The Real Estate Sector

History
The Early human dwellings as pointed by archeological evidences started in caves Zhoukbodian caves system near Beijing, China dates at 500,000 years Chinese caves contain some of the earliest evidence of human use of fire, approximately 400,000 years ago Easily inhabitants of Australlia, the Middle east and the perusian Andes have also left remains in caves

Gradually as agriculture became important to people, some 4500 years ago, people established villages of permanent houses and found new uses for hunting and herding activities

Key Features
The term Real Estate is defined as land, including the air above it and the ground below it, and any buildings or structures on it. It is also referred to as realty Real estate involves the purchase, sale, and development of land, residential and nonresidential buildings The activities of the real estate sector encompass the housing and construction sectors also The real estate sector is a major employment driver, being the second largest employer next only to agriculture About 250 ancillary industries such as cement, brick, steel, timber, building materials etc. are dependent on the real estate industry India Still has a shortfall of 2.47 crores as on 2007
Source: http://planningcommission.nic.in/

Impact of Real Estate Industry on some other key industries

Retail(Malls) Hospitality (Resorts, hotels, lodges, spa, inns) Entertainment Industries(Multiplexes, Theatres, Recreation centers ) Economic Services( Hospitals, school) Information technology(IT) Enabled companies( call centers)

REAL ESTATE

RESIDENTIAL

NONRESIDENTIAL/CO MMERCIAL

OFFICE

HOSPITALITY

INDUSTRIAL(SEZ)

RETAIL

GOVT. OFFICES

PRIVATE OFFICES

MALLS AND MULTIPLEXES

STANDALONE OUTLETS

Physical Targets for Infrastructure in the Eleventh Plan

Power
Additional power generation capacity of around 78500 MW

Roads and highways

Six- laning 6500 km of Golden quadrilateral and selected National Highways Four laning 6736 km on North-South and East-West Corridors Four-laning 20000 km of national Highways Widening 20000 km of National Highways to two lanes Developing 1000 km of expressways

Railways
Constructing dedicated freight corridors between Mumbai-Delhi and Ludhiana-Kolkata 8132 km of new railway lines: gauge conversion of over 7148

Seaports
Capacity addition of 485 million tones in major ports, 345 million tones in minor ports

Airports
Modernization and redevelopment of 4 metros and 35 non-metro airports Constructing 7 greenfield airports Constructing 3 airports in North-east region

Telecom
Achieving a telecom subscriber base of 600 million, with 200 million rural telephone connections Achieving a broadband coverage of 2-0 million internet connections

Irrigation
Developing 16 million hectares through major medium, and minor irrigation works 2.18 million
Source: Planning Commission

FY06
1.10 %

FY10

16.50% Other FDI Housing & Real Estate

98.90 %

83.50%

Boom

Increasing vacancy Slowing down Construction growth Property price starting to fall

Capital outflows Declining prices Lending curbs Low consumption High vacancies

Recession

Total number of Census houses(in crores)

1.58

Total number of vacant censes houses Total number of Occupied census houses

23.33

Total number of houses: 24.91 Source: www.indiastats.com

Indias Real GDP(at Constant 2004-05 Prices) Growth Rate Trend 14.00% 12.00% 12.40% 10.60%
9.50% 9.70%

10.00%
Growth rate (%) 8.00%

10.00%
9.20%

7.40% 6.70%

6.00% 4.00% 2.00% 0.00% FY06 FY07

Growth rate

5.90%

6.50%

FY08

FY09

FY10

Source: MOSPI

Total share in real estate sector

25%

Residential Segment Commercial Segment

75%

Indian Real Estate Market Size(USD Bn)

200 180 180

160
140 120 100 90 60

80
60 40 20 0 2006 2010 2015e 2020e 16

100% 90%
22.98

80% 70% 60% 50% 40%

8.74 9.83 2.38
1.24

30.27 40.27

Others Depreciation

36.19

1.76

Interest paid

25.07 22.67

Marketing expenses
Advertising expenses

30% 20% 10% 0% FY07

3.41

0.83
1.25 0.87

0.79 3.27 4.81

0.71 0.8 4.49

Compensation to employees Raw material expenses

14.16

11.19

13.47

16.75

FY08

FY09

FY10

Major challenges faced

Land availability and acquisition issue Lack of Transparency High stamp duty charges

Variable prices of raw materials

Absence of a centralized regulatory authority Constraints of funds

Indias leading Real Estate Companies(as per Total Income)

