Real Estate Last Updated February 2010
Real Estate Last Updated February 2010
Real Estate Last Updated February 2010
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.
Almost 80 per cent of real estate developed in India is residential space, the
rest comprises 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, India leads the pack of top real estate investment markets in Asia
for 2010, according to a study by PricewaterhouseCoopers (PwC) and Urban
Land Institute, a global non-profit education and research institute.
The study is based on the opinions of over 270 international real estate
professionals, including investors, developers, property company
representatives, lenders, brokers and consultants.
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.
The real estate sector is also likely to get a boost from Real Estate Mutual
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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 reach US$ 1,400 billion in the next three 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).
New Projects
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Government Initiatives
• 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 2009-10 budget 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 financial year 2007-08.
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.
Road Ahead
Moreover, 2010 is expected to be a positive year for the real estate sector.
The revival is expected to be driven by infrastructure growth, which, in turn,
can accelerate real estate activities both in the residential as well as
commercial spaces.