Sam Sujeet

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    FINANCE PROJECT ON

    INDIAN REAL ESTATE

    INDUSTRY

    SUBMITTED BY

    SAM SUJEET

    MBA (PGPM)

    INTRODUCTION

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    The last five years in Indian real estate constituted a one-off boomperiod triggered by the emergence of India as a global investmentdestination. This is a general phenomenon that every sector goesthrough before maturity - we can compare it to the boom of 2000-2001or the stock market boom of 2007-2008. The end always comes as a

    surprise, and can never be accurately predicted.

    This is not to say that the good times have come to an end - the realestate industry is one of the basic industries of any economy and willalways be an important component. In times ahead, we will see theindustry revive and accelerate, though through smaller and shortercycles. We already know that every industry has a life cycle ofexplosive growth, stabilization and maturity, followed by moderategrowth. Real estate used to be a niche industry in terms of stockmarket exposure and private equity funding a now, it will emerge a

    larger, more-organized industry with realistic growth in line with theGDP, and it will represent a better and more sustainable valueproposition.

    Over the past six months, the real estate industry in India underwentand continues to undergo various changes. Now that the popular mythof India being a decoupled economy is finally broken, we are facedwith new challenges that will see the progression of the industry intothe next phase of a general industry cycle.

    It is historically established that as an industry matures, it gives way tofewer and stronger players who help to bring some sense in theindustry. The coming months will see consolidation in an industry thatis on a journey towards equilibrium price discovery, resulting in a win-win for both the developer and the end-user. Developers may not getthe high margins which they were used to, but they can still makemoney through higher volumes and a faster cash cycle.

    Consolidation will happen at different levels. Primarily, however, wewill witness it at the national as well as regional levels - there will be

    niche-specialized players who are experts in local municipal approvalprocesses, as well as national players who operate with a much largerfocus. This consolidation will mark the extinction of the fly-by-the-nightoperators who had entered the industry and had made it deviate fromits fundamentals.

    The projection of India needing approximately 22 million units stillholds true. Therefore, demand still exists, and increasing affordability

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    in housing will help tap this demand. Also, affordability has totranscend the current far-flung locations and kick in at the suburbanlevels, closer to CBD areas.

    Currently, developers must not only complete projects under execution

    but also re-strategize to sell them quickly. Once they get out of theexisting inventory and execution pipeline, they can look at new landparcels and new business ideas such as affordable housing andinnovate. While there is certainly demand, it is essential for thisstrategizing to take place, so that affordable housing schemes becomea win-win for both developers and end-users.

    SOME OF THE HALL MARKS FOR FUTURE

    1.The advent of affordable housing2.Increased consolidation, corrected valuations and a focus on deliveryto exist3.Decreased leverage4.Decreased land banking5.Increased focus on execution and timely delivery to gain end-userconfidence6.Emphasis on and more focused expansion in Tier-I and Tier-II cities,where demand is already proven

    7.Decrease in speculative supply in commercial real estate8.A better comprehension of the fact that buyers and sellers interestsneed to match for the market to exist9.Players re-examining their valuations to make sound acquisitiondecisions10.The return of the fundamental market focus An industry survivesbecause of the users, and not vice-versa. 2009, especially the secondhalf, will bring excellent bargains for investors, as well as to those whohave a medium-to-long term view on the industry and the necessaryrisk appetite. Much will depend on being bang on target in terms of

    location, product and entry valuation.

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    PRESENT SCENARIO OF THE INDIAN REAL ESTATE

    INDUSTRY

    The Indian real estate sector plays a significant role in the country'seconomy. The real estate sector is second only to agriculture in termsof employment generation and contributes heavily towards the grossdomestic product (GDP). Almost five per cent of the country's GDP is

    contributed to by the housing sector. In the next five years, thiscontribution to the GDP is expected to rise to 6 per cent. Fastereconomic growth in Brazil, Russia, India and China could result in theproperty markets of those nations recovering at a faster rate than theUK and US real estate markets. It has also been suggested that India'sproperty sector could begin to improve from late 2009 and may attractup to US$ 12.11 billion in real estate investment over a five-yearperiod.

