CURRENT SCENARIO IN REAL ESTATE AND MARKETING

STRATEGIES OF ANSAL API

Master Trust

Submitted by: Students Name: Nishant Pandey

Enrolment no: A7002211015Specialization: Marketing and sales

Under guidance of: Mr. R.M Sharma

Industry Guides name:Mr. R.M Sharma Faculty Guide:Fatima BeenaDesignation: Manager-Marketing Organization:Master trust ABS, Lucknow

AMITY BUSINESS SCHOOL

AMITY UNIVERSITY UTTAR PRADESH

LUCKNOW

Acknowledgement

The project title “CURRENT SCENARIO IN REAL ESTATE AND MARKETING

STRATEGIES OF ANSAL API” has been conducted by me during 14th may and 9th July

2012 at Ansal Properties & Infrastructure Ltd. I have completed this project, based on the

primary research under the guidance of Mr. Alok Agnihotri (General Manager, Marketing) and

Mr. Vipin Sheoran (Assistant Manager, Marketing).

I owe enormous intellectual debt towards my guides Mr. Alok Agnihotri (General Manager,

Marketing) and Mr. Vipin Sheoran (Assistant Manager, Marketing), who have augmented my

knowledge in the field of Marketing. They have helped me learn about the process and giving me

valuable insight to understand how I can suggest new and innovative ways. They have provided

me a true learning platform, and have been the perfect mentors, in giving me the necessary

guidance regarding my project.

I would like to thank them in enriching my thoughts in this field from different perspectives.

I would like to thank all the respondents without whose co-operation my project would not have

been complete.

I feel indebted to all those persons and organizations that have provided help directly or

indirectly in successful completion of this study.

At the end, ANSAL API, was a great experience to work in, where I feel, the dedication of its

employees is one of the vital factors of its success.

EXECUTIVE SUMMARY

Real estate is a 12$ billion (revenue) industry in India. There has been a rapid growth in the

industry in the past few years. In the residential sector, a growing middle class is enjoying rising

income levels. Combined with smaller household sizes, this demographic change has boosted

demand for more modern housing and home loans. Meanwhile, increasing consumer spending

power has encouraged growth in organized in organized retailing – both feeding off and

contributing to the spear of ‘mall culture’ and the popularity of other large-scale retail property

developments.

In the commercial property segment, strong growth in the services sector – particularly in the IT

and ITES sectors – and corporates’ growing scale of operations have led to greater demand for

commercial space, including modern offices, warehouses and lodging space.

Many Developers have substantial plans to increase both their size and geographical spread.

They are also expanding into different kinds of properties, which can boost the firms’ franchise

values and reduce concentration risks. However, managing and financing such activities can be a

challenge, and puts a premium on financial flexibility, capital access and operational

infrastructure.

The project assigned to me has an objective to find and analyze the current scenario of Real

Estate, covering the preferences of current as well as prospective customers. The major part of

the project also analyses the size of investment in various states and mind set of the customers

regarding this as well as the perceptions of customers towards major leading Real Estate players.

The study was carried out with a methodology, in order to collect as much primary data as

possible. Data was collected by getting the questionnaires filled from Real Estate Agents across

Lucknow.

Once the data was collected, this data was analyzed using Microsoft Excel as a tool and various

conclusions were drawn. This analysis is depicted in the form of various charts and graphs.

Along with the questionnaires, Agents’ viewpoints on various issues were also taken in order to

get a more insight into the Real Estate.

Following is the analyses done and conclusions drawn:

Plots, Apartments and Rented Offices are the most preferred investment options in Real

Estate people prefer for investment.

The states that people prefer for investment and anticipate a good return in those states

are:

NCR

DELHI

LUCKNOW

Delhi, seen as a market of End-Users, rather than investors.

People from all over are interested in investing in NCR, including a good amount of

population of NRIs.

In other states, a declining trend is seen; NCR is into a stagnant state, where there are

least chances of the market going worse in the near future.

Real Estate Scenario In Various States

RAJASTHAN:

General size of investment in Rajasthan

92% of the people responded that the current size of investment in Rajasthan is

below Rs.25 lac.

Most Preferred Developer

Omaxe, Ansal API

Preferred Cities

Jaipur, Bhiwadi

PUNJAB:

General size of investment in Punjab

95% of the people responded that the current size of investment in Punjab is below Rs.50 lac.

Most Preferred Developer

Ansal API, Emaar MGF

Preferred Cities

Mohali, Amritsar

U.P.

General size of investment in U.P.

92% of the people responded that the current size of investment in U.P. is below Rs.25 lac.

Most Preferred Developer

Parsvnath, Omaxe

Preferred Cities

Lucknow, Agra

HARYANA:

General size of investment in Haryana

94% of the people responded that the current size of investment in Haryana is below Rs.50 lac.

Most Preferred Developer

Ansal API, Omaxe

Preferred Cities

Sonepat, Panipat

DELHI:

General size of investment in Delhi

85% of the people responded that the current size of investment in Delhi is above Rs.50 lac.

Most Preferred Developer

DLF, Unitech

NCR:

General size of investment in NCR

98% of the people responded that the current size of investment in NCR is above Rs. 25 lac.

Most Preferred Developer

Emaar MGF, DLF

Preferred Cities

Gurgaon, Noida

DLF, most preferred developer in NCR, fact remains, DLF, a company for High-End

investors, rather than small investors.

Emaar MGF, one of the biggest developer with huge amount of capital in its hands, since

none of its projects are complete as of now, real estate agents are still not clear with its

position amongst the investors.

Emaar MGF is likely to come big in the near future.

Parsvnath in Delhi has created a place for itself by setting a trend of Metro Malls.

