Synopsis

“A study of the Prospects and Challenges of

Real Estate Market” (With special
Reference to Thane District.)

Submitted for the Degree of

Doctor of Philosophy in the faculty of Commerce
To

Swami Ramanand Teerth Marathwada University,

Nanded 431606

By
Miss Shilpa Kishore Bhagtani
Research Student

Under the Guidance of

Dr. B.V. Dakore
(M.Com, Ph.D.)
Assistant Professor& Research Guide
A.C.S. College
Shankar Nagar Tq. Nayagaon Dist. Nanded

Feb-2013

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 “A study of the Prospects and Challenges of Real Estate
Market” (With special Reference of Thane District.)

INTRODUCTION:
The Indian economy is presently the second fastest growing economy in the world with
an expected real GDP growth of 7% (2004)*.India has the potential to grow at rates
higher than 5% over the next 30 years surpassing the GDP of developed economies such
as Italy, Germany and Japan in the process. India’s domestic GDP is expected to grow
from current $585bn to a trillion dollars by 2012.
Indian economic growth over the past decade has principally been supported by
buoyancy seen in consumption. India is amongst the very few economies in the region
where household consumption accounts for almost 65% of GDP. The economic growth
has also been supported by favorable changes in the demographic structure like rising
income levels, changing age profile, etc in the country. Indian economy is experiencing a
structural demographic change. The key factors responsible for this demographic
transformation can broadly be attributed to;
a) Rising Income levels
b) Changing age profile- relatively young population
c) Attitudinal shifts
d) Nuclearisation of families
e) Emerging middle class- 300 million
f) Rising share of services businesses and
g) Changing consumption pattern- savings rate declining & consumption increasing.
Favorable changes in the demographic structure is also been supported by the falling
interest rate scenario making credit cheaper and increasing fiscal benefit in terms of
concession on principal and interest repayments by the government for investments in
real estate by individuals.

Household consumption continues to be a key growth driver for the Indian economy
(accounting for about 65% of GDP) supported by an upward movement in housing
demand, which has helped to provide some buoyancy to the real estate market. The
importance of the housing in real estate sector in India can also be gauged from the fact
that for every one rupee invested in the construction of houses, an estimated 75 80%

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 (Rs0.75- 0.80) is added to the GDP and the sector is subservient to the development of
over 250 other ancillary industries The real estate sector is amongst the top 3
employment generators in India. Market analysis estimates returns from real estate in
India at an average of 10-12% annually mentioned in exhibit 12, with an upsurge in
commercial real estate on account of the Indian BPO and insurance boom. Lease rentals
have been picking up steadily and there is a gaping demand for quality infrastructure.
The housing sector has been growing at an average of 34% annually, while the
hospitality industry witnessed a growth of 10-15% last year. Further, the penetration
levels are still very low across India, despite the recent growth seen across housing
indicated by the fact that the mortgage to GDP ratio in the country is about 3% compared
to over 50% in the US. However, even if one were to benchmark with more comparable
counterparts, the ratio ranges between 15-20% for most South East Asian countries. Thus
the penetration level of mortgages is miniscule when compared with the shortage of
housing units. Almost 80% of real estate developed is residential space and the rest
comprised of office, shopping malls, hotels and hospitals. Commercial real estate
development is being driven increasingly by the off-shoring business, including high-end
technology the Indian real estate industry has been on a roller coaster ride since 2005.
Consequent to the government’s policy to allow Foreign Direct Investment (FDI) in this
sector, there was a boom in investment and developmental activities. The sector not only
witnessed the entry of many new domestic realty players but also the arrival of many
foreign real estate investment companies including private equity funds, pension funds
and development companies entered the sector lured by the high returns on investments.
The real estate sector has been riding through many highs and lows since then. The
industry achieved new heights during 2007 and early 2008, characterised by a growth in
demand, substantial development and increased foreign investments. However, by mid
2008, the effects of the global economic slowdown were evident here too, and the
industry took a ‘U’ turn. FDI inflow into real estate dropped significantly and what had
emerged as one of the most promising markets for foreign investments experienced a
down turn.

Significance and statement of the study:-

Commercial real estate sector is in boom in India. In the last fifteen years, post
liberalization of the economy, Indian real estate business has taken an upturn and is

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expected to grow from the current USD 14 billion to a USD 102 billion in the next 10
years due to this the study of the proposed research work is significant.

The recent growth in the Indian economy has stimulated demand for land and
developed real estate across the country. Taking into consideration the rising demand
for residential, commercial and retail real estate, the Finance Bill 2012 had proposed
insertion of section 194LAA in the ITA to deduct tax by way of TDS @ 1% on
consideration for transfer of immovable property (other than agricultural land) if the
value of the property exceeds Rs. 50 lakh in urban areas and Rs. 20 lacs if the
property is situated in any other areas so the study of the real estate sector is
significant.
The present day challenges of the real estate sector are increasingly complex and
diverse. The industry is facing the headwinds of recent regulatory changes, inflation,
declining demand, scarcity of skilled manpower, high cost of finance, stagnating
selling prices and increasing land cost. Also, maintaining credibility while meeting
customer expectations in terms of quality and timely delivery is another major
challenge plaguing the sector because of this the study of the real estate sector is
significant.
Today, the real estate sector is grappling with a number of challenges such as shortage
of skilled manpower, escalating project cost and prolonged construction period.
Technology holds the key to not only address some of these issues, but also a promise
for the sector to react to the changing market conditions more effectively and
efficiently due to it the study of the real estate sector is significant.
The traditional methods of marketing construction projects have proved to be
extremely time-consuming and ineffective at offering useful information of buildings
such as design and planning to potential customers. With customers seeking more
information for making informed decisions while making purchases, deployment of
technology provides an opportunity to savvy developers to differentiate their
marketing efforts from that of their competitors. Across the sector, developers are
investing in providing virtual tours of their projects to their potential customers to
effectively market their projects while saving both time and cost. Therefore the
researcher wants to know the problems of the real estate sector.
India has all the characteristics to attract international investments in the Real estate
sector and provide comparatively higher returns. There are certain challenges that

