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Indian real estate- enormous potential
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8/29/2008 12:54:43 AM
Indian real estate: 'enormous potential'
India has "enormous potential in all its property investment categories". Strong population growth, a large pool of qualified workers, greater integration with the world economy and increasing domestic and foreign investment are fuelling demand for office, retail and residential property. These are the conclusions of Deutsche Bank researchers Tobias Just, Maren Väth and Henry Chin in their latest 'India Special' publication, Building up India: Outlook for India’s real estate markets:

Above-av economic growth in India. Strong population growth, a large pool of highly-skilled workers, greater integration with the world economy and increasing domestic and foreign investment are expected to drive India’s real GDP by 6% p.a. over the next 10 to 15 years.

Services outsourcing revving up office demand. India is the prime destination for IT services outsourcing. In the coming five years, at least 55 million m² of extra office space must be completed in the premium office segment alone.

600 new shopping centres by 2010. India’s burgeoning middle class will drive up nominal retail sales through 2010 by 10% p.a. At the same time, organised retail is becoming more important. At present organised retail accounts for a mere 3% of the total; by 2010 this share will already have reached 10%.

By 2030 India will need up to 10 million new housing units per year. Rapid population growth, rising incomes, decreasing household sizes and a housing shortage of currently 20 million units will call for extensive residential construction. The financing of owner-occupied housing in particular holds out enormous market potential.

Capita market still underdeveloped. The total stock of commercial property is estimated at over USD 300 bn. So far the invested market accounts for only USD 4 bn of this. Capital market products, such as commercial mortgage-backed securities or listed property vehicles are still almost entirely lacking.

Heed risks. Property investments in India are not risk-free. Market transparency is far behind European or US standards. It is therefore vital for foreign investors to have a professional local partner. The lack of liquidity and upward pressure of pricing remain the main concern within the market.

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