New Delhi: Foreign direct investment in the country’s real estate sector is likely to rise to a whopping $25 billion in the next 10 years from the present $4 billion, even as the industry faces a slowdown in the short term due to rising interest rates, an Assocham study said.
“Despite real estate market confronting a temporary depression with real interest rates hovering between 12-16%, FDI in real estate market would increase by about $21 billion to touch $25 billion in the next 10 years,” industry chamber Assocham said in its latest study.
At present, the domestic real estate market is estimated at $15 billion, of which FDI contributions are about $4 billion, it pointed out.
“In future, higher interest rates would subside with India scaling a GDP growth of over 10% for at least a decade, and create a huge space for overseas investors in its real estate sector,” Assocham President Sajjan Jindal said.
Real estate in India would be a hot market and investors are constantly looking at India for parking their surpluses as returns on such investments would be the highest in the near future, the study said.
The sector would grow larger as the IT sector alone is expected to require about 200 million sq ft of space across the major and large townships, it added.
It is also estimated that in India’s residential sector, housing shortage is around 20 million units. About 100 million sq ft is likely to be added by end of 2008 from over 300 mall projects.
Currently, foreign developers could undertake construction activities in a minimum space of 50,000 sq ft, as a result of which the FDIs component in domestic real estate market has been restricted to less than $4 billion, Jindal said.
The chamber is expecting that the ceiling of 50,000 sq ft would be enhanced to a minimum 2 lakh sq ft in next 10 years in a gradual manner and result for much higher foreign capitals absorptions.