Explorative Study of Real Estate

SOCIO ECONOMIC ENVIRONMENT OF REAL ESTATE
ITS HISTORY AND IMPLICATION IN STRATEGIC

PLANNING
Since Beginning till July 2008
Prepared Under the Supervision of

Er.A.K.Srivastava
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Table of Contents
From To Page
Page
1. Introduction & Objective of study………………… 8 10
2. Literature Review…………………………………. 12 87
2.1) History of real estate in India: Economic Times 12 23

Intelligence group report (Covering Period up to
March 2006)………………………………….
2.2) Maturing real estate from the eyes of Ernst &

Young annual report (Covering Period between April 24 40
2006 to March 2007) ……………………………
2.3) Ernst & Young Quarterly reports on 41 49

Real Estate: ………………………………….
1) June 2007 ………… 41 42

2) September 2007…… 43 45
3) December 2007…… 46 46
4) March 2008……….. 47 49
2.4) Overview of Economic Environment of Indian Real

Estate (from the eyes of various news paper)............ 50 56
2.5) Indian Monetary policies & its impact on

Real Estate…………………………………………... 57 62
2.6) Contribution of Indian Real Estate in Indian 63 63

Economy…………………………………………….
2.7) Impact of American recession on Indian Real 64 65

Estate………………………………………………..
2.8) China verses India………………………………….. 66 68
2.9) Supply of Land…………………………………….. 69 71
2.10) Infrastructure problem and its impact……………. 72 76
2.11) Raising Fund other than I.P.O. & Foreign 77 81

Investment………………………………………..
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2.12) Climatic concerns & Carbon credit………………. 82 87
3. Recent developments in Real Estate (April 2008 to 20th July)
…………………………………………………………... 88 101
4. Statistical facts and Regulatory regime………………….. 102 114
5. Observations on developments I Real Estate……………. 115 131
6. Trends & Patterns Observed……………………………… 132 132
6.1. Real Estate sector becoming more organized and transparent
…………………………………………………………….. 133 133
6.2. Global environment has major impact on Indian real
estate…………………………………………………… 134 135
6.3. Real Estate market and stock market are correlated but
rise or decline is steeper in case of Real Estate………… 136 139
6.4. Investors & speculators support real estate companies
during upturn but work against during down turn……... 140 140
6.5. There is shift expected in preference of customer towards
luxurious living, high quality branded product, studio 141 142
apartment or make shift accommodation.........................
6.6. Established Real Estate companies diversifying in unrelated

areas while companies from other sectors are entering into 143 145
real estate………………………………….. …………...
6.7. Redevelopment of slums: New Trend: Dharavi leads the way

………………………………………………………….. 146 147
6.8. Growing tie up with facilitators—like educational School
chain, Hospital chain, Hotel chain by Realtors, Foray Into 148 148
Related Areas……………………………………………
6.9. Reversal of Trend in IPO Market……………………… 149 150

6.10. Affordable Housing…………………………………… 151 151
7. PESTEL Analysis ……………………………………... 152 155
8. Swot Analysis…………………………………………... 156 160
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9. Formulation of Strategy………………………………… 161 161
10. Validation of studies through expert interview……….. 162 165
11. Conclusion…………………………………………….. 166 166
12. ANNEXURES
1. Special Residential Zones Strategy by CREDAI

2. Business plan for Special Residential Corridors
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1. INTRODUCTION
We as human being has variety of needs. Perhaps the most basic needs are food, shelter
and clothing but we all have limited income to allocate to first fulfill the primary needs
and then other needs. This require social and economic considerations. Economics
primarily deals with allocation of limit resources to fulfill our unlimited wants.
A Business Firm also operates in an open environment where it is affected by forces of

