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India Real Estate Report Q1 2011
Business Monitor International, Nov 2010, Pages: 67
India Real Estate Report provides industry professionals and strategists, corporate analysts, real estate associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on India's Real Estate industry.
India’s real estate market suffered heavily in the global economic downturn. After the brutal fall in rentals reported for 2009, more companies are now seeking office space on the basis that rents are bottoming out. According to a report released in October 2010 by Cushman & Wakefield, 240mn sq ft of commercial property and about 4.25mn units of residential property will be required to meet demand over 2010-2014. Office space demand will total about 55mn sq feet. Hotels will experience a demand for about 78mn room nights over 2010-2014.
Bangalore, the National Capital Region (NCR) of New Delhi and Mumbai will generate demand for about 46% of the Indian office space over the next five years. Demand for office space in second tier cities, such as Chennai and Kolkata, is expected to increase at a faster pace, at about 17% and 22%, respectively. In Mumbai, retail rentals have been on the rebound since the beginning of Q210. They are set to grow further, averaging 10-15%, by the end of the year. Vacancies are low at a time when retailers are seeking to expand, after the global downturn.
Residential property has seen increasing demand over Q210 and Q310. However, supply has been relatively low because of reduced construction activity during 2009-2010. Consequently, demand is expected to be three times the supply in 2010-2014.
The staging of the Commonwealth Games in New Delhi in the first half of October 2010 has led to a major real estate market upgrade. Residential property prices in the surrounding areas – which have benefitted substantially from improved infrastructure and connectivity – have risen steadily for at least a year, at levels of 10-15% per annum (pa). The Games Village is a premium development in a prime location.
India's economy chalked up impressive real GDP expansion of 8.6% year-on-year (y-o-y) in Q110, propelling full-fiscal year growth to 7.4% in FY2009-10 (April-March). The brisk pace of expansion has been largely underpinned by domestic demand.
BMI are pencilling in real growth rates of 7.9% in both FY2010-11 and FY2011-12, which would put the country comfortably above their emerging market (EM)-weighted averages of 5.5% and 5.1% in 2010 and 2011 respectively. However, this pace of growth is not expected to continue to accelerate as 2010 unfolds. Indeed, the signs are that BMI will see a cooling in activity.
Yet India's long-term growth dynamics are constructive, with the economy expected to enjoy the positive effects of increasing labour productivity, infrastructure build-out and a greater drive for reform. BMI are pencilling in a mean real GDP growth rate of 7.7% per annum over the next decade, higher than the 7.2% annual average seen between 2000 and 2009.
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