The real estate story in India is growing bigger by the day as it continues to receive an ever-increasing influx of funds. While more than 35 big-ticket foreign funds have already checked in, the first half of 2007 will see at least 20 more funds making an India entry. Meaning, US$ 10 billion of foreign direct investment (FDI) will be injected into the real estate sector.
Merrill Lynch forecasts that the Indian realty sector will grow from US$ 12 billion in 2005 to US$ 90 billion by 2015. Prominent global funds including Carlyle, Blackstone, Morgan Stanley, Trikona and Warbus Pincus are sitting on a total corpus of US$ 12-15 billion, say experts.
Retailers in India--the most aggressive in Asia when it comes to expanding their businesses--are creating a huge demand for real estate. The Jones Lang LaSalle third annual Retailer Sentiment Survey-Asia revealed that India topped the chart with 45 per cent expanding rapidly followed by Greater China at 27 per cent and other South East Asian capitals at 6 per cent.
Global majors in India's real estate
Eminent global real estate business houses like the Philippines-based Ayala, and Signature group, Och-Ziff Capital, EurIndia and Old Lane from Dubai are keen on sizeable investments into India. And, while FDI from the UK is also likely to pick up in the next few months, investors in the US, Israel, Malaysia and Singapore want to be a part of the India story.
- Australian real estate consultancy major LJ Hooker, with 700 odd franchisees in South East Asia, has opened its India account with a franchisee in Bangalore
- US-based global investment bank Goldman Sachs and Unitech, the largest listed real estate company in India, will set up a special purpose vehicle (SPV) with a corpus of US$ 208.7 million for investments in the real estate sector
- DLF Ltd is forging a 50:50 joint venture with Nakheel, a large property developer of the UAE, for two integrated townships in India at a whopping investment of US$ 10 billion
- Zurich-headquartered Credit Suisse, the world's leading financial house, is finalising on a US$ 1 billion fund to invest in India's real estate sector
- Hilton Hotels Corporation (HHC) announced a joint venture company with DLF Ltd to develop and own 75 hotels and serviced apartments over 7 years
- Dawnay Day International, the US$ 10 billion UK-based investment company, plans to invest US$ 1.5 billion in Indian real estate in the next two years
Kochi realty offers high capital gains
This city's emergence as one of the fastestgrowing real estate destinations in India has provided investors with an opportunity to make good profits . Over the last three years, property prices and rentals in Kochi have witnessed an unprecedented boom. So far it was the non-resident Indians (NRIs) who boosted to the real estate sector in Kerala . But with many large investment projects doing the rounds, other players have also shown keen interest in properties in Kerala. The price boom is not restricted to the city but it is extending to the suburbs such as Kakkanadu, Kalamasserry and Thripunithura. Property prices in Kochi have spurted by about 300 percent in the last four years on the backing of high-growth prospects of the city.
Earlier in the late 1990s, the State had witnessed a similar kind of boom. But at that time, it was the residential sector which benefited from it. But now, both residential and commercial sectors are witnessing a steep growth. According to market sources, the gap between demand and supply has been continuously increasing in Kochi due to lack of availability of land. The industry is finding it difficult to satisfy thegrowing demand. Most of the builders active in the sector are now looking for spaces outside the city to start to projects.
Now, there has been a high wave of action in the real estate sector in Kochi. Rejuvenated demand since early 2004, has led to the firming up of real estate markets across the three sectors - commercial, residential and retail. Good money supply, stock market gains, large number of high profile projects and policy changes are helping the sector enormously .
It is expected that the growth of Kochi as a major IT destination will attract lot of investments to the State. The proposed Dubai Smart City, Vallarpadam container terminal and investments by major IT companies such as Wipro, TCS and other domestic companies, are expected to create about 50,000 highpaying jobs. This new class of employee demands a total change of shopping culture in the city. This will mean a boom for commercial real estate spaces. The tourism sector has also played major role in the increasing property prices in Kochi. Major industrial groups have been buying land near the seashore, lake sides, hills stations and countryside, to woo tourists with the picturesque atmosphere.
"Considering the growth of the real estate sector in Kochi, a property in the city will yield the highest returns . The actual return from a flat in Kochi will come to around 30-40 percent yearly . So it is the most favored choice. An investor can preserve the value of his portfolio from the eroding effect of inflation" , says G Suresh, Partner, VBSK and Associates , a financial consultant in Kochi. He says even the capital market and gold could not give such returns to investors.
The rental market in Kochi is also growing. The lack of sufficient accommodation in the city has caused substantial increase in rentals in the city. The major reason is that though the city is expanding at a fast pace, there are not that many homes available here on rent to meet the demand. "If you take a bank loan to buy a flat in Kochi, the rental amount will help you to pay back a major portion of the monthly installment of your bank loan," says Padmakumar, an executive in a major private sector bank in Kochi.
If we compare the existing property prices in Kochi with other parts of the south India, we could find that prices here are still at lower levels. "This is the best time to invest in property in Kochi
