PRESENTATION ON REAL ESTATE SMARKET

MANISH BARUI SUBHADIP MITRA RAHMATULLAH KHAN SRIDEB SAHA

Introduction
y Real Estate is one the fastest growing sectors in India y A Mckinsey report reveals that the average profit from construction in India is 18%

which is double the profitability for a construction project undertaken in the US.
y One rupee invested in this sector results in 78 paise being added to the GDP of the

state
y If the economy grows at the rate of 10%, the housing sector has the capacity to grow

at 14% and generate 3.2 million new jobs over a decade

y Seven (7) % percent of the country s GDP is contributed by the housing sector y It is the second largest employer next only to agriculture and its size is close to US $

12 billion and grows at about 30% per annum

Revenue& Net Profit Figures

Growth Drivers and Potential

y 100% FDI is allowed under automatic route in township, built-up infrastructure and construction development project y Industry experts estimate that by 2o11, Indian IT and ITES sector will need approximately 150 million sq ft of official space y Growth in organized retail sector will provide significant boost to commercial real estate sector, which is expected to demand 220 million sq ft of additional space across tier-1 and tier-2 cities y According to the Tenth Five year plan of the government, there is a shortage of units and over the medium and long term around 90 million dwelling units will have to be constructed especially for middle and lower income families y Introduction of REMFS(REAL Estate Mutual Funds) and REITS(Real Estate investment Trusts) will definitely have a major impact on realty sector by helping players for price determination. As per Crisil , REITs has the potential to reach the size of Rs 1400 billion in the next 3 years

INDIAN SCENARIO
MAJOR PLAYERS IN REAL ESTATE INDUSTRY
DLF TATA PROJECTS SHAPOORJI PALLONJI & Co. UNITECH

CURRENT DEVELOPMENTS
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

FUTURE OUTLOOK
Outlook: Commercial Real Estate
Office rents to start appreciating after mid-2011 More outright purchases by occupiers as well as private equity players IT would continue to account for 60-70% of office demand

Outlook: Residential Real Estate

Launch of premium products to continue, though at a slower pace Launch of Ultra Low Cost (ULC) Housing by private developers Housing for all Large number of launches would continue to be in the range of INR 2,0003,000 per sq ft at the leapfrogged suburban locations

Outlook: Retail Real Estate

Rents to remain stable except select prime locations Large number of malls started to become operational Retailers would continue to expand beyond Tier I into Tier II and III cities More international retailers to venture into India

GOVERNMENT REGULATIONS

FDI
The Department of Industrial Policy and Promotion (DIPP) (2005) permitted FDI up to 100% under automatic route in townships, housing, built-up infrastructure and construction development projects The minimum area to be developed under each project would be as follows: In case of development of serviced housing plots, a minimum land area of 10 hectares. In case of construction development projects, a minimum built-up area of 50,000 sq.mts. In case of a combination of the above two projects, any one of the above two conditions would suffice. The minimum capitalization norm shall be USD 10 million for a wholly owned subsidiary and USD 5 million for joint ventures with Indian partner/s. The funds would have to be brought in within six months of commencement of business of the company

ALTERNATIVE FINANCING OPTION Model: PRIVATE EQUITY CAPITAL Description

Pure financial investment to provide the base capital required to undertake large projects and, thus, reduce exposure to debt financing.

Model: JOINT VENTURE COMPANY Description

Joint ownership of project specific Special Purpose Vehicles (SPV), foreign partner contributes capital and engineering capabilities, Indian developer contributes land, local resources and expertise.

Model: JOINT DEVELOPMENT AGREEMENT

Description:
Foreign investors set up Indian presence and undertake development activity, Indian partner contributes land and receives deferred consideration in terms of development or revenue share.

TAX POLICY
Concession in taxes if Capital gain (sale of old house) is greater than the cost of new house, then only such excess Capital gain is taxed. But if the Capital gain is less or equal to the cost of new house then the entire Capital gain is tax free. If taxpayer sells the new house within 3 year of purchase or construction its cost will be taken as nil. It does not matter if the taxpayer owned any other house property when the sale or purchase is done.

MARKET SHARE OF MAJOR PLAYERS

DLF
HDIL

51,832.22 crore
8,567.76 crore

INDIA BULLS REAL STATE 6998.83 crore

NET SALES
Mar '06 Mar '07 1,101.66 1,203.45 13.33 Mar '08 5,496.96 2,379.87 47.77 Mar '09 2,827.90 1,719.29 45.03 Mar '10 2,729.42 1,491.99 33.99

DLF HDIL INDIA BULLS

953.46 422.15 0.00

NET SALES
6000 5000 4000 3000 2000 1000 0

Mar '06

Mar '07
DLF

Mar '08
HDIL INDIA BULLS

Mar '09

Mar '10

PROFIT
Mar '06 Mar '07
405.77

Mar '08
2,574.40

Mar '09
1,547.77

Mar '10
765.06

DLF HDIL INDIA BULLS

3000 2500 2000 1500 1000 500 0 -500
Mar '06

227.44

113.93 -7.69

541.81

1,410.51 467.70

830.42 16.56

602.30 22.44

13.11

PROFIT

DLF HDIL INDIA BULLS

Mar '07

Mar '08

Mar '09

Mar '10

SWOT ANALYSIS

STRENGTHS
Huge demand Growing population Availability of home loan Huge margin Cheap labour

WEAKNESS
Huge investments High sensitive to economic condition of the country

OPPURTUNITIES
Availability of FDIs Increased income of the average Indian citizen

THREATS
Price war Lots of competition Economic slow down

PEST ANALYSIS
POLITICAL FACTORS
Governments regulations and policies in favour of real estate sector. Heaviest tax imposed on the construction industry FDI experience in Indian real estate market

ECONOMIC FACTORS
Controlled Inflation levels Low Interest Rates Provides further Liquidity

SOCIAL FACTORS
Increase in consumption Urbanization Increase in per capita income (current prices) Rise in Demand for Quality Housing Projects

TECHNOLOGICAL FACTORS:
Internet revolution Media

PORTERS FIVE FORCE

TDI Magic bricks
Increase buyer volume More price sensitivity

Large number of suppliers Strong distribution channel Few dominants players.

DLF, UNITECH, INDIA BULLS

No threats

CONCLUSSION
Indian real estate sector growing 30 percent per annum. Revenue earning from residential and commercial real estate sector respectively 8% and 20%. Contribution of organized real estate sector is gradually increased and it was 49.53%. 15% educated work force attached with real estate sector in India SBI, Tata, LIC to float new mutual funds investing in the stock of real estate sector.

BIBLIOGRAPHY
1. WWW.REALESTATEMARKET.COM 2. WWW.SCRIBD.COM 3. WWW.MONEY MARKET.COM 4. WWW.MONEYCONTROL.COM

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