Trends Of Real Estate Sector In INDIA

Shrutika Nidhi Chaudhary Nidhi Kampani Neha Rhythm Ritika

Group members:

The real picture…Before…

After…..

Real estate in India was unorganized.

Lack of uniformity in local laws and their application.

Non availability of bank financing, high interest rates, and transfer taxes .

Lack of transparency in transaction values.

Greater organization and transparency.

Greater availability of financing for real estate developers.

Regulatory changes permitting foreign investment.

Hightened consumer expectations influenced by higher disposable incomes.

Increased globalization.

key growth driver of the country’s economy. One of the highest FDI-attracting sectors in India. Growth in the services sector DLF, Unitech, AnsalProperties, K. Raheja Corporation and

Parsvnath Developers Emaar, Ascendas, Keppel Land, Tishman Speyer and Nakheel

Group.

Market overview:

Real Estate Sector

Market Segments:

Residential space

Commercial space

Retail space

Hospitality space

Special economic zones

Demand pull factors: Robust and sustained macroeconomic growth Upsurge in industrial and business activity,

especially in new economy sectors. Favorable demographic parameters. Significant rise in consumerism. Rapid urbanization. Availability of a range of financing options at

affordable interest rates.

Growth drivers:

Impact of demand pull factors: Increasing occupier base. Significant rise in demand for office/industrial

space. Demand for new avenues for entertainment,

leisure and shopping. Creation of demand for new housing.

Impact:

Policy and regulatory reforms Positive outlook of global investors. Fiscal incentives to developers. Simplification of urban development guidelines. Infrastructure support and development initiatives from the

GoI.

Supply push factors

Impact of supply push factors: Entry of several domestic and foreign players; increasing

competition and consumer affordability. Easy access to project-financing options. Increased developers’ risk appetite and large-scale

development. Improved quality of real estate assets. Development of new urban areas and effective utilization of

prime land parcels in large cities.

Impact:

High growth projections Multiple growth drivers Rapid evolution of the sector Increased foreign investments Well defined regulatory framework Demand for affordable housing

Advantages in India

Modification in the rent control act to provide greater protection to home owners wishing to rent out their properties.

Rationalization of property taxes in a number of states. The proposed computerization of land records.

Policy and regulatory framework:

Budget analysis: Policy impact Direct tax impact Indirect tax impact

Continued….

The confederation of real estate developers association of India(CREDIA)

Builders Association of India

Industry associations

DEMAND DRIVERS

The trends have benefited from substantial recent growth in Indian economy, which has stimulated demand for land and developed real estate across the real estate industry.

Real Estate Sector In India

Residential real estate development

Commercial real estate development

Retail real estate development

Tourism and Hospitality industry

Special economic zones

Infra structure development project

Commercial Real Estate Development

Demand increase for commercial space

Continue to grow and additional employment

By increasing the revenue of companies

By rising disposable incomes Rapidly growth middle class Low interest rates Fiscal incentives Hightened customer expectations

Residential Real Estate Development

By demographic factors By increasing disposable incomes Changes in shopping habits Entry of international retailers Growing no. of retail malls

Retail Real Estate Development

The hotel industry in India has grown as a result of Growing economy, increased business travel and tourism

The hospitality segment has witnessed robust demand growth, primarily due to strong growth in tourism, including both business and leisure travel.

India is becoming increasingly popular as a medical tourism destination.

Hospitality players are diversifying into budget hotels and service apartments.

Tourism and Hospitality

Policy Of Real Estate In India.

Conditions for Development • Minimum 10 hectares to be developed for

serviced housing plots • For construction-development projects, minimum built-up area of 50,000 square meters prescribed • In case of a combination project, any one of the above two conditions should suffice • At least 50 per cent of project to be developed

within 5 years from date of statutory clearances

Key regulations for FDI in real estate in India

Guidelines for FDI In Real Estate in India Conditions for Investment • Minimum capitalization of US$ 10 million for wholly owned subsidiaries & US$ five million for

joint ventures with Indian partners • Infusion of funds within six months of

commencement of business • Original investment cannot be repatriated

before a period of three years from completion of minimum capitalization.

• Investor may be permitted to exit earlier with prior government approval.

Key regulations for FDI in real estate in India

Guidelines for FDI In Real Estate in India Miscellaneous Conditions • Investor not permitted to sell undeveloped plots • Project to conform to norms and standards laid down by respective State authorities • Investor responsible for obtaining all necessary

approvals as prescribed under applicable rules/by-Iaws/regulations of the State

• Concerned Authority to monitor compliance of above conditions by developer

Key regulations for FDI in real estate in India

Key Highlights

• Several global investors and developers keen on

investing in India.

• FDI inflows estimated to be US$ 19.5 billion in 2007 and, US$ 7.5 billion in the first five

months of 2008.

• FDI in the sector expected to touch US$ 25 to 28 billion by 2011

FDI experience in Indian real estate

2009-2010

2008-2009

2007-2008

2006-2007

0 2 4 6 8 10 12

real estateother sectors

Real estate share in FDI

Key Highlights • Majority of the direct investment is from West Asia with overall commitment of US$ 9.7 billion from Dubai based developers.

