Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2019 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Look who's driving the realty boom - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Look who's driving the realty boom

Aug 24, 2010

If you thought that all the big bucks entering India were through the stock market route or in setting up businesses in high growth sectors like IT or telecom, you were wrong. A large portion of FDI (foreign direct investment) is now being invested into India's housing sector.

The FDI in India's real estate and housing market jumped almost 80 times or 8000% between 2005 and 2010. In FY05, the FDI in this sector was a mere Rs 1.7 bn. This has however increased exponentially to Rs 136 bn in FY10. In the past 10 years, cumulative FDI inflows into this sector totaled Rs 381 bn or US $8.5 bn. This makes it fourth on the list of FDI inflows in the past decade. What is surprising is that this sector did not even feature in the top ten list in the 15 year period post liberalisation from 1991-2006.

Source: Department of Industrial Policy & Promotion;
Note: Computers include hardware and software

Metros are where the money is. According to a leading business daily, the largest number of building projects where FDI is in action is in our very own financial capital, Mumbai. Of the 1,614 projects in which foreign investors have put in cash since 2005, 422 were cleared by the RBI's Mumbai office, followed by 316 in Delhi. Other large cities including Bangalore with 225 projects, Hyderabad with 105 projects and Chennai with 68 projects, also received foreign capital.

In Mumbai over the past four years, according to data from Times Property, average real estate prices have shot up significantly. Cuffe Parade, Ghatkopar, Andheri (W), Vashi and Bandra (W) have seen hikes of 72%, 95%, 96%, 87% and 79% respectively. The largest FDI in the last five years however has been in the construction of a technology park at Bandra Kurla Complex (BKC) in Mumbai, totaling US$ 372 m. Rates of Bandra (E), where BKC is located have incidentally increased by 162% since August 2006.

But, due to the huge boom in the property market across the country, FDIs are not confined to metros and big cities. Since 2005, real estate projects have been approved by RBI offices in Bhopal, Kanpur, Kochi, Jaipur and Panaji, amongst others.

Offshore banking zone, Mauritius has contributed the maximum to FDI fund inflow to India, totaling 42% of total funds in the past decade.

With new iconic structures such as World One by Lodha Developers and the planned hill city Lavasa, by HCC coming up, India's property market is expected to see more money from foreign investors. Initial public offerings by the developers are also an easy exit route for the foreign investors to cash in on their investments.

For investors in real estate and home buyers, however, this may means paying a heavy premium. While buying a house to reside in may not be postponed, investments could certainly be more value driven.

Equitymaster requests your view! Post a comment on "Look who's driving the realty boom". Click here!


More Views on News

HIND. CONSTRUCTION Announces Quarterly Results (3QFY19); Net Profit Down 68.3% (Quarterly Result Update)

Feb 12, 2019 | Updated on Feb 12, 2019

For the quarter ended December 2018, HIND. CONSTRUCTION has posted a net profit of Rs 99 m (down 68.3% YoY). Sales on the other hand came in at Rs 11 bn (down 10.5% YoY). Read on for a complete analysis of HIND. CONSTRUCTION's quarterly results.

HIND. CONSTRUCTION Announces Quarterly Results (4QFY18); Net Profit Down 3.9% (Quarterly Result Update)

Jul 20, 2018 | Updated on Jul 20, 2018

For the quarter ended March 2018, HIND. CONSTRUCTION has posted a net profit of Rs 201 m (down 3.9% YoY). Sales on the other hand came in at Rs 14 bn (up 6.2% YoY). Read on for a complete analysis of HIND. CONSTRUCTION's quarterly results.

IRCON International IPO: Is This PSU Worth Betting On? (IPO)

Sep 17, 2018

Should you subscribe to the IPO of IRCON International Ltd?

Capacit'e Infraprojects Ltd. (IPO)

Sep 12, 2017

Should you subscribe to the IPO of Capacit'e Infraprojects Ltd?

Bharat Road Network Ltd. (IPO)

Sep 5, 2017

Should you subscribe to the IPO of Bharat Road Network Ltd?

More Views on News

Most Popular

Stocks that Could Be Out of Reach Post Elections(The 5 Minute Wrapup)

Apr 9, 2019

It's a matter of time before the stocks catch the fancy of the markets and big investors.

3 Indian Stocks with Amazon-Like Potential(Profit Hunter)

Apr 10, 2019

We have identified 3 stocks with huge wealth building potential which meet our 'Click of a Button' criteria.

This Company is Making a Big Comeback and You Can Now Profit from Its Example(The 5 Minute Wrapup)

Apr 10, 2019

How Dell got its mojo back.

This is Why the Stock of Jubilant FoodWorks Went Up 1,160%(The 5 Minute Wrapup)

Apr 12, 2019

This critical business strategy has enabled companies to scale their operations faster.

Pocketing Massive Gains with HDFC And HDFC Bank(Profit Hunter)

Apr 12, 2019

Here's how one could have generated gains of Rs 59,250 in 10 days by trading HDFC and HDFC Bank with a capital of Rs 4 lakh.


Get the Indian Stock Market's
Most Profitable Ideas

How To Beat Sensex Guide 2019
Get our special report, How to Beat Sensex Nearly 3X Now!
We will never sell or rent your email id.
Please read our Terms


Apr 18, 2019 (Close)