BRIEF REPORT
ON
REAL ESTATE SECTOR IN INDIA
January 2015
2.1
Overview
The real estate sector in India has come a long way by becoming one of the fastest
growing
markets in the world. It is not only successfully attracting domestic real estate
developers, but
foreign investors as well. The growth of the industry is attributed mainly to a large
population
The sector comprises of four sub-sectors- housing, retail, hospitality, and commercial.
base,
While rising income level, and rapid urbanisation.
housing contributes to five-six percent of the countrys gross domestic product (GDP),
the
remaining three sub-sectors are also growing at a rapid pace, meeting the increasing
infrastructural
The real estate needs.
sector has transformed from being unorganised to a dynamic and
organised
sector over the past decade. Government policies have been instrumental in providing
support
after recognising the need for infrastructure development in order to ensure better
standard of
living for its citizens. In addition to this, adequate infrastructure forms a prerequisite
The Indian real estate sector is one of the most globally recognised sectors. In the
for
country, it is
sustaining the long-term growth momentum of the economy.
the second largest employer after agriculture and is slated to grow at 30 per cent over
the next
decade. It comprises four sub sectors - housing, retail, hospitality, and commercial. The
growth
of this sector is well complemented by the growth of the corporate environment and the
demand for office space as well as urban and semi-urban accommodations. The
construction
It
is also ranks
expected
that
this sector
incur
moreinnon-resident
Indian
(NRI) and induced
industry
third
among
the 14 will
major
sectors
terms of direct,
indirect
investments in the
effects
near
survey
by an industry body has revealed a 35 per cent surge in the
in all future,
sectorsas
of athe
economy.
number of
enquiries with property dealers. Bengaluru is expected to be the most favoured
property
investment destination for NRIs, followed by Ahmedabad, Pune, Chennai, Goa, Delhi
and
Dehradun. Private equity (PE) funding has picked up in the last one year due to
attractive
valuations. Furthermore, with the Government of India introducing newer policies
helpful to
real estate, this sector has garnered sufficient growth in recent times.
Page 2 of 11
2.2
Commercial
space
Retail space
Hospitality
space
SEZs
Real Estate
sector
Page 3 of 11
Market Size
The real estate sector in India is being
recognised as an infrastructure service
that is driving the economic growth
engine of the country. The Indian real
estate market size is expected to touch
US$ 180 billion by 2020. Foreign direct Urbanisati
on
investment (FDI) in the sector is
expected to increase to US$ 25 billion in
the next 10 years, from present US$ 4
billion.
Growth in
tourism
Policy
support
Growth
drivers
Epidemolohas
gical
Page 4 of 11
The housing sub-sector contributes five-six per cent to the country's gross domestic
product
(GDP). Meanwhile, retail, hospitality and commercial real estate are also growing
significantly,
catering
to real
India's
growing
needs
The Indian
estate
market
sizeof
is infrastructure.
expected to touch US$ 180 billion
2.2
by 2020.
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.
Major acquisitions in real estate sector in India
Target
Acquirer
Caraf Builders
DLF Assets ltd
Cowtown Land DvlpPvt Lodha Group
Ltd
Compact Disc film city Jeff Morgan
Oceanus Real Estate
Warburg Pincus
Indiabulls Properties PvtIndiabulls Property
Ltd
Invest Trust
Embassy Property
Blackstone
Value ($
million)
696.5
513.6
Year
320
318
223.1
2011
2011
2012
200
2012
2009
2011
Page 5 of 11
3 MARKET PLAYERS
3.1
3.2
3.3
The Indian real estate sector has traditionally been an unorganised sector but it is
slowly evolving
into a more organised one. The sector is embracing professional standards and
transparency
with open arms. The major established domestic players in the sector are DLF, Unitech,
Hiranandani Constructions, Tata Housing, Godrej Properties, Omaxe, Parsvanath,
Raheja
Developers, Ansal Properties and Infrastructure and Mahindra Lifespace Developers
Ltd to
DLF
Ltd
name
a few. International players who have made a name for themselves in India
include Hines,
DLF
group
is a leading
estate developer
India since Portman
1946. DLF
has been
Tishman
Speyer,
Emaarreal
Properties,
Ascendas,inCapitaland,
Holdings
and
instrumental
in
Homex.
putting Gurgaon on the urban landscape of India. DLF has over 220 million sq. ft. of
existing
development projects and 574 million sq. ft. of planned projects. DLF has so far
developed 22
urban colonies, and an entire integrated 3,000-acre township - DLF City. DLF's
development
projects across India span over 30 cities: Gurgaon, Ambala, Shimla, Amritsar, Jalandhar,
Ludhiana, Sonepat, Panipat, Chandigarh, Panchkula, Noida, New Delhi, Jaipur, Indore,
UNITECH
Ahemdabad, Baroda, Lucknow, Faridabad, Mumbai, Pune, Nagpur, Goa, Kochi,
Kokkanad,
Established
in 1972, Vytilla,
UnitechCoimbatore,
is Indias leading
real estate
developer inand
India.
