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Real estate developers forsee high sector growth: report

Real estate developers forsee high sector growth: report
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First Published: Wed, Sep 03 2008. 04 55 PM IST
Updated: Wed, Sep 03 2008. 04 55 PM IST
New Delhi: A latest Ernst & Young survey, titled Realty Pulse, of real estate developers points out that 62% respondents on being asked about the “the current phase of Indian real estate” foresee the Indian real estate sector embarking upon high growth trajectory in the long-term, despite the momentary slowdown witnessed over last 12 months. The qualitative survey, conducted by Ernst & Young across six prominent cities comprising NCR, Mumbai, Pune, Hyderabad, Chennai, Kolkata and Bangalore, forms a part of the FICCI–Ernst & Young Real Estate Report.
The survey highlights a vast section of respondents who demonstrated their keenness in foraying into the affordable housing, subject to certain enabling factors like government support, basic infrastructure support and low cost of land. Almost 35% of developers define capital value of affordable housing in the range of Rs1-1.5 million, followed by another 35% developers defining value in the range of Rs1.5-2.5 million. 70% respondents indicated an inclination to expand beyond the ‘obvious eight’ cities (Delhi, Mumbai, Chennai, Hyderabad, Bangalore, Kolkata, Pune and Ahmedabad). They opine that this diversification is an effective hedge against market fluctuations in the obvious eight cities.
Respondents across most cities are feeling the pinch of rising manpower and material costs; however the availability of quality manpower is topmost concern for the developers. Respondents were uniform in their opinion that delays in approval and clearances are the biggest regulatory challenge for them. 80% developers indicated the need for an apex regulatory body for the real estate sector. The need to have an apex organization to facilitate a single-window clearance and ensure active representation of developers’ interest is being strongly felt. The report emphasized that in the near future, the formation of products that originate from the convergence of Infrastructure, Real estate and Government (IRG) could possibly be the biggest and most stable growth models in coming years.
The report underscores tremendous synergies originating in Healthcare infrastructure, Logistics & warehousing and affordable housing asset classes. These formats hold significant growth potential in the Indian real estate sector. The Healthcare infrastructure market continued to showcase a strong growth in the year 2007-08 and the sector has created collaborative opportunities for real-estate players. Hospital buildings generate longer leases and low turnover; hence this is increasingly turning out to be a more stable asset class. In line with the above trend, established healthcare clusters are projected to show real-estate creation till 2011-12. While the traditional formats would continue dominance, specialty products like health cities (integrated townships focused on health) and specialty clinics (targeted at the urban upper and middle class) would emerge. Tier II and III cities remain a part of the expansion plans of almost all healthcare corporates. The immediate driver here would be the five-year tax break as per the latest federal budget .This would encourage the creation of 100-150 bedded hospitals across the country.
Affordable housing, recently, has attracted attention from prominent developers and private equity players primarily with the investment rationale of early mover advantage, volume-driven profitability, priority sector status accorded by government, subsidized land costs. The key success factors for affordable housing as an asset class would be Infrastructure support, use of alternate materials and low cost techniques and mechanisms, subsidized land costs, faster approvals from the government.
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First Published: Wed, Sep 03 2008. 04 55 PM IST