CONTEMPORARY ISSUE ON SEMINAR

A STUDY ON

‘INDIAN REAL ESTATE SECTOR’

“Reaching the Customer in an Untraditional Way”
Session: 2009–11
Presented at

Submitted By: - Submitted To:-

Balram Garg Mr. Rajat Mendiratta
MBA II Sem. Lecturer
A.I.M.S. A.I.M.S.

Acknowledgement

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The beatitude, bliss and euphoria that accompany successful completion of any task
would not be complete without the expression of appreciation of simple virtues to the
people who made it possible. So, with reverence, veneration honor I acknowledge all
those whose guidance and encouragement has made successful in winding up this.
I take this opportunity to thank Rajat Sir for his support and encouragement which
helped me in the completion of this report.
I extend my gratitude and thankfulness to other Faculty of Apex Institute of Management
& Science. Last but not the least I’m also grateful to my parents for providing me the
continuous support to motivate me to successfully complete my report.

Date: Submitted By:

Place: Jaipur Balram Garg

Preface

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 The underlying aim of the seminar on contemporary issue as an integral part of M.B.A
programme is to give presentation by the students on the issue. The topic of my seminar
is ‘INDIAN REAL ESTATE SECTOR’ and contains introduction of REAL ESTATE
SECTOR, growth and history of real estate sector.

My report has also contains the phenomena of Indian real sector, & its future prospective.

Balram Garg

Executive Summary 48

My topic contains the various issues in real estate sector related to various key
players of real estate. It includes the introduction of real estate sector.
48
The key growth sectors have been office driven by need for IT space,
residential space driven by increased ownership and retail malls driven by increasing
spending power.

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There are no monopolistic positions in real estate, as there are more players today in
the development game.
The Indian real estate market, estimated ay around $15 billion, is expected to
continue growing at 30% annually to reach $45-50 billion in 2010 and $90 billion in
2015.

Table of Contents

S.No. Particulars Page

No.
1 Introduction 1

2 Growth in Indian Real Estate Sector 2

4
3 Why Invest in Indian Real Estate Sector 6

4 Opportunity in Indian Real Estate Sector 7

5 Integrated Townships 9

6 Retail and Real Estate Sector 13

7 Real Estate Mutual Funds 15

8 An real estate sector research and analysis 16

9 Major players 21

10 Key trends of Real Estate Sector 25

11 Impact of Budget 2010 on Real Estate Sector in India 28

news
12 Conclusion 30

13 Bibliography 31

Introduction

With property boom spreading in all directions, real estate in India is touching new
heights. However, the growth also depends on the policies adopted by the government to
facilitate investments mainly in the economic and industrial sector. The new stand
adopted by India government regarding foreign direct investment (FDI) policies has
encouraged an increasing number of countries to invest in Indian Properties. India of
5
today can be acknowledged as the one of the fastest growing economy in the world and in
this current economic status, real estate has emerged as one of the most appealing
investment areas for domestic as well as foreign investors. And this high growth curve in
the real estate sector owes some credit to a booming economy and liberalized Foreign
Direct Investments (FDI) regime in the real estate sector.

Real estate studies in India, in most cases are restricted to being a branch of
financial studies. Finance majors usually have a choice to specialize in real estate. But the
Indian Institute of Real Estate gives you the opportunity to earn a coveted degree in real
estate. IIRE conducts contact and correspondence courses in the ‘Principles and Practices
of Real Estate’. It offers real estate education through its accredited training centres
across India. It is accredited with Institute of Real Estate Management (IREM) and
Certified Commercial Investment Manager (CCIM). It also has ties with the National
Association of Realtors, U.S.A, which enables its members to use the internationally
acclaimed and respected REALTOR’ brand. Courses are conducted in Mumbai,
Bangalore and Delhi.

India becomes the favorite investor’s hub for the IT, ITES and the BPO sector. As
a result of this, the real estate market in top Indian these cities is witnessing a boom.
Apart from the IT/BPO sector, the ancillary industries (banking, insurance, hotels,
transport, catering) which are growing as a result of the IT/BPO boom are going to
account for a large share of the real estate boom.
.

GROWTH IN INDIAN REAL ESTATE SECTOR:

INDIAN ECONOMY GROWTH

The housing and real estate boom in India is being driven by NRI inflows into India. In
2005, the inflow was 90,000 crores ($21 billion). For China, which was the second
biggest recipient, the number was $5 billion.
The reason for heavy NRI investment into real estate is that they would like to have a
long-term view into India, given the upcoming demographic dividend, and the overall
growth prospects. So they are buying and selling, creating the market. Additionally, it is
the simplest (and safest) way to get a foot in the door right now.
It also needs to bear remembering that land prices in India can only appreciate over the
long run ( high density, massive demand, growth concentrated in a few regions). Plus,