    The IT and ITES sector alone is estimated to require 150 million sq ft of

    office space across urban India by 2010. Almost 80 per cent of realestate developed in India is residential space, the rest comprising ofoffices, shopping malls, hotels and hospitals. According to the TenthFive-Year-Plan, there is a shortage of 22.4 million dwelling units. Thus,over the next 10 to 15 years, 80 to 90 million housing dwelling unitswill have to be constructed with a majority of them catering to middle-and lower-income groups.

    Foreign direct investment (FDI) into India in the real estate sector forthe fiscal year 2008-09 has been US$ 12.62 billion approximately,

    according to the latest data given by the Department of Policy andPromotion (DIPP).

    New Projects

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    Tata Housing Development Company will build 1300 low-costhomes at Boisar, 100km from Mumbai. The houses will be pricedbetween US$ 8,258 and US$ 14,187.

    Atlas Group, which has carved out a niche of itself in the jewelleryand healthcare industries across Gulf countries, is diversifying

    into real estate sector and plans to invest US$ 201.51 in Kerala inthe next two to three years.

    Mexican global multiplex operator Cinepolis plans to invest US$357.7 million in India for its film exhibition business over the nextseven years. It will open 500 movie screens.

    The Avinash Bhosale Group (ABIL) is planning to invest US$126.25 million for setting up three five-star hotels in Pune,Nagpur and Mumbai over the next three years.

    Luxury hotel chain Marriott International will open 24 newproperties in India over the next three years.

    Buoyed by encouraging response from home-buyers for theirmarked-down properties, companies such as DLF, Unitech, HDILand others have lined up housing projects of over 60 millionsquare feetin the current financial year.

    Tata Realty and Infrastructure (TRIL), plans to invest US$ 4.2billion to build special economic zones, roads, ports and othercore sector projects in the next three years.

    Housing Development & Infrastructure Ltd (HDIL) and theMumbai Metropolitan Development Authority (MMRDA) have

    joined hands to develop a residential-cum-commercial complex in

    Virar, a suburb of Mumbai at a cost of US$ 1.49 billion to providelow-cost rental housing.

    STEPS TAKEN BY GOVERNMENT

    The government has introduced many progressive reform measures tounlock the potential of the sector and also meet increasing demandlevels. The stimulus package announced by the government, coupled

    with the Reserve Bank of India's (RBI) move allowing banks to providespecial treatment to the real estate sector, is likely to impact theIndian real estate sector in a positive way. RBI has decided to extendexceptional concessional treatment to the commercial real estateexposure and restructured it to June 30, 2009.

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    100 per cent FDI allowed in realty projects through the automaticroute.

    In case of integrated townships, the minimum area to bedeveloped has been brought down to 25 acres from 100 acres.

    Urban Land (Ceiling and Regulation) Act, 1976 (ULCRA) repealed

    by increasingly larger number of states. Minimum capital investment for wholly-owned subsidiaries and

    joint ventures stands at US$ 10 million and US$ 5 million,respectively.

    Full repatriation of original investment after three years. 51 per cent FDI allowed in single-brand retail outlets and 100 per

    cent in cash-and-carry through the automatic route.

    The Union Ministry of Commerce & Industry has initiated steps toreduce the time taken to develop special economic zones (SEZs) by

    simplifying procedures to get the tax-free industrial enclaves notified.

    IMPORTANCE OF THE STUDY

    This project shows the importance ofIndian Real Estate Industry

    which plays an important role in the GDP (GROSS DOMESTIC

    PRODUCT) that is almost 5 percent. Due to the development of this

    industry at a higher rate government is also providing some assistanceto continue its growth in a steady manner. Some of the upcoming

    projects which will help INDIAN REAL ESTATE INDUSTRYto increase

    there contribution towards the GDP and which will help in the growth of

    the infrastructure.

    AIMS AND OBJECTIVE OF THE STUDY

    The main aim is to know about the detailed study on the INDIANREAL ESTATE INDUSTRYand its role in the growth and

    development of the country.

    To study about the role played by the Indian government.

    To know the about the future projects and its importance.

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    To know about some of the hallmarks for future.

    SCOPE

    It provides various information about the INDIAN REAL

    ESTATES INDUSTRY, and its contribution and future

    hallmarks which will play a huge role in the development of

    the country.

    It also gives information about the role played by

    government in the growth ofINDIAN REAL ESTATE

    INDUSTRY.