BRAND NAME and PREVIOUS TRACK RECORD of the company that counts most

for the prospective clients to invest into a particular project. This is for a reason that

projects in Real Estate cannot be accurately forecasted for success or failure. So, counting

on the Brand name and previous track record is the only option prospects are left with.

People nowadays go for Short-Term investment plans. This is mainly because, Real

Estate is not at a boom, so people, who are interested in investing want to invest and

realize as soon as possible.

74% respondents: Own funds that people use for investing into a particular project.

94% respondents: Nearby housing facility does influence investors to invest in

commercial properties in remote areas.

92% respondents: future govt. plans, somehow influence the investment decisions in

these areas.

Investments Options preferred other than Real Estate:

42% respondents: Equity & Commodities

37% respondents: Mutual Funds

12% respondents: Insurance

9% respondents: Fixed Deposits

CURRENT TREND OF REAL ESTATE

UPWARD: North Delhi(Pitampura, Rohini, Netaji Subhash Place

and Adjoining Areas, Dwarka, South Delhi(End-Users), East Delhi.

DOWNWARD: Gurgaon(Stagnant), Rajasthan, U.P., Indirapuram, Gaziabad

UPWARD situation will last for: 1-2 yrs.

DOWNWARD situation will last for: 1-2 yrs.

TABLE OF CONTENTS

1. Company Profile

2. Product Portfolio

3. Introduction to Real Estate

4. Real Estate as an Investment Option

5. Research Methodology

6. Findings & Analysis

7. Conclusions & Suggestions

Bibliography

Questionnaire

CHAPTER-I

INTRODUCTION

INTRODUCTION TO REAL ESTATE

Real estate is a 12$ billion (revenue) industry in India. There has been a rapid growth in the

industry in the past few years.100% FDI is allowed in real estate development subject to

minimum scale norms of either: 25 acres in case of serviced plots or integrated townships; or

50,000 sq. mtrs. of built-up area for construction development projects.

Commercial and office complexes mushrooming in major Indian metros present a minefield of

opportunities. Over 20 million new housing units required in the next 5 years. The real estate

market is projected to grow to $50 billion by 2010 CAGR of over 30% p.a. is expected over the

next five years. Increasing demand for commercial and office space especially from the rapidly

growing Retail, IT and Hospitality sectors and the Urban Infrastructure Renewal mission is

expected to give a boost to the sector.

Other factors include:

$11.5 billion earmarked over the next five years for 60 cities.

Investment opportunities exist in almost every segment business ; About 20 million new

units expected to be built in five years in office space for IT and five-fold increase in

office space requirement over the next 3 years.

Commercial space for organized retailing: 200 million sq. ft. by 2010.

Hotels and hospitality: Over 50,000 new rooms in the next 5 years; Investment

opportunity of over $50 billion in the next five years.

Various Real Investment Options are:

AGRICULTURE LAND

Agriculture Land in India is the most protected area by the State and Central Govt. Identification

of Agricultural Land requires a bit of analysis about the rate and assessment of future

development in the nearby area. Due to fast growing urbanization and development of

infrastructure the price of agriculture land zooms quickly. Agricultural land can be given on

contract to cultivators with sharing of crop model, to make small but regular tax-free earnings.

Real Estate Investment Options

Agriculture Land

Residential/Plotted development

Apartments/Villas

Commercial Spaces

Farm Houses

Real Estate Mutual Funds

Rural agriculture land is completely free from capital gains tax and income from lease out or sale

of crop is also exempt as per the provision of IT Act, 1961.

RESIDENTIAL PLOTTED DEVELOPMENT

Most state governments have loosened their fists and have implemented land reforms that make

the conversion of agricultural land into residential land much easier. The process of township

development takes a period of about 5 to 10 years. Initially, the prices of plotted development are

quite low which rapidly increases with the pace of development and with the rise in inflation

factor.

APARTMENTS/VILLAS

As per the assessment made in the Indian Habitat Policy 1998, the demand for houses in urban

area is to the tune of 22 million houses. The gap in demand and supply in housing stock has

thrown big investment opportunities. Booking at the launching stage and getting the exit at the

completion stage ca offer shining returns on investments. In this process the stamp duty and

other taxes can be legally avoided.

COMMERCIAL/RETAIL SPACES

The retail boom in India has fueled huge demand for commercial/shopping spaces. Many MNC’s

and big corporate retailers prefer to take prime commercial properties on long-term lease basis.

The option offers regular returns besides appreciation in capital value, taking both the returns

together gives handsome return and a wonderful combination of regular and a wonderful

combination of regular and long-term returns.

FARM HOUSES/SECOND HOMES

Many developers are offering lifestyle with smart returns through farm houses/second homes.

The offer comprises of sale of farm houses at affordable rates with professional property

management giving lifestyle and capital appreciation together.

REAL ESTATE MUTUAL FUNDS

Securities Exchange Board of India (SEBI) has recently allowed the launch of mutual funds

which can invest in physical property. Many corporates such as HDFC and IDBI are in the

process of launching real estate mutual funds.

FACTS AND FIGURES

In India Construction is the second largest economic activity after Agriculture. Investment in

construction accounts for 11 percent of India’s Gross Domestic Product (GDP) and nearly 50

percent of Gross Fixed Capital Formation (GFCF). Construction accounts for nearly 65 percent

of total investment in infrastructure and is expected to be the biggest beneficiary of the surge in

Infrastructure Investment over the next five years. According to the Economic Survey, India has

the potential to absorb US$ 150 Billion of Foreign Direct Investment in the next five years in the

Infrastructure sector. The sector is expected to grow at a CAGR of 15 percent over the next few

years.

