The Indian real estate sector plays a significant role in the country's economy. The real estate sector is second only to agriculture in terms of employment generation and contributes heavily towards the gross domestic product (GDP). Almost five per cent of the country's GDP is contributed to by the housing sector. In the next five years, this contribution to the GDP is expected to rise to 6 per cent. According to Jones Lang LaSalle, faster economic growth in Brazil, Russia, India and China (BRIC) could result in the property markets of those nations recovering at a faster rate than the UK and US real estate markets. It has also been suggested that India's property sector could begin to improve from late 2009 and may attract up to US$ 12.11 billion in real estate investment over a five-year period. The IT and ITES sector alone is estimated to require 150 million sq ft of office space across urban India by 2010. Organised retail is also responsible for the growth in commercial office space requirement. The organised retail industry is likely to require an additional 220 million sq ft by 2010. Moreover, growth is not restricted to a few towns and cities but is pan-India, covering nearly all tier-I and tier-II cities.
Almost 80 per cent of real estate developed in India is residential space, the rest comprising of offices, shopping malls, hotels and hospitals. According to the Tenth Five-Year-Plan, there is a shortage of 22.4 million dwelling units. Thus, over the next 10 to 15 years, 80 to 90 million housing dwelling units will have to be constructed with a majority of them catering to middle- and lower-income groups. Moreover, a report by leading international property consultants, Jones Lang LaSalle Meghraj and Cushman & Wakefield India in association with Shopping Centres Association of India, named Mall Realities India 2010, states that over 100 malls of over 30 million sq feet of new shopping centre space are projected to open in India between 2009 and end-2010.Apart from the huge demand, India also scores on the construction front. A McKinsey report reveals that the average profit from construction in India is 18 per cent, which is double the profitability for a construction project undertaken in the US
Foreign institutional investors (FIIs) have also shown confidence in the country’s construction sector and are shoring up investment. With the BSE Sensex touching a 15-month high, the market capitalisation of FII investment in construction has gone up a whopping 422 per cent in the past six months. The real estate sector is also likely to get a boost from Real Estate Mutual Funds (REMFs) and Real Estate Investment Trusts (REITs). In fact, according to a CRISIL paper, the REITs would have the potential to hold at least 5 per cent share of the total global real estate market by 2010, the size of which would turn to US$ 1,400 billion in the next 3 years. The paper titled, ‘Indian REITs; Are We Prepared', says that by 2010, REITs alone would hold a market size of US$ 70 billion of the total real estate market as its concept is gaining ground in countries like India and other developing nations.
Foreign direct investment (FDI) into India in the real estate sector for the fiscal year 2008-09 has been US$ 12.62 billion approximately, according to the latest data given by the Department of Policy and Promotion (DIPP).
Zuri Group Global is planning to invest about US$ 247.5 million for setting up five-star business hotels and luxury residential properties over the next three years.
Accor Hospitality, the largest hotel chain in Europe, with 4,000 hotels in 90 countries will invest US$ 130 million to come up with 50 hotels in India by 2012.
An investment of US$ 627.3 million will be made by industries in the Aeropsace and Precision Engineering Special Economic Zone at Adibatla, Andhra Pradesh.
Shriram Properties, part of Chennai-headquartered diversified Shriram Group, is planning to invest around US$ 1.02 billion in various residential and commercial projects.
The government has introduced many progressive reform measures to unlock the potential of the sector and also meet increasing demand levels. The stimulus package announced by the government, coupled with the Reserve Bank of India's (RBI) move allowing banks to provide special treatment to the real estate sector, is likely to impact the Indian real estate sector in a positive way. RBI has decided to extend exceptional concessional treatment to the commercial real estate exposure and restructured it to June 30, 2009.
100 per cent FDI allowed in realty projects through the automatic route.
In case of integrated townships, the minimum area to be developed has been brought down to 25 acres from 100 acres.
Urban Land (Ceiling and Regulation) Act, 1976 (ULCRA) repealed by increasingly larger number of states.
Minimum capital investment for wholly-owned subsidiaries and joint ventures stands at US$ 10 million and US$ 5 million, respectively.
Full repatriation of original investment after three years.
51 per cent FDI allowed in single-brand retail outlets and 100 per cent in cash-and-carry through the automatic route.
