Builders in kolkata

Oversized private equity commitments by a growing number of foreign investors and home-grown financial institutions are helping to feed the frenzy. But several astute industry watchers have begun poking big holes in that picture. For one, they say that many foreign investors have actually brought in only a small portion of their promised investments. Second, soaring land prices and price resistance from buyers are narrowing investors' margins significantly. Finally, they note that concerns continue to run high about the regulatory opaqueness for real estate ventures, bureaucratic red tape and the absence of title insurance, in addition to a host of other issues.

The property market today is rife with uncertainties. Prices as well as interest rates have been rising. The main risks or challenges that real estate investors in India will be up against in the short term can be summarized as:

- An oversupply of office space in the major and second-tier cities.
- A hazy regulatory framework fostering indecision and delayed investments is another concern.
- Finally, opaque deal-making processes that narrow the exit route deters serious investors.

For foreign investors, one troubling fact is a pan-India phenomenon that is inadequate transparency in land valuations which are used to price the investments. There is a marked lack of transparency, corporate governance and accountability among India's real estate developers. There also continues to be a serious lack of quality infrastructure. In addition, India scores low in terms of congenial political environment in terms of the real estate sector. This means that there is a lack of clarity in pertinent policies those issues will soon fade away as India's real estate markets mature.

The Indian real estate sector plays a significant role in the country's economy. The real estate sector is second only to agriculture in terms of employment generation and contributes heavily towards the gross domestic product (GDP). Almost five per cent of the country's GDP is contributed to by the housing sector. In the next five years, this contribution to the GDP is expected to rise to 6 per cent. Because of the rising importance of real estate Govt. has introduced ‘Residex’, an index planned to benchmark the housing sector and expected to serve as an indicator of property prices. The housing start-up index (HSUI) planned by the Reserve Bank (RBI) of India aims to indicate the volume of construction taking place in a particular location. The RBI also expects to publish the data by March 2010 for every quarter. HSUI would also serve as a lead indicator of the economy's growth as more houses would require more input materials like cement and steel, labor and credit demand. This index would be useful for developers as it would help know areas of oversupply. They can hence refrain from construction activity in those areas. In case of an oversupply in a particular location, consumers before investing would wait till prices fall.