The sustained growth and positive outlook for the future has increased focus on Infrastructure

development. Opening of the Infrastructure development to private players, FDI and increased

investment commitments from the govt. has thrown a host of opportunities for companies in the

infrastructure development sector, innovative projects like the metro Rail and Sky Bus, along

with the proposed SEZ projects have provided additional opportunities for the SME’s in the

sector. While majority of the infrastructure development projects are given out by the

government Agencies, the private sector is also actively participating through development

projects like SEZs and commercial construction.

Along with the government bodies and funding agency, various infrastructure development

companies, machinery and materials suppliers, ancillary suppliers and allied support industries

would play an important role in meeting in demand the for infrastructure development.

The Indian Infrastructure Sector is currently going through a vast transformation. The

Government’s decision to throw open the construction of roads, Bridges Airports and ports to the

private sector and allowing 100 percent Foreign Investment in real Estate Projects has provided a

boost to the construction Industry as well as generate demand for construction machinery.

Housing and Infrastructure Projects like Roads, Bridges and Ports are expected to grow about 20

percent per annum for the next 15 years.

The new and expanding housing and infrastructure construction ventures have generated

substantial demand for construction machinery manufacturing and servicing, including erection,

commissioning and maintenance. Several multi national firms are already present in the country.

REAL ESTATE AS AN INVESTMENT

OPTION

Is Real Estate A Good Investment Option?

Are you fatigued by the diminishing income and risk-factors associated with main-stream

investment avenues – fixed deposits, stocks, mutual funds, etc.? Think `real estate': a lesser

explored investment option.

Why real estate investment stands out?

• Quantum of investment required is high

• Investment horizon is long

• Dual returns are available in form of rental income and capital

Appreciation

What are the promising avenues of real estate investment?

• Offices

• Shopping malls

• Retail outlets

• Industrial warehouses

What is the current Indian real estate scenario?

• Periodic returns on commercial property ranges from 10 to 13 percent

Per year

• The Indian real estate industry has a growth rate of 35 to 40 percent

Annually

• The demand for real estate is picking up as the IT industries set up their

Base in India or look for expansion in these cities.

• Top financial companies have recognized the advantage of India as a

Business process outsourcing destination and had started expanding

their business.

• Companies are increasingly switching over to renting office premises.

This offers flexibility in operations and avoids locking capital.

• Companies operating in automobile design, auto components

Manufacturing, computer aided design and drawing are also entering

India in search of acquisition of space preferably as ready-to-occupy

premises.

• Real estate developers are offering premises on long lease to the

companies.

• Individual investors are benefiting from the developing commercial real

Estate market in India by investing in pre-leased properties.

• Norris / Pies are investing in real estate as the rental income and capital

Used to purchase the property is easily reparable .

What are funding sources supporting investment in real estate?

• Banks

• Financial institutions

• High net worth individuals

• Real Estate Mutual Funds

What are the procedures to be followed before investing in real estate?

• Find out credibility of the developer.

• Check out the attractiveness of property to tenants/ buyers

• Weigh future value potential

• Get to know the chances of project completion (in case it’s under

Construction)

• Investigate the quality of project

• Explore the availability of financing option

• Take advice from a reputed and a credible real estate consultant.

• Consult a reputed financial institution

Selecting a right option to invest hard earned-money is always a matter of big confusion. The

decision making process requires in depth analysis of available options which suits the needs

of a particular person or organization. A complete analysis and overview of investment

decision making with innovative solutions are given hereafter.

INVESTMENT NEEDS

The investment needs depend on the requirements of a particular person about the liquidity

of funds and his capacity and temperament bear risk. The tax implication on return of

investment to the investor is always a crucial matter for choosing the right option.

FACTORS AFFECTING INVESTMENT DECISION MAKING

After Tax ROI

Safety

Liquidity

TaxImplication

ConvenienceTo Invest

INVESTMENT OPTIONS:

The following are the major options available to the investors:

PO/Bank/Govt.SecuritiesPO/Bank/Govt.Securities

Bonds/DebenturesBonds/Debentures

Bullion (Gold/Silver)Bullion (Gold/Silver)

Shares/Mutual FundsShares/Mutual Funds

Real EstateReal Estate

All the options have different features with respect to various factors having implication on

investment decision making. The following Chart depicts the analysis of features of various

options at a glance:

*based on prevailing market rates

**based on last 25 years track record

Features→

↓Options

Liquidity

Options

Safety Convenience Tax

Benefits

Approx.

ROI

P.O/Bank/Got.

Securities

Reasonable Good Good Good 6-8%*

Comparative Features of Investment Options

Bonds/Debentures Reasonable Reasonable Reasonable NIL 8-10%*

Shares/Mutual

Funds

Good High Risk Reasonable Reasonable 12-15*

{With high

level of

uncertainty}

Bullion[Gold and

Silver]

Good Good Good Reasonable 5-7%**

Real Estate Reasonable Reasonable Not so

Convenient

Good 14-24%

{High

Returns}

GRAPH ON RETURN ON DIFFERENT INVESTMENT

OPTIONS

REAL ESTATE AS AN INVESTMENT TOOL WITH SPECIFIC

REFERENCE TO RAJASTHAN

Population (2001 Census)

– 5,65,07,188

• Urban population

– 23.38%

• Literacy rate - 61.03%

– Male - 75.7%

– Female - 43.9%

• Major industries

– Mineral based

– Agro based

– Heritage based

Rajasthan at a glance

Abundant availability of minerals.

Open & responsive Government

Proximity to Gurgaon & Delhi, which are now getting saturated.

Relatively better law & order scenario as compared to many other States in North India.