The Union Ministry of Commerce & Industry has initiated steps to reduce the time taken to develop special economic zones (SEZs) by simplifying procedures to get the tax-free industrial enclaves notified.
Developers will now be able to get their land classified as an SEZ at the initial stage of approval by submitting legal documents that prove land ownership.
Budget 2009-2010, has also given sops to the realty sector. Developers of affordable housing projects (units of 1,000-1,500 sq ft) have been granted a tax holiday on profits from projects initiated in the 2007-08 financial year. Such projects would have to be completed before March 1, 2012.
At the same time, the finance minister allocated US$ 207 million to grant a 1 per cent interest subsidy on home loans up to US$ 20,691, provided the cost of the home is not more than US$ 41,382. This subsidy is expected to give a further boost to the housing sector.
The worth of Indian real estate has been estimated by Manoj Vaish, President and CEO of Dun & Bradstreet to be around fourteen billion US dollars. According to him this sector is growing at a tremendous speed of 30% per annum. The main reason behind this growth is the demand generated by the off-shoring businesses.
The stratified picture of the demand pattern of the real estate market in India shows that eighty percent of it comes from residential real estate sector and the real twenty percent from the commercial real estate one.
Real estate market boom in India is making the Asset Management Company(s) like SBI, TATA, LIC, etc. to float new mutual funds investing solely in the stocks of the listed real estate sector companies.
The future prospect of this industry is looking very bright because of the retail sector boom that India is going to observe in a couple of years. Big players in the retail sector like reliance, Bharti, Walmart, etc. have already making their foray in India either directly or through back door channel. This would require the construction of a lot of shopping complexes and retail outlets which would only help in mopping up the growth rate of the real estate sector in India. Organized Retail sector's contribution to the growth of real estate sector has been estimated to be 49.53%.
Contribution of the Indian real estate sector to the GDP of the economy has been calculated to be around 7 %. One of the very important indicators for real estate sector growth is the demand for loan for the same. It has been observed that the total disbursed amount of loan for real estate purposes in the year 2006 has increased by almost 12000 crores from the previous year. But this enthusiasm came out to be too much for the apex bank of India as it felt that the economy is becoming overheated. So, the frequent churning of the repo and reverse repo by RBI has cooled down the demand for home loans. The rate of interest rate associated with the home loan is now at 9.25-10.5 level.
Real estate sector has come up as the second largest employment generator in India coming only after agriculture sector. It has been estimated that 15% of the educated workforce are attached with real estate sector in India. Positive steps taken by the Government of India for for the development of Indian real estate sector The most significant step taken by the Indian government in this end is the granting of permission for 100% FDI in Real estate sector Government has succeeded in introducing a trust called Real Estate Investment Trust (REIT) which has made it possible for the small investors to earn a formidable dividend from the real estate investments.
Some of the regressive aspects that are associated with the Real Estate Sector in India The structure of the Stamp Duty required to be paid are not standardized yet all over India. Though according to the Urban Development Ministry the stamp duty has to be rationalized at the rate of 5 %, differential rate are applied in different states which most of the times cross the 5% mark. Urban Land Ceiling and Regulation Act is one of the major obstacles in the path of real estate growth in India because it barres real estate development on valuable piece of land.
Some of the Reputed Real Estate Companies In India are 21st Century Realtors, Adhiraj Construction Pvt Ltd., Adarsh Group, Jhavar and Associates and many more.
Growth is compulsory: but its rate must be within limits- “Being rich is having money; being wealthy is having time”- Margaret Bonnano. Riding piggyback on a healthy per capita income growing at a rate of 13 percent (at current prices in 2006-07), the Indian real estate industry is booming at an exponential rate. This upturn has in fact pulled up many related sectors to the threshold from where they can flourish and has simultaneously given a big push to a number of others. In this study we make an attempt to find out the causes and effects of this growth and at the same time analyse the various employment vistas that the surge has thrown open to the Indians. Real estate expansion: a closer look
It has been observed since the last few years that end-user buying in the sector has increased from 35 percent to more than 60 percent. There are many obvious reasons for this improvement. First, the advent of the IT sector has made job in the cities a highly common phenomenon. This has induced office workers to migrate to cities. Second, the median age of home buyers has come down to 28 years from 38 years a decade ago. This has significantly improved the number of first time home buyers and ensures buying one's own house even if the job is highly vulnerable to relocations. The table below depicts the growth of different sectors that have contributed heavily to the real estate growth in India.
