Real Estate News

Sound Economy

Real estate sector will continue to witness high growth in the medium-to-long-term period. According to a report India Property, by Germany based Deutsche Bank, the $48 billion-Indian real estate industry should grow at a yearly growth rate of 21% compounded annually to $140 billion by 2012.

It said consumer spending on mobile telephony was as high as $18 billion compared to $5.3 billion on two wheelers and $8.3 billion recorded by the top 4 fast moving consumer goods companies in 2006-07. At the same time, the residential real estate market was $45 billion with $16 billion worth of net bank disbursals for mortgages in 2005-06, the report pointed out.

With the Indian economy expected to grow robustly at 8% in the short-to-medium term and income growth being faster in higher-income categories and urban areas, the report said real estate might be the next segment to catch consumer attention.

And, because of the shift in demographics towards a younger population resulting in lower dependencies, coupled with robust growth in incomes, has increased the savings rate from 23% in GDP in 2000-01 to 32% in 2006-07. According to the Deutsche Bank economist Sanjeev Sanyal, the deposits rate is expected to reach 40% by 2020.

At the same time, as Indians prefer owning assets rather than renting, Indians accounted for 27% of global gold consumption in 2006, which went up to 39% in the quarter ending June 2007. The mentality of owning assets also resulted in fragmented land holdings as they are passed across generations with little consolidation. The report said while home ownership is over 90% in rural India, it has been increasing continuously from less than 50% in 1970 to 70% in 2001 in urban areas driven by faster income growth and easier availability of loans.

The Germany-based bank argues that while the high economic growth should have driven the demand across the country, the sharp increase in concentration of income and population in the six metros led to the concentration of development in these six cities such as National capital Region of Delhi, Mumbai, Bangalore, Chennai, Kolkata and Hyderabad.

However, as the economic activities are spreading to other smaller cities, a global real estate consultant said that construction activities are also spreading to those areas, citing Baddi in Himachal Pradesh and Rudrapur in Uttaranchal as two examples. Besides this, other cities like Chandigarh, Ludhiana, Amritsar, Jaipur, Ajmer, Ahmedabad, Surat, Pune, Kochi and Nagpur are some other places where the construction activities have been picking up. Source: The Times of India (Delhi edition) , Prabhakar Sinha << Back