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Real Estate India - A Sector Analysis

Posted By - Mr. Rahul Singh- On-18/08/10
The size of the real estate industry in India is estimated by FICCI, to be around US$ 12 billion. This
figure is growing at a pace of 30% for the last few years. Almost 80 % of real estate developed in
India, is residential space and the rest comprise office, shopping malls, hotels and hospitals. This
double-digit growth is mainly attributed to the off-shoring business, including high-end technology
consulting, call centers and software programming houses which in 2003-04, is estimated to have
accounted for more than 10 million square feet of real estate development. This is the ideal time to
invest in the country as policy makers have begun to emphasize on developing adequate
infrastructure for the country. Real estate companies would also do well to maximize their own
performance and operational efficiency.

For every Indian rupee invested in the construction of houses in India, INR 0.78 is added to the
gross domestic product. The real estate sector is also subservient to the development of over 250
other ancillary industries. A study by a rating agency ICRA shows that the construction industry
ranks 3rd among the 14 major sectors in terms of direct, indirect and induced effects in all sectors of
the economy. After agriculture, the real estate sector is the second largest employment generator
inIndia.

The sustained demand from the Information Technology sector also affected the urban landscape in
India. As per estimates, there is demand for 66 million square feet of IT space over the next five
years. Several multinational companies continue to move their operations to India to take advantage
of lower costs of skilled manpower and logistics. With human resources being the key element in this
industry, the hiring and housing of people, both at their work place and home assume great
importance and therefore the need to create space for people to work and live, which in turn triggers
the development of other related infrastructure.

The predominant trend has been to set up world-class business centers, often campus-style
establishments, bearing a distinctive corporate stamp. So distinct are some of these locations that
they are being termed as the "temples of modern India" by the local press. This is just an indication of
the extent of real estate development taking place. Indian and international real estate majors also
envisage a major boom in the hotel project developments over the next five years. During the last five
years, major chains such as the Orchid, Marriott, Holiday Inn, etc. have either tied up with local
developers of property or they have started planning for their own real estate.

Though the real estate sector in India is proclaimed to be the most promising sector today, it is still
hugely plagued by market uncertainties and inhibitions. This is manifested by an abysmally low
mortgage penetration. In India the mortgage to GDP ratio is about 2%. This compares to a mortgage
to GDP ratio of over 51% in USA. However, even if one were to benchmark with more comparable
counterparts, the ratio ranges between 15-20% for South East Asian countries. Thus the penetration
level of mortgages is miniscule when compared with the shortage of housing units. The real estate
market in India predominantly continues to remain unorganized, fairly fragmented, mostly
characterized by small players with a local presence.

Foreign Direct Investment (FDI) in Real EstateThe decision to liberalise the FDI norms in the
construction sector is perhaps the most significant economic policy decision taken by the Union
Government. Until now, only Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs) were
permitted to invest in the housing and the real estate sectors. Foreign investors other than NRIs were
allowed to invest only in development of integrated townships and settlements either through a wholly
owned subsidiary or through a joint venture company in India along with a local partner. However, the
guidelines prescribed via Press Note 2 (2005) series issued by Ministry of Commerce & Industry,
have further opened out FDI in townships, housing, built-up infrastructure and construction-
development projects. Major conglomerates are taking initiative and are wooing internationals firms in
order to line up investments for major projects.

http://housingsectorofindia.349510.free-press-release.com/
http://www.free-press-release.com/news-indian-housing-demand-to-grow-by-leaps-bounds-
1302857050.html

FOR IMMEDIATE RELEASE

NOIDA, U.P, India, Republic of (Free-Press-Release.com) April 15, 2011 --

According to our latest report “Indian Housing Sector Analysis”, the Indian housing market has
been growing quite well for the past few years and it is one of the fastest growing markets in the
world. Although the market was hit hard in 2008 due to severe economic crisis across the world,
the market has emerged much stronger thereafter. With the entry of numerous real estate
developers, availability of finance options, and rising demand for residential property, the
country’s housing industry is witnessing tremendous growth. Therefore, we anticipate that the
country’s housing demand will grow at a CAGR of around 22% during 2011-2013.