Sector CAGR (Compound Annual Growth Rate) Organized Retail 49.53 IT and ITES 28 Overall Housing 30 Real Estate 33
But bureaucrats are pre-occupied with another concern. The real estate sector in India is highly confined to the urban and semi-urban regions and only a few developers in the country have the capability to operate in niche categories and deliver quality projects. This is a matter of worry as most of the above mentioned sector have not yet made their forays in the backward regions. However real estate contributes to more than 7 percent of the GDP and every rupee invested in this sector results in the addition of 78 paise to the state's income. These figures are significant enough to ensure at par development of the needy sections.
Government has eased the growth of the real estate sector by making things easy for the bourgeoisie. Its intervention in this regard has been two-folded:
1. Government allowed FDI up to 100 percent in the real estate in the integrated township segment. This helped in stabilizing real estate prices and invited reputed builders and property developers to invest in India thus eliminating the shady images of brokers.
2. The introduction of REIT (Real Estate Investment Trusts) some years back has allowed small investors to earn a decent dividend on their investments in this sector. This also assists the real estate developer to make contingency plans for variegation in manufacturing and marketing chains. Last year SEBI (Securities and Exchange Board of India) unveiled guidelines for mutual funds permitting them to invest directly in Indian real estate properties.
Globalisation has transformed the world into a household, the members of which are heavily dependent on each other. Economists all over the world firmly believe that globalisation will bring in growth and development and the synergy will eliminate the present disparities. Asia is being accepted as the trusted brand of 21st century and real estate has a major role in it. India is destined to make its mark in the real estate market. The opening of Indian real estate is properly timed and scrupulously regulated thus increasing the chances of its success. It has lot of models beforehand to choose from and the indirect benefits that exist are significantly huge. After all, a man does not seek his luck, luck seeks its man.
India's rising demand for real estate is fueled by multidimensional components. IT is one of the major segments contributing to this surge. Estimates say that the IT sector will require a space of 150 million sq. ft. in major cities by 2010. The residential sector faces a shortage of 19.4 million housing units and the pattern of demand has changed with house seekers becoming more and more brand-savvy. Industry observers expect the Indian retail market to grow at a rate of 35 percent and thus generate an aggregate demand for 220 million sq ft by 2010. The reason for the above metamorphosis can be innumerable. According to analysts, this transformation is facilitated by significant rise in purchasing power, encouraging rates on home loans, favourable demographics etc. However, it is the direct and indirect benefits of globalisation that configure the precise campaign at work. The indirect benefits include an affluent middle class, a competitive market and a well-informed consumer. Below we depict the Indian growth and development scenario in comparison to other countries.
As can be clearly seen, Indian real estate has a magnificent growth rate. China and United States fare better on the GDP and Life Expectancy fronts. But the real fascination for India is led by the potential returns from investment at the rate of 25-35 percent.
The Indian government got rid of its 'being isolated means being safe' dogma in February 2005, when it permitted 100 percent foreign investments in construction and favored fast-track approvals. According to a report prepared by property consultants Jones Lang La Salle, foreign investment of the order of US $ 10 billion will be flowing into India within next 12-18 months. Malaysia leads the show followed by UK, US, Israel and Singapore. The companies that are eager to make a fortune out of the bright prospects in India are: Signature of Dubai, Ayala of the Philippines, Och-Ziff Capital, EurIndia and Old Lane.
Globalisation of real estate in countries like India is a must from the viewpoint of unemployment and demographic profiles. India's unemployment hovers around 6 percent and estimates show that at this rate anywhere between 19 and 37 million people (mostly consisting of educated youth) will be unemployed by 2012. Secondly demographic differentials has placed India at an advantageous position. The present population status concentrated in the younger age group indicate that many new opportunities can be optimally explored and real estate globalisation is one of them. This will be beneficial in providing self-employment through franchising and will open new vistas for the unskilled and semi-skilled workforce of India. But before entering the bull's run, one must analyze the probability of actually hitting the bull's eye. In reality, a courtyard common to all will be swept by none. There have been many instances when the Asian countries had a bitter experience due to artificial boom in the real estate brought in by the global funds. Sensex has seen unprecedented fluctuations in the last few years and so inflow with frequent checks is always welcome.