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    CHAPTER-1

    REAL ESTATE OVERVIEW

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    REGIONAL OVERVIEW

    The global economy moved deeper into recession in the first quarter of

    2009 as trade contracted, industrial production declined andunemployment rose in markets around the world. The primary concernin Asia during the first three months of 2009 continued to be the dropin exports, which is the most severe the region has endured since theSecond World War. It will be difficult for Asia to escape from itsvulnerability to exports and this major component of the regionaleconomy is unlikely to be supplanted by rising domestic consumptionover the short term. Nevertheless, a number of economic indicatorsreleased towards the end of the first quarter suggested that Asianeconomies are stabilizing. The declines in exports, industrial output

    and the purchasing managers indices all eased during this period.While remaining skeptical about the overall market outlook,economists are increasingly taking the view that the global economywill contract for most of the remainder of this year before staging aslow recovery in 2010.India the regions fastest growing economies during the first quarter ofthe year, and are expected to play a critical role in ensuring globaleconomic growth in the coming years.

    REAL ESTATE OVERVIEW

    Following a sharp contraction of global economic activity, the realestate market witnessed significant performance pressures over thelast few quarters leading into. Conditions in the Indian Real Estatemarket deteriorated over the first quarter of the year as various stake-holders including corporate, retailers, home-buyers, etc. remained

    cautious about their real estate commitments in the course of pooreconomic climate and uncertain business outlook. It were marked byan evident downturn in the industry in the form of delayed timelines ofprojects owing to liquidity crunch faced by majority of the developers,decreasing buyer confidence across residential segment, delayedexpansion plans of corporate & retailers (owing to difficult trading

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    situations) and most importantly the correction in prices witnessedacross real estate segments.However, the second quarter of 2009 witnessed some improvement inmarket activity.

    There were more enquiries for office and retail space in the market and

    the volume ofTransactions went up marginally. Additionally, with the introduction ofAffordable housing and softening of interest rates, potential homeowners have startedEvincing interest in the residential sector again. These changes can beprimarily attributed to improved market sentiments, brought on by thestable elections, marginally improving economic conditions within thecountry and improving stock market conditions.

    RESIDENTIAL

    In the midst of the economic uncertainty, job losses, remunerationreductions, etc.home buyers have exhibited circumspection while dealing inresidential property, by either deferring their acquisition plans in caseof end-users (in hope of prices bottoming out) or evaluating alternatesources of investments in the case of speculative investors (in the formof stock markets, precious metals - specifically gold, etc).This had led

    to a negative sentiment across a segment which had exhibited strongfundamentals over the last few years. With the basic precept of urbanland always being in short supply, given the rate of increase in urbanpopulation, residential property has had the capability of resisting asharp collapse which might be brought on by adverse economicconditions. Accordingly, while corrections have happened, either drivenby excess supply or a recessionary force, the long-term potentialremains positive. One of the primary changes witnessed in theresidential segment as a result of the turbulent economic conditions, isthe increase in preference for affordable housing as end-users look at

    means of reducing their investment outlays. As a result, there hasbeen a paradigm shift in this segment with developers moving awayfrom luxury and high-end residential projects, the mainstay of theresidential sector over the past few years, towards focusing onaffordable housing.

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    OFFICE

    Over the last decade, the office sector (primarily the Information

    Technology andthe Information Technology enabled Services segment - IT/ITES) hasbeen the driving force for real estate growth within the country.Activities within the retail and residential segments to a large extenthave been driven by Indias successfulestablishment as a software and outsourcing hub. With the downturn inthe globaleconomy, most corporate have preferred to adopt a wait and watchpolicy before going ahead with their investment/ expansion decisionswith a number of companies even downsizing in order to reduce costs.

    Consequently, demand for office space in major cities across Indiaremained weak over three quarters. An additional factor compoundingthe problems faced by the office segment has been the significantquantum of supply which has been introduced over the last fewquarterscoupled with the quantum of supply which is expected to getcompleted over the next couple of years.As a result of the reducing demand in consonance with the significantsupply undervarious stages of completion, there has been significant pressure on

    rentals with allmarkets exhibiting a downward trend over the last 3-4 quarters.However, with theincrease in enquiry levels in the current quarter, the pace of decline inrentals hassignificantly reduced, and rentals are expected to stabilize over thenext couple of quarters. Owing to the change in the outlook ofcorporate who have been assessing thepossibilities of reducing occupancy costs, developers too have beenevaluating the

    possibility of introducing more cost effective options for office space,through measuressuch as increased efficiencies, configurations requiring reducedmaintenance expenses, etc.