It is the
Chennai, Bangalore,
Hyderabad,
Bhubhaneshwar
Kolkata.
first
developer to have been certified ISO 9001:2000 in North India.
Project Spectrum: Unitech offers diversified projects across residential, commercial/IT
parks,
retail, hotels, amusement parks and SEZs segments. Unitech was the first real estate
company to
be part of the National Stock Exchanges NIFTY 50 Index. The company has over
600,000
shareholders. Unitech and Norway based Telenor Group came together to build Uninor Ansal API
a
telecommunication services company providing GSM services across India.
Established in 1967 as a family business, Ansal API today is clearly amongst the real
estate
leaders of India. Having established itself very strongly in the NCR region, Ansal API is
now
focusing on ventures in cities like Bhatinda, Mohali, Amritsar, Ludhiana, Jalandhar,
Jaipur,
Jodhpur, Ajmer, Sonepat, Panipat, Karnal, Kurukshetra, Faridabad, Gurgaon, Greater
Noida,
and Ghaziabad, Meerut, Agra, Lucknow, to name a few. Ansal API has till date,
Project
Spectrum:
Integrated Townships, Condominiums, Group Housing, Malls,
developed
and
Shopping
delivered more than 190 million sq ft. The company currently has a land reserve of
Complex,
Hotels, SEZs, IT Parks and Infrastructure and Utility Services
about 9,335
acres.
Page 6 of 11
3.4
3.5
The Company was founded in 1995 by PNC Menon after he returned home from the
Middle
East where he was acclaimed for quality interiors and construction since 1977. Today,
this Rs10
billion plus company is one of the largest and only backward integrated company in the
construction arena. Its IPO in 2006 was oversubscribed by 126 times that created
history,
Till date,being
Sobha has completed 47 residential projects, 13 commercial projects and 166
the first event of its kind in Indian capital markets.
contractual projects covering about 36 million sq.ft area in 18 cities across India (as of
31 March
2010). The company currently has 21 ongoing residential projects aggregating to 8.5
million sq.ft,
while
4.24Developers
million sq.ftLtd
of contractual projects are under various stages of construction.
Parsvnath
Incorporated in July 1990 by Mr Jain in New Delhi, Parsvnath today has a substantial
pan India
presence in over 45 cities across 16 states. The company has emerged as one of the
most
progressive
and multi-faceted
real estate
and construction
entities
in India.
Project spectrum:
Housing (premium,
mid-market
as well as
affordable),
office
complexes,
shopping malls & hypermarkets, hotels, multiplexes, IT Parks and SEZs.
Page 7 of 11
4 POLICY INITIATIVES
4.1
Government Initiatives
Under the Sardar Patel Urban Housing Mission, 30 million houses will be built by
2022,
mostly for the economically weaker sections and low-income groups, through publicprivatepartnership,
interest
subsidy
and
increased
flow of resources
to housingstates
sector.
The Government
of India
along
with
the governments
of the respective
have
taken
several initiatives to encourage the development in the sector. Some of them are as
follows:
The Securities and Exchange Board of India (SEBI) has notified final regulations that
will
govern real estate investment trusts (REITs) and infrastructure investment trusts
(InvITs).
This move will enable easier access to funds for cash-strapped developers and create
a new
investment avenue for institutions and high net worth individuals, and eventually
ordinary
investors.
The Telangana Real Estate Developers' Association (Treda) plans to host the Fifth
Treda
Property Show 2014 at Hitex Centre, Hyderabad. The show will be open to a mix of
the
populace, including prospective property purchasers, investors, architects and
others.
The State Government of Kerala has decided to make the process of securing
permits from
local bodies for construction of houses smoother, as it plans to make the process
online with
As
Indian
economy
real estateThis
sector
benefiting.
With the
thethe
launch
of a
softwaregrows,
calledthe
'Sanketham'.
willkeeps
ensure
a more standardised
increase
in
procedure,
foreign
tourist arrivals
every year,and
there
is demand for real estate in the
more transparency,
and(FTA)
less corruption
bribery.
tourism
and
The Government
of India has proposed to release the Real Estate (Development and
hospitality
Also,aims
withto
the
entry consumer
of major private
players
in the education
Regulation)sector.
Bill which
protect
interest
and introduce
sector,
the
standardisation
in
major
cities,
that isand
Hyderabad,
Bengaluru,
Mumbai,
Pune,
and
business
practices
transactions
in the sector.
