India, like many other parts of the world is zooming away in the face of a real estate boom. In India there is a real estate boom in any direction you wish to see. Whether it is Bangalore, Pune, Calcutta or Chennai or Hyderabad or even already sky high Mumbai and Delhi - the story is the same.
If you know the basics of economics, you may know the law of demand and supply – excess demand over supply of a commodity leads to a rise in its price. The present state of India’s real estate is a practical depiction of this fundamental of economics.
Investing in real estate in India is becoming more expensive with each passing day. A study conducted by Donald Trump Jr. shows that the Indian real estate market is worth US $12 billion, with an average annual growth rate of 30%. Property prices have appreciated by over 50% in cities like Bangalore, Pune, and Mumbai.
Why has real property become “out of reach” in India?
The Indian economy, especially the information technology and BPO sectors, has been on a fast growth track. These industries offer high paying jobs. Also, people are more aware of the luxurious lifestyle of the West. With money in their hands, IT and call center employees can afford to buy these luxuries in India. However, even with the construction business being stronger than ever before, it falls short of meeting the demands of the large population. All put together, this has led to rise in property prices!
Real returns in real estate caught the NRIs’ attention! The inflow of NRI funds in India’s real estate has also contributed to the price hype. There is also a rise in the trend of NRIs returning to India for good. This has put pressure on India’s real estate.
India’s commercial and retail real estate has also been on a rise. There has been a mushrooming of shopping malls and entertainment centers throughout the country. Multi-national companies are also entering the Indian market regularly. Naturally, there is an increase in demand for office space.
As the real estate investments gave high returns to investors, foreign investors have also started taking interest in India’s real estate. For example, Morgan Stanley invested US$ 68 million in Mantri developers and Merrill Lynch has invested US$ 50 million in Panchsheel Developers. Foreign companies like GE Commercial Finance Real Estate has invested US$ 63 million in IT parks in India.
According to the Merrill Lynch forecast, the real estate business in India will grow to $US 90 billion by 2015.
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