globalisation. Domestic economic factors also affect their business. The primary motive
of a business firm is to earn profit but to earn this a firm has to decide what to produce,
how to produce and for whom to produce. This all requires environmental scanning so
that limited resources of the Firm can be applied to produce a product which is desired by
society and which help firms to earn ample profit not only for its survival but also for its
growth.
Till Recently Real Estate Industry was part of Construction Industry in India. It was
somewhere in Year 2000 that the growing need for a new sectorial industry was realized
and people start recognizing a new sector industry as Real Estate Industry. Formal
industry status has till now not been awarded to it. This sector is some what different in
nature and requires a different type of Professionalization. So far civil contractors,
builders and established construction companies has taken a lead and developed
themselves as Real Estate Industry but its peculiar nature, high risk taking capacity and
interaction with government customers coupled with complications from technology and
pressure from globalization require development of highly specialized professional
culture for this Industry which is yet to be achieved. Scarcity of land, proximity to work
center and growing need to security between new developing nucleus families has put
forward a culture bounded by multi storied residential colonies against single or double
storied houses, development of Mall culture requiring a totally different shopping culture,
IT and ITES Industry requiring round the clock working World Class office spaces,
booming retail and hospitality Industry require world class retail and recreation space, all
these has put great pressure on Real Estate Industry to quickly professionalize itself.
Growing Economy of the country, rising per Capita Income, increasing Influx of Foreign
Capital, impact of globalization and continuous Economic Reforms in India has to be
deeply studied so that proper forecasting for the Real Estate Sector can be done and
strategic decision could be taken.
Real Estate Sector as a whole contributes about 7% to GDP, employs around 32 million
people directly or indirectly and accounts for about 40% of gross investment.
Sustainability of growth of Indian economy and employment of mass scale rural
population, which does not posses adequate skill, is a great challenge before this sector.
This all needs deeper professional study for future strategic decisions.
Real Estate firms were basically disorganised in India. The liberlisation of Indian
economy started in nineties but the real estate firms started taking shape only after 2002
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and got a boost when Foreign Direct Investment was permitted for them. Now they
became more transparent and organised when they got themselves listed in stock
exchange and started operating in a big way in collaboration with foreign players.
Till now there was no profession or professional branch which could have studied its
evolution, organisation and growth in a systematic manner, not only to make their
organisation more effective but to make them able to face the fierce competition. It is first
time in India that “Indraprastha University” in collaboration with School Of Planning
And Architecture has introduced a professional MBA course in real estate and I am
fortunate enough to be a student of first of its batch, so it becomes obvious to study the
real estate industry in an organised manner so as to make future firms take their decision
in a professional manner. Hence, need of this study evolved and become a matter of
prime importance.
Real estate industries in India are in business of ‘Space Selling’. The space may be
commercial one, may be industrial, may be recreational or may be residential. So far
these firms are family owned but now after their listing their size grow bigger and bigger
and professional skill is very much required to manage them. In growing Indian economy
which is now integrated with world economy, Indian real estate firms faces new
challenges of what to produce, how to produce and for whom to produce. This social and
economic understanding will be the outcome of this study.
This study will provide a deep understanding of interplay between various market forces
which have an impact on industry, will identify prominent trends and also device suitable
strategy along with a workable business plan as an end result.
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Objective of the study
The objective of this study is to do environmental scanning from the point of view of
understanding different macro economic parameters, which affects the real estate
business, so that a viable business strategy can be formulated.
Sub Objective
1) To Study economic environment of country and find out its impact on Real Estate.
2) To Study the pattern of development of sector.
3) To formulate suitable strategy for future housing.
4) To Develop Suitable Business Plan to implement the Strategy.
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Methodology
The methodology used in this project is:
1. Explorative Research
2. Interview
1) Explorative Research:
In depth analysis of following documents has been carried out to understand the history
of real estate in India, past trends and social and economic development leading to
present status.
a) Economic Times survey on Real Estate published by ET intelligent Group in

2006,covering major real estate development in India up to march 2006.
b) Ernst & Young, International consultant on Real Estate annual report on Indian
Real Estate: “Growth and new Destination” released in the month of August
2007, covering growth of real estate from April 2006 to March 2007.
c) Ernst & Young, International consultant on Real Estate Quarterly report on Real
Estate from April 2007 to March 2008.
d) Real Estate Observer, Reality Plus magazine of year 2007 to July 2008.
e) Important New papers of India like: Times of India, Economic Times, Hindustan
Times, Financial express and business Standards report on real estate from August
2006 to June 2008.
2) Case Study:
A National Seminar was organized by NAREDCO on April 21st 2008.The GOI came
out with figures of demand on Affordable Housing and appealed Real estate
Developers to participate in massive demand of Affordable Housing.
A strategy of Special Residential Corridors was conceived and presented in the

seminar.
The formulation of this strategy will be studied in the background of Strategy of

Special residential Zones to understand its viability.
A Business plan and suitable plan of action will be designed to implement this
strategy.
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2. LITERATURE REVIEW
2.1) History of Real Estate in India as evident from Economic Times

Intelligence Group Report
TIMES
MULTIMEDIA Real Estate – Construction ETIntelligence
Group
THE ECONOMICS TIMES
Following observations emerged out of study of publish literature
“The right to life is guaranteed in any civilised society. That would take within its
sweep the right to food, the right to clothing, the right to decent environment and
a reasonable accommodation to live in. The difference between the need of an
animal and a human being for shelter has to be kept in view. For the animal, it is
the bare protection of body. For a human being, it has to be a suitable
accommodation which would allow him to grow in every aspect –physical, mental
and intellectual.” (Observation of the Hon’ble Supreme Court in M/s Shantistar
Builders Vs Narayan Khimalal Totame AIR 1990 SC 630)
(Source: - ET Intelligence Group)
“Shelter – a basic human need

Article 21 of our constitution guarantees right to life or personal liberty to every
person. Several un-enumerated rights fall in these rights as the expression □ ‘right
to life of personal liberty’ has the widest amplitude. As right to shelter is a must to
enjoy a meaningful right to life guaranteed by the constitution, it also falls within
Article 21.
Defined by the WHO in 1961, housing is the residential environment,

neighbourhood, micro district or the physical structure that mankind used for
shelter and the environs of that structure including all necessary services,
facilities, equipment and devices needed for the physical health and social well-
being of the family and the individual.
Housing shortage is attributed mainly to:
(a) growth of population