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zoning between commercial and residential areas in most high growth regions continues
to be quite weak, and that also pushes up demand significantly.
Future growth is going to be in India and China. China received lot of foreign funds, but
India received less. All the development is taking place in India is from domestic
Investment and little bit Foreign Investment. There is lot of Black Money and NRI funds
are flowing in Real Estate business. Going forward MNCs and Foreign money is going to
come to India. India is growing at the rate of 8% PA, it would continue for at least next
10 years.In next 25 years China will have highest GDP,followed by USA and India. So
clearly Real Estate will benefit. In future, don’t get surprised if you see skyscrapers all
over major cities in India. My suggestion to All NRIs is don’t just buy Land/Flats/House
by Ads, do proper research, take help from local people. Indian Registration system is
very inefficient, corrupt. If you want to buy Tajmahal, they are people who can sell it you
and register in your Name. And also many Land mafias, encroachments. Despite of all
these, you can expect RealEstate a best Investment option.
First, the returns. As mentioned in the article, the returns doesn’t justify such a risky
investment. The rule of the thumb in US is, the house price must be 11-12 times the
annual rent (PE of approximately 12). If it is more than that the interest rate would kill
the returns. So, for the 7K rent, the reasonable price would be around 10 lakhs.
Second, affordability. In US, anything above 3-4 times the annual salary of the intended
target buyers is considered expensive. Thus, if you are buying an average middle class
house, paying anything above 10 lakhs (assuming that middle class average salary is
around Rs.20K/month) is a risky venture for resale. And if you are buying a house for
50lakhs make sure there are enough guys who earn a salary of Rs 1 lakh per month who
would love your house and its location.
Third, high variation. In Chennai, for example, a lot of properties are still available for
Rs. 500/sq ft (around 30 km from City), while property prices in some parts of the city
are above Rs.10000/sq ft. This is due to lack of infrastructure development. In five years
down the line, if the infrastructure improves and transportation gets better, people paying
the 10K/sq ft would move out of the city, and those high priced properties would deflate.
Fourth, risk component. While other forms of investments have very little loan
component, house investments are almost financed by 80%+ loans and thus presents a
huge risk, if the property tanks by even 10%. If the banks raise their rates OR property
market cools OR if salaries get flatter, a lot of bankruptcies could happen for those who
bought on rosy expectations.
Let us make some assumptions about growth. Real GDP is growing at 8% and inflation is
currently at 7-8%. let us assume that 6% real growth is sustainable for the foreseeable
future (conservative assumption) and let us say that 4% inflation is sustainable (again
conservative). So, g=10%. Interest costs are 8% and let us say that we have further 5%
maintenance and upkeep costs (to offset depreciation) and taxes (to put that in

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perspective, we are talking about something like Rs. 135,000 per year, no mean sum.
That puts k (cost of capital) at 13%. Plug in the numbers and you get a PE of 33. Multiply
Rs. 84000 (annual rent) by 33 and you get Rs. 27,72000! Of course, I played with the
numbers a little. But they are all within the bounds of plausibility.
The biggest problem in Indian market is a huge variation in city and suburban markets
and this is set to even out in the future. For eg, recently a lot of hotels companies have
started to move to Noida when it offered land at less than 1/40 than DDA offerings. As
infrastructure develops the prime city properties are going to cool down (like what we
had in LA, SD and Florida realty markets that are collapsing from over-heating) and
these virgin lands might hotten up.
And another factor is the over zealous IT guys. India has been growing at 7% for the last
10 years, but only in the last 2 years I’m seeing the huge property growth, while in the
period from 1994-2004 the property prices were growing with inflation. So, this time it is
more of hype than a reflection of the GDP growth. There is a lot of hot money and too
young people, who don’t know what to do with. And NRIs with fat pockets are joining
the game.
In the foreseeable future, commercial property - hotels, retail and office segments will
grow at the rate of Indian growth, while residential properties might be lucky if it avoids
what US had been undergoing now.
Union Minister of Commerce and Industry, Mr. Kamal Nath said that rapidly increasing
real estate sector signifies the varying face of India, while addressing NATCON
(National Convention) 2008. He said that in recent years service sector has directed
Indian economy. Considering the recent economy growth, Mr. Kamal spoke on the
requirement of creating international standard infrastructure and housing facility to carry
on the growth rate projected in the 11th Five Year Plan. “The Real Estate Development
sector has the capacity to pay for itself without straining the limited resources of the State
Government”, Shri Kamal Nath stated.
Mr. Kamal Nath further said that we have already opened construction development
sector for FDI and the policy permits wholly owned subsidiary in this sector in India by a
foreign company. “Of course, there are conditions regarding minimum area for
development and minimum capitalization to be brought in by the foreign investor. A
number of global players have entered the Indian market. Growth and investment have
also created opportunities for investment in real estate sector”, he said. Further he
included that the Govt. is playing its part as the launch pad to the development process
and the private sector participation is required to bring technical and managerial expertise
in delivering good quality mass housing projects.
The fact that many State governments are joining hands with private
entrepreneurs in resolving the acute housing problem in urban areas is a good step in this

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regard. The private sector and Government has to work in tandem towards a common
goal. It is equally important to address the institutional and regulatory aspects as well as
strengthen and expand the capacity of financing institutions for further growth of the
sector. Over the past decade, India has emerged as a leader in the global economy. It is a
magnet for foreign direct investment (FDI), and has displaced Mexico as the third most
preferred country for foreign investment. FDI in India is expected to increase to US$15
billion this year, triple the 2004 figure. Many foreign companies are starting or expanding
operations in India. One-fifth of all Fortune 500 companies including Eli Lilly, General
Electric, and Hewlett Packard have set up research and development facilities in India.
The surge in foreign investment, more joint ventures between Indian and foreign
companies, and the growth of India’s domestic industries have created more employment
opportunities for India’s young, highly educated, professional workforce and fueled the
growth of the country’s middle class.

Advantage India: Real estate is one of the fastest growing sectors in India. Market
analysis pegs returns from realty in India at an average of 14% annually with a
tremendous upsurge in commercial real estate on account of the Indian BPO boom. Lease
rentals have been picking up steadily and there is a gaping demand for quality
infrastructure. A significant demand is also likely to be generated as the outsourcing
boom moves into the manufacturing sector. Further, the housing sector has been growing
at an average of 34% annually, while the hospitality industry witnessed a growth of 10-
15% last year.

Apart from the huge demand, India also scores on the construction front. A Mckinsey
report reveals that the average profit from construction in India is 18%, which is double
the profitability for a construction project undertaken in the US. The importance of the
Real Estate sector, as an engine of the nation’s growth, can be gauged from the fact that it
is the second largest employer next only to agriculture and its size is close to US $ 12
billion and grows at about 30% per annum. Five per cent of the country’s GDP is
contributed by the housing sector. In the next three or four or five years this contribution
to the GDP is expected to rise to 6%.