Very good living conditions –

– Good civic infrastructure –

– Residential, Educational and Medical facilities.

– Road, Power and Water.

– Avenues for re-creation and tourism.

Recent emphasis on technical manpower will yield results in near future.

Easy access – International Airport (Direct flights to Thailand,Singapore, Dubai).

Continuously improving telecommunication infrastructure as a result of Free Right of

Way facility.

Strong focus now on Knowledge Sector at the highest level in State Government.

Jaipur: A Magnificent Metropolis in Making

Salient Features of Jaipur Master Development Plan-2011:

• Master Development Plan 2011 has been prepared not only to meet the future

requirement of the city and the region but also to tackle the day to day

problems of the city.

• Jaipur is a fast developing city. By 2011 population of Jaipur is expected to

reach about 42 Lacs. The plan has been prepared to accommodate about 35

Lacs in the city & the remaining seven lacs in the satellite towns of Chomu,

Bagru, Bassi, Achrol, Shivdaspura, Goner, Balawala, Jamwaramgarh, Kanota

and Kakus etc.

• Jaipur is a tourist city. The plan provides for conservation and preservation of

its architectural heritage and to augment tourist facilities.

• The land use plan along with the land use zoning code facilitates easy

implementation of the master plan proposals.

Mega Projects in Pipeline :

• Mahendra City (S.E.Z) on Ajmer Road…3000 Acres

• World Trade Park

• Film City

• IT City

• Knowledge Corridor

• Ring Road

• Gems and Jewelry Market

• Rope-Way

• Medi-Tech City

Proposed Projects:

• International Convention Centre

• Sports City

• Green field Airport

• International Golf Course

DYNAMICS OF REAL ESTATE PRICING

The Interest rate factor has a direct relationship with the pricing of the immovable property.

Future properties are discounted by the market at a particular rate of discounting factor to

calculate the present market value, when the discounting factor reduces by few points, the prices

of immovable property increases many fold as the present value of the future property gets

increased.

The following chart shows the present value of Rs.1000 after 1 to 15 years. The chart clearly

shows that present value of Rs.1000 after 15 years discounted @ 20% is Rs. 65, while if the

same is discounted @ 10% the present value comes to Rs. 239, it is amazing to note that 50%

(from 20% to 10%) curtailment in interest rates increases the present value from Rs. 65 to Rs.

239 reflecting a jump of 267%. This dynamic works in future property pricing.

CASE STUDY TO UNDERSTAND THE DYNAMICS OF REAL ESTATE

PRICING

Year 2000

Belief: Agriculture Land in Shivdaspura is a future property of 2015 and at time the price level

shall be Rs. 50.00 lakh per bigha.

Discounting factor: 20%

Present Value (PV) in the year 2000, of Rs. 50.00 lacs in years 2015 was 50.00 lacs×0.065* =

3.25 lacs ** approx

*

*Discounting factor of Rs.1 after 15 years @20% p.a.

**The same was the approx. then prevailing price.

Belief: Agriculture Land in Shivdaspura is a future property of 2015 and at time the price level

shall be Rs. 50.00 lack per bigha.

Discounting factor: 10%

Present Value (PV) in the year 2006, of Rs. 50.00 laces in years 2015 was 50.00 lacs×0.424* =

21.20 laces ** approx

*Discounting factor of Rs.1 after 9 years @ 10% p.a.

**The present prevailing price is more than that which is pushed by other driving forces.

%/ 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Nyrs. 10% 909 826 751 683 621 564 513 467 424 386 350 319 290 263 23920% 833 694 579 482 402 335 279 233 194 162 135 112 093 078 065

REAL ESTATE IN WORLD

A real estate bubble or property bubble (or housing bubble for residential markets) is a type

of economic bubble that occurs periodically in local or global real estate markets. It is

characterized by rapid increases in valuations of real property such as housinguntil they reach

unsustainable levels and then decline.

The questions of whether real estate bubbles can be identified and prevented, and whether they

have broader macroeconomicsignificance are answered differently by schools of economic

thought, as detailed below. The financial crisis of 2007–2010 was related to the bursting of real

estate bubbles around the world, which had begun during the 2000s

Identification and prevention

As with all types of economic bubbles, whether real estate bubbles can be identified or prevented

is contentious. Bubbles are generally not contentious in hindsight, after a peak and crash.

Within mainstream economics, some argue that real estate bubbles cannot be identified as they

occur and cannot or should not be prevented, with government and central bank policy rather

cleaning up after the bubble bursts.

Others, such as American economist Robert Shiller of the Case-Shiller Home Price Index of

home prices in 20 metro cities across the United States, indicated in May 31, 2011 that a "Home

Price Double Dip Confirmed"[3] and British magazine The Economist, argue that housing market

indicators can be used to identify real estate bubbles. Some argue further that governments and

central banks can and should take action to prevent bubbles from forming, or to deflate existing

bubbles

Macroeconomic significance

Within mainstream economics, economic bubbles, and in particular real estate bubbles, are not

considered major concerns.[dubious – discuss] Within some schools of heterodox economics, by

contrast, real estate bubbles are considered of critical importance and a fundamental cause

of financial crises and ensuing economic crises.

The mainstream economic view is that economic bubbles bring about a temporary boost in

wealth and a redistribution of wealth. When prices increase, there is a positive wealth

effect (property owners feel richer and spend more), and when they decline, there is a negative

wealth effect (property owners feel poorer and spend less). These effects, it is argued, can be

smoothed by counter-cyclicalmonetary and fiscal policies. The ultimate effect on owners who

bought before the bubble formed and did not sell is zero. Those who bought when low and sold

high profited, while those who bought high and sold low (after the bubble has burst) or held until

the price fell lost money. This redistribution of wealth, it is also argued, is of little

macroeconomic significance.

