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A

Report on

REAL ESTATE
For
Internship Assignment
To

Sachin Jain
(Industry Guide)
By:Aamir Saleem
(Team-Go Getter)

INTRODUCTION
Real estate is "property consisting of land and the buildings on it, along with its natural
resources such as crops, minerals, or water, immovable property of this nature, an interest vested
in this, an item of real property, buildings or housing in general. Also, the business of real estate;
the profession of buying, selling, or renting land, buildings or housing.

REAL ESTATE IN INDIA AND NCR


The real estate sector in India assumed greater prominence with the liberalization of the
economy, as the consequent increase in business opportunities and labor migration led to rising
demand for commercial and housing space. At present, the real estate and construction sectors
are playing a crucial role in the overall development of Indias core infrastructure.
The real estate industrys growth is linked to developments in the retail, hospitality and
entertainment industries, economic services and information technology enabled services.
Residential real estate industry has witnessed stupendous growth in the past few years owing to
the following reasons:
Continuous growth in population
Migration towards urban areas
Ample job opportunities in service sectors
Growing income levels
Rise in nuclear families
Easy availability of finance
Demand for houses increased considerably whilst supply of houses could not keep pace with
demand thereby leading to a steep rise in residential capital values especially in urban areas.
The Indian Real estate market size is expected to touch USD 180 billion by 2020. At present FDI
is USD 12 billion which is expected to grow to USD 25 billion by 2014-15. Demand is expected
to grow at a compound annual growth rate (CAGR) of 19-20% by 2014 with Tier-I metropolitan
cities projected to account for about 40% of this.
It is the second-largest employment-generating sector after agriculture. Growing at a rate of
about 20% per annum and this sector has been contributing about 5-6% to Indias GDP. Not only
does it generate a high level of direct employment, but it also stimulates the demand in over 250
ancillary industries such as cement, steel, paint, brick, building materials, consumer durables and
more. The Indian real estate industry has been on a roller coaster ride since 2005. Consequent to
the governments policy to allow Foreign Direct Investment (FDI) in this sector, there was a
boom in investment and developmental activities.

FDI in Real Estate


Foreign Direct Investment in India is prohibited in Real Estate Business. FDI is 100% permitted
under automatic route without any approval.
Construction Development includes townships, housing, built up Infrastructure and other
construction development projects (which would include, but not be restricted to, housing
commercial premises, hotels, resorts, hospitals, educational institutions, recreational facilities,
city and regional level Infrastructure).
Basic Guidelines
The Department of Industrial Policy and Promotion, vide Press Note No. 2 (2005), has permitted
FDI up to 100% under automatic route in townships, housing, built-up infrastructure and
construction development projects, subject to the following guidelines:
1. The minimum area to be developed under each project would be as follows:
a) In case of development of serviced housing plots, a minimum land area of 10 hectares.
b) In case of construction development projects, a minimum built-up area of 50,000 sq.mts.
c) In case of a combination of the above two projects, any one of the above two conditions would
suffice.
2. The minimum capitalization norm shall be US$ 10 million for a wholly owned subsidiary and
US$ 5 million for joint ventures with Indian partner/s. The funds would have to be brought in
within six months of commencement of business of the company.
3. Original investment cannot be repatriated before a period of three years from completion of
minimum capitalization. However, the investor may be permitted to exit earlier with prior
approval of the Government through the Foreign Investment Promotion Board.
4. Development of at least 50% of the integrated project has to be completed within a period of
five years from the date of obtaining all statutory clearances. The investor would not be
permitted to sell underdeveloped plots. The investor must provide this infrastructure and obtain
the completion certificate from the concerned local body/service agency before being allowed to
dispose of the serviced housing plots.
5. The project shall conform to the norms and standards, including land use requirements and
provision of community amenities and common facilities as laid down in the applicable building
control regulations, by-laws, rules and other regulations of the State Government / Municipal /
Local Body concerned.
6. The investor shall be responsible for obtaining all necessary approvals, including those of the
building / layout plans, developing internal and peripheral areas and other infrastructure
facilities, payment of development, external development and other charges and complying with
all other requirements, as prescribed under applicable rules/bye-laws/regulations of the State
Government / Municipal Body / Local Body concerned.
7. The State Government / Municipal / Local Body concerned, which approves the building /
development plans, will monitor the developers compliance to the above conditions.
Driving Forces

Stated below are the reasons that have led to the real estate boom in the country
Booming economy; accelerated GDP to 8% p.a.

