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Real Estate

November, 2011

The real estate sector in India is on a growth path. The development in the real estate market encompasses growth in both commercial and residential spheres. Further, it has been estimated that there would be shortage of 26.53 million houses during the Eleventh Five Year Plan (2007-12), which provides a big investment opportunity, according to a report by the Technical Group on Estimation of Housing Shortage. The popularity of the Indian real estate sector is also highlighted by a report ‘Emerging trends in Real Estate in Asia Pacific 2011’ published by PriceWaterhouseCoopers and Urban Land Institute. The report focuses on various places where developers such as Ansal Properties and Omaxe are building commercial and residential developments. These places include Jodhpur, Agra, Punjab, Uttar Pradesh, Haryana, Madhya Pradesh, and Rajasthan among others.

Indian Real Estate: Investments

During April-September 2011-12, the Indian real estate and housing sectors received US$ 453 million in foreign direct investment (FDI), according to the Department of Industrial Policy and Promotion India (DIPP).

Further, the industry also witnessed growth in private equity (PE) investments as well. In the current calendar year so far (November 13, 2011), total investment from PEs was around US$ 741 million.

According to a report by Jones Lang LaSalle (JLL), about US$ 15.8 billion has been invested from 2006 till date on various types of assets in the real estate sector in the country. Of which, US$ 2.7 billion went to residential projects and US$ 2.4 billion to township projects. A sum of US$ 2.3 billion went to commercial projects, US$ 2.1 billion to mixed use and US$ 961.4 million to special economic zones (SEZs). During the current year, PEs invested US$ 320 million in commercial, US$ 65 million in mixed use, US$ 44 million in residential, US$ 190 million in SEZs and US$ 122 million in township projects.

During 2011, Hyderabad attracted the highest investment of US$ 190 million followed by Chennai US$ 143 million, NCR (national capital region) US$ 66 million and Bangalore US$ 22 million, as per the JLL report.

Indian Real Estate: Major Developments

  • Piramal Group plans to lend Rs 750-1,000 crore (US$ 145 million to US$ 193 million) to real estate projects in this fiscal to March 2012 through its newly set up non-banking financial company, according to Ajay Piramal, the Group’s Chairman.
  • Real estate developer Isha Group of Companies has entered the concrete block manufacturing business by launching Isha Concrete Blocks unit in Chennai. The company has set up a manufacturing unit for concrete blocks at Medavakkam Post with an investment of Rs 12 crore (US$ 2.3 million), including land and machinery, with a capacity to manufacture 10,000 eight inch blocks per shift a day, according to Suresh Krishn, Managing Director, Isha Homes.
  • Chennai-based real estate developer Vijay Shanthi Builders Ltd is planning to develop projects worth of Rs 2,100 crore (US$ 399.1 million) in next four years. The company has announced a residential project worth Rs 120 crore (US$ 22.8 million) in the city.
  • NCC Urban Infrastructure Limited, a subsidiary of Hyderabad-based construction major NCC Limited, is lining up over 10 residential and commercial projects, together with a built-up area of 2.5 million sft, in Bangalore, Chennai, Hyderabad and Kochi.
  • Real estate developer Lodha Group today announced over Rs 10,000 crore (US$ 1.9 billion) investment in a new project in the island city. The project, titled New Cuffe Parade, will come up at Wadala and is spread across 23 acres over the next five to seven years. The 23-acre plot is part of the 250-acre land bank that the company had bought from the Mumbai Metropolitan Region Development Authority (MMRDA) for Rs 4,053 crore (US$ 770.4 million).
  • Malabar Builders, the real estate development arm of jewelery retail chain Malabar Gold, is planning to launch its first township project in Mangalore with an investment of Rs 500 crore (US$ 95 million).
  • Diversified conglomerate Larsen and Toubro (L&T) is set to build India's first residential high-rise building on a pre-cast basis, a move that may introduce a structural change in the real estate market.
  • DLF Ltd will invest up to Rs 3,000 crore (US$ 570.2 million) over the next five years to develop shopping malls across India as it looks to cash in on opportunities following the further opening up of FDI in retail sector.