The Real Estate Sector

History The Early human dwellings as pointed by

archeological evidences started in caves

Zhoukbodian caves system near Beijing, China dates at 500,000 years

Chinese caves contain some of the earliest evidence of human use of fire, approximately 400,000 years ago

Easily inhabitants of Australlia, the Middle east and the perusian Andes have also left remains in caves

Gradually as agriculture became important to people, some 4500 years ago, people established villages of permanent houses and found new uses for hunting and herding activities

Key Features The term ‘Real Estate’ is defined as land, including the air above it and the ground below

it, and any buildings or structures on it. It is also referred to as realty

Real estate involves the purchase, sale, and development of land, residential and non-residential buildings

The activities of the real estate sector encompass the housing and construction sectors also

The real estate sector is a major employment driver, being the second largest employer next only to agriculture

About 250 ancillary industries such as cement, brick, steel, timber, building materials etc. are dependent on the real estate industry

India Still has a shortfall of 2.47 crores as on 2007

Source: http://planningcommission.nic.in/

Impact of Real Estate Industry on some other key industries

Retail(Malls)Hospitality (Resorts, hotels, lodges, spa, inns)Entertainment Industries(Multiplexes, Theatres, Recreation

centers )Economic Services( Hospitals, school) Information technology(IT) Enabled companies( call centers)

REAL ESTATE

RESIDENTIALNON-

RESIDENTIAL/COMMERCIAL

OFFICE

GOVT. OFFICES PRIVATE OFFICES

HOSPITALITY INDUSTRIAL(SEZ)

RETAIL

MALLS AND MULTIPLEXES

STANDALONE OUTLETS

Physical Targets for Infrastructure in the Eleventh Plan Power

Additional power generation capacity of around 78500 MW

Roads and highways Six- laning 6500 km of Golden quadrilateral and selected National Highways Four laning 6736 km on North-South and East-West Corridors Four-laning 20000 km of national Highways Widening 20000 km of National Highways to two lanes Developing 1000 km of expressways

Railways Constructing dedicated freight corridors between Mumbai-Delhi and Ludhiana-Kolkata 8132 km of new railway lines: gauge conversion of over 7148

Seaports Capacity addition of 485 million tones in major ports, 345 million tones in minor ports

Airports Modernization and redevelopment of 4 metros and 35 non-metro airports Constructing 7 greenfield airports Constructing 3 airports in North-east region

Telecom Achieving a telecom subscriber base of 600 million, with 200 million rural telephone connections Achieving a broadband coverage of 2-0 million internet connections

Irrigation Developing 16 million hectares through major medium, and minor irrigation works 2.18 million

Source: Planning Commission

98.90%

1.10%

FY06

83.50%

16.50%

FY10

Other FDIHousing & Real Estate

•H

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ws

•H

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ion

activ

ity

•H

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occu

panc

y ra

tes

•H

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prop

erty

pric

es

•R

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• Capital outflows• Declining prices• Lending curbs• Low consumption• High vacancies

Boom

Recession

• Increasing vacancy• Slowing down• Construction growth• Property price starting to

fall

Rec

over

y

• Falling vacancy rate

• Increasing

construction activity

1.58

23.33

Total number of vacant censes housesTotal number of Occupied census houses

Total number of houses: 24.91

Total number of Census houses(in crores)

Source: www.indiastats.com

FY06 FY07 FY08 FY09 FY100.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

9.50% 9.70%9.20%

6.70%

7.40%

12.40%

10.60%10.00%

5.90%6.50%

India’s Real GDP(at Constant 2004-05 Prices) Growth Rate Trend

Growth rate

Gro

wth

rat

e (%

)

Source: MOSPI

75%

25%

Total share in real estate sector

Residential SegmentCommercial Segment

2006 2010 2015e 2020e0

20

40

60

80

100

120

140

160

180

200

16

60

90

180

Indian Real Estate Market Size(USD Bn)

FY07 FY08 FY09 FY100%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

14.16 11.19 13.47 16.75

3.413.27

4.814.491.24 0.87

1.250.82.38 0.79

0.830.71

8.749.83

25.0722.67

40.27 36.19

22.9830.27

1.76

OthersDepreciationInterest paidMarketing expensesAdvertising expensesCompensation to employeesRaw material expenses

Major challenges faced

Land availability and acquisition issue

Lack of Transparency

High stamp duty charges

Variable prices of raw materials

Absence of a centralized regulatory authority

Constraints of funds

India’s leading Real Estate Companies(as per Total Income)Sr. No Company Name Total Inco01me( Rs. Cr)

