Building, Construction and Realestateservices: Surabhi Agarwal Eram Khan Fatima Abbas Aarti Chaudhary Abhishek Gangwar

Building, Construction and
RealEstateServices
t Submitted By :
SURABHI AGARWAL
ERAM KHAN
FATIMA ABBAS
AARTI CHAUDHARY
ABHISHEK GANGWAR
ACKNOWLEDGEMENT
Before we get into thick of things, We would like to add a few words of appreciation for
the people who have been a part of this project right from its inception. The writing of this project
has been one of the significant academic challenges We have faced and without the support,
patience, and guidance of the people involved, this task would not have been completed. It is to
them We owe Our deepest gratitude.
It gives us Immense pleasure in presenting this project report on “Real Estate Industry”.
It has been our privilege to have a team of project guide who have assisted me from the
commencement of this project. The success of this project is a result of sheer hard work, and
determination put in by us with the help of my project guide. I hereby take this opportunity to add
a special note of thanks for Prof. Yash Shridhar, who undertook to act as our mentor despite his
many other professional commitments. His wisdom, knowledge, and commitment to the highest
standards inspired and motivated us. Without his insight, support, and energy, this project wouldn't
have kick-started and neither would have reached fruitfulness.
We convey our heart full thanks to the member faculties of IIPM, with their help and
corporation.
We are very thankful to our Project guide Prof. Swati Srivastava(IIPM , Lko) for her full
support in completing this project work.
Last but not least, we would like to thank our families and Friends for their full cooperation &
continuous support during the course of this assignment.
The project is dedicated to all those people, who helped us while doing this project.
Building, Construction
Industry and Real Estate
Services
Page 1 of 48
Building, Construction Industry and Real Estate Services
Table of Contents
1. Executive Summery
1.1. Industry size and Growth of Construction Industry ................................................................

18
1.2. Industry Segmentation ........................................................................................................... 19
1.3. Real Estate Sector .................................................................................................................. 20
1.4. Infrastructure .......................................................................................................................... 22
1.5. Key Risk Factors for Construction Industry ......................................................................... 26
1.6. Market Structure of Construction Industry ........................................................................... 30
1.7. Major Players ....................................................................................................................... 31
1. Analysis
1.1 PEST Analysis .......................................................................................................... 35
1.2 Swot Analysis ........................................................................................................... 36
1.3 Porter’s Five Forces Model ....................................................................................... 37
1.4 Ratio Analysis ............................................................................................................ 42
1.5 CAGR ...................................................................................................................... 44
2. JnNurm
2.1 Power ........................................................4
8
2.2 Ports ......................................................... 49
2.3 Airports .................................................... 49
2.4 Roads ...................................................... 50
3. Research
3.1 Abstract ............................................... 53
3.2 Introduction… ......................................... 53
3.3 Objective of the Study............................ 54
3.4 Hypotheses Of the Study........................ 54
3.5 Research Methodology ...........................54
3.6 Discussion… ........................................... 54
3.7 Conclusion and Suggestions ................... 58
List of Figures
Figure 1: Industry size and growth of Construction GDP at constant prices (Rs. billion) ...................... 4
Figure 2: Indian Construction Industry Landscape ................................................................................. 5
Figure 3: Share of Real Estate and Construction by GDP contribution .................................................. 5
Figure 4: Real Estate Segments .............................................................................................................. 6
Figure 5: Housing Shortage by State over the Eleventh Five Year Plan (million houses (% of share of
various states) ........................................................................................................................................ 7
Figure 6: Size of Commercial/Retail Construction .............................................................................

8
Figure 7: Commercial Office Space Absorption by location, 2007 ...................................................
9
Figure 8: Distribution of Outlay in Infrastructure Segments in Tenth and Eleventh Five Year
Plans.. 10
Figure 9: Breakup of employment in Building, Construction and Real Estate sector in India ........
18
Figure 11: Value chain within the Real Estate segment ....................................................................
21
Figure 12: Value chain within the Infrastructure segment .................................................................
22
Figure 13: Activities in the Project Execution stage ..........................................................................
22
Figure 16: Investment planned under JnNURM totalling Rs. 3,35,000 crore ...................................
38
Figure 17: Investments under various heads of JnNURM (Rs. crore) ...............................................
38
Figure 18: State-wise investments under JnNURM..........................................................................39
Figure 19: Investments in Power Generation, Transmission and Distribution up to 2021-22 (Rs.
crore)
......................................................................................................................................................... 39
Figure 20: State-wise investments in Transmission and Distribution.............................................. 40
Figure 21: Planned Investments in Roads in the Eleventh Five Year Plan (Rs. crore) ................... 42
Figure 22: Projected Real GDP of Construction sector (Rs. billion) ............................................... 42
List of Tables
Table 1: Urban Population in India ................................................................................................. 13
Table 2: Total Power Generation Capacity in India ....................................................................... 14
Table 9: Airports commissioned / granted approval / under consideration ......................................
41
Table 10: Share of economic activity estimated in the Infrastructure segment .............................
Executive Summery
The pr oject ” Real Es tate industr y” is based on the current i ndustr y

t r e n d s o f R e a l e s t a t e s e c t o r . The main objectives of the project are:
 Understanding the functioning of Real Estate Industry
 Analysing the industry performance on Qualitative and Quantitative Basis.
 Forecasting the Future Investment in the Sector.
 JnNurm Scheme in coming years.
 To study the fundamental factors affecting the real estate value.
 To examine the factors of real estate boom in 2008.
 To present the future constraints of real estate investment in India.
For this project the financial performance of the major players of the industry
was studied and interpretation were drawn. We learnt Cumulative Average
Growth Rate and Compound Average Growth rate to conduct Quantitative
analysis of the Industry.
The Report Is Divided Into Various Sections:
Industry Overview
This part describes the Industry profile. This part r ecogni zes the
Char act eri sti cs of Real Estate ,Driving Forces, it also gives little insights into Real Estate
Investment Banking . This section also describes the Major Players Of the Sector.
Analysis
Quantitative and Qualitative analysis are conducted in this sector and Recommendation are the
output .
JnNurm
This Part Discusses JnNurm Schemes and various investment to be made under this Schemes. It’s
Effect on Real Estate industry.
Research
This Part Contains the Study Conducted in year 2008. The factors in the present paper are the
Macro Economic factors for which the secondary data is more suitable and reliable. The
collected in the aforesaid manner have been tabulated in condensed form to
draw the meaningful results. To analyze the data tables, percentage and graphs
were used.
Findings
A Detailed Analysis Of the industry Shows that Growth Rate of The industry has declined since last
five years , showing the effect of Global Recessions in India. Although India’s Real estate’s
situation is very much healthy against over countries of the World. But Developers did face the
Drop in demand of the properties which has decreased the prices of Properties indirectly. As
companies are trying to achieve large number but lower margin sales these day.
At the end submitted to “ IIPM – lko”.

Industry Overview
Current Scenario of the Real Estate Market in India

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
expected to grow from the current USD 14 billion to a USD 102 billion in the next 10
years. This growth can be attributed to favorable demographics, increasing purchasing
power, existence of customer friendly banks & housing finance companies,
professionalism in real estate and favorable reforms initiated by the government to attract
global investors
Characteristics of the Real Estate Market in India
• Realization of large commercial

projects
Growing Market Demand
• IPOs by developers
• Gradual organization of the markets in
the Tier I cities
• Emergence of transparency and

liquidity
Greater availability of
• Entry of international real estate
information
consultancies
• Governing legal framework relaxed
• Competitive pricing
Cause-Effect scenario leading to emergence of organized real estate market in India
The property market in India has traditionally been unorganized and fragmented.
However, the recent past has seen a consolidation of positions in the market as
developers are stretching their capacities to the maximum in order to meet the growing
market demand, which in turn has encouraged large projects with sourced financing. The
IPOs by large real estate developers like Sobha, Raheja and DLF have led to organization
of the market in the Tier I cities, but the Tier II and Tier III cities still demonstrate the
traits of an unorganized market. Whilst the Indian real estate market still lacks
transparency and liquidity compared to more mature real estate markets, the increasing
requirements of multi national occupiers, as well as the influx of international property
consultancies has led to the introduction of greater availability of market information,
both in published and private form pushing the sector to an organized market form.
Driving Forces
Stated below are the reasons that have led to the real estate boom in the country
• Booming economy; accelerated GDP to 8% p.a.
• India’s emergence as an attractive offshoring destination and availability
of pool of highly skilled technicians and engineers ; Development of large
captive units of major players include GE, Prudential, HSBC, Bank of

America, Standard Chartered and American Express
• Rise in disposable income and growing middle class, increasing the
demand for quality residential real estate and real estate as an investment
option.
• Entry of professional players equipped with expertise in real estate
development;
• Relaxation of legal rulings and processes by the governing bodies
encouraging investments in real estate
• Improvement in infrastructure facilities
Categorization
The demand for new office space in India has grown from an estimated 3.9 million sq. ft
in 1998 to over 16 million sq. ft in 2004-05. 70% of the demand for office space in India
is driven by over 7,000 Indian IT and ITES firms and 15% by financial service providers
and the pharmaceutical sector. In 2005 alone, IT/ITES sector absorbed a total of approx
30 million sq. ft and is estimated to generate a demand of 150 million sq. ft. of space
across major cities by 2010. This data clearly demonstrates the growth of the real estate
sector in the country.
With reference to the availability of infrastructure facilities, following cities are currently
attracting MNCs/corporate/real estate developers:
Tier I cities, Mumbai (Commercial hub), Delhi (Political hub) and Bangalore
(Technological hub):
• Preferred option for many new market entrants
• Command the highest international profiles and significant proportion of
FDI
• Offer qualified labor pool and the best infrastructure facilities
• Exhibit development of sub-urban commercial real estate
• Yield of 9.5 – 10%
Tier II cities, notably Hyderabad, Chennai, Chandigarh, Kochi, Mangalore, Mysore,

Thiruvananthapuram, Goa, Bhubaneshwar, Ahmedabad and Pune
• Yield of 10.5-11.5%
• Offer competitive business environments, human resources availability,
telecommunications connectivity, quality of urban infrastructure,
• Attract high value IT, ITES and biotech corporate houses
Tier III cities, like Cuttack and Jaipur

• Low liquidity and still highly unorganized.
Special Economic Zones:

• 28 operational SEZs in the country, including those converted from Export
Processing Zones (EPZ) to SEZ
• Development of SEZs in various segments such as multi-product,

Information Technology, Bio-technology, Gems and Jewellery, Textiles
and technology intensive industries
• Attract both developers and corporate houses (refer table for a list of
corporate that have shown interest in development of SEZs)
Corporate Location
Reliance Industries Gurgaon, Mumbai/Navi Mumbai
Adani Group Mundra
TCG Refineries Haldia
Suzlon Coimbatore, Udipi, Vadodara
Hindalco Sambalpur
Genpact Bhubaneshwar, Jaipur, Bhopal
Vedanta Orissa
Corporate interested in development of SEZs in India and the location of interest
Apart for the corporate clientele, the SEZs also attract a number of real estate developers,
including DLF, Ansals, Omaxe, Parsvnath, Shipra Estate to name a few.
As per utilization, the real estate space can be classified as follows:
Real Estate Utilization
Residential Commercial
Office
Hospitality
Retail
Malls Multiplexes
Real estate utilization

