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FDI in real estate to go up by US$21billion: ASSOCHAM

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The Associated Chambers of Commerce and Industry of India (ASSOCHAM) has projected that foreign direct investment (FDI) in the country’s real estate market will increase by about US$21 billion to touch US$25 billion by the next 10 years.

Releasing the assessment on FDI contribution to the domestic real estate market, Sajjan Jindal, president, ASSOCHAM, said that in future, higher interest rates will subside and India is likely to scale a GDP growth of over 10 per cent for at least a decade, creating huge space for overseas investors in the real estate sector.

According to the analysis, the domestic real estate market is presently estimated to be around US$15 billion, in which the FDI contribution is calculated to be around less than US$4 billion. The bank credit to this sector by the end of 2007-08 has been estimated at over Rs 3,500 billion, which will multiple substantially in the coming years in view of the growth that the sector is expected to register.

Citing reasons for the growth of real estate sector, ASSOCHAM said that with the increase in purchasing power and exposure to organised retail formats, retail projects have been mushrooming in smaller towns and cities. The retail market is likely to grow at around 35 per cent, which will again create scope for real estate developers.

As per estimates, nearly 30 million square feet of organised retail space is currently available. Another 100 million square feet is likely to be added by end of 2008. Out of these, 20 million square feet is slated to come up in Delhi and Mumbai.

ASSOCHAM further held that real estate business in India will grow bigger as the IT sector alone is expected to require about 200 million square feet of space. It is also estimated that in India’s residential sector, the housing shortage is around 20 million units, of which nearly seven million units are estimated to be in urban India.

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