Smaller cities to fuel real estate growth

Tuesday, 18 September 2007, 07:00 Hrs
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New Delhi: With the Indian economy booming, smaller cities are going to drive realty growth, says a FICCI-Ernst & Young report.

Improving infrastructure, urban governance, rapid influx of knowledge industry professionals, improving quality of life and rising prosperity would lead to the development of smaller cities such as Surat, Chandigarh and Nagpur, according to the report brought out jointly by the Federation of Indian Chambers of Commerce and Industry (FICCI) and Ernst & Young.

According to the report, cities that have tremendous growth potential are Vadodara, Visakhapatnam, Jaipur, Thiruvananthapuram, Kochi, Nashik, Indore and Ludhiana.

"The real estate sector is witnessing exponential growth and attracting immense interest from developers, consumers and investors in India and abroad," said Ganesh Raj, partner and national leader (real estate practice), Ernst & Young.

Demand for commercial office space, unexplored resources and low labour cost is driving investors towards smaller cities and towns, the report noted.

It is estimated that Indian developers have been able to raise upwards of $4 billion via the capital market in the past two years. They might raise a further $4.7 billion in the coming year. As a result, investment opportunities exist in many different product types and regions across the country.

"Institutionalisation and evolution of Indian real estate will get a fillip from large-scale investment in infrastructure planned by the government over the next 4-5 years," said Amit Mitra, secretary general, FICCI.

"India's Planning Commission has estimated that investment in infrastructure - defined broadly to include road, rail, air and water transport, electricity, telecommunications, water supply and irrigation - would need to increase from 4.6 percent of GDP to between 7-8 percent during the Eleventh Plan period (2007-2012), which would entail an outlay of almost $320 billion over the plan period," Mitra added.

The report highlighted that cities such as New Delhi, Mumbai, Bangalore, Hyderabad, Kolkata and Chennai have amply showcased that the real estate sector has grown very fast and that the window of opportunity is limited in terms of time and money.
Source: IANS
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