June 19, 2024


Mad about real estate

$30 Bn Fdi to Flow Into Realty in 10 Yrs: Assocham

New Delhi, June 15: With the real estate sector witnessing a steady growth of more than 30 per cent, Foreign Direct Investment (FDI) worth 30 billion dollars is expected to flow into the domestic market in the next 10 years, an Assocham study says.

At present, the domestic real estate market is expected to be worth about 15 billion dollars, in which FDI contributes about six billion dollars.

The bank credit to this sector in 2006-07 is estimated at about Rs three lakh crore, which will multiply substantially in the coming years in view of the growth that the sector has been registering, the study adds.

‘’Currently, the foreign developers can undertake construction activities on a minimum space of 50,000 sq ft, as a result of which Indian real estate sector could achieve FDI’s component around six billion dollars,” Assocham President Sajjan Jindal said.

The Chamber expects the government to lift the ceiling of 50,000 sq ft. It estimates the figure to be increased to two lakh sq ft in next 10 years in a gradual manner and result for much higher foreign capital absorptions.

‘’The only problem that the real estate sector is currently confronting is that of approvals for setting up townships as involvement of Centre and a number of state agencies are there,” Assocham said.

As the real estate sector opens up, the multiple approvals will have to be done away with as in the Asian region, India is the only country which offers return on commercial and residential properties which range between 20-25 per cent against 15-18 per cent in rest of Asia, it adds.

The study also projects that the FDI to be routed through private equity instead of institutional mechanism.
‘’The real estate sector story in India would grow larger as the IT sector alone is expected to require about 200 million sq ft space across the major and large townships,” says the study.

It is also estimated that in India’s residential sector, the housing shortage is around 20 million units of which nearly seven million units are estimated for urban India. The increase in purchasing power and exposure to organised retail formats have also redefined the consumption patterns for dwelling units which has resulted in retail projects to mushroom in smaller towns and cities.

The retail market is likely to grow at around 35 per cent, which will again create scope for real estate developers, Jindal said.

The study estimates that nearly 30 million sq ft of organised retail space is currently available, while an additional 100 million sq ft is likely to be added by the end of this year from over 300 mall projects.