Summit Notebook

A bubble in the real estate market?

Have you tried buying or renting a house in Mumbai recently? If so, then I won’t be surprised if you think real estate prices are plain expensive, and incredibly so. But that’s almost always been the case in India’s commercial capital. After all, when was the last time someone told you they got a cheap house in the city?

So is the real estate market in a bubble? We asked Adi Godrej, the man who controls Godrej Properties, if things could get bubblicious. This is what he had to say: “I don’t think we are in a bubble, because demand is strong, but we could get into a bubble.”

Godrej, whose family fortune is estimated to be about $5.2 billion, doesn’t really care if prices go up in south Mumbai’s old-money neighbourhoods such as Malabar Hill or Altamont Road, where Reliance Industries chairman, billionaire Mukesh Ambani, is building a 27-storey $1 billion home.

“I would be more disturbed if middle-level and lower-level housing in Mumbai were to go up much,” Godrej told the Reuters India Investment Summit in Mumbai.

Godrej Properties, which is developing a lot of what is termed ‘affordable housing’, expects revenue to jump more than 50 percent in the fiscal year ending in March as rising incomes boost demand for housing.

If prices continued to increase at current supply levels, the Indian residential market could head into a “bubble.”

The company, part of the $2.5 billion diversified Godrej group, defines ‘affordable housing’ as an apartment that carries a price tag of less than 2,500,000 rupees or $50,000. Is that within your budget?

Infrastructure still top-of-mind in India

On Monday, we kick-off the 2010 India Investment Summit. We’ll have exclusive interviews in Mumbai and Bangalore. In 2006 we held the first Reuters India Investment Summit. It was my first time in India. I’ve had the privilege to return every year. How time flies. Here we are four years later. Some of the key players may have changed but the big, over-arching theme is still the same: Infrastructure. It’s the key to realizing the country’s potential but bureaucracy, tough financing and hesitant overseas investment have slowed development in the sector, calling into question the future of India as a powerhouse.

India has had only mixed success in its efforts to accelerate construction of roads, bridges and power plants. The statistics are mind-blowing…the country is growing at 8.5% and has a population of 1.2 billion that is making a mad-dash from the countryside to sprawling cities. Call them growing pains…in India’s expanding cities there is an acute need to speed project approvals, implement new financing models and attract overseas investment for much needed infrastructure. But, while the business opportunity is tremendous investors looking to India as a way to play the emerging markets are wary given the history of missed deadlines and red tape that makes getting projects completed a challenge.

Is red tape getting better or worse? Which sectors are attracting most interest? How do returns compare with similar projects globally? How do sector companies attract foreign investment in large projects? Are the challenges forcing investors and developers to look overseas instead?

These topics and more will be the key points of discussion at the Reuters India Investment Summit in Mumbai and Bangalore September 27-29.

To read our exclusive stories and analysis starting September 27 copy and paste the link below to your browser: www.reuters.com/summit/IndiaInvestment10