Listed below are the salient features of each category:
Commercial Real Estate
Office Space
• Backed by strong infrastructure
• Promoted by increasing demand from IT industry
• Shift of focus from the traditional CBDs towards secondary centers owing
sharply higher land prices in the city centers.
Retail Space
• Growth of 25- 30% expected in the organized retail sector (malls and
multiplexes) leading to an increased demand in real estate
• Affected by government policies for foreign retailers
• Pronounced in the Tier I, Tier II and Tier III cities.
Hospitality Space
Criteria Statistics
Annual growth rate of the industry 8%
Number of foreign tourists in 2005 4000000
Total number of five star rooms (2005) 96000
Total number of five star rooms needed by 150000
2010
Growing demand of real estate in the hospitality industry
• Increasing demand of lodging in commercial cities such as Bangalore,

Mumbai, Delhi etc. from business travelers.
• Established brands in this sector include Asian Hotels, Indian Hotels, ITC,
Le Meridien etc are in expansion mode with many new players such as
Accor Group, Marriot, Choice, IHG Group
Residential Real Estate

• Development triggered by:
o Low per capita housing stock
o Rising disposable income
o Easy availability of finance
• Currently growing at 30-35% per annum
• Driven by retail investors who view real estate as an attractive investment
option as compared to mutual funds and stocks
• Geographically widespread with townships being built in both the metros
and the tier II and III cities
Real Estate Investment Banking

Real Estate Investment Banking is an approach to real estate financing – providing the
client a host of services including the structuring of real estate projects, legal advice,
operative management of real estate projects and support in marketing properties. The
banking focus in Real Estate Investment Banking is on structured financing products and
structuring of entire portfolios. Extending on similar lines is the importance of

syndication that forms the base line of larger-sized transactions.
Real estate investment banking focuses on the following target market as prospective
client base:
Real Estate Consultants

The increase in transparency and liquidity in the real estate market in India is attracting
international real estate consultants to India. These consultants offer end to end solutions
for their clients’ real estate needs. These services include strategic consulting to
developers, investors, advisors and lenders seeking assistance with existing assets,
potential acquisitions, new development projects and properties slated for disposition,
feasibility studies, concept testing, business planning exercises, investment advice,
market research and analysis, demand forecasting, financial modeling and project
structuring exercises, portfolio optimization and re-engineering strategies, expansion and
occupancy, location and entry, brokerage services, legal documentation review,
valuations etc.
Real estate consultants also ensure that the financing needs of the client are well taken
care of by liaising with banking/non banking institutions and providing them with
investment and structured finance solutions including securitization and sale &
leasebacks, structured finance facilitating equity/debt into development projects on behalf
of private and government sector clients, structuring development financing, public -
private - partnerships, joint ventures, portfolio transactions and privatization exercises.
The recent players in the Indian market are Jones Lang Lasalle, Colliers, CBRichard
Ellis, Frank Knight and Trammell Crow Meghraj.
Developers and Construction Companies

With the opening up of the real estate sector in the country, the construction houses are
scaling up the commercial and residential constructions. An increasing number of
developers are offering IPOs for fund raising. AIM too is a sought after solution to meet
the fund requirements for these developers.
Group Route/Market
Parsvanath IPO
Sobha IPO
Pyramid Saimira IPO
DLF Universal IPO
K Raheja Corp AIM
Unitech AIM
Hiranandani
Construction AIM
Fund raising options by developers
Domestic Corporate Houses

As the land prices in the Tier I cities have always moved upward, land was regarded as a
safe investment which, regardless of how it was used, would produce capital gains far
above the inflation rate. It was thus common for companies in the manufacturing and
service industries to acquire real estate even though they themselves were completely
unrelated to property rental or real estate investment, seeking collateral value and tax
benefits from depreciated assets, and expecting unrealized gains to absorb business risk.
Acquisition of real estate as an asset was further encouraged as part of a diversification
strategy in the investment portfolio of these corporate houses..
As these real estate possessions are classified as fixed assets held for the company’s own
business purposes, it becomes feasible recent moves to increase real estate liquidity often
involve the conversion of corporate real estate into commercial use. The corporate houses
in India are also demonstrating a shift from ownership to leasing. With the advent of
MNCs into the country, a growing number of companies no longer see real estate
ownership as an absolute necessity.
From the perspective of companies who want to sell off assets, securitization schemes
provide a greater diversity of alternatives to liquidate real estate. This has been greatly
encouraged by corporate restructuring and a return to focusing on core competencies.
Thus, there seems an opportunity to tap the corporate houses who have a large corpus of
real estate and are willing to trade this asset for want liquidity.
FDIs/FIIs
Post liberalization, the investment opportunities in real estate for the FDIs and FIIs have
greatly opened up. Foreign investors can now purchase commercial development projects
(under construction) over 50,000 sq m (540,000 sq ft), or plotted residential
developments with a minimum size of 10 hectares. Foreign investors may purchase an
equity stake in an unlisted real estate company and thereby partner in its growth plans
across asset classes and cities. Listed real estate companies also offer good liquid
investment opportunities routed into designated special purpose vehicles that hold the
asset(s) being developed, thereby reducing risk. These investors look for innovative
financial products to suit their investing needs.
Financial Institutions – Real Estate Mutual Funds

Major financial institutions such as ICICI, HDFC, IL&FS and Kotak Mahindra have all
launched real estate funds, either as joint ventures or sole investors. Most institutional
funds operate on a pan-Indian basis, and are increasingly looking at opportunities in Tier
III cities, in order to gain "first mover advantage".
Private Equity/Venture Capital Funds

As per the Securities and Exchange Board of India (SEBI), Foreign Venture Capital
Investors (FVCIs) may invest in real estate assets, within the framework of SEBI. This
has paved the way for capital infusion into the market and a significant weight of foreign
capital is now chasing Indian real estate. Indirect real estate investments are made into a
pooled investment fund; such funds are usually created in partnership with domestic
developers or financial institutions. Such VC firms, partnered with developers form a
potential client base, keen to invest in the real estate sector.
Real Estate and Financing Trends in India

Securitization and CMBS
From the perspective of companies who want to sell off assets, securitization schemes
provide a greater diversity of alternatives to liquidate real estate. Securitization is
primarily used by the corporate houses to convert the corporate real estate to commercial
real estate.
Realty Funds/ Realty Mutual Funds in India

Initiated by SEBI, the REMFs true potential would be tapped only after the setting up of
REITs, as they infuse confidence among investors by serving as custodians of title deeds.
(REITs pool various real estate assets, including warehouses, buildings, industrial estates
and parks, malls, commercial and residential premises and get listed on the stock
exchange to enable investors to buy and sell. They afford an opportunity to diversify the
portfolio within that limited sense as well. However, SEBI has not allowed the creation of
REITs in India as yet, though REITs are well established in the more mature real estate
markets. ) Currently the REMFs in the Indian market are targeted at the HNIS and
corporate investors.
Risks involved in the Real Estate Investment Market
Liquidity risk
The real estate investment market is still in its infant stage. The time required for liquidity
of real estate property can vary depending on the quality and location of the property.
Regulatory risks
In terms of property ownership, permission from the Reserve Bank of India is required
for foreign investors. For capital repatriation, investors need to apply for approval from
the RBI, and foreign direct investment is limited to a limited set of opportunities (e.g.
townships). The REMFs work within the SEBI framework. Being a developing and
growing sector, the rules, regulations and legalities demonstrate frequent changes,
making it seem as a cumbersome investment option to the investors.
Property market transparency risk

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.
Macroeconomic risks
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.
Ownership and Land Title Issues

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.
Conclusion
The Indian real estate sector promises to be a lucrative destination for foreign investors into
the country. The Indian realty sector, if channelized properly, could catapult the growth
of several other sectors in India through its backward and forward linkages. However,
there are potential constraints for domestic as well as foreign investments in India.
Absence of a single regulator to monitor business practices prevailing in Indian real estate
market is perceived to be a risk factor by investors. The SEZ guidelines which are issued by
the Commerce Ministry are constantly modified, creating uncertainty. Since the liberalization
of FDI norms, significant foreign investments have flown into real estate; but availability
of suitable exit options for such investments is still constrained.
Maturity of the real estate markets will lead to infusion of foreign investment and
adoption of international best practices by real estate players. Developers will get more
organized, and become more transparent to avail opportunities emerging in the market. With
the Indian securities market regulator SEBI allowing real estate mutual funds (REMFs) in
India, equity investors will have an exit option available to them. All these factors will
contribute in making the Indian real estate market more organized and structured, thus
providing better investment opportunities.
Environment Scanning and Competitiveness of Construction Industry
1.1. Industry size and Growth of Construction Industry
The size of the Construction industry is around Rs. 2.1 trillion1 in 2008. The Construction sector in
India is the second largest economic activity after agriculture and provides employment to about 33
million people. India's Construction industry has grown at a Compounded Annual Growth Rate
(CAGR) of about 11.1% over the last eight years on the back of massive infrastructure investment and
rapid rise in housing demand. Foreign Direct Investment (FDI) inflow into the sector during 2007-08
is estimated to be around Rs. 240 billion. Spending on infrastructure sectors such as ports, power
plants and roads is projected at more than Rs. 2.5 trillion annually for the next six years, and will
require 92 million man years of labour2.
Construction investment accounts for around 52.4% of the Gross Fixed Capital Formation in India.
Investments in Construction have a positive domino effect on supplier industries, thereby contributing
immensely to economic development. The Construction sector has strong linkages with various
industries such as cement, steel, chemicals, paints, tiles, fixtures and fittings. While in the short term it
serves as a demand booster, in the long term it contributes towards boosting the infrastructure
capacity.
Figure 1: Industry size and growth of Construction GDP at constant prices (Rs. billion)
2,500 2,263
2,055
2,000 1,839
11.1%1,58
1,500 2
1,217
1,084 1,127 1,362
1,000
500
-
200 1 200 2 200 3 2004 2005 2006 2007 2008
Source: Economic Survey 2008-09 and IMaCS analysis
2
Construction Industry Development Council
1.2. Industry Segmentation
Construction sector can be broadly classified into 2 sub-segments:
1) Real estate (Residential, Commercial/Corporate, Industrial and Special Economic Zones (SEZs))
2) Infrastructure (Transportation, Urban development, Utilities)
Figure 2: Indian Construction Industry Landscape
Construction Industry
Real Estate Infrastructure
Residential Utilities Urban Infrastructure Transportation
Commercial Power Railways
Special Irrigation Civil Aviation

