India has witnessed an emerging middle class in recent years due to the country's economic boom.

The Indian economy is growing at a rate of 8% per year.

Property laws are underway to improve the market.

India is attracting international property players.

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A 'real' giant

According to credit ratings agency, CRIS-Infac, demand for hotel rooms will grow at a compounded annual growth rate of 10% over the next five years resulting in 2.9 million hotel rooms compared to today's 1.2 million.

While this growth is significant across the entire country, there are a number of areas which are proving more popular for developers and investors. Jones Lang LaSalle divides the Indian property market into three distinctive tiers.
Tier one cities include Mumbai, Delhi and Bangalore which all remain the preferred option for multinational companies entering the market for the first time.

Tier 2 cities are Hyderabad, Chennai and Pune, all of which are providing highly attractive business locations and tier 3 cities represent 18 emerging cities, state capitals, which are predicted to have the potential to emerge as important real estate markets over the next five years.

"One of the most striking features is the geographic expansion seen over the last five to seven years. There is a lot of activity in the primary cities such as Mumbai, Bangalore and Chennai, there is a new trend of expansion to other locations such as Calcutta and Hyderabad, all of which have grown dramatically over the last five years," says Grover. "The tier 3 cities are also emerging destinations with great potential to grow," she adds.

Despite the country's significant boom in recent years there are a number of factors holding India's economy back. A report by the Economist describes its problems, "from a government that depends on communist support to the caste system, power cuts and rigid labour laws."

In its predictions for the Indian economy, the Economic Intelligence Unit notes that like so many other countries across the world, India will continue to be plagued by the current US credit crunch.

"The gloomy outlook for the US economy will have a negative impact on the Indian economy, but the slowdown in India is expected to be shallow, with real GDP growth decelerating to 7.8% in 2008-2009 and 7.2% in 2009-2010."

India still lacks transparency and liquidity but according to a Jones Lang LaSalle's latest Global Real Estate Transparency Index (2006) the region has shown "significant improvements" in real estate transparency over the last three years.

"India is moving ahead in improving transparency, fuelled by interest from international stake holders and more institutional involvement from the capital market side institution leaders and investors," says Grover.

Good news for developers and investors alike.

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