Sr. No Company Name 1 2 3 4 5 DLF Limited National Buildings Construction Corporation Limited DLF Home Developers Limited Unitech Limited Housing Development and Infrastructure Limited Total Inco01me( Rs. Cr) 3220.43 2947.73 2469.78 2221.71 1599.58

6 7
8 9 10

Ahluwalia Contracts (India) Limited DLF Retail Developers Limited

True Value Homes(l) Private Limited Emaar MGF Land Limited Sobha Developers Limited

1573.43 1501.89
1400.00 1172.35 1119.28

Source : Indias leading Real Estate Companies 2010

Indias leading Real Estate Companies(as per net worth)

Sr. No Company Name 1 2 3 4 5 6 7 8 9 10 DLF Limited Unitech Limited Housing Development and Infrastructure Limited Emaar MGF Land Limited Anant Raj Industries Limited D B Realty Limited* DLF Home Developers Limited IVRCL Assets & Holdings Limited Parsnath Developers Limited DLF Commercial Developers Limited Net worth( Rs. Mn) 128036.0 79032.3 70385.8 46093.7 34967.2 30967.2 24733.7 22884.8 22174.7 20966.8

Source : Indias leading Real Estate Companes 2010

Worlds Tallest Buildings

Year Building City Country Roof 2010 Burj Khalifa Dubai United Arab Emirates 828m

1963

KVLY-TV mast

Blanchard

United States

628.8

2011 2011

Abraj Al Bait Towers Tokyo Sky Tree

Mecca Tokyo

Saudi Arabia Japan

601m 634 m

1962

BREN Tower

Neveda Test Site

United States

462 m

1962

Lualualei VLF transmitter

Lualualei

United States

458 m

1998 1997

Petronas Twin Towers Ekibastuz GRES-2 Power Station

Kuala Lampur Ekibastusz

Malaysia Kazakhstan

452 m 419.7 m

2008

Dimona radar Facility

Dimona

Israel

400 m

1987

Kiev TV Tower

Kiev

Ukraine

400 m

Breakthroughs

Burj Dubai
Tallest structure ever built, and freestanding Highest elevators ever installed Worlds fastest elevators at 64 km/hr. Worlds highest installation of an aluminum and glass faade, at a height of 512 meters Highest number of floors in a building 160, breaking 110 of World Trade Center buildings

Stakeholders
Constructing companies Developers Engineers Technicians Design consultants Landlords Foremen Clerical staff Skilled workers Unskilled workers Banks Insurance companies Tenants Suppliers of material( Electrical, Material, etc.) Buyers Government Licensing/ Registration offices( e.g. BMC)

Investments -Investors -Speculators -Specu-vestors -Investor-occupiers -Owner-occupiers

Organizations - Govt. owned buildings - Organizations/companies - Self rented Types of end users

On the basis of size of family - Nuclear Family - Extended Family - Joint Family

Type of occupation Service class Business class Labor class

Budget Small Medium Large

Value Parameters(Residential)

Price Location Connectivity Neighbourhood Access to facilities like hospitals, schools, gardens, markets etc. Future growth prospects Brand name Reputation of the builder Lifestyle Quality of construction Legality of construction Speed of Construction Space ( S/B area vs. Carpet Area) Environmental friendliness Earthquake Resistance Security Parameters like distance from the police station, fire station.

Slum in the area Quality of Amenities Upcoming projects, infrastructural developments Developing/ Ready to possess buildings Permissions by necessary Govt. bodies Investment/ Lease / Self occupancy Parking Space

Financial Aspects Cash/ Cheque component Home Loan Interest rates Property and other tax Terms of Payment Monthly outflow or maintenance cost Down payment Fixed/Floating Slab duration/ Difficulty in getting Loan Affordability

Comparative chart (on the basis of New worth)

200000 180000 160000 140000 120000 100000 80000 60000 40000 20000 0
128036

79032.3 70385.8 46093.7 34958.3

Net Worth(Rs. Mn) Net Profit(Rs. Mn) EBITDA( Rs. Mn) Total income( Rs. Mn)

Comparative chart (on the basis of New worth)

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
2.4 11.8 8.5 11.3 37.3

62.2 6.8 8.3 70.9 8.3

1.9 7.3 6 8.1 23.7

2.5 3.2 3.2 4.1 12.7

3.1 5.7 6.6 8.9 23.7

65 93.3

33.4

78.5

48

Interest cover(times) Debt-to-equity(times) ROA(%) RONW(%) ROCE(%) NPM(%) EBITDA Margin(%)

