Real Estate opportunities in India

India has become a favorite destination for investors the world over. The economy is aggressively growing ahead in all sectors but comparatively infrastructure in the country still remains an impoverished sight.

Bt crossing the mark of $1 trillion GDP India has joined the group of top 21 elite countries in the world. The Indian economy is functioning at its best exports growing at CAGR of 13% and FDI inflows at 26.4%. India is the third largest economy in the world in terms of PPP GDP and the 12th largest in terms of total GDP (US$ 906 bn). And with a comparatively poor infrastructure India still has been able to achieve a growth rate of 9%. When compared to China, India lies way behind in terms of infrastructure. As against the Chinese investment in infrastructure of $100 billion, Indian investment stood at a basic figure of $20 billion. So a huge opportunity for India lies ahead. To sustain this growth, India will have to improve its basic infrastructure.

11th five year plan has proposed an investment of $320 bn in infrastructure. Currently infrastructure contributes to just 4.5% of GDP. But government would have to strive for a figure near 7-8% to sustain a growth of 9%.

The Indian population is speedily multiplying and so the country will have to invest in making the basic infrastructure affordably available to the people. Foreign companies earnestly want to exploit the Indian market but the connectivity needs to be improved Sufficient Power, Transport, Communication, Urban infrastructure needs to be in place. The Indian middle class is emerging strongly. The lower middle class has grown at a CAGR of 7.9% and expected to grow by 49% over the next four years. The upper middle class too has grown with a CAGR of 19% and is expected to grow by 116% over the next four years. By 2026, the million plus cities are expected to touch a figure of seventy from present thirty five and so the demand from the housing sector is going to be huge.

This clearly shows the huge potential lying ahead for Indian real estate market.

The key drivers of real estate in India are the Commercial Real Estate, the Residential Real Estate and the Retail Real Estate. Demand for office spaces is on the high with 75% of demand coming from sunrise sectors like IT and ITES. Soaring land process in the city means new office spaces in peripheral location. Tourism is also contributing to this demand. There are currently 90,000 hotel rooms available across India.

With tourist arrivals expected to rise at CAGR of 20% over the next three years, an additional 80,000 hotel rooms will be required to accommodate them.

On to the residential side, the housing demand supply has always shown a shortage. But with increasing population, the demand will stay perennial. In India, the share of housing loans to GDP is 8.5% as per the year 2006. Housing loans disbursals have grown at a CAGR of 37.4% over the last four years.

India is one of the world’s ten largest retail markets. Last year India saw a retail turnover in excess of US $250 billion; Low organized retail penetration was only about 3.2% of total retail was only about 3.2% of total retail turnover (US$ 7-8 billion).

With the Indian economy surging ahead at a growth rate of 9.4% the stalwarts are betting big on the infrastructure and real estate opportunities in India.