With a view to catalyzing investment in townships, housing, built-up infrastructure and construction development projects as an instrument to generate economic activity, create new employment opportunities and add to the available housing stock and built-up infrastructure, the Government of India has decided to allow FDI up to 100% under the automatic route in townships, housing, built-up infrastructure and construction development projects (which would include, but not be restricted to, housing, commercial premises, hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level infrastructure)
India has been one of the most attractive investment destinations as they yield huge dividends and are exposed to much less risk. This has been the consensus because of two reasons: first, India is an emerging economy and second, the economy is a stable one with growth prospects backed by sound fundamentals. It is estimated that 70 percent of foreign investors are reaping profits from investment in India and another 12 percent are earning profits that are enough to break even. So far, so good. However, it is a well known fact that spiraling property prices caused by a deluge of speculative foreign investment in commercial real estate ignited the 1990 East Asia crash. The apprehension of its imitation in India's case has made the government go slow. However the catch is not so daunting as a recent report by JP Morgan says that property prices in India are at risk, but not yet in bubble zone. In this study we analyze the plausible causes and effects of allowing FDI in Indian real estate industry.
Until 2004, only NRIs (Non-Resident Indians) and PIOs (Person of Indian Origin) were permitted to invest in the housing and the real estate sectors. Foreign investors other than NRIs were allowed to invest only in development of integrated townships and settlements either through a wholly owned subsidiary or through a joint venture company in India along with a local partner. FDI up to 100% was already allowed under the automatic route in the Hotel and tourism sector vide Press Note 4 (2001 Series) and in the Hospital sector vide Press Note 2 (2000 Series). Special Economic Zones are separately regulated under the Special Economic Zone Act, 2005. However, the guidelines prescribed vide Press Note 2 (2005) series dated 2.3.2005 issued by Ministry of Commerce & Industry, have further opened out FDI up to 100 percent in townships, housing, built-up infrastructure and construction-development projects(which would include, but not be restricted to, housing, commercial premises, hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level infrastructure facilities, such as roads and bridges, transit systems et al), subject to the following guidelines:.
1.The minimum area to be developed under each project would be as follows:
- In case of development of serviced housing plots, a minimum land area of 10 hectares.
- In case of construction development projects, a minimum built-up area of 50,000 sq.mts.
- In case of a combination of the above two projects, any one of the above two conditions would suffice.
2. The minimum capitalization norm shall be US$ 10 million for a wholly owned subsidiary and US$ 5 million for joint ventures with Indian partner/s. The funds would have to be brought in within six months of commencement of business of the company.
3. Original investment cannot be repatriated before a period of three years from completion of minimum capitalization. However, the investor may be permitted to exit earlier with prior approval of the government through the FIPB.
4. Development of at least 50% of the integrated project within a period of five years from the date of obtaining all statutory clearances, has to be completed. The investor would not be permitted to sell underdeveloped plots (underdeveloped connotes, where roads, water supply, street lighting, drainage, sewerage and other conveniences as applicable under prescribed regulations, have not been made available). The investor must provide this infrastructure and obtain the completion certificate from the concerned local body/service agency before being allowed to dispose of the serviced housing plots.
5 . The project shall conform to the norms and standards, including land use requirements and provision of community amenities and common facilities as laid down in the applicable building control regulations, by-laws, rules and other regulations of the State Govt./Municipal/Local Body concerned.
6. The investor shall be responsible for obtaining all necessary approvals, including those of the building/ layout plans, developing internal and peripheral areas and other infrastructure facilities, payment of development, external development and other charges and complying with all other requirements as prescribed under applicable rules/bye-laws/regulations of the State Government/Municipal Body/ Local Body concerned.
7. The State Government/ Municipal/ Local Body concerned, which approves the building/ development plans, will monitor the developer’s compliance to the above conditions. It was clarified in Press Note 2 (2006 Series) that the provisions of Press Note 2 (2005 Series) shall not apply to Special Economic Zones; neither shall it apply to establishment and operation of hotels and hospitals which shall continue to be governed by Press Note 4 (2001 Series) and Press Note 2 (2000 Series) respectively.