Indias emergence as an attractive offshoring destination and availability of pool of


highly skilled technicians and engineers, Development of large captive units of major
players include GE, Prudential, HSBC, Bank of America, Standard Chartered and
American Express.
Rise in disposable income and growing middle class, increasing the demand for quality
residential real estate and real estate as an investment option.
Entry of professional players equipped with expertise in real estate development.
Relaxation of legal rulings and processes by the governing bodies encouraging
investments in real estate.
Improvement in infrastructure facilities.
Urbanization.
Government policy.
Growth in tourism.
Easier financing.
As per various government sources, the size of the Indian real estate market was around USD 16
billion in 2006 and it is estimated to reach USD 90 billion by 2015, growing at a C AGR of 21%
during this period . Further, it is expected to touch USD 180 billion by 2020, registering a C
AGR of around
19% from 2006 to 2020.

Market segmentation in Real estate

Real Estate

Residential

Commercial

Hospitality

Retail

SEZ

Residential Segment

The residential segment dominates the industry with a lions share of nearly 75% of total
turnover of the Indian real estate sector. Housing alone contributes around 5-6% to the countrys
GDP. Growing disposable income, shifting trend towards nuclear families, rapid urbanization,
and favorable demographics are some of the factors driving demand for residential real estate.
While demand for housing has increased substantially over the years, supply has not kept pace.
As per the 11th five-year plan (2007-2012), an estimated shortage of 26.53 Million houses offers
a big investment opportunity.
The Technical Group has estimated that at the start of the 12th Five Year Plan (2012-17),
the total housing shortage in the country is 18.78 million. The below table exhibits the
components that contribute toward the estimated urban housing shortage at the start of the 12th
Five Year Plan, as of March 2012.
Commercial Segment
Office
Increasing demand for office space is one of the major growth drivers for the domestic real estate
market. The domestic office market has been driven by the IT-BPO sector where India has
emerged as one of the key offshoring destinations. Other growing industries such as financial
services and telecom are also key contributors. According to DTZ, a leading global real estate
advisory and consultancy firm, the +7,000 Indian IT and ITES firms account for 70% of the
office space requirements, followed by financial services and pharmaceuticals at 15%; the
remaining 15% is divided between other industrial sectors.
Hospitality
The hospitality industry in India has emerged as one of the key industries driving the countrys
economic growth. Over the years, India has emerged as one of the major tourists destinations.
This industry is projected to grow at 8% P.A led by growth in the number of foreign tourist
arrivals (FTAs) and domestic tourist visits.
Industrial SEZ
The Special Economic Zones (SEZs) in India were set up to promote exports of goods and
services and create employment opportunities. As of Oct 2010, there were 580 formally
approved SEZs in India, of which 363 are notified. IT/ITeS parks account for around 62% each
of the formally approved and notified ones. A large share of supply in the IT/ITeS space is
expected to come from these SEZs.
Retail Segment
The domestic retail market is largely unorganized. According to Investment Commission of
India, retail sales were USD 262 billion during 2006, constituting more than 30% of Indias GDP.
The organized retail market constituted only 4.6% of total retail sales of USD 12 billion as of
2006, but it increased at a fast pace of around 40% p.a. during its previous two years. The

organized retail sector is being driven by rising income and customer aspirations, demographic
changes, changing lifestyles, and increasing rate of urbanization among others.
Niche sector expected to provide growth opportunity

Tourism

Foreign tourists arrivals in India are expected to rise at a CAGR of 10.5% by 2015.
Over 8.9 million tourist are expected to arrive by 2015.
The number of hotel rooms in India as of 2011-12 was 121000 which is to be raised to
443000 by 2015.

Issues and Challenges


Land availability and acquisition issue.
Variable prices of raw materials.
Lack of transparency.
High stamp duty charges.

Absence of a centralized regulatory authority.


Constraints on funds.

