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A

BRIEF REPORT

ON

REAL ESTATE SECTOR IN INDIA

January 2015

For more information, contact: [email protected]


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A brief report on Real Estate Sector in India

1. INDIA’S REAL ESTATE SECTOR

2.1 Overview

The real estate sector in India has come a long way by becoming one of the fastestgrowingmarkets in the world. It is not only successfully attracting domestic real estatedevelopers, butforeign investors as well. The growth of the industry is attributed mainly to a largepopulationbase, rising income level, and rapid urbanisation.The sector comprises of four subsectors housing, retail, hospitality, and commercial.!hilehousing contributes to "vesi# percent of the country$s gross domestic product %&'(),the

remaining three subsectors are also growing at a rapid pace, meeting the increasinginfrastructural needs.The real estate sector has transformed from being unorganised to a dynamic andorganisedsector over the past decade. &overnment policies have been instrumental in providingsupportafter recognising the need for infrastructure development in order to ensure betterstandard of living for its citi*ens. In addition to this, ade+uate infrastructure forms a prere+uisiteforsustaining the longterm growth momentum of the economy.

The Indian real estate sector is one of the most globally recognised sectors. In thecountry, it isthe second largest employer after agriculture and is slated to grow at - per cent overthe ne#t

decade. It comprises four sub sectors housing, retail, hospitality, and commercial. Thegrowthof this sector is well complemented by the growth of the corporate environment and thedemand for oice space as well as urban and semiurban accommodations. Theconstructionindustry ranks third among the /0 ma1or sectors in terms of direct, indirect and inducedeectsin all sectors of the economy.

It is also e#pected that this sector will incur more nonresident Indian %2RI)investments in thenear future, as a survey by an industry body has revealed a 3 per cent surge in thenumber of en+uiries with property dealers. 4engaluru is e#pected to be the most favouredpropertyinvestment destination for 2RIs, followed by Ahmedabad, (une, 5hennai, &oa, 'elhiand

'ehradun. (rivate e+uity %(E) funding has picked up in the last one year due toattractive

valuations. 6urthermore, with the &overnment of India introducing newer policieshelpful toreal estate, this sector has garnered suicient growth in recent times.

Private Con!"entia# (age 7 of //


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2.2 Se$ment% in t&e In"ian rea# e%tate %ector

Residentialspace

6ragmented market with few large players 'emand of over --,--- units in the seven ma1or

cities in 7-/-

6ew players with presence across India 8ver 9.7 million s+ft demand in : ma1or cities in

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6'I in multi brand retail to boost demand 6ragmented market with few national players 'emand of around /3 million s+ft in ma1or cities

A competitive market with many players 8ver /7/,--- hotel rooms in the country as of

7-//

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2 REAL ESTATE 'AR(ET

2.1 'ar)et Si*e

The real estate sector in India is beingrecognised as an infrastructure servicethat is driving the economic growthengine of the country. The Indian realestate market si*e is e#pected to touch@S /9- billion by 7-7-. 6oreign directinvestment %6'I) in the sector ise#pected to increase to @S 73 billion inthe ne#t /- years, from present @S 0billion.

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According to 'epartment of Industrial +rowin$Ea%ier(olicy and (romotion %'I((), theeconom/!nancin$construction development sector in India E0i"emo#ohas received foreign direct investment $ica#%6'I) e+uity inBows to the tune of @S c&an$e%7,9:0./ million in the period April7---September 7-/0.

The Indian real estate market si*e is e#pected to touch @S /9- billion by 7-7-. Thehousingsector alone contributes 3C per cent to the countryDs gross domestic product %&'().

Also, inthe period 6-97-, the market si*e of this sector is e#pected to increase at a compoundannualgrowth rate %5A&R) of //.7 per cent. Retail, hospitality and commercial real estate arealsogrowing signi"cantly, providing the muchneeded infrastructure for IndiaDs growingneeds.

=umbai is the best city in India for commercial real estate investment, with returns of/7/; percent likely in the ne#t "ve years, followed by 4engaluru and 'elhi2ational 5apitalRegion%25R). Also, 'elhi25R was the biggest oice market in India with //- million s+ ft, outof which 99 million s+ ft were occupied. Sectors such as IT and ITeS, retail, consulting ande

commerce have registered high demand for oice space in recent times.