(b) disintegration of the joint family system
(c) new household formation due to economic independence
(d) low level of income of families
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(e) inadequate availability of funds for housing, particularly in case of people in
the unorganised sector
(f) shortage of developed land in for housing
(g) high prices of developed land in urban and semi-urban areas
(h) migration of population from rural to urban areas in search of employment,
and
(i) the legal impediments

Housing – Legal Reforms
Specific action areas in the category of legal and regulatory reforms included in
the policy are:
(a) amendment of Land Acquisition Act or enactment of a new law for

acquisition of land for the urban areas
(b) repeal of Urban Land Ceiling Act to correct the distortions in the land market
(c) amendments in the rent control legislations to stimulate investment in rental
housing
(d) Amendment of town planning laws and land-use regulations to provide
statutory support for land assembly, land pooling and sharing arrangements.
(e) new legislation to regulate the activities of promoters/builders
(f) Simplification in the procedure of sanction of building plans
(g) conferment of homestead rights in rural areas on the landless and others
(h) introduction of speedy foreclosure procedures in case of defaults
(i) introduction of mortgage insurance by amending the act relating to insurance
sector
(j) Amendment in the co-operative laws including enactment of separate act for
housing cooperatives to encourage them to take up more housing projects
(k) reduction in the stamp duty on residential properties as also on asset
securitisation
(l) simplification of registration procedure in the conveyance of immovable
properties
(m) updating and modernisation of land records and introduction of Torren
System for land □records and little investigation
(n) enactment of apartment ownership legislations by the states
(o) amendment of municipal laws/building bye-laws and planning regulations for
urban renewal and slum improvements
Global Real Estate – The earth is not enough
With the world’s largest population, China is now emerging as a major market for
residential property. The US is the biggest market for real estate.
Key Points
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□ the size of the global real estate industry was estimated to be $332 billion
(2003), according to Data monitor. The residential market accounted for 56% of
this
□ The US is the single largest market for real estate, accounting for about one-
third of the global market
□ The US market is witnessing a consolidation – the share of the five largest
players has increased from 4% to 14% since 1991.
□ The US market is being driven by a large number of people investing in real
estate.
□ China is an increasingly important real estate market with an estimated urban
demand of 540 million square metres per annum over the next five years.
□ Growth drivers of the Chinese market are increasing urban population and
smaller family size
China
With the world’s largest population, China is now emerging as a major market for
residential property as well. Property in China is sold by the square metre. In
2004, a total of 382 million sq m of residential property was sold in China, up 44
million sq m from 2004. The average price of housing in China increased by
14.4% in 2004, and 2005 seems likely to witness a repeat. In May 2005, the
Chinese Government took several measures to ‘prick’ the housing bubble.
The most important of these measures were :
□Home buyers who sell a property within two years of purchase will pay a tax on
the sale price.
□Buyers of unfinished properties will be banned from reselling these properties
until they are completed
□Land idle for over a year will attract a tax
Some cities, such as Shanghai are also taking steps to curb speculation in
property. The city government required home owners to settle any outstanding
mortgages before they can sell the property. China’s central bank tightened
mortgage loan regulations in March by basing mortgage lending rates on regular
lending rates, essentially raising the cost of borrowing for property loans.
According to research findings taken from the Chinese industry, the urban
population of the country is expected to increase from 537 million in 2005 to 660
million in 2010. At the same time, the average household size in the urban areas is
projected to fall.
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The three major demand drivers for residential property in urban China are
expected to be the rising population, smaller family size and ageing of population.
From 2005 to 010, these three factors are expected to drop o 453 million sq m per
annum for the period from 2010 to 2015.
According to Datamonitor a research group, the size of the Chinese real estate
management and development market was estimated to $8.2 billion in 2002. It is
expected to cross $12 billion by 2007 – a growth of almost 50% in five years.
Commercial business accounts for about 57% of the Chinese market.
The traditional pattern of life in China is now undergoing a change. Earlier, the
state used to provide housing for city dwellers at very low or nominal rates.
Young people typically lived with their parents till they married and marriages
were often delayed till the couple could get a house from the local agency.
Real Estate Construction – Residential
Keys Trends
□Housing shortage of 19.4 million units, 12.7 million in rural areas and 6.7
million in urban areas
□Increasing urbanization – 27.8% as per 2001 census
□Increase in home loan disbursements – at a CAGR of 30%
□Size of home loan market was Rs 54,000 crore in FY04. Total market size could
be twice that figure
□Age profile of home buyers is decreasing
□Higher loan to cost ration
□Residential property coming up as investment option
□Trend towards township projects
□Premium and super-premium housing is growing
□Ownership of houses is increasing
□Quality of housing is improving
At the beginning of the 21st century, a little over 10% of India’s population lived
in urban areas. By 1931, the share of urban population had increased to 12% of
the total population. The real growth in urban areas started after independence. As
one would expect, with development, urban population has been increasing
rapidly and the share of urban population has increased from 23.3% in the 1981
census of 25.7% in the 1991 census to 27.8% in the 2001 census. At this rate, we
can expect the urban population to top 30% of total population by 2010.
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The levels of urbanization are the highest in the union territories and some smaller
states like Goa (50%) and Mizoram (50%). Among the bigger states, urbanization
levels are high in Maharashtra (42.4%), Gujarat (37.4%), Karnataka (34%) and
Tamil Nadu (43.9%). The decadal growth rate in urban housing over the past four
decades was highest during 1971-81 at 51.4%.
Some of the trends visible from looking at these macro number are:
□There has been a slowdown in the growth of India’s financial capital, the city of
Mumbai
□This could be because Mumbai used to be the centre for textile, chemical and
engineering industries –many of which have now shut down or moved elsewhere.
□Job creation in the new sectors such as IT and BPO is greater in other cities like
Bangalore, Pune, Delhi and Chennai.
□Pune has the second highest growth rate amongst the eight top cities over the
1991-01decade. Pune is one of the major centres of India’s IT industry but the
high growth in Pune is only partly attributable to growth from IT and BPO
industries.
□Despite earning notoriety as the ‘city of plague’, Surat’s growth rate of 85% is
by far the highest amongst all the major cities. This is attributable to employment
is gems & jewellery, textiles and agriculture related industries.
□The NCR area has been job creation in the BPO sector, As per ETIG estimates,
about 50% of India’s current 270,000 jobs in the BPO industry are based in the
NCR region.
□Some of the leading Indian BPO companies such as EXL Services and Wipro
spectramind are based in the NCR region. The software sector is not as big, but
Delhi can still boast of some big names such as HCL. There has also been growth
due to the service sector retail, multiplexes and mall.
□Apart from the IT sector, Delhi is also one o the major centre for the auto
industry. Major players in the Indian auto sector including Maruti, Hero Honda,
Eicher, Swarj Mazda and Yamaha are based in Delhi-Gurgoan.
□Bangalore’s growth is attributed primarily of the software industry. The city is

