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BRIEF REPORT

ON

REAL ESTATE SECTOR IN INDIA


August 2013

1. INDIAS REAL ESTATE SECTOR



2.1 Overview

The real estate sector in India has come a long way by becoming one of the fastest growing
markets in the world. It is not only successfully attracting domestic real estate developers, but
foreign investors as well. The growth of the industry is attributed mainly to a large population
base, rising income level, and rapid urbanisation.

The sector comprises of four sub-sectors- housing, retail, hospitality, and commercial. While
housing contributes to five-six percent of the countrys gross domestic product (GDP), the
remaining three sub-sectors are also growing at a rapid pace, meeting the increasing
infrastructural needs.

The real estate sector has transformed from being unorganised to a dynamic and organised
sector over the past decade. Government policies have been instrumental in providing support
after recognising the need for infrastructure development in order to ensure better standard of
living for its citizens. In addition to this, adequate infrastructure forms a prerequisite for
sustaining the long-term growth momentum of the economy.

2.2 Segments in the Indian real estate sector





















Real Estate
sector
Residential
space
Fragmented market with few large players
Demand of over 300,000 units in the seven major
cities in 2010
Commercial
space
Hospitality
space
Retail space
Few players with presence across India
Over 38.2 million sqft demand in 7 major cities in
2011
FDI in multi- brand retail to boost demand
Fragmented market with few national players
Demand of around 15 million sqft in major cities
589 SEZs have been approved by the government
so far
Majority of SEZs are in the IT/ ITeS sector
SEZs
A competitive market with many players
Over 121,000 hotel rooms in the country as of
2011

2 REAL ESTATE MARKET



2.1 Market Size

The real estate sector in India is being
recognised as an infrastructure service
that is driving the economic growth
engine of the country. The Indian real
estate market size is expected to touch
US$ 180 billion by 2020. Foreign direct
investment (FDI) in the sector is
expected to increase to US$ 25 billion in
the next 10 years, from present US$ 4
billion.

Demand is expected to grow at a
compound annual growth rate (CAGR)
of 19 per cent between 2010 and 2014,
with tier I metropolitan cities projected
to account for about 40 per cent of this.
Growing infrastructure requirements
from sectors such as education,
healthcare, and tourism are also providing opportunities in the real estate sector.

The construction industry ranks third among the 14 major sectors in terms of direct, indirect and
induced effects in all sectors of the economy. The industry's growth is linked to developments in
the retail, hospitality and entertainment (hotels, resorts, cinema theatres) sectors, economic
services (hospitals, schools) and information technology (IT)-enabled services (like call centres)
etc and vice-versa.

The sector is divided into four sub-sectors:
Housing
Retail
Hospitality
Commercial

The housing sub-sector contributes five-six per cent to the country's gross domestic product
(GDP). Meanwhile, retail, hospitality and commercial real estate are also growing significantly,
catering to India's growing needs of infrastructure.

The Indian real estate market size is expected to touch US$ 180 billion by 2020.

India is going to produce an estimated 2 million new graduates from various Indian universities
during this year, creating demand for 100 million square feet of office and industrial space.


Growth
drivers
Growth in
tourism
Policy
support
Easier
financing
Epidemolo
gical
changes
Growing
economy
Urbanisati
on

2.2 Major acquisitions in real estate sector in India



Target Acquirer Value ($
million)
Year
Caraf Builders DLF Assets ltd 696.5 2009
Cowtown Land DvlpPvt
Ltd
Lodha Group 513.6 2011
Compact Disc film city Jeff Morgan 320 2011
Oceanus Real Estate Warburg Pincus 318 2011
Indiabulls Properties Pvt
Ltd
Indiabulls Property
Invest Trust
223.1 2012
Embassy Property Blackstone 200 2012

3 MARKET PLAYERS

The Indian real estate sector has traditionally been an unorganised sector but it is slowly evolving
into a more organised one. The sector is embracing professional standards and transparency
with open arms. The major established domestic players in the sector are DLF, Unitech,
Hiranandani Constructions, Tata Housing, Godrej Properties, Omaxe, Parsvanath, Raheja
Developers, Ansal Properties and Infrastructure and Mahindra Lifespace Developers Ltd to
name a few. International players who have made a name for themselves in India include Hines,
Tishman Speyer, Emaar Properties, Ascendas, Capitaland, Portman Holdings and Homex.

