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BRIEF REPORT
ON
REAL ESTATE SECTOR IN INDIA
January 2015
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
base, rising income level, and rapid urbanisation.
The sector comprises of four sub-sectors- housing, retail, hospitality, and commercial. While
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 needs.
The real estate 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 for
sustaining the long-term growth momentum of the economy.
The Indian real estate sector is one of the most globally recognised sectors. In the country, it is
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
industry ranks third among the 14 major sectors in terms of direct, indirect and induced effects
in all sectors of the economy.
It is also expected that this sector will incur more non-resident Indian (NRI) investments in the
near future, as a survey by an industry body has revealed a 35 per cent surge in the 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.
2.2
Commercial
space
Retail space
Hospitality
space
SEZs
Real Estate
sector
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
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
Urbanisati
on
Policy
support
Growth
drivers
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 India's growing needs of infrastructure.
The Indian real estate market size is expected to touch US$ 180 billion 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.
2.2
Acquirer
DLF Assets ltd
Lodha Group
Jeff Morgan
Warburg Pincus
Indiabulls Property
Invest Trust
Blackstone
Value ($
million)
696.5
513.6
Year
320
318
223.1
2011
2011
2012
200
2012
2009
2011
3 MARKET PLAYERS
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
name a few. International players who have made a name for themselves in India include Hines,
Tishman Speyer, Emaar Properties, Ascendas, Capitaland, Portman Holdings and Homex.
3.1
DLF Ltd
DLF group is a leading real estate developer in India since 1946. DLF has been instrumental in
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,
Ahemdabad, Baroda, Lucknow, Faridabad, Mumbai, Pune, Nagpur, Goa, Kochi, Kokkanad,
Chennai, Bangalore, Vytilla, Coimbatore, Hyderabad, Bhubhaneshwar and Kolkata.
3.2
UNITECH
Established in 1972, Unitech is Indias leading real estate developer in India. It is the 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 - a
telecommunication services company providing GSM services across India.
3.3
Ansal API
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, developed and
delivered more than 190 million sq ft. The company currently has a land reserve of about 9,335
acres.
Project Spectrum: Integrated Townships, Condominiums, Group Housing, Malls, Shopping
Complex, Hotels, SEZs, IT Parks and Infrastructure and Utility Services
3.4
3.5
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 public-privatepartnership, interest subsidy and increased flow of resources to housing sector.
The Government of India along with the governments of the respective states have taken
several initiatives to encourage the development in the sector. Some of them are as follows:
4.2
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
the launch of a software called 'Sanketham'. This will ensure a more standardised procedure,
more transparency, and less corruption and bribery.
The Government of India has proposed to release the Real Estate (Development and
Regulation) Bill which aims to protect consumer interest and introduce standardisation in
business practices and transactions in the sector. The bill will also enable domestic and
foreign investment flow into the sector.
As the Indian economy grows, the real estate sector keeps benefiting. With the increase in
foreign tourist arrivals (FTA) every year, there is demand for real estate in the tourism and
hospitality sector. Also, with the entry of major private players in the education sector, the
major cities, that is Hyderabad, Bengaluru, Mumbai, Delhi, Pune, Chennai and Kolkata are
likely to account for 70 per cent of total demand for real estate in the education sector.
Demand for improved healthcare facilities is also expected to provide a boost to the
construction sector in the country.
Investments
The Indian real estate sector has witnessed high growth in recent times with the rise in 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
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.
Challenges
The key challenges that the Indian real estate industry is facing today are:
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 underpinning demand in the regions residential real estate
market.
It is believed that the Finance Ministry's motivation through softening of interest rates and
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
introduce developer and buyer friendly policies, the outlook for real estate in 2013 does look
promising.
Real estate contributed about 6.3 per cent to India's gross domestic product (GDP) in 2013. The
market size of the sector is expected to increase at a compound annual growth rate (CAGR) of
11.2 per cent during FY 2008-2020 to touch US$ 180 billion by 2020.
The Government of India has allocated US$ 1.3 billion 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
FDI of up to 100 per cent in development projects for townships and settlements.
The entry of major private players in the education sector has created vast opportunities for the
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 demand is
likely to be on the uptrend and presents opportunities for the unorganised sector.
Healthcare
Service apartments
5.3
CAGR:
10.5%
6.6
7.4
8.2
8.9
2012F
2013F
2014F
2015F
443
392
98
2009
241
210
109
2010
295
262
121
2011
135
2012F
339
154
2013F
176
2014F
197
2015F