1 DLF Limited 3220.43

2 National Buildings Construction Corporation Limited

2947.73

3 DLF Home Developers Limited 2469.78

4 Unitech Limited 2221.71

5 Housing Development and Infrastructure Limited

1599.58

6 Ahluwalia Contracts (India) Limited 1573.43

7 DLF Retail Developers Limited 1501.89

8 True Value Homes(l) Private Limited 1400.00

9 Emaar MGF Land Limited 1172.35

10 Sobha Developers Limited 1119.28

Source : India’s leading Real Estate Companies 2010

India’s leading Real Estate Companies(as per net worth)Sr. No Company Name Net worth( Rs. Mn)

1 DLF Limited 128036.0

2 Unitech Limited 79032.3

3 Housing Development and Infrastructure Limited

70385.8

4 Emaar MGF Land Limited 46093.7

5 Anant Raj Industries Limited 34967.2

6 D B Realty Limited* 30967.2

7 DLF Home Developers Limited 24733.7

8 IVRCL Assets & Holdings Limited 22884.8

9 Parsnath Developers Limited 22174.7

10 DLF Commercial Developers Limited 20966.8

Source : India’s leading Real Estate Companes 2010

Year Building City Country Roof

2010 Burj Khalifa Dubai United Arab Emirates 828m

1963 KVLY-TV mast Blanchard United States 628.8

2011 Abraj Al Bait Towers Mecca Saudi Arabia 601m

2011 Tokyo Sky Tree Tokyo Japan 634 m

1962 BREN Tower Neveda Test Site United States 462 m

1962 Lualualei VLF transmitter Lualualei United States 458 m

1998 Petronas Twin Towers Kuala Lampur Malaysia 452 m

1997 Ekibastuz GRES-2 Power Station

Ekibastusz Kazakhstan 419.7 m

2008 Dimona radar Facility Dimona Israel 400 m

1987 Kiev TV Tower Kiev Ukraine 400 m

World’s Tallest Buildings

Breakthroughs

Burj Dubai

Tallest structure ever built, and freestanding

Highest elevators ever installed

World’s fastest elevators at 64 km/hr.

Worlds highest installation of an aluminum and glass façade, at a height of 512 meters

Highest number of floors in a building – 160, breaking 110 of World Trade Center buildings

Stakeholders Constructing companies Developers Engineers Technicians Design consultants Landlords Foremen Clerical staff Skilled workers Unskilled workers Banks Insurance companies Tenants Suppliers of material( Electrical, Material, etc.) Buyers Government Licensing/ Registration offices( e.g. BMC)

Types of end users

Investments

-Investors

-Speculators

-Specu-vestors

-Investor-occupiers

-Owner-occupiers

On the basis of size of family

- Nuclear Family

- Extended Family

- Joint Family

Budget• Small• Medium • Large

Type of occupation• Service class• Business class• Labor class

Organizations

- Govt. owned buildings

- Organizations/companies

- Self rented

Value Parameters(Residential)

Slum in the area Quality of Amenities

Upcoming projects, infrastructural developments

Developing/ Ready to possess buildings Permissions by necessary Govt. bodies Investment/ Lease / Self occupancy Parking Space

Financial Aspects Cash/ Cheque component Home Loan Interest rates Property and other tax Terms of Payment Monthly outflow or maintenance cost Down payment Fixed/Floating Slab duration/ Difficulty in getting Loan Affordability

Price Location Connectivity Neighbourhood Access to facilities like hospitals,

schools, gardens, markets etc. Future growth prospects Brand name Reputation of the builder Lifestyle Quality of construction Legality of construction Speed of Construction Space ( S/B area vs. Carpet Area) Environmental friendliness Earthquake Resistance Security Parameters like distance

from the police station, fire station.

Comparative chart (on the basis of New worth)

04000080000

120000160000200000

34958.3

128036

46093.7

70385.8 79032.3

Net Worth(Rs. Mn)Net Profit(Rs. Mn)EBITDA( Rs. Mn)Total income( Rs. Mn)

Comparative chart (on the basis of New worth)

0%20%40%60%80%

100%

93.365 33.4 78.5 48

70.9

23.7 12.7 37.3 23.78.38.1 4.1 11.3 8.9

6.8

6 3.2 8.5 6.68.3

7.3 3.2 11.8 5.762.21.9 2.5 2.4 3.1

Interest cover(times)Debt-to-equity(times)ROA(%)RONW(%)ROCE(%)NPM(%)EBITDA Margin(%)

Distribution chain Portals like 99acres.com, Magicbricks.com, Indiaproperty.com Property exhibitions Newspaper ads Property magazines Leaflets Agents, brokers Leaseholders Government allotments( MHADA, Tata Housing) Neighbors, friends, colleagues Word of mouth Auctions Banks Investment Banks

