Smaller cities to fuel real estate growth

As many as 11 tier II cities in the country are emerging as growth centres that could transform the landscape of India, a report by industry body FICCI and Ernst and Young said on Monday.

The FICCI-Ernst and Young Indian Real Estate Report, 2007: Growth and New Destinations, the highlights of which were released today, reveals that besides eight metros, cities such as Surat, Chandigarh, Nagpur, Vadodara, Visakhapatnam and Jaipur are experiencing initial phase of rapid economic growth.

These cities have been rated as B++ in the E&Y India City rating. Delhi and Mumbai rank first and second respectively with A++ ratings, followed by Bangalore, Chennai, Hyderabad, Kolkatta (with A+ rating) and Pune and Ahmedabad (A).

The realty sector in India is growing by more than 30 per cent per annum and this order of growth is shifting the focus of investors and developers to relatively smaller cities and hence there is a likelihood of such emerging cities leading the transformation of the real estate sector, the study says.

The ratings are based on five critical indices, city prosperity, urban governance, business environment, quality of life and infrastructure, encompassing 55 parameters.

Ernst and Young Partner and National Leader (Real Estate Practice) Ganesh Raj said: "An attempt has been made to rank the cities based on scientific methodology and statistical tools. The term tier I, II and II cities are loosely used".

The assessment of potential in different cities across India would assist the government, industry, developers and investors to systematically plan the inflow of investments and the development of cities, he added.

The report, which will be released on September 27 at FICCI's International Real Estate summit to be held in Mumbai, also found out that education, healthcare and medicities are the new avenues that are available for developers, Raj said.

FICCI-E&Y report also carries a survey from leading investors, which revealed that all the respondents believe that more than $5 billion would be deployed into Indian real estate over the next three years with around 20 per cent believing that the deployment would be more than $20 billion.

Almost 80 per cent of the respondents believe that in short to mid term, India as an investment destination is 'excellent' or 'very good' compared to other Asian markets like China, Vietnam, Malaysia, Indonesia and Thailand.

According to survey, more than 50 per cent of respondents believe that high trajectory growth would continue for next 2-3 years.

Highlighting the growth of Indian real estate sector, FICCI Secretary General Amit Mitra said, "We are going to see a major development in the future where housing industry defines the flip-flop of growth and expansion as in the US. We are moving in that direction."

Mitra also noted that due to upsurge in the real estate, new opportunities have cropped up for architects, master planners, interior designers, finance and legal professionals and vaastu consultants.

Source : The Economic Times