Further, we have analyzed that the housing industry In India is highly fragmented. For instance,
the unorganized sector, which comprises small contractors and builders, accounts for about
three-fourths of the total housing units and the organized sector represents the remaining share.
The organized sector mainly includes large builders and the government-affiliated entities.

Besides, we have segregated total demand into three important segments namely: Affordable
housing, Medium housing, and Luxury housing. The ongoing research analysis found that, the
affordable housing segment accounts for the major share in the Indian housing industry, in terms
of both volume and value. Apart from affordable housing segment, other segments are also
showing promising future prospects. Luxury and medium housing segment have shown a
tremendous growth in the past and we anticipate that these segments will grow significantly in
the coming years, on the back of various reasons discussed in our report.

Our report “Indian Housing Sector Analysis”, analyzes factors critical to the success of the Indian
housing industry. It is a comprehensive report that provides an insight into the structure and
trends of the housing sector in India. The report also provides valuable information of different
industry parameters, such as Total Housing Units, Flat & Independent Houses, and Types of
Ownerships. Detail data and rational analysis will help investors, financial service providers, and
global players to navigate through the latest trends in the Indian housing industry.

For FREE SAMPLE of this report visit: http://www.rncos.com/Report/IM013.htm

Description
India is blessed with one of the fastest growing real estate markets in the world. It is not only attracting domestic
real estate developers but also the foreign investors; particularly, the NRI investments in India have a bulk of their
share in the Indian housing market. The housing construction industry is poised for double-digit growth in the
backdrop of large population base, rising income level and rapid urbanization, says our research report, “Indian
Housing Sector Analysis”. Moreover, the housing construction industry is expected to overtake other industrial
sectors in terms of contribution to GDP growth in the next few years.

Presently, the affordable housing is basically targeting at economically weaker class and low income groups and
constitutes majority of the Indian housing industry, both in terms of value and volume. However, medium housing
segment is also witnessing tremendous growth, especially in Tier-1 and Tier-2 cities. Besides, luxury housing is
also expected to witness significant growth in coming years as this market segment is comparatively very small
and has huge potential for further developments. As far as super luxury housing segment is concerned, latest
industry trends and developments are skewed towards the segment. MNCs have again began hiring expat
employees who are provided with the luxury housing benefits. Additionally, high net worth NRIs are also
propelling demand for luxury housing in the country. Both these factors are expected to sustain the growth of
luxury housing segment in long run.

Besides, the report analyzes factors critical to the success of the Indian housing industry. It has also identified
key players in the market and included their detail business description along with their recent activities.
Additionally, the report sheds light on the emerging industry trends and discusses the market structure along with
current and past market performance of the Indian housing industry.

Forecast for potential housing demand in key segments such as, affordable, medium, and luxury housing have
also been presented to provide better understanding of the Indian housing sector.

TOC

1. Analyst View

2. Research Overview

3. Market Attractions

4. Residential Real Estate Industry Outlook to 2013

     4.1 Overview
     4.2 Market Structure
             4.2.1 Housing Units
             4.2.2 Number of Rooms
             4.2.3 Flat and Independent Houses
             4.2.4 Type of Ownership

5. Housing Demand Analysis

     5.1 Affordable Housing
             5.1.1 Current Demand Potential
             5.1.2 Latest Developments
     5.2 Medium Housing
             5.2.1 Current Demand Potential
     5.3 Luxury Housing
             5.3.1 Current Demand Potential
             5.3.2 Latest Developments
             5.3.3 City Level Analysis

6. Housing Finance
     6.1 Home Loan Demand
     6.2 Mortgage Rates

7. Industry Verticals
     7.1 Faucets
     7.2 Tiles
     7.3 Switch
     7.4 Cement & Steel
     7.5 Paint
     7.6 Bathroom Fittings
     7.7 Furniture

8. Commercial Real Estate: Hotel Industry

9. Competitor Analysis
     9.1 DLF Limited
             9.1.1 Business Description
             9.1.2 Recent Developments
     9.2 Omaxe Limited
             9.2.1 Business Description
             9.2.2 Recent Developments
     9.3 Ansal Properties & Infrastructure
             9.3.1 Business Description
             9.3.2 Recent Developments
     9.4 Parsvnath Developers Ltd.
             9.4.1 Business Description
             9.4.2 Recent Developments