Backend supply chain

Backend Supply Chain Land Architects Cement Industry Steel Industry Sandstone Petrol Prices Electrical wiring and hardware fittings Flooring( Tiles, Marbles, Granites) Paints Heavy equipments(Cranes, Land movers, etc.) Glass Industry Bank and Insurance companies Road and Infrastructure Government agencies for plan approval, NOCs, DCRs

Top 10 Cement CompaniesName of the Company Annual Turnover Production Installed

Capacity

1. ACC Ltd. 9339.64 17902 18640

2. Ambuja Cements Ltd. 7998.55 15094 14860

3. Ultratech Cement Ltd. 13980.35 13707 17000

4. India Cement Ltd. 3667.16 14649 14115

5. Shree Cement Ltd. 3558.64 8434 8810

6. Rain Cement Ltd. 4965.76 6174 6680

7. Prism Cement Ltd. 3456.03 6316 6531

8. Madras Cement Ltd. 2644.71 6636 6300

9. Birla Cement Ltd. 2264.35 4550 5470

10. JK Cement Ltd. 2119.35 5150 5113

http://business.mapsofindia.com/cement/top-10-cement-companies.html

Brief about the industry Indian Cement Industry is the Second largest in the world with

236.16 MT as on September 2011. With the government of India giving boost to various infrastructure

projects, housing facilities and road networks, the cement industry in India is currently growing at an enviable pace

Most of the cement Industries are located close to Madhya Pradesh, Andhra Pradesh, Rajasthan, Gujarat and Tamil Nadu because of the availability of Limestone, Gypsum and Coal.

Although this Industry got a boost post reforms in 1992 but the price of the Cement is still controlled by the government and due to economies of scale 95% of the sales come from the top 10 players.

SOURCE: http://business.mapsofindia.com/cement/

Indian Steel Industry

India is the 8th largest producer of steel with a production capacity of 35MT.

There has been a significant growth in the production and consumption of steel in the domestic market.

The consumption of steel in the Country is a significant indicator of the development in the country owing to the use of steel in the infrastructure, housing and Industry

SOURCE: www.cci.gov.in/images/media/.../Indicussteel_20090420151842.pdf

Top 5 Steel companies in India(on the basis of production)

Tata Steel Steel Authority of India Ltd. Bhushan Power and Steel Jindal Steel and Power Limited. Essar Steel

Petrol/Diesel A Price of Crude oil has a huge impact in the Realty market

because of the rise in price of other raw materials.

Highly regulated market with top leaders being IOCL, HPCL and BPCL

Glass Industry

The topmost glass manufacturers in India are Asahi India Glass, NSG Group, Saint-Gobain, Guardian Industries and Hindustan National Glass.

A strong demand and growth of infrastructure, liquor & other beverages, boom in building and construction will see the glass industry at its best in the coming years.

The industry is estimated at 5500 crores by the end of FY 11-12

Source: www.niir.org/.../glass...glass...glass...glass...glass...glass-glass...glass...

Paint Industry

Indian Paint Industry is valued at Rs. 11000 Crores by FY 2009-10.

The Ratio of the organized and unorganized sector is 65:35 with the unorganized sector’s involvement being more in the distemper coating

Top leaders are Asian Paints, Nerolac, Berger, Jenson and Nicholson, Dulux.

Source: http://www.managementparadise.com/forums/publish-upload-project-download-reference-project/72869-paint-industry-analysis.html

Basis of questionnaire

Current trend

Expected trend

Profit margins

Overall market growth overview

Runwal Symphony, Vakola, Santacruz(east)

Project 16 floors 2 wings 2, 3 bhk

• Total area- 10000 sq. ft.• Construction cost- Rs. 2500 per sq. ft.• Land cost – Rs. 2500 per sq. ft.• Other expenses- Rs. 600 per sq. ft.• Considering 30% area sold while booking or bhoomi poojan.• Interest = around 10-12% • Therefore total cost= 10000 * 5600= 5.6 cr• Total sales cost = 9800* 11000= 10.78 cr(avg out)• Booking sales= 4200(30%) * 8000= 3.36 cr[Construction cost

averages out]• Total sales revenue= 10.78 + 3.36= 14.14 cr• Total profit % = 152% profit

Laws Governing Real Estate Market In India

Indian Transfer of Property Act Indian Registration Act, 1908 Indian Urban Land (Ceiling And Regulation) Act, 1976Rent Control ActsThe Town & Country Planning Acts

http://www.indialawoffices.com/pdf/realestate.pdf

No specific tax incentives for real estate sector, however the following incentives will boost the real estate.