According to the JP Morgan Research Report, the real estate industry is expected to grow from the present size of $50 billion to a magnificent size of $90 billion by 2011-12. The residential sector is poised to grow at an eye-catching rate over the next 5-10 years. Riding on a growing popularity on the stock-market front, real estate has achieved a market capitalisation of Rs. 2,00,000 crores. This amplification has been directed by improving demographics, a healthy macro environment, growth of the service industry, and notification of city development plans, underscores the report. Unavailability of skilled labour force, a crucial factor in accomplishing projects in time has been accepted as one of the major challenges.
According to the RBI's First Quarter Review of Annual Monetary Policy for the Year 2007-08, growth in housing and real estate loans were respectively 24.6 percent and 69.8 percent respectively in 2006-07. RBI has also increased the risk weightage of lending to the real estate. The norms on FDI in real estate are strict, thus leading to multiple chances of ineligibility. So real estate investors have taken the FII route to meet the needs for funds. But it must be kept in mind that FIIs turning net-sellers have led to most of our stock market crashes. Thus the proposal to allow FDI in realty through the FII route with a lock-in period is welcome. Moreover the FEMA (Foreign Exchange Management Act) must be amended before the status of portfolio investment can be given to FDI in real estate.
Real estate employs a huge proportion of the workforce next to only the IT sector in India. The real estate industry's direct employment has been estimated to be around 500,000 people within three years. In addition there are thousands of casual workers who find job opportunities in unorganised real estate market. There are a number of positions in the real estate business which can be handled well by unskilled or semi-skilled people. So the inflow of FDI in the organised real estate market is expected to generate more employment opportunities in the organised sector and thus ameliorate the general standard of living.
The government's plan to regulate ECB(External Commercial Borrowing) for integrated townships has narrowed down the flow of external debt to the real estate sector. ECB has come in as 'disguised equity' and has raised the money supply thus pushing the inflation rate. FDI is surely a better option as it will neither make the real estate sector over-heated and will also be a long term investment.FDI brings professional real estate experts and ensures the smooth flow of foreign technology and fund management and will reduce wastage. This added benefits are essential for the nascent Indian real estate to take off.
The introduction of FDI in real estate will exert pressure on local investors and developers besides resulting in appreciation of rupee. This will compel investors and developers to act competitively. Regarding the concern for rupee, it is needless to say that this will make Indian exports more competitive. Thus an unbiased peruse of permitting FDI has advantages that more than outweigh the disadvantages.
With a view to catalysing investment in townships, housing, built-up infrastructure and construction-development projects as an instrument to generate economic activity, create new employment opportunities and add to the available housing stock and built-up infrastructure, the Government has vide Press Note no 2 (2005 series) decided to allow FDI up to 100% under the automatic route in townships, housing, built-up infrastructure and construction- development projects (which would include, but not be restricted to, housing, commercial premises, hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level infrastructure), subject to the following guidelines:
a. Minimum area to be developed under each project would be as under:
i. In case of development of serviced housing plots, a minimum land area of 10 hectares
ii. In case of construction-development projects, a minimum built-up area of 50,000 sq.mts
iii. In case of a combination project, any one of the above two conditions would suffice
b. The investment would further be subject to the following conditions:
i. Minimum capitalization of US$10 million for wholly owned subsidiaries and US$ 5 million for joint ventures with Indian partners. The funds would have to be brought in within six months of commencement of business of the Company.
ii. Original investment cannot be repatriated before a period of three years from completion of minimum capitalization. However, the investor may be permitted to exit earlier with prior approval of the Government through the FIPB.
c. At least 50% of the project must be developed within a period of five years from the date of obtaining all statutory clearances. The investor would not be permitted to sell undeveloped plots. For the purpose of these guidelines, “undeveloped plots” will mean where roads, water supply, street lighting, drainage, sewerage, and other conveniences, as applicable under prescribed regulations, have not been made available. It will be necessary that the investor provides this infrastructure and obtains the completion certificate from the concerned local body/service agency before he would be allowed to dispose of serviced housing plots.
d. The project shall conform to the norms and standards, including land use requirements and provision of community amenities and common facilities, as laid down in the applicable building control regulations, bye-laws, rules, and other regulations of the State Government/Municipal/Local Body concerned.
e. The investor shall be responsible for obtaining all necessary approvals, including those of the building/layout plans, developing internal and peripheral areas and other infrastructure facilities, payment of development, external development and other charges and complying with all other requirements as prescribed under applicable rules/bye-laws/ regulations of the State Government/ Municipal/Local Body concerned.
f. The State Government/ Municipal/ Local Body concerned, which approves the building /development plans, would monitor compliance of the above conditions by the developer.2. Para (iv) of Press Note 4 (2001 Series), issued by the Government on 21.5.2001, andPress Note 3 (2002 Series), issued on 4.1.2002, stand superceded.
