New Delhi(IANS) : India’s realty industry will grow at a fast clip of 30 percent over the next 10 years, offer 20-25 percent returns and secure foreign investment worth $30 billion, says a study by a leading industry lobby.
“The total size of investments in the domestic real estate sector is likely to be $102 billion,” says the study released Sunday by the Associated Chambers of Commerce and Industry of India (Assocham).
“At present, the domestic real estate market is expected to be $14 billion, in which the foreign direct investment contribution is estimated to be at $5-5.5 billion,” the study adds.
“The only problem that the real estate sector is currently confronting is with approvals for setting up townships, as a number of central and state agencies are involved,” said chamber president Venugopal N. Dhoot.
“As the real estate sector opens up, the multiple approvals will have to be done away with,” the chamber said, expecting the governments at both the central and state levels to ease the procedural hurdles.
“This will be particularly so because in the Asian region, India is the only country that offers return on commercial and residential properties ranging between 20-25 percent, against 15-18 percent in rest of Asia.”
Interestingly, Assocham says the foreign investment component in the development of real estate will come through private equity funds instead of institutional mechanisms.
The main reason for the optimism in the growth of the realty industry is that the IT sector alone is expected to require about 200 million sq ft of space across the major cities and large townships, says the chamber.
“It is also estimated that in India’s residential sector, the housing shortage is around 20 million units, of which nearly 7 million units were estimated for urban India,” it says.
The increase in purchasing power and the exposure to organised retail formats have redefined the consumption patterns for dwelling units, which have, in turn, resulted in retail projects mushrooming in smaller towns and cities, it says.
As per the chamber’s estimates, some 30 million sq ft of organised retail space is currently available and another 90 million sq ft is likely to be added by 2008 by the 265 mall projects on the drawing board.
“Out of these, 20 million sq ft is slated to come up in New Delhi and Mumbai and around 10 million sq ft in Ludhiana, 5.8 million sq ft in Chandigarh and 3.5 million sq. ft. in Ahmedabad,” it says.
“Shopping malls with over 1 million sq ft of space have become the order of the day. About 20 of these are now at various stages of construction across the country.”