List of Figures:

Figure 3-1: Real GDP Growth (%), 2009-10 to 2012-13

Figure 3-2: Population (Billion), 2008-2013
Figure 3-3: Middle Class Population (Million), 2007 & 2025
Figure 4-1: Housing Market (Billion US$), 2007-2010
Figure 4-2: Housing Market Potential (Billion US$), 2011-2013
Figure 4-3: Share of Housing Sector in Real Estate Industry (2005)
Figure 4-4: Share of Housing Sector in Real Estate Industry (2010)
Figure 4-5: Housing Sector Contribution to GDP (%), 2008 & 2013
Figure 4-6: Household by Number of Rooms (%), 2001 & 2008
Figure 4-7: Forecast for Household Demand by Number of Rooms (%), 2013
Figure 4-8: Share of Flat and Independent Houses in Rural Region (2003 & 2008)
Figure 4-9: Share of Flat and Independent Houses in Urban Region (2003 & 2008)
Figure 4-10: Share of Owned and Hired Houses in Urban and Rural Region (2004)
Figure 5-1: Housing Demand Potential (Million Units), 2011-2013
Figure 5-2: Housing Unit Sales in Volume by Segment (%), 2011-2013
Figure 5-3: Housing Unit Sales in Value by Segment (%), 2011-2013
Figure 5-4: Affordable Housing Demand Potential (Million Units), 2011-2013
Figure 5-5: Affordable Housing Market Potential (Billion US$), 2011-2013
Figure 5-6: Medium Housing Demand Potential (Million Units), 2011-2013
Figure 5-7: Medium Housing Market Potential (Billion US$), 2011-2013
Figure 5-8: Luxury Housing Demand Potential (Million Units), 2011-2013
Figure 5-9: Luxury Housing Market Potential (Billion US$), 2011-2013
Figure 6-1: Home Loan Portfolio of Scheduled Commercial Banks (Trillion INR), 2006-07 to 2009-10
Figure 6-2: Lending Interest Rates (%), 2010-2013
Figure 7-1: Faucet Market (Million US$), 2009 & 2010
Figure 7-2: Tiles Industry Revenue (Billion INR), 2007-08 to 2011-12
Figure 7-3: Tile Industry by Type (%), 2010 & 2012
Figure 7-4: Electrical Switch Market (Billion INR), 2007-2011
Figure 7-5: Forecast for Cement Demand by Sector (%), 2007-08 to 2011-12
Figure 7-6: Steel Consumption (Million Tonnes), 2008-2013
Figure 7-7: Steel Consumption by Major Sectors (%), FY 2006 & FY 2010
Figure 7-8: Paint Industry (Million Tonnes), 2009-2013
Figure 7-9: Paint Industry by Segment (%), 2010
Figure 7-10: Paint Industry Revenue by Type of Paint, FY2010
Figure 7-11: Bathroom Fittings Market (Billion INR), 2008-2012
Figure 7-12: Bathroom Fittings Market by Product (%), 2010
Figure 7-13: Furniture Industry by Consumer Segment (%), 2010
Figure 8-1: Hotel Market (Billion INR), 2007-08 & 2008-09
Figure 8-2: Planned Construction of Hotel Rooms (Numbers), 2007-08 & 2008-09

List of Tables:

Table 4-1: Number of Occupied Residential Houses in Urban and Rural Region by State (2001)
Table 4-2: Share of Flat and Independent Houses in Urban and Rural Region by State
Table 4-3: Share of Owned and Hired Houses in Urban and Rural Region by State
http://www.free-press-release.com/news/200904/1238657533.html

FOR IMMEDIATE RELEASE

(Free-Press-Release.com) April 2, 2009 --
RNCOS has recently added a new Market Research Report titled, “Indian Housing Sector
Analysis” to its report gallery. The real estate industry in India has grown on the back of fast
developing housing segment. In fact, it is the most dynamic segment of the real estate industry
compared to commercial and other property development segments. With the entry of corporate
houses like DLF, Parsvnath and Omaxe, easy finance options from financial institutions and
government support, the housing industry in India has rapidly grown over the past few years.