More and more foreign investors are lining up to make investments in Indian real estate. They are believed to have raised $3.5 billion and above $2.5 billion have already been invested by overseas real estate funds in India till date. The list includes the names such as Blackstone Group ($1 billion), Goldman Sachs ($1 billion), Citigroup Property Investors ($ 125 million), Morgan Stanley ($70 million) and GE Commercial Finance Real Estate ($63 million).
However, this is not an end to the list. It further goes listing JP Morgan, Lehman Brothers, Warren Buffett’s Berkshire Hathaway, Colony Capital, Merril Lynch, and Starwood Capital. The change in policy of February 2005 has paved ways for foreign investments in construction projects with fast approvals. The major attraction is returns of 25% offered by realty projects in India that certainly appears hard to come by the US and Western Europe. Of all, Goldman Sachs seems to be the most determined player and has been combing through Indian property market for more than a year now. The company, indeed, encouraged several other investors to look forward to real estate trends in the country.
India’s urban office space market is what attracts investors. It is 60 million sq ft as compared to New York City’s 400 million sq ft or New Jersey 175 million sq ft. Tishman Spyer was the first US developer to invest in India. ln 2006, the New York City based firm entered into a joint venture with ICICI Venture Funds of Mumbai that will have a war chest of $2.5 billion.
Speyer- ICICI Venture has signed memorandum of understanding for two construction projects in India. One is a $200 million project for residential and commercial development on 42 acres in Bangalore’s prime Whitefield suburb. Another project is in Karnataka’s Devanahalli, where Tishman Speyer and ICICI Venture Funds are purchasing a 25 acre plot whose final use has not yet been decided.
The Real Estate Industry in itself has a huge potential to grow. The statistics illustrates that this industry in the coming period would not only support the Indian Economy but also would enhance the face of the present looking India. Indian Real Estate is on the high growth path and the boom is mainly due to mall culture, multiplexes, hypermarkets and retail sector that are growing in India and retail brands from all over the world are showing their keen interest to even setup their base in India especially MNCs, apart from retail outlets coupled with rising demand for commercial and residential boosting the industry. It is expanding its wings even in remote towns. Leave aside metro cities, smaller towns have attracted construction activity from big developers. Shopping mall construction, IT parks development and Township development are shaping new India. Indian real estate development has huge potential demand in almost every sector especially commercial property investment and development, residential property development, hotels project development, IT parks development, townships development etc. This is growing at a dizzying pace of almost 30 percent each year. The bulk of construction activity - 80 percent is dedicated to housing, while the rest is commercial, including offices, malls, hotels and hospitals. Buying a residential property in India is also suitable for investors due to emerging new renting system.
Property or real estate market contains a better money growth than other markets, and on the other hand, risk factor is minimum here. Real estate in India, due to this reason, is one of the biggest growing sectors. Information and proposed plans of various real estate developers in India are planned and drafted. Categories according to residential and commercial sectors are made according to the needs and demands of the potential buyers, sellers and lenders. The real estate developers are the prominent people who are visible and help in the transaction of bulk properties in the field of Real Estate and Infrastructure. Take the case of any IT cities, such as Gurgaon, Noida, Hyderabad, Chennai and Pune. The real estate of each of these cities has witnessed sea change on the back of IT boom. The other factors which boost the real estate and infrastructure development in India are, the generally acceptable English language is widely spoken here and talent pool is unlimited as the country churns out around 15 million graduates every year. As compared to the United States, the man power cost is also cheaper in India by 10 -14%. Construction development company has lot of scope in the growth of real estate development, but it has some responsibilities towards the society also like - Improving the quality of life for the end user and those in the surrounding community, Respecting the ideas and concerns of everyone whom our development affects and preserving and protecting the natural environment. The need of such real estate development company is always there in real estate market, which helps other sectors like Interior Decoration, Architectures and Builders etc. to grow without forgetting the social responsibilities. Pacifica Companies is having that kind of philosophy.
