Indian Real Estate Sector (1)

8/3/2019 Indian Real Estate Sector (1)

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REAL ESTATE SECTOR IN

INDIA

www.studygalaxy.com


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Contents

Growth in Real Estate Sector

Why to Invest In Indian Real Estate Sector

Opportunity of Investor in Indian Real Estate SectorIntegrated Township

Retail Sector and Real Estate Sector

Latest trends of FDIs and Guidelines for FDIs

Real Estate Mutual Funds

Special Economic Zones (SEZs)

Key trends in Real Estate boomMajor players

References Websites


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Growth in Real Estate

Investment of US$320 billion required in next five years ininfrastructure.

Real Estate sector is registering an annual growth rate of30%. Investment of US$ 16 billion expected over the nextfive to six years in Real Estate.

Credit to the housing sector has continued to be strong andbenefited from low interest rates and incentives.


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Growth in Real Estate (C

ontd.)

1.1% of the GDP constitutes FDI in real estate

sector.Returns in India range between 12-15% compared

to 3-4% in the advanced countries.

Merrill Lynch forecasts that the Indian real estate

sector will grow from US$ 12 billion in 2005 toUS$ 90 billion by 2015.


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Why Invest in Indian Real Estate

Sector

The Economy is growing with GDP Rate 9.2%

IT, ITES and Business Process Outsourcing (BPO) India

has shown its expertise in sectors like auto-components,chemicals, apparels, pharmaceuticals and jewellery whereit can match the best in the world.

Presence of a large number of Fortune 500 and otherreputed companies

India is going to produce an estimated

2million newgraduates from various Indian universities during this

year, creating demand for 100 million square feet of officeand industrial space.


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Opportunity in Indian Real Estate

Sector

Commercial Ventures

Retail Outlets and Malls

Sprawling Malls and Multiplexes

Building of Apartments

In Hotel Industry


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Integrated Townships

Central Government permitted setting up integratedtownships at the following places:-

Gurgaon (Haryana)

Hyderabad (Andhra Pradesh)

Mohali (Punjab)

Jaipur (Rajasthan) Bangalore (Karnataka)

Kolkata (West Bengal)


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Retail and Real Estate Sector

Spurt in extremely large retail spaces.

Shopping malls with over 1 million sq ft of space have

become the order of the day. About 20 of these are now at various stages of construction

across the country.

In the National Capital Region (NCR), Unitech's GreatIndia Place has a million square feet (sq ft) of retail space.

In Mumbai, at least 8 malls with over 1 million sq ft. each.

In Bangalore, at least 3 malls with similar dimensions areunder development.

Ludhiana will soon have a 1.6-million sq ft mall by Today

Homes.


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Latest Trends Of FDIs

100% FDI is allowed under automatic route intownships, housing, built-up infrastructure and

construction-development project (including but notrestricted to housing, commercial premises, hotels,resorts, hospitals, educational institutions, recreationalfacilities and regional level infrastructure), subject tocertain conditions.

FDI up to 51% is allowed through FIPB route in singlebrand retail shops.


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Guidelines for FDI in Real Estate

Minimum area to be developed under each project

would be as under: 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 project, any one of the

above two conditions would suffice


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The investment would further be subject to thefollowing conditions:

Minimum capitalization of US$ 10 million for whollyowned subsidiaries and US$ 5 million for joint ventureswith Indian partners. The funds would have to be brought in within six months of commencement of

business of theC

ompany. Original investment cannot be repatriated before a

period of three years from completion of minimumcapitalization. However, the investor may be permittedto exit earlier with prior approval of the Government

through the FIPB.


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At least 50% of the project must be developed within aperiod of 5 years from the date of obtaining all statutory

clearances. The investor would not be permitted to sellundeveloped plots.

Undeveloped Plots, here will mean where roads,water supply, street lighting, drainage, sewerage, and

other conveniences, as applicable under prescribedregulations, have not been made available. It will benecessary that the investor provides this infrastructureand obtains the completion certificate from theconcerned local body/service agency before he would

be allowed to dispose of serviced housing plots.


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Real Estate Mutual Funds

(REMFs)

SEBI has recently approved the scheme of REMFs/

This scheme has an objective to invest directly orindirectly in real estate property.

The units of REMFs will be compulsorily listed instock exchanges and Net Asset Value (NAV) of thescheme will be declared daily.

SEBIs has permitted to mutual funds companies tolaunch REMFs. It announced that all REMFsplanswill be close ended.


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REMFs (C

ontd.)

REMFs can invest directly in real estate

properties within India, mortgage (housinglease) backed securities, equity shares,

bonds, debentures of listed and unlisted

companies, which deal in properties and

also undertake property development and in

other securities.


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Special Economic Zones

(SEZs)

SEZ is a specifically delineated duty free enclave and isdeemed to be foreign territory for the purposes of trade

operations and duties/tariffs. To augment infrastructurefacilities for export production it has been decided to permitthe setting up of SEZs in the public, private, joint sector or

by the State Governments.

SEZ Act 2005 has now come into effect. SEZ Rules 2006were also issued in February. The above Act and Rulesenable India to leverage SEZs, like many East-Asianeconomies, to push investments and growth to a higherlevel.

Details at: www.sezindia.nic.in


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SEZs (C

ontd.)

So far 63 SEZs are functional.

237 SEZs have been approved.

Total investment in SEZs is expected to be

over US $ 8.8 billion in the next five years.


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Key trends in real estate boom

Legislation

Transaction Costs

Absence of REITs and REMFs

Land Acquisition

Lack of corporatization


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Major Players

Real Estate Developers

DLF Universal

OMAXE Ltd.

ANSAL BUILDWELL Ltd

REVFs/REMFs

Indian companies: IDFC, Kotak Mahindra, DewanHousing Finance, HDFC, etc.

Foreign companies: Blackstone, Dawnay Day,Savvils, Macquarie Bank, etc.


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Major Players Citigroup is investing around $400 million of equity

from a recently raised fund in India.

Hilton Hotels Corporation (HHC) has announced a

joint venture company with DLF Ltd to develop

and own 75 hotels and serviced apartments over7

years.

Dawnay Day International, the UK-based

investment company, plans to invest US$ 1.5

billion in Indian real estate in the next two years.


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References Websites

www.indianground.com

www.indianrealestateforum.com

www.assocham.org

www.sezindia.nic.in


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REAL ESTATE IN INDIA

Indian Real Estate Sector (1)

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