India can Face Housing Shortage by 2012- Ernst and Young

India will face shortage of over 26 million houses by 2012, which would lead to spurt in housing prices as demand-supply gap widens amid rising purchasing power of the middle class people, a consultancy firm has said. “With India back on a high growth trajectory, demand for commercial and residential space is likely to witness an upward trend,” consultancy firm Ernst and Young said in a report.

Demand for residential property is rising sharply because of growing young working population, increasing urbanisation, declining household size resulting in more nuclear families with growing household income and improved availability of loans. Co-chairman of FICCI Real Estate Committee Pranay Vakil said over $1.2 trillion investment was needed to meet the rising demand for urban development.

He said that the urban population in India would nearly double to 600 million in the next 15 years from nearly 350 million now, and this would put massive pressure on urban infrastructure, including roads, power and water supply. Dean Hodcroft, partner-head of real estate for Europe, Middle East, India and Africa at Ernst and Young, said India needed institutional reforms to attract more investments in infrastructure development projects.

He said the country’s macro-economic fundamentals were in great shape and it was poised to reap huge benefits of growth. “India needs to fix the institutions to attract more private investments, including foreign investments,” he said. Comparing the investment climates in India and China, Hodcroft said: “While it is easy for investors to get into China, it is extremely difficult to get out. In contrast, it took time for foreign companies to enter India, but exiting is comparatively much easier.” He noted that India was lower ranked in areas that were easy to fix.