By Subhankar Mitra, Head - Strategic Consulting (West), Jones Lang LaSalle India
India�s growth story has many facets; one of the integral parts of growth - and arguably the most important one - is urbanization. In fast-growing economies, cities are significant investment and employment generators, which in turn carry the growth momentum forward. The sustainability and livability of any city depends largely on the quality of its infrastructure and real estate stocks. Needless to say, cities also require large sums of money to create urban asset stocks, including buildings and infrastructure. Over last decade, India�s population grew by 18% while its urban population grew at almost double that rate (at 32%). Currently, about 31.2% of India�s population lives in urban areas. The country�s share of urban population has increased by almost 3.5% over the last decade. What is even more astounding is the increase in the built-up real estate stock in its cities and towns. Data from the 2001 census shows that about 110 million �Census Houses� exist in the urban areas, which indicates an increase of 39 million over the last 10 years. In other words, real estate stock shows a compounding growth of 4.5 % per annum as against the growth rate of 2.8% in urban population. Obviously, such massive growth needs adequate support from infrastructure. However, the state of affairs with infrastructure in Indian cities is not very encouraging. Most of the cities still have to deal with issues in terms of roads, public transportation, sanitation, storm water drainage, solid waste management systems, etc. on a regular basis. With the volume of real estate stock increasing inexorably in the cities, there is an acute problem with the basic needs like energy and water in the store for urban India. The private sector contributes most of the development of real estate stock; however, the responsibility of infrastructure development lies squarely with public sector entities such as ULBs and other utility companies - most of which are Government agencies. The investment pattern in our cities shows a similar trend � the private sector invests in the development of real estate stocks, while the public sector invests largely into infrastructure development. The quantum of investments in most infrastructure projects is huge, and the agencies responsible for its development are seriously under-financed. They depend either on domestic grants like JNNURM or on intercalation financing involving bilateral and multilateral agencies. In some instances, funds are mobilized from private sources in the form of Public Private Partnership. The private sector generally tends to shy away from investments into city-level infrastructure projects, as most of these projects are considered non-remunerative. They prefer to focus on investing into the development of real estate stock. Mumbai � A Case Study Mumbai, India�s financial capital, attracts massive investments - largely in the real estate sector. The city being the nation�s epitome of high real estate prices and land scarcity, huge sum of money keep chasing land in the city - while infrastructure augmentation lags behind. Way behind. The opening up of FDI in real estate in 2005 opened the floodgate for investors vying for a share in the juicy pie that Mumbai real estate represents:| Prime Land Deals in Mumbai City Since 2005 | ||
| Zones | Land area (in acres) | Total investment (in INR crores) |
| South Zone | 105 | 13,406 |
| Central Zone | 42 | 6,356 |
| West Zone | 98 | 4,016 |
| East Zone | 451 | 3,831 |
| Grand Total | 697 | 27,608 |
In terms of investment sizes and the total quantum of investment, South Mumbai leads the pack, followed by the Western zone - primarily because of land auctions at BKC. The East zone attracted the least investments - most of them into defunct industries along LBS Marg. Interestingly, CIDCO at Navi Mumbai has also been able to mobilize massive funds through the auction of plots at different nodes. The level of infrastructure, social amenities and economic activities has pushed up the real estate prices of Navi Mumbai � and they are still rising. From a city-level perspective, it is important to understand whether the large volumes of investments in land have actually delivered a proportionate development of real estate stocks in the city: Prime Residential Unit Launches | Year | 2007 | 2008 | 2009 | 2010 | 2011 |
| New Launches (No. of Prime Residential Units) | 21,870 | 24,747 | 66,796 | 80,592 | 61,907 |
| Cumulative Growth | 21,870 | 46,617 | 113,413 | 194,005 | 255,912 |
| Prime Infra Projects in Mumbai since 2005 | Total investment (crores) |
| Monorail | 2,716 |
| 36 Skywalks | 735 |
| MUTP Phase II | 5,300 |
| MUIP | 2,648 |
| Extended MUIP | 1,550 |
| Mumbai Metro - Versova-Andheri-Ghatkopar Corridor | 2,356 |
| To be added | Total investment (crores) |
| MTHL | 8,800 |
| Worli Haji Ali Sea Link | 1,120 |
| Mumbai Metro - Charkop-Bandra-Mankhurd | 8,250 |
| Mumbai Metro - Colaba-Bandra Corridor | 9,400 |
| Total | 27,570 |
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Find the best of Al News in one place, specially curated for you every weekend.
Stay on top of the latest tech trends and biggest startup news.