Economic
Zones
Roadways
Ports
Source: IMaCS analysis
The Real Estate segment contributes around 24% to the Construction GDP of India while
Infrastructure segment contributes around 76%.
Figure 3: Share of Real Estate and Construction by GDP contribution
Rs 504
Billion
24%
Rs 1,596
Billion
76%
Real Estate Infrastructure
Source: Economic Survey 2007-08, IMaCS analysis

1.3. Real Estate Sector
In terms of GDP contribution, Real Estate sector is estimated at around Rs. 504 billion in 2007-08.
The market size of the Indian real estate sector is estimated to be around Rs. 2,643 billion in 2007-08.
The sector has been growing at a CAGR of 12%. It is constituted of the Residential, Commercial and
real estate activities of Special Economic Zones.
Figure 4: Real Estate Segments
Commercial
/ Retail
SEZ
9%
9%
Residential
82%
Source: I-Sec Research, Ministry of Commerce and Industry, IMaCS analysis
1.3.1. Residential
At around Rs. 2,171 billion, the housing sector is estimated to grow at 12% in the long term. Demand
for housing is estimated to be around 4.8 million houses per year over the Eleventh Five Year Plan
period. In addition to the need for new housing tenements, the demand is also likely to be fuelled by
the housing shortages already prevalent in several states. The shortage of housing across several
states, as illustrated in the graph below, amounts to about 25 million houses in the period of the
Eleventh Five Year Plan.
Figure 5: Housing Shortage by State over the Eleventh Five Year Plan (million houses (% of share
of various states)
Andhara
Pradesh Gujarat
1.95 1.66
8% 7%
Other States Karnataka
5.11 1.63
Delhi 21% 7%
1.13 Madhya
4% Pradesh
West Bengal Maharastra 1.29
2.04 3.72 5%
8% 15%
Uttar Pradesh
Tamil Nadu Rajasthan
2.38 2.82 1
10% 11% 4%
Source: Planning Commission Working Group on Urban Housing, 2007
1.3.2. Demand drivers for Residential Sector
Favourable demographics - The demographics work strongly in favour of the Indian Construction
industry. India is the second highest populated country in the world after China. India's estimated
population as of March 2008 is 1.14 billion, while the average age of Indians is 26 years. The
demographic profile indicates that India's working population forms around 61% of the total
population. India is and will remain one of the youngest countries in the world for some time. The
strong economic growth led to sharp income generation, which led to rise in middle class segment.
India currently has around 260 million persons in the middle class segment. This segment's rising
purchasing power and propensity to consume is expected to drive and support a robust growth rate of
the economy in the coming years. The middle class along with robust macro-economic scenario and
changing demographic profiles has a major role to play in the growth and emergence of the
Construction industry in India.
Urbanisation and Migration - The decadal growth rate of urban population (20% between 1991-
2001) in India is higher than the rural population (18% during the same period). Average annual rate
of change (AARC) of the total population in India during 2000-2005 is estimated at 1.41% with
2.81% for urban and 0.82% for rural sectors. AARC for urban areas by 2025 will increase to 2.25%
whereas the AARC for rural population will decline to -0.4% showing a clear shift of population from
rural to urban areas3. The average household size has been estimated by the National Sample Survey
Organisation as being around 4.47 in urban areas and only 67% of the houses are pucca units.
Though there is a slump in real estate activity in the last one year, investment over the long term will
be primarily led by housing, which is expected to account for nearly 90% of the total real estate
sector.
1.3.3. Commercial/Retail Construction
The rapid growth of the Indian economy has had a significant impact on the demand for commercial
property to meet the needs of business, by way of offices, warehouses, hotels and retail shopping
centres. Growth in commercial office space requirement is led by the burgeoning outsourcing and
information technology (IT) industry and organised retail. For example, IT and ITES alone is
estimated to require 150 million square feet across urban India by 2010. Similarly, the organised retail
industry is likely to require an additional 220 million square feet by 20104.
Figure 6: Size of Commercial/Retail Construction
Retail
Office
Rs 113 billion
Rs 126 billion
47%
53%
Source: I-Sec Research, Ministry of Commerce and Industry, IMaCS Analysis
3
Planning Commission – Working group on Urban Housing for the 11 th Five Year Plan
4
Source: India Brand Equity Foundation (IBEF)
Figure 7: Commercial Office Space Absorption by location, 2007
Bangalore, 20 Others, 8% Total : 45 Million Square

% Feet
Pune, 8%
Mumbai, 9%
NCR, 19%
Chennai, 12
%
Hyderabad, 1
2% Kolkata, 12%
Source: IBEF
1.3.4. Demand drivers for Commercial/Retail Sector
The following are some of the demand drivers in the Commercial/Retail Sector:
ƒ Sharp growth in organised retailing – Organised retail, which is expected to grow at over 25%
in the next few years, is likely to drive demand in the commercial real estate sector. Growth in
IT/ITES sector at 30% annually - The investments in commercial Construction are expected
to grow faster than investments in housing mainly due to the spurt in office space construction
driven by IT/ITES industry.
1.3.5. Special Economic Zones
Over the next five years, growth in investments in Indian Industry will be driven by strong capacity
additions, led by strong growth in demand and high existing operating rates. Special Economic Zones
(SEZs) will be at the forefront of this growth. About 315 SEZs which have been notified as of now, of
which about 202 belong to the IT/ITES Sector.
1.4. Infrastructure
With the government's focus on infrastructure development along with the active participation of the
private sector, this segment is growing rapidly. The Power, Irrigation, Transportation including
Roadways, Railways, Airports and Ports, Urban Development and Communications sectors have
witnessed investments of Rs. 6.9 trillion over the Tenth Five Year Plan (10th FYP) and will witness
around Rs. 14.8 trillion in the Eleventh Five Year Plan (11th FYP).
Figure 8: Distribution of Outlay in Infrastructure Segments in Tenth and Eleventh Five Year
Plans
1,600,000
Rs 953 billion
1,400,000
1,200,000
Rs 5.7 trillion Communications
1,000,000
Transportation
800,000 Urban Development

Rs 1.2 trillion
Rs 989 billion Irrigation
600,000 Rs 2.1 trillion
Power
Rs 2.2 trillion
400,000
Rs 382 billion
Rs 1.03 trillion
200,000 Rs 4.8 trillion
Rs 2.3 trillion
-
10th FYP 11th FYP
Source: Economic Survey 2007-08
India's infrastructure is set to improve rapidly with an estimated CAGR of 15%. Public spending
would continue to dominate this sector. The Government of India projects that for the economy to
grow at 9% per annum over the Eleventh Plan period the Gross Capital Formation5 in the
infrastructure should increase from 5% of GDP at the start of the Tenth Plan to around 9% at the end
of the Eleventh Plan. The central government would contribute 37%, the state governments 32% and
the private sector would contribute 31% of the total investments in infrastructure for the next five
years.
1.4.1. Roads
Roads occupy an eminent position in India’s transportation as they carry nearly 65% of freight and
85% of passenger traffic in the country. The Government of India in the Tenth Plan provided for an
outlay of Rs.595 billion for development of roads. The largest highway project ever undertaken in the
country is being implemented by the National Highways Authority of India (NHAI). Phase I and II of
the National Highways Development Project (NHDP) envisaged 4/6 laning of about 14,279
5
Measure of the net new investment by enterprises, government and households in the domestic economy in fixed
capital assets, during an accounting period
kilometres of National Highways at a total estimated cost of Rs. 650 billion (at 2004 prices). These
two phases consist of the Golden Quadrilateral, the North-South & East-West Corridors, port
connectivity and other projects. The upgradation of 12,109 km of existing national highways has been
approved by the Government under NHDP Phase-III at an estimated cost of Rs. 806 billion.
The Government has also approved six-laning of 6,500 km of NHs comprising 5,700 km of the
Golden Quadrilateral and balance 800 km of other sections of NHs under NHDP Phase-V at a cost of
Rs. 412 billion. The Government has approved construction of 1,000 km of expressways with full
access control on new alignments at a cost of Rs. 166 billion under NHDP Phase-VI and the
construction of ring roads including improvement of NH Links in cities, grade separated intersections,
flyovers, elevated highways, underpasses and service roads at a cost of Rs. 166 billion under NHDP
Phase-VII.
One of the physical targets for state infrastructure in the Eleventh Five Year Plan is the construction
of a core network would include expressways, four-laned roads, strengthened pavements, and
pavements with good riding quality, bypasses, bridges, etc. for a length of about 71,500 km, with a
financial outlay of about Rs. 80,000 crore covering the states. This network could be based on the
‘corridor concept’, such that a commercial vehicle can cover about 500 km on this network in one day
(800 km or more on expressways) with adequate road safety.
Rural roads would also be an important thrust area The Government of India has launched the
Pradhan Mantri Gram Sadak Yojana (PMGSY) which aims to provide good all-weather road
connectivity to unconnected habitations.
1.4.2. Airports
India has 125 airports. Of these, 11 are designated as international airports. Airports Authority of
India (AAI) has taken up the development of infrastructure in the country through the PPP model.
Joint Ventures formulated for the modernisation of Delhi and Mumbai airports, and development of
greenfield airports at Bangalore and Hyderabad are cases in point. AAI has also drawn an action plan
to develop and modernise 35 non-metro airports. An investment of about Rs. 400 billion is projected
for the development of airports during the Eleventh Five Year Plan.
1.4.3. Railways
The premier transport organisation of the country, the Indian Railways is the largest rail network in
Asia and the world’s second largest. However there is a need to upgrade facilities to meet the growing
rail transportation needs. The proposed investment in railways over the eleventh five year plan is Rs.
2.8 trillion. PPP projects are estimated to account for 9% of total investment over the period to ramp
up infrastructure in 22 metropolitan city stations, increase terminal capacity by 43% and construct
2,700 km of rail lines.
The Tenth Five Year Plan document had envisaged construction of Dedicated Freight Corridors
(DFCs) on selected trunk routes. This has since been given effect to with the announcement of
construction of DFCs separating freight traffic from passenger traffic on trunk routes. The proposal
for capacity augmentation through construction of DFCs along the highly saturated freight routes is a
part of the new long-term strategy to provide premium services in freight and passenger travel.
A Western Corridor of 1,469 km will connect Jawaharlal Nehru Port to Dadri and Tughlakabad in the
North. An Eastern corridor of 1,232 km will connect Ludhiana to Sonnagar via Dadri and Khurja, thus
facilitating transfer from one corridor to another. The Eastern corridor will further get extended to
Kolkata region to connect the proposed deep-sea port. The estimated cost of construction of both
these corridors is expected to be around Rs. 372 billion and it is likely to take about five years for
completion of these corridors and have a spill-over beyond the Eleventh Plan.
1.4.4. Ports and Shipping
There are 12 Major Ports and 185 Minor Ports along India’s 7,517 km long coastline. 100% FDI
under the automatic route is permitted for all port development projects. PPP is seen by the
Government as the key to improve the existing facilities. This sector would see Rs. 1 trillion
investments on shipbuilding and port infrastructure development within the next 5 years.
The Eleventh Plan outlay for the shipping sector is Rs. 1,000 crore at 2006–07 prices. The sector is
also expected to generate IEBR6 amounting to Rs. 12,285 crore at 2006–07 prices. In addition, the
budgetary support for ship-building and repairs is Rs. 150 crore (Rs. 170 crore at current price). The
IEBR for this sector is Rs. 550 crore at 2006–07 prices.
The total projected outlay for the Eleventh Plan for the Department of Shipping (including Ports) is
Rs. 43,874 crore at 2006–07 price (Rs. 49623 crore at current price) which includes Rs. 4465 crore of
6
Internal & Extra Budgetary Resources
Gross Budgetary Support at 2006–07 price (Rs. 5,050 crore at current price) and Rs. 39409 crore of
IEBR at 2006–07 price (Rs. 44573 crore at current price).
The Indian shipbuilding industry is centred around 27 shipyards comprising 8 public sector (6 yards
under Central Government and 2 under State Governments) and 19 private sector shipyards. The
shipyards between them have 20 dry docks and 40 slipways with an estimated capacity of 2,81,200
Dead Weight Tonnage (DWT). A major share of this capacity is held by the 8 public sector yards and
only Cochin Shipyard Limited (1,10,000 DWT) and HSL (80,000 DWT) have the required
infrastructure to build large vessels.
India’s share in the world shipbuilding market has increased from an insignificant 0.1% in the
beginning of Tenth Plan to 1.3% in 2006. On the export front, one public sector shipyard, that is
Cochin Shipyard Ltd (CSL), and three private sector shipyards, viz., ABG, Bharti, and Chowgule
performed remarkably well during the Tenth Five Year Plan period and were able to get export orders.
The Indian Shipbuilders Association has estimated that the industry can grow at a rate of more than
30% and this momentum can be maintained for the next 10 years to reach a level of 5 million DWT
order book for the Eleventh Five Year Plan as against 1.3 million DWT for the Tenth Five Year Plan.
1.4.5. Urban Infrastructure
India’s total urban population is around 285 million, which is 30%of India’s population. There has
been significant growth of the urban population over the past decade and the trend is expected to
continue. This warrants an urgent up-scaling and up-gradation of urban infrastructure. This sector is
expected to be the second-largest contributor to infrastructure investments after roads.
Table 1: Urban Population in India
Year 1981 1991 2001
Number of metro cities 12 23 35

