India Infoline releases tome on India's Real Estate Sector

India Infoline Ltd has announced that the Company has released a tome on India’s Real Estate sector covering Tier I, II and III cities.

According to the research, the Indian real estate market size is estimated at US$ 12bn and limited institutional participation does not truly reflect the future potential of the market. The industry is estimated to grow at a 33% CAGR to touch US$ 50bn by 2010. Strong economic growth, favourable demographic changes, fiscal benefits, lower interest rates and improving institutional framework have helped the industry grow rapidly over the last 2-3 years. The industry is estimated to have grown at 30% annually in 2005. Government has also shown keen interest in developing the sector by relaxing FDI norms, allowing market participants to access foreign capital.

The evaluation also reflects that, since 2004 most companies have reported astronomical growth in profitability on the back of rising property prices. Management interaction has induced the analyst to think that the growth is set to continue in the future as well. Companies have lined up projects, which are more than 2-3 times the size they have completed in the past 5 years. While the macro theme supports this exuberance, there are certain concerns, which cannot be overlooked. The following risks are highlighted in the demand led real estate growth story.

1. Economic slowdown and drop in property prices
2. Interest rate risk
3. Roll back of income tax benefits
4. SEZ framework not yet completely developed
5. Drop in the wealth effect

Speaking to the media, Mr Sachin Neema, Head of Research, of the Company said, "Indian real estate market is growing at a rapid pace on the back of improved real estate prices and sustained demand from end users as well as investors. High economic growth, favorable demographic and socio-economic factors have led to a sharp rise in demand for housing and commercial real estate. Unlike most markets, multiple themes are playing out at the same time in India. We estimate India to experience a demand supply gap of 17.9mn housing units by 2010. This apart, commercial real estate demand is expected to be around 350mn sq ft out of which IT/ITES and organized retailing sector should contribute around 300mn sq ft. Sensing this huge opportunity, the market has seen increased interest following the FDI relaxation and government’s SEZ policy. Cities are expected to form hubs of development, around which economic activity will prosper."

Source : Equity Bulls

Keywords