also home to some of the biggest names in the software sector such as Wipro,
Infosys and Polaris.
□In the recent past however, there have been some concerns whether Bangalore
has the infrastructure to support further growth of the software industry.
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□Hyderabad has attracted a lot of attention from the software industry over the
past few years. Apart from campuses of the leading software companies,
Hyderabad also boasts of some home-grown firms such as Satyam.
□Chennai has also seen a growth in IT related jobs over the past few years.
Growth in the BPO sector is not as impressive. However, apart from the IT
industry, Chennai is also a major centre for the auto-industry.
Large Developers – Hands On

There are only a handful of listed companies in the Indian real estate market. The
DLF Group, Hiranandani Group, Lok Housing and Constructions, and Ansal
Properties Industries are some of the well-known developers.
The Indian real estate market is unorganized. There are no large players with a
national presence. Each city is an independent market which is split amongst
dozens of builders/developers. For instance, in the city of Mumbai, no single
builder controls more than 5% of the total market. Moreover, most of the
companies operating in this sector are privately held. In contrast, China had
around 70 listed real estate companies by the end of 2003. The estimated total
market cap of these entities was in the range of $18 billion. There are a handful of
listed companies in the Indian real estate market. Some companies such as
Kalpataru, Mahindra Gesco, Unitech and Era Constructions specialize in real
estate development. There are others–particularly the Hyderabad-based Nagarjuna
Constructions and IVRCL Infrastructures. These companies specialize in
infrastructure projects but they also take up large scale housing projects from time
to time. However, their role is just construction, and not development. Larsen &
Toubro, India’s largest engineering company also constructs building, but only as
turnkey projects and not as developer. One of the construction majors –Hindustan
Construction Company –has moved into real estate sector as a developer. The
company has a 50% stake in a large township project that is being developed at a
location between Mumbai and Pune. This is a mega project spread over 10,000
acres and is to be completed in three phases. However, this remains an exception.
Commercial Market : Room with a view
The software and BPO (business process outsourcing) industries are taking up
over two-thirds of new office space that is being built. As estimated 8-10 million
sq. ft. of commercial space is added annually for the IT/BPO industry. Most of
this is in metros and Class I cities. The other major driver for commercial real
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estate is organized retail. The construction boom in India has prompted several
players to launch real estate funds
Key Trends
□IT/BPO and retail sectors to be drivers of the drivers of the commercial property
market – former in office □space and latter in commercial space
□IT/BPO industry generated a demand of 8-10 million sq. ft. per annum
□This could increase to 18-20 million sq. ft. per annum in 2-3 years time
□Bangalore, Chennai, Hyderabad and Pune account for the bulk of the IT industry
□Delhi accounts for a big chunk of the BPO industry
□Smaller cities such as Jaipur, Kochi, Indore and Bhuvaneshwar are coming up as
destinations for IT/BPO industry
□Organised retail is growing at a rapid pace and the same is evident from the
growth of retail chains and the number of malls coming up
□The current space taken up by organised retail is about 6.5 million sq. ft. with
another 40 million sq. ft. under construction
□Retailing is moving to Tier-2 cities which could contribute 20-25% of the retail
space added
FDI is Real Estate : Opportunity Knocks
With 100% FDI (foreign direct investment) in real estate now being allowed,
overseas developers are looking at the real estate market. According to the new
FDI policy, up to 100% will be allowed under automatic route in townships,
housing, built-up infrastructure and construction-development projects. Banks and
financial institutions have also begun to invest in funds floated by venture capital
firms
Key Trends
□100% FDI permitted in real estate sector

