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An upswing in the business process outsourcing industry in India will create the need for 200 million sq ft of additional real estate space in the country over the next five years, a global consultancy firm has predicted. The overall trend for real estate in India is very positive with an expected increase in real estate prices for the next two years, said the study by US-based NAI, formerly New America International, in its latest global market report.

A possible liberalisation could make India one of the most preferred locations for foreign real estate investment looking at the steady increase in economy and one of the most secure locations in the Asia Pacific regions, the study added. The other positive factor is the emerging interest of foreign investors and international real estate funds in India, said Abhijit Malkani, regional director of NAI's India operations.

The market is upbeat about a hope of liberalisation in the investment policy in the near future, he said, adding the creation of 3.5 million new jobs in the IT sector by 2009 would require 10-20 million square feet of space per annum. The residential section will get a boost to house this new prosperous workforce. These business relocations will drive the local housing demand,Malkani told IANS, quoting the study covering Delhi, Mumbai, Kolkata, Chennai, Hyderabad and Bangalore. The National Capital Region (NCR) would consolidate the gains in property prices and would continue to witness an upward trend in the next two years, with a return on investment of between 11 and 18 per cent per annum, the study said.

The Gurgaon region has been the hotspot for commercial expansion and residential relocations. This region has seen capital values appreciate in the excess of 40-50 per cent, the study added. Mumbai, India's financial capital, remains a land of opportunity and the recent availability of retail and commercial space in the mill areas has ensured increased supply of real estate space. The positive move towards suburban areas like Andheri and Bandra Kurla has increased demand in these areas. The expected returns in the Mumbai region for the next year would be a return on investment of around 12-18 per cent, it said. Bangalore, the study says, continues to be the favourite destination for the IT industry and this market, thanks particularly to the high income among the youth, has completely changed the valuations of real estate, the study said. Some of the suburban areas in Bangalore have seen capital appreciation close to 30-40 per cent in 2004. The average return on investment in Bangalore should be between 13 and 19 per cent, which is surely one of the highest in all metros.

Chennai too has witnessed hectic activity in the commercial real estate market in the first three quarters of 2004 with the IT and IT-enabled services sector being the key drivers of the commercial property market. Large developers are aggressively developing integrated townships in and around the city and the residential real estate market is on an upswing, driven by low interest rates and a general boom in the economy. The expected average returns from the Chennai market would be in the range of 10-15 per cent over the next two years, said the study. Even Kolkata, the capital of Communist-ruled West Bengal, has come out of its shell and is seeing a lot of high quality development. The city is also the preferred list of IT firms due to its conservative nature and low cost of living, it said. More than 25 large size IT companies have expanded into the Kolkata region. The expected rate of return in Kolkata should be an average of 12-17 per cent per year for the next couple of years, the study said. The Hyderabad market has stabilised in value due to lack of investment activity. This trend should continue for 2005 keeping in view the change in government, said the study. The demand, however, has been steady for large spaces, particularly suite and campus type complexes, from the IT-enabled services segment and research and development industry.
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