India to attract investments from global realty firms: study

New Delhi, Sep 17 (UNI) Indian real estate industry will emerge as a favourable investment destination for global realty and investment firms, a Ernst and Young and FICCI study said here.

According to 'Indian Real Estate' study, enlargement of project size, shift of focus from metros to small cities, consolidation of large business groups, switch between land transaction and development trasaction, and emergence of strong real estate capital market will drive the change in the sector in next 3-5 years.

In the commercial office segment, the demand for office space is set to expand significantly in the next few years. The demand will primarily be driven by the IT and ITeS industry, which according to the Ernst and Young's estimates would require an additional office space of more than 36.7 crore sq ft up to the year 2012-13.

Several upcoming and proposed Special Economic Zones (SEZs) are expected to provide the next generation impetus to the commercial office space development in the country.

In this, large number of corporates, in order to take benefits fiscal sops and India's manufacturing capabilities, will set up SEZs in India, the study said.

Further, India's improving image as a regional corporate base for Asian markets and strong growth in emerging sectors such as financial services, pharmaceuticals, telecommunications, and biotechnology will also boost demand and broaden the occupier base. With rising realty prices, a large number of Public Sector Undertakings (PSUs), which own prime real estate in metropolitan and other major cities, are now looking to commercially exploit such land parcels.

The study expected that this new trend will provide for a significant amount of land supply for commercial development at prime locations.

It also pointed out some potential challenges, which the developers may have to face in this segment. Firstly, any unforeseen downturn in the performance of IT/ITeS industry will have a significant impact on the vacancy levels of the upcoming stock commercial office space in the country.

Also, if the migration of existing units to SEZs is allowed, the market will witness supply of a huge stock of unutilised office space, which will lead to substantial crash in rental and capital values in the segment.

In the residential segment, Asian Development Bank has estimated a shortage of nine million units which will escalate to around 2.2 crore units by 2007-08 and the same will rise up to one crore units by 2030.

In the hospitality segment, by 2010, the number of rooms will be 29 lakh and, by 2020, it will rise to 66 lakh units. Presently, there are an estimated 12 lakh hotel rooms in the country, of which star hotels account for a mere seven per cent (about 80,000 rooms).

The study identified the upcoming Commonwealth Games 2010, booming tourism sector backed by low cost airlines and cheap health care services in the county as the key pusher of growth in this segment.

The commercial retail and entertainment segment are also expected to see a rise in the real estate investments. Industry estimates suggest that by the end of 2008, the eight largest Indian cities will experience a supply of about 6.6 crore sq ft of new retail space through more than 200 proposed retail centres.

In the next seven largest cities, around 38 centers with an estimated 1.3 crore sq ft of retail space is also being planned by the end of 2008.

UNI KR PKS DKS BS1635