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    RETAIL

    The burgeoning middle class and the increasing economic growth over

    the last few years have led to an increase in the purchasing power of

    the populace living within urban catchments. As a result, enormous

    opportunities have been created within this segment for booth retailers

    and developers over the last few years. The change in policy where

    FDDI (Foreign Direct Investment) of up to 51% has been permitted for

    single product retailing, has also led to an increase in retail activity

    within the country. Based on this increased activity, retail

    developments had witnessed sharp growth in the rental levels withrentals in many areas rivaling those witnessed in some of the more

    expensive cities across the world.

    As with the other segments of real estate, thee retail sector too has

    been significantly impacted by the economic slowdown, with a sharp

    decline in transaction activity and rentals being witnessed over the last

    few quarters.

    However, there have been some positive signs for this segment as the

    pace of decline in Retail rentals has been reducing and accordingly is

    expected to bottom out over the coming quarter.

    MARKET DRIVERS

    Ever since the impact of the global slowdown has been felt on theIndian economy, there has been a general sense of caution andabstinence across the various stakeholders of the Indian real estateindustry, including developers, investors and end users. Now, with theformation of a stable Government at the centre, and a generalimprovement in the sentiment towards the economy, the varioussegments are expected to witness a gradual improvement/stabilization over the next few quarters.

    The key demand driver for commercial activity has been the consistentgrowth of the IT/

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    ITeS (including Business Process Outsourcing) sector owing to Indiasreputation of beingone of the most favorable offshore destinations and a softwaredevelopment hub. Large talent pool with well educated and Englishspeaking workforce along with lower operating cost provides further

    impetus for the growth of this sector. In addition, based on thrust beingprovided by the government and the private sector, additionalemerging sectors such Bio-technology, Alternate Energy, R&D, etc arealso expected to play a key role in generating demand for office spacein the future.Within the residential segment, the 11th Five year plan estimates thetotal housingRequirement (including the carried over shortage) for the period 2007-12. Dwelling units, with majority of the requirement in the LIG (LowIncome Group) and EWS (Economically Weaker Section) segments.

    This coupled with the changingDynamics in the residential segment (i.e. becoming more end-userdriven) has contributed significantly in transforming the portfolio ofresidential products being developed across the country.Consequently, the affordable housing segment is expected to witnessrobust demand over the short to medium term. Further, thegovernment has undertaken several key macro level initiatives in orderto restore the consumer confidence in the market and provide anenvironment for growth. In addition, the government has also beencommitted to reducing the cost of Borrowing by reducing interest rates

    through reduction in key rates such as bank rates. This is expected toprovide further relief to corporate, developers and home buyers in thenear future.

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    CHAPTER-IIPOLICIES IN INDIAN REAL ESTATE

    INDUSTRY

    INTRODUCTION

    The importance of the Real Estate Sector in FDI inflows into India iswell established. According to the report by the India Brand EquityFoundation, the total size of the Real Estate Sector Market was around

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    12 Billion US Dollars and it was estimated to grow at a Steady Clip ofover 30 percent per annum. The Report, mentioned above, alsopointed out in relation to the Construction Housing Sector in India. TheMcKinsey Report pointed out that the Construction Housing Sector inDeveloped Countries constitutes around 3 to 5 percent of its Gross

    Domestic Product [GDP]. However in India, the Housing ConstructionSector constituted only around 1 percent of the GDP. Per capita whichis extremely low compared to other Develop or Developing Countries.Having underlined the need and prospect for growth in the Housingand Real Estate Sector in India, it will be relevant to point out thecontribution of Real Estate in FDI inflows to India. According to aSurvey conducted by the Federation of Indian Chambers of Commerceand Industry [FICCI], the share of Real Estate in the Total ForeignDirect Investment into India has increased from 4.5 percent to 10.6percent. It was estimated that the component of Real Estate in the

    total FDI would be between 10 to 20 percent. This exponential growthof the component of Real Estate in the total FDI inflows has been dueto the trigger provided by the liberalized FDI Policy. According to FICCI,this decision of the Government of Indian to liberalize the FDIannounced in the construction sector is perhaps the most significanteconomic policy decision taken by the Union Government.