Distribution chain
Portals like 99acres.com, Magicbricks.com, Indiaproperty.com Property exhibitions Newspaper ads Property magazines Leaflets Agents, brokers Leaseholders Government allotments( MHADA, Tata Housing) Neighbors, friends, colleagues Word of mouth Auctions Banks Investment Banks

Backend supply chain

Backend Supply Chain

Land Architects Cement Industry Steel Industry Sandstone Petrol Prices Electrical wiring and hardware fittings Flooring( Tiles, Marbles, Granites) Paints Heavy equipments(Cranes, Land movers, etc.) Glass Industry Bank and Insurance companies Road and Infrastructure Government agencies for plan approval, NOCs, DCRs

Top 10 Cement Companies

Name of the Company 1. ACC Ltd. 2. Ambuja Cements Ltd. 3. Ultratech Cement Ltd. 4. India Cement Ltd. 5. Shree Cement Ltd. 6. Rain Cement Ltd. 7. Prism Cement Ltd. 8. Madras Cement Ltd. 9. Birla Cement Ltd. 10. JK Cement Ltd. Annual Turnover 9339.64 7998.55 13980.35 3667.16 3558.64 4965.76 3456.03 2644.71 2264.35 2119.35 Production 17902 15094 13707 14649 8434 6174 6316 6636 4550 5150 Installed Capacity 18640 14860 17000 14115 8810 6680 6531 6300 5470 5113

http://business.mapsofindia.com/cement/top-10-cement-companies.html

Brief about the industry

Indian Cement Industry is the Second largest in the world with 236.16 MT as on September 2011. With the government of India giving boost to various infrastructure projects, housing facilities and road networks, the cement industry in India is currently growing at an enviable pace Most of the cement Industries are located close to Madhya Pradesh, Andhra Pradesh, Rajasthan, Gujarat and Tamil Nadu because of the availability of Limestone, Gypsum and Coal. Although this Industry got a boost post reforms in 1992 but the price of the Cement is still controlled by the government and due to economies of scale 95% of the sales come from the top 10 players.

SOURCE: http://business.mapsofindia.com/cement/

Indian Steel Industry

India is the 8th largest producer of steel with a production capacity of 35MT. There has been a significant growth in the production and consumption of steel in the domestic market. The consumption of steel in the Country is a significant indicator of the development in the country owing to the use of steel in the infrastructure, housing and Industry

SOURCE: www.cci.gov.in/images/media/.../Indicussteel_20090420151842.pdf

Top 5 Steel companies in India (on the basis of production)

Tata Steel Steel Authority of India Ltd. Bhushan Power and Steel Jindal Steel and Power Limited. Essar Steel

Petrol/Diesel
A Price of Crude oil has a huge impact in the Realty market because of the rise in price of other raw materials. Highly regulated market with top leaders being IOCL, HPCL and BPCL

Glass Industry
The topmost glass manufacturers in India are Asahi India Glass, NSG Group, Saint-Gobain, Guardian Industries and Hindustan National Glass. A strong demand and growth of infrastructure, liquor & other beverages, boom in building and construction will see the glass industry at its best in the coming years.

The industry is estimated at 5500 crores by the end of FY 11-12

Source: www.niir.org/.../glass...glass...glass...glass...glass...glass-glass...glass...

Paint Industry
Indian Paint Industry is valued at Rs. 11000 Crores by FY 2009-10. The Ratio of the organized and unorganized sector is 65:35 with the unorganized sectors involvement being more in the distemper coating Top leaders are Asian Paints, Nerolac, Berger, Jenson and Nicholson, Dulux.

Source: http://www.managementparadise.com/forums/publish-upload-project-download-reference-project/72869-paint-industry-analysis.html

Basis of questionnaire
Current trend Expected trend

Profit margins
Overall market growth overview

Runwal Symphony, Vakola, Santacruz(east)

Project
16 floors 2 wings 2, 3 bhk

Total area- 10000 sq. ft. Construction cost- Rs. 2500 per sq. ft. Land cost Rs. 2500 per sq. ft. Other expenses- Rs. 600 per sq. ft. Considering 30% area sold while booking or bhoomi poojan. Interest = around 10-12% Therefore total cost= 10000 * 5600= 5.6 cr Total sales cost = 9800* 11000= 10.78 cr(avg out) Booking sales= 4200(30%) * 8000= 3.36 cr[Construction cost averages out] Total sales revenue= 10.78 + 3.36= 14.14 cr Total profit % = 152% profit