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 Why Investment In Real Estate Sector:

1. Flying high on the wings of booming real estate, property in India has become a
dream for every potential investor looking forward to dig profits. All are eyeing Indian
property market for a wide variety of reasons:
2. It’s ever growing economy which is on a continuous rise with 8.1 percent increase
witnessed in the last financial year. The boom in economy increases purchasing power of
its people and creates demand for real estate sector.
3. India is going to produce an estimated 2 million new graduates from various Indian
universities during this year, creating demand for 100 million square feet of office and
industrial space.
4. Presence of a large number of Fortune 500 and other reputed companies will attract
more companies to initiate their operational bases in India thus creating more demand for
corporate space.
5. Real estate investments in India yield huge dividends. 70 percent of foreign
investors in India are making profits and another 12 percent are breaking even.
6. Apart from IT, ITES and Business Process Outsourcing (BPO) India has shown its
expertise in sectors like auto-components, chemicals, apparels, pharmaceuticals and
jewellery where it can match the best in the world. These positive attributes of India is
definitely going to attract more foreign investors in the near future.

The Indian economy and the real estate sector in particular are high on
its ride to prosperity. As India’s economic growth curve rises, real estate India has
emerged as one of the most appealing investment areas for domestic as well as foreign
investors. Indian real estate has huge potential demand in almost every sector, but
especially commercial, residential, retail, industrial, hospitality, healthcare etc. But
maximum growth is attributed to its growth from the booming IT sector, since an
estimated 70 per cent of the new construction is for the IT sector.

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 Opportunities for Investors in Indian Real Estate :

India in the recent times has been the potential goldmine for investors all over the world.
With a booming economy and liberalized government policies, investors from all over
the globe are choosing India as their business destination.
As Indian real estate rules the economic vibes of the country, the most important
beneficiary of the recent boom in this sector is the investors. Driven by positive growth in
the real estate scenario and the Government of India’s decision to allow100% foreign
direct investment (FDI) under the 'automatic route' in the construction and development
there has been a significant rise in the number of Indian as well as foreign investors in the
realty sector.
While top developers in India like the DLF, Ansal, Omaxe, Sobha Developers, Bengal
Ambuja, Unitech, Vatika and Sahara Infrastructure among a few have initiated large scale
real estate developments in the residential sector catering to all segments of the society.
With more corporate houses entering real estate, a corporatisation of real estate can be
witnessed.
Real estate is much more professionally managed with a number of big players
(developers as well as corporates) entering the business. There are no monopolistic
positions in real estate, as there are more players today in the development game. The
greater the number of players, the healthier the competition and the beneficiary of all this
would at last be the end-user.
In the residential segment, with the increase of disposable incomes and easy availability
of home loans, most builders are trying to woo investors with lucrative features and the
latest inclusions are premium luxury apartments and condominiums fitted with the most
modern accessories in home luxury.
The commercial ventures include state-of-the-art office spaces, sprawling malls,
multiplexes and retail outlets. Reports indicate that around 200 new malls with a
combined retail space of Rs.2.5 crore/sq.ft and investment of Rs.12.500 crore are
expected to come up in this year.
The boom and the relaxation in FDI are also attracting interest from foreign investors to
invest in India and many are seen tying up with the local developers in expanding their
business. As the competition in the market is intense, builders are going out of their way
to be different and provide quality services.
Major real estate investor’s in the foray Emmar Properties, of Dubai one of the largest
listed real estate developer in the world has tied up with the Delhi-based MGF
Developments to announce India's largest FDI in the realty sector for mall and other
facilities in Gurgaon. On the other hand, in a recent development DLF and UK-based

11
construction major, Laing O'Rourke (LOR), has joined hands for participation in airport
modernization and infrastructure projects.

Again, Morgan-Stanley Real Estate has announced that its investment of around US$ 68
million in Mantri Developers Private Ltd, a private Bangalore-based real estate
developer. DB Real Estate, a unit of Deutsche Bank AG, has set up plans to start a global
fund that will invest as much as US$ 300 million in India to tap an expected surge in
demand for property.

Vancouver-based Royal Indian Raj International Corporation (RIRIC) will invest a

whopping US$ 2.9 billion in a single real-estate project named Royal Garden City in
Bangalore. Estimated to be of retail value Rs 41,000 crores, this project is to be
completed in period of 10 years. Indonesia-based Siputra Selim group is slated to invest
$200 million into the housing sector in Kolkata.
Indiabulls Real Estate (IREL) is proposing to enter into arrangements with Dev Property
Development, a company incorporated in the Isle of Man, whereby Dev shall subscribe to
new shares and also acquire a minority shareholding from the company, in Indiabulls
Property (IPPL), Indiabulls Real Estate (IRECPL) and Indiabulls Infrastructure
Development (IIDL). Dev has completed an initial public offering of its ordinary shares
for a total amount of Rs 12 billion or GBP 138 million and shall be listed on the
alternative investment market of the London Stock Exchange.

As the real estate investments open up opportunities for the associated fields like Home
Loans and Home Insurance, a number of global insurance companies have shown
interest in the sector. This include companies like Cesma International from Singapore,
American International Group Inc (AIG), High Point Rendel of the UK, Colony Capital
and Brack Capital of the US, and Lee Kim Tah Holdings to name a few.

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 Integrated Township:

Growing fashion of integrated townships:

The concept of integrated township have established its presence in the trend for staying.
With growing demand for apartments in integrated townships, Veena Ramkrishnan
explain in detail about the concept.

The changing priorities and lifestyles of India’s new breed of young property buyers who
have much more than just a simple home on their minds when they decide to take the
plunge and buy that dream house. A trend that has played a pivotal role in opening the
floodgates for the development of integrated townships across the country that offer their
residents the promise of a quality lifestyle tailored to suit every budget.
This concept has emerged into a growing trend in people aspiring for more homes in
townships especially among the metro cities. This has bought in the FDI’ s also into the
race with more and more foreign industries investing in such projects.
Integrated townships
Integrated townships have become the most sought after now a days even though they
cost much higher than individual buildings.
Complexes built in large area of lands with all facilities including schools, hospitals,
shopping malls, gymnasium, health spa provide the living experience that people demand
now a days.