□Minimum project size reduced to 25 acres from 100 acres for township projects
□Minimum project size is 50,000 sq metres for commercial construction
□Investment subject to minimum capitalization of $10 million for subsidiary
companies and
□$5 million for joint ventures
□FDI in retail could touch Rs 4,000 crore
□Investment limited by availability of Grade-A tenanted buildings
□Indian banks and financial institutions are also setting up VC funds for real
estate
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FDI in Real Estate
The government cleared 100% FDI (foreign direct investment) in the construction
sector under the automatic route in February 2005. Though foreign investment
was allowed in the sector earlier as well, too many restrictions were preventing
the flow of FDI. In order to prevent foreign investors from speculating in the real
estate market, sale of undeveloped land has been prohibited. Minimum land area
to be developed under each project will be 10 hectares in the case of serviced
housing plots, and 50, sq mt in the case of construction-development projects. In
the case of combined projects, any one of the above two conditions will suffice.
The investment will be subject to a minimum capitalization of $10m for wholly-

owned subsidiaries and $5m for joint ventures with Indian partners. The fund will
have to be brought in within six months of commencement of business of the
company. Original investment cannot be repatriated before a period of three years
from completion of minimum capitalisation. But the investor may be permitted to
exit earlier with prior approval of the government through the FIPB.
The investor will not be permitted to sell undeveloped plots. □ ‘Undeveloped

plots’ mean areas where roads, water supply, street lighting, drainage, sewerage,
etc. have not been made available. The investor will have to provide this
infrastructure and obtain completion certificate from the concerned local body
/service agency before he is allowed to dispose of the plots. Projects chosen for
investment by foreign companies shall conform to the norms, including land use
requirements and provision of community amenities and common facilities, as
laid down in the building control regulations, and bye-laws and rules of state
government, municipal bodies or local authorities. In terms of treatment, FDI
projects will be accorded national treatment on par with those of local developers.

Real Estate Construction Industry – An Overview
That the cities can be dubbed as ‘engines of growth’ is historically acknowledged

in most nations of the world. The real estate construction business plays a key role
in the development of cities. At a macro level, increases in urban population and
rising incomes have meant that the housing business has boomed. On the housing
and residential front, the growing middle class (with its increasing purchasing
power and growing number of nuclear families) and a softer interest rate regime
have meant that the investment in this sector has grown at a rate of over 18% on
an average during the last couple of years. Increasing employment opportunities
in urban areas – particularly in the information technology (IT) and back office
processing (BPO) industries, has increased the demand for real estate. Finally, an
increase in income also means higher purchasing power and increased
consumption, which results in developments of commercial property such as
malls etc.
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India’s Urban Scenario
As per the data of Ministry of Urban Development, the total number of towns and
cities in India is 4,378. There are a total of 35 cities with a population exceeding 1
million. The increase in urban population has been higher than he overall growth
rates – urban areas accounted for 23.3% of the total population in 1981, which
had gone up to 25.7% in 1991. As per the 2001 census, this had increased to
27.8%. In absolute terms, the urban population increased from 159.5 million in
1981 to 285 million in 2001.
A rapid rise in population translates into higher demand of dwelling units for
residential purposes. The government alone cannot meet this demand for housing.
As per the 1991 census estimates, there was a shortage of 8.2 million dwelling
units in the urban areas, which had come down to 7.1 million in 2001. In recent
times, the focus of the government has been on creating strong public-private
partnerships for tackling the housing and habitat issues.

Trends in the Housing Sector
Reliable estimates are not available on the overall size of the housing sector.
However, there is data available on the number of dwelling units and the type of
construction. As per the census data, the total occupied housing stock in India
added up to 187.1 million in 2001. Cities accounted for 52 million –about 27.8%
of the total, up from 38.7 million in 1991. In the urban areas, a little above 79.2%
of the houses were pucca structures. Census data reveal that there is clear trend
towards increased ownership of homes. In 1961, about 54% of households in the
urban areas lived in rented accommodation. This figure has been falling steadily
and as per the 2001 census, this was down to 28.5%.
Another clear trend is the increasing number of pucca houses. In 1961, only 45%
of the houses were pucca structures. The figure increased to 63.8% by 1971 and to
79.2% by 2001.
Another interesting trend visible from the census data is the fact that with time,
there is a shift towards larger dwellings. For instance, in 1971, 50% of all urban
households occupied one room. This number fell to 45.8% in 1981 and was down
to 35.1% in 2001. A similar trend was observed in the percentage of families
occupying two rooms. On the other hand, there has been an increase in the
number of families occupying three, four or more rooms.
Since 67% of all urban households still occupy two or fewer rooms, there is
plenty of scope for growth as they upgrade to larger dwellings.
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Government Initiatives – Housing in the Five-Year Plans
The policies of urban development and housing in India have come a long way
since five year planning has been initiated in the country. The pressure of urban
population and lack of housing has been evident since the 1950s. We look at how
the housing policy in the country has evolved over the years.
The First-Year Plan (1951-56) – Emphasis was given on building different