The housing construction industry is poised for tremendous growth in coming years in the
backdrop of large population base, rising income level, increasing demand for housing units, fast
changing rural housing landscape. In addition, the housing construction industry is expected to
overtake other industrial sectors in terms of contribution to GDP growth in the next few years.
Although the Indian housing industry will see slowdown in 2009 due to after effects of global
financial crisis, it is anticipated to attain earlier growth trajectory by the end of 2010 on account of
precautionary measures.

RNCOS report “Indian Housing Sector Analysis” provides exhaustive information and objective
analysis on the growing housing industry in India, its components and supporting financing
structure. The report also discusses the market structure, current and past market performance
and factors critical to the success of housing industry in India. Detailed data and rational analysis
helps investors, financial service providers and global banking players to navigate through the
latest trends in the Indian housing industry.

The forecast given in the report is not based on a complex economic model, but is intended as a
rough guide to the direction in which the market is likely to move. The forecast is based on the
correlation between past market growth and growth in base drivers, such as household size,
disposable personal income, GDP growth, long-term interest rates, competitive structure,
government support, contribution by housing financing industry and growing industrialization.

http://www.free-press-release.com/news/200611/1164369322.html

Housing Sector in India to be on a Growth Spree by 2015

FOR IMMEDIATE RELEASE
(Free-Press-Release.com) November 24, 2006 --
Indian industry body, ASSOCHAM, asserts that housing demand is poised to see a growth of
around 80 Million for the lower-income and the lower-middle income groups. Housing Sector in
India is also likely to generate around 4 Million new jobs within a decade with a whooping
investment of US$ 670 Billion. It�s also expected that housing and real estate sector will
undergo a revolutionary transformation to grow at around 14% annually. Presently, the
contribution of Indian Housing to the country�s GDP is modest at less than one percent.

It was also estimated by a research firm that by 2010 the demand would further grow to a
massive volume of around 400 Million Units. This will necessitate a minimum outlay of US$ 890
Billion. There is a shortage of more than nearly 20 Million housing units in India and this is a
positive sign of the untapped opportunities for this sector.
RNCOS� recent report �Opportunities in Indian Housing Sector (2006-2007)�, talks about the
Housing and real estate industry and its impact on the other sectors of the economy. Experts
highlight that for every unit added as expenditure, there are rippling effects on income generation
capacity, with an increase of approximately 400%. Looking at the impressive pace of the Indian
economy in general and housing sector in particular, it can be fairly concluded that the housing
sector will grow at around 14%. The sector will also contribute to employment generation with a
capacity of creating roughly 3.2 Million new job opportunities in the coming decade.

The research report also addresses the issues and facts that are critical to business success:

- The factors contributing to the growth of the Housing Industry in India.

- The regional distribution of housing demands by the year 2010.

- The reasons for slower growth of housing sector in India.

- The role played by housing finance companies in India.

- The share of India in Asia�s Real estate industry.

RNCOS� �Opportunities in Indian Housing Sector (2006-2007)�, report provides extensive

research and objective analysis on the growing housing industry, its components and the
supporting financing structure.

http://www.free-press-release.com/news/200904/1239595972.html

FOR IMMEDIATE RELEASE

(Free-Press-Release.com) April 13, 2009 --
Affordability is one of the most important factors that will decide the future of housing
construction industry in India, says RNCOS in its new research report, “Indian Housing Sector
Analysis”. Apart from luxury villas and deluxe flats, the demand for affordable housing units will
be the main driver of growth in the next decade. It is anticipated that the affordable housing units
will continue to account for 80% of the total housing demand by 2013 and will contribute more
than US$ 100 Billion to housing market.

In wake of rising middle class population and improving income levels, real estate developers will
definitely search for innovative ideas to build homes specific for one of the largest middle class
population in the world.

The report further says that despite financial crisis of 2008, the Indian housing industry will
continue to hold its fundamental level and will emerge as the fastest recovering housing industry
across the globe. Strong regulatory environment, intact demand level and market adjusted
approach by developers and consumers will shield the Indian housing industry from after effects
of economic crisis.

Moreover, it is anticipated that the growth in the Indian housing industry will slowdown for a
shorter duration rather than collapsing similar to housing industry in Europe and the US. The
industry will attain its earlier growth trajectory in next two to three years by taking more
precautionary measures.