Integrated Township in Jaipur:

Omaxe City in Jaipur Ajmer Expressway

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Omaxe city at Jaipur is an integrated township with international standards. It offers
every thing from residential plots, expandable villas hospital, commercial complexes &
schools. So if you want to invest in property/plots/villas in Jaipur which is one step ahead
with fine fusion of world class infrastructure & rich taste, nothing else would be adequate
then Omaxe City Jaipur. Diamond Estates is involved in wide spectra of services in real
estate and property dealing related services in Omaxe City Jaipur and assure you to
provide the best of all at competitive prices.
Omaxe City Ajmer Road - Jaipur;
Omaxe city at Jaipur is an integrated township with international standards. It offers
every thing from residential plots, expandable villas hospital, commercial complexes &
schools. So if you want to invest in property/plots/villas in Jaipur which is one step ahead
with fine fusion of world class infrastructure & rich taste, nothing else would be adequate
then Omaxe City Jaipur.
Jaipur set to become Wi-Fi compliant:
Jaipur would soon be made a Wi-Fi city. Rajasthan's chief minister Vasundhara Raje
while announcing this in her budget speech said, "We would make Jaipur a wi-fi city in
phases". After the completion of this project one could access wireless internet in any
part of the city "We plan to set up a biotech information centre in Jaipur. It would be set
up in association with private sector", Raje said. State government would give a financial
assistance of Rs one crore.
Wipro Lands In The Pink City:
Wipro has signed an MoU for 100 acres of land to set up its campus in Mahindra World
City, Jaipur. This facility will come up in two phases: Phase one will occupy 25 acres of
land, which will have over one lakh sq ft built-up area and capacity to seat over 1000
employees. According to Arun Nanda, executive director and president, infrastructure
development sector, Mahindra & Mahindra, With proven capabilities of offering world-
class, state-of-the-art facilities for business retail, leisure, hospitality and residential
housing, Mahindra World City, Jaipur will prove to be the ideal venue for Wipros
regional aspirations.
Mahindras set to start work on World City
The Mahindra group is set to begin work on an ambitious World City here, in step with
its promise of providing cutting-edge business facilities in the state. Called the Mahindra
World City, a joint venture between Mahindra Gesco Developers Ltd and the Rajasthan
State Industrial Development and Investment Corporation Ltd (RIICO), is being
developed as a multi-product special economic zone. Phase-1 of the project will involve
construction of an IT and ITES SEZ spread over 188 acres.

Integrated township in Mohali:

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Ansal Properties & Infrastructure Ltd (API) is developing Golf Links, an estimated Rs
2,000-crore integrated township in Mohali, which is being designed by Woodhead, the
premier architect firm of Australia. The 600-acre project will have luxurious villas,
condominiums and penthouses, malls, food courts and four-screen multiplex.
The empowered committee of the Government of Punjab has cleared the project in
principle under its mega project approval policy and the township is scheduled to be
completed in three to four years. The township is coming up in a strategic location,
flanked by the city's arterial roads in the main commercial zone of Mohali City Plan.
.

Integrated Township in HYDEABAD

In Andhra Pradesh, nothing comes close to the 400-acre Tellapur Township by

HUDA/TISHMAN SPEYER:

With the expected changes the new international airport and the outer ring road will bring
in, several mega projects in the Public Private Mode are being taken up by government
agencies such as APIIC, APHB, HUDA. The projects include the IInd Hitech City, the
Financial District and Hardware Park, the Fab city, the Singapore Township and several
satellite townships, industry SEZs ....the list goes on and on. Since the city is on a growth
path, the investment, employment and growth opportunities are likely to boom.

To avoid sporadic and haphazard growth, well-controlled, planned and regulated

15
framework of development initiatives are what will now make up the blue-print of the
future city. The reality today is that with the sudden boom, roads and all essential city
amenities are choked rendering it difficult for the civic authorities. Hence initiatives like
the Greater Hyderabad plan, the one kilometre growth corridor on either side of the ORR,
the Hyderabad Airport Development Authority master plan are steps in the direction of a
carefully planned expansion of the city
The objective of the Integrated Townships slated to be built in the city is to ease traffic
congestion in the twin cities and to meet the growing need for residential, commercial
and office spaces.

"When we started doing the ring road, we realized that once this road is operational,
distance will be measured in time, not kilometers. So though the city will spread out, the
travel time will be extremely manageable. Taking advantage of the ORR, we will plan
satellite townships around it," avers Jayesh Ranjan, VC, HUDA.

The stellar Tellapur Township being developed by HUDA, for example, is three miles
from Hyderabad's CBD and will include a total of 20 million sq ft of residential and
office components and associated retail, civic and cultural amenities. Upon completion, it
is expected to be the country's largest integrated township and the first of its kind under a
public-private partnership.

