Analysis of Real Estate Funding in India
Real Estate Funding
Commercial real estate sector is in boom in India. In the last fifteen years, post liberalization of the economy, Indian real estate business has taken an upturn and is expected to grow from the current USD 14 billion to a USD 102 billion in the next 10 years. This growth can be attributed to favourable demographics, increasing purchasing power, existence of customer friendly banks & housing finance companies, professionalism in real estate and favourable reforms initiated by the government to attract global investors.
Reason for growth
Growing Market Demand and their drivers
• Realization of large commercial projects
• IPOs by developers
• Gradual organization of the markets in the Tier I cities
Greater availability of information
• Transparency and liquidity improved manifolds
• Entry of international real estate builders and consultancies
• Governing legal framework relaxed
• Entry of more players has lead to increased level of competition and competitive pricing
The property market in India has been unorganized and fragmented for many years. However, the recent past has seen a consolidation of positions in the market as developers are stretching their capacities to the maximum in order to meet the growing market demand, which in turn has encouraged large projects with sourced financing. The IPOs by large real estate developers like Sobha, Raheja and DLF have led to organization of the market in the Tier I cities, but the Tier II and Tier III cities still demonstrate the traits of an unorganized market and show signs of cartelization amongst small scale builders.
Though on a pan India level the real estate market still lacks transparency and liquidity. The costs breakup of the property is still vague but the entry of international level builders and consultancy is more promised to root out