“Indian Housing Sector Analysis” provides comprehensive information and objective analysis on
the growing housing industry in India, its components and supporting financing structure. It also
facilitates clients to evaluate the factors responsible for the development of Indian housing
industry along with brief overview of current and past market trends. The report also outlines the
market structure, demand drivers and competitors to understand the market dynamics.

Detailed data and analysis helps investors, financial service providers and global banking players
to navigate through the latest trends in the housing industry. The report provides the segment-
wise analysis, forecast, the latest market trends and information of emerging areas.

http://www.free-press-release.com/news/200610/1161171967.html

Government Encourages Foreign Direct Investment in Real

Estate Sector in India
October 18, 2006

After the government of India's decision to remove restrictive laws on FDI, housing industry in India is
set to boom with more and more foreign players entering in this sector.

FOR IMMEDIATE RELEASE

(Free-Press-Release.com) October 18, 2006 --
In February last year (2005), Government of India liberalized the laws to encourage FDI in real
estate market. Removal of the laws, which were considered restrictive to the FDI in this sector in
India, resulted in many MNCs gaining entry in the country. FDI increased dramatically after the
government lifted the restrictive laws on it.

NRIs (Non Resident Indians) or OCBs (Overseas Corporate Bodies) are now allowed to invest
up to hundred percent in real estate industry and building construction ventures in the country.
While, only 1.1 percent FDI was permissible in the real estate sector in India prior 2005.

RNCOS has recently published a report "Opportunities in Indian Housing Sector (2006-2007)".
As per the report, "Increased limit of FDI to hundred percent will encourage more number of
foreign investors and players in this region, and this will also result in increased inflow of foreign
exchange in this economy. There will also be opportunities for domestic players, as they can join
hands with foreign giants to meet the growing needs."

RNCOS report on housing industry in India gives an analytical overview of every aspect of the
industry. It provides extensive research and objective analysis on the growing housing industry,
its components and the supporting financing structure.

Key issues and facts analyzed in this report

- Factors supporting the growth of Housing Industry in India.

- States in India that will have the highest demands for houses by the year 2010.
- Reasons for slow rate of growth in housing sector in India.

- Overview of Indian housing industry in the perspective of Asia's Real estate industry.

Target audience of the report

- Businesses, consultants, researchers, analysts, and individuals who are closely monitoring the
developments in the Indian housing industry.

http://www.free-press-release.com/news/200811/1225535319.html

Builders are now focusing in the middle-income group-housing

sector
November 1, 2008

With the slowdown in real estate sector over the last one year, the real estate prices have shown some
signs of correction. As there is oversupply in the premium segment of housing sector

FOR IMMEDIATE RELEASE

(Free-Press-Release.com) November 1, 2008 --

With the slowdown in real estate sector over the last one year, the real estate prices have shown
some signs of correction. As there is oversupply in the premium segment of housing sector,
builders are now focusing in the middle-income group-housing sector. But, the biggest hurdle in
this enterprise is the land prices, which have gone through the roof in the last couple of years.
According to a report prepared by real estate consultancy firm DTZ, affordable housing for the
middleincome group in the country range between Rs 2,500 per sq ft and Rs 3,000 per sq ft. But
as the prevailing land cost of floor surface area of apartments in suburbs are over Rs 2,000 per
sq ft, Real estate developers are finding it difficult to build affordable houses for the middle class
group.

In fact, the cost of land in Delhi is around Rs 6,000 per sq ft. According to an industry source, the
cost of construction for an average quality house is in the range between Rs 1,100 per sq ft and
Rs 1,500 per sq ft. Besides that, marketing cost is in the range of Rs 150 to Rs 300 per sq ft.
Therefore, the minimum cost of an apartment in suburbs of NCR is Rs 3,200 to Rs 3,500 per sq
ft. Thus, the report points out that the high land prices in cities are main hurdle to develop
affordable house in cities. This has led to a sharp drop in the transactions of land in cities like
NCR,Mumbai,Bangalore and Hyderabad The report says that the steep fall in the number of
transactions indicates that prices are likely to moderate in near future. Anshul Jain, CEO of DTZ
India, says:“Land prices usually lag the real estate cycle.

