THIS may come as a surprise to many. India has the largest concentration of wealth in Asia, over four times the nett worth in China, according to Forbes magazine. There's ample evidence, though, as seen in the collective nett worth of India's 40 richest people, which amounts to US$106 billion (RM360.4 billion) while in China, it is only US$26 billion (RM88.4 billion). Lakshmi Mittal, India's richest man, alone has US$23.5 billion (RM79.9 billion).
However, this wealth concentration has not been the catalyst to attract foreign direct investment (FDI) into the country's booming real estate market. The biggest driving force has been the need for information technology (IT) and IT-related space by companies involved in IT and IT-enabled services (ITES), software development and call centres.
To meet the surging demand from the IT sector, at least 591.25 million square feet of new office space must be completed within the next five years. And this is not all. The IT and ITES sector is also creating a multiplier effect through wealth creation for their labour force that has also added to the demand for property.
"Real" consumers spurring demand
It is estimated that 70 million Indians earn a salary exceeding US$18,000 (RM61,200) per annum, a figure that is expected to rise to 140 million by 2011.
But the "real" consumers are the 300 million middle-class - predicted to rise to 600 million by 2010 - who are spurring demand for housing and boosting retailing and retail development opportunities.
Between now and 2030, India will need up to 10 million new housing units a year. A surging population, rising income levels, shrinking household sizes and rapid urbanisation are exacerbating the current housing shortage, estimated at 20 million units.
Statistics further reveal that while only three per cent of homebuyers had a mortgage 10 years ago, this has now grown to 95 per cent. At the same time, the average age of homebuyers has fallen from between 40 and 45 years to 30.
Foreign capital infusion
With increasing integration with the global economy, and rising domestic and foreign investments, the World Bank has set its forecast for India's economy to grow at a rate of nine per cent this year. On current trends, a recent Goldman Sachs report predicted that the country's economy will overtake that of Japan by 2030 and will emerge as the third largest after China and the United States by 2050.
No wonder then that there has been a sudden spurt of foreign players staking the Indian real estate market. According to India's Confederation of Real Estate Developers Association, the real estate sector can expect a capital infusion of more than US$7 billion (RM23.8 billion) next year, of which foreign investors have committed more than 70 per cent.
These include global real estate players such as New York-based property investment fund, Trikona Capital which has a wide range of ongoing and completed projects in major Indian cities such as Mumbai and Hyderabad. Canada-based Royal Indian Raj International Corp is investing US$791 million (RM2.69 billion) in Royal Garden City, a fully integrated township in Bangalore that, when completed in 2015, will have 35,000 residential units.
Asian players
Several Malaysian property companies have also made a beeline to India. Property giant IJM Bhd has moved into Hyderabad to develop a 35-acre township near Hi-Tech City. Ho Hup Construction Bhd has teamed up with the Andhra Pradesh Housing Board to develop a 125- acre project in Shamshabad in Hyderabad.
Singapore-based Lee Kim Tah Holdings is developing a 100-acre mega township that includes a commercial complex near Mumbai at an investment sum of US$115 million (RM391 million). Another Singapore company, Keppel Land Ltd, the fifth largest property group in the island state, made its foray into India after buying land in Bangalore for US$13 million (RM44.2 million). In partnership with local Puravankara Projects Ltd, Keppel is developing the first phase of a condominium in an area known for high-tech campuses.
Other Singapore-based companies with projects in India are SembCorp Engineers and Contractors Pte Ltd, which has eight on- going developments in Mumbai, Pune, and Bangalore, worth US$50 million (RM170 million) and Ascendas, which has lined up plans to expand its flagship project in India - the International Tech Park Bangalore - at a cost of S$270 million (RM621 million).
Sustainable growth
Indonesia's Universal Success Enterprise Ltd has signed a memorandum with Delhi-based developer Unitech Ltd for a US$155 million (RM527 million) IT park and housing project in Kolkata. Another Indonesian conglomerate with eyes on India is the Salim Group, which plans to invest over US$100 million (RM340 million) in a 309-acre township, also in Kolkata.
While the list of foreign funds arriving in India is still growing, not all investors are sanguine about prospects for the Indian real estate market. The ever-rising property prices are causing jitters among some real estate professionals.
Sam Zell, former owner and chief executive officer of Equity Office REIT, and a legendary real estate investor who recently sold his portfolio of US office buildings for US$39 billion (RM132.6 billion), is of the opinion that the Indian property industry is "on the brink of excess" and "the boom would end in tears". The last time a property bubble burst in India, between 1995 and 2005, prices slumped by as much as 70 per cent.
* Lim Lay Ying is managing director of Research Inc. (Asia), a company specialising in market research and consultancy for all facets of real estate development. Access past articles and more at www.researchinc.com.my or call 03-2092 4966.
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