â€œReal estate developers are building land banks at a furious pace to participate in the gold rushâ€?, states the research paper.