Since real estate in India is expected to be a major market, the chamber said the FDIs were constantly looking at India for parking their surpluses as returns on such investments would be the highest in the near future.
Releasing the Assocham assessment on FDIs’ role to domestic real estate market, its president, Mr Sajjan Jindal, said in future higher interest rates would subside with India scaling a GDP growth of more than 10 % for at least a decade and create huge space for overseas investors in its real estate sector.

At present, the domestic real estate market is likely to be around fifteen billion dollar, in which the FDI’s contribution is estimated at less than four billion dollar. Bank credit to this sector by the end of 2007-08 has been a little above Rs 3,50,000 crore, which will multiply significantly in the coming years in view of the growth that the sector is expected to register, as per the Assocham analysis.

Another reason why the real estate sector would witness a boom, said Mr Jindal, was that currently the foreign developers can undertake construction activities in a at least space of 50,000 sq ft, as a result of which the FDI component in domestic real estate market was restricted to less than four billion dollar.

With the government under pressure to raise the ceiling of 50,000 sq ft to facilitate higher FDI in real estate sector, Assocham expects it to be enhanced to a minimum of two lakh sq ft in the subsequent 10 years in a gradual manner and thus result in much higher foreign capital absorption.

Interestingly, Assocham also projected that the foreign investors component in the real estate development would come through private equity instead of institutional mechanism.

As per estimates, nearly 30 million sq ft of organised retail space is currently available. Another 100 million sq ft is likely to be added by the end of 2008 from over 300 mall projects. With the retail sector experiencing a boom, the country is witnessing a spurt in extremely large retail spaces.