Retail & Real Estate Sector in India:

Retail and real estate are the two booming sectors of India in the present times. And if
industry experts are to be believed, the prospects of both the sectors are mutually
dependent on each other.
Retail, one of India’s largest industries, has presently emerged as one of the most
dynamic and fast paced industries of our times with several players entering the market.
Accounting for over 10 per cent of the country’s GDP and around eight per cent of the
employment retailing in India is gradually inching its way toward becoming the next
boom industry.
As the contemporary retail sector in India is reflected in sprawling shopping
centers, multiplex- malls and huge complexes offer shopping, entertainment and food all
under one roof, the concept of shopping has altered in terms of format and consumer
buying behavior, ushering in a revolution in shopping in India.
This has also contributed to large scale investments in the real estate sector with
major national and global players investing in developing the infrastructure and
construction of the retailing business. The trends that are driving the growth of the retail

16
sector in India areLow share of organized retailingFalling real estate pricesIncrease in
disposable income and customer aspiration.
Increase in
expenditure for
luxury items

Another credible factor in the prospects of the retail sector in India is the increase in the
young working population. In India, hefty pay-packets, nuclear families in urban areas,
along with increasing working-women population and emerging opportunities in the
services sector. These key factors have been the growth drivers of the organized retail
sector in India which now boast of retailing almost all the preferences of life - Apparel &
Accessories, Appliances, Electronics, Cosmetics and Toiletries, Home & Office Products,
Travel and Leisure and many more. With this the retail sector in India is witnessing a
rejuvenation as traditional markets make way for new formats such as departmental
stores, hypermarkets, supermarkets and specialty stores.
The retailing configuration in India is fast developing as shopping malls are increasingly
becoming familiar in large cities. When it comes to development of retail space specially
the malls, the Tier II cities are no longer behind in the race. If development plans till
2007 is studied it shows the projection of 220 shopping malls, with 139 malls in metros
and the remaining 81 in the Tier II cities. The government of states like Delhi and
National Capital Region (NCR) are very upbeat about permitting the use of land for
commercial development thus increasing the availability of land for retail space; thus
making NCR render
to 50% of the malls in
India.

India is being seen as a potential goldmine for retail investors from over the world
and latest research has rated India as the top destination for retailers for an attractive

17
emerging retail market. India’s vast middle class and its almost untapped retail industry
are key attractions for global retail giants wanting to enter newer markets. Even though
India has well over 5 million retail outlets, the country sorely lacks anything that can
resemble a retailing industry in the modern sense of the term.
Another cap to the retailing industry in India is allowing 51% FDI in single brand outlet.
The government is now set to initiate a second wave of reforms in the segment by
liberalizing investment norms further. Retail industry in India is at the crossroads but the
future of the consumer markets is promising as the market is growing, government
policies are becoming more favorable and emerging technologies are facilitating
operations in India.

Real estate mutual funds:

The Indian Mutual Fund industry is in a robust growth path. Over the last 4 four years it
has been growing at a compounded annual growth rate of more than 50 percent per
annum. Yet, it is estimated that only about 7 percent of the households invest in Mutual
Funds, as against more than 50 percent in developed markets like U.S.A. The standards
and practices followed by the industry are world class. With 32 Asset Management
Companies managing more than 800 schemes, the industry offers suitable investment
vehicles to all types of investors to suit their requirements and risk-return profiles.
The Indian real estate sector has witnessed a revolution. Growing at 30 percent Indian
real estate market is of the order of USD 14 billion, and is expected to touch USD 90
billion by 2015. Investing in real estate mutual funds has become a common concept in
the US and Europe. There are more than 300 funds functioning in these countries.
REITs/REMFs offer an innovative option for investors to buy and trade shares in the real
estate sector and collect dividends from capital appreciation and rental incomes. With
SEBI clearing draft guidelines on such investments, some of the biggest names in Indian
business have either already launched such funds or have rolled out ambitious plans to do
so.
With the objective of spreading better understanding of the Real Estate Mutual Fund
Industry and to position mutual fund as an appropriate investment avenue for wealth
creation and to discuss investor protection.
REMFs have been under consideration by SEBI for almost two years now, the
delay being on account of the market regulator and the institute of Charted Accounts of
India (ICAI) debating the accounting standards for determining the net asset value of
REMFs.
SEBI’s new regulations say REMF schemes shall be close ended.

18
 The real estate assets held shall be valued at cost price on the date of actuation and at fair
price every 90 days from the day of purchase by two values accredited by a credit rating
agency.

An real estate sector research and analysis. October

2009.

We attended the recently held Property Exhibition 2009 organised by the

Maharashtra Chamber of Housing Industry (MCHI) in Mumbai. Many housing
finance companies (HFCs) also participated in the exhibition, which showcased
more than 100 projects across Mumbai city. The exhibition saw significant
turnout of prospective buyers indicating revival of interest in the property
markets. Notably, during the downturn, Mumbai was the least affected market,
and currently is at the forefront of the recovery especially in the Residential
Segment. Conditions have
been easing for the
developers with the real
estate prices, especially in
Mumbai, having increased
sharply in the last six months
from their nadir. For instance,
the Central suburbs, which
had witnessed a sharp
correction during the slump,
in recent months has
recorded 5-30% increase in
prices across projects. On
the other hand, the Western
suburbs have been
witnessing maximum number
of new launches in the current festive season. Also, compared to our last visit,
there have been delays in fit-outs for certain projects. Besides, Home loan rates
have also declined by 100-200bp and most banks and HFCs are offering fixed
rate loans for the initial years. Our interaction with industry participants indicate
that the real estate transactions have picked up sharply though we believe that

19
sustainable recovery in prices will hinge on growth in disposable income and
benign Interest rates.

20
New launches skewed towards Western suburbs
The exhibition had lesser number of ready-to-move in properties compared to our
last visit, which held th
potential for more launches. In the past, developers had pulled back their
launches to holthepricesepecially in the Western suburbs

Benign Home loan rates

The exhibition also saw a number of HFCs participating compared to our last visit
(when Home loan rates had become dearer by 100-200bp since April 2009). This
indicates that affordability has been improving. Further, banks like Union Bank,
SBI and HFC, GIC are offering fixed rate loans for the initial years, thereby

21
making conditions more conducive for prospective home buyers. Moreover,
Banks are also offering 80-85% of the property value in line with our last visit.

