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Real Estate

November, 2012


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 from the real estate sector 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, with tier I metropolitan cities projected to account for about 40 per cent of this. Growing infrastructure requirements from sectors such as education, healthcare and tourism are also providing opportunities in the real estate sector.

Urban population has been increasing and is expected to cross 590 million by 2030.Urbanisation and increasing household income are some of the major factors that influence demand for residential real estate and growth in the retail sector.

Market Size

The Indian real estate market size is expected to touch US$ 180 billion by 2020.

Demand for residential, commercial and retail real estate is rising throughout India, accompanied by increased demand for hotel accommodation and improved infrastructure. Growth prospects and price stability of smaller cities are attracting large real estate developers in such cities in the recent past, according to a report titled 'Real(i)ty Next: Beyond the Top 10 Cities of India', released by Crisil. The report estimates that the sale of new residential apartments in 10 such smaller cities are at around US$ 4 billion in 2012.


Non-resident Indians (NRIs) are looking forward for investment in Indian real estate with the dollar appreciating in value compared to the rupee in the recent times. Foreign direct investment (FDI) inflows in real estate in 2011-12 (April-January) stood at Rs 2,750 crore (US$ 499.59 million). In fact, FDI in the sector is expected to increase to US$ 25 billion in the next 10 years, as per a latest industry body report.

Construction development sector (including townships, housing, built-up infrastructure) has attracted a cumulative FDI worth US$ 21.1 billion from April 2000 to June 2012. FDI flows into the sector for the period April-June 2012-13 stood at US$ 348 million, according to the Department of Industrial Policy and Promotion (DIPP).

India needs to invest US$ 1.2 trillion over next 20 years to modernise urban infrastructure and keep pace with the growing urbanisation, as per a report released by McKinsey Global Institute (MGI)-India's urban awakening.

Indian real estate emerged as the popular sector for private equity (PE) funds, investing around US$ 1,700 million in this sector during 2011. PE in real estate projects will fetch considerable returns by next year (2013), according to Vikram Hosangady, Partner, KPMG

Some of the major investments in the Indian real estate sector are:

  • Realty firm Avalon Group to invest Rs 200 crore (US$ 36.32 million) to develop a group housing project at Bhiwadi in Rajasthan. The company would develop 800 housing units in the 12-acre project 'Avalon Regal Court'
  • Canada-based NRI billionaire Bob Dhillon is considering investing up to US$ 100 million (about Rs 540 crore) in the Indian real estate market and is planning to approach the Haryana Government for developing a township near Chandigarh
  • Sahara India has set up a construction joint venture with 110-year-old American real estate company Turner Construction Co, a subsidiary of German construction group Hochtief, and the Acropolis Capital Group, a special situation investment and development firm. The JV Company will build integrated townships called Sahara City Homes and other Sahara India projects in India worth US$ 25 billion over the next 20 years
  • Berggruen Hotels, a mid-market business hotel chain funded by US-based Berggruen Holdings, plans to double its room inventory and invest at least Rs 450 crore (US$ 81.72 million) in new projects across the country. The company operates under the brand Keys Hotels and aims to add 2,300 rooms over the next 18-24 months
  • Kotak Realty Fund, the real estate private equity fund of Kotak Mahindra Group, has entered into a joint venture with Chennai-based Akshaya Homes for construction of residential units on a 20-acre plot of Chennai's Old Mahabalipuram road