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 India needs to overcome to develop a conducive environment for attracting
sustainable long term capital for that reason the study of the real estate sector is
significant.
The Indian property market has low transparency when compared to the more mature
and developed real estate markets. Although market transparency has improved,
reliable and consistent information on the Indian property market is still not easily
available. There are also more professional due diligence and valuation institutions
needed. This holds true even for the Tier I cities. So the study of the real estate sector
is significant.
Interest rates, inflation and exchange rate risks are amongst the important
macroeconomic indicators and have shown decreased volatility. The provision of
facilities, is in many regions, still inadequate (education, transport infrastructure).
These risk factors are not likely to disappear in the near future, impeding the
development of the real estate sector. Lack of information and low transparency in the
real estate segment in India, coupled with the age old property related issues
discourages the investment of the large players in the semi urban and rural areas thus
slacking an overall growth of the real estate sector for all above reasons the study of
the real estate sector is significant.
In the proposed research work the researcher will try to find out suitable solution for
the following challenges or problems faced by real-estate sector in Thane district.
The key challenges that the 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.

The Objectives of the Study:

In order to know the present performance and the challenges in front of the real estate
sector the researcher has selected following objectives,
1. To analyse the process of development & challenges in real-estate in India during post
reform period.

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 2. To evaluate the contribution of real-estate sector to income and employment.
3. To compare the growth & challenges during Pre & Post FDI Policy.
4. To assess the role of real-estate sector in foreign trade.
5. To bring out the factors responsible for the real-estate sectors growth.
6. To evaluate the challenges faced by real-estate sector in India.
7. To study the fundamental factors affecting the real estate value.
8. To present the future constraints of real estate investment in India.

Hypothesis of the Study:

1. The generation of income and employment by the real estate sector increase
tremendously.

2. The Real Estate sectors growth is experienced due to education, high income
elasticity and infrastructure development.

3. The family from economically middleclass prefer real estate sector more than
economically lower class family.

Scope of the Study:-

1. Temporal Scope:-

For the purpose of study, mainly the duration of the year’s i. e.2002 to 2012 is
considered. Where ever necessary reference will make to the previous and current
circumstances.

2. Geographical Scope:-

A study has been mainly confined to the Thane districts of Maharashtra state.

3. Functional Scope:-

The purpose of the study is to acquire information about the performance of real
estate sector for welfare of families and to know about the government policy for
real estate sector

Research Methodology:-

The present research work is A study of the Prospects and Challenges of Real Estate Sector in
India: with special Reference of Thane District.” in the Maharashtra state and its relevance
with economic development and growth, as well as the living standard of the peoples During
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 the period of Ten years i.e. from 2002-2003 to2011-2012. This is a descriptive, analytic,
based upon historical facts. This is an empirical study. Therefore the research model that is
selected that of descriptive, empirical, quantitative and historical research. The major aspects
are as follows:-

Primary Data:-

Primary data is the foundation of this study. Following methodology will adopted to collect
the essential information to analyze and give the accurate results,

1. Direct visits.

2. Interviews

3. Questionnaires.

With the help of these Questionnaires data Will collect and process by means of statistical
methods.

A. Secondary Data:-
Secondary data is also one of the foundations of this study. The researcher will collect
secondary data from the publish sources such as;

1. Annual report of Real Estate Companies.

2. The Library books available.
3. The trade Journals on real estate industry.
4. Government reports on Real Estate.
5. Magazines on Real Estate sector.
6. Published news of real estate market in different news papers.
7. Government Publications
8. Use of internet etc.
B. Tools Employed:-

Various statistical tools will use such as, Tables, pie charts, histograms and structure will use
in explanations to bring out the point more clearly. Therefore with this in mind, while
presenting arguments in theory, diagrammatic, structural, graphic representation will sort on
some necessary cases exhibits will give to draw, made calculation of percentage, ranks and
means of comparison.

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Limitations of Study:-
Even though its achievement, this research has some limitations that should be addressed in
future studies. The first is the limited number of experts & respondents involve in the study.
The second limitation it is limited for ten years period i.e. 2002 to 2012. Another limitation it
is limited to the given objectives by the researcher.

Chapter Plan:-
The whole study can be divided in to eight sub chapters such as under.

Chapter: 1 Introduction and importance of study.

Chapter: 2 Review of Literature

Chapter: 3 Socio-Economic profile of Thane District.

Chapter: 4 Present scenario of real-estate sector

Chapter: 5 Growth and Opportunities in real-estate sector.

Chapter: 6 Challenges of Real-Estate Sector.

Chapter: 7 Conclusion and suggestion.

Appendix

Bibliography

Miss Shilpa Kishore Bhagtani Dr. B.V. Dakore

Research Student. Research Guide.