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Business News/ Companies / Real estate boom to continue in smaller cities in India, China: Report
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Real estate boom to continue in smaller cities in India, China: Report

Real estate boom to continue in smaller cities in India, China: Report

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PTI

New Delhi: World’s two fastest growing economies China and India will continue to witness boom in the real estate segments in smaller cities as both countries are expected to record strong growth in residential demand in the coming years, says a report.

Further, investments volume in the two neighbouring nations is projected to go up in the next few years.

According to a report prepared by the research group of Germany’s Deutsche Bank, the long-term growth prospects for both countries “remain very good."

“All commercial real estate segments continue to boom Tier-II cities will gain particularly... Investment volumes are still very low. This will change rapidly in the next few years," the report titled ‘Real Estate Investments in China and India: Big returns in big countries?´ said.

Although, strong residential demand growth is expected, the bank noted that “dangerous exaggerations can occur."

An important growth driver for the real estate market would be the increasing urban population in both countries. India and China are projected to witness increased number of urban population especially by the end of 2050. From just about 30%, India’s urban population is anticipated to touch 55% by 2050.

According to the report, another growth driver for both countries would be the rising population of working age. In the near term, that population is expected to touch a peak of over 70% in China.

The working age population in India is projected to be on the upward curve in the coming years and would be above 65% by 2050.

However, house prices are skyrocketing in recent times, with the average house price growth reaching nearly 16% in Mumbai, in India.

In the Chinese cities of Beijing and Shanghai, the growth is little less at 10% and 13%, respectively.

The report noted that even though it is easier to get “good data" on Chinese and Indian real estate markets, “the quality and stability of the data cannot be compared to the US or European standards."

Deutsche Bank said even though India and China are facing shortage of highly-skilled employees, such a scenario implies strong influence in the future.

Estimates show that both nations would record strong rise in average education of their population, which in turn would foster sustainable long term growth.

Globalisation has helped the emerging economic giants to post double digit growth in recent years. Both countries have immensely benefited from increased trade and capital imports.

“Both China and India benefit from globalisation (more trade, more capital imports and significant knowledge transfers) which has been pushing up growth rates ," the report added.

Pointing out that “economic expansion" would continue in the two neighbouring nations, the Deutsche Bank said that sustaining “double digit" growth rates is unlikely.

Foreign Direct Investment (FDI) flows into India was about $8 billion in 2007 while it stood at $74 billion for China during the same period.

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Published: 29 Jun 2008, 02:13 PM IST
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