The Hindu Business Line : Study predicts upward rise in real estate prices

THE real estate prices in the country are expected to witness a stable, upward trend over the next three years and are unlikely to experience the "exorbitantly high levels of price rise" as seen during the past two years, according to a study done by US-based NAI, a company that offers commercial real estate brokerage and consulting services worldwide.

NAI, which has over 300 offices throughout the US, Canada, Latin America and the Caribbean, Europe and Asia Pacific, today announced the launch of its Indian operations with offices in Delhi, Mumbai, Chennai, Bangalore, Kolkata and Hyderabad.

NAI has entered into partnerships with six real estate service providers through licensing arrangements.

NAI's clients include DHL, IKEA, US Postal Service, Pepsi Bottling Group, among others. In India, the company's client list includes Siemens and Cairns Energy.

The company estimates that a demand for 200 million square feet of office space would be created over the next five years. This demand would be driven by creation of 3.5 million jobs, which would be outsourced to India.

"While a major portion of this demand will be fulfilled by the space currently vacant, an average of 10-20 million square feet new space per year will be required annually over the next decade," according to the NAI study.

The expected returns on investment are estimated to gain between 11-18 per cent a year in the New Delhi NCR region over next two years, whereas the expected returns for Mumbai region next year would be around 12-18 per cent.

The average return on investment in Bangalore should be between 13-19 per cent, according to the study. The average returns from the Chennai market would be in the range of 10-15 per cent over the next two years, whereas those in Kolkata market should be around 12-17 per cent per year for the next couple of years. In Hyderabad, return on capital would be between 10-14 per cent, according to NAI.

Listing other major trends in the country, NAI Asia Pacific's Regional Director for Indian operations, Mr Abhijit Malkani, said that investments in the real estate sector have become pretty strong as compared to the scenario two-three years ago when they were unorganised. "One now sees a more structured return on investment approach in the market and most of the projects are now being financed pre-sales," he said.

"In fact most of the investors worldwide are very keen on investing in India. Based on our interactions, we discover that investors want to finance new satellite cities, retail shopping malls," added Mr Malkani.

In its second phase of expansion, which would be kicked off in late 2005, NAI would open offices in Jaipur, Pune and other relatively smaller cities.

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