News: Retail, commercial space demand to lead real estate growth

(BS 01/01/2007) Mumbai - Real estate development in India, focused on the three primary segments of demand for residential, commercial and retail uses, was expected to report strong and sustained growth at least till 2010.

According to reports released by the global real estate consulting group Knight Frank, the real estate segment of India was growing at 30 per cent per annum overall. In the retail space, Knight Frank ranked India fifth in the list of 30 emerging retail markets and predicted 20 per cent growth rate for the organised retail segment by financial year 2012 (FY10).

It indicated that the retail industry will witness investment over Rs 100 billion upto FY10.

Presently available mall space of about 30 million square feet (mn sqft) in India was expected to increase to 100 mn sqft by FY10.

Out of this total mall space to be developed, around 75 per cent will be developed in cities like Mumbai, Pune, Bangalore, Hyderabad and NCR cities.

The rest will be in tier-2 and tier-3 cities like Nagpur, Ahmedabad, Chandigarh and Ludhiana.

The number of malls to be developed in the country over next three years will be above 300. According to a report on real estate trends by Merrill Lynch, the number of malls in the five cities Mumbai, Bangalore, New Delhi, Hyderabad and Pune itself was expected to reach to about 250 by FY10.

Recently, Reliance Industries has announced its retail venture with pan-India footprint covering 1500 cities and towns involving investment outlay of Rs 25,000 crore.

In the commercial space, business opportunity is led by the unprecedented outsourcing activity in the country driven by the information technology (IT) or IT-enabled services.

Many global companies are setting up their back offices and outsourcing their work to India.

As the trend gathered pace, commercial space requirement would expand to 100 mn sqft by FY08 according to research done by Knight Frank.

Out of this, almost 75 to 80 per cent will be contributed by IT/ITES industry.

Industry feedback and business associations indicate that a large number of of companies have evinced interest in setting up special economic zones (SEZs).

Growth in this sector was being fuelled by incentives from Gol and was attracting foreign investment.

For example, the Dubai-based real estate major Emmar group was setting up SEZs at Haryana at an estimated investment $1.5 billion.

Investment in the residential segment is estimated to be above Rs 9,000 billion over next five years.

Number of households estimated to be built was above 5 millions over next five years.

All this real estate construction was expected to create a surge in demand for the raw materials of growth and the greatest growth was likely to be in demand for cement.

The cement consumption projections by National Council of Applied Economic Research (NCAER), on a conservative basis, have placed the cement demand at 225 mn tonne by the FY11.

If the government went ahead with infrastructure projects in a big way as planned, consumption was pegged to be at the much higher level of 291 mn tonne.