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| As India's economy grows and the information technology, outsourcing and manufacturing industries expand, other trends such as the spurt in retailing, the affluence of India's business and working class and the aspirations of a new generation, are all combining into a strong demand for urban real estate that looks like it is set for a uptrend for the next few years. |
| Real Estate in India has been looking very good for the past few years since the reversal of the downturn in 2002 and is set for growth and expansion in the next few years. The improvement in income levels, the strong economic growth, the development of strong retail lending mechanisms and the interest of Indians to invest and develop homes, farm houses, weekend homes and real estate investments are all driving the real estate market. |
| The year 2006 has also marked the entry of real estate mutual funds with regulations by the government of India allowing for their operation and investment in real estate with foreign investments. |
| The real estate market breadth and expansion has been very large during the past four years and has resulted in prices of land and buildings rising by multiples in several cases. The growth has not been restricted to the traditional centres of Mumbai and Delhi alone but has touched almost all the leading cities of India. Riding on this boom is the growth of the retail market in almost all sectors from consumer goods to automobiles to financial services, necessitating the need for quality real estate in prime locations of Indian cities. Added to this is the rising income levels of Indian professionals in the growth sectors of Information Technology, Business Process Outsourcing, Engineering, Pharmaceutical & Bio-technology and Financial Services, helping them aspire for better quality apartments and homes. These trends have been encouraged by a strong growth in lending from banks and financial institutions to individuals and businesses with the low interest rates that were offered during the past few years. All of these have led to a combined surge in interest and capital availability for real estate purchases, pushing prices up rapidly across the Indian cityscape. |
| A new trend that is likely to further fuel the supply of real estate is the advent of the new SEZ (Special Economic Zone) policy of 2005 that now allows SEZ developers to apply for land and use only 25% of this land for the actual SEZ while the balance 75% can be developed into commercial projects and sold at market values. Coupled with 100% income tax exemption for the income from the development of SEZ over a ten year period, this has led to a number of large business houses and real estate developers planning and applying for large tracts of land around the large cities. |
| There is a mixed view on this large supply that has also crept into the Indian market in anticipation of this boom. There is a view that this large supply will not have the required demand expansion that has already been satiated to a large extent in the past 3-4 years. The Indian information technology and outsourcing industries are seeing a tapering off of talent expansion as all the required absorption from other sectors and experienced professionals have been almost exhausted and now the only expansion is from fresh graduates that are flowing out of India. These number only a few hundred thousand each year of which the high quality talent is in the thousands. This could led to lower demand than the past and result in a flattening of the demand curve. |
| This is however not deterring Indian real estate developers from dreaming and sizing large projects all over India. While the dream run of the past three years is unlikely to progress over the next few years, all indications are that India's economic growth will continue to power at the 7-8% levels in the next five years leading to large global interest and expansion in the retail industry. This coupled with the large requirement of space as Indian information technology and outsourcing industries expand will keep the demand for high quality commercial space in the high growth numbers. |
| While interest rates have seen a rise from mid-2005 onwards they are still lower than what Indians have been used to in the eighties and nineties. The aspirations from middle-class India for better housing and facilities continues and this is likely to continue the trends for new developments and layouts in most Indian cities. Indian cities are now increasingly attempting to emulate and match global standards in living and ambiences and this will call for new construction and the migration from traditional homes to apartment based communities |
| Indian real estate is showing strong signs of growth in the large Indian cities and in the smaller ones. Indiamap has classified these Indian cities into three categories. Within each category, the cities are listed alphabetically. |
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