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Photo: M. Vedhan

Take the right direction: What the construction industry needs is all-inclusive growth.

The Chief Secretary also emphasised the importance of public private partnership in ensuring sustainable development. “While taking up large scale projects with a futuristic vision there is a need for inbuilt support systems for energy, environment and water conservation. The green buildings movement should grow,” he said adding that the Tamil Nadu had always been supportive of development and the construction industry, but there was a greater need to integrate amenities and infrastructure into the development plan and this presented huge opportunities for the private sector.

Later in the day, Chief Executive Officer, Asipac, Amit Bagaria, echoing the sentiments of inclusive growth put forward by Mr.Tripathy said “The Indian organised real estate players should tap the growing market represented by people from economically weaker sections which constitute up to 50 per cent of the estimated housing demand of 25 million units constituting 41 per cent of the total market which translates to over Rs. 21 billion.”

He said, that though income levels have been rising, home prices have been growing faster, thereby causing home affordability to be flat. Further elaborating on this aspect of the market, Mr Bagaria said that lately larger developers had been concentrating on larger and more expensive homes. Thus the smaller 1200 to 1600 square feet apartments which cost Rs. six to 25 lakhs in 1996-97 now cost Rs. 25- 110 lakhs now. The sum of this was that while incomes are up by 160-225 per cent, home prices are up by 285-341 percent, resulting in a mismatch.

In his speech, Director, Corporate Operations, True value Homes, Nakshastra Roy said that the residential property market made up 80 per cent of the total real estate market in India and had been growing at an annual pace of 34 per cent. Mr. Roy also noted that there was a shortfall of 22 million housing units in urban India and this deficit was on the rise.

In his address on real estate funding, managing Director and CEO, ICICI Home Finance Company Limited said that public listing offered good opportunities for big developers. “The advantages of going public are pan India visibility and brand recognition. Public listing also helps growing regional players to explore national markets.” He said that six developers have listed their companies in international capital markets and have raised $3060 million.

Mr. Divakar Rana, assistant vice president, Capital Market Group, India, Cushman and Wakefield, said that the FDI in housing and real estate had increased to $ 0.04 billion in 2005 to $0.52 billion in 2006. It is projected to increase to $1.85 billion in 2007 which would be equal to 11 per cent of the total FDI and up by 1 per cent from two years ago.

Speaking on the second day , Mr Manish Kashyap, Managing Director, Transaction Management Group, CB Richard Ellis South Asia said, that peripheral locations, with the heavy focus on infrastructural development, are likely to be integrated into “main” city within a shorter horizon – within 2-3 years, compared to the time it took to create attractive infrastructure in Tier II/III cities. The projects in peripheral areas also offer large floor plates and access to large labour pool. “Generally, occupiers say high cost and higher attrition are the key issues they would like to address as they consider a new location. As the rentals of peripheral markets are less by over 30–70% compared to other areas in the city, the peripheral micro-markets in the metros are growing phenomenally. “For instance, the Old Mahabalipuram Road location in Chennai is looking at an additional 10 million sq.ft. of new commercial supply by the end of 2008, which is a whopping 25% of the overall stock in Chennai, as on date. Till 2004, the Grade ‘A’ office stock in Gurgaon was 5 million sq.ft and by the end of 2008, this figure would stand at 22 million sq.ft,” he pointed out. Mr Kashyap said that in many cities, peripheral markets are essentially the only area location available for large developments. The peripherals house large residential developments while cities witness huge commercial supply influx. The two day discussion tried to capture the various facets of the Indian real estate, the growth potential and challenges facing the market.

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