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Real estate sector with Special Economic zones:

The real estate industry on Monday sought introduction of special residential zones (on
the lines of Special Economic Zones), to ensure affordable housing in the country.
“We need SRZs across India with these zones patterned on the lines of SEZ Act entailing
similar approvals, the board structure, and monitoring and execution, and also similar
concessions in terms of direct, indirect taxes and octroi, amongst others,” Mr Kumar
Gera, Chairman of Confederation of Real Estate Developers’ Association of India
(CREDAI), said at a conference here.
Mr Gera said that the experience gained from the SEZ Act could be translated to create
SRZs, and pointed out that SRZs could ensure affordable housing in India. “To ensure
that these SRZs do not become new slums, they need to be supported by proper
infrastructure, sustainable development, and a realistic floor space index (FSI),” Mr Gera
added.
Goa SEZ issue
Meanwhile, reiterating his earlier stance that SEZ policy could not be “thrust or forced”,
the Union Minister of Commerce and Industry, Mr Kamal Nath, on Monday said he is
awaiting a written representation from Goa Government, on the SEZ issue.
“We are waiting to hear from them, and once we get letter from the State, we will
respond to it. But just now there is no letter,” Mr Nath said on the sidelines of a real
estate conference organised by CREDAI here.
Mr Nath had, last week, asked the Goa Chief Minister, Mr Digambar Kamat, to give in
writing the reasons for scrapping SEZs in the state.
The Commerce Minister today said that while SEZ policy was not to be thrust or forced
on anyone, it was for a State to formulate its own policies.
“Some States want more, some less, some want things differently but the growth process
of the State has to be determined by the State itself,” he said.

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Major Players:

DLF And its New Projects:

The DLF group is a leading real estate developer in India. The group has over 224
million sq. ft. of existing development and 748 million sq. ft. of planned projects. DLF is
committed to quality, trust and customer sensitivity, and deliver on promises with agility,
financial prudence and in tune with the highest global standards. The company has also
entered into several strategic alliances with global industry leaders.
The core business traditionally has been into three prime divisions: Homes, Offices and
Shopping Malls. To these DLF has added three more divisions: Hotels, Infrastructure and
SEZs.
New Town Heights
DLF now brings quality living and contemporary lifestyle at NEW TOWN HEIGHTS, a
residential project in Sector-90 Gudgeon. A truly integrated township in new Gudgeon
that is well-connected from NH-8 and Manesar.
Gardencity In INDORE By DLF:
As one of the fastest growing cities in India, dotted with lush green surroundings,
brimming with new job opportunities and diverse talent pool, Indore is ideal for
comfortable living and working. And DLF is here to complement the ever growing
lifestyle of Indore with world-class homes.
DLF Riverside Kochi:
This premium condominium is situated close to Kochi’s most prestigious schools and
super specialty hospitals. Easily accessible from the National Highway, and the main
arteries of the city, DLF Riverside is also in the vicinity of The Info Park, Kinfra Park,
Cochin Export Zone and the fast developing Smart city at Kakkanad.

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ANSAL BUILDWELL Ltd And its New Projects:
Ansal Buildwell Ltd, India's largest developer and builder brings to you "Ansal City"
after the successful completion of "Ansals Riverdale" at Kochi. "Ansals Riverdale", is an
elite residential project with independent luxury villas and town houses. The 10 acre
township has large open space accommodating children's park and beautifully laid lawns
all along the river frontage of around 500 meters and is presently the best residential
address in town.
"Ansal City", our second project in Cochin - an elite residential township with fully
serviced independent plots of various sizes comes to you with fully developed facilities
like 12mt wide tree lined avenues, jogging tracks, round the clock security & 24 hrs
water supply. The township has large green open spaces accommodating children's park
and beautifully laid lawns all along the river frontage and convenience for boating.
Nudging the calm serene backwaters, this exquisite property features a recreation centre
with swimming pool, health club, card room and many more.
Riverdale is an elite residential project with independent luxury villas, 10 mtr.
Wide tree-lined avenues, jogging track, water supply and sewerage disposal system,
water and sewage treatment plants. The 10 Acre Township has large open space
accommodating children's park and beautifully laid lawns all along the river frontage of
around 500 metres and convenience for boating. This luxury villa project has an
outstanding family club facing the Kaniampuzha river.
Ansal Group is all set to launch a Special Purpose Vehicle (SPV) as a subsidiary of the
group looking after the hotel and service apartment operations. Taking charge of the yet
to be named SPV will be Vipin Luthra, managing director of Ansal Colonizers &
Developers.
ANSAL’s SHUSHANT CITY In Jaipur:
ANSAL has developed beautiful landscaped township spread over 200 acres on Kalwar
road, which is just 4 kms away from JDA’s Govindpura Kardhani Scheme, adjacent
to Hathod Kardhani Scheme.

Splendid location, pollution free, planned township with state of the art infrastructure
facility 20 minutes from MI road.

OMAXE Ltd. And Its New Projects:

25
Omaxe has received a number of awards from the industry, recognition of its continued
efforts towards achieving excellence and quality. The company became the first
Construction Company of northern India to receive an ISO 9001:2000 Certification. The
company which was founded as a civil construction and contracting organization in1989
and subsequently diversified its business to focus on Real Estate Development from the
year 2001, to capture the opportunity offered by the growing Real Estate markets in India
, is today among the large Real Estate Development companies in India.
The company in a short span of 5 years has completed and delivered 10 projects
consisting of 8 residential and 2 commercial covering approx 5.13 million sq. ft of area,
with all “on time deliveries”. The company currently has 46 projects under development.
These include 19 group housing projects,13 integrated townships,13 shopping malls and
commercial complexes and 1 hotel. The company is at present developing over 140
million sq ft of saleable area across 30 towns in 9 states in Northern and Central India.
Real estate developer Omaxe Ltd is entering into the power transmission and airport
infrastructure business in an effort to tap emerging opportunities in these sectors in one of
Asia’s fastest growing economies.
The company has earmarked an initial investment of around Rs lOO-200 crore for its
infrastructure business. Omaxe plans to set up power transmission lines in states such as
Uttarakhand and Punjab. This will be done either in partnership with the state or Union
government or other private agencies.
Omaxe Ltd, the real estate company headquartered in New Delhi, has won the bid for the
construction of a theme township in Naya Raipur, the capital city of Chhattisgarh. The
project is estimated to cost Rs 1,200 crore. Naya Raipur Development Authority, the
project promoter, is developing the township that will have an 18-hole golf course over
400 acres, golf villas, residential and commercial buildings, and a hotel.