    Key regulations for FDI in real estate in India

    Guidelines for FDI in Real Estate in India

    Minimum 10 hectares to be developed for serviced Housingplots For construction-development projects, minimum Built-up areaof 50,000 square meters prescribed In case of a combination project, any one of the above two

    conditions should suffice At least 50 per cent of project to be developed within 5 yearsfrom date of statutory clearances.

    Minimum capitalization of US$ 10 million for wholly ownedsubsidiaries & US$ five million for joint ventures with Indianpartners

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    Infusion of funds within six months of commencement ofbusiness Original investment cannot be repatriated before a period ofthree years from completion of minimum capitalization.

    Investor may be permitted to exit earlier with prior Governmentapproval. Investor not permitted to sell undeveloped plots. Project to conform to norms and standards lay down byrespective State authorities. Investor responsible for obtaining all necessary approvals asprescribed under applicable rules/by- Laws/regulations of theState Concerned Authority to monitor compliance of above conditionsby developer

    FDI Experience in Indian Real Estate

    Key HighlightsThe India growth story has become an established theme that hascaptured the imagination of the world. India is on every internationalinvestors wish-list and among the sectors that have the potential tobecome drivers of the new Indian economy in a global scenario, real

    estate ranks amongst the top. The Governments increased focus onattracting investments and changing market fundamentals indicatinggood long-term growth prospects has put the Indian real estate sectoron the radar of many cross-border real estate investors/developers. Anumber of global investors/developers are now keen on real estateinvestment opportunities in India. Consequently, the share of realestate in FDI has been rising. It has already risen from a low 4.5 percent to25 per cent and an estimated 26 per cent. With higher growth in FDIand even further increase in real estates share of FDI it is expectedthat the sector wouldWitness inflows to the tune of US$ 8-10 billion. By the standards ofmost major economies, is growing rapidly and many industry observershave further identifiedthe hospitality sector as an area set for future expansion.

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    Emerging Business Models

    Real estate itself is a regulated activity and is subject to a number ofFDI restrictions. These restrictions essentially result in a market whereforeign investors with no Indian joint venture partner must invest asignificant amount and undertake substantial development schemeswith a limited ability to repatriate the funds in the short term. There istherefore a limited ability for a foreign company to make a tentative

    entry into the market as a sole investor. This position has resulted in anumber of business models being used to facilitate investment.Four main market entry strategies have been adopted by foreign realestate players in India: Large scale direct entry: With an independent approach forundertaking property development schemes. Establishment of an umbrella property development jointventure with a local player in order to carry outnumerous futureprojects. Multiple joint venture approach where a number of ventures are

    entered into with local partners each negotiated on a scheme byscheme basis and often with the local player placing land into theventure as equity. Investment into the Indian property market through thecreation of a capital fundwhich in turn facilitates local developersIrrespective of the method of entering the market there area largenumber of potential market opportunities. Largeand well publicized property development activity has taken place inthe principal areas of Delhi, Mumbai, Chennai and Bangalore. In termsof specific sectors of investment,

    housing remains the single largest new construction activity whilstcommercial office schemes, particularly for the IT sector havegenerated significant opportunities.

    Government and Policy Initiatives

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    As within other sectors in the Indian economy, one of the key drivershas been the changes in policy of the Indian Government to a moreliberal model. There has been a drastic curtailment in restrictivepolicies such as the Urban Land Ceiling and Regulation Act,accompanied by major reforms in the Integrated Township Policy.

    These changeshave allowed the real estate development industry to take a significantstep forward, whilst international investors have brought both capitaland expertise. With the liberalization of FDI rules and the emergence ofreal estate funds, the options available to both domestic andinternational investors will continue to grow. Continuing the reformsagenda for the sector, the Securities and Exchange Board of India(SEBI), has approved the guidelines for Real Estate Mutual Funds(REMFs) wanting to set up shop in India and may possibly introduceReal Estate Investment Trusts (REIT) thereby continuing to widen the

    source of capital for the sector. The sector has further benefited by arange of Government incentives including residential tax breaks andthe Special Economic Zones. Government now allows 100 per cent FDIfor townships, housing, built-up infrastructure and constructiondevelopment projects (including commercial premises, hotels, resorts,hospitals, educational institutions, and recreational facilities), subjectto certain guidelines.

