Evaluating The Growth Of

Indian Real Estate Industry

INTRODUCTION – YES BANK LTD.

EVOLUTION OF INDIAN REAL ESTATE

GROWTH STORY OF INDIAN REAL ESTATE

- PRESEN T& FUTURE

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YES BANK- BACKGROUND

Incorporated by Rana Kapoor and Ashok Kapoor in 2004 (current stakestake at 38%),
it’
it’s one of the fastest growing private banks in the country
Pedigree investors like Rabobank International (20%), Citigroup Venture Capital
(10%), Chrysalis (7.5%) and Asia Infrastructure Fund (7.5%)
Maiden IPO in 2005 - Asset book as on December 31, 2007 is of US$ 2.1 billion
As on 31st December, 2007:
– Balance Sheet – Rs.150 bilion (USD 3.7 billion)
– Deposits – Rs.111 billion (USD 2.7 billion)
– Borrowings – Rs.7.6 billion (USD 0.19 billion)
– Profitabality - Return on Equity of 20.46% (annualized)
– Capital Adequacy Ratio – 14.18 %
Key recognition:

Accolades

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Accolades

REALTY BANKING GROUP @ YBL

Financial Role:
Construction Finance

Project Finance

Take out Finance -

Project Loan Syndication

Lease – Rental Securitization

Mortgage Back Securities / Cash-

Cash- Flow Financing

Advisory Role:
Lead Arranger

Project Conceptualization

Joint-
Joint- Venture Partner Identification

Innovate Bankable Products/ Strategies

Legal Advise and Tax Guidance

Pre-
Pre- IPO placements

Private Equity stakes at project/ group level

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 INTRODUCTION – YES BANK LTD.

EVOLUTION OF INDIAN REAL ESTATE

GROWTH STORY OF INDIAN REAL ESTATE

- PRESENT & FUTURE

Stages of Evolution

Past Present Moving Forward

• Lack of Industrial Status • In line for industrial status • Fully organized
• Finance being arranged • Multiple sources of industry
mainly from pre-selling funding – Debt, PE, VC, • Well placed industry
of the units etc standards
• Limited purview of the • Enjoys strong attention of • Industry regulator in
government the central as well as state place to control the
• Quality of construction government sector
average • Remarkable improvement • FDI allowed in across
• Lack of transparency in the quality and designs real estate avenues
of construction • REITS/REMFs
• Improvement in the increasing the depth
transparency level of the market
• Emergence of well-defined
product categ
ories

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 INTRODUCTION – YES BANK LTD.

EVOLUTION OF INDIAN REAL ESTATE

GROWTH STORY OF INDIAN REAL ESTATE

- PRESENT & FUTURE

Real Estate Industry Snapshot

• Indian real estate industry is growing with a compounded growth

rate (CAGR) of more than 30%on the back of robust economic
performance of the country.

• Market is getting more organized with presence of overseas

developers

• Emergence of small cities – tier II & tier III cities

• New avenues of investment – hospitality, health care, integrated

townships, infrastructure corridors and others

• Investments flowing from multiple sources – FDI/PE/Institutional

Investors/Debt

• Real Estate – Second Largest employment driver in India

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Robust Economy

Rising Per Capita Income Rapid Urbanization

Source: Census India, Global Research

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Regulatory Growth

Various regulatory initiatives have been taken at different levels towards

streamlining and standardizing the capital flow in the industry.

REITs / REMFs ?

FDI in all kinds

of Real Estate ?

Real estate VCFs

Opening up to FDI
in Select Project
Types
Relaxation of
Investment
Norms for NRIs

Regulatory Framework

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 Debt Funding

• In the last three years, RE has been

one of the prime sectors driving the Real Estate Lending by Banks
credit growth with lending to the
sector rising by more than 500%.

R e a l E sta te L o a n s (in U S D b illio n )

• RBI has taken steps to stem the flow 14
of bank credit to the sector via 12
regulations and interest rates
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• The hardening of interest rates have
had some effect on the markets 8
especially the residential sector, but
given the long term view and strong 6
fundamentals, the development
activity has not been noticeably 4
hampered.
2
• The restricted debt options are 0
making private and public markets
more attractive to most of the 2002-03 2003-04 2004-05 2005-06 2006-07
developers.

• New models of project development

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Deepening Capital Market

Public Equity Market

• IPO Market – Around 18 real estate and construction companies have went
public by now.
• Offshore Exchanges – A new trend has cropped up last year, several indian
real estate companies got listed on the offshore exchanges like AIM,
Singapore listed REIT, Singapore Stock Exchange and Dubai International
Financial Exchange.

Private Equity Market

• India has attracted the highest private equity at USD 2.6 billion in 2007
• The spectrum of private equity transactions ranges from project specific
Special Purpose Vehicle (SPV) to entity level investments.

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 PRIVATE EQUITY
India has attracted the highest private equity at
USD 2.6 billion in 2007

Distribution of PE Transactions in Real Estate

40% 36%

24%

SPV Entity Portfolio

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PUBLIC EQUITY MARKET

The Indian real estate sector has raised equity worth USD 2.6 billion during 2006-07 of
which almost 60% has come through public offerings in the domestic and foreign markets.

Indian Real Funds Raised Name of the Developer Funds raised

Estate (approx listed on Domestic (approx)
Compani million Capital Market in million
es listed USD) USD
on AIM
Sobha Developers Limited 121
Parsvnath Developers Limited 242
Unitech 716 Lanco Infratech Limited 314

Ishaan 341 Unity Infraprojects Limited 53

Trinity 500 Purvankara Projects Limited 207

Omaxe Limited 147
Hirco 761
Housing Development and 413
Alpha Tiger -
Infrastructure Ltd
Dev Property 412 DLF Limited 2210
West Pioneer 80 Akruti Nirman Limited 88

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Emerging Trends

• Tier II & Tier III cities

• Ribbon Development around expressways

• Infrastructure – a pushing force

• Emerging real estate zones – Health zones, Logistics & Warehousing,

Integrated Townships, Ports & Airports and others

• Public Private Participation- Increasing Risk sharing between

participants

• Real Estate Mutual Funds- greater depth, suitable exit options

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Impact on Indian Real Estate of

Global Chaos

• Possible impacts can be from psychological wariness of the emerging

markets, else India still looks promising to the investors in its future
prospects

• The major banks which have been affected by sub-prime have not lent in
the same manner in India. For them the Indian real estate story has been
much more of an equity or quasi-equity play, with little direct debt
exposure; and even then, the debt generally has had substantial protection.

• Indirect funding through these banks to PEs overseas likely to become

expensive

• Domestic funding to continue unhindered

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The Growth Story continues….

• RBI/SEBI - Market controllers as well as enhancers

• Industry consolidation likely to accelerate.

• PPP projects to gain force.

• Property prices high, but still not in a bubble zone. However, a micro-market level
correction cannot be ruled out

• In terms of financing, more sophisticated structures will come into place to cater to
investors with varying risk profiles.

• A robust mortgage backed security (MBS) market with adequate safeguards could
also help banks shift their real estate credit exposure

• Development of a robust REIT market would tremendously help investors keen to

hold a yield-based real estate asset.

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Key Investment Criterias….

• Developers with established track record and strong

management

• Transparent Operations

• Healthy financials

• Diversified across geographies and across sectors

• Presence in PPP projects.

• Focus on volume than value

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Thank You

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