Building a Dream

The biggest threat, though, is a crash in the property or stock market. When U.S. property and media tycoon Sam Zell visited India in April, he told local real estate executives that they were "on the brink of excess" and that the boom could end in a bust. Real estate stocks plunged as much as 50% in a general market sell-off last spring, while property prices have fallen 20% or so in some areas in the past six months. Both the government and the Reserve Bank of India are trying to cool the real estate sector without crashing it. The RBI has raised interest rates six times in the past 18 months to try to rein in inflation, which peaked in March at an annual rate of 7%. The Securities and Exchange Board, meanwhile, has tightened up regulations on foreigners investing in real estate firms ahead of public listings. All that has made it harder and more expensive for Indian builders to raise money.

Considering the challenges, it's hard to see how DLF's spectacular growth rate can be sustained for long. In its fiscal year ending March 31, 2007, DLF reported that its profit grew more than 1,000%, to $470 million, while sales tripled, to just under $1 billion. After a stupendous two-year run, DLF's stock is unlikely to move much further, says Mukesh Agarwal, a manager at Indian financial-services firm HDFC Securities. "The upside may be limited."

Singh doesn't see it that way. "Urban development in India ... will be the biggest sunrise industry that any country has seen in any part of the world," he says. The trend is being driven by macro forces. As the country becomes richer and more urban (the number of people living in cities will rise to 461 million by 2025, from 286 million today, according to the Asian Development Bank), demand for housing should go right on booming.

As its economy grows, India will need millions more square feet of offices as well. Industry analysts estimate that India has less modern urban office space than a single large American city. "It's not a bubble," says Arjun Divecha, the California-based manager of investment firm GMO's $15 billion emerging-markets fund. "The reason prices have risen so rapidly is that there has been so little increase in supply. If you look at the experience of other emerging markets, the real wealth escalator has been real estate, and I expect the same in India."

So does Singh, who laments that in its first 60 years, India's philosophy was to "think small, make small buildings and never to think that we could make bigger things, better things." He pauses, looking old when he stops, but animated and younger as soon as he begins talking again. "I ask you, Why can't we be excellent?"

INDIA'S RISING REALTY

OFFICE RENT IS WORLD-CLASS COSTLY ...

London (West End) $2,597

Tokyo (Inner Central) $1,745

Mumbai $1,490

Moscow $1,298

New Delhi $1,251

Paris $1,202

Hong Kong $1,046

Ranked by annual occupation cost per sq m

... AND HOME PRICES ARE SOARING TOO [This article contains a chart. Please see hardcopy of magazine.]