Real Estate Industry, Indian Real Estate Market and Boom

November 23, 2010by EconomyWatch


Indian Real Estate Report

"If the human race wishes to have a prolonged and indefinite period of material prosperity, they have only got to behave in a peaceful and helpful way toward one another." -Winston Churchill. The heresy of typical Indians has changed the orthodox mindset of building and designing a house to live in it. A ramification of this is that houses are nowadays counted as a transitory asset. The idea of buying a house that will last a lifetime has gradually vanished. The buzzword nowadays is 'investment'. Both the policymakers and the stock-brokers share an united view in this aspect(although moved by different intentions). 'The growth in the real sector is not unreal' said S.K.Jain, President Global Infocom. In this study we make an attempt to vivisect the real and unreal components in this eye-catching sector.

The Real Estate Boom: A genuine Euphoria

Indian real sector has seen an unprecedented boom in the last few years. This was ignited and fueled by two main forces. First, the expanding industrial sector has created a surge in demand for office-buildings and dwellings. The industrial sector grew at the rate of 10.8 percent in 2006-07 out of which a growth of 11.8 percent was seen by the manufacturing sector. Second, the liberalisation policies of government has decreased the need for permissions and licenses before taking up mega construction projects. Opening the doors to foreign investments is a further step in this direction. The government has allowed FDI in the real estate sector since 2002. FDI was deemed necessary in the view of making the sector more organised and increasing professionalism. farmers. The villages adjacent to the metro cities have experienced sky-rocketing land prices. This has induced farmers to sell their land for good money.

Future Prospects on Real Estate Industry

The real estate market in India is yet in a nascent stage and the scope is simply unlimited. It does not resemble a bubble that will burst. An unhindered growth for the next twenty years is almost sure. This is because the outsourcing business in India is going in great guns and this entails a huge demand for commercial buildings and urban housing besides improvement in infrastructure. The organised retail market in India is also accelerating with players like WalMart, Bharti, Reliance etc. looking forward to make a foray thus stepping up the demand for real estate.

According to former Planing Commission Advisor Tarun Das, a price index for the housing market to track price movement must be incorporated. The government must ensure that there is no shortage of funds. Sebi's(Securities Exchange Board of India) recent harbinger of permitting real estate mutual funds in both private and public sector will go a long way in attracting funds from small investors who emphasize on certain return. Another impediment that can be eased on the discretion of government is the existing tax laws and other complex regulations relating to multidimensional real estates such as industrial parks and SEZs(Special Economic Zone). RITES(Real Estate Investment Trusts) of the type introduced in U.S.,U.K. and Germany should be imitated and explored.

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