Delhi NCR region:Delhi NCR real estate market is expected to see more traction in this year. The overall economic
scenario in the country is expected to improve in 2014. As per an Asian Development Bank
(ADB) report, the countrys GDP is expected to increase to 5.7 per cent from the present 4.7 per
cent. The interest rates are also expected to come down in 2014, which in turn will spur real
estate demand. Delhi NCR will continue to be the largest real estate market in India with almost
40 per cent share in new residential launches.
Delhi NCR, on an average, sees new construction of 100,000 residential units per annum, out of
which approximately 60 per cent are in Noida. As per a recent report by International Property
Consultants (IPC), in terms of unsold inventory, Delhi NCR fares much better than other cities,
such as Mumbai, which are reeling under the pressure of huge unsold inventory of 48 months.
There is an unsold inventory of only 15 months in Gurgaon and approximately 21 months in
Noida and Greater Noida.
Noida has experienced a period of unprecedented growth over the last few years, which is
expected to continue in future also. It has emerged as a well developed micro market having
substantial office and retail space, with deepening commercial activity in various sectors.
Rapid commercial development has led to a spillover of housing growth in and around the
region. Also, benefitting from metro extension, expressways, wider highways and release of land
parcels,
Noida promises to be a great residential destination in this year.
Ghaziabad is facing a shortage of approximately two lakh housing units in the below Rs 10 lakh
category. Ghaziabad Development Authority understands that providing a home below Rs 10
lakh is difficult for the developers. Thus, we are planning an affordable policy scheme for the
developers, wherein we will offer concessions, such as free registration, direct buying from
farmers, no land conversion charges, no external development charges etc. Apart from this, there
are a few plots left in Madhuban Bapudham scheme, near Govindpuram. This scheme may be
advertised in the near future. However, there is no new plotted development coming up soon.
GDA is planning several infrastructure development projects in the area. We will build the
Northern Peripheral Road (NPR) that will cater to the heavy traffic originating from Delhi and
going towards Meerut, Kanpur and Lucknow. It is planned for free flow of traffic on the northern
side of the city. Another infrastructure project that is planned is the Eastern Peripheral
Expressway, which will form a third ring road around Delhi, along with the Western Peripheral
Expressway, to decongest both Delhi and Ghaziabad.
The realty market of Gurgaon is expected to get a major boost with the upcoming Dwarka
Expressway that connects Dwarka and Gurgaon and will be operational sometime in 2014.

Second, the affordable housing policy of the Haryana government is likely to be implemented. It
will be a forward move towards inclusive growth as commercial and luxury segments
significantly dominate Gurgaons property market. We also expect both the state and central
governments to move further on the Delhi Gurgaon-Rewari-Alwar Regional Rapid Transport
System (RRTS). These factors will drive the realty market in 2014.
Investing in real estate
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:

Its 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.
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.
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.
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.
Apart from IT, ITES and Business Process Outsourcing (BPO) India has shown its
expertise in sectors like auto-components, chemicals, apparel, pharmaceuticals and
jeweler 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.
Competitive risk adjusted returns
High tangible asset value
Attractive and stable income return
Inflation hedging
Portfolio diversification

The relaxed FDI rules implemented by India last year has invited more foreign investors and
real estate in India is seemingly the most lucrative ground at present. The revised investor
friendly policies allowed foreigners to own property, and dropped the minimum size for
housing estates built with foreign capital to 25 acres (10 hectares) from 100 acres (40
hectares). With this sudden change in investment policies, the overseas firms can now put up
commercial buildings as long as the projects surpass 50,000 square meters (538,200 square
feet) of floor space. Indian real estate sector is on boom and this is the right time to invest in
property in India to reap the highest rewards

Risk in investment

1.
2.
3.
4.
5.
6.
7.

Foul play
Infra pitch
Title disputes
Delayed projects
Valuation risk
Home loan
Circumventing rules

Reasons to buy residential/commercial


Unlike stocks, mutual funds, gold and commodities, the chances of downfall in value of
real estate investments is extremely low in India
Investing in property with rentals is the safest way to secure your retirement properties
give you uninterrupted, passive, inflation proof stream of income
Reasonable good research will lead you to real estate investments with CAGR of 15%
plus per annum in Indian conditions only equity gives better returns but even equity
has ups and downs.
In India, real estate investment is akin to a FD that commits 15% returns year over year
with almost zero risk.
Higher return
Very less devaluation risk
Higher saving

Investment option in real estate


Residential properties - flats
Landed residential properties houses with land
Commercial properties shops /offices
Land commercial/ industrial/ residential
Land agricultural.
Real Estate Investment Trust (REIT)
Real estate funds
Real estate equity

Residential properties flats


In good locations flats give 3% rental returns (after 5 years) and a capital appreciation of
around 15% per annum (doubling in value in 5 years) a total return of 18% p.a.
Minimum investment required is Rs 40 lacs - 80% of this can be through loans.

