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Property prices are rising fast as the tech boom spreads across the country as reported by Fortune.

Property prices in India are rising fast, and not just in the biggest cities. As the tech boom spreads across the country, as more Indians buy homes, and as the economy grows at faster than 8% a year, real estate is attracting more investors, many of them from abroad.

"India is one of the last few countries where there is primary demand for real estate rather than individuals trading up," says Rajiv Sahney, who runs the India operations of New Vernon Advisory, a $1.4 billion New Jersey hedge.

Merrill Lynch forecasts that the Indian realty sector will grow from $12 billion in 2005 to $90 billion by 2015. "India is the most exciting real estate market in Asia," says Michael Smith, head of Asian real estate investment banking at Goldman Sachs. "It's one of the last major countries in Asia with an improving market."

Real estate funds set up to invest only in India have already raised more than $2.7 billion. And new funds worth as much as $4 billion are being planned by J.P. Morgan, Britain's Knight Frank, and other foreign investors. Warburg Pincus, the largest private-equity investor in India, says it is spending nearly a third of its time studying opportunities in this area. And Deutsche Asset Management recently hired someone to head its real estate activities in India. "As the largest active managers of real estate funds in the world," says Edouard Peter, head of Deutsche Asset Management Asia Pacific and Middle East, "we expect to be actively raising and investing funds in real estate in India.

The government’s decisions to allow 100% foreign direct investment (FDI) and the entry of venture funds in real estate are expected to add to the growth momentum created by affordable financing options and rising disposable incomes. Further, there are indications that obstacles such as the absence of investment instruments in real estate are likely to be removed. Already, real estate mutual funds have been allowed to be floated in a move industry observers believe will pave the way for the setting-up of Real Estate Investment Trust-like structures.

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