INDUSTRIAL GROWTH TO REV UP RESIDENTIAL AND RETAIL SECTORS

The growth of the Indian manufacturing sector through the development of SEZs, industrial corridors and townships is expected to have a significant impact on the real estate market. The residential and retail sectors, which act as valueadded sectors to the manufacturing industry, will also experience growth, reports Jones Lang LaSalle Meghraj, in its latest research Indian industrial real estate landscape – An emerging investment opportunity. 

The major emerging and high-growth industrial sectors are automobile and auto components; telecommunications; semiconductor, drugs and pharmaceuticals and biotech industries. The growth of the manufacturing and retail sectors and the improvement in transport infrastructure has already attracted many domestic and international players to invest in the logistics sector. Logistics and warehousing sectors are foreseen as the sectors, which will witness growth at breakneck speed in the future.

 Anuj Puri, Country Head & Chairman, Jones Lang LaSalle Meghraj, says, “However the industrial growth cannot be assessed by a short term analysis. Any industrial growth has a long-term perspective and has to be looked at taking the long- term development into consideration. The current crisis does have its effect on the industrial sector but this effect is temporary, as the demand slug will not remain constant. Consumer goods demand will again start growing and will certainly drive the production in the coming years.”

Abhishek K Gupta, Head of Operations, Research and REIS, Jones Lang LaSalle Meghraj, says, “The growth of the Indian manufacturing sector through the development of SEZs, industrial corridors and townships is expected to create a significant impact in the real estate market. The residential and retail sectors, which act as value-added sectors to the manufacturing industry, will also experience growth. Residential areas that have seen tremendous price increases in the past two years are Panvel in Mumbai - risen by 87 per cent, Northern area in Hyderabad - by 75 per cent, GST Road in Chennai - by 125 per cent, Pimpri and Chinchwad in Pune - by 87 per cent and Manesar in the NCR region - by 92 per cent. Over time, we can see the emergence of numerous industrial corridors along various regional belts to significantly bolster demand for real estate. 

The industrial sector plays a pivotal role in the overall economic performance of the nation. Over the last two years, the industrial sector has been the second highest contributor to India’s GDP and will continue to remain an important contributor to the economy. The slowdown in industrial growth was mainly in the manufacturing sector, and as per the data released by RBI in August, its relative contribution in the index of industrial production (IIP) growth has declined during 2006-07 from 91.1 per cent to 89.5 per cent during 2007-08. The decline in production of consumer durables segment which performed well in the last few years could be attributed to slowdown in demand which is directly related to the slowdown in economic growth and negative consumer sentiments. Certain industry types have attributed the slow demand to hardening of interest rates.

Land value appreciation will depend on the type of industry and the facilities that will be developed in an area. The growth of fast-growing industries like automobile, telecom, semiconductor, and drugs and pharmaceuticals will automatically be reflected on real estate through the expansion of existing companies and new start-ups. These emerging industries are also expected to penetrate into the smaller towns and cities of India. The government’s initiatives to improve interconnectivity betweens towns and cities through projects like the GQ and new airport and seaport developments in major cities will significantly cater to this growth.

The development of industrial clusters along in dustrial corridors like the DMIC will improve economic activity, resulting in the appreciation of land values. 

The government is also working towards improving manpower conditions across the country through the development of technological and training institutes. It is facilitating the development of these institutes through allotting land and giving tax incentives on land. As such, it is observed that India is transforming and striving strongly for the growth of the industrial sector, and it is envisaged that this growth will lead to the overall economic development of the region.

                                           Courtesy:- HT dtd:- 1^st Nov 2008