3.1 DLF Ltd

DLF group is a leading real estate developer in India since 1946. DLF has been instrumental in
putting Gurgaon on the urban landscape of India. DLF has over 220 million sq. ft. of existing
development projects and 574 million sq. ft. of planned projects. DLF has so far developed 22
urban colonies, and an entire integrated 3,000-acre township - DLF City. DLF's development
projects across India span over 30 cities: Gurgaon, Ambala, Shimla, Amritsar, Jalandhar,
Ludhiana, Sonepat, Panipat, Chandigarh, Panchkula, Noida, New Delhi, Jaipur, Indore,
Ahemdabad, Baroda, Lucknow, Faridabad, Mumbai, Pune, Nagpur, Goa, Kochi, Kokkanad,
Chennai, Bangalore, Vytilla, Coimbatore, Hyderabad, Bhubhaneshwar and Kolkata.

3.2 UNITECH

Established in 1972, Unitech is Indias leading real estate developer in India. It is the first
developer to have been certified ISO 9001:2000 in North India.

Project Spectrum: Unitech offers diversified projects across residential, commercial/IT parks,
retail, hotels, amusement parks and SEZs segments. Unitech was the first real estate company to
be part of the National Stock Exchanges NIFTY 50 Index. The company has over 600,000
shareholders. Unitech and Norway based Telenor Group came together to build Uninor - a
telecommunication services company providing GSM services across India.

3.3 Ansal API

Established in 1967 as a family business, Ansal API today is clearly amongst the real estate
leaders of India. Having established itself very strongly in the NCR region, Ansal API is now
focusing on ventures in cities like Bhatinda, Mohali, Amritsar, Ludhiana, Jalandhar, Jaipur,
Jodhpur, Ajmer, Sonepat, Panipat, Karnal, Kurukshetra, Faridabad, Gurgaon, Greater Noida,
and Ghaziabad, Meerut, Agra, Lucknow, to name a few. Ansal API has till date, developed and
delivered more than 190 million sq ft. The company currently has a land reserve of about 9,335
acres.

Project Spectrum: Integrated Townships, Condominiums, Group Housing, Malls, Shopping
Complex, Hotels, SEZs, IT Parks and Infrastructure and Utility Services



3.4 Sobha Developers Ltd

The Company was founded in 1995 by PNC Menon after he returned home from the Middle
East where he was acclaimed for quality interiors and construction since 1977. Today, this Rs10
billion plus company is one of the largest and only backward integrated company in the
construction arena. Its IPO in 2006 was oversubscribed by 126 times that created history, being
the first event of its kind in Indian capital markets.

Till date, Sobha has completed 47 residential projects, 13 commercial projects and 166
contractual projects covering about 36 million sqft area in 18 cities across India (as of 31 March
2010). The company currently has 21 ongoing residential projects aggregating to 8.5 million sqft,
while 4.24 million sqft of contractual projects are under various stages of construction.

3.5 Parsvnath Developers Ltd

Incorporated in July 1990 by Mr Jain in New Delhi, Parsvnath today has a substantial pan India
presence in over 45 cities across 16 states. The company has emerged as one of the most
progressive and multi-faceted real estate and construction entities in India.

Project spectrum: Housing (premium, mid-market as well as affordable), office complexes,
shopping malls & hypermarkets, hotels, multiplexes, IT Parks and SEZs.

4 POLICY INITIATIVES

4.1 Government Initiatives
According to the latest reforms, FDI up to 100 per cent is allowed under the automatic route
in townships, housing, built-up infrastructure and construction development projects to
increase investment, generate economic activity, create new employment opportunities and
add to the available housing stock and built-up infrastructure
The Ministry of Housing & Urban Poverty Alleviation has planned to introduce a single-
window system for clearance of all real estate projects across the country. The system could
bring down the average approval time from the current 196 days to 45-60 days
The Government of India has sanctioned projects worth Rs 41,723 crores (US$ 7.51 billion)
for building of 1,569,000 houses/dwelling units for economically weaker/lower income
group sections under the Ministrys flagship Jawaharlal Nehru National Urban Renewal
Mission (JNNURM) programmes
Housing finances are becoming feasible with the housing loan limit being raised to US$
52080 for priority sector lending