Laws Governing Real Estate Market In India

Indian Transfer of Property Act Indian Registration Act, 1908 Indian Urban Land (Ceiling And Regulation) Act, 1976 Rent Control Acts The Town & Country Planning Acts

http://www.indialawoffices.com/pdf/realestate.pdf

No specific tax incentives for real estate sector, however the following incentives will boost the real estate. Excise duty rates on bulk cement and packaged cement brought on par; bulk cement to attract excise duty of Rs.400 per Metric Tone or 14 per cent ad valorem, whichever is higher Cement clinkers excise duty at Rs.450 per Metric Tone. General CENVAT rate on all goods reduced from 16 per cent to 14 per cent to give a stimulus to the manufacturing sector. Reduction in the excise duty from 16 per cent to 14 per cent. Reduction in customs duty from 5 per cent to nil on steel and aluminum melting scraps
http://www.indialawoffices.com/pdf/realestate.pdf

Regulations from Primary survey

Under the Income tax Act:

Valuation of the property is done as per three values: Fair Valuation Municipal Valuation Market Valuation
Valuation can be done on the basis of any of the above three but the registration and stamp duty cannot be paid at a rate lesser than the Municipal Valuation, better known as Ready Reckoner rate of the property.

 (CLIS) Change of land Use NOC At least in 2 stages Plan verification Registration NOC post completion As per new rule an additional Service tax of 2.5% will be levied on the registration value

Stamp Duty Rates

Non-residential Properties Flat 5%

Residential Flats in a housing society and buildings covered under Article 25(d) of schedule I of Bombay Stamp Act 1958 attracts concessional rates depending upon the market rates depending upon its market value as follows: Below 100000 - Nil 100000- 250000 - 0.5% of the value 250000- 500000 1250 + 3% above 500000 Above 500000 8750 + 5% of the value above 500000

Registration
Post January 2010 the registration fees of a property in Maharashtra has gone up to 1% of the ready reckoner rate. Earlier this rate was Flat Rs. 30000.

TRENDS

 A large number of projects that have come up in the past decade have placed a lot of importance on additional amenities like swimming pool, gymnasium, etc thereby increasing the maintenance cost for thee projects.
A lot of developers are now considering moving to the construction of 1BHK and BK apartments in prime locations because of growing demands for this particular format by the lower-middle and middle income groups

 Some of the builders that I visited have now gone on to make apartment sizes much larger than the ones prevalent for that particular segment. E.g. A normal 3 BHK should be between 1500-1700 sq. ft. RNA Builders are now coming up with areas like 2400 and 2800 sq. ft. These flats are brought over by a lot of investors Builders too are looking forward to developing compact houses with reduced space. For e.g. 3 BHK usually having 1500 to 1800 sq. ft are reducing their floor size to 1000 and 1200 sq. ft. catering majorly to the people with limited budget and higher requirement Concept of satellite cities like Amby valley and Lavasa too is experiencing a boom. Urban crowd are slowly moving from cities like Delhi to Gurgaon and Noida. This trend can also be seen in Mumbai in the past decade.

NEED GAPS

Medical Travelers
India has over 5 lakh patients travelling every year for medical purpose People from abroad travel to India for Orthopedic surgeries like hip/knee replacement Birmingham hip resurfacing Cardiac surgeries like cardiac bypass Valve replacement Pediatric heart surgeries for congenital heart disease

Prevalent Long term illnesses

Cancer GIT(Gastro Intestinal Track) Cancer Hepatocellular Carcinoma Bone Marrow Transplant( Leukemia, Hodgkin's) Brain Cancer Pancreatic Cancer Terminal Stage of HIV( Full Blown AIDS) IVS( In vitro fertilization)

Top Hospitals In Mumbai

Tata Memorial Jaslok Hospital Hinduja Hospital Amla Cancer Hospital KEM Fortis Bombay Hospital Leelawati Breach Candy Wockhard Asian Heart Institute

Proposal for Medical Tourism

Setting up of medical service apartments These service apartments should be within the boundaries of the city because of our capacity to charge more Other business facilities like internet service, fax should be made to encourage them to stay with us Tie-Ups with the above mentioned hotels for this purpose should be a good idea Tie-Ups with people who are involved in medical tourism

Proposal
Recommend to construct and set up apartments in the vicinity of the city dedicated specially to cancer patients or long-term residential patients termed as Medical Service Apartments 24 Hour Ambulance service in case of any Mishap Modern Pathology Laboratory to be set up for time to time examination Tie-Ups with Hospitals for the marketing of these Apartments

SATELLITE CITIES
Development of satellite cities unlike Amby valley and Lavasa catering to the need of the lower-middle and middle age group. Basic Requirement of this particular segment being affordable houses with basic amenities and safety.

SEGMENTATION MATRIX