The construction industry ranks third among the /0 ma1or sectors in terms of direct,indirect and

induced eects in all sectors of the economy. The industryDs growth is linked todevelopments inthe retail, hospitality and entertainment %hotels, resorts, cinema theatres) sectors,economicservices %hospitals, schools) and information technology %IT)enabled services %like callcentres)etc and viceversa.

The sector is divided into four subsectorsF ?ousing Retail ?ospitality 5ommercial



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The housing subsector contributes "vesi# per cent to the countryDs gross domesticproduct%&'(). =eanwhile, retail, hospitality and commercial real estate are also growing

signi"cantly,catering to IndiaDs growing needs of infrastructure.The Indian real estate market si*e is e#pected to touch @S /9- billionby 7-7-.

India is going to produce an estimated 7 million new graduates from various Indianuniversitiesduring this year, creating demand for /-- million s+uare feet of oice and industrialspace.

2.2 'aor aci%ition% in rea# e%tate %ector in In"ia

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8 'AR(ET PLA7ERS

The Indian real estate sector has traditionally been an unorganised sector but it isslowly evolvinginto a more organised one. The sector is embracing professional standards andtransparencywith open arms. The ma1or established domestic players in the sector are 'G6, @nitech,?iranandani 5onstructions, Tata ?ousing, &odre1 (roperties, 8ma#e, (arsvanath,Rahe1a'evelopers, Ansal (roperties and Infrastructure and =ahindra Gifespace 'evelopersGtd toname a few. International players who have made a name for themselves in Indiainclude ?ines,Tishman Speyer, Emaar (roperties, Ascendas, 5apitaland, (ortman ?oldings and

?ome#.

8.1 DLF Lt"

'G6 group is a leading real estate developer in India since /;0C. 'G6 has been

instrumental inputting &urgaon on the urban landscape of India. 'G6 has over 77- million s+. ft. ofe#istingdevelopment pro1ects and 3:0 million s+. ft. of planned pro1ects. 'G6 has so fardeveloped 77urban colonies, and an entire integrated ,---acre township 'G6 5ity. 'G6Dsdevelopmentpro1ects across India span over - citiesF &urgaon, Ambala, Shimla, Amritsar, Halandhar,Gudhiana, Sonepat, (anipat, 5handigarh, (anchkula, 2oida, 2ew 'elhi, Haipur, Indore,

Ahemdabad, 4aroda, Gucknow, 6aridabad, =umbai, (une, 2agpur, &oa, ochi,okkanad,5hennai, 4angalore, Jytilla, 5oimbatore, ?yderabad, 4hubhaneshwar and olkata.

8.2 -NITEC9

Established in /;:7, @nitech is India$s leading real estate developer in India. It is the

"rstdeveloper to have been certi"ed IS8 ;--/F7--- in 2orth India.

(ro1ect SpectrumF @nitech oers diversi"ed pro1ects across residential, commercial>ITparks,retail, hotels, amusement parks and SE


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: POLIC7 INITIATI3ES

:.1 +overnment Initiative%

@nder the Sardar (atel @rban ?ousing =ission, - million houses will be built by7-77,mostly for the economically weaker sections and lowincome groups, through publicprivatepartnership, interest subsidy and increased Bow of resources to housing sector.The &overnment of India along with the governments of the respective states havetakenseveral initiatives to encourage the development in the sector. Some of them are asfollowsF

The Securities and E#change 4oard of India %SE4I) has noti"ed "nal regulations thatwill

govern real estate investment trusts %REITs) and infrastructure investment trusts%InvITs).This move will enable easier access to funds for cashstrapped developers and createa newinvestment avenue for institutions and high net worth individuals, and eventuallyordinaryinvestors.The Telangana Real Estate 'evelopersD Association %Treda) plans to host the 6ifthTreda(roperty Show 7-/0 at ?ite# 5entre, ?yderabad. The show will be open to a mi# ofthepopulace, including prospective property purchasers, investors, architects and

others.The State &overnment of erala has decided to make the process of securingpermits fromlocal bodies for construction of houses smoother, as it plans to make the processonline withthe launch of a software called DSankethamD. This will ensure a more standardisedprocedure,more transparency, and less corruption and bribery.The &overnment of India has proposed to release the Real Estate %'evelopment andRegulation) 4ill which aims to protect consumer interest and introducestandardisation inbusiness practices and transactions in the sector. The bill will also enable domestic

andforeign investment Bow into the sector.

