The Indian economy has witnessed robust growth in the last few years and is expected to be one of the fastest growing economies in the coming years. Demand for commercial property is being driven by India's economic growth. Real estate in India contributes about 5 per cent to India's gross domestic product (GDP). The total revenue generated in 2010-11 stood at US$ 66.8 billion.
Demand is expected to grow at a compound annual growth rate (CAGR) of 19 per cent between 2010 and 2014—Tier 1 metropolitan cities are projected to account for about 40 per cent of this. Growing requirements of space from sectors such as education, healthcare and tourism provide opportunities in the real estate sector. FDI of more than US$ 9 billion was infused in real estate in the last decade.
In 2010, over 11 per cent of total FDI in India was in the real estate sector. There have been 110 deals in this sector during the period 2001 to the first half of 2011.
Urban population has been increasing and is expected to cross 590 million by 2030. Urbanisation and growing household income are some of the major factors that influence demand for residential real estate and growth in the retail sector.
Real estate emerged as the popular sector for private equity funds who invested US$1,700 million in this sector during 2011. Private equity in real estate projects will fetch considerable returns by next year-end or early 2013, as per Vikram Hosangady, Partner, KPMG.
Some of the recent investments in this sector are mentioned below:
In the Union Budget 2011-12, Mr Pranab Mukherjee, Union Finance Minister presented various initiatives for the real estate sector, especially focussing on affordable housing. Some of these initiatives are listed below:
Real estate plays an important role in the Indian economy. This sector happens to be the second largest employer after agriculture and is expected to grow at the rate of 30 per cent over the next decade. The size of the Indian real estate market is expected to touch US$ 180 billion by 2020.
The housing sector alone contributes to 5-6 per cent of the India's GDP. Retail, hospitality and commercial real estate are also growing considerably, providing the much-awaited infrastructure towards India's growing needs.
According to a study by ICRA, the construction industry in India ranks 3rd among the 14 major sectors in terms of direct, indirect and induced effects in all sectors of the economy. A unit rise in construction spending generates five times the income, having a multiplier effect across the board. With backward and forward linkages to over 250 ancillary industries, the positive effects of real estate growth spread far and wide. Therefore, real estate acts as a catalyst for adding momentum to growth of the Indian economy.
Exchange rate used: 1 INR = 0.02032 as on February 22, 2012
References: CREDAI, Media reports