External Factor Analysis Summary

External Factor Analysis SummaryGroup 4 :Amit Ranjan GuptaAshish KhandelwalBhupendra MalviyaJagdish AgrawalMukunda RamamurthyIntroduction of EFASBrief Overview of Real Estate IndustryOpportunities for Real Estate IndustryThreats for Real Estate IndustryEFAS Analysis of DLF Pvt LtdEFAS Analysis of Shobha DevelopersConclusionAgendaLimitation of SWOT AnalysisUses only single level of analysisNo weights to reflect priorities

Advantage of EFASTwo level of analysisStudy of Threats and OpportunitiesStudy of ability of the organization to respond to above factorsEFAS provides weighted score

External Factor Analysis SummaryExternal Factor Analysis Summary (EFAS)ExternalStrategic FactorsWeightRatingWeighted ScoreComments123451.00Opportunities

Threats

Total Weighted Score72Real Estate IndustryReal estate contributes about 5 per cent to Indias GDP.The total revenue generated in FY11 stood at USD 66.8 billion.The housing shortage in urban and rural India will be around 21.7 and 19.7 million units respectively in 2014 .

Residential Real EstateCommercial Real EstateOpportunitiesOpportunitiesWeightCommentsIncreased FDI Limit0.15 Upto 100% FDI allowed with Govt. Permission FDI flows for the period 2012-13 stood at USD 1,260 million Minimum 10 Hectares for Ser ice housing plots and 50,000 sq. mts for other projects.Increased Per capita income0.1 Disposable income to invest in real estateGrowing constant Demand0.09 Urbanization Better InfrastructureGovernment Initiatives0.09 Allocation of USD 833 million for Rural Housing Fund Rajiv Awas Yojana JnNURMThreatsThreatsWeightCommentsHigh Inflation0.05 Interest rate risk. Exchange rate risk. Low savings.Land Acquisition bill0.15 Increased cost of project. Deindustrialisation fear.Direct Tax Code0.15 No tax rebate on HRA. No tax rebate on home loan interest. Increased tax on capital gain.Liquidity Crunch0.15 D/E ratio requirement of banks decreased to 3:7 from 5:7. New loan disbursement guidelines from RBI to banks.Threats (Contd..)ThreatsWeightCommentsPolitical Instability0.05 New government. Red Tape. Parties favouritism.Non transparency of pricing0.02 No systematic way of pricing. No Regulator. Multiple brokers mark up.Total1DLF LTDExternal FactorsWeightRatingWeighted ScoreCommentsOpportunitiesIncreased FDI Limit0.154.000.60NO FDI investment and higher allowed limits give opportunity to raise fund in futureIncreased per capita income and NRI customers interest0.104.000.40Popular in NRIs, High end residential projects will be good investment opportunities for NRIsGrowing constant demand0.094.000.36Project over 53 MSF is under executionGovernment initiative0.094.000.36Presence in all over india provide opportunity to ThreatsHigh Inflation0.053.000.15Interest rate risk, low tendency to spend moneyLand acquisition bill0.154.000.60Land Bank is 314 MSF as on Sept 2013 in 10 major cities of IndiaDirect Tax code0.153.000.45Taxable home loans will discourage the investorsLiquidity crunch0.151.000.15Very High Debt, Debt/Equity Ratio is 7:1political instability0.053.000.15Operational mostly in politically stable regionsNon transparency of pricing0.023.000.06Price based on built up area or super built up area are generally manipulatedTotal Scores1.003.28 x 54321OutstandingAveragePoorShobha DevelopersExternal FactorsWeightRatingWeighted ScoreCommentsOpportunitiesIncreased FDI Limit0.153.000.45100% of FDI subject to certain criterion but 60% already invested as per 12-13 ARIncreased per capita income and NRI customers interest0.104.000.40Popular in NRIs, High end residential projects will be good investment opportunities for NRIsGrowing constant demand0.094.000.3645 Ongoing projects mainly in Southern regions & NCRGovernment initiative0.092.000.18ThreatsHigh Inflation0.053.000.15Interest rate risk,exchange rate risk,low savingsLand acquisition bill0.152.000.30Increase cost of projects, Less Land bankDirect Tax code0.153.000.45Taxable home loans will discourage the investorsLiquidity crunch0.155.000.75Good Debt/Equity ratio of 3:5. Required by banks 5:5 or 3:7political instability0.053.000.15Operational mostly in politically stable regionsNon transparency of pricing0.022.000.04Prices are not transparentTotal Scores1.003.23 x 54321OutstandingAveragePoorEFAS score shows that both DLF and Shobha Developers has average performance to the factors in its external environment. ConclusionThank You