OVERVIEW OF THE CONSTRUCTION INDUSTRY IN INDIA
Today, India is the second fastest growing economy in the world. The Indian construction industry is an integral part of the economy and a conduit for a substantial part of its development investment, is poised for growth on account of industrialization, urbanization, economic development and people's rising expectations for improved quality of living. In India, construction is the second largest economic activity after agriculture. Construction accounts for nearly 65 per cent of the total investment in infrastructure and is expected to be the biggest beneficiary of the surge in infrastructure investment over the next five years. Investment in construction accounts for nearly 11 per cent of India’s Gross Domestic Product (GDP). ?239.68 billion is likely to be invested in the infrastructure sector over the next five to 10 years - in power, roads, bridges, city infrastructure, ports, airports, telecommunications, which would provide a huge boost to the construction industry as a whole.
Investment into this sector could go up to ?93.36 billion by FY2010. With such bullish prospects in infrastructure, affiliated industries such as cement are on a high. Cement consumption, for the first time, is set to exceed the 150-million tonne mark. Reflecting the demand for the commodity, capacity utilisation rose to over 100 per cent to touch 102 per cent in January 2007 with dispatches touching 14.10 million tonnes as against the production of 14 million tonnes. As opportunities in the sector continue to come to the fore, foreign direct investment has been moving upwards. The real estate and construction sectors received FDI of ?216.53 million in the first half of the current fiscal year.
Construction Industry Segments
- Residential (Housing & Development)
- Industrial (Industrial Parks, Factories, Plants, etc.)
- Corporate (Office, Research Centers)
- Commercial (Retail: Malls, Shops, Showrooms; Hotels; etc. )
- Roads
- Railways
- Urban infrastructure (improved housing, water supply and sanitation, schools, universities, health and security, etc.)
- Ports
- Airports
- Power
The Infrastructure is a EURO8 bn (by revenue) Industry in India. It is projected to grow toEURO34 bn by 2010. It has witnessed a revolution, driven by the booming economy, favorable demographics and liberalised foreign direct investment (FDI) regime. Growing at a scorching 30 per cent, it has emerged as one of the most appealing investment areas for domestic as well as foreign investors. The second largest employing sector in India (including construction and facilities management), real estate is linked to about 250 ancillary industries like cement, brick and steel through backward and forward linkages. Consequently, a unit increase in expenditure in this sector has a multiplier effect and the capacity to generate income as high as five times. Rising income levels of a growing middle class along with increase in nuclear families, low interest rates, modern attitudes to home ownership (the average age of a new homeowner in 2006 was 32 years compared with 45 years a decade ago) and a change of attitude amongst the young working population from that of 'save and buy' to 'buy and repay' have all combined to boost housing demand.
According to 'Housing Skyline of India 2007-08', a study by research firm, Indicus Analytics, there will be demand for over 24.3 million new dwellings for self-living in urban India alone by 2015. Consequently, this segment is likely to throw huge investment opportunities. In fact, an estimated ?16 billion investment will be required over the next five years in urban housing, says a report by Merrill Lynch.
Simultaneously, the rapid growth of the Indian economy has had a cascading effect on demand for commercial property to help meet the needs of business, such as modern offices, warehouses, hotels and retail shopping centers.
Growth in commercial office space requirement is led by the burgeoning outsourcing and information technology (IT) industry and organised retail. For example, IT and ITES alone is estimated to require 150 million sqft across urban India by 2010. Similarly, the organised retail industry is likely to require an additional 220 million sqft by 2010.
Some Important Facts about India’s Infrastructure
Power
- Power generation capacity of 122 GW; 590 bn units produced (1 unit =1kwh), Compound Annual Growth Rate of 4.6% over the last four years.
- India has the fifth largest electricity generation capacity in the world.
Roads
- An extensive road network of 3.3 m km — the second largest in the world.
- The Golden Quadrilateral (GQ-5846 km of 4 lane highways) North-South & East West Corridors (NSEW-7300 km of 4 lane highways).
Railways
- The premier transport organisation of the country - the largest rail network in Asia and the world’s second largest.
- 7566 locomotives, 37,840 Coaching vehicles, 222,147 Freight wagons, 6853 Stations, 300 Yards, 2300 Goodsheds, 700 Repair shops, 1.54 m Work force.
