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OVERVIEW | OPPORTUNITIES
Real
Estate &
Construction
OVERVIEW
SIZE
- Real Estate and Construction is a US$16-billion (2006) industry in India
- There has been a rapid growth in the industry in the past few years
- Real estate share in total FDI increased from 10% in 2004-05 to over 25% in 2006-07 (estimated at over US$5 billion)
- High-demand growth has led to prices doubling over 3 years in many cities
STRUCTURE
- Fragmented sector with relatively few organised players of scale
- Large corporations beginning to show active interest
- Margins are higher in India (>20%) as compared to the developed
markets (5-6%)
- Active participation of institutional finance in real estate
- Real estate venture funds permitted: Prominent Indian corporates like Tata Group, ICICI Bank, SBI and HDFC have promoted real estate venture funds
- Real estate Investment Trusts (REITs) expected to be set up shortly.
- Several Private Equity firms have specific funds for real estate investments. Real estate fast displacing IT/ITeS as the top private equity investment sector in India
- Various foreign real estate and finance companies such as GE Commercial Finance, Tishman Speyer, Ascendas and Farallon Capital, Goldman Sachs, Lehman Brothers etc. have entered the Indian market
POLICY
- 100% FDI is allowed in real estate development subject to minimum scale norms of either:
- 25 acres in case of serviced plots or integrated townships; or
- 50,000 sq. mtrs. of built-up area for construction development projects
- Initial investment is locked-in for a 3 year period
Top Players in the Real Estate & Construction industry
| Company |
Sales Turnover
(2007, US$ million) |
| Unitech |
784 |
| DLF Ltd. |
590 |
| HDIL |
286 |
| Ansal Properties |
190 |
Source: Capitaline, Business Press |
OPPORTUNITY
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Commercial and office complexes mushrooming in major Indian metros
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Over 25 million new housing units required in 7 years |
OUTLOOK
- The real estate market is projected to grow to US$60 billion by 2010 at a CAGR of 40%
- Real estate companies have been successfully tapping the country’s booming capital markets for funds
- Companies have also raised equity internationally at the AIM
in London
- Tier 2 cities (non-metros) likely to experience faster growth in the future
POTENTIAL
- Several factors are expected to contribute to the rapid growth in
real estate
- Large demand-supply gap in affordable housing, with demand
being fuelled by tax incentives and a growing middle class with higher savings
- Increasing demand for commercial and office space especially from the rapidly growing Retail, IT/ITeS and Hospitality sectors
- The recently announced JNNURM expected to provide further impetus
- Investment opportunities exist in almost every segment of
the business
- Housing: about 25 million new units expected to be built in
7 years
- Office space for IT/ITES: 150 million sq. ft. across urban India
by 2010
- Commercial space for organised retailing: 220 million sq. ft.
by 2010
- Hotels and Hospitality: Over 100,000 new rooms in the next
5 years
- Investment opportunity of over US$75 billion in the next 5 years
- Major foreign institutional investors including Morgan Stanley, Goldman Sachs, Merrill Lynch, AIG, Blackstone and Calpers have invested or are in the process of investing in Indian real estate
For additional information:
Ministry of Urban Development (http://urbanindia.nic.in),
Confederation of Real Estate Developers Associations of India
(http://www.credai.com), Indian Brand Equity Foundation (http://ibef.org) |
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