institutions and construction of houses for Government employees and weaker
sections. The Ministry of Works & Housing was constituted and National
Building Organisation and Town & Country Planning Organisation were set up.
Sizeable part of the plan outlay was spent for rehabilitation of refugees from
Pakistan and building the new city of Chandigarh. An industrial Housing Scheme
was also initiated.
The Second Five-Year Plan (1956-61) – The Industrial Housing Scheme was
extended to cover all workers. Rural Housing, Slum Clearance and Sweepers
Housing Schemes introduced. Town & Country Planning Legislations enacted in
many states and organisations were set up to prepare Master Plans for important
towns.
The Third Five-Year Plan (1961-66) – A Scheme was introduced was extended
1959 to give loans to State Governments for a period of 10 years for acquisition
and development of land to make available building sites in sufficient numbers.
Master Plans for the State capitals of Gandhi Nagar and Bhuvaneswar were
developed
The Fourth Five-Year Plan (1969-74) – The Plan stressed the need for dispersal of
population from larger cities. The creation of smaller towns and planning the
spatial location of economic activity was seen as the means for this. Housing &
Urban Development Corporation (HUDCO) was establishment to fund housing
and urban development programmes.
The Fifth Five-Year Plan (1974-79) – A Task Force was set up for development
of small and medium towns. The Urban Land (Ceiling &Regulation) Act was
enacted to prevent concentration of land holdings in urban areas such that land is
available in urban areas for constrution of houses for the middle and low income
groups.
The Sixth Five-Year Plan (1980-85) – The Integrated Development of Small and
Medium Towns (IDSMT) was launched in towns with population below one lakh
for provision of roads, pavements, minor civic works, bus stands, markets,
shopping complex etc. Positive incentives were proposed for setting up new
industries and commercial and professional establishments in small, medium and
intermediate towns.
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The Seventh Five-Year Plan (1985-90) – The National Housing Bank was set up
to expand the base of housing finance. NBO was reconstituted and a new
organisation called Building Material Technology Promotion Council (BMTPC)
was set up for promoting commercial production of innovative building materials.
The National Housing Policy (NHP) was announced in 1988. The National
Commission of Urbanisation submitted its report.
The Eighth Five-Year Plan (1992-97) – The role and importance of the urban
sector for the national economy was recognized. Thus, the urban areas were to be
enabled to absorb larger increments to the labour force. Key issues in the
emerging urban scenario were identified including the supply of infrastructure
services, proliferation of slums and urban employment. The Nehru Rojgar Yojana
(NRY) was launched.
The Ninth Five-Year Plan (1997-2002) – It was estimated that Rs 250, 000 crore
shall be required for urban infrastructure but now more than 10% would be
available from government sources.
The Tenth Five-Year Plan (2002-2007) – The Tenth Five Year Plan estimated the
urban housing shortage at 8.89 million dwelling units in 2002. The total number
of houses that would be required cumulatively during the Tenth Plan period was
estimated at 22.44 million dwelling units. The investment requirement from
public sector institutions was estimated at around Rs 415, 000 crore. The
compulsion to access financial resources from the market and induce the private
sector to participate in housing programs was recognized. The government with
an annual allocation of Rs 500 crore has also approved the Urban Reforms
Incentive Fund.
The National Housing and Habitat Policy 1998
The development of satisfactory housing is always the priority in both policy

formulation and its implementation. The major obstacle facing public initiative
for housing is the uncontrolled population explosion, especially in the urban
areas. Hence, the constant migration of people from rural areas to cities in search
of jobs puts housing and basic services in the urban areas under much pressure.
By 1997 India had an estimated housing shortage 13.66 million units, out of
which 7.57 million units were in the urban areas. More than 90% of this shortage
was in the low income category. An investment of Rs 151,000 crore (about $34
billion) was estimated as the requirement to bridge this deficit. It was realized that
no significant headway can be achieved without massive participation of the
private sector. This called for legal, regulatory reforms and fiscal concessions to
encourage non-government sector to take up land and focus on investment and
19
construction real estate. In short, it envisaged the changing role of the government
from a regulator to a facilitator.
The National Housing Policy of 1998 was formulated to ensure sustainable

development of infrastructure and for fostering private-public partnerships for the
purposes of housing. Through the policy, the government declared HOUSING
FOR ALL as a priority and set a target of construction of two million houses
every year, of which 0.7 million are to be constructed in the urban areas.
Since ‘housing’ is a state subject, the primary responsibilities of fulfillments of

the physical targets are with the respective state governments.
20
2.2) Maturing Real Estate from the eyes of Ernst & Young annual
report
Characterized by massive scale of development, significant price appreciation across
asset classes and geographies, rising occupancies and sustained end user demand, free
cross border flow of real estate capital ,entry of large international player ,billions of
dollar raised through IPO’s and several dynamics policies and regulatory interventions,
the Indian real estate sector has witnessed frantic activity throughout the last year.
• Increase spending trend by Indians and rising tourist flow into the country
fuelled the demand for retail and hospitality space.
• To cool off the substantial price appreciation and ensure sustainable liquidity
in the sector, the RBI, the apex bank of the country, increased interest rates as
well as risk weightages for loans to real estate and restricted real estate
companies from borrowing debt in international markets.
A) SCALING NEW HEIGHTS: Sectoral snap shots
• Driven by broad based economic growth, Indian real estate sector has
witnessed phenomenal growth across all asset classes-commercial, retail,
residential, industries and hospitality. Real estate continues to be chosen
Investment Avenue as the yields are visibly higher than other investment
options. it can further be attribute that yields from investment in Indian real
estate are among the highest in the world.
• The commercial real estate segment witnessed a dominance of IT/ITeS –

