India's Property market is not over-heated

The Indian real estate market is not over-heated. The economy is witnessing an unprecedented growth across sectors since the last decade. Forget the stupendous growth numbers for a moment and imagine India as the "super-economy" of tomorrow.

The liberalisation programme kick-started in 1991, has catapulted India as one of the most talked-about growth economies in the world.

Sceptics point out caveats to our policy makers on three counts: infrastructure, infrastructure and infrastructure. And this is being built with a visionary zeal, unprecedented perhaps, in the history of modern India.

The government's initiative in accelerating sustainable public-private partnership models for developing roads, power and airports is fuelling global and local investments into the sector.

It is estimated that over $5 billion of investments will flow into the infrastructure and realty sector over the next five years. The government has also taken suitable measures to ensure that the real estate industry evolves to meet global standards.

Changes in the regulatory norms to foster transparency, accountability and service standards are changing the dynamics of the industry. Computerising land records and repealing the Urban Land Ceilings Act in cities such as Mumbai and Delhi will unlock further value into the entire demand-supply equation.

Pre-liberalisation, developers did not have easy access to capital. Today, global investors are investing in companies, which are focused on delivering value to the Indian realty and infrastructure sector.

The government's FDI policy has been extremely favourable to developers and has given the boom a further impetus. FDI-compliant projects have access to capital from institutional investors, banks, PE firms and corporates.

On the cards are path-breaking initiatives such as REMFs and REITs. Land or real estate, which was perceived primarily as a "lumpy" asset will be "liquid" soon. Just as consumers invest in stocks, mutual funds, gold and PF, "real estate" will be an additional choice in their investment options.

And going forward, it is this "liquidity" that will drive the Indian real estate market. As the world moves closer to becoming a global village, capital will flow seamlessly between countries in search of the best investment opportunities.

In 2005, there was an outward flow of around $58 billion into the overseas real estate from four major countries - USA, Germany, Australia and UK.

In a major shift from the earlier period, these investors were investing in not only mature markets but also in emerging markets like China and India. Inflation was contained, primarily due to the linking of India, China, central and eastern Europe to the global economy.

Banks, generally wary of taking huge real estate exposure, are more than willing to lend for real estate.

From an end-user perspective, consumers are raising the benchmarks of this industry. Global travel and lifestyle exposure have increased the aspirations. Consumers are demanding world-class facilities, accessories and "after-sales" from developers.

Easy access to housing loans, rising incomes and nuclear families are also fuelling this boom across all strata of society.  Today, the real estate industry is conceptualising projects based on the demographic and psychographic profiling of potential customers.

Greater customer involvement, global quality projects, transparency and accountability are key areas that will differentiate the real estate industry of tomorrow from the way we perceive it currently.

Positive economic and demographic factors have contributed immensely to the demand and price of real estate. With over 200 million households in India, the demand for real estate is increasing everyday.

The demand for land is not only pronounced for residential projects but also for various other projects, such as IT Parks, SEZs, malls and retail chains. The growth in these sectors have spurred demand not only in Tier I cities, but also in Tier II and Tier III towns.

India as a country will need more than 50 fully developed urban cities with state-of-the-art infrastructure to move to the next level of growth. The potential is unlimited and what we are currently witnessing is just the tip of the iceberg.

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