Real Estate Sector Still dominates In Investment In India.

The real estate sector may not be performing well in the context of economic slowdown, but it accounted for a sizeable proportion of total investment as of December 2011, in seven of the top 20 well-performing states in terms of investment, an ASSOCHAM study found.

Reflecting a realty rush bordering Delhi, particularly from Gurgaon, Haryana saw almost 50 per cent of its investment coming in the real estate sector. The other states attracting sizeable interest in the sector included Uttar Pradesh, Maharashtra, Gujarat, Karnataka, Andhra Pradesh, Tamil Nadu, Rajasthan and Punjab, according to the study on investment pattern mostly in the last one decade.

It found that the investment in real estate has a very strg nexus with the growth and investors’ interest in the services sector. The services sector also attracted a good chunk of investment in the states which were fancied by investors in the realty sector.

For instance, the Chamber Secretary General D.S. Rawat said, in Haryana as of December 2011, the services sector accounted for about 34 per cent of its total investment. Similarly, in Maharashtra as much as 37 per cent of its total investment went into the service sector, which in any case contributes 57 per cent of the national gross domestic product.

In Gujarat, the services accounted for 16 per cent of total investment. It was 30 per cent in Uttar Pradesh, 38.5 per cent in Punjab, 30.8 per cent in Tamil Nadu and 24.6 per cent in Karnataka.

It is only in Kerala and Jammu and Kashmir where there was not much of a relationship between investment in services and real sector sectors. For instance in Jammu and Kashmir, fresh money committed towards services sector accounted for 56 per cent of the total investment, but in the realty sector it was just about 0.7 per cent of the total funds invested in the state.

As Gurgaon bordering Delhi has become a hub of domestic and multi-national companies, mostly in the services sector like IT business outsourcing, “the real estate development was the focal point in Haryana as the sector attracted 49.7 per cent of the total investment in the state,” the study pointed out.

What Gurgaon has done to Haryana in terms of investors’ interest in the real estate sectors, Noida and Greater Noida have done it for Uttar Pradesh, though on a lesser scale as the state is many times bigger than Haryana.

In Uttar Pradesh, the realty sector accounted for 22 per cent of the total investment in the state.

The growth of the services sector, mainly driven by IT exports, tourism and restaurants, has also led to investors rushing to build housing and commercial space in the areas which have remained in the forefront of economic development.

This is visible in Andhra Pradesh, Tamil Nadu, Maharashtra, Gujarat and Karnataka, the ASSOCHAM study said.

Of its total investment of   Rs 4.98 lakh crore as on December 2011, the real estate sector accounted for Rs 2.48 lakh crore in Haryana, which has other towns like Faridabad, Sonepat, Ambala, Panipat and Karnal where the realty sector is growing fast, even though they are no match for Gurgaon.

The investment patterns, according to the ASSOCHAM study, suggests that the strategy adopted by progressive states is that they invest in development of the primary sector. “The strategy envisages use of public investment exclusively for the development of primary sector and private investment for the industry and services sectors. Progressive states have mainly followed such a strategy and created quality infrastructure networks and investor friendly policy framework,” it said.

In line with this strategy, states have gradually been confining themselves to the role of regulator while the private sector develops and manages the industry and services sectors.

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