Landed residential properties houses with land


Houses with land need to be bought with care as the upfront investment can be very high
Trick is to buy in areas where the land values are low now but will appreciate due to
developments around
Typical rentals are 2-3% ( 5 years after purchase) and capital appreciation is 20% plus
Typical investment required is Rs 50 lacs plus - 80% of this can be through loans
Commercial properties shops /offices
This is a smart investment option that people miss.
Typical investment starts at Rs 15 lacs - 80% of this can be through loans.
Rentals are around 7-10% of the invested amount from year 2 (as compared to 3% on
residential properties).
Capital appreciation is also about 15% per annum.
Every investment savvy person would most likely.
Land commercial/ industrial/ residential
Investment in land must be done after reaching financial independence.
Land investments give no cash flow, are fairly difficult to exit but give superior returns
- more than 20% per annum.
Typical investment starts at 15 lacs and value doubles every 3 - 5 years.
Lower value land investment start at 5 lacs but the initial appreciation takes about 5-8
years
Land agricultural.
In many states only farmers can buy agricultural land farmers are defined as someone
who has agricultural land already and who has a non-agricultural income of less that 2
lacs per annum

If you are qualified to buy these lands it makes sense to buy agricultural land next to any
town, build a farm house and wait for the town to grow to your property in 15 years.
Agricultural lands near areas of development give a reasonable capital appreciation
however it completely depends on the location.

MASTER PLAN 2031

The Interim General Plan for Greater Delhi was prepared in 1956 and then the first
Master Plan of Delhi prepared in 1962 suggested that serious considerations should be
given for the planned decentralization of large scale economic activities from Delhi and
the development of towns around Delhi. This paved ways for the development of
Industrial units and warehousing at various locations around Delhi, resulting in
speculative land dealings and potentials for unplanned and unauthorized development
activities.
Finally on April 17, 1976 the Government of Uttar Pradesh notified 36 villages of
Yamuna-Hindon-Delhi Border Regulated Area as New Okhla Industrial Development
Area wide its notification No. 415.7 Bha-U-18-(II), Lucknow, dated 17.4.1976 under
the provisions of U.P. Industrial Development Act, 1976.
a master plan for the area for the year 1991Plan had the following objectives:
i. Provide developed sites for about 10,000 small-scale industrial units;
ii. Provide employment to about 41,000 industrial workers; and
iii. Achieve a conducive living and work environment for the workers engaged in
manufacturing and allied activities, and develop an integrated township for an ultimate
population of 3,75,000 workers.

The plan was revised several time in its preparation due to economic instability, more than
stipulated growth of population, income of people, government policies etc.
The prepared master plan was revised in 1979, again in 1982 and several times during the period
before it was finally accepted as planned for 2031.
In the meantime, a statutory plan for the National Capital Region of Delhi (of which Noida is a
part) was finalised and enforced in 1988 for perspective year 2001. Also, a Perspective Plan for
Delhi - 2001 was finalised by the Delhi Development Authority and enforced since 1990 for the
perspective year 2001. Both these Plans had significant implications for the development
potential of Noida.
NCR Planning Board revised the Regional Plan in 2005 for the perspective year of 2021.

Another factor, which is likely to have far reaching implications for the growth potential of
Noida is the development of Greater Noida and Yamuna Expressway Industrial area townships
on a contiguous territory east of the river Hindon.
In view of the fast changing development scenario in the region, growth of Delhi, Ghaziabad,
Gurgaon, Faridabad, Greater Noida and other cities in the region various large size projects of
infrastructure comprehensive revisions were considered in the Master Plan 2021 which were
suggested in the form of Noida Master Plan 2031. It had the following objective:
Within the framework of broad policies for the development of U.P. Sub- region of NCR and
taking into consideration the proposed strengthening of the road and rail infrastructure and the
development pressures due to the creation and development of various activities in the adjoining
area, Greater Noida, Delhi, Ghaziabad etc., prepare a Master Plan for Noida 2031 for:
Achieving integrated development of Noida and its environs; and
Accommodating future growth of population up to the year 2031
To capitalize on the areas high growth potential due to its proximity to the
metropolitan city of Delhi and public investment expenditure not only in the area but
also the environs.

To promote employment generating activities such as small scale industrial work opportunities,
offices spaces, institutions, commercial centers, IT parks, etc., at places which are well suited for
such activities and provide a conducive environment for people to work and enjoy good quality
of life.
The Authority approved the Draft of Noida Master Plan 2031 in its 172 board meeting held on
29-032011 and decided to send the draft to the State Govt. and NCR Planning Board for
suggestion.
Further, the Authority in its 174 Board meeting held on 25.8.11 approved few changes in the plan
to incorporate the suggestions of NCR Planning Board and residential area proposed for
allotment of plots to the farmers.
The master plan has the objective to analyze the land in terms of physiographic features,
topography, regional context, soil, climate, land uses pattern etc.
This analyzing of the land would be very helpful to the real estate developer. This would help
them plan in advance to what type of infrastructure to develop residential or commercial. The
cost of development of the project etc.
The analysis that would be of great importance to the real estate developer as per the Master Plan
document are following:

Regional context.

