Real estate under const market value crosses $100b
The market value of investment grade real estate in India under construction has increased from US$69.4 billion at end-2006 to US$101.3 billion at end-2Q10, which equates to 8.2% of India’s nominal GDP for 2009, a Jones Lang LaSalle India report said.
While residential markets in India have already witnessed a rapid bounce, commercial markets have touched a cyclical low and are expected to recover in 4-6 quarters. “The market value of commercial office and retail under construction has remained range-bound during 2006-2010 due to the effect of an increase in construction activity offset by a fall in capital values. However, the contribution of residential has amplified due to a confluence of increase in construction activity and rapid recovery of property prices,” said Abhishek Kiran Gupta – Head, Research & REIS, Jones Lang LaSalle India.
The report says that a significant portion of this market value is required as costs of construction and development of these real estate assets, the costs assessed to be US$48.5 billion over a period of 2-3 years.
“While stocks and bonds have held their positions as traditional instruments of investment, investors are increasingly looking towards the alternative investments – real estate, hedge funds, private equity and Exchange Traded Funds (ETFs), to engineer an overall enhanced performance of their portfolios,” Gupta added.
He attributes this tread to a number of factors including improvement in construction quality, enhancement of market transparency, and availability of suitable options which have made the Indian real estate market a definitive asset class to invest. This provides a stable and predictable income yield along with a possibility of capital appreciation.