accounting nearly 70-75% for total commercial office space absorption
followed by Banking, Financial Services and Insurance (BFSI),
Pharmaceutical and telecom in most cities.
• Rental and capital values of the grade A commercial space witnessed steady
appreciation in most parts of the country; highest appreciation for the most
cities was witnessed in last quarter of 2006
21
14%
23%
Mumbai
10% Pune
Kolkata
Chennai
8% 8% Banglore
Hydrabad
NCR
11%
26%
Commercial office Space Total Absorption – 45.5 million sq. ft (2006)
Secondary Business districts (SBDs) benefited from limited supply in CBDs and
witnessed high appreciation in rental and capital values.
Favorable policy change in the form of reduced minimum area requirements for
FDI compliant township projects, coupled with robust demand from both end
users and investors, resulted in explosive growth of residential segment in the past
year. Hence strong demands ensure healthy price appreciation.
It is believed that the hardening interest rates in 2006 due to tightening of lending
norms by the RBI and hike in provisioning requirements for banks on home loans
(for home loan above 20 lacs)had some dampening impact on the housing
demand, through overall absorption remained healthy.
With the home buyer profile getting younger, there was a visible shift in the
product format and integrated development emerged popular with discerning
customers.
Residential developments remained concentrated in the peripheral regions of

major metropolitan cities. Which can be attribute to availability of land and
proximity to upcoming knowledge industries. Regional developers dominated the
supply in the residential markets and offered products in premium as well as mid
segment category.
Commercial retail:
90% of commercial retail supply was primarily concentrated in the top seven
metropolitan cities as shown in the chart.
22
• NCR witnessed highest absorption of organized retail mall space (8.2 mn
sq. ft.) followed by Mumbai (4.1 mn sq. ft) Hence we conclude that
Investment yields from commercial retail space in top Indian cities
remained amongst the highest in the world.
• Bangalore emerged as a leader in terms occupancy rate. This could be
attributed to economic growth led by the IT industry in the city.
• Low vacancies in all hotel categories, serviced apartment concept received
a major boost.
• There were also some significant joint venture and strategic alliance
between leading developers and global hospitality management groups.
SEZ and Industrial Parks:

Large numbers of prominent SEZ approvals were granted by the Government of
India. Almost 90% of the SEZs approved were sector specific. The maximum
number of approvals are bagged by Maharashtra(75), Andhra Pradesh(61), Tamil
Nadu(53) & Karnataka(36).Now government has withdrawn the freeze on new
approvals however, at the same time has tightened rules by capping the land size
to a maximum of 5,000 hectares.
Apart from SEZ developers, contractors appointed by an SEZ unit to be accorded

exemption on construction material purchase.
Pharmaceuticals
Biotechnology
4% 5% 2%
5% Gem & jew ellary
4%
Engineering
11%
Textile
69%
Others
IT/TES/Electonics/Electronics
hardw are
B) REGULATORY AND POLICY BUZZ
• Industry regulator shaping up:
The initiative by the Government of India on the regulatory front was the preparation of
the draft Real estate management (regulation & control) Bill. The initiative expected to
23
fill in the long standing gap of absence of any regulatory body to monitor implementation
of projects. This would result in transparency in system, better quality standards and
ensuring structure safety of the building.
• National housing & Habitat urban policy:
A new centrally sponsored scheme to provide an interest subsidy of 5% per annum for a
period of 5 years to commercial lenders for lending to economically weaker section and
low income group segment of the urban areas.
Not only this ministry of rural development,GOI,is examining the “amendment to land
Acquisition Act” the amendment includes a provision that makes it mandatory for the
beneficiaries to develop wasteland in exchange for allocation of farm land .The objective
of this review is to ensure that the total agricultural land in the country does not shrink.
• Integrated township policies:
State government of Rajasthan, Gujarat & Maharashtra have released integrated township
policy.
• Credit to the Real estate sector :measure to cool off the market:
As indicated in a graph ahead, the commercial real estate sector has witness an extra
ordinary rate of credit expansion during the last year. Further the credit growth for sectors
such as construction, retail and housing sector has been phenomenal, which in turn has
fuelled the over all demand.
Engineering 15.3
infrastructure 23.2
Food processing 23.6
Chemicals 26.9
Agriculture 30.8
Housing 32.3
Textiles 34.2
retail 34.3
Construction 49.5
Construction/real estate 83.9
0 10 20 30 40 50 60 70 80 90
In % year on year, Credit Growth Rate by Sector,

