Shortage of quality hits real estate deals

A significant number of domestic and global firms are now chasing Indian real estate, but the activity is constrained by limited availability of high quality projects.

Singapore developers and US opportunity funds, which have dominated the cross-border market so far, are focussing on IT parks and residential schemes in India, reveals international property consultancy company Jones Lang LaSalle's report 'India "" A Real Estate Investment Future'.

"They are now being joined by other Asian and European investors, who are presently exploring opportunities. The market will see more investments from domestic and cross-border real estate funds," the report added.

For these cross-border investors, suburban offices and the residential sector offer the best opportunities over the short term, and over the medium-term opportunities in the retail sector are expected to grow.

"Suburban office occupiers' demand is supported by a 30 per cent plus annual growth forecast for the IT/ITeS sectors. A strong growth in emerging sectors like telecom, financial services, pharmaceuticals and biotechnology will also boost demand and broaden the occupier base. Campus developments are expanding rapidly across the country, and sale and leasing opportunities are emerging," report said.

The favourable residential demographics, urbanisation, rising incomes and easier access to finance are fuelling the strong demand for residential accommodation.

"India has an acute shortage of housing, with analysts assessing a shortfall in urban areas of over 20 million units," report said. In the retail space, India has a huge potential for retail expansion, and the sector is growing around 10 per cent a year. Organised retailing presently accounts for only 2-3 per cent of the market, but the sector is undergoing structural change, with leading domestic retailers seeing a rapid growth, format migration and consolidation.

"Construction of shopping centres is high, but most are of poor quality, strata titled (multiple ownership through common society and vacancy risk is high. There is a huge untapped potential for high quality shopping mall development," the report said.

"Liberalisation of FDI norms will create opportunities for cross-border investors and mall developers/operators," report added.