(population-1 million +)
Population (million) 42 70 108
Percentage of total 26 32 38
urban population
Source: Report of the Steering Committee on Urban Development, 11th FYP, Planning Commission of India
Urban Infrastructure covers basic civil services such as water supply, sewerage, solid waste
management and urban transportation. Water supply and sanitation projects alone offer scope for
annual investment of Rs. 294 billion. Urban infrastructure investments will get a boost from the
Jawaharlal Nehru Urban Renewal Programme (JnNURM). The programme was started in 2005-06 to
enable sustainable urban infrastructure development of 63 mission cities. Under this scheme, the
programme receives Rs. 500 billion as central assistance and Rs. 500 billion from state governments
and urban local bodies. Rs. 3.3 trillion was allotted under the City Development Plans scheme. Some
other notable schemes for urban development include the Rs. 28 billion sub-mission on infrastructure
development scheme and the Rs. 11.7 billion additional central scheme. Currently, 100% foreign
direct investment (FDI) under the automatic route is allowed in townships, housing, built-up
infrastructure and construction-development projects. Urban transport development is currently
supported by the National Urban Transportation Policy (NUTP).
1.4.6. Utilities (Power and Irrigation)
India has a power generation capacity of 122 GW. The sector has been growing at a Compound
Annual Growth Rate of 4.6% over the last four years. India has the fifth largest electricity generation
capacity in the world. The Ministry of Power has formulated a blueprint to provide reliable, affordable
and quality power to all users by 2012. This calls for an investment of Rs. 3.7 trillion in the next five
years.
The gross electricity requirement by the end of the Eleventh Plan projected by the Planning
Commission Working Group on Power is 1,038 Billion Unit (BU) and peak demand estimation is
1,51,000 MW. To fulfil the estimated electricity demand requirement, the Working Group
recommended the capacity addition programme initially of 78,530 MW and updated at 78,577 MW
during the Eleventh Plan.
Table 2: Total Power Generation Capacity in India
Source Central State Private Total

Hydro 9685 3605 3263 16553
Thermal 26800 24347 7497 58644
Nuclear 3380 0 0 3380
Total 39865 27952 10760 78577
Source: Planning Commission, 11th Five Year
Plan
The emphasis of the Central Government to improve irrigation facilities in the country through
programmes such as Bharat Nirman, Accelerated Irrigation Benefit Programme (AIBP), and state-
level initiatives will be the main driver of investments in the irrigation sector. The plan outlay under
the Tenth Plan for irrigation sector was Rs. 922 billion. There is a renewed emphasis on this front
with states like Andhra Pradesh drawing ambitious plans. Increased focus on irrigation is evident from
the fact that the Tenth Plan irrigation outlay was 50% more over the Ninth Plan. Investment in
irrigation in the Eleventh Plan is projected to increase to Rs. 2,533 billion from Rs.1,115 billion spent
in the Tenth Plan7.
Apart from the above, Government spending on infrastructure activities for defence and other
specialised construction would also be a demand driver for the sector.
1.4.7. Demand drivers for Infrastructure Sector
ƒ Economic growth would be around 7% CAGR over next decade

ƒ Increased domestic investments and foreign direct investment in sectors such as
communications
ƒ Government policies with a thrust on developing infrastructure and increased government
spending on transportation, urban development and utilities.
1.5. Key Risk Factors for Construction Industry
ƒ Manpower Shortages - Although the construction industry employs 33 million people, second
only to the agricultural sector, the incremental workforce requirement is around four million
people per year over the next seven years to sustain the current growth rate. The construction
industry is set to face a challenge in terms of sourcing manpower. Adding to this problem is
the shortage of contractors.
ƒ Procedural and Legal Vulnerability - Development projects entail clearances and permissions
from various government departments. Delays are tedious and vary from state to state
depending on local laws. Hence this adds to overall complexities of transaction, increasing the
need for local expertise in each market.
ƒ Low project risk, but high payment receivable risk - The project risk for a contractor is low,
due to low financial commitments. Most construction projects are executed on a cash contract
basis and are funded and managed by the owner/sponsor. The number of construction projects
with equity participation by contractors is limited to a few projects.. Payment security
concerns are high, and they depend on the credit profile of the client. Usually outstanding
payments and retention money payable to the contractor are delayed, as these payments are
made after the entire construction activity and project period is completed. This may affect
the smaller players in the industry.
7
Planning Commission, Government of India
ƒ Infrastructure Bottlenecks - Infrastructure is a cause of concern in majority of cities across the

country as recent infrastructure developments have been slow and has not kept in pace with
the development. Inadequate power, absence of drinking water, electricity failure, traffic
congestion and pollution are common features across the major cities in India. On the basis of
current plans, electricity generating capacity will rise by 6% annually over the period 2007 to
2012, double the rate of the past five years and the second largest absolute increase in
capacity in the world. However, this is still well below the likely growth rate of GDP. Power
shortage could be an impediment to construction activities in the future.
ƒ High level of fragmentation - The industry is highly fragmented, as the entry barriers are low
due to less fixed capital requirements. It is estimated that in 2004, over 3 million construction
entities (including housing contractors) existed, of which only around 28,000 were registered.
However, there is more fragmentation in the housing segment than the industrial/
infrastructure segment, as the unorganised sector accounts for 75% of the same. Furthermore,
the industrial/infrastructure sector requires far more technical expertise and it is difficult for
smaller players in the unorganised sector to compete effectively.
ƒ Title clearances for SEZs are invariably delayed - Title clearance in India is a complicated
process in the absence of a central database of properties. This also adds to the costs and
delays in a project.
ƒ Delays in land acquisition: Delays in land acquisition is a major source of project delays and
escalating project costs. This is applicable to large infrastructure projects such as SEZs, power
plants, and others.
ƒ Delays in Master Plan / Development Plan Review and Implementation - Experience of
implementing the Master Plans has not been encouraging because of weak data base, financial
constraints, lack of resource mobilization, over ambitious plan proposals, lack of integration
between spatial planning proposals with economic development plans and inadequate
legislative support and enforcement.
ƒ Frequent and expensive reconstruction - The maintenance requirement of the high density
corridor of NHs under construction and post implementation support is provided by NHAI.
However, the non-NHDP NH sections, which are maintained by State PWDs, are poorly
managed, primarily because the funds made available to them for maintenance are well short
of the requirement as per norms.
1.6. Market Structure of Construction Industry