In some schools of heterodox economics, notably Austrian economics and Post-Keynesian

economics, real estate bubbles are seen as an example of credit bubbles (pejoratively, speculative

bubbles), because property owners generally use borrowed money to purchase property, in the

form of mortgages. These are then argued to cause financial and hence economic crises. This is

first argued empirically – numerous real estate bubbles have been followed by economic slumps,

and it is argued that there is a cause-effect relationship between these.

The Post-Keynesian theory of debt deflation takes a demand-side view, arguing that property

owners not only feel richer but borrow to (i) consume against the increased value of their

property --- by taking out a home equity line of credit), for instance; or (ii) speculate by buying

property with borrowed money in the expectation that it will rise in value. When the bubble

bursts, the value of the property decreases but not the level of debt. The burden of repaying or

defaulting on the loan depresses aggregate demand, it is argued, and constitutes the proximate

cause of the subsequent economic slump.

Melbourne House Prices and Wages 1965 to 2010

Recent real estate bubbles

1990: Japan

The crash of the Japanese asset price bubble from 1990 on has been very damaging to

theJapanese economy,[4]. The crash in 2005 affected Shanghai, China's largest city.[5] In

comparison to the stock market bubbles, real estate bubbles take longer to deflate: prices decline

slower because the real estate market is less liquid. Commercial real estate generally moves in

tandem with the residential properties, since both are affected by many of same factors (e.g.,

interest rates) and share the "wealth effect" of booms. Therefore this article focuses on housing

bubbles and mentions other sectors only when their situation differs.

2007: many countries

As of 2007, real estate bubbles had existed in the recent past or were widely believed to still exist

in many parts of the world,[6]especially in the United States, Argentina,

[7] Britain, Netherlands, Italy, Australia, Canada, New

Zealand, Ireland, Spain, Lebanon,France, Poland,[8] South

Africa, Israel, Greece, Bulgaria, Croatia,[9] Norway, Singapore, South Korea, Sweden, Baltic

states, India,Romania, Russia, Ukraine and China.[10] Then U.S. Federal Reserve Chairman Alan

Greenspan said in mid-2005 that "at a minimum, there's a little 'froth' (in the U.S. housing

market) … it's hard not to see that there are a lot of local bubbles." [11] The Economistmagazine,

writing at the same time, went further, saying "the worldwide rise in house prices is the biggest

bubble in history".[12] Real estate bubbles are invariably followed by severe price decreases (also

known as a house price crash) that can result in many owners holding mortgages that exceed the

value of their homes. As of the end of 2010, 11.1 million residential properties, or 23.1% of all

U.S. homes, were in negative equity at Dec. 31, 2010.[13] Commercial property values remain

around 35% below their mid-2007 peak in the United Kingdom.[14] As a result, banks have

become less willing to hold large amounts of property backed debt, a likely key issue in affecting

a recovery worldwide in the near term.

Housing market indicators

UK house prices between 1975 and 2006 adjusted for inflation.

Robert Shiller's plot of U.S. home prices, population, building costs, and bond yields,

from Irrational Exuberance, 2d ed. Shiller shows that inflation adjusted U.S. home prices

increased 0.4% per year from 1890–2004, and 0.7% per year from 1940–2004, whereas U.S.

census data from 1940–2004 shows that the self-assessed value increased 2% per year.

In attempting to identify bubbles before they burst, economists have developed a number

of financial ratios and economic indicators that can be used to evaluate whether homes in a given

area are fairly valued. By comparing current levels to previous levels that have proven

unsustainable in the past (i.e. led to or at least accompanied crashes), one can make an educated

guess as to whether a given real estate market is experiencing a bubble. Indicators describe two

interwoven aspects of housing bubble: a valuation component and a debt (or leverage)

component. The valuation component measures how expensive houses are relative to what most

people can afford, and the debt component measures how indebted households become in buying

them for home or profit (and also how much exposure the banks accumulate by lending for

them). A basic summary of the progress of housing indicators for U.S. cities is provided

by Business Week.[15] See also: real estate economicsand real estate trends.

Housing affordability measures

The price to income ratio is the basic affordability measure for housing in a given area. It

is generally the ratio of median house prices to median familial disposable incomes,

expressed as a percentage or as years of income. It is sometimes compiled separately for first

time buyers and termed attainability.[citation needed] This ratio, applied to individuals, is a basic

component of mortgage lending decisions.[citation needed] According to a back-of-the-envelope

calculation by Goldman Sachs, a comparison of median home prices to median household

income suggests that U.S. housing in 2005 is overvalued by 10%. "However, this estimate is

based on an average mortgage rate of about 6%, and we expect rates to rise," the firm's

economics team wrote in a recent report.[16] According to Goldman's figures, a one-

percentage-point rise in mortgage rates would reduce the fair value of home prices by 8%.

[citation needed]

The deposit to income ratio is the minimum required downpayment for a typical

mortgage[specify], expressed in months or years of income. It is especially important for first-

time buyers without existing home equity; if the downpayment becomes too high then those

buyers may find themselves "priced out" of the market. For example, as of 2004 this ratio

was equal to one year of income in the UK.[17]

Another variant is what the United States's National Association of Realtors calls the

"housing affordability index" in its publications.[18] (The NAR's methodology was criticized

by some analysts as it does not account for inflation.[19] Other analysts, however, consider the

measure appropriate, because both the income and housing cost data is expressed in terms

that include inflation and, all things being equal, the index implicitly includes inflation). In

either case, the usefulness of this ratio in identifying a bubble is debatable; while

downpayments normally increase with house valuations, bank lending becomes increasingly

lax during a bubble and mortgages are offered to borrowers who would not normally qualify

for them (see Housing debt measures, below).

