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The FICCI-Ernst & Young report titled ‘Realty in Changing Times’, released on Thursday reveals that Maharashtra has better urban areas in the country and thus occupies the top slot in the ‘Urban India State Ranking’. The state is followed by Tamil Nadu, Karnataka and Andhra Pradesh.

Delhi, the national capital, occupies the sixth position. The top-three states are also among the highest gross state domestic product (GSDP) generators for the country where there is a high rate of economic growth.
The Indian real estate industry has witnessed various cycles during 2007-11. While it is in the recovery mode, several headwinds still challenge market stability. The fundamentals are still strong; however, price rise, tightening liquidity, increasing cost of raw material and surplus supply along with economic uncertainty have compelled users to adopt a policy of wait and watch while developers struggle to complete their projects on time.
The FICCI-E&Y report shows that districts of Mumbai, Thane and Pune are the most prominent centers.

The top five states – Maharashtra, Tamil Nadu, Karnataka, Andhra Pradesh and Gujarat – also have the most matured environment for industrial development. And Bihar ranked the lowest at 35.
Among the larger states, the report placed Orissa at 33 and Chhattisgarh at 29, trailing at the end. The slow pace of development in the northeast is emphasised by four of the seven sisters trailing in the bottom rung of the spectrum with Arunachal Pradesh at 28; Tripura at 34; Nagaland at 32; Assam at 31; and Manipur at 30.
Ajit Krishnan, Partner & National Leader-Real Estate Practice, Ernst & Young, said, “Urbanisation will be the single-largest factor driving demand for real estate and housing in particular. In the residential sector, by 2015, more than 410 million people will be staying in cities, which is more than the population of the US. In commercial, strong growth in the services sector and revival in manufacturing are expected to help the economy maintain high-growth levels in the coming years and enable the office space gather its lost momentum. Whereas, the retail space is currently witnessing excessive supply; however, the gap between demand and supply is narrowing. Moreover, the Government of India’s decision to allow FDI in multi-brand retail can be a boon for this segment.”
The State performance across indices is as follows:

Housing index ranking: Tamil Nadu leads the housing index (with good access to housing for its population, good quality of housing and a reasonably high ownership status), followed by Maharashtra and Karnataka. The states at the lower rung of the ranking, namely Bihar, Uttar Pradesh and Odisha have all recorded significantly high number of dilapidated residences. Uttar Pradesh also recorded the highest number of households without residences. Providing housing at more affordable prices to cater to the EWS, LIG and MIG segment has traditionally been the responsibility of the Government. The entry of the private sector to cater to this segment coupled with ease of getting housing finance to lower segments of the society along with state government reforms and policies is likely to be the solution to bridging the gap of housing shortage.

Liveability index: A state’s progress and liveability cannot be mapped only by its economic progress. The living conditions of the people and their access to basic services such as lighting, treated drinking water, bathing and toilet within the household along with sense of safety, plays an important role in judging the liveability of the state. Thus, the liveability index ranking have captured data sets, which will analyse the overall living condition profile of the state with respect to physical infrastructure at the household level such as access to electricity, sanitation facility, safety, and awareness level gauged by access to internet.
According to this ranking, Maharashtra, Tamil Nadu and Andhra Pradesh fare the best. All three states have more than 95 per cent of the households with electricity as the main source of lighting. Tamil Nadu and Andhra Pradesh have seen a significant increase in electricity connections in comparison to 2001 census estimation. The larger states such as Bihar rank 28, Chhattisgarh 26 discounting union territories and north-eastern states have fared the worst. The unemployment rate goes as high as 73 per cent in Bihar, compared to a national average of 34 per cent and a lower HDI of 0.367 (national average -0.467).

Consumption propensity index: According to this indices Goa, Chandigarh and Delhi fare the best in the ranking. These three states function more as city states exhibiting high urbanisation rate with 62 per cent in Goa, 97 per cent in Chandigarh and 97 per cent in Delhi. If the larger states are considered (excluding Delhi, Chandigarh and Goa), Punjab ranks 4, Himachal Pradesh at fifth and Haryana at sixth position fare better than the other states. Delhi with Rs 119,032 and Goa with Rs 112,372 have one of the highest per capita income with a growth rate of more than 10 per cent from the previous year, which can be linked to increase in possession of assets and hence increase in consumption.
The development of new housing stock at affordable range will be crucial to meet the housing shortage of 18.78 million. The decline in housing shortage can be good news but still there is considerable housing shortage in urban India. With around 2 million dilapidated households in urban India, planned redevelopment with rationalised floor space index could well ease the housing woes in the worst-affected districts. These include Mumbai (59,094 dilapidated houses including suburbs and Thane), Kolkata (25,777) and Patna (21,077), which presents a sizable market. The city of Shanghai is an outstanding example of how a city re-oriented its focus and prospered through redevelopment.
The cities in India need to re-think their strategies and find solutions and innovations to upgrade to match world standards. Singapore, a city state, has been successful in transforming itself into a world-class city with excellent urban amenities. This was achieved by making the jobs in the civil authorities the best in the industry, by matching their salaries with private sector salaries, felt Krishnan.
In India, there is a dire need for capacity building in our urban local bodies. Gurgaon is a clear example of the downfall of comprehensive city planning. Though the city today has a very developed real estate market attracting some of the biggest corporate entities in the world, housed in ‘A’ grade real estate, the civic infrastructure in the city is unable to cope with the demand. On the contrary, the neighbouring city of Noida, developed its infrastructure before allowing real estate development. Greater Noida learnt from Noida and has exceeded the development profile of Noida further.
Considering that in India development is currently focused around cities, the urban fringes of our cities take on the character and often the load and spill from our cities. Acknowledging this growth pattern and increasing focus on regional planning as opposed to restricted city planning will immediately ensure planned city expansion.
Talking about the real estate private equity funds, the FICI-E & Y report states that the sector is witnessing a period of significant structural and cultural change, with cautious investors, large-scale regulatory overhauls and the ongoing illiquidity of the capital markets all driving change. Considering the impact of these factors, the emerging environment for funds is not for the faint hearted. The deal flow remains slow, if not stagnant, in most markets. The fund-raising continues to be challenging, especially for new funds. Furthermore, there is potential for market consolidation where some of the more enhanced platforms are likely to look to acquire niche, small platforms or mid-tier managers will look to merge.
The upside to the pressures of intensifying investor demands and regulatory scrutiny is that new solutions are emerging within the real estate funds sector to improve operational efficiency and reduce costs. The challenges posed by the current environment will ultimately make it easier for fund managers to build more efficient, transparent and scalable platforms, which will, in turn, attract a wide range of investors from around the world to the real estate funds sector.
However, the biggest challenge for global real estate funds remains beyond their control — continued illiquidity in the capital markets.
Persisting volatility in the financial markets means that the real estate funds sector will continue to face some level of uncertainty in the foreseeable future. This means it is not immune to individual symptoms that draw so much attention and indeed, it will need to become even more adept in adjusting to them. However, the solution is not in treating these one-off shocks; the solution lies in growth.
Naturally, not all businesses will emerge unscathed from this transitional period.The difficulty in fundraising, increased business costs and widespread market consolidation will continue to claim casualties in the funds sector. But this corrective phase is necessary for the sector’s overall quality and credibility, purging excessively risky and poorly run players from the market, as well as rewarding those able to bring creative solutions to the recovery process, and helping to rebuild investor confidence in the funds space over the long term.

Via : ConstructionWeekonline.in