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SPECIAL REPORT: REAL ESTATE
India’s real estate industry poised for a landscape change: FICCI-E&Y study
Industry expected to grow to $50 billion by 2010 from $14 billion currently
Commercial office segment to require 367 million sq. ft. additional space by 2012-13
Urban housing deficit to escalate to 22 million by 2007-08
The Indian real estate industry is emerging as one of the most preferred investment destinations for globalrealty and investment firms, says a study conducted jointly by the Federation of Indian Chamber of Commerceand Industries (FICCI), the premier industry body of India having a membership of more than 1500 companiesand more than 500 chambers of commerce and business associations, and U.K.-headquartered professionalservices firm Ernst & Young (E&Y), which is one of the world’s Big Four accounting firms.The current size of the Indian real estate industry is estimated at about $14 billion - $15 billion. The Indian realestate market will grow to $50 billion in 2010 from $12 billion in 2005, forecasts a Merrill Lynch report in May2005. Merrill Lynch & Co., Inc., financial management and advisory firm expects the industry size to reach at$90 billion by 2015.The FICCI-Ernst & Young (E&Y) study says that in the commercial office segment, the demand for office spaceis set to increase significantly in the next few years, primarily driven by the IT and IT-enabled Services (ITeS)industry. As far as the residential segment is concerned, rising disposable incomes, financing terms and risingpopulation will continue to be the driving force of housing demand in India.The boom in the economy across industries, increased business travel, new opportunities such as medicaltourism and the entry of low-cost airlines are expected to result in the sustained growth of the hospitalitylinked real estate in the country. The rise of organised retail segment is another growth driver for the realtysector.
IT and ITeS industry key driver for demand in commercial office segment
In the commercial office segment, the demand for office space will primarily be driven by the IT and ITeSindustry, says the FICCI-Ernst & Young (E&Y) study. The commercial office segment would require an additionaloffice space of more than 367 million sq. ft. up to the year 2012-13, out of which approximately 256 million sq.ft. would be required by the Indian IT & ITeS sector only. On the supply side, the unlocking of prime land byPublic Sector Undertakings (PSUs) in next 2-3 years will be another key driver, says the study. With rising realtyprices, a large number of PSUs that own prime real estate in metropolitan and other major cities are nowlooking to commercially utilising such land. This new trend will provide for a significant amount of land supplyfor commercial development at prime locations, predicts the FICCI-E&Y study.
Rising incomes along with growing population propel housing demand
In the residential segment, India is short of approximately 9 million urban housing units. This deficit willescalate to around 22 million units by 2007-08 and by 2030 India will need up to 10 million new housing unitsper year, according to the Asian Development Bank (ADB) estimates. Rising disposable incomes, financing termsand growing population will continue to be the driving force of housing demand in India, suggests the FICCI-E&Ystudy.
Growing economy becomes the key driver for hospitality segment
In the hospitality segment, the demand for hotel rooms is increasing as the economy is growing acrossindustries. Low-cost airlines have also given the much needed boost to business as well as leisure travel. TheFICCI-E&Y study expects the demand for hotel rooms to continue increasing, as the inbound foreign anddomestic tourism in the country will become more economic. There are an estimated 1.2 million hotel rooms inthe country, of which star hotels account for a mere 7% (approximately 80,000 rooms). There will be a total of2.9 million and 6.6 million hotel rooms in India in 2010 and 2020, suggest the government estimates. Thedemand for hotel rooms in the country will continue to grow at a compound annual growth rate (CAGR) of 10%over the next 5 years, as per a report by CRIS-Infac, the industry information service of CRISIL, India’s leadingratings, financial news, risk and policy advisory company.
Relaxation in FDI guidelines likely to metamorphose the retail space
While the growing middle class and consumerism is slated to support the retail industry, the further relaxationin FDI guidelines is likely to metamorphose the $250 billion Indian retail market, says the FICCI-E&Y study. By