    Rationalization of processes

    The Government has moved towards modernizing and rationalizingother areas of regulation impacting real estate, which are perceived tobeing barriers to further investment and growth. To date this hasincluded simplification of urban development design guidelines and atrend towards reducing and rationalizing stamp duties across thestates. Steps are being taken to address the record keeping of landownership and transaction records, thus improving transparency andpossibly reducing transaction costs.

    Regulatory and Policy Intervention

    Real Estate RegulatorThe preparation of the draft Real Estate Management (Regulation andControl) Bill is likely to fructify into a definitive industry regulator andwill solve the long pending demand of bringing the real estate sector,property dealers and developers under the scanner of a real estate

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    Regulator. The Draft of the bill is expected to be put up for approval inthe Parliament, in the coming winter session.

    National Housing and Urban Habitat Policy

    National Housing and Urban Habitat Policy expected to be introduced,will address theissue of affordable housing for all sections of the society. Currently, thedraft policy lays emphasis on social harmony and on increasinginstitutional finance for housing for thepoor and its accessibility at affordable rates. Some salient features ofthe policy include:A new centrally sponsored scheme to provide an interest subsidy of 5

    per cent per annum for a period of five years to commercial lenders forlending to economically

    Weaker Section and Low Income Group segment of the urban areas.The National Housing Board (NHB) and Housing & Urban developmentCorporation Ltd. (HUDCO) would be nodal agencies for disbursement ofsubsidies.

    Increase d Government Focus on UrbanInfrastructure Development

    The increasing thrust of the Indian Government on urban infrastructuredevelopment has led to emergence of newer locations and hassignificantly induced the real estateDevelopment activity. Government initiatives such as Mega Cities Fundand the City Challenge Fund of the Government of India intend toundertake Implementation of the urban reforms agenda and improveinfrastructure provision in select urban centres. With better urbaninfrastructure, extending the urban sprawl, supported by connectivitythrough ring road, metros/ mass transport systems people are nowmore open towards shifting to new suburban areas. Further, increasing

    corporatization of public authorities such as housing boards, etc. posesstrong competition to the private developers and provides a widerange of options to the urban consumers. This improved urbangovernance has enhanced the fiscal performance of the ULBs andconsequently their credit ratings. This has enabled the ULBs to accessthe capital market for undertaking new development programmers andexpansion of services. The ULBs have become proactive in provisioning

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    of services, providing an enabling environment for different models ofimplementation such as Public Private Partnerships etc.

    Urban Land (Ceiling and Regulation) Act 1976/Rent Control Act

    ULCA was enacted primarily with the objective of preventing landhoarding by developers and to increase supply. The Act imposes aceiling on ownership and hoarding of land in cities and towns.

    Rent Control Act

    Various states and Union Territories have formulated their own rentcontrol legislation with respect to regulating chargeable rents,recovery and possession of property, and tenancy rights. These laws

    act as disincentives towards investment in housing for rental purposes.

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    CHAPTER-IIIFUTURE SCENARIO OF INDIAN REAL

    ESTATE INDUSTRY

    INTRODUCTION

    The recent economic slowdown has highlighted Indias strong ties withthe global economy, with the real estate sector coming undersignificant pressure over the last fewQuarters. In the midst of the global crisis, the Indian real estateindustry has cooled down following several years of rapidly risingrentals and aggressive development activity. However, owing to strongfundaments that have been driving the industry over the last fewyears, it is expected to revive in the medium to long term on a

    platform supported by key Government initiatives along with infusionof adequate private sector investment. Additionally, one of the keyfallout of the recessionary impact on the real estate industry has beena significant liquidity crunch faced by the developers, as both debt andequity are hard to come by (with banks increasing risk weightage forthe sector and private equity players being extremely reluctant toinvest in a falling market).Over the last few months, however, there have been positive signs forthe industry in terms of financing as most of the developers are eyeingthe Qualified Institutional Placement (QIP) route to raise capital.