Other Players:
ETA Star to Innest 1500cr. In Real Estate.
Chennai-based real estate developer ETA Star Property Developers, a part
of $4 billion ETA Ascon group based in the UAE, will build a Rs 1,500 crore mall in
Mumbai's Juhu area. The construction work will begin in January 2008. ETA has formed
a 50:50 joint venture with Supra Estates, to develop the 10 acre plot (450,000 sq ft) into a
shopping mall and service apartments. The companies have paid Rs 800-900 crore for the
said plot of land. The mall will be given on a seven-year lease upon completion of the
project in 2010. ETA has brought Rs 200-250 crore as equity contribution for the project
in terms of foreign direct investment (FDI) and will raise the balance through banks and
other financial institution. ETA has also forged a joint venture with Wavy Construction

26
for a project based in the hill station of Khandala, Maharashtra. The project involves
building luxury villas, health spas, hotels and furnished apartments. Even as the structure
of the joint venture is yet to be finalised, both companies will inject Rs 400 crore for the
project spread across 28 acres. A US consultancy firm, Tony Asahi, has been appointed
to provide a detailed study of the area, which would help draft the final outlook of the
project. The company is involved in real estate ventures mainly in the southern region of
the country with projects spread across Chennai, Bangalore and Hyderabad. The
company is executing a residential project in Chennai, where it is developing apartments
under the name of Jasmine Court. The project follows two other projects 'Binny Crescent'
and 'The Gardens', both residential projects in Bangalore.
ICICI Launches Real Estate Security Fund
ICICI Prudential Mutual Fund recently launched its real estate securities fund, which is
the first real estate mutual fund in India. The new fund offer is open for subscription from
November 15 to December 14, 2007. The fund will invest 51 per cent of its portfolio in
high-yielding debt securities issued by real estate companies. The scheme will not
directly own or hold real estate. It will invest up to 49 per cent in the shares of companies
that will benefit from the real estate sector or have substantial investments in property.
Debt securities issued by real estate companies have relatively low liquidity. Hence, in
order to manage the liquidity risk, the fund has been designed as a 3-year close-ended
fund. It will invest in real estate and related sectors such as cement, construction, metals,
hotels, retail, banks and finance companies. According to National Housing Bank, India
will have a shortage of over 20 million housing units and an incremental demand of 8-10
million each year.
Key Trends facing Real Estate sector :
1. Legislation
ULCRA yet to be repealed in key states of Maharashtra and Karnataka The Urban Land
(Ceiling & Regulation) Act has failed to achieve its objectives due to its poor
performance. Physical possession was acquired only of 19,020 ha. of vacant land by the
State Governments. There has been a demand to repeal this Act so that the stock of urban
land increases and development of urban land for various sectors, namely, housing,
transport, industry, etc. may be available The figures given in the above statement show
that though 23 years elapsed since the ULCRA came in force in 64 towns; no effective
results could be achieved. It’s dismal Performance was attributable to a plurality of
reasons. Amongst them, one of the mainreasons was the illusory amount of compensation
(Re 1 to Rs 10 per sq. mt.), evidencing its confiscatory nature i.e. it was almost
amounting to a fine people paid for owning excess land instead of proper reimbursement
and therefore, no feeling of coercion.
The Act was penalizing people for holding excessive lands. This is a problematic
idea because land- holding is a perfectly legal right and if your title if good then no one
27
can question the amount being held by you. But here the state was questioning it in the
basis of public Interest and taking it away for so small a compensation that it was forcing
people to not Agree to their land holdings.

Also the ULCRA “institutionalized” corruption. Sec. 20/ 21 were subjective in

nature and allowed for exemptions under the Act and this was being utilized by all
bureaucrats to earn favors and majority of land was exempted under one pretext or
another.

2. Transaction Costs
Stamp duty is as high as 14-15% in some states the Stamp Duty is as high as 14- 15 % of
the value of the transaction.
Astonishingly in the Indian context, not only are the rates high, but also the levy of
Stamp Duty is applicable in every subsequent transaction, be it the initial transfer /
purchase of land or on further sale of the same land after development or any other
succeeding transaction. Opportunely some states have brought the Stamp Duty down to
between 6-8 %, this should ideally be further brought down to 2-3 % and made uniformly
applicable across all states.
However, if the above suggestion is not acceptable then if stamp duty has already
been paid on one transaction, there should be a mechanism in the law, whereby there is a
provision for concession or a system of credit for any subsequent transactions. This
would avoid the resultant cascading effect of Stamp Duty, thereby reducing the cost of a
property.

3.Absence of REITs and REMFs

The Government should consider setting up of Real Estate Mutual
Funds/Investment Trusts to provide the much needed support to the cash starved housing
sector, similar to the structures adopted for Estate Mutual Funds/ investment Trusts in
developed real estate markets such as, USA, Singapore, Hong Kong etc. Real Estate
Mutual Funds/Investment Trusts would be an efficient mode for providing equity
financing as against debt, which is currently the norm for financing real estate
developments in India.