Excise duty rates on bulk cement and packaged cement brought on par; bulk cement to attract excise duty of Rs.400 per Metric Tone or 14 per cent ad valorem, whichever is higher

Cement clinkers excise duty at Rs.450 per Metric Tone.

General CENVAT rate on all goods reduced from 16 per cent to 14 per cent to give a stimulus to the manufacturing sector.

Reduction in the excise duty from 16 per cent to 14 per cent.

Reduction in customs duty from 5 per cent to nil on steel and aluminum melting scraps

http://www.indialawoffices.com/pdf/realestate.pdf

Regulations from Primary survey

Under the Income tax Act:

Valuation of the property is done as per three values: Fair Valuation Municipal Valuation Market Valuation

Valuation can be done on the basis of any of the above three but the registration and stamp duty cannot be paid at a rate lesser than the Municipal Valuation, better known as Ready Reckoner rate of the property.

(CLIS) Change of land Use

NOC – At least in 2 stages

Plan verification

Registration

NOC post completion

As per new rule an additional Service tax of 2.5% will be levied on the registration value

Stamp Duty Rates

Non-residential Properties – Flat 5%

Residential Flats in a housing society and buildings covered under Article 25(d) of schedule I of Bombay Stamp Act 1958 attracts concessional rates depending upon the market rates depending upon its market value as follows: Below 100000 - Nil 100000- 250000 - 0.5% of the value 250000- 500000 – 1250 + 3% above 500000 Above 500000 – 8750 + 5% of the value above 500000

RegistrationPost January 2010 the

registration fees of a property in Maharashtra has gone up to 1% of the ready reckoner rate.

Earlier this rate was Flat Rs. 30000.

TRENDS

A large number of projects that have come up in the past decade have placed a lot of importance on additional amenities like swimming pool, gymnasium, etc thereby increasing the maintenance cost for thee projects.

A lot of developers are now considering moving to the construction of 1BHK and BK apartments in prime locations because of growing demands for this particular format by the lower-middle and middle income groups

Some of the builders that I visited have now gone on to make apartment sizes much larger than the ones prevalent for that particular segment. E.g. A normal 3 BHK should be between 1500-1700 sq. ft. RNA Builders are now coming up with areas like 2400 and 2800 sq. ft. These flats are brought over by a lot of investors

Builders too are looking forward to developing compact houses with reduced space. For e.g. 3 BHK usually having 1500 to 1800 sq. ft are reducing their floor size to 1000 and 1200 sq. ft. catering majorly to the people with limited budget and higher requirement

Concept of satellite cities like Amby valley and Lavasa too is experiencing a boom. Urban crowd are slowly moving from cities like Delhi to Gurgaon and Noida. This trend can also be seen in Mumbai in the past decade.

NEED GAPS

Medical Travelers

India has over 5 lakh patients travelling every year for medical purpose

People from abroad travel to India for Orthopedic surgeries like hip/knee replacement Birmingham hip resurfacing Cardiac surgeries like cardiac bypass Valve replacement Pediatric heart surgeries for congenital heart disease

Prevalent Long term illnesses

Cancer – GIT(Gastro Intestinal Track) Cancer – Hepatocellular Carcinoma Bone Marrow Transplant( Leukemia, Hodgkin's) Brain Cancer Pancreatic Cancer Terminal Stage of HIV( Full Blown AIDS) IVS( In vitro fertilization)

Top Hospitals In Mumbai Tata Memorial Jaslok Hospital Hinduja Hospital Amla Cancer Hospital KEM Fortis Bombay Hospital Leelawati Breach Candy Wockhard Asian Heart Institute

Proposal for Medical Tourism Setting up of medical service apartments

These service apartments should be within the boundaries of the city because of our capacity to charge more

Other business facilities like internet service, fax should be made to encourage them to stay with us

Tie-Ups with the above mentioned hotels for this purpose should be a good idea

Tie-Ups with people who are involved in medical tourism

Proposal Recommend to construct and set up apartments in the vicinity of the

city dedicated specially to cancer patients or long-term residential patients termed as ‘Medical Service Apartments’

24 Hour Ambulance service in case of any Mishap

Modern Pathology Laboratory to be set up for time to time examination

Tie-Ups with Hospitals for the marketing of these Apartments

SATELLITE CITIES Development of satellite cities unlike Amby valley and

Lavasa catering to the need of the lower-middle and middle age group.

Basic Requirement of this particular segment being affordable houses with basic amenities and safety.

SEGMENTATION MATRIX