• Further, investor from USA and Europe have shown keen interest with the launch of several

RE funds.

FDI experience in Indian real estate

59%25%

10%

2%4%

DubaiIndonesiaSingaporeMalaysiaothers

Major countries investing in Indian Real Estate

Rationalization of process : • Rationalization of the regulations in governance affecting real estate • For example, improved land records,

rationalizing stamp duty across states, simplifying urban development guidelines etc. Social Infrastructure: • Focus from both public and private sector • Different models for foreign investment being

evaluated.

Regulatory and Policy interventions

Government incentives: • SEZ Act, 2006 provides major Tax benefits, Tax relief and Single window clearance and approval Urban Infrastructure Development: • Focus on urban infrastructure • Urban Reform schemes * JNNURM * City Challenge Fund * Mega Cities Fund

Regulatory interventions

Policy Impact • NHB to introduce reverse mortgage

• Senior citizens to receive monthly income against their property

• They do no have to repay the loan

• Regulations for mortgage guarantee companies

• Guaranteeing mortgages on the behalf of the banks and finance companies.

Budget analysis

Direct Tax Impact • Reduction in tax burden due to increase in

threshold limits on individual tax slabs • No change in corporate income tax rates and

surcharge. • 100 per cent tax holiday for five years for hotels

and convention centres in World Heritage sites if

they start functioning before March 31, 2013. • 100 per cent tax holiday for five years

anywhere in India if they start functioning before March 31,

2013. • No tax regime proposed for Real Estate

Investment trusts.

Budget analysis

IndirectTax Impact • General rate of excise duty reduced from 16 per

cent to 14 per cent. • Excise duty revised on bulk cement from US$

10 per tonne to 14 per cent of assessable value or

US$ 9.8 per tonne, whichever is higher. • No change in service tax rate • Seven new taxable services included in the

service tax net • Decrease in customs duty rate on imports

under project import scheme from 7.5 per cent to

five percent.

Budget analysis

Prospects & Problems OfReal estate Of India

REAL ESTATE BUSINESS INCLUDE

APPRAISALBROKERAGEDEVELOPMENTPROPERTY MANAGEMENTREAL ESTATE MARKETINGRELOCATION SERVICES

PARTICIPANTS OF REAL ESTATE OF INDIA

Owner/userOwnerRenterDeveloperRenovatorsFacilators

Part 1- Fundamental Factors Determining Value Of Real Estate

DEMANDSUPPLY ANALYSISPROPERTY

PART 2-Causes For Present Real Estate Boom

Foreign Funds.

Real Estate Exposure Of Banks.

BARRIERS IN GDP GROWTH

CURRENT TRENDS

STATE-REAL ESTATE 2006

Geographic de-concentration of real estate activity from large metros. Green buildings are gaining popularity. Affordable housing is still the buzzword. Recovery in demand for luxury projects.

KEY TRENDS

Growth not only in the metros, Also in the surrounding regions.

The suburban areas developing at a faster pace .

Global Investors Interested in Indian Real Estate: Cushman & Wakefield

NRIs and foreign investors eyeing Indian property as lucrative

World’s renowned banks like Morgan Stanley, etc. now investing in the Indian Real Estate market.

Tremendously hiked prices and large returns assured.

TRENDS

Steady expansion and development in the IT sector of India.

Adoption of Foreign Direct Investment (FDI) policy.

Easy access to bank loans. Growth in Indian economy.

CURRENT TRENDS

Pune Nagar Road - the preferred location. Economically vibrant areas of the city on the

Eastside. Development taking place and the name is

gaining national and even international prominence.

Nagar Road is experiencing the full impetus of development in all important respects.

Growing IT/ITES/BPO sectorsalong with the rapid improvement of physical andsocial infrastructure in city

LATEST NEWS

Bangalore The Metro countdown is on. Next couple of years - the metro network is scheduled to be

complete. The Metro promises to be a game changer for the city’s

property sector. The Outer Ring Road (ORR) and the six-laning of Bellary

Road The prospects from the Metro are much more. While these roads brought connectivity to specific localities in the

vicinity, the Metro networks the entire city.

LATEST NEWS

STATE-REAL ESTATE 2011

Suffer in second half of the current financial year.

Drop in home sales and a slowdown in office leasing transactions.

Mumbai and NCR home state decline due to high home loan rates and property prices.

Realty Firms Continue To See Drops In profits.

Attaining a twofold increase. Market experts predict that the coming

years will witness a boon in the Indian Real Estate Scenario

Property business will turn out to be a cash processing machine.

Anyone investing inproperty is sure to reap large profits.