The Affordability Index measures the ratio of the actual monthly cost of the mortgage to

take-home income. It is used more in the United Kingdom where nearly all mortgages are

variable and pegged to bank lending rates. It offers a much more realistic measure of the

ability of households to afford housing than the crude price to income ratio. However it is

more difficult to calculate, and hence the price to income ratio is still more commonly used

by pundits. In recent years, lending practices have relaxed, allowing greater multiples of

income to be borrowed. Some speculate that this practice in the longterm cannot be sustained

and may ultimately lead to unaffordable mortgage payments, and repossession for many.

[citation needed]

The Median Multiple measures the ratio of the median house price to the median annual

household income. This measure has historically hovered around a value of 3.0 or less, but in

recent years has risen dramatically, especially in markets with severe public policy

constraints on land and development.[citation needed]

Inflation-adjusted home prices in Japan(1980–2005) compared to home price appreciation in

the United States, Britain, andAustralia (1995–2005).

[edit]Housing debt measures

The housing debt to income ratio or debt-service ratio is the ratio of mortgage payments

to disposable income. When the ratio gets too high, households become increasingly

dependent on rising property values to service their debt. A variant of this indicator measures

total home ownership costs, including mortgage payments, utilities and property taxes, as a

percentage of a typical household's monthly pre-tax income; for example

see RBC Economics' reports for the Canadian markets.[20]

The housing debt to equity ratio (not to be confused with the corporate debt to equity

ratio), also called loan to value, is the ratio of the mortgage debt to the value of the

underlying property; it measures financial leverage. This ratio increases when the

homeowner takes a second mortgage or home equity loan using the accumulated equity as

collateral. A ratio greater higher than 1 implies that owner's equity is negative.

[edit]Housing ownership and rent measures

The ownership ratio is the proportion of households who own their homes as opposed

torenting. It tends to rise steadily with incomes. Also, governments often enact measures

such as tax cuts or subsidized financing to encourage and facilitate home ownership. If a rise

in ownership is not supported by a rise in incomes, it can mean either that buyers are taking

advantage of low interest rates(which must eventually rise again as the economy heats up) or

that home loans are awarded more liberally, to borrowers with poor credit. Therefore a high

ownership ratio combined with an increased rate of subprime lending may signal higher debt

levels associated with bubbles.

The price-to-earnings ratio or P/E ratio is the common metric used to assess the relative

valuation of equities. To compute the P/E ratio for the case of a rented house, divide

the price of the house by its potential earnings or net income, which is the market

annualrent of the house minus expenses, which include maintenance and property taxes. This

formula is:

The house price-to-earnings ratio provides a direct comparison to P/E ratios used to

analyze other uses of the money tied up in a home. Compare this ratio to the simpler but

less accurate price-rent ratio below.

The price-rent ratio is the average cost of ownership divided by the received rent

income (if buying to let) or the estimated rent that would be paid if renting (if buying

to reside):

The latter is often measured using the "owner's equivalent rent" numbers published by

the Bureau of Labor Statistics. It can be viewed as the real estate equivalent of

stocks' price-earnings ratio; in other terms it measures how much the buyer is paying for

each dollar of received rent income (or dollar saved from rent spending). Rents, just like

corporate and personal incomes, are generally tied very closely to supply and

demand fundamentals; one rarely sees an unsustainable "rent bubble" (or "income

bubble" for that matter). Therefore a rapid increase of home prices combined with a flat

renting market can signal the onset of a bubble. The U.S. price-rent ratio was 18% higher

than its long-run average as of October 2004.[21]

The gross rental yield, a measure used in the United Kingdom, is the total

yearly gross rent divided by the house price and expressed as a percentage:

This is the reciprocal of the house price-rent ratio. The net rental yield deducts the

landlord's expenses (and sometimes estimated rental voids) from the gross rent before

doing the above calculation; this is the reciprocal of the house P/E ratio.

Because rents are received throughout the year rather than at its end, both the gross and

net rental yields calculated by the above are somewhat less than the true rental yields

obtained when taking into account the monthly nature of rental payments.

The occupancy rate (opposite: vacancy rate) is essentially the

number of occupied units divided by the total number of units in

a given region (in commercial real estate, it is usually expressed

in terms of area such as square meters for different grades of

buildings). A low occupancy rate means that the market is in a

state of oversupply brought about by speculative construction

and purchase. In this context, supply-and-demand numbers can

be misleading: sales demand exceeds supply, but rent demand

does not.

[edit]Housing price indices

Main article: House price index

The Case–Shiller index (national, quarterly) 1987–2008, showing a

housing bubble peaking in 2006.

Measures of house price are also used in identifying housing

bubbles; these are known ashouse price indices (HPIs).

A noted series of HPIs for the United States are the Case–Shiller

indices, devised by American economists Karl Case, Robert J.

Shiller, and Allan Weiss. As measured by the Case–Shiller index, the

US experienced a housing bubble peaking in the second quarter of

2006 (2006 Q2).

[edit]Real estate bubbles in the 2000s

By 2006, several areas of the world were thought to be in a bubble

state, although this contention was not without controversy. This

hypothesis was based on observation of similar patterns in real estate

markets of a wide variety of countries.[22] This includes similar

patterns of overvaluation and excessive borrowing based on those

overvaluations.

The subprime mortgage crisis, with its accompanying impacts and

effects on economies in various nations, has given some credence to

the idea that these trends might have some common characteristics.

