Understanding India real estate
In a recent Global Emerging Markets Survey, India was identified as the most sought-after market by retailers worldwide. This is just the tip of the iceberg, as India seems to be well in the path of a much talked about real estate revolution. Stakes for private investors, equity funds, institutional investors, banks and major international real estate players could not be any higher. However, India presents its own unique challenges which cannot be underestimated.
One of the major investment growth sectors is India’s dynamic hospitality industry. A quick snap-shot:
Consistent growth in tourist and business travelers to India. Based on the World Travel and Tourism Council report, India is ranked 5th among the world’s tourist hot spots - growing at 8.8% annually.
Government is expected to spend some 150 billion US dollars in tourism related infrastructure over the next five years.
Research on Indian hospitality shows some 67,000 new hotel rooms are to be added between 2007-2011 in major markets alone. That includes Delhi, Mumbai, Bangalore, Goa, Chennai, Hyderabad, and Kolkata. Of this, more than 1/3rd is expected in the mid-market segment, approx. 28% in the first class segment, and some 20% in the luxury segment. Despite this several fold increase in new hotel supply, it is expected that total supply of hotels rooms by 2015 will still be lagging behind projected demand.
Occupancy rates for hotels in India are among the highest in the world, with Average room rates doubling in the four year period ending 2007. Average room rates for key Indian cities like Delhi and Mumbai are already approaching the levels of mature markets such as Singapore and Hong Kong.
The growth prospect in other areas of the real estate industry looks equally promising. Industry estimates indicate some 1.5 to 1.8 billion square metres of residential, commercial, and retail real estate are to be developed by 2010, of which around 1.4 billion square meters will be in the residential sector alone.
It is no secret that the key driver of growth in Indian real estate has been its almost double digit growth in GDP over the past decade. This has led to a rapidly increasing middle class and wealthy population. Buoyed by robust returns from equities and real estate investments, high foreign inflows and a booming economy, India is now the world’s second –fastest producer of millionaires, marginally behind Singapore. It is estimated that India is home to more than 120,000 dollar millionaires. The demand for high-end and luxury real estate is almost entirely domestic, which is very different from other emerging residential markets such as Phuket and Bali where the demand is international.
One of the major investment growth sectors is India’s dynamic hospitality industry. A quick snap-shot:
Consistent growth in tourist and business travelers to India. Based on the World Travel and Tourism Council report, India is ranked 5th among the world’s tourist hot spots - growing at 8.8% annually.
Government is expected to spend some 150 billion US dollars in tourism related infrastructure over the next five years.
Research on Indian hospitality shows some 67,000 new hotel rooms are to be added between 2007-2011 in major markets alone. That includes Delhi, Mumbai, Bangalore, Goa, Chennai, Hyderabad, and Kolkata. Of this, more than 1/3rd is expected in the mid-market segment, approx. 28% in the first class segment, and some 20% in the luxury segment. Despite this several fold increase in new hotel supply, it is expected that total supply of hotels rooms by 2015 will still be lagging behind projected demand.
Occupancy rates for hotels in India are among the highest in the world, with Average room rates doubling in the four year period ending 2007. Average room rates for key Indian cities like Delhi and Mumbai are already approaching the levels of mature markets such as Singapore and Hong Kong.
The growth prospect in other areas of the real estate industry looks equally promising. Industry estimates indicate some 1.5 to 1.8 billion square metres of residential, commercial, and retail real estate are to be developed by 2010, of which around 1.4 billion square meters will be in the residential sector alone.
It is no secret that the key driver of growth in Indian real estate has been its almost double digit growth in GDP over the past decade. This has led to a rapidly increasing middle class and wealthy population. Buoyed by robust returns from equities and real estate investments, high foreign inflows and a booming economy, India is now the world’s second –fastest producer of millionaires, marginally behind Singapore. It is estimated that India is home to more than 120,000 dollar millionaires. The demand for high-end and luxury real estate is almost entirely domestic, which is very different from other emerging residential markets such as Phuket and Bali where the demand is international.