The Construction industry is highly fragmented, as the entry barriers are low due to less fixed capital
requirements. Reportedly, in 2004, over 3 million construction entities (including housing contractors)
existed, of which only around 28,000 were registered8.
However, there is more fragmentation in the housing segment than the industrial/infrastructure
segment, as the unorganised sector accounts for 75% of the same. Furthermore, the
industrial/infrastructure sector requires far more technical expertise. Around 96% of construction
companies are classified as small and medium enterprises.
1.7. Major Players
Post independence, in the First Five Year Plan, construction of civil works was allotted nearly 50% of
the total capital outlay. The first professional consultancy company, National Industrial Development
Corporation (NIDC), was set up in the public sector in 1954. Subsequently, many architectural, design
engineering and construction companies were set up in the public sector (Indian Railways
Construction Limited (IRCON), National Buildings Construction Corporation (NBCC), Rail India
Transportation and Engineering Services (RITES), Engineers India Limited (EIL), etc.) and private
sector (M N Dastur and Co., Hindustan Construction Company (HCC) etc.).
The Indian Construction industry comprises of about 200 firms in the corporate sector. In addition to
these firms, there are about 1,20,000 class-A contractors registered with various government
construction bodies. There are thousands of small contractors, which compete for small jobs or work
as sub-contractors of prime or other contractors.
The major players in the construction industry are:
ƒ Companies such as L&T, Unitech, GMR Infrastructure, HCC, Gammon, Jaypee group,
Jaiprakash associates, BL Kashyap etc. which undertake large infrastructure projects.
ƒ Companies such as IVRCL, Nagarjuna, L&T, DLF, Omaxe etc. involved in the construction
of flyovers, pipelines, apartments and housing/office spaces.
ƒ Companies such as DLF, Purvankara, Raheja and others are engaged in the construction of
residential and office space.
8
Planning Commission – Eleventh Five Year Plan
Organized Real Estate Industry in India is only a couple of decades old .Real Estate Industry in India
took off with the global boom in the Realty Sector which percolated down to India as well.Lack of clear
land titles and litigation has made this industry one of the most opaque and corrupt ones.Due to the
massive price appreciation and huge valuations,Land Scams have become quite common with Chief
Ministers,Generals,Top Bureaucrats all involved in the murky environment of Real Estate in India.The
most recent scam related to bribing of top public banks officials in the LIC Housing Finance Scandal has
again put question mark on the fundamentals of the industry.Valuing the industry and making a real
estate investment remains one of the most difficult investing tasks in the Indian Stock Market.Even Fund
Managers are staying away from the Sector due to lack of trust in the Financial Statement given by the
industry.That said modern India presents a booming picture of tall buildings and huge office areas &
shopping malls. A list of the chief players in Indian market is given below:
 DLF: DLF’s chief business is to develop housing, marketable and retail properties. Currently it
has undertaken the development of 70 million sq ft of housing projects which it intends to finish in
the next three years. DLF has joined hands with Delhi Development Authority to develop townships
in Amritsar, Pune, Gurgaon, Mumbai, Chennai and Goa. DLF has been the construction company
behind different malls in the major cities in India. The company is also developing 50-75 hotels
along with Hilton Hotels and infrastructure and SEZ in India in collaboration with Laing O’Rourke
(UK).The current market cap is around Rs.51,832.22 crore.
 Tata Projects: Tata Projects registered an annual turnover of Rs 2,300 crore on July 1, 2007.
With more than 1,500 professionals the company has emerged as one of the chief player in EPC
projects. Over the last four years, it has attained a CAGR of 50 per cent which quadrupled its
annual turnover of 2006-07. Tata Projects functions in concentrated divisions like broadcast and
distribution, steel, power production, oil, gas and hydrocarbons and industrial infrastructure.
 Sobha Developers Ltd: With an annual turnover of Rs 1,189 crore, Sobha Developers Ltd was
initiated by the now chairman PNC Menon in the year 1995. On June 30, 2007, the company has
3,706 skilled professionals working for it. At present it owns Rs 3,500-acre land in eight Indian
cities namely Coimbatore, Bangalore, Mysore, Chennai, Thrissur, Kochi, Pune and Hosur. The
company’s clientele include some of the top players in IT, hotel and construction sector such as
Hewlett Packard, Mico, Infosys, Ramaraju Developers, Dell, Timken, etc.
 Shapoorji Pallonji & Co: The Company has more than 3,500 professionals working for it and
is largely driven by its loyalty to consumer satisfaction. Some of the major projects undertaken by
Shapoorji Pallonji & Co are World Trade Centre, Mumbai; TELCO industrial complex, Pune;
Bhabha Atomic Research Centre, Kalpakkam; HSBC Bank, Mumbai; Hotel Taj Intercontinental,
Mumbai; Bank of India, Mumbai; Indira Gandhi International Airport, New Delhi, etc. the company
has created magnum opus of construction and has been a consistent executer of challenging
projects.
 Unitech: Recently Ramesh Chandra, Unitech’s Chairman has declared the investment of $ 720
million by his company in the coming four years to develop 28 hotels along with Marriott
 International. The market capitalisation of the company is Rs.16,867.40 crore.Its chief activities
 include construction, expansion of real-estate, consultancy in associated sectors, hotels,

electrical broadcast and information technology.
 India Bulls Real Estate: One of India’s largest listed developers developing residential and
commercial real estate. Being a focused regional player, more than 90% of IBREL’s portfolio by
value is in the three major markets of Mumbai, NCR and Chennai. Established in 2000, the
company has grown into one of the leading Indian business houses with its companies being listed
on Indian and overseas financial markets having a combined net worth in excess of Rs. 18,000
crores. the current market cap being Rs.6,545.17 crore.
 HDIL: Ranked as India’s fastest growing real estate company by Construction World-NICMAR
in October 2007 & with a current market cap of Rs.8,567.76 crore, Housing Development &
Infrastructure Limited has established itself as one of India’s premier real estate development
companies, with significant operations in the Mumbai Metropolitan Region. HDIL is a public listed
real estate company in India with shares traded on the BSE & NSE Stock Exchanges. With
operations spanning every aspect of the real estate business, from residential apartment complexes
to towers & townships, commercial premium office spaces and retail projects like world-class
shopping malls. it is India’s largest slum rehabilitation company, & was given the Mumbai
International Airport Slum Rehabilitation project in October 2007,one of the largest urban
rehabilitation projects in India..
 Emaarr-MGF: One of the world’s leading real estate developers company in India and
Development of properties in the residential flats, Commercial Properties, premium apartments etc.
The ‘Commonwealth Games Village builder’ is still trying to get listed on NSE. Currently not
listed.
Analysis
Analysis
 Quantitaive
Pest Analysis of Indian Real Estate Sector
The various factors which influenced the Real Estate segment were Political, Technological, Social and
Economical factors.
POLITICAL FACTORS:  Government’s regulations and policies in
favour of real estate sector.
 Heaviest tax imposed on the construction

industry.
 FDI experience in Indian real estate market.
ECONOMIC FACTORS:  Controlled Inflation levels.
 Low Interest Rates.
 Provides further Liquidity
SOCIAL FACTORS:  Increase in consumption.
 Urbanization.
 Increase in per capita income (current

prices).
 Rise in Demand for Quality Housing

Projects.
TECHNOLOGICAL FACTORS:  Internet revolution
 Media
SWOT analysis
Strength
 employment and training opportunities in the field of construction

 Private sector housing boom and commercial building demands
 Construction of the multi building projects on the feasible locations in the country.
 Good structured national network facilitates the boom of construction industry.
 Low cost well- educated and skilled labour force is now widely available across the country.
 Sufficient availability of raw material and natural resources in the country is supportive for the
industry.
 Real estate development is on high and it is attracting the focus of the industry towards
construction.
Weakness
 Chances of Natural disadvantage are there.
 Distance between construction projects reduces business efficiency.
 Training itself has become a challenge.
 Changing skills requirements and an ageing workforce may accentuate the skills gap.
 Improve in long-term career prospects is highly required to encourage staff retention and new
entrants.
 External allocation of large contracts becomes difficult.
 Lack of clearly define processes and procedures for construction and its management.
 Huge amount of money need to be invested in this industry and inefficiency may lead to high
level of risk.
Opportunity
 continuous private sector housing boom will create more construction opportunities.
 Public sector projects through Public Private Partnerships will bring further opportunities.
 Developing supply chain through involvement in large projects is likely to enhance the chances
in construction.
 Renewable energy projects will offer opportunities to develop skills and capacity in new
markets.
 More flexible training delivery techniques are now available.

 Financial supports like loan and insurance and growth in income of people is in support of
construction industry.
 Historical cultural heritages like the TAZ MAHAL encourage and provide a creative platform
for the industry.
 Remote areas in the country are easily accessible and plenty of land is available in the country.
Threat
 Long term market instability and uncertainty may damage the opportunities and prevent the
expansion of training and development facilities.
 Current economic situation may have an adverse impact on construction industry.
 Political and security conditions in the region and Late legislative enforcement measures are
always threats to any industry in India.
 Infrastructure safety is a challenging task in construction industry.
Porter’s five forces Model

1. Intensity of Industry Rivalry (Neutral to Favorable)
Compared to many other industries, the intensity of rivalry among developers in residential
development is relatively low. The area where it is felt most is in competition for
development land. When it comes to selling end units, developers typically try to avoid
competing directly by 1) developing products in different markets / locations; 2) launching
products at different time periods; 3) differentiating product types.
The key factor is that residential property is sufficiently differentiable and not subject to
any sort of perishibility or technological obsolescence such that developers have much
mor producing and selling their end pr
2. Threat of new entrants (Neutral to Unfavorable)
When an industry has over 60,000 registered participants, it is hard to conclude that
barriers to entry are high. Although the number of entrants varies over time and
according to market condition, they are sufficiently low relative to other
industries that new entrants can continue to enter and eventually push above
average returns back to historical means.
Generally speaking, the potential barriers to entry to any industry fall into
several broad categories: 1) capital; 2) technology; 3) legal authorization; and 4)
expertise and know-how.
Legal authorization is necessary for certain types of industries such as telecoms

and utilities. The number of participants in these industries is limited due to the
nature of the businesses (“natural monopolies”) or the return profiles (massive
upfront investments which can only be recovered through limited operating
competition).
For most real estate development, no special legal authority is needed to enter
the industry. That is why many non-property companies find it relatively easy to
migrate into this industry as and when returns become attractive or simply out of
interest.
Furthermore, the technological and expertise/know-how component of this

industry is not particularly high. Designs, names and concepts can all be copied as
there is less ability to protect these through patents or copyright. Large value supply
chains such as agents, consultants, property managers and employees of rivals can all
be hired or co-opted.
Capital can be considered a barrier but mostly to larger scale projects. The gross
amount of capital needed to “enter” the industry is paltry compared to the likes of
steel mills or chip fabs.
In addition to the above factors, the wide range of different types and scales of
development each entail different barriers to entry. Obviously larger, more
specialized developments in top tier cities would have much higher barriers to entry
than a small residential project3. Threat of substitutes (Favorable for End Use;
Neutral for Investment)
Real estate development involves different types of products - residential, office,

retail and industrial being the most common. To narrow the scope of discussion, we
will just consider private residential real estate.
Currently in China, residential real estate is in high demand both for its utilitarian
value as accommodation and also for its investment value as a stable, inflation-
proof store of wealth. As such we need to consider the substitutability on both
fronts.
As accommodation, new private housing from any firm can be replaced by 1
competitive product from another developer; 2) existing private housing for sale or for rent; 3)
social housing either for sale or rent. Any specific developer can lower the risk of
substitution by differentiating their product offering by i) location; ii) type and iii) quality.
The more generic a developer’s product，the more substitutable . Developers that have
managed to distinguish their product or image will fare the best.
The threat from the secondary market varies by city. In T1 and large T2 cities, a
sufficiently large stock of housing exists for the secondary market to be a viable
choice for potential homebuyers. In many T3 and T4 cities, there are either not
enough secondary units for sale or the market is simply is too illiquid.
The threat from social housing exists but not significant. Usually, those allowed to
buy or rent social housing would only be able to enter the low end of the private
housing market anyway - if at all. Moreover, resale and other restrictions make it a
far less liquid asset class. For that reason, the threat is only to the lower end of the
private housing market.
Given China’s current state of negative real interest rates and capital controls, most
individuals have limited channels for savings and investment. Real estate has helped
fill this void. If investors were given more alternatives and if other asset classes
such as equities start to perform better, investment demand for real estate would
quite likely cool.
4. Bargaining power of suppliers (Favorable)
Overall, developers are in a favorable bargaining position relative to the key

suppliers in the industry. The 3 key suppliers to any residential developer are 1)
land sellers (usually cities or other developers); 2) construction contractors; 3)
building materials and home furnishing / equipment manufacturers; 4) capital
providers. This situation is more or less reflected in that the typical cost of sales
for any developer is made up of roughly 1/3 land, 1/3 construction and 1/3
financing costs.
A typical developer’s bargaining position relative to a land seller varies according