INDIA: REAL ESTATE SCENARIO

GROWTH ACROSS GEOGRAPHIES

India’s Property Sector: Credit Strengths

In the residential sector, a growing middle class is enjoying rising income levels. Combined with

smaller household sizes, this demographic change has boosted demand for more modern housing

and home loans. Meanwhile, increasing consumer spending power has encouraged growth in

organized in organized retailing – both feeding off and contributing to the spear of ‘mall culture’

and the popularity of other large-scale retail property developments.

In the commercial property segment, strong growth in the services sector – particularly in the IT

and ITES sectors – and corporates’ growing scale of operations have led to greater demand for

commercial space, including modern offices, warehouses and lodging space.

Many Developers have substantial plans to increase both their size and geographical spread.

They are also expanding into different kinds of properties, which can boost the firms’ franchise

values and reduce concentration risks. However, managing and financing such activities can be a

challenge, and puts a premium on financial flexibility, capital access and operational

infrastructure.

The property industry is also wrestling with oversupply in certain areas, such as in India’s

commercial property sector, which may lead to rent reductions and value drops. Meanwhile,

property firms must also cope with a reduction in customer advances on new construction,

increasing land values (making acquisition and development deals tougher), rising interest rates

since 2005, and increased difficulty in arranging capital. The latter is exacerbated by rising

interest rates and property prices, which have encouraged banks to become more selective in

granting loans as they try to preserve asset quality.

Moreover, the Reserve Bank of India (RBI) has increased risk weighting for real estate exposure,

which has served to curtail direct lending to this sector.

The property business in India also faces political risks. These risks may come in various forms,

but include the stalling of decisions over acquisitions or planning permission during elections,

while some approvals have even been rescinded following elections and changes to state

governments.

Property financing remains largely conducted through conventional mortgages, with the volume

of more modern, transparent and liquid products-such as shares in public property firms and

CMBS-still negligible. This is partly due to high registration charges and transaction costs and

structural impediments in the securitization legal framework.

Furthermore, mutual funds lack the appetite of long-tenure deals, and mostly invest in high

quality debt, while pension funds and insurance companies have yet to invest in structured paper

either.

COMPANY PROFILE

VISION OF ANSAL API

To fulfill growing aspirations of our customers by:

Building world class real estate solutions

Redefining lifestyle standards.

IDENTITY

The color Red stands for RAJA/REGAL. It stands for passion, heat, energy, dynamism &

purity. It exhibits group’s rich heritage.

Black occurs when an object absorbs all the other colors. Black is significant to the group

as it represents the proposed amalgamation of all group companies into “Ansal API”,

thereby creating the new and vibrant Sushil Ansal Group.

The Slogan, Building Lifestyle since 1967, encapsulates the Group’s heritage and vision in

creating a better life for Indians in various sphere like- homes, offices, places of entertainment,

hotels, shopping malls & educational institutions.

ANSAL API was established as a result of a dream, shared by its visionary founders. A dream

that was to, radically improve the lifestyle standards of the citizens by building world class real

estate solutions.

After four decades of spectacular growth Ansal API is at a stage where the company has

acquired immense experience, consolidated and established assets- physical and intellectual and

at the same time retained youthful energy & zeal. With foundations entrenched in the solid

bedrock of technical expertise and financial stability its pinnacles are rising new heights with

foresight and innovations for future requirements of resurgent India.

Ansal API as an organization can be best envisaged as a creator of man made social

infrastructure, where modern life blooms, in collaboration with the environment. The ascent of

Ansal API to the top of the Real Estate acme is a direct product of Mr.Sushil Ansal's foresight

and his dynamic leadership. Ansal API, the corporate manned by professionals at all levels with

its strong base and lineage is now in a state of renaissance; all the companies of Sushil Ansal

Group will now be under one banner i.e. the Ansal API.

The new "Ansal API" identity, is the first communicator of this phase of resurgence, excellence

and modernity. The rectangular shape signifies solidity, cohesiveness and strength, the red colour

stands for passion, heat, energy, dynamism & purity and the black colour signifies the proposed

amalgamation of Ansal Township and Projects Limited into Ansal Properties and

Infrastructure Limited. The slogan, ' Building lifestyles since 1967', encapsulates their heritage

and vision in creating a better life for Indians in various spheres like - homes, offices, places of

entertainment, hotels, shopping malls and educational institutions.

Ansal API is focusing on ushering in new lifestyle ventures in cities like- Greater Noida,

Gaziabadh. Meerut, Agra, Lucknow, Batindha, Mohali, Amritsar, Ludhiana, Jalandhar, Jaipur,

Jodhpur, Ajmer, Sonepat, Panipat, Karmal, Kurukshetra, Faridabad, Gurgaon to name a few.

It is said that actions speak louder than words and nothing highlights this adage better than Ansal

API's effort to give something back to the society of which they are a part. Ansal API believes

that today's children are tomorrow's leaders and in order to hone their young minds, Ansal API

has forayed into the education sector with schools like the Chiranjiv Bharati School at Palam

Vihar and Sushant Lok, premier institutions like the Ansal Institute of Technology and the

Sushant Schools of Art and Architecture. Ansal API in its endeavour to fulfill its duties to

payback in form of green cover for the society have created manmade verdant ambiance at

projects like the Aravali Retreat, Pushpanjali Farms, Satbari Farms.

Ansal API plans to create an ambiance of peace and tranquility for the people who have served

their duties and are now in their dusk of life to relax and enjoy their retirement by building old

age homes.

Touching every facet of modern lifestyle with its signature of excellence, Ansal API has

changed the skyline of India with its versatile portfolio of residential complexes, educational

institutions, hotel and hospitality avenues, shopping malls, farmlands and IT parks amongst

others. With its deep-rooted foundation of ethics and values, Ansal API continues to conquer

new horizons, thus pioneering and identifying new vistas of growth for the real estate sector.

