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The Mutual Survivors - Financial Institutions and Realty Investors
 Monday, June 19, 2006
Role of Financial Institutions Such as ICICI, HDFC in the Indian Real estate Boom

When it comes to, real estate India Investments currently one of the most exciting countries and is fast becoming the hottest country in Asia to invest in. A recent survey of the real estate scenario acknowledge the Indian metropolis of Mumbai, Bangalore and New Delhi as the top three investors’ choices for real estate investment in Asia. The survey also noted that, investment interest in the region will continue to be healthy this year with more confidence towards the retail and office property markets across the region. This has brought about an array of investment opportunities for buyers and developers who would want to capitalize on this growing opportunity.

However, along with the excitement amongst investors and property developers at the potential opportunity of investment opportunities in real estate and infrastructure projects, they still have a number of concerns. And this is mainly related to the availability of necessary funds for investment. In the more recent times, the boom in the real estate market opened the doors for a host of realty funds from financial institutions.

Earlier the finance company in India like ICICI and HDFC which focused mainly on the banking and insurance sectors of the country are turning to more lucrative opportunities for investment targeting on the basic need for modern real estate. The financial institutions also wasted no opportunity in tapping the fund requirement catering to the inflow of potential buyers in the retail sector. The decrease in housing loan interest rates and an increase of disposable income has contributed largely to an increased demand in the residential segment. The retail markets are also undergoing a defining change with the introduction of larger retailing formats.

While most funds were initially floated by financial Institutions or banks such as HDFC, ICICI Bank and IDBI Bank to name a few, real estate developers like DLF Universal and even retailers such as Pantaloons Retails (India) have now entered the real estate sector for creating more retail facilities and have been hugely successful. This has shown rapid sales growth in the major cities and segments in the Indian real estate market and trend shows that with the increasing funding from the financial sectors more investors are willing to pledge their assets to the realty sector.

As the realty prices in India skyrockets, the growth across all real estate segments and experts estimate that demand will remain steady at the currently high levels because of the improving economic environment and the real estate sector is expected to grow 30% every year. This rising property prices encourage banks and financial institutions to lend more with the increase in collateral values. So, the investors and financial institutions, on mutual survival are banking high on the India’s real estate rising growth curve and with the entry of foreign direct investment in India the competition is expected to be healthier.

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