KEY POINTS:
What's the connection between the legendary American comedian Bob Hope and Indian property developer K.P. Singh?
Hope, who made a fortune in real estate, would drive to the outskirts of Las Vegas, buy up plots of land and wait patiently for the city to grow.
You could say that Singh employed the same technique - on a gargantuan scale. In the 1970s he bought 1000ha of scrub and farmland on the outskirts of India's capital, New Delhi.
Today Gurgaon is a glass-and-concrete jungle that stretches for many kilometres out of the capital.
Singh's DLF is India's largest real estate developer and Singh is worth an enormous US$33 billion ($44.6 billion). If that isn't enough, Singh, 76, has gigantic plans for the future that could dwarf the high-rises and sprawling corporate towers he has already put up.
This month DLF announced that it would partner a Dubai-based developer to develop a huge US$12.5 billion township near Bangalore in south India.
And that's only one part of the DLF story. It's planning to build 18 malls in the next three years, including one mammoth one called the Mall of India - which will be 370,000 sq m and bigger even than anything the Chinese have put up so far. The price of this shopping spree: almost US$4 billion.
The company is also expanding into hotels in partnership with the Hilton group - and bidding for a score of giant infrastructure projects such as airports and townships around India.
Real estate developers around the world are often guilty of over-hyping themselves a la Donald Trump, who happens to be coming to India next month for a real estate conference. But the scale of India's real estate boom is so huge that there's no need to overstate the case. Even if you subtract half or more of all the plans that are on the drawing board there's a vast amount of activity.
In real estate terms it's even rated the top emerging market by consulting firm Oxford Business Group. The Kuwait Investment Company, one of the most powerful investors in the oil-rich sheikhdom, reckons the Indian real estate sector will grow 700 per cent in the next decade.
"The Western world is fully built up. In that sense demand has been met. In India demand has not been met," says Ashwin Ramesh, partner at Primary Real Estate Advisers.
The boom is fuelled by the vast amounts of money coming into the sector. In the past 18 months a score of Indian real estate firms have raised about US$3 billion on London's Alternative Investment Market.
Closer to home, DLF raised US$2 billion in June in the country's biggest ever IPO. Adding to this flow, India opened its doors to foreign capital in the real estate sector about two years ago and the money has been pouring in ever since.
The boom is bringing the world's financial giants to India's doorstep. Blackstone, the muscular private equity firm, has a US$1 billion real estate fund and others, like Goldman Sachs, Merrill Lynch and J.P. Morgan, are also treading into the market, buying small exploratory stakes in middle-sized developers.
Real estate consultant Cushman & Wakefield reckons foreign funds and institutions have already committed about US$30 billion to the Indian real estate sector.
One man who isn't happy about the frenetic building activity is Reserve Bank of India Governor Yaga Venugopal Reddy. Since October 2004 he has pushed up interest rates seven times. His biggest worry is that a bubble is building up in the real estate sector.
Reddy has certainly doused the hopes of many would-be homeowners who have put off purchases because of a combination of soaring real estate prices and stiff interest rates.
But the building boom is still rising to new heights. Take Delhi's Unitech, a developer that was started in a modest way by Ramesh Chandra, an engineer from one of India's elite Indian Institutes of Technology. In May his company was worth US$11 billion and its share price had rocketed by more than 800 per cent during the last financial year. Like its cross-town rival DLF, Unitech is also expanding into everything from townships to hotels, malls, amusement parks and also special economic zones.
The Indian giants won't have the building sites entirely to themselves. There are a handful of cash-rich foreign giants such as Dubai's Emaar also jumping into the fray. Emaar has turned its attention to India in a big way and has just announced it will soon be holding a US$1 billion IPO in the near future. It's also planning a giant shopping mall in Gurgaon that at 340,000 sq m will be slightly smaller than the DLF effort. Emaar also paid top dollar in Hyderabad, where it plans to build a sprawling residential-leisure complex which will include the country's largest golf course.
What has triggered all this frenetic building activity? That's easy enough to figure out. Take the example of India's largest software company, TCS, which is hiring 32,000 new recruits this year (that works out to 87 a day). It's hardly surprising that TCS is also building new campuses and office complexes at top speed to house these new workers.
Also, as Indians get more affluent and access to credit gets easier they're reaching out for the middle class dream and buying their own homes in ever increasing numbers. The figures are iffy but it's reckoned that more than 19 million houses are needed to catch up with potential demand.
Are there warning lights flashing in the real estate sector? Drive to Gurgaon and you'll pass half-a-dozen malls that are already open and about 15 more that are under construction.
It's still to be demonstrated that Indians have such a huge appetite for shopping.
The big building boom started in Delhi, Mumbai and Bangalore, the country's fastest growing metropolises. Now it has moved to the smaller cities (there are about 30 cities in India with a population of more than 1 million) because growth is slowing slightly in the metros. Says a DLF spokesman: "Every real estate company is now moving from the metros to the tier one cities."
But the sector is still looking at huge growth. In south India, for instance, the Karnataka government says it wants to build five satellite cities that would take the weight off Bangalore, which is becoming hopelessly overcrowded. Similar blueprints are being drawn up all over the country and there are also plans for about 100 special economic zones.
That's why industry association Assocham reckons the realty sector will grow from about US$70 billion at present to about US$120 billion by 2010.
But being a real estate developer is a tricky game and boom can turn to bust in the blink of an eye. For the moment, though, nobody's even thinking about that possibility.