    Developers such as Unitech, Parsvnath, Sobha Developers, HDIL, OrbitCorp, etc. have either raised funds through QIP or are in the process ofraising the much needed funds to complete their stalled venturesacross the country and to rectify balance sheet positions by paying offa portion of the significant debt which has accumulated over the lastfew years.

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    RESIDENTIAL SEGMENT

    Based on the experience gathered during this slowdown in theindustry, developers have become cautious of their future plans andare diligently looking to capture the actual demand in the market. Theonce investor-driven market has become an end-user market withmajority of the products being targeted towards the mid-end segment.For example, affordable housing segment has picked up pace and isexpected to meet the demand requirements of the end-users in thevarious cities. The residential sector is expected to witness a recoveryover the next few months, with the focus being on affordable housingin the short term to meet the prevailing demand supply mismatch.Additionally, the medium to long term is expected to witness thereintroduction of high income and luxury housing projects.

    A key challenge for this segment would be the timely delivery of newhousing projectswhich have recently been launched or will be launched in the nearfuture as the focus ofmost developers have been to address the debt repayment problemsthat are beingcurrently faced. Consequently, this may be the right time to introduceconcepts such as escrow accounts, which will ensure that moneys that

    have been raised/ collected for aspecific project is utilized in the development of the said project.

    The Indian real estate sector promises to be a lucrative destination forforeign investors into the country. The continued growth of the Indianoutsourcing industry provides excellent opportunities for real estateinvestors. The booming middle class will continue to drive the demandfor housing and retail space. The Indian realty sector, if channelizedproperly, could catapult the growth of several other sectors in Indiathrough its backward and forward linkages. However, there arepotential constraints for domestic as well as foreign investments inIndia. Absence of a single regulator to monitor business practicesprevailing in Indian real estate market is perceived to be a risk factorby investors. Also, there remain numerous ambiguities in guidelinesrelating to the real estate sector. The SEZ guidelines which are issuedby the Commerce Ministry are

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    constantly modified, again creating uncertainty. The primary constraintfor foreign investments in India is the availability of exit options. Sincethe liberalization of FDI norms significant foreign investments haveflown into real estate; but availabilityof suitable exit options for such investments is still constrained. It is

    expected that the need for exit options will prompt foreign investorsand other real estate players to devise financial instruments to enablethem to divest their investments. Creation of these financial productsand instruments will go a long way in adding depth and maturity to thereal estate market. With the Indian securities marketregulator SEBI allowing real estate mutual funds (REMFs) in India,foreign equity investors will have another exit option available to them.Also, retail investors will be able to invest in real estate with smallerinvestment through these REMFs. The introduction of suitable financialinstruments and REMFs will make real estate similar to any other asset

    class and will enable investors to diversify their investment portfolio byinvesting in real estate through such options. Infusion of foreigninvestment will also lead to adoption of international best practices byreal estate players. Developers will get more organized, corporatizethemselves and become more transparent to avail of these funds. Allthese factors will contribute in making the Indian real estate marketmore organized and structured.

    OFFICE SEGMENT

    The office segment in India has witnessed exponential growth acrossthe past decade,driven by enhanced industrialization levels leading to greater activityin the corporateoffice segment, strengthening money market conditions giving a fillipto the BFSI (Banking Financial Services and Insurance) segments,growth in the IT/ITeS industry, etc.During economically turbulent times, when companies globally try toreduce theiroperational costs, India becomes an attractive low cost destination,

    thereby continuing to attract demand from global companies. In viewof this, post the period of stabilization which is expected to take placeover the next few quarters, the office segment is expected to continuewitnessing demand with the caveat that the growth in rentals is goingto slow down from the previously recorded levels of 15-25% per annumto inflation led 4-5% per annum.

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    Additionally, it is important to note that most cities have beenwitnessing a significantquantum of supply which are either in various stages of construction orare in theplanning stage. As a result of the oversupply which is expected, the

    level of success fordevelopments being introduced in the near future would depend on anumber of factorssuch as location of the site, the level of infrastructure present, thequality of access, theimage perception issues which a region might have, etc.

