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Real Estate

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Real Estate

May, 2010

The real estate sector in the country is one of great importance. According to the report of the Technical Group on Estimation of Housing Shortage, an estimated shortage of 26.53 million houses during the Eleventh Five Year Plan (2007-12) provides a big investment opportunity.

India leads the pack of top real estate investment markets in Asia for 2010, according to a study by PricewaterhouseCoopers (PwC) and Urban Land Institute, a global non-profit education and research institute, released in December 2009. The report, which provides an outlook on Asia-Pacific real estate investment and development trends, points out that India, in particular Mumbai and Delhi, are good real estate investment destinations. Residential properties are viewed as more promising than other sectors. While, Mumbai, Delhi and Bangalore top the pack in the hotel 'buy' prospects as well.

The study is based on the opinions of over 270 international real estate professionals, including investors, developers, property company representatives, lenders, brokers and consultants.

According to the data released by the Department of Industrial Policy and Promotion (DIPP), housing and real estate sector including cineplex, multiplex, integrated townships and commercial complexes etc, attracted a cumulative foreign direct investment (FDI) worth US$ 8.4 billion from April 2000 to March 2010 wherein the real estate and the housing sector witnessed FDI amounting US$ 2.8 billion in the fiscal year 2009-10.

New Projects

  • Shristi Infrastructure Development Corporation will invest US$ 444.7 million over the next three years in seven small cities in West Bengal, Tripura and Rajasthan. The money would be used to build integrated townships, healthcare facilities, hospitality and sports facilities, retail malls, logistics hubs and commercial and residential complexes.
  • Realty major Ansal Properties & Infrastructure Ltd plans to invest about US$ 330.8 million over the next three years on expansion of its existing integrated townships and to develop a group housing project in Haryana
  • Integrated property development and asset management company, Vision India Real Estate Pvt Ltd, is planning to develop logistics parks in Bengaluru and Chennai, with an outlay of US$ 110 million
  • Tata Housing is planning to launch about 10 new residential projects in both affordable and luxury segments in 2010-11, with an investment of about US$ 268.9 million along with its partners
  • Vision India Real Estate, a closely-held business group in the US, is investing US$ 5 million in Gem Group’s upcoming residential project in Chennai. This will be the first joint development project for the US Company that is proposing to invest US$ 100 to US$ 200 million over the next three years on projects, especially in the logistics arena.
  • Real estate firm Supertech will invest US$ 880.5 million for developing 15 realty projects across North India in the next three years

Government Initiatives

The government has introduced many progressive measures to unlock the potential of the sector and also to meet the increasing demand levels.

  • 100 per cent FDI allowed in townships, housing, built-up infrastructure and construction development projects through the automatic route, subject to guidelines as prescribed by DIPP
  • 100 per cent FDI is allowed under the automatic route in development of Special Economic Zones (SEZ), subject to the provisions of Special Economic Zones Act 2005 and the SEZ Policy of the Department of Commerce
  • FDI is not allowed in Real Estate Business

In the Union Budget 2010-11, the Finance Minister made the following announcements with regard to the real estate sector:

  • Allocation for urban development were increased by more than 75 per cent from US$ 660.3 million to US$ 1.17 billion in 2010-11
  • Allocation for housing and urban poverty alleviation were raised from US$ 183.4 million to US$ 215.8 million in 2010-11
  • Scheme of 1 per cent interest subvention on housing loan up to US$ 21,576 where the cost of the house does not exceed US$ 43,153 announced in the last Budget has been extended up to March 31, 2011 and US$ 151 million has been earmarked for this scheme for 2010-11
  • US$ 274 million has been allocated for Rajiv Awas Yojna, as compared to US$ 32.4 million last year

Road Ahead

According to the Confederation of Real Estate Developers' Associations of India (CREDAI), the affordable housing segment is set to play an important role in India's real estate sector in 2010 on the back of substantial demand.

"Affordable housing will be a key factor in driving the sector and we have already started working on progressive solutions in this area for effective and customised implementation of such projects," Confederation of Real Estate Developers' Associations of India (CREDAI) Chairman Kumar Gera said in January 2010.

Moreover, 2010 is expected to be a positive year for the real estate sector. The revival is expected to be driven by infrastructure growth, which in turn, can accelerate real estate activities both in the residential as well as commercial spaces.

Exchange rate used:
1 USD = 44.97 INR (as on May 2010)
1 USD = 46.35 INR (as on February 2010)