Growth Drivers for Real Estate Sector

Losses of industry players were capped by timely intervention of RBI which increased interest rate since 2006, the sector continues to remains unsteady. However, driven by the global economic recovery and macro-economic and sector-specific factors, experts believe that capital will start flowing in this sector. Besides global economic recovery, following are the indicators of this sector’s growth in the near future:

Industry experts estimate that by 2010, Indian IT and ITES sector will need approximately 150 million sq ft of official space.

Growth in organized retail sector will provide significant boost to commercial real estate sector, which is expected to demand 220 million sq ft of additional commercial space across tier-I and tier-II cities.

According to the Tenth Five Year Plan of the government, there is a shortage of approximately 22 million residential units and over the medium and long term around 90 million dwelling units will have to be constructed especially for middle and lower income families. Housing Development & Infrastructure Ltd (HDIL) and the Mumbai Metropolitan Development Authority (MMRDA), together plan to build a residential-cum-commercial complex in Virar, a suburb of Mumbai at a cost of around $1.49 billion.

Introduction of REMFs (Real Estate Mutual Funds) and REITs (Real Estate Investment Trusts) will definitely have a major impact on realty sector by helping players for price determination. As per CRISIL, REITs has the potential to reach the size of $1400 billion in next 3 years.

Following section are some of the new projects expected to be undertaken by private realty developers:

• Tata Housing Development Company is expected to build around 1300 low-cost residential units at Boisar, 100km from Mumbai
• Atlas Group plans to diversify into Indian real estate sector and invest $201.51 million in Kerala over the next years
• Tata Realty and Infrastructure (TRIL) will invest approximately $4.2 billion for building SEZs, roads and other core sector projects
• All major realty players including DLF, Unitech and HDIL have big housing projects lined up for marked-down properties
• Avinash Bhosale Group (ABIL) will invest $126.25 million across Pune, Nagpur and Mumbai for developing 5-star hotels
• Marriott International plans to open 24 new properties in India over the next three years
• Cinepolis, a Mexican global multiplex operator plans to invest around $357.7 million in India and open 500 movie screens in the next 7 years for its film exhibition business.