India Real Estate 2020

This article has been contributed by Mr. Rohit Malhotra, CEO, Realtech. Realtech (www.realtechgroup.in) is a leading North India based Real Estate developer promoted by a team of young, dynamic entrpreneurs. Since founding the company just over 3 years ago, Realtech has undertaken projects across office, retail, residential and hospitality verticals.

India’s progress over the next 20 years will be intimately linked to events within the region and around the world. The World Bank estimates that India will become the third or fourth largest economy in the world by 2020, with the GDP per capita to double by 2020. Thus, India is viewed as a key element in the "Chindia" and the "BRIC" economies, which are seen as key emerging markets playing an expanding role in the global economies. The scale of development might end up a lot larger in India than even China. India is a two-speed market with small medium and large players. Since India's political system is more defined, investor appetite in India is longer term -- 6-10 years.
India’s urban population is expected to rise to around 40 per cent by 2020. The face of urban poverty in 2020 is unlikely to be very different from what it is today, given that the largest indicator of poverty in cities is not so much lack of income, as lack of decent housing and civic amenities. While improving infrastructure in existing cities/towns is not to be ignored, in the next two decades there will be need to encourage growth of new townships and take up regional urban development plans where growth corridors can be identified and public-private partnerships promoted for investment in alternative nodes of development. Such centres will have considerable impact in improving the urban profile of the country.

The Indian real estate sector has witnessed an equivalent growth, driven by the booming economy, favorable demographics and liberalized foreign direct investment (FDI) regime. Growing at a scorching 30 per cent p.a., it has emerged as one of the most appealing investment sectors for domestic as well as foreign investors. India has 10 of the 30 fastest-growing urban areas in the world. Based on current trends, a massive 700 million people (roughly equivalent to the current population of Europe) will move to cities by 2050. This will have significant implications for demand for urban infrastructure, real estate, and services.

This is no fast burn as a 700% increase is forecast in the Indian property market. India is already achieving GDP of US $1.50 trillion. Currently, the overall property market in India is estimated to be worth about $12 billion. Policies to enhance financial sector growth, openness to trade, rural-urban migration, capital formation, education, and environment — together labelled the `FORCE' factors — will be critical to sustaining growth.

There is now an air of certainty of significant inflow of funds in infrastructure, increase in production capacity and creation of new employment opportunities but how to make this a reality is the enormity of the challenge before us.