Spotlight

Realty is Indian tourism's unsung hero

Surrounded by a vibrant economy, a thriving infrastructure, a flourishing real estate market and a potential-laden tourism industry, India, no doubt, awaits a history to be rewritten. The Economy is firing on all cylinders, entertaining more global tourists and creating jobs faster than many other emerging economies as a whole, while leaving many employers struggling for qualified people to hire. Hundreds of top global brands are going to pack thousands of square meters of retail and office space. India is has suddenly become 'the happening' place to visit.

However, this 'destination India' odyssey would not have been possible had the realty revolution not happened in this part of the world. Howsoever majestic the charm of a place may be, travel and tourism can not grow unless there is a required infrastructure in place. Even though the realty sector has always been an unsung hero in attracting the tourist inflow, I must say that infrastructure and tourism complement each other. Critics, no doubt, are questioning sharp run-up in prices and sustainability of the rise. And as any single market emerges as a favorite - stocks, bonds, real estate, precious metals or whatever - there is often a tendency to overdo it. In the initial phases of overvaluation, we begin to suspect it.

India though, I must admit, still has a fairly long list of reasons why 'this time it's different'. The Indian odyssey is based on strong fundamentals. Over the next few years, India expects tourist arrivals to increase manifold. The driving force behind this strong tourism sector expansion is the government plan to develop tourism in the country as an essential component of an ambitious economic diversification drive. Infrastructure development has made travel to India a pleasure now. Adding fuel to growth is the upcoming Commonwealth Games in New Delhi.

Economics 101 teaches that the only way to effectively bring down the now somewhat exorbitant real estate prices is to increase supply. In that regard, the country is luckier than the other emerging economies because there is more room for additions to supply here. India's hotel industry expects the number of rooms in the country to grow 300 times as a result of the tourism industry push. No wonder, the hotel industry is at the centre of the business radar of all the leading real estate players.

India's own population is also growing fast. Together, the country's expanding tourism sector global retailers jumping in the fray and growing housing unit demands are fuelling an unprecedented construction sector expansion which is attracting top international investors and a steady flow of high-power investment. The country is full of internationally acclaimed multi-billion-dollar development projects. International real estate companies are billing India as a top location and can barely keep up with client demand.

In the next few years, India's hospitality industry is going to require many new luxury hotels to keep up with the increase in tourist arrivals. This in turn is creating growing demand for a complete range of building materials, equipment, technology, systems and machinery. In the country, as in the rest of the developing economies, real estate continues to be the economic sector that's getting most of the attention. India's disparate geographic areas lead to a wide range of prices and markets. Owing to the diversity of the real estate, and the country's size and room for expansion, local concerns about affordability may be slightly less as the property market matures even further.

Our economic performance still remains quite healthy. One drag has been the higher fuel and energy prices, which so far have not slowed the Economy as much as in the past. As the stock market performance has remained tepid, investors have turned to real estate and bonds as places to put their money in. Buying bonds helps keep longer term interest rates. That reinforces demand for real estate and also contributes to rising home prices. An emerging debate at the national level concerns whether a speculative bubble is forming in the national real estate market. In my opinion, the analysts are getting unnecessarily worried.