to 1) nature of sale and 2) location of sale. Developers typically prefer to buy
land through direct bilateral negotiations with the government or 3rd party
rather than be involved in a multi-party bidding ware. Auctions are the least desired
channel for land acquisition but sometimes a necessity. For land bought in smaller cities
or newer areas of larger cities, developers wield a lot more bargaining power. Smaller
cities are generally eager to entice well known national developers. For example, if
Vanke or COLI buys into a smaller T3/4 city, it would signal to other developers that this
city is worthy of investment. In such cases, local officials are willing to give a discount to
entire desired players. This logic is also true of newly emerging districts in T1/2 cities.
Construction companies do not command much if any pricing power and many
work on thin margins. Although developers can backward integrate and take on
construction duties themselves, this is often more for ensuring timeliness of
completion or maintaining quality standards than for cost savings. Also, the
construction materials and household furnishings that developers buy are mostly
commodity goods for which the manufacturers not only command no particular
pricing power but would also yield a discount on bulk or volume purchases.
Lastly, capital providers, be they banks, shareholders or bondholders, may have

different investment appetite for this industry at different times but whether
investors or bankers demand a specific risk premium to provide capital is more
dependent on the perceived risks at any point in the property cycle and not any kind
of structural risk premium.
5. Bargaining Power of Buyers (Neutral)
Of all the five forces, this is perhaps the most dependent on 1) the stage in the
industry cycle; 2) regulations to protect consumer interests and 3) financial state
of individual developers. Given this wide variance, it is very difficult to conclude
definitively that buyer power is always strong or always weak. The truth is buyer
power will fluctuate greatly. Thus developers that have a larger proportion of
their business in markets with weaker buyer bargaining power will obviously
realize higher returns.
Near the peak of a property cycle, the

combination of investment and end
user
demand generally outstrip
available supply. This gives
developers tremendous pricing
power and leads to outsized
returns.
Conversely, near the bottom of
the cycle, developers are
usually overstocked and
must cut prices to move units.
In the transaction of any

large sized
purchases, information is
the key to
knowing what a
reasonabl\price to pay is.
Figure 1 Property Cycle In the absence of rules and
regulations,
developers often maximize revenue by

trying to extract the maximum possible price for each unit. They can do this by 1)
not publishing any standard price lists and 2) not reporting critical information
such as how many units have been sold and at what price. This situation is
generally known as asymmetric information and gives the developer tremendous
power. However, in most large markets, regulators are aware of this and have
enacted laws to protect consumer interests by making information more
transparent and readily available. In general, all else being equal, consumers in
T1/2 cities or those with consumer protection laws have more bargaining power
than cities without protection.
Lastly, developers that are on solid financial footing (larger resulting from a more
prudent management of working capital) would generally have greater pricing and
operational flexibility than those that are financially overstretched heading into a
cyclical trough.
Quantitative
Real Estate Industry: A Financial Analysis

I have attempted to capture the current trends in the Indian real estate industry through financial
analysis of a sample of listed companies. This section provides a brief overview of the performance of
the sample of listed real estate companies.
The sample selected for this analysis comprised listed real estate companies that had total income of र
750 mn and above. We then narrowed down its choice to a fair representative list of 30 companies for
which financial information was available for the past five years.
It further categorised the 30 real estate companies into large-size, mid-size, and small-size companies
based on their total income, by using the 80:15:5 principle. Based on this categorisation, 12, 10, and 8
large-size, mid-size, and small-size companies respectively were chosen.
This classification primarily aims to study the dynamics and operating efficiencies of the chosen
companies in the real estate industry. Of the 30 companies under study, in FY10, large companies
contributed 80% of total income and had 40% representation.
Debt- equity Ratio

Real estate companies require significant resources to fund their projects. Thus, they went on an equity
capital raising spree during FY06–FY08 to scale their operations aggressively. These companies also
procured considerably high debt to finance their capital-intensive projects.
However in FY09 and FY10, growth in equity and debt declined due to decreased demand, a downtrend
in sales, stoppage in execution of projects, rising interest expenses and the credit crunch arising out of
the global financial crisis.
The global financial crisis, volatile capital markets, slowdown in FII flows made it difficult for
companies to raise funds through equity markets.
Further, in FY10, the focus of companies was to enhance cash flows, release cash blocked in non-core
assets, increase process improvements and cost cutting, and achieve better working capital management
along with real estate development. This resulted in renewal and progress of certain stalled projects and
new launch announcements.
ROCE
The return on capital employed (ROCE) is a measure of returns that a company is realising from capital
employed. ROCE is defined as the ratio of profit before interest and taxes (PBIT) to capital employed.
Another factor that led to a sharp decline in ROCE of real estate players is increase in capital employed
at a higher pace than PBIT growth. In fact, small and large companies registered a sharp decline in
PBIT as against a positive growth in capital employed, which had a double effect on ROCE. In FY10,
PBIT of mid-size companies grew at a lesser rate of 19.7% compared with 27.8% growth in capital
employed. However, large and small companies saw a decline in PBIT of 20% and 30.2% compared
with 25.3% and 8.6% growth in capital employed.
Fixed Asset Turnover Ratio

Fixed Asset Turnover ratio shows that 12.32% . FATR is mostly modest leaving one firm, which tell
that most of the companies were able to sail out with much fixed asset harm.
Compound Annual Growth Rate - CAGR ( Revenues )
Company March Mar’11 Mar’10 Mar 09 Mar 08 CAGR

Name 2012
DLF 10,207.88 10,091.54 7,791.31 10,392.55 14,655.01
-6.98%
Omaxe 62.90 62.51 90.77 78.12 398.80 -30.88%
UNITECH 326.71 510.08 544.30 739.66 1030.68 -20.53%
ANSAL API 10.32 10.55 6.41 10.06 7.24 7.39%
Parsvnath 25.53 75.48 133.85 113.04 408.74 -42.57%

Developers
Ltd.
GODREJ 81.36 106.24 121.84 74.74 75.89 1.47%
PROPERTIES
LTD
Real Estate 10714.7 10856.4 8688.48 10668.51 16276.36 -8.02%
Where,
Formula
 : start value, : finish value, : number of years.

 Actual or normalized values may be used for calculation as long as they retain the same
mathematical proportion.
 The CAGR can also be calculated as the geometric mean of 1 plus each year's return (i.e. +3%
becomes 1.03 and -2% becomes 0.98), minus 1
Analysis:
CAGR of Real Estate industry has Been -8.02, which clearly signifies that industry has been
suffering from low earning capability over 5 years or so. The main reason for such Drastic fall is
“recession” , which has made consumer reluctant to invest. It was backed by Raising interest Rates.
Cumulative Average Growth Rate
Interpretation
 Real Estate is suffering from down turn of cumulative average growth rate.
 A -340 % of decrease show that industry is not healthy right now.
 Recession has had adverse effect on Indian real estate industry.
Suggestion
 Real estate companies has to inject money to start new projects.
 Companies have to formulate effeicient policies to skip florclosures.

JnNurm
2.6. Profile of Investments and Projected Industry Size
Given the skill requirements outlined in the earlier section, it is also necessary to forecast the human
resource requirement required in the Infrastructure and Real Estate sector. The first step is to forecast
the industry size.
In this section, we will analyse the profile of investments planned in each of the sectors and arrive at
the projected industry size.
2.6.1. JnNURM
According to India's Census in 2001, more than 285 million people (27.8% of the total population)
live in urban areas. With this large base, which is growing at the rate of around 2.7% annually, India
has the world's second largest urban population. Given the current trends in population growth and
migration, India's urban population is estimated to reach 575 million by 2030. Consequently, the
Jawaharlal Nehru National Urban Renewal Mission (JnNURM) was set up to encourage reforms and
fast track planned development of identified cities. Focus is to be on efficiency in urban infrastructure
and service delivery mechanisms, community participation, and accountability of Urban Local Bodies
(ULBs)/Parastatal agencies towards citizens. The current list of 6512 cities under JnNURM together
host around 120 million residents, which constitutes 42% of all urban residents in the country, or 12%
of total Indian population.
For the 65 cities identified under the JnNURM, the total investments are expected to be over Rs.
3,35,000 crore directed towards Urban Infrastructure and Governance (UIG), Basic Services to Urban
Poor (BSUP) and Capacity Building and Institutional Development (CBID). Of these investments in
Urban Infrastructure and Governance (UIG) account for over 80% of the total investments under the
JnNURM, as below:
12
Including inputs on addition or deletion of cities/ UAs/towns, the total number of cities under the
JNNURM
will remain around 60 – the figure of 63 cities has recently been revised to 65 cities.
Figure 16: Investment planned under JnNURM totalling Rs. 3,35,000 crore
Basic Services Capacity

C
to Urban Poor Building and
BSUP)
( Institutional
17% Development
(CBID)
1%
Urban
Infrastructuree
and Governance
(UIG)
82%
As part of Urban Infrastructure and Governance, investments are being made under the heads of
Urban Transport, Water Supply, Sewage/Sanitation, Drainage/Solid Waste Disposal, MRTS, and
Solid Waste Management. Of these, the investments in Urban Transport, Water Supply, Sewage
/Sanitation account for about 80% of the total investments under the JnNURM, with Urban Transport
alone accounting for over 50%, as seen below:
Figure 17: Investments under various heads of JnNURM (Rs. crore)
Urban Transport 137,391

t
9
Water Supply 40,062
0
Sewage
g / Sanitation 33,324
2
Drainage / SWD 20,100
Others 16,762
S
MRT 12,050
M
SWM 6,809
- 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000
With respect to the states, investments in Maharashtra, Tamil Nadu, Andhra Pradesh, Delhi, Uttar
Pradesh, Karnataka, Kerala, Gujarat, Jharkhand and West Bengal account for over 80% of total
investments under the JnNURM, as seen below:
Figure 18: State-wise investments under JnNURM
West
3% Other s M
Maharashtra
18% 18%
d
4%
Tamil
Gujarat Nadu
5% 13%
Andhra Pradesh
Karnatak
a 12%
a 7% Uttar Pradesh Delhi (NCT)
Kerala 7%% 7%%
6%
2.6.2. Power
The total installed capacity of power currently in India is over 1,50,000 MW. This is expected to
increase to over 3,18,000 MW by 2021-22. Hence additional capacity of about 1,68,000 MW will be
needed. For this, it is expected that about Rs. 7,07,500 crore will be needed for Generation and about
Rs. 6,19,000 crore will be needed for Transmission and Distribution, as seen below:
Figure 19: Investments in Power Generation, Transmission and Distribution up to 2021-22 (Rs.
crore)
Transmission
and
Distribution
47% Generation
53%
The infrastructure for Transmission and Distribution needs to be set up in each state based on the
additional capacity required in that state. The investments in power Generation cannot be attributed to
the state which has the demand, since the power need not be generated at the same location where it is
needed. Thus, while the state-wise breakup of investments for Transmission and Distribution are as
seen below, investments in power generation cannot be attributed to particular states.
Figure 20: State-wise investments in Transmission and Distribution
Andhra Pradesh
Others Uttar Pradesh 9%
W est Bengal 18% 10%
4%
Tamil Nadu
Bihar 9%
4%
Maharastra
9%
Karnataka
4% Delhi Gujarat
u
Rajasthan Punjab 7%
5%
Madhya 5%
5 7%
Pradesh
4% Haryana
5%
2.6.3. Ports
India currently has 12 major ports and 187 minor ports. In 2007-08, major ports accounted for about
70% (519 million tonnes) of the total port traffic in India, while minor ports accounted for the
remaining 30% (220 million tonnes).
As regards investments going ahead, the investments in minor ports will account for abut 50% of the
total investments in ports.
2.6.4. Airports
India has a total of 125 airports and currently all 125 airports are owned and operated by the Airports
Authority of India (AAI). The Government aims to attract private investment in aviation
infrastructure, as seen in the cases of privatisation of the Delhi and Mumbai airports as well as the
new international airports at Bangalore and Hyderabad. The latest status of airports that have been
commissioned/granted approval/are under consideration is as below:
Table 9: Airports commissioned / granted approval / under consideration
Name State Status

