Engulfing the period of stagnation, the evolution of Indian genuine estate sector has been phenomenal, impelled by, increasing economy, conducive demographics and liberalized foreign direct investment regime. Nevertheless, now this unceasing phenomenon of true estate sector has started to exhibit the signs of contraction.
What can be the reasons of such a trend in this sector and what future course it will take? This post tries to locate answers to these concerns…
Overview of Indian true estate sector
Considering the fact that 2004-05 Indian reality sector has tremendous growth. Registering a growth rate of, 35 per cent the realty sector is estimated to be worth US$ 15 billion and anticipated to develop at the rate of 30 per cent annually more than the next decade, attracting foreign investments worth US$ 30 billion, with a number of IT parks and residential townships getting constructed across-India.
The term genuine estate covers residential housing, industrial offices and trading spaces such as theaters, hotels and restaurants, retail outlets, industrial buildings such as factories and government buildings. Real estate involves buy sale and development of land, residential and non-residential buildings. The activities of real estate sector embrace the hosing and construction sector also.
The sector accounts for significant supply of employment generation in the country, becoming the second largest employer, subsequent to agriculture. The sector has backward and forward linkages with about 250 ancilary industries such as cement, brick,steel, developing material etc.
Thus a unit improve in expenditure of this sector have multiplier impact and capacity to create earnings as high as five occasions.
All-round emergence
In genuine estate sector significant element comprises of housing which accounts for 80% and is expanding at the rate of 35%. Remainder consist of commercial segments office, purchasing malls, hotels and hospitals.
o Housing units: With the Indian economy surging at the rate of 9 % accompanied by increasing incomes levels of middle class, expanding nuclear families, low interest rates, modern day strategy towards homeownership and change in the attitude of young operating class in terms of from save and invest in to buy and repay having contributed towards soaring housing demand.
Earlier expense of houses utilised to be in multiple of almost 20 occasions the annual income of the buyers, whereas today many is significantly less than four.five times.
According to 11th five year strategy, the housing shortage on 2007 was 24.71 million and total requirement of housing during (2007-2012) will be 26.53 million. The total fund requirement in the urban housing sector for 11th five year program is estimated to be Rs 361318 crores.
The summary of investment needs for XI plan is indicated in following table
Scenario Investment requirement
Housing shortage at the beginning of the XI plan period 147195.
New additions to the housing stock throughout the XI strategy period such as the extra housing shortage for the duration of the plan period 214123.1
Total housing requirement for the plan period 361318.1
o Office premises: fast development of Indian economy, simultaneously also have deluging effect on the demand of commercial house to enable to meet the desires of small business. Growth in commercial workplace space requirement is led by the burgeoning outsourcing and data technology (IT) market and organised retail. For example, IT and ITES alone is estimated to require 150 million sqft across urban India by 2010. Similarly, the organised retail industry is most likely to require an added 220 million sqft by 2010.
o Buying malls: more than the previous ten years urbanization has upsurge at the CAGR of 2%. With the development of service sector which has not only pushed up the disposable incomes of urban population but has also turn out to be far more brand conscious. If we go by numbers Indian retail industry is estimated to be about US $ 350 bn and forecast to be double by 2015.
Hence rosining income levels and altering perception towards branded goods will lead to higher demand for shopping mall space, encompassing strong growth prospects in mall development activities.
o Multiplexes: an additional development driver for real-estate sector is expanding demand for multiplexes. The larger growth can be witnessed due to following factors:
1. Godrej Matunga comprises of 250-400 seats per screen as against 800-1000 seats in a single screen theater, which give multiplex owners extra advantage, enabling them to optimize capacity utilization.