FUTURE PREDICTIONS

MAJOR PLAYERS

ZZ

The

Ansal

Group

…since 1965

COMPANY PROFILE

Conglomerate of 35 companies with Ansal API, AHCL, ABL

All three engages in real estate development activity

Employing 5000 People nation wide

All three companies have acquire the ISO 9001-2000 certificate

…since 1965

FUTURE PROSPECTS

Intend to shift its focus to value added development or constructed property

Expansion into hospitality

Focus on premium location in TIER 211 cities of north India

The

Ansal

Group

The

DLF

Group

…since 1946

COMPANY PROFILE•The DLF group is leading

real estate developer based in New Delhi, India

The

DLF

Group

…since 1946

FUTURE PROSPECTS•Increase land reserves in strategic locations •Expand core business verticals nationally•Diversify into SEZ development•Diversify into hotel development•Enhance execution capabilities

•Established in 1972 by group of Engineers•Initially started consultancy firm for soil and foundation engineering•Established Real Estate Business in Gurgaon in 1986.

Establishment

unitech

COMPANY PROFILE

The group’s principal activities are:ConstructionReal estate developmentConsultancy in related

areas.HotelsInformation technologyElectrical transmission

Mr. Ramesh Chandra the

Executive Chairman of

Unitech

Ajay Chandra, son of Mr. Ramesh Chandra, is Managing Director of Unitech.

Sanjay Chandra, the other son of Mr. Ramesh Chandra, is also Managing Director of Unitech

FUTURE PROSPECTS

Achieve high growth by establishing a pan India presenceFocus on major economical centersFocus on profitable projects that maximize returnsUndertake large mixed-use projects like integrated township in the suburbs of main cities.

Company profile:

PDL Chairman:

Parsvnath Developers Ltd.Parsvnath Developers Ltd.

PDL is one of the leading real estate companies in India

Diverse business portfolio of commercial complexes, shopping mall, integrated township and group housing

Strengthening its position in core operations if real estate

First real estate company to achieve a NAREDCO-ICRA DR 2-rating

…since 1990 …since 1990

Pradeep Jain

Parsvnath Developers Ltd.Parsvnath Developers Ltd.

Plans to have at least 17 hotels across 13 cities operational by 2011

Expanding footprints in newer locations across India

Participation in re-development of land

Exploring possibilities of power generation & distribution.

Exploring infrastructural projects

…since 1990 …since 1990

Future prospects:

PDL Chairman: Pradeep

Jain

Parsvnath Developers Ltd.Parsvnath Developers Ltd.

PDL has a pan-India presence and an experience of more than 17 year in offering state of the art construction

…since 1990 …since 1990

Marketing Network:

PDL Chairman: Pradeep

Jain

OMAXE Limited

COMPANY PROFILE: Began life as a civil construction

and contracting company Executed more than 120

Industries, Institutional, Commercials, Residential & Hospitals.

Entered REAL ESTATE DEVELOPMENT business in 2001

…since 1989

Rohtas Goel, CMD, Omaxe Ltd

OMAXE Limited

FUTURE PROSPECTS: Planning to invest Rs. 20 billion in its

hotel project in 11 cities across India. Also planning a Rs 20-30 billion

REAL ESTATE PROJECTS in Punjab. Also planning to invest 2 billion in

DUBAI Real Estate projects They have exhaustive plans to

upgrade living environs of smaller cities in North India in next 5 years.

…since 1989

Sobha Developers Limited

Year of Establishment : 1995 By Mr. P N C Menon

Company profile: Pioneered the concept of truly

international quality in construction industry.

ensured consistent international quality to costumers resulting the industry benchmark for international quality

Built residential, contractual and commercial projects

Accepted as the industry benchmark for world class building techniques and quality standards

Enjoys an ever widening reputation for reliability, dependability and honesty

Sobha Developers Limited

Year of Establishment : 1995 By Mr. P N C Menon

Future Prospects: They anticipate building a presences in

varied industries including hotels and resorts. Hypermarkets, Home stores and building materials.

Emmar MGF

Company profile:

It’s a joint venture b/w Emmar properties PJSC of Dubai and MGF Development Ltd.

Development in residential, commercial, retail and hospitality sectors

Also identified healthcare, education and infrastructure as business line

Aspects of real estate development , such as land identification and acquisition, projects planning, designing, marketing and execution

...commended operation in India in 2005

Largest privately held real estate in the World

It has 195 offices in 55 countries around the globe and 11,000+ talented professional

Involved in every stage of the real estate process, from strategy to execution

The firm represents clients in buying, selling, financing, leasing, managing and valuing assets

…since 1917

Company Profile:

CUSHMAN & WAKFIELD

CUSHMAN & WAKFIELD

Future Prospects

•Consultancy Services

•Transaction Services

•Capital Markets Group 

•Client solutions •Project

Management •Facilities and

Property Management 

Cushman & Wakefield India offers a full range of

real estate services combining local expertise

and experience with technology and standards

of service that are well established and consistent

across all Cushman & Wakefield's offices

worldwide. Our main service offerings are:

…since 1917

Opportunities There is a shortage of 12 million housing units in

urban areas There is a scope for 400 township projects over the

next five years spread across 30 to 35 cities, each having a population of 0.5 million

Total project value dedicated to low and middle income housing in the next seven years is estimated at USD 40 billion

Instrumental such as mortgage-backed security(MBS)

Commercial and collateralized debt obligations(CDO) are being use to make capital work more efficiently