Physiographic, demographic features and topography.


Soil characteristics and climate.
Land utilization pattern.
Hydrological study for surface flow, underground water table and aquifer low lying areas
and flood prone areas.
Transport patterns.
Settlement pattern.

Industrial development
Phased development of industries which would give the idea about the type of
infrastructure needed by the industries being attracted to the area.
Presently the following types of industrial units are being attracted to Noida:

Electrical Home Appliances,


Machinery,
Ready-made Garments,
Paper Products,
Electronics,
Rubber/ Plastic Products,
Dies,
Tools and Machinery,
Wooden Furniture,
Leather Products,
Beverages and Food Products
Automobile Parts
Building and Finishing Material
Pharmaceuticals
Fabrication

In the future, the following types of industries are likely to be attracted:

Electronics,
Electrical Goods,
Ready-made Garments,
Plastic Molds,
Packing Materials,
Dies,
Tools and Machinery, and
Steel Fabrication

This would generate the employment for the people or population in the area and would also
provide with the information about demographic i.e type of people employed, housing
infrastructure they need, institution for the children, transport facility, type of organized retail
market they need, this would be very helpful for the real estate developer.
Thus the commercial development will be the need for the great importance.
Infrastructure development
Water Supply
Sewerage and Waste Disposal
Institutional Facilities
Medical Facilities
Transportation
Hierarchy of Roads
Traffic Volume Characteristics
Parking Facility
Need of railway station for connection and other express way linkage to Faridabad and dadri
dedicated freight corridor will pass through Noida and rise the industrial growth as well as real
estate. With the development of DMRC from Noida to Greater Noida will increase the mobility
of the population and thus help to extend the real estate development.

Development perspective and planning concept


NOIDA is to be developed as an independent city, no longer a satellite town to Delhi. It is
envisioned that by the year 2021, the city will begin to acquire an accentuated commercial and
institutional focus reflecting on its location at the center of a large megalopolitan conurbation
comprising of the surrounding cities such as Delhi, Gurgaon, Faridabad, Bulandshahar,
Sikandrabad, Ghaziabad and Meerut. The type of industries will also experience a gradual shift
from the traditional small and medium scale industries to hi-tech industries like Information
Technology, Biotechnology etc. and their ancillary R&D platform. The focus will also be to
develop it as an integrated town with all the amenities and the infrastructure for the resident
population in place to create conducive living environment.
Planning imperatives
Within the framework of policy for the development of the NCR and UP sub-region and taking
into consideration the development pressures due to the development of Yamuna expressway
from Noida to Agra and rail connections to NOIDA, the master Plan is prepared with following
underlying imperatives:
o Integrated development of NOIDA to accommodate future growth of population up to the year
2031.
o Capitalize on the areas high growth potential due to its proximity to the metropolitan city of
Delhi and evolving transport linkages.
o Promote a conducive environment for people to earn livelihood and enjoy good quality of life.
o Promote small-scale industrial, Institutional and other work opportunities at places which are
well suited for such activities.
Land Use:

Social Infrastructure and Facilities:


Health and Educational Facilities

Socio-Cultural Facilities Center


Telecommunication and Postal Facilities
Security and Fire Fighting Services
Distributive Service
Milk and Vegetable Booths
LPG Godowns and Petrol Pumps/ CNG Station
Public Utilities:
Water Supply
Sewerage System
Solid Waste Disposal
Power Supply

Development of transportation and mobility within Noida


Transportation is an important sector for achieving development objectives of an area. The role
of transport in enabling and directing urban development has been long appreciated. In the
planning for a transport system, a number of objectives form the base. In case of Noida, the
following objectives have been identified:
i) To enable the mobility of people and goods, and faster economic development and enhance
social interactions.
ii) To improve the accessibility of Noida particularly to and from the sub-region and there by
promote the nodal functions of Noida.
iii) To encourage inter sectoral integration and ensure intra sectorial coordination.
iv) To conserve resources (land, material, money, energy etc.)
v) To maximize safety.
vi) To promote the environmental quality of the area and enhance the quality of life.

Regional linkage road


Transport facilities i.e Bus terminal, Railway station and Yard, Transport Nagar, elevated
roads
Expansion of public transport, integrate mode of transport, emission control, parking
policy etc

Recreational areas
Recreational Green

Parks
Playgrounds
Green Belts
Sports City

Disaster Management Plan:


Flood Hazard
Earthquake Hazard
Fire Hazard
Fire Risk Mitigation
High Wind Hazard Risk Mitigation
Man Made Hazard