PRODUCT PORTFOLIO

1. COMMERCIAL

2. TOWNSHIP & GROUP HOUSING

3. RETAIL/MALLS

4. HOSPITALITY & ENTERTAINMENT

5. IT PARKS/INDUSTRIAL PARKS/SEZs

6. EDUCATION

7. FACILITIES MANAGEMENT

RESEARCH METHODOLOGY

Project Title:

Real Estate Investment trends in Northern India

Objectives of the Study

1. To identify the scope of investment in various states, especially outside NCR & Delhi.

2. To identify the current trend of Real Estate, in areas across Delhi, NCR, Rajasthan,

Punjab, U.P., Mariana.

3. To identify the reasons of investment in various states.

4. To identify the reasons of people for not investing in various states.

5. To identify the preferences of customers.

6. To evaluate the effectiveness of major real estate players.

Type of Data

The data collected is Primary data and Secondary data which is both quantitative and qualitative

data, which was further analyzed in order to draw conclusions and suggestions.

Data Collection

Data was collected by visiting Real Estate Agents across Lucknow and getting the questionnaires

filled through them. Five areas of Delhi were covered, being, North, East, West, South and

Central Delhi. Areas covered in the NCR region were Gurgaon, Indripuram, Vaishali,

Vasundhra.

Limitations of the study

1. Biasness of the real estate agents towards a particular company.

2. Lack of knowledge of the agents about areas outside their scope.

3. Agents catering to a specific kind of market, tend to favor those options.

4. Some generalizations by the targeted agents.

FINDINGS & ANALYSIS

CONCLUSIONS & SUGGESTIONS

What Cities Need To Do In Order To Attract Investments?

• BESIDES FINANCIAL POLICY FRAMEWORK – MANAGEMENT OF LAND IS A

PRECURSOR OF GROWTH FOR ANY REGION

• ITS CONTRIBUTION IS MANIFOLD IN ALL SYNERGISTIC AREAS OF GROWTH

• Give a different identity to each city

• Have INTL. level Planning and infrastructure – physical and social

• Antiquated Land Policies need to change

• Effective implementation

• Conducive policies

• Get an Image Makeover

13. SWOT ANALYSIS OF RELIANCE ENERGY LIMITED

STRENGTHS

1. Long experience in creation of world class assets at competitive schedules and costs

2. Experience in setting up of power projects and distribution of electricity to over 5 million

consumers

3. Strong project management and execution expertise

4. REL is ranked amongst India’s top 25 listed Private Co. in terms of financial parameters

including assets, sales, and profit and market capitalization.

5. Most valuable power company with a market capitalization of over Rs 10,000 crore

6. Group contributes nearly 16,000 million units of power to over 25 million consumers in

Mumbai, Delhi, Orissa and Goa across an area covering 1, 24,300 Sq. Kms.

7. Brand Equity and Brand name.

8. Governmental Supports through grants.

9. Internet usage drives down distribution costs.

WEAKNESSES

1. Financial losses.

2. Increase in wages and salaries.

3. Increase in debt to cover the operating expenses.

4. The acquired distribution circle is in bad state in terms of technology, investments and

consumers.

OPPORTUNITIES

1. Northern region has looming power deficit due to which economic growth is hampered,

which discourages further investments by corporate and industrial investors.

2. The challenges for power reforms in distribution in various states are vast and the private

sector participation in distribution has huge potential. Even if one state in India opens up

this sector every year, this will be a value creating opportunity for the customer and the

state.

3. Decline in interest rates.

THREATS

1. Reliance has very little expertise in distribution.

2. The risk factor in the strategy is the timing of the state government in allocating new

distribution licenses.

3. The competition in this Industry is increasing very fast.

CONCLUSIONS

1. Investors have a great amount hope from ANSAL API. Although, there are delays in

some ANSAL Projects, even then, investors feel secured in investing in ANSAL API

projects.

2. Clients often face problems with the company follow-up and allotment.

3. In the view of real estate agents, Unitech & DLF are the best service providers.

4. Circle rates of Plots must go up. Government should control the non-committed trend of

upcoming builders. With prices of property, infrastructure should also grow.

5. Bank Loan Interest rates must go low for the survival of real estate.

6. People are not too keen to invest outside NCR, and block their money for long term.

7. There should be no hidden costs, and everything should be crystal clear, which poses a

great influence on building brand image.

8. Developers should come up with timely projects. Companies should keep constant

correspondence with its customers. There should be a commitment of prices by the

company.

9. Pre-Launching is a major problem, thereby customers feel cheated by the

Developers/Agents.

10. Tough for small developers, due to frauds by companies like OSB, etc.

11. Good Scope of agricultural land in Rajasthan.

12. As, in U.P. there is a problem of electricity, so developers should focus on issues like

these.

13. It is observed that as far as Rajasthan is concerned, people are not aware of its scope as

an option, and have very limited information about the prevailing price hike and future

scope.

14. In Delhi, in some places like South Delhi, there is a high demand of floors, than its

supply.

15. A significant reason for people to not invest outside NCR, is that there are still good

options left in NCR.

16. It is noted that there is a good amount of scope on NH-8, as the foresight of the agents

see many colonies flourishing on the highway.

17. It is anticipated, Rajasthan will take a time period of around 10 years to see a boom.

18. It is seen that there is a great demand for 2 Bedroom Apartments in Gurgaon, but lack

supply.

19. People find a reason to invest in a particular city. In Rajasthan there is no such reason

except the tourism Industry. People come to Delhi for work and not Rajasthan.