The real manifestation will come in 2007 for Real estate boom in INDIA

January 01, 2006
NRI press
Gary Singh

Some trends come and go, while others become standard. This same principle applies just as much to Real estate. The slowdown that hit the U.S. economy will persist into 2007 as the once red-hot housing market continues to suffer through a serious correction, analysts say. The median home prices of existing homes stand at $225,000 - 1.7% down from a year earlier. The resident home owners are giving up. It happened first time since 1995 and the magnitude looks like a crash. Real estate median price chart resembles the time delayed chart of 1929 stock market crash.

Indian real estate market is growing at about 30% annually, offering one of the steepest returns in the Asia-Pacific region. The Indian real estate market is expected to grow from the current USD 14 billion to a USD 102 billion in the next 10 years.

'As an NRI, you can't do business in India by telephone and email, you need to talk to some one whom you trust. Now some NRI companies have set up network in India. please do some home work before invest your $s

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• The real estate boom of 2006 is set to multiply itself in 2007 to get India a foreign capital of over Rs. 8000 crore .......ASSOCHAM
• In India and China the real estate can collapse 40 to 70%. in 2007 ..........Sam Adelton. India Daily

Real estate boom in india will continue in 2007: ASSOCHAM

According to ASSOCHAM, overseas real estate giants likely to bring in a collective capital of US$ 8 bn investments in India

The real estate boom of 2006 is set to multiply itself in 2007 to get India a foreign capital of over Rs. 8000 crore with leading international investors establishing their presence in its richly rewarding real estate development, providing new employment opportunities for over 2 lakh skilled and unskilled workforce, according to estimates made by The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

Overseas real estate giants such as Royal Indian Raj International, Blackstone Group, Goldman Sachs, Emmar Properties, Pegasus Realty, Citigroup Property Investors, Lee Kim Tah Holdings, Salim group, Morgan Stanley and GE Commercial Finance are likely to bring in a collective capital of US $ 80 billion investments to suitably reward them benefits with India’s opening up of its real estate sector to 100% FDIs.

The ASSOCHAM estimates point out that the US-headquartered investment bank Morgan Stanley already forayed into India's booming real estate sector in March 2006 through its real estate investment arm Morgan Stanley Real Estate investing Rs 300 crore (around $68 million) in Mantri Developers Pvt Ltd, a Bangalore-based real estate developer. Morgan Stanley plans to invest more than $1 billion over the next 4-5 years in the Indian real estate sector.

It also points out that Tishman Speyer's tied up with ICICI Bank to invest $1 billion in the country, while Kotak India Real Estate Fund closed its domestic tranche raising $100 million and this trend will continue to lure many more such investors to retain their interests in domestic real estate business.

The Chamber is of the view that as the government allowed 100 per cent Foreign Direct Investment in real estate, an efficient regulatory framework, simpler tax regime and proper regulations are imperative to boost public-private participation and bring in managerial and technical expertise.

According to findings, the biggest US pension fund, CalPERS, hedge fund Farallon Capital Management, US-based developer Tishman Speyer and NRI fund Trikona Capital too have drawn plans to invest in the booming market. Domestic funds including Kotak Realty Fund, HDFC India Real Estate Fund, Pantaloon Retail's Kshitij Real Estate Fund and UTI Venture Fund were also very active.

The two most active investor segments were High Net Worth Individuals (HNIs) and Financial Institutions. Both these segments were particularly active in commercial real estate. With the rules related to investing and repatriation relaxed to a large extent, an estimated 25 million Non Resident Indians (NRIs) living across 125 countries are investing in immovable property in India. NRIs have been keener in investing in residential properties than commercial Properties.

Strong economic growth, rising income levels, growing middle class, increasing urbanization and improving transparency brought resurgence for the Indian real estate sector in 2006 which will continue to grow further in 2007 with easy availability of financing facilities growing still further.

The Chamber forecasts that real estate growth will go from $12 billion in 2005 to $90 billion by 2015. Greater integration with the global economy and the increase of domestic as well as foreign investments are encouraging demand for real estate. Despite ill found doubts of a bubble, foreign investors are lining up.

While HDFC introduced real estate mutual fund in its sector specific mutual funds, Industry major Parasvnath Developers Limited came up with Initial Public Offer, DLF decided to bring IPO, Global big names such as Morgan Stanley, Lehman Brothers, HSBC and ABN Amro queued up to pick up stake in local realty firms, Year 2006 truly belonged to Realty.

Though criticized as an opportunity for the builders to grab land, Special Economic Zones offered tremendous opportunity for the Industry both for the commercial sector as well as for the industrial and logistics sector. The government finalized the guidelines for the development of social infrastructure, besides setting criteria for developers. The Reserve Bank of India directed commercial banks to treat exposure to Special Economic Zones as lending to commercial real estate sector. “However, there is case for relaxing the guidelines for the sector”, stated ASSOCHAM President, Mr. Anil K Agarwal.

According to Chamber, emergence of IT and ITES sector and organized retail are the major growth drivers. Growth of IT and ITES created vast demand of office space and appearance of malls all over the country tendered huge scope for land development. Analysts peg the total demand for commercial office real estate in Bangalore, Chennai, Delhi-NCR, Mumbai, Pune, Hyderabad and Kolkata alone to be over 25 million sq ft in 2006.

Booming hospitality with the booming economy brought additional reasons to cheer for the Real Estate developers. Tier II cities such as Nagpur, Ahmedabad, Vadodara, Indore, Raipur, Jaipur, Agra, Siliguri and Kochi emerged as investment destinations in the current real estate scenario. The development of suburbs such as Navi Mumbai also generated immense opportunities.

“With stock market being highly volatile, investment in real estate has begun to look attractive and competitive with typical yields being 20-25 per cent per annum. Real estate will offer a good investment alternative to stocks and bonds over the coming years” added the President.

Markets also welcomed real estate with a cheer. The public issues of Parsvnath Developers and Lanco Infratech was oversubscribed by more than 50 times and 10 times, respectively. Parsvnath Developers Ltd. made a debut at 80 per cent premium to the offer price of Rs 300 on the BSE. The stock opened at Rs 540 on the BSE. The initial public offering of Sobha Developers Ltd was also subscribed 108.51 times on the bourses.

Eredene, a private equity fund raised $ 100 million earlier this year followed by another private equity fund Trinity Capital, which raised $500 million through AIM. Ansal Properties & Infrastructure Ltd, garnered Rs 681.75 crore through QIP, the overall book was subscribed by over two times. IVRCL Infrastructures & Projects Ltd raised Rs. 555 crore in a private placement via QIP route. The issue was oversubscribed multiple times. IVRCL is the first infrastructure construction company to raise equity through the QIP route

The great world depression led by China and India has started - the real manifestation will come in 2007

Sam Adelton
Sep. 25, 2006

43% 0f the Chinese economy is based on manufacturing booming on the basis of easy Chinese money policies.

The only commodity whose price is regulated by the Government is crude oil. Chinese manifacturing companies are bleeding with 100 to 200% rise in their input materials on one side and lack of pricing power of the Western companies.

The explicit commodity inflation and severe outward pricing deflation of thge customers are the ingredients for total collapse of Asian economies.

India is another story. The whole country is based on boom from imported jobs. When in 2007 worldwide depression starts manifesting its ugly tooth, Indian ellite middle class will suffer the most.

US and Western economies look bad. But Asian economies look much worse. The chinese and Indian unemployment can hit as high as 30%. Farmers who let their children go and work for IT bodyshoppers and call centers (India) and factories and mines (China) will rush them back to fields.

In India and China the real estate can collapse 40 to 70%. Worst hit will Indian major cities. Chinese Government will try to hold the economy through artificial liquidity but soon everything fall flat on their face.