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 Real Estate Investment Trusts, or REITs, have established themselves as the
"Brand Name" investment vehicle of choice for institutional and retail investors looking
to participate in real estate ownership, management and development. And while REITs
are already common players in developed markets, they are now also making their
presence felt in emerging markets.
The attractions of REITs for investors are clear: they provide a similar
structure for investors buying into real estate as mutual funds provide for investment in
stocks.
Another key design feature is the elimination or reduction of the taxation
differential between directly-owned property and property owned through a corporation –
though whether this will be the case for Indian REITs remains to be seen. Nevertheless,
as India's real estate market grows and opens up, REITs could play a major part in its
development.
Although there are no REITs in India now — some India-referencing REITs
are reportedly considering listing offshore in established REIT jurisdictions — the
Securities Exchange Board of India (SEBI) is currently finalizing Guidelines for the
introduction of Real Estate Mutual Funds (REMFs), and it will consider framing
guidelines for REITs going forward. SEBI's guidelines should also make it easier to
invest in the sector through listed real estate operating companies (REOCs) and
increasingly through foreign direct investment (FDI).
More broadly, the introduction of REITs could also provide many benefits to
India's economic development, just as they have to other countries such as Australia,
Singapore, Japan, the UK and France. For instance, REITs can boost capital access and
reduce capital costs for property owners, managers and developers.

.4. Land Acquisition

The Land Acquisition Act of 1894, still, to a large extent, governs the procurement of
raw land. With the changing investment scenario it has become necessary to review the
existing law, in order to ensure that private developers and colonizers procure the land
directly from farmers and land owners without putting undue financial burden on State/
Central Government on land acquisition for public purposes. Today, a builder is governed
by “Agriculture Land Ceiling Act” even after the lands have been urbanized in the zonal
plans / master plans. This makes builders to create several companies in order to
circumvent the archaic laws. It is submitted that once the land has been urbanized and
incorporated in the master plan, then Agriculture Land Ceiling Act should not apply and
builders should be permitted to acquire lands as per their requirements, for the
development of townships.

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Impact of Budget 2010 on Real Estate Sector in India news

05 March 2010

This is further to our recent hotline India Budget Insights (2010 – 11) analyzing the
implications of the Budget 2010. This Hotline seeks to bring to the fore the provisions of
Budget 2010 and attendant implications concerning the Indian Real Estate Sector.
The Positive
• The pending housing projects have been granted a one year extension for
completion, from the existing four years to five years, for claiming a 100%
deduction on their profits under section 80-IB of the Income Tax Act, 1961
(''Act''). This extension is available for housing projects approved by a local
authority on or after April 1, 2005.
• In addition, under section 80-IB of the Act the built-up area of shops and other
commercial establishments in housing projects has been relaxed to 3% of the
aggregate built-up area of the housing project or 5000 square feet, whichever is
less, from the existing 5% of the aggregate built-up area or 2000 square feet,
whichever was less.
• A 4 month extension has been provided for setting up and commencing operations
of hotels and convention centers in National Capital Territory of Delhi and
specified surrounding regions. Such hotels and convention centers would now be
eligible to claim specified deductions, where such facilities are set up and
commence business by July 31, 2010.
• Investment linked incentives have been proposed for the business of building and
operating new hotels of two-star or above category, anywhere in India, which start
functioning after April 1, 2010. The incentives are in the nature of 100% deduction
with respect to capital expenditure, incurred wholly and exclusively, for the
purposes of such business, provided such expenditure is incurred prior to
commencement of operations and the amount is capitalized in the books of such
undertaking.
• One per cent interest subvention on housing loans up to Rs.10 lakh (where the cost
of the house does not exceed Rs.20 lakh) has been extended till March 31, 2011.
• There has been higher allocation under Indira Awas Yojana and other rural
development/infrastructure schemes.
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The Negative

• Service tax on commercial rentals: The High Court of Delhi in the case of Home
Retail Solution and Ors. v. Union of India had clarified that renting of commercial
property would not be subject to the levy of service tax. The Budget has amended
the scope of 'Renting of Immovable Property Service' to directly overrule the High
Court judgment and to explicitly cover the activity of mere renting as well and this
has been done with retrospective effect from 1st June 2007. Moreover, renting of
vacant land where the agreement of contract between lessor and lessee provided
for undertaking construction of building/structure on such land for furtherance of
business or commerce during the lease period will also be subjected to service tax.
• Construction of real estate complexes will now attract service tax, unless the entire
consideration for the property is paid after the completion of construction, that is,
on obtaining the occupation certificate from the concerned authorities.
• Service tax will now also be levied on additional services provided by a builder to
buyers for extra charge like preferential location, internal and external
development of complexes.
• Increase in the standard rate of excise duties to 10% and also on cement, which is
a major input for real estate construction.
What it means: Service tax on the activity of construction would primarily mean, buyers
paying higher price for property which is under construction.
The expansion of scope of 'Renting of Immovable Property Service' is likely to be one of
the most controversial proposals. Pursuant to the Delhi High Court judgment, most
industry players refrained from paying service tax pursuant to such transactions. This
amendment would have a significant impact on both the real estate sector as also sectors
which rely on lease of immovable property for running their business. Further,
retrospective nature of the amendment will now result in an adverse impact on the sector
and may lead rise to a large amount of litigation.

CONCLUSION

31
The Real estate sector in India has undergone such a dramatic change and rapid change in
such a short span of time. The key growth sectors have been office driven by need for IT
space, residential space driven by increased ownership and retail malls driven by
increasing spending power.
In Feb.2005 The union Govt. permitted 100% FDI in real estate development
projects with a minimum size of 50,000 square meters. The Indian real estate market,
estimated ay around $15 billion, is expected to continue growing at 30% annually to
reach $45-50 billion in 2010 and $90 billion in 2015.
The investments of investors are divided five broad segments of the industry:
1. Residential
2. Retail,
3. Commercial,
4. Hospitality and
5. Industrial.
Real estate is much more professionally managed with a number of big
players (developers as well as corporate entering the business. There are no monopolistic
positions in real estate, as there are more players today in the development game. The
greater the number of players, the healthier the competition and the beneficiary of all this
would at last be the end-user.

Bibliography

32
Websites :

1. www.indianground.com

2. www.indianrealestateforum.com

3.www.assocham.org

4.www.sezindia.nic.in

Newspaper:
5.Economics times
6.times of india
Books:

7.buss

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