As the Indian economy grows, the real estate sector keeps bene"ting. !ith theincrease inforeign tourist arrivals %6TA) every year, there is demand for real estate in thetourism andhospitality sector. Also, with the entry of ma1or private players in the educationsector, thema1or cities, that is ?yderabad, 4engaluru, =umbai, 'elhi, (une, 5hennai and

olkata arelikely to account for :- per cent of total demand for real estate in the educationsector.'emand for improved healthcare facilities is also e#pected to provide a boost to theconstruction sector in the country.

:.2 Inve%tment%

The Indian real estate sector has witnessed high growth in recent times with the rise indemandfor oice as well as residential spaces. Some of the ma1or investments in this sector areasfollowsF Assotech Realty has tied up with Gemon Tree ?otels to manage and operate itsserviced residences. The "rst pro1ect, 7/- apartments under the branding of Sandal Suites,will be

launched in 2oida in 7-/3. The companies will launch 9/- similar pro1ects in aphasedPrivate Con!"entia# (age 9 of //


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manner over the ne#t seven years with an investment of Rs 9---;--- million%@S /7;/03 million) appro#imately.

4lackstone &roup G( is all set to become the largest owner of commercial oicerealestate in India after a threeyear ac+uisition drive in which it spent @S ;--million tobuy prime assets. 4lackstone has ac+uired 7; million s+ ft of oice space in citiessuch as4engaluru, (une, =umbai, and 2oida on the outskirts of 2ew 'elhi.GKT Infra 6inance (rivate E+uity %(E) plans to raise Rs :,3-- million %@S C-:million) in an overseas and a domestic fund, and launch a real estate fund.I'65 Alternatives Gtd has sold two of its real estate investments to (E "rm4lackstone&roup G(. The assets a special economic *one %SE


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; C9ALLEN+ES IN3EST'ENT OPPORT-NITIES

;.1 C&a##en$e%

The key challenges that the Indian real estate industry is facingtoday areF

;.2

lack of clear land titles,absence of title insurance,absence of industry status,lack of ade+uate sources of "nance,shortage of labour,rising manpower and material costs,approvals and procedural diiculties.

Inve%tment O00ortnitie%

The real estate industry in India is yet in a promising stage. The sector happens to bethe secondlargest employer after agriculture and is e#pected to grow at the rate of - per centover the ne#tdecade. A growing migrant population due to increasing 1ob opportunities, togetherwith healthyinfrastructure development, is underpinning demand in the region$s residential realestate

market.

It is believed that the 6inance =inistryDs motivation through softening of interest rates

andlending more to the real estate sector will have a positive impact on both developersandconsumers. The real estate market could start to perform better as the easing of 6'Inorms willbegin to show results during the second half of the year. The economy will also recoverin 7-/which in turn will perk up the real estate sector in India. !ith the government trying tointroduce developer and buyer friendly policies, the outlook for real estate in 7-/ doeslook promising.

Real estate contributed about C. per cent to IndiaDs gross domestic product %&'() in7-/. Themarket si*e of the sector is e#pected to increase at a compound annual growth rate%5A&R) of //.7 per cent during 6 7--97-7- to touch @S /9- billion by 7-7-.The &overnment of India has allocated @S /. billion for Rural ?ousing 6und in the

@nion4udget 7-/0/3. It also allocated @S -.: billion for 2ational ?ousing 4ank %2?4) toincreasethe Bow of cheaper credit for aordable housing for urban poor. The government hasallowed6'I of up to /-- per cent in development pro1ects for townships and settlements.The entry of ma1or private players in the education sector has created vastopportunities for thereal estate sector. Emergence of nuclear families and growing urbanisation has givenrise toseveral townships that are developed to take care of the elderly. A number of seniorciti*enhousing pro1ects have been planned, and the segment is e#pected to grow signi"cantlyin future.&rowth in the number of tourists has resulted in demand for service apartments. Thisdemand islikely to be on the uptrend and presents opportunities for the unorganised sector.

Private Con!"entia# (age /- of //


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Nic&e %ector% e

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