Reality of Real Estate in India

Real Estate industry in India has become a hot spot for investment. Being one of the sectors attracting

considerable investments, Real estate as an industry has become a channel and an important benefactor

to the country’s economy. The FDI norms adopted by the Indian government have encouraged other

nations and their inhabitants to invest in Indian properties. What has further fuelled the growth of the

sector is the accelerating presence of industry, offices and commercial space. There is a overwhelming

demand for 100 million square feet for offices and industrial space. Development of varied sectors like

Information Technology, ITES, BPOs, auto-components, chemicals, apparels, pharmaceuticals and

jewelry have been causative factors.

While a lot seems positive, let us also get a certainty check. The declining global scenarios, ushering

waves of recession have also sent out tremor of uncertainties in the industry. If we put the macro-

economic factors under scrutiny, one can witness the signs of weakness, as fiscal deficits, towering

interest rates all whilst a depreciating rupee are spelling gloom for real estate. And the ripple effect has

caused to harm the confidence of both end-users and investors who have hit a pause button for a while.

For instance in the residential space, particularly in Mumbai volumes have dropped 70% while

prices are up by 20%. The commercial space is also undergoing correction by 10-15% in most of the

markets. A similar correction is expected to continue in the year 2012.

On the commercial space front a supply correction is expected by experts in the year 2013 and 2014. It

is foreseen that the market may remain under stress for four more quarters. While the commercial

space is showing some discipline the Indian residential side of real estate is erratically swinging like a

pendulum sale velocity has been fluctuating and has been more of a roller coaster ride sometimes

touching peaks while the other times hitting lows. Further on capital values are going up because of

increased input costs.

While these are the major current brewing in the Indian real estate industry, let’s do a number check.

India has approximately attracted about 18 billion US$ of investment in the past seven years whilst the

3.4 Billion US$ of exits. India enjoys a 6% quarter-over-quarter growth in the direct commercial space. In

all India’s real estate sector despite its troubled indicators remains to be an attractive market for

investment. Especially investment in Apartments in major cities like Bangalore, Chennai, Delhi, and

Mumbai is increasing day by day because all are feeling Apartments, buildings can be one of the best

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