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Property Sector Set For Higher Growth Rate
Posted by Pradeep Sadanapalli | November 4, 2007 | 315 views
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Loading ...It is estimated that foreign funds and institutions have raised around $30 billion, to invest in real estate in India reports Prabhakar Sinha.
This is an unprecedented time in the real estate sector in the country. It was never so good. The growth in the sector is likely to pick up further,as the availability of funds is likely to improve. A foreign investor aptly puts it, “Presently, India is under construction mode.”
Despite the growing real estate activities, foreign fund managers say there is an acute scarcity of projects to invest in, in the country. In fact, the scarcity of projects is being sorely felt as huge amounts of funds have flown into the country for investments into this sector, and there are not many matching projects available to invest.
According to a Cushman & Wakefiled report, foreign funds and institutions have raised around $30 billion to invest in real estate with an estimated $3 billion that has already been committed. The report says: “The Indian real estate environment is poised at the most dynamic stage of its evolution redefined by the growing investors’ confidence in the market.”
This, a senior developer said, will certainly augment the supply side of the business cycle. In fact, according to a foreign fund manager, to reduce the risk in a project, the foreign investors are now impressing upon the developers to construct more and more apartments in the lessthan Rs 50 lakh price range, which are affordable for the middle income people in the country. A senior fund manager, who has invested more than $200 million in the real estate market, said there is a huge unmet demand in the medium and lower range of the products.
The returns on investments in the real estate sector are around 30 percent per annum compounded annually. He said that even foreign fund managers demand over 20 percent returns. But, the returns, in comparison, say of other emerging markets like China and Brazil, are in the range of only 12 percent.
At present, as the returns are big, a huge amount of funds are flowing in the sector. This will increase the development activities, and the supply of both commercial and residential properties.
Private equity
The maximum amount of private equity funds (28 percent of the total fund size),according to the report, is committed to integrated townships, which is considered to be a low risk investment avenue due to its diversification benefits and low entry cost with larger upside potential. The proposed integrated townships will have residential, commercial and retail development. The report said that despite the speculative element, the end user demographics facilitate more secure returns.
Locations
As India enters the next phase of real estate growth, more and more developments are taking place in the suburban and peripheral areas of major cities.On the one hand, it opens up an affordable range for the middle income group, while it also helps in diversification of the investment risk for the developers.
There are 17 corridors that reflect high investment potential locations spread all over the country. These are Devanahalli, Tumkur Road and Bidadi in Bangalore, Karnataka, Chakan, Kharadi and Hinjewadi near Pune in Maharashtra, Sriperumbudur in Tamil Nadu, Shamshabad and Kokapet near Hyderabad in Andhra Pradesh, Panvel, Virar and Thane near Mumbai, Rajarhat and Bantala near Kolkata. These corridors are seeing not only major infrastructure projects but are also driving the development patterns of housing ventures.
Overburdened infrastructure, rising real estate and operational costs, and limited availability of large land parcels have driven corporates and developers to seek alternate locations in the periphery areas. These emerging corridors are extensions of tier I and II cities.
SOURCES:
Times Of India
Topics: Reports, Real Estate |
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