Industry Analysis of Real Estate sector

By Kumari Surabhi Mahesh(12DM050) Mary Madhumita

Advantage India
Growing demand
Demand for residential property has gone up due to increased urbanisation Growing economy driving demand for commercial and retail space

Attractive opportunities
Growing requirements of space from sectors such as education and healthcare

2015E

Market size: USD126 billion

Growth in tourism providing

opportunities in the hospitality sector

Advantage India
Increasing investments
real estate of more than FDI in USD11.25 billion between April 2000 and May 2012 In FY12, the real estate sector accounted for 2.0 per cent of total FDI inflows into India

Policy support
Allocation of USD625 million for rural housing
FDI up to 100 per cent allowed with government permission for developing townships and settlements

Market size: USD55.6 billion

2010-11

Overview
Has become one of the fastest growing markets in the world. The growth of the industry is attributed mainly to a large population base, rising income level, and rapid urbanisation. Comprises of four sub-sectors- housing(5-6%of GDP), retail, hospitality, and commercial. Government policies have been instrumental in providing for infrastructure development. Adequate infrastructure forms a prerequisite for sustaining the long-term growth momentum of the economy.

Segments in the Indian real estate sector

Residential space
Fragmented market with few large players
Demand of over 300,000 units in the seven major cities in 2010

Commercial space

Few players with presence across India Over 38.2 million sq ft demand in 7 major cities in 2011

Real estate sector

Retail space

FDI in multi- brand retail to boost demand Fragmented market with few national players Demand of around 15 million sq ft in major cities during 2011 A competitive market with many players Over 121,000 hotel rooms in the country as of 2011

Hospitality space

SEZs

589 SEZs have been approved by the government so far

Majority of SEZs are in the IT/ ITeS sector

Real estate being driven by policies and growing economy

Growth in tourism

Urbanisation

Epidemological changes

Growth drivers

Growing economy

Easier financing

Policy support

Key Facts
The Indian real estate market size is expected to touch US$ 180 billion by 2020. Foreign direct investment (FDI) in the sector is expected to increase to US$ 25 billion in the next 10 years, from present US$ 4 billion. Demand is expected to grow at a compound annual growth rate (CAGR) of 19 per cent between 2010 and 2014. The construction industry ranks third among the 14 major sectors. India is going to produce an estimated 2 million new graduates from various Indian universities during this year, creating demand for 100 million square feet of office and industrial space.

Market Players
DLF, Unitech, Hiranandani Constructions, Tata Housing, Godrej Properties, Omaxe, Parsvanath, Raheja Developers, Ansal Properties and Infrastructure Mahindra Lifespace Developers Ltd

Major acquisitions in real estate sector in India

Target Acquirer Value ($ million) Year

Caraf Builders Cowtown Land DvlpPvt Ltd Compact Disc film city Oceanus Real Estate

DLF Assets ltd Lodha Group

696.5 513.6

2009 2011

Jeff Morgan Warburg Pincus

320 318

2011 2011

Indiabulls Properties Pvt Ltd

Indiabulls Property Invest Trust

Blackstone

223.1

2012

Embassy Property

200

2012

POLICY INITIATIVES
Government Initiatives

FDI up to 100 per cent is allowed under the automatic route in townships, housing, built-up infrastructure and construction development projects. The Ministry of Housing & Urban Poverty Alleviation has planned to introduce a singlewindow system for clearance of all real estate projects across the country. The Government has sanctioned projects worth Rs 41,723 crores for building of 1,569,000 houses/dwelling units for economically weaker/lower income group sections under the Ministrys flagship Jawaharlal Nehru National Urban Renewal Mission.

Some of the initiatives taken in the union budget 2013-14

For homes and flats with a carpet area of 2,000 square feet or more or of a value of Rs 1 crore or more, which are high-end constructions, where the component of services is greater, rate of abatement reduced from 75 to 70 percent. Rs 6,000 crore (US$ 1.08 billion) were given to Rural Housing Fund. National Housing Bank plans to set up Urban Housing Fund. Rs 2,000 crore will be provided to the fund in the current financial year.

Investments
Private equity investments in real estate investment, reveals that approximately Rs 118.54 billion is available with private equity firms. PE investments in real estate was recorded at Rs 16.38 billion in H1 2013, which is 46% lower when compared to first half of 2012. The total value of investments in the residential segment recorded at Rs 9.3 billion in H1 2013 witnessed a drop of 48% over last year. In 2013, the highest value of private equity investments is noted in Pune at Rs 7.8 billion followed by Mumbai at Rs 4billion, NCR at Rs 2.3 billion, and Bengaluru at Rs 1billion.

Some of the major investments in the Indian real estate sector are:
Ashiana Housing Ltd plans to foray into Gujarat's real estate with its first project worth Rs 100 crore at Halol . Mr Akhilesh Yadav, Chief Minister of Uttar Pradesh (UP) has inaugurated and laid the foundation of development projects worth Rs 3,337 crore pertaining to Noida, Greater Noida and Yamuna Expressway. Wave Infratech plans to invest Rs 500 crore to set up its first affordable housing venture in the NCR area Mahindra Life space Developers has bought the stake of private equity Arch Capital in its joint venture residential project at Chennai. The buyout of the stake was estimated to be around Rs 70 crore. Godrej Properties Ltd (GPL) has signed a development management agreement with United Oxygen Company Pvt Ltd to develop residential housing project in Bengaluru

Challenges
lack of clear land titles, absence of title insurance, absence of industry status, lack of adequate sources of finance, shortage of labour, rising manpower and material costs, approvals and procedural difficulties.

Investment opportunities
The sector is expected to grow at the rate of 30 per cent over the next decade. The real estate market could start to perform better as the easing of FDI norms will begin to show results during the second half of the year. The economy will also recover in 2013 which in turn will perk up the real estate sector in India. With the government trying to introduce developer and buyer friendly policies, the outlook for real estate in 2013 does look promising.

THANK YOU