Bangalore International Karnataka Commissioned
airport
Hyderabad International Andhra Pradesh Commissioned
airport
Mopa airport Goa Approval Granted
Navi Mumbai International Maharashtra Approval Granted
airport
Kannur airport Kerala Approval Granted
Bijapur airport Karnataka Approval Granted
Simoga airport Karnataka Approval Granted
Hassan airport Karnataka Approval Granted
Gulbarga airport Karnataka Approval Granted
Sindhudurg Airport Maharashtra Approval Granted
Dabra Airport Madhya Pradesh Approval Granted
Durgapur Airport West Bengal Approval Granted
Greater NOIDA Uttar Pradesh Under
international airport Consideration
Under
Chakan international airport Maharashtra
Consideration
Under
Karaikal airport Puducherry Consideration
Under
Jhajjar airport Haryana Consideration
Under
Ludhiana Punjab Consideration
Under
Paladi-Ramsinghpur Rajasthan Consideration
Under
Bharuch Gujarat Consideration
Under
Rameswaram Tamil Nadu
Consideration
Under
Itanagar Arunachal Pradesh Consideration
2.6.5. Roads
India has an extensive road network of 3.3 million km – the second largest in the world. Roads in
India carry about 65% of the freight and 80% of the passenger traffic. The Government of India plans
to spend about Rs. 50,000 crore per annum on road development over the next five years. Road
projects in India consist of the National Highways that are being constructed under 7 phases of the
National Highway Development Project (NHDP), State Highways, Rural Roads and the North East
roads Special Accelerated Road Development Program, the investments in which are as below:
Figure 21: Planned Investments in Roads in the Eleventh Five Year Plan (Rs. crore)
NE roads Spl
Rural Roads Acc Road Dev
36,800 Program
12% 4,800
2%
State
Highways
116,000
37% National
Highways
154,300
49%
2.6.6. Projected Size of the Infrastructure and Real Estate sector13
Given these investments, we forecast that the real GDP of the Building, Construction and Real Estate
sector to grow at a CAGR of 9.5% to 10% till 2022, in real terms. The GDP economy of Construction
would be about Rs. 8,000 billion in constant prices at 2022.
Figure 22: Projected Real GDP of Construction sector (Rs. billion)
9,000
- 7,925
8,000 9.5% to
7,000
5,833
6,000
5,000
4,000 3,427
3,000
2,263
2,000
1,000
-
2008 2012 2018 2022
Source: IMaCS analysis
13
Our overall approach to macro-economic modeling and forecasting is explained in a separate annexure
While Real Estate (including housing and commercial) would account for 30% of the activity, the rest of
the infrastructure activity (70%) would be shared across the following areas in the proportion
indicated below.
Table 10: Share of economic activity estimated in the Infrastructure segment
Sector in Infrastructure % of economic activity

Electricity 32.4%
Road and Bridges 15.3%
Telecommunication 12.6%
Railways (including MRTS) 12.7%
Irrigation 12.3%
Water Supply and 7.0%
Sanitation
Ports 4.3%
Airports 1.5%
Others 1.9%
Source: Planning Commission’s Tenth and Eleventh Five Year Plan and IMaCS analysis
Abstract
The Global Credit Crises that began like a small fire in the US housing finance market in 2007 spread
and became a forest fire that first engulfed the US, then the Western economies, and eventually the
rest of the world, including India. The crisis is clearly the deepest and the most widespread economic
meltdown that the world has faced since the Great Depression. Indian industry started experiencing
the real impact of the global financial meltdown from the last quarter of 2008. The Indian
economy, which was on a robust growth path up to 2007-08, averaging at 8.9 per cent during the
period 2003-04 to 2007-08, witnessed moderation in 2008-
09, with the deceleration turning out to be somewhat sharper in the third quarter. IT industries,
financial sectors, real estate owners, car industry, investment banking and other industries as well
are confronting heavy loss due to the fall down of global economy. The Real Estate Business has
seen 62 per cent decline in revenues, 58 per cent decline in PBDIT, and 78 per cent decline in net
profit, between March 2008 and March 2009. This decline has been accompanied by a
significant fall in the property prices in India. The importance of the real estate sector in India
cannot be understated given the strong forward and backward linkages that it generates. The sector
has demand implications for intermediate inputs like steel, cement, etc., while keeping afloat the
whole construction industry including transport and other intermediate labour services. Given its
importance for the economy it is worthwhile to see how adverse expectations are playing a role in this
sector and what the possible solutions are.
Introduction
“March 16, 2008: Bear Stearns is acquired for $2 a share against its 52-week high of $134. July
14, 2008: Oil hits $145 a barrel and then collapse to $34 within six months. September 15, 2008:
Collapse of Lehman Brothers. November 20, 2008: Dow Jones at a record low of 7,449 points. June 1,
2009: General Motors files for bankruptcy. We are living in a time that has seen unprecedented
volatility. From boom to bust in a matter of months”.
To begin with let us define the term Recession; „recession is a decline in a country's gross domestic
product (GDP) growth for two or more consecutive quarters of a year. A recession is also preceded by
several quarters of slowing down‟.
An economy which grows over a period of time tends to slow down the growth as a part of the normal
economic cycle. An economy typically expands for 6-10 years and tends to go into a recession for
about six months to 2 years. A recession normally takes place when consumers lose confidence in the
growth of the economy and spend less. This leads to a decreased demand for goods and services, which
in turn leads to a decrease in production, lay-offs and a sharp rise in unemployment.
The Real Estate industry in India witnessed unprecedented growth in a relatively short span of time.
With most companies having seen only the upward swing, the economic downturn proved to be a
litmus test. Companies with stronger fundamentals and ability to make quick strategic decisions
continued to operate, though with reduced visibility and size of operations, the weaker ones found it
challenging to retain their position and image as a Real Estate developer.
As has been said, “Businesses with the right strategy and vision come out stronger from
times of depression”.
In order for Companies to gear up to face the challenge, it is imperative to understand how the real
estate market has been impacted. There is an overall slowdown in demand across India as has been
experienced by industry players. Property prices and rentals are correcting which have led to the erosion
in market capitalisation of many listed players like DLF and Unitech. Many current projects of real
estate developers have been stalled due to lack of funds and investors either do not have funds to invest
or are reluctant to do so. Consequently, companies are forced to sell of the properties at a lower value.
This scenario is ascertained by the fact that finding buyers is also proving to be a challenge.
Increasing input costs has led to margin shrinkages, in fact, companies with ordinary supply chain
management have stalled their projects.
Rising costs, lack of capital, reluctance of buyers have all contributed to the current scenario. This
paper aims to analyse various strategic initiatives by companies to combat the existing times and sustain
their businesses through future turbulent times.
Objectives of The Study

Following are the objectives of the study:
1. To study the impact of Global recession on India‟s real estate sectors foreign direct
investment flows, rate of growth, sales and profit after tax (PAT) and
2. To analyse various strategic initiatives by companies to combat the existing times and sustain
their businesses through future turbulent times.
3. To give suitable conclusion & suggestion.
Hypotheses of The Study
1. There is no significant impact of recession on Indian real estate market (Ho)

2. Global recession has a definite impact on development of Indian real estate market (Ha)
Research Methodlogy
The study is primarily based on secondary data collected through journals, periodicals,
Websites and newspapers
Results and Discussions
The real estate market in India remains unorganized, fragmented and characterized by small
players with a local presence. The growth of the real estate sector is attributed to various factors
such as growing economy, growing business needs etc. However, this boom is restricted to areas
such as commercial office space, retail and housing sectors. The major concerns of this sector
namely are skill shortage, non-availability of statistics, lack of low cost-affordable housing, lack
of sustainability and to meet a future that might have downturn due to oversupply.
The industry is presently facing a major resource crunch – an obvious lack of qualified and
skilled people. Coupled with this manpower shortage is the shortage of availability of relevant
statistics, which has created an ambiguity as to how much construction activity is actually taking
place and one can‟t gauge the demand and supply trends accurately.
The major issues that plague this industry is tremendous shortfall of middle class housing as
majority of the developers are involved in developing high class housing. So, there is a dearth of
low cost affordable units.
Recession in US economy has caused great impact on Indian real estate business. The real estate
industry was a booming industry in pace with information technology (IT) industry. Demand for
it space and from high net worth individuals had created opportunities for the this sector.
Figure 1: Quarterly Estimates of GDP At Constant (1999-00) Prices-Growth

Rates7
12
9.7 10.2
10 9.4 9.8 9.2 9.3
9
Real GDP Growth (%)
8.6
7.8 7.7
8
5.8 5.8
6
0
2006-07 2007-08 2008-09
Q1 Q2 Q3 Q4
Source: Reserve Bank of India Bulletin

The Indian industry has dealt with economic slowdowns in the past but this one is in the nature
of contagion effect of the western recession. The full spectrum of the shades of the contagion is
not evident in the GDP growth trend. Numbers alone would indicate that economic slowdown, so
far, has been barely a two-quarter phenomenon. In figure 1, the real slowdown was seen only in
the last two quarters of 2008-09. Sales growth respectively dropped to 9.5 per cent and 1.9 per
cent in Q3 and Q4 with much worse impact on the net profits that respectively fell by 53.3 per
cent and 19.9 per cent.
Figure 2: Sales And Profit After Tax Trend of India Real Estate Sector8
5000
4500
4000 real-estate sales
real-estate profit
3500
Rs. in Crores
3000
2500
2000
1500
1000
500
0
Nov-08
Jul-07
May-06
May-07
Sep-07
May-08
Sep-08
May-09
Mar-06
Nov-06
Mar-07
Nov-07
Mar-09
Sep-06
Jan-09
Mar-08
Jan-07
Jan-08
Jul-06
Jul-08
The trend in sales and net profit of “worst affected” Real Estate is given in figure 2. The Real
Estate has been 62 per cent decline in revenues, 58 per cent decline in PBDIT, and 78 per cent
decline in net profit, between March 2008 and March 2009. This decline has been accompanied
by a
significant fall in the property prices in India. However, the sector shows a moderate
recovery in the quarter after March 2009.
Table 1: Rate Of Growth At Factor Cost At 1999-2000 Prices (Per Cent)9
2003- 2004- 2005- 2006- 2007-08 2008-