4.2 Some of the initiatives taken in the union budget 2013-14 include:

For homes and flats with a carpet area of 2,000 square feet or more or of a value of Rs 1
crore (US$ 180,213) or more, which are high-end constructions, where the component of
services is greater, rate of abatement reduced from 75 to 70 percent
Rs 6,000 crore (US$ 1.08 billion) were given to Rural Housing Fund
National Housing Bank plans to set up Urban Housing Fund. Rs 2,000 crore (US$ 360.47
million) will be provided to the fund in the current financial year

4.3 Investments

Private equity (PE) investments in real estate investment, reveals that approximately Rs 118.54
billion is available with private equity firms ready to be deployed in real estate, despite a drop in
the PE investment in the first half of 2013.

While PE investments in real estate was recorded at Rs 16.38 billion in H1 2013, which is 46%
lower when compared to first half of 2012 (Rs 30.50 billion), PE funds continue to show keen
interest in the market with a number of deals in discussion. This decline in the quantum of
private equity real estate investment (PERE) was essentially due to fewer deals (13 in H1 2013)
as the average ticket size of deals remained same.

The total value of investments in the residential segment recorded at Rs 9.3 billion in H1 2013
witnessed a drop of 48% over last year. The total value of investments in the office segment was
also lower in H1 2013 at Rs 7.0 billion. However, there is a strong growing trend towards
investments in ready office space. The growing stability of the market is reflected by the
continuous growth of the core investors (number and value) with over Rs 77.05 billion invested
in ready office space during the last three years.

In 2013, the highest value of private equity investments is noted in Pune at Rs 7.8 billion
followed by Mumbai at Rs 4billion, NCR at Rs 2.3 billion, and Bengaluru at Rs 1billion.

Some of the major investments in the Indian real estate sector are:
Ashiana Housing Ltd plans to foray into Gujarat's real estate with its first project worth Rs
100 crore (US$ 18.01 million) at Halol
Mr Akhilesh Yadav, Chief Minister of Uttar Pradesh (UP) has inaugurated and laid the
foundation of development projects worth Rs 3,337 crore (US$ 601.21 million) pertaining to
Noida, Greater Noida and Yamuna Expressway
Wave Infratech plans to invest Rs 500 crore (US$ 90.08 million) to set up its first affordable
housing venture in the Delhi national capital region (NCR) area
Mahindra Life space Developers has bought the stake of private equity Arch Capital in its
joint venture residential project at Chennai. The buyout of the stake was estimated to be
around Rs 70 crore (US$ 12.61 million)
Godrej Properties Ltd (GPL) has signed a development management agreement with United
Oxygen Company Pvt Ltd to develop residential housing project in Bengaluru. The project
will offer approximately 1,000,000 sq. ft. of saleable area and will be developed as a
residential housing project


5 CHALLENGES &INVESTMENT OPPORTUNITIES




5.1 Challenges

The key challenges that the Indian real estate industry is facing today are:

lack of clear land titles,
absence of title insurance,
absence of industry status,
lack of adequate sources of finance,
shortage of labour,
rising manpower and material costs,
approvals and procedural difficulties.

5.2 Investment Opportunities

The real estate industry in India is yet in a promising stage. The sector happens to be the second
largest employer after agriculture and is expected to grow at the rate of 30 per cent over the next
decade. A growing migrant population due to increasing job opportunities, together with healthy
infrastructure development, is underpinning demand in the regions residential real estate
market.

The Kalpataru spokesperson feels that the Finance Ministry's motivation through softening of
interest rates and lending more to the real estate sector will have a positive impact on both
developers and consumers. The real estate market could start to perform better as the easing of
FDI norms will begin to show results during the second half of the year. The economy will also
recover in 2013 which in turn will perk up the real estate sector in India. With the government
trying to introduce developer and buyer friendly policies, the outlook for real estate in 2013 does
look promising.


5.3 Nic



5.4 Tou
incr





S
che sectors
urism mark
rease capac
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expected to
cent during
The numbe
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is expected
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