TheDelhi,
bill will
alsoChennai
enable domestic
Kolkata
are
and
likely
toinvestment
account forflow
70 per
total demand for real estate in the education
foreign
intocent
the of
sector.
4.2
Investments
sector.
Demand for improved healthcare facilities is also expected to provide a boost to the
Theconstruction
Indian real estate
witnessed high growth in recent times with the rise in
sectorsector
in the has
country.
demand
for office as well as residential spaces. Some of the major investments in this sector are
as
follows:
Assotech Realty has tied up with Lemon Tree Hotels to manage and operate its
serviced
residences. The first project, 210 apartments under the branding of Sandal Suites,
will be
launched in Noida in 2015. The companies will launch 8-10 similar projects in a
phased
Private & Confidential
Page 8 of 11
manner over the next seven years with an investment of Rs 8000-9000 million
(US$ 129145 million) approximately.
Blackstone Group LP is all set to become the largest owner of commercial office
real
estate in India after a three-year acquisition drive in which it spent US$ 900
million to
buy prime assets. Blackstone has acquired 29 million sq ft of office space in cities
such as
Bengaluru, Pune, Mumbai, and Noida on the outskirts of New Delhi.
L&T Infra Finance Private Equity (PE) plans to raise Rs 37,500 million (US$ 607
million) in an overseas and a domestic fund, and launch a real estate fund.
IDFC Alternatives Ltd has sold two of its real estate investments to PE firm
Blackstone
Group LP. The assets - a special economic zone (SEZ) in Pune and an information
technology (IT) park in Noida - were sold for a combined enterprise value of Rs
11,000
million (US$ 178 million).
Goldman Sachs plans to invest Rs 12,000 million (US$ 194 million) to build a new
campus in Bengaluru that can accommodate 9,000 people. The new campus is
being
developed in collaboration with Kalyani Developers on the Sarjapur Outer Ring
Road,
Bengaluru.
Snapdeal has entered into a strategic partnership with Tata Value Homes to sell
the
latter's apartments on its e-commerce platform, which marks the first time that
an ecommerce company has tied up with a real estate venture.
Page 9 of 11
Challenges
The key challenges that the Indian real estate industry is facing
today are:
lack of clear land titles,
absence of title insurance,
absence of industry status,
lack of adequate sources of finance,
shortage of labour,
rising manpower and material costs,
approvals and procedural difficulties.
5.2
Investment Opportunities
The real estate industry in India is yet in a promising stage. The sector happens to be
the second
largest employer after agriculture and is expected to grow at the rate of 30 per cent
over the next
decade. A growing migrant population due to increasing job opportunities, together
with healthy
infrastructure
development,
is Ministry's
underpinning
demandthrough
in the regions
residential
real
It is believed that
the Finance
motivation
softening
of interest
rates
estate
and
market.
lending more to the real estate sector will have a positive impact on both developers
and
consumers. The real estate market could start to perform better as the easing of FDI
norms will
begin to show results during the second half of the year. The economy will also recover
in 2013
which in turn will perk up the real estate sector in India. With the government trying to
Real
estatedeveloper
contributed
per cent
to India's
gross domestic
product
in
introduce
andabout
buyer6.3
friendly
policies,
the outlook
for real estate
in(GDP)
2013 does
2013.
The
look
market
size of the sector is expected to increase at a compound annual growth rate
promising.
(CAGR) of
11.2
per cent during
FY 2008-2020
to touch
US$billion
180 billion
by 2020.
The Government
of India
has allocated
US$ 1.3
for Rural
Housing Fund in the
Union
Budget 2014-15. It also allocated US$ 0.7 billion for National Housing Bank (NHB) to
increase
the flow of cheaper credit for affordable housing for urban poor. The government has
allowed
The entry of major private players in the education sector has created vast
FDI
of up to 100
opportunities
for per
the cent in development projects for townships and settlements.
real estate sector. Emergence of nuclear families and growing urbanisation has given
rise to
several townships that are developed to take care of the elderly. A number of senior
citizen
housing projects have been planned, and the segment is expected to grow significantly
in future.
Growth in the number of tourists has resulted in demand for service apartments. This
Private
& Confidential
Page 10 of 11
demand
is
likely to be on the uptrend and presents opportunities for the unorganised sector.
Healthcare
5.3
Service apartments
10
4
the country is expected to be over 8.9 3
2
million by 2015
1
The number of hotel rooms in India as of0
CAGR:
10.5%
6.6
7.4
8.2
8.9
2012F
2013F
2014F
2015F
443
392
210
98
2009
241
109
2010
295
262
121
2011
135
2012F
339
154
2013F
176
2014F
197
2015F
Page 11 of 11