04 05 06 07 09
Agriculture, forestry & 10 0 508 4 4.9 1.6
fishing
Mining & quarrying 3.1 8.2 4.9 8.8 3.3 3.6
Manufacturing 6.6 8.7 9.1 11.8 8.2 2.4
Electricity, gas & water 4.8 7.9 5.1 5.3 5.3 3.4
supply
Construction 12 16.1 16.2 11.8 10.1 7.2
Trade, hotels & 10.1 7.7 10.3 10.4 10.1 9
restaurants
Transport & 15.3 15.6 14.9 16.3 15.5 9
communication
Real estate & Financing 5.6 8.7 11.4 13.8 11.7 7.8
Community, social & 5.4 6.8 7.1 5.7 6.8 13.1
personal services
Total GDP at factor cost 8.5 7.5 9.5 9.7 9 6.7
Source: Central Statistical Organization
Figure 3: FDI Equity In Indian Real Estate Business10
14000
12621
12000
10000
8749
Rs. in Crores
8000
6000
412% 144%
4000
2121
2000
0
2006-07 2007-08 2008-09
Source: RBI’s Bulletin August 2009 (Table No. 46 – Foreign Investment Inflows)
Above Table no 1 reflects how the steady growth rate of real estate sector was slowed down in
year 2008-09 due the recessionary trend prevalent in the economy .this proves our hypothesis
(Ha) that recessionary effects were responsible for downtrend in the real estate sector and null
hypothesis is rejected from the observations made. In figure 3, it is seen that FDI equity in
Indian
Real Estate Business is increasing but in reality it is not so. In the year 2007-08 it is increased
by
412 per cent and in 2008-09 it is only increased by 144 per cent. So it is not rise as it is accepted
by the Real Estate Market.
Strategies To Cope Up With The Above Situation

Challenging times present an opportunity for Companies to capture market share by
outperforming competitors. A quick analysis of the market conditions and quicker response to
mitigate existing risks differentiates companies.
There can be multiple reasons why some companies continue to tread well while some
companies falter badly, when faced by serious challenges. But, invariably, the most
significant role here is played by the strategic decisions taken by the company.
When the global economic crisis, compounded by the local economy issues, started hitting real
estate demand in India, different companies reacted in different ways.
1) Financial Decisions
Initially, developers were reluctant to reducing real estate prices in order to revive demand.
However, with no immediate respite and growing pressure to cut down losses, a gradual
slash down in prices was introduced.
The worsening situation of credit availability led developers into liquidity crunch. Many
developers succumbed to borrowing at a very high cost, Private Equity which was once easily
available became a very distant option.
2) Diversification of Business
Recognizing the need of developing multiple streams of revenue, some cash-rich developers
vertically diversified (or attempted to diversify) their businesses into telecommunications,
financial services, insurance, etc. Horizontal diversification into services related to property
management and leasing also surfaced up as a preferred strategy for dealing with the downturn.
Owing to increased competition in metropolitan cities, developers opted to diversify
geographically as well. Tier II and Tier III cities thus came under their radar. Interestingly,
one can easily find developers cheering their strategy of foraying in smaller cities, which
are relatively less-affected of the ongoing economic turbulence.
Maintenance of high equity
As part of long term strategy, instead of selling off properties, developers began to enter onto
lease agreements with larger companies for commercial space. The long term rental arrangement,
though at reduced rates, guaranteed a steady stream of income.
3) Cost Control
In the wake of controlling cost like most other sectors of the economy, Indian real estate
companies also embarked upon various cost cutting strategies. Capital intensive projects that
had no impact on company‟s revenues in the short term were either put on hold or scaled down,
and even cancelled. IT related projects were among major ones in this case.
However, some significant projects such as those including the use of IT to improve investor
access to information are important, and most developers appear to agree on this. Therefore,
projects meant for maintaining a fair interface between the company, investors and customers
hold water, especially during the turbulent times.
A number of companies also downsized their extra manpower. However, in many instances, this
was not done in a thoughtful manner, thereby putting companies on the risk of losing essential
talent in exchange of short term cost savings.
A number of real estate companies in countries such as the US and the United Kingdom (UK)
don‟t hesitate in outsourcing their marketing activities after carrying out the necessary due
diligence. This acts as a measure to infuse efficiency and cut unnecessary costs involved in
many of the related processes.
4) Focus On Customer Satisfaction
The ongoing condition of economic contraction has also resulted in improved services to the
customer. In order to shed off an image of being non-transparent and unorganised, a number
of developers increased their focus on customer satisfaction.
A customer was provided the facility of checking the status of construction of his property by
logging on to a website. Earlier, this was possible only after visiting the site and following up
with the concerned officials.
With such initiatives, developers are fast changing their image as professionally
managed corporate houses, committed for meeting customer expectations and empathetic in
resolving the concerned issues.
Conclusions & Suggestions

Owing to the correction in real estate prices and re-aligning of business strategy, as per the
ongoing business environment, has resulted in some signs of revival in the Indian real estate
sector, in the recent past. A stable political scenario has also boosted confidence in the Indian
capital markets, and the overall business environment. This was further complemented with the
Indian economy managing to achieve a growth rate of 6.7% during 2008-09, despite recession
in the global economy.
At the first instance, such positive indicators reinforced the potential of Indian domestic
economy, while uplifting sentiments otherwise enshrouded by negative movements on the front
of employment and deepening financial crisis in the global economy.
These small packs of positive developments slowly flowing into the economy have also started
generating interest amongst customers, and some developers have experienced
improving situation in terms of demand of real estate in select pockets. The recent situation,
however, has sent the message home. The Indian real estate companies are urged to focus
on customer satisfaction. The industry is no more dominated by a developer, putting customer
expectations at the backstage and carrying on operations at his own sweet will.
More significantly, the ongoing correction in the real estate market has indicated towards its
fundamental strength wherein it tends to correct itself with any excesses on the front of prices,
and other demand relating factors. Nevertheless, real estate companies are fast-learning to lay
emphasis on retention of existing customers and acquire new customers. The present times have
been calling for a fair level of flexibility, which even the real estate companies have been
expecting from their suppliers and service providers. At the same time, many developers have
found a viable strategy in forging collaborations – leading to cost benefits, synergies, and mutual
strength. The potential areas of collaboration include supply chain, procurement, production and
brand promotion.
Nevertheless, this phase of market consolidation is a real opportunity where weaker players will
be defragged and stronger ones will increase their market share through well-thought business
strategies, and further tighten their belts for high growth in the future. The Budget
2010 presented a mixed bag for real estate sector in India. However, it has failed to address
some of the key demands of the real estate developers, including infrastructure status to the
real estate sector, relaxation of external commercial borrowings to fund projects, provision
of separate deduction of Rs. 1 lakh for housing loan repayment or increasing the overall 80C
deduction to Rs. 2 lakhs etc.the key to growth of this sector lies in growth of disposable
income with the population and willingness of property developers to build affordable homes for
middle class.
“It is said, that success is not about how high you rise, but about how high you bounce back
when you hit rock-bottom. Real Estate companies today are at that strategic inflection point,
where they must define new imperatives to be successful once again. Bridging the gap between
the customers and themselves, taking a harder look at resource-sapping processes, and above
all gaining agility and flexibility as organizations, will be the stepping stones to success.”
- Vinamra Shastri
Head – Strategic Services & Partner, Grant Thornton India
Biblography
 CCI.com
 Research Papers
 Kodatsecurities.com
 Moneycontrol.com
 Dlf.com

Building, Construction and Realestateservices: Surabhi Agarwal Eram Khan Fatima Abbas Aarti Chaudhary Abhishek Gangwar

Transféré par

Informations du document

Titre original

Copyright

Formats disponibles

Partager ce document

Partager ou intégrer le document

Options de partage

Avez-vous trouvé ce document utile ?

Ce contenu est-il inapproprié ?

Droits d'auteur :

Formats disponibles

Building, Construction and Realestateservices: Surabhi Agarwal Eram Khan Fatima Abbas Aarti Chaudhary Abhishek Gangwar

Transféré par

Droits d'auteur :

Formats disponibles

Building, Construction and

1.1. Industry size and Growth of Construction Industry ................................................................

1.2. Industry Segmentation ........................................................................................................... 19

1.3. Real Estate Sector .................................................................................................................. 20

1.4. Infrastructure .......................................................................................................................... 22

1.5. Key Risk Factors for Construction Industry ......................................................................... 26

1.6. Market Structure of Construction Industry ........................................................................... 30

1.7. Major Players ....................................................................................................................... 31

1.1 PEST Analysis .......................................................................................................... 35

1.2 Swot Analysis ........................................................................................................... 36

1.3 Porter’s Five Forces Model ....................................................................................... 37

1.4 Ratio Analysis ............................................................................................................ 42

1.5 CAGR ...................................................................................................................... 44

Figure 6: Size of Commercial/Retail Construction .............................................................................

The pr oject ” Real Es tate industr y” is based on the current i ndustr y

 Understanding the functioning of Real Estate Industry

 Analysing the industry performance on Qualitative and Quantitative Basis.

 Forecasting the Future Investment in the Sector.

 JnNurm Scheme in coming years.

 To study the fundamental factors affecting the real estate value.

 To examine the factors of real estate boom in 2008.

 To present the future constraints of real estate investment in India.

The Report Is Divided Into Various Sections:

At the end submitted to “ IIPM – lko”.

Current Scenario of the Real Estate Market in India

Characteristics of the Real Estate Market in India

• Realization of large commercial

• Emergence of transparency and

Cause-Effect scenario leading to emergence of organized real estate market in India

captive units of major players include GE, Prudential, HSBC, Bank of

Tier II cities, notably Hyderabad, Chennai, Chandigarh, Kochi, Mangalore, Mysore,

Tier III cities, like Cuttack and Jaipur

Special Economic Zones:

• Development of SEZs in various segments such as multi-product,

Real Estate Utilization

Real estate utilization

• Increasing demand of lodging in commercial cities such as Bangalore,

Residential Real Estate

Real Estate Investment Banking

structuring of entire portfolios. Extending on similar lines is the importance of

Real Estate Consultants

Developers and Construction Companies

Fund raising options by developers

Domestic Corporate Houses

Financial Institutions – Real Estate Mutual Funds

Private Equity/Venture Capital Funds

Real Estate and Financing Trends in India

Realty Funds/ Realty Mutual Funds in India

Risks involved in the Real Estate Investment Market

Property market transparency risk

Ownership and Land Title Issues

1.1. Industry size and Growth of Construction Industry

Source: Economic Survey 2008-09 and IMaCS analysis

1.2. Industry Segmentation

Construction sector can be broadly classified into 2 sub-segments:

2) Infrastructure (Transportation, Urban development, Utilities)

Figure 2: Indian Construction Industry Landscape

Real Estate Infrastructure

Residential Utilities Urban Infrastructure Transportation

Commercial Power Railways

Special Irrigation Civil Aviation

Figure 3: Share of Real Estate and Construction by GDP contribution

Real Estate Infrastructure