India Property Market Growth
By Sara Seddon Kilbinger
From The Wall Street Journal Online
The housing markets in the U.S. and the United Kingdom have been slowing, but in India, large-scale residential projects are only getting bigger.
India’s massive urban migration — it is estimated that 220 million people there will migrate to cities in the next decade — has triggered a slew of large-scale residential developments. The rural exodus is largely being driven by workers leaving India’s agricultural sector to take up more-lucrative employment in the rapidly expanding service and manufacturing industries.
Forecasters estimate that India has a shortage of about 20 million housing units — and counting — intensifying the need for more dwellings. The government has created a number of initiatives to address the shortage, including the creation of “townships,” or satellite towns located close to big cities such as Bangalore, where overcrowding is most severe.
Township projects are taking shape in various parts of India, but one of the biggest undertakings — the first phase of which is expected to provide homes for around 750,000 people when completed — has been drawn up by the Bangalore Metropolitan Region Development Authority, formed by the state government of Karnataka to oversee planning and development in the Bangalore area. The ambitious development will create five integrated townships, which will be developed through a partnership with private developers over a roughly 60,000-acre site.
This month, Indian developer DLF Group & Limitless, a development subsidiary of Dubai World, the business and investment-holding arm of the Dubai government, were tapped by the authority to develop the first of the five townships, Bidadi. Together, the two companies will invest $12 billion in the project, a 9,884-acre development located 22 miles southwest of Bangalore.
“Satellite towns are essential as the services and manufacturing sectors grow and more people move from the countryside to cities,” says Anurag Mathur, deputy managing director of real-estate advisory firm Cushman & Wakefield Inc. in India. “The infrastructure is under enormous pressure in towns such as Bangalore, so the aim of projects such as Bidadi is to decongest city centers.”
Bangalore is on course to follow the example of some other major Indian cities to build entire suburbs in huge chunks to meet the hunger for quality housing and office space for one of the world’s fastest-growing middle classes. Thanks to changes in the law that encourages foreign investments in Indian development, many of those townships are joint partnerships between established Indian developers and Western real-estate investors, including U.S.-based Tishman Speyer Properties LP, Marathon Asset ManagEment and Walton Street Capital LLC.
In addition to dwellings, Bidadi Township will have a retail, office and recreational component, according to Imad Benharouga, head of corporate strategy at Limitless in Dubai. Construction is expected to start in the first half of next year and take five years to complete.
Plans for Bidadi also include the largest technology hub in the country and one of the largest in the world, says Karun Varma, head of transaction services in Bangalore at real-estate advisory firm Jones Lang LaSalle Inc. The aim: for workers to both work and live in the vicinity, cutting down on commuting time. Schools, parks and medical facilities are also going to be developed.
“It is a challenge to build a large township like this in such a short time, which is why I think the government chose a big developer to do it. However, you need aggressive and challenging timelines to make projects like this happen,” says Mr. Varma, who isn’t advising on the project.
This month, Indian conglomerate Sigrun Group started construction on a 200-acre township on the northern outskirts of Mumbai. Sigrun Kingdom, as it is known, will consist of around 7,000 homes, as well as shops, offices, medical facilities and schools, according to Sheetel Chantel Halai, head of South Asia at real-estate advisory firm Savills in London, who is advising on the project.
1 comment
I am amazed at the way Indian real estate market is rising. It has many similarities to the Indian stock market but minus the volatility.I had earlier mentioned how it has proved me wrong. Since then, I have stopped making any predictions on Indian real estate market. Although, US has shown clear signs of things slowing down in last year or so, India is carrying on with same breakneck pace that it picked up sometime at the start of the decade.Although rate of growth in metros is slowed down a bit (as the rates have reached such astronomical levels that even higher middle class Indians are finding it tough to buy), all other cities and smaller towns are growing at around 50% year on year. In some places like Pune and Mysore, it is touching 100%.In India, the reforms programme has been going on for past one and a half decade and in the process it has led to a phenomenal growth in several sectors like IT, ITES, Telecom, etc. All economic indicators are pointing to the India Property market as the next growth story.Facts speak for themselves. The growth in the India Property sector is all round with hardly any element of the value chain being out of this “being on fire” trend. The real estate sector is perhaps the most recent one to join the coveted list of sectors which have taken off in a major way and all slated to hit the stratosphere in the years ahead. It indeed has the capacity to display “sky is the limit” syndrome and this is what it has begun to display in India. Be it housing construction, malls, state-of-the-art office complexes, mid-sized retail stores - the rapid fire development can be seen all around especially in locations which have come up as commercial hubs. New concepts in construction like specialty malls or weekend property have barged in much sooner than expected and they are adding new dynamism to the Indian Property sector on a consistent basis.
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