Real Estate in the Technology Hub - Some facts

Indian Real Estate sector has been on the path of rapid growth since 1991 after the reforms in Indian economy, which was revolutionized the country's stride towards the present economic boom by then Indian Government lead by late Mr.Narasimha Rao than prime minister and than present Prime Minister and than Finance Minister, Mr.Manmohan Singh. In the last few years it has established as a major investment option in the country since the stock-broking business brought misfortune to many and ending in deep financial troubles. A forecast by a well known financial consultant has indicated in its recent segment review that the bangalore real estate sale sector can grow from the current $12 billion to $90 billion by 2015 and India is the most promising real estate market in Asia.

Technology sector with the help of outsourcing business is driving the development process now with the push focused on infrastructure and real estate business. The suburban locations at Bangalore, Chennai, Mumbai, Delhi NCT, which include Noida, Ghaziabad, Faridabad, Gurgaon are witnessing fast development activities with residential purpose luxury apartment and villas and face of new satellite cities such as large shopping malls.

Bangalore, the capital city of Southern State of Karnataka, in India, and the Silicon Valley of India, has been in news for the last few years for the booming IT and other technology business, and now, witnessing a very fast and steep increase in development of infrastructure and real estate business. As a prerequisite for further growth of technology sectors, it has tremendous potential and great opportunity for the investors who are looking for a three fold or more fortune in a shortest possible time, while considering the recent success story of Indian economy, which is one of the fastest growing economies in the world, with a growth rate of more than at a 8% and can be even able to touch the magical figure of 10% growth to catch up with the Chinese. With a major investment and growth forecasted to be taken place in bangalore real estate sale and Infrastructure segments in India, it is quite clear that the march towards the goal of a developed country's growth will continue.

This Southern cosmopolitan city has a very pleasant climate throughout the year and a very nice place to live in with a much more green space than in any other Indian cities. Despite the pollution levels and the overpopulation problems, the elite class still prefers Bangalore as a city to settle down and work. Bangalore has a population of nearly five million people, mostly professionals migrated from nearby states and seeking jobs with good living conditions and many Indian and international companies offering them jobs with a higher salary. Salary level in the technology sector has witnessed a higher growth and powered the young people to go for investment in properties resulting in the present real estate boom.

Bangalore real estate sale has also become the largest office market with a number of IT companies engaged in outsourcing business landed in; it has a 32% share in office sector

absorption in Tier 1 and Tier 2 cities. Although a record of over 8 million sq. ft. transactions took place in 2005 in the city, comparing to 2004 supply figures, it has marginally exceeded the absorption, which has stabilized the market in lease rentals and slower growth in capital value appreciation. Prime Office Market business can be expected to record 6 million sq. ft. in 2006, as per the bangalore real estate sale market indications.

Another factor of growth in this segment has been the investment interests shown by the Indian expatriate community living in almost every corner of the world and a majority of them working as professionals in the US, UK and gulf countries. Especially, in Bangalore, NRI investment has increased drastically as all of them are aware of the importance of Bangalore as a technology hub and growth prospects.

The entire real estate business can be classified into four major segments, viz., Residential (end user villas, Residential (Rental apartments), Commercial plots (construction) and Office establishments. Residential market has strong end user and investor demand and a gained around 15-20 per cent in apartment capital values over the previous year in many areas. A demand study on the residential apartment units revealed that approximately 1500 units per month with the South and East corridor taking a major share of more than 40 per cent of the absorption. To cop up with the increasing competition, many builders are offering most sophisticated and innovative designs and quality housing amenities, which are acclaimed as one of the best available in the entire country. Fuelled by the high growth in apartment market, villa market has also witnessed a rocketing up in demand and 30 per cent or more rise on capital values every year. Earlier high grade villas construction and demand were concentrated in Whitefield, Bannerghatta Road and the ORR areas of city, and now, it has started spreading its wings to the other parts of the city since the predictions indicate that appreciation on capital values of apartment and villas will continue. With a high increase in income and robust growth in office sector employment, it will be a preferred investment option than stock market and the boom will continue for years.

Fraudulent property transactions which were one of the nightmares for investors and end users have overcome with the insurance cover which protects against such malpractices and the draft National Housing and Habitat Policy, 2005, has provisions of `title insurance' in the country. Such insurance should be made mandatory for all housing transactions in future like in other countries where Title Insurance protects the buyer from any loss arising out of unclear Title of the property purchased. Even the policy suggests that the insurance premium of weaker sections and in rural areas could be shared by the Government and the financial institution. This will create confidence in the mind of all sections of people in the transactions since the evictions and destructions of villas, farmhouses and commercial buildings were in news recently in Delhi and other parts of the country. Such confidence building measures will further increase the demand and growth in real estate sector.

The existing system of Title search undertaken with the help of lawyers is not considered to be a defect free system since land and property records are not fully computerized yet and lack of unified laws related to such transaction throughout the country. Title insurance schemes could have their own set of problems and insurance companies still need the support of old system of consulting lawyers before such insurance cover.

Karnataka State Government has amended BDA rules to bring back the lease-cum-sale method, which has a lock-in period of 10 years on the sale of sites to prevent misuse because it was found that many individuals were applying for BDA sites and then selling them immediately for a profit. This method was in practice till 2000 and omitted from the BDA rules including the clause referring to it. As per the lease-cum-sale method, an individual with a site allotment will get a sale deed from the BDA only after 10 years.

There are some major investments in Bangalore from some of the big names in Real Estate Sector such as Morgan Stanley Real Estate, which has invested around $68 million in a Bangalore based real estate developer Mantri Developers Private Ltd. Another giant and Vancouver based company Royal Indian Raj International Corporation (RIRIC) have plans of a staggering $2.9 billion in a single project named Royal Garden City within the next 10 years.

Investments from foreign countries will be allowed in wholly owned subsidiaries in India if they invest $10 million or more. They can build commercial and residential buildings if the projects exceed 50,000 square meters, or about 538,000 square feet.