The trend is visible in that while built up property prices have softened over the last few months,
land prices have held. However, we anticipate a general softening of land prices in the range of
15% over the next six months.” A survey conducted by DTZ among the realty brokers revealed
that more and more land owners, who were earlier unwilling to negotiate on price points are now
willing to talk to prospective buyers.The report says that in the next 6-12 months the expectations
of both sides would start to converge, thereby resulting in pick up of transactions across major
cities. It says these transactions are likely to be executed at price points lower than those
observed in 2007. The report says that because of the slowdown in the residential sector in the
last one year, Real estate developers have shifted their focus to affordable houses.The
economics of these projects, driven by the end-use pricing of their apartment units, dictates the
pricing of other inputs including land. It says keeping a fixed finalprice band in mind, the
developer/investor works backwards taking into account the construction, marketing and
overhead costs and acceptable profit margins...For Latest Real Estate News and Articles:
http://www.maaproperties.com/Pages/ModuleContent.aspx?Module=News

http://www.free-press-release.com/news-nirem-india-budget-2010-11-a-mixed-bag-
for-real-estate-sector-1267352831.html
NIREM: India Budget 2010-11, a mixed bag for real estate sector
February 28, 2010
NIREM believes that contrary to the popular demand of and expectation for huge impetus to the housing
and real estate sector, the India budget 2010-11 has brought a mixed bag for this sector.

FOR IMMEDIATE RELEASE

(Free-Press-Release.com) February 28, 2010 --
26 February 2010
Released by Chief Economic, IDS NIREM*

IDS National Institute of Real Estate Management (IDS NIREM) believes that contrary to the
popular demand of and expectation for huge impetus to the housing and real estate sector, the
India budget 2010-11 has brought a mixed bag for this sector. Though, some benefits have been
extended to housing and real estate sector, the burden imposed will definitely undermine the
benefits. The burdens and benefits for the real estate sector are as follows:

The burden:
• Widening of Service Tax net:

Real Estate Developers will have to pay service tax on transactions where consideration is
collected from prospective buyers prior to completion of construction. However, it seems service
tax will not be applicable if the full payment is made after completion of the construction.

In addition, other services provided by the builders to prospective buyers such as providing
preferential location or external or internal development charges (excluding vehicle-parking
space) etc. shall also be covered.

Renting of immovable properties is also under service tax net and the definition of ‘renting of
immovable property service’ has been clarified as well as widened to cover rent of vacant land
under contract for undertaking construction of buildings or structures for business purposes. This
may have negative effect on to the properties bought or to be bought solely for investment
purpose.

Excise Duty on Cement:

Excise duty ion cement has been increased which will increase the cost of construction and it is
expected that per unit cost for prospective buyers will also increase.

The benefits:
Some emphasis has been given to promote housing in general such as:
• Extension of Interest subvention scheme upto March 31, 2011,
• Extension of deadline for completion of pending housing projects by one year without losing tax
holiday u/s 80-IB. However, MAT may affect the companies executing such projects.

• Extension of 1% interest subsidy on housing loans upto Rs. 10 lakhs and where the cost of the
property is under Rs. 20 Lakhs. This along with along with increase in the tax slab rates for
individuals should provide the necessary demand boost for low-cost housing.
• Relaxation in norms for built-up area of shops and other commercial establishments in such
eligible housing projects and
• Increased budgetary allocations for urban development and housing schemes.
• extension of investment linked deduction benefit to convention centres located in the NCR of
Delhi extended from the present 31st March, 2010 to 31st July, 2010 (for purposes of deduction
u/s Section 80-ID of the Income-tax Act).

Overall, this budget will have mixed affect on the Indian real estate sector. However, looking at
the overall economic scenario, we also need to consider that the budget was presented against
mutually conflicting objectives, where-in it is not possible to meet the demands of each individual
sector. Another important aspect is that very clearly the Finance Minister took pragmatic
approach instead of populist measures, which is a good sign of a growth orientated government.

* IDS National Institute of Real Estate Management is India’s first integrated centre of learning for
Real Estate education, training, consulting & research. It currently offers courses in different
areas of real estate management. For further Information, please contact