India’s Real Estate Boom is Here to Stay

Ellena Arroyo

Indian real-estate market has never found it so good. Amidst the euphoria in major metros and second and third tier cities where possibly every domestic investor is investing like there is no tomorrow a plethora of foreign investors are also all set to enter the Indian real estate investment space. A conservative estimate by one leading research firm states that over the next eighteen to thirty months venture capital worth $7 billion to $8 billion is expected to flow into the country.

Truly Indian real estate is having a dream run for last five years. Some skeptic minds however, already have started asking the sustainability of the momentum. Global research and consulting firm A. T. Kearney has evolved a global industry curve for the property in India. A. T. Kearney has been analyzing real estate speculation and investment trend across fifty countries globally. The finding was blended with the particular country’s GDP and it was realized that in between the two (real estate investment and GDP of respective country) there exists a strong correlation. ‘Global industry curve,’ thus devised by the consulting firm fits best between the two.

Real Estate in India has always been considered as fragmented and unorganized business sector. Ten years ago, in 1995-1996, investment for the sector in the country was a meager 2% of the total GDP. For China the figure was a healthy 4.8%. However, investment since then in India kept rising steadily and touched 2.4% in 2004. Manufacturing favorite China was still way ahead with a robust 6.5% rate. A. T. Kearney by dint of its ‘global industry curve’ has predicted that by 2010 the rate may go up to 4.2%. This only reinforces the fact provided by UN Economic and Social Commission for Asia and the Pacific (ESCAP) that real estate boom in Asia Pacific region is probably here to stay. India who has been witnessing a steady rise in the global economy for last 15 years thanks to its strong and consistent economic fundamentals delivered some robust result as far as GDP growth is concerned. For last five years, continuously, the country has been achieving GDP growth of 6.5%.

Since liberalization India has attracted huge volumes of FDI inflows. In the last five years alone the FDI inflow stood up to $19 billion. These FDI inflows along with service sector boom have also straight driven the demand for office and business markets and districts. Next coming up are SEZs which will represent the next generation of growth. India with ever growing purchase powered middle-class with high disposable income and easy to available of housing finance holds a great fortune in real estate investment because the residential segment investment in the country represents more than 60-70% of the overall investment in the sector. It constitutes residential, office and commercial premises.

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