Source :RBI
24
It also raised risk weight on exposures to CRE from 125% to 150%.All these measures
have been introduced to rein in the unbridled growth of the industry and to curtail
liquidity in the real estate sector.
• Union Budget 2007:impact on real estate:
Direct Tax:
There is no extension of tax holiday under section 80IB (10) for small sized housing,
which impact developer and state housing boards. The tax holiday would not be available
for projects whose first sanction/approval from local authorities is obtained after March
31, 2007.
Indirect Tax:
Service Tax has been levied on services relating to renting of immovable property.
Service tax has been levied on services relating to execution of a work contract.
C) BROADENING INDIAN REAL ESTATE CAPITAL MARKET:
Funds raised in million
2500
2000
1500
1000
500
0
Parsvnath Developers
Lanco Infratech
Housing development &

Sobha Developers
Omaxe Limited
DLF Limited
Unity Infraprojects
Purvankara Projects
Akruti Nirman
Infrastructure Ltd
25
• Private Equity:
Private equity emerged as one of the most preferred options for the foreign investors
to enter the Indian real estate market. Real Estate private equity funds played an
aggressive role in the 2006-07 and likely to be continue to dominate the real estate
transaction activity in 2007-08.
Some of the prominent large private equity deals in the Indian real estate sector
during the last year were:
1) Avenue Capital’s
2) DE Shaw’s USD
3) IL & FS’USD
4) Morgan Stanley Real Estate USD
5) TPG-Axon Capital’s
6) Blackstone Group
The activity is not only limited only to International private equity player and
financial institutes. Several Indian financials institutions have raised real estate
focused funds and are aggressively looking for investments across asset classes and
geographies within India.
D) URBAN GOVERNMENT REFORMS…..DRIVING UP THE REALITY

MARKET:
Governments are expected to drive up the socio economic growth of these cities
which in turn will impact the local real estate market dynamics.
Most of these master plans are intended to increase land supply.
• Resent Development
- The notification of 2021 Master plan envisages private sector participation in land
acquisition and housing in Delhi ending DDA monopoly.
-As per the new Bangalore master plan, 2015, FAR has been increased in the range
of 2.75-3.5.
-The Government of Maharashtra plan to repeal the Urban Land Ceiling and
Regulation Act.
• Jawahar Lal Nehru national Urban Renewal Mission
63 mission cities with focus on efficiency in planned urban development. During the
year 2006 the sector witnessed increasing interest from several international
developers originating primarily from Middle East. In addition to developers, several
26
contracting and infrastructure development firms also entered India to grab a pie of
significant development pipeline in the country.
E) STRATEGIC ALLIANCE:
This is the new mantra for real estate that is trend towards strategic alliances and
collaboration. Most of the alliances are for the objective of fulfilling the funding
requirement, mitigating risk in projects with high gestation periods, obtaining
technical expertise, enhancing execution capabilities, brand equality etc.
Several International developers prefer to follow the strategic alliance model while
bidding for large scale development projects on PPP model in India. The two most
prominent alliance were: Emaar-MGF 50:50 JV faith leading Australian contractor
Leighton Holdings Ltd. and DLF Joint venture with Laing O’Rourke of UK. Omaxe
has tie up with Vishal Retail Ltd. to develop retail properties across 50 metro station
in Delhi.
Investor Perception towards Real Estate

Real estate is a capital intensive sector. Being so, availability of capital is one of the
important catalysts for the growth of the real estate sector. Hence, while evaluating the
opportunities and formats, it is essential to seek investor prospective on the same. Now
we will find out the following key point:
1) Prospective on Indian Real estate

2) Preferred model of investment in India real estate.
3) Emerging investment destination.
4) Asset class wise investment preferences
5) key risks and concerns in the Indian Real estate market
A survey which was conducted by Earns & Young to find out the answer of above
mention questions. Following points were emerging through this survey:-
27
1) Prospective on Indian Real estate Market:
1.1. On real estate market vis-à-vis other development counties
Excellent 37%
Very Good 42%
Good 16%
Average 0%
cant say 5%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
79% of the survey respondents rate India as either as very good or as an excellent
investment destination.
1.2 On Growth trajectory of the Indian Real Estate sector;
one year 16%
2-3 year 26%
3-5 year 21%
More than 5 year 11%
0% 5% 10% 15% 20% 25% 30%
63% of the respondents feel that the current growth momentum witnessed in Indian realty
would continue for next 5 years with a sustained growth of 25%.
28
1.3 On the expected Yields in the real estate sector
Cant say 6%
Mid term 50%
Short term 22%
Long term 22%
0% 10% 20% 30% 40% 50% 60%
50% of the respondents feel that the expected yields in the real estate sector are mid term.
2. Preferred model of investment in Indian real estate.
2.1On the preferred mode of investment:
26%
SPV Level(with single

asset holding project)
Enterprise Level
5% SPV level (with multiple

asset holding)
69%
95% of investors surveyed prefer to take the SPV route for investment.
29
2.2 On the Preferred Investment instrument:
5% 9%
14% others
Equity
Fully convertible
debentures
Differential Equity
45%
27%
Fully convertible prefernce
share
Equity emerges as a most preferred investment instrument amongst the investors.
3) Prospective on the preferred Investment Destination