    RETAIL SEGMENT

    Favorable demographics (approximately 60% of the Indian populationis under 30 years of age), increasing disposable income and easieravailability of credit (in the form of credit cards) has led to a markedincrease in retail spending over the years. In line with the overalldynamics, the retail sector in India has also witnessed a transition overthe last 5 years with traditional (unorganized high-street) marketsmaking way for new formats such as department stores,hypermarkets, supermarkets and specialty stores. Accordingly, changein consumer lifestyles & preferences and improving technologies hasled to increasing demand for quality retail space from retailers.

    Consequently, despite the lull currently being witnessed by the retailindustry due to theongoing economic slowdown, the industry is expected to witnessresurgence over the next few quarters.

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    Established a wholly owned subsidiary, Ascendas India PrivateLimited Operating 5 IT Parks across Banglore, Hydrabad and Chennaihaving BUA of 4.4 million

    Plan to develop two new IT Parks in Pune and Nagpur at a costof US$ 375 million Ascendas Advantage India Development Fund for US$ 325million launched in 2007 Ascendas India IT Fund for US$ 520 million launched in 2005

    EMAAR, Dubai Present in India since 2005 Developing integrated township at Mohali over 3000 acres

    Plans to develop integrated townships, commercial offices, ITParks, SEZs and Hotels Planning to venture into healthcare and education sector Joint Venture with MGF Development Limited, India Emaar MGF has JV with Accor Hotels (France) & Premier TravelInn (UK) Capital outlay of US$ 4 Billion for group projects in real estate inIndia

    Salim Group, Indonesia Present in India since 2004 Developing township at Howrah over 450 acres Plans to construct expressways and bridges, a multi-productSEZ in Haldia and a Chemicals SEZ in East Midnapore and Healthand Knowledge cities Joint venture with Unitech and Universal Success Plans to invest US$ 4.2 billion for projects.

    Some of the Indian Real Estate Industry Companies. whowill make a huge progression in the coming years withthere future projects.

    Unitech Operating various asset classes in residential, commercial andretail segment

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    Developed more than seven million sq.ft of built up area (BUA) Specialises in planning residential, commercial, SEZdevelopment, retail and hospitality, integrated townships 430 million sq.ft of BUA under planned projects

    Major presence in National Capital Region and other areas suchas Kolkata, Chennai and Hyderabad

    DLF Largest real estate developer in India Developed Asias largest private township DLF City at Gurgaon,Haryana spread over 3000 acres Present across all the asset classes: Residential, Commercialand Retail.

    Developed more than 220 million sq.ft of BUA Specializes in planning Hotels, Infrastructure and SEZs 574million sq. ft. of BUA under planned Projects Pan-India footprint, major presence in Gurgaon& Kolkata.

    Ansal Properties Operates primarily in Residential & Commercial asset classes Developed over 2850 acres in Gurgaon and Delhi

    Developing integrated townships, malls, hotels IT parks andSEZs Plan to construct 157.6 million sq.ft of BUA Pan-India footprint with major presence in 16 North-Indian citiesacress four states

    K Raheja Corp Present in Commercial, Retail & Residential asset classes Developed over five million sq. ft. of BUA Developing 15 self-contained townships and 10 hotels Planning to construct 13.2 million sq. ft. of BUA

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    Major presence in Mumbai with operations in Bangalore,Ahmadabad, Goa, Pune and Hyderabad.

    Sobha Developers Asset classes include Residential, Commercial, Development ofplots and Contractual projects Developed over 4.5 million sq. ft. of BUA Planning residential and retail projects 101 million sq. ft. of BUA is planned under various projects Major concentration in Bangalore with presence in other areassuch as Cochin, Chennai and Pune.

    Parsvnath Developers Presence in Residential, Retail Commercial asset classes Developed over 3.8 million sq. ft. of BUA Plans to develop IT Parks and 12 SEZs across the country Planning to construct around 46.5 million sq. ft. of BUA Major Presence in National Capital Region

    Increasing Pan-India Footprint, active in over 46 cities across 17states.

    CONCLUSION

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    From this Indian Real Estate Industry study I conclude that the presentscenario and future scenario can bring up INDIAN REAL ESTATEINDUSTRYat a higher place in world.

    And this will also help in adding a big percentage of profit to the GDP ofIndia.I have also learnt about the present policies of government for INDIANREAL ESTATE INDUSTRY IN INIDA and the role of FDI in this industry.At last the new investors and there future project which will make a bigdifference in this country in the sense of infrastructure.