Ports
- 12 Major Ports and 185 Minor Ports along 7,517 km long Indian coastline
- 100% FDI under the automatic route is permitted for port development projects
- Public—Private partnership is seen by the Government as the key to improve
Airports
- India has 125 airports; of these, 11 are designated international airports
- 100% FDI is permissible for existing airports; FIPB approval required for FDI beyond 74%
- Privatization of the Delhi and Mumbai airports is in progress. Expected investment of about EURO2.4 billion
- New international airports - Bangalore & Hyderabad are being built by private consortia — total investment of about 411 million
- 25 other city airports are being considered for private investment.
With the economy surging ahead, the demand for all segments of the construction sector is likely to continue to grow. The Indian Infrastructure industry is likely to grow from EURO7 billion in 2005 to EURO58 billion in by 2015. Given the boom in residential housing, IT, ITeS, organised retail and hospitality industries, this industry is likely to see increased investment activity. Foreign direct investment alone might see a close to six-fold jump to EURO19 billion over the next 10 years. There are a lot of opportunities that are sprouting up in the construction of Roads, Railways, Airports and Power. Projects worth EURO1.872 billion are coming up to develop.
India is the world's second largest producer of cement after China, with cement companies adding nearly eight million tonnes (MT) capacity in April 2009, taking the total installed capacity to 219 MT. A few of the leading manufacturers are the UltraTech/Grasim combine, Dalmia Cements, India Cements, Holcim etc. With the boost given by the government to various infrastructure projects, road networks and housing facilities, growth in the cement consumption is anticipated in the coming years. According to Jyotiraditya Scindia, Minister of State, Ministry of Commerce and Industry, cement production could rise to 236.16 MT in FY11 and touch 262.61 MT in FY12.
The Government has introduced many progressive reform measures to unlock the potential of the sector and also meet increasing demand levels.
- 100 per cent FDI allowed in realty projects through the automatic route.
- Enactment of Special Economic Zones Act.
- Minimum capital investment for wholly-owned subsidiaries and joint ventures stands at EURO9 million and EURO3 million, respectively.
Venue : Bandra Kurla Complex (BKC), Mumbai, India Event Profile : CONSTRU India will focus on the progress of Indian Construction industry and provide an unparallel opportunity to catch up with the latest developments in building materials, machinery and construction technologies. It will be a unique platform to meet leading Indian and international construction sector professionals, manufacturers and suppliers of construction machinery and services. Organizer : India-Tech Foundation
Government initiatives in the infrastructure sector, coupled with the housing sector boom and urban development, continue being the main drivers of growth for the Indian cement industry.
Increased infrastructure spending has been a key focus area over the last five years indicating good times ahead for cement manufacturers.
The government has increased budgetary allocation for roads under National Highways Development Project (NHDP). Appointing a coal regulator is looked upon as a positive move as it will facilitate timely and proper allocation of coal (a key raw material) blocks to the core sectors, cement being one of them.
End Date : 2009, December 11 Venue : Bombay Exhibition Centre - NSE Exhibition Complex, Mumbai, India Event Profile : Cityscape India is an annual networking exhibition and conference focusing on all aspects of the property development cycle. It attracts regional and international investors, property developers, leading architects and designers to an annual forum that celebrates the very best in real estate, architecture, urban planning and design. Organizer : IIR Middle East 3 -- PlumbexIndia Start Date : 2010, February 05 End Date : 2010, February 07 Venue : Bombay Exhibition Centre - NSE Exhibition Complex, Mumbai, India Event Profile : PlumbexIndia is a one of its kind mega exhibition showcasing the latest products, processes and technologies in plumbing and allied sectors, happening for the first time in India. PlumbexIndia'09 is the most appropriate platform to reach the 'right type of decision' makers and selling products. Organizer : AIM Expositions Pvt. Ltd. 4 -- Real Estate Investment World India Start Date : 2010, April 26 End Date : 2010, April 28 Venue : Grand Hyatt Mumbai, Mumbai, India Event Profile : Real Estate Investment World India 2010 trade exhibition will offers buyers and investors a unique platform to screen, evaluate and finalize some of the best deals available in this booming city. The exhibition will be held between 26 to 28 April 2010 at Grand Hyatt Mumbai. Organizer : Terrapinn Pte Limited
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Source : http://www.depthai.go.th