Indian realty industry to almost double to $140B by FY17

The Indian real estate industry is expected to grow to approximately $140 billion by FY17, said a research report on real estate released by advisory firm Ernst $ Young and industry body FICCI. The report said, according to industry estimates, the size of the Indian real estate market was close to $78.5 billion in FY13.

Niranjan Hiranandani, chairman of FICCI’s real estate committee and managing director, Hiranandani Constructions Pvt. Ltd, said, “Mumbai urgently needs change of infrastructure with the support of government and also reforms in taxation, with 34 per cent of cost of an affordable house going out as taxes.”

The realty industry, which had been growing at around 8 per cent during 2009-11, saw a 6.5 per cent deceleration in 2012-13 primarily due to the sluggish domestic growth, rising input costs and negative global economic sentiments.

The sector’s major growth driver has been the pumping of capital through foreign direct investment (FDI) route. Between April 2011and July 2013, the sector attracted FDI of close to Rs 100,000 crore. The report, however, said the volume of FDI into the sector has been declining.

Even for private equity funding, the sector saw its peak in 2007 when $6.8 billion came in. In 2012, the industry attracted $1.7 billion from limited partners in realty projects across the country, as per the report.

For the first half of the current calendar year, the realty industry has seen investment of close to $1.4 billion and industry experts indicate that this year would be one of the better years compared to last four years.

With negligible sales and developers’ reluctance to bring down prices of properties, even banks’ credit exposure to the real estate and housing sector declined from 10 per cent as a percentage of gross bank credit in FY10 to 7.9 per cent in FY13. While bank construction finance continues to be the cheapest source of funding, another instrument which has caught attention of developers is raising money through non-convertible debentures (NCDs). Reflecting this trend, NCDs worth $4.2 billion were issued in 2012 compared with $3.8 billion in 2011.

The realty industry recently witnessed a few big-ticked buyout transactions in commercial office space by private equity funds. Over the last three years, it has attracted investment of $1.14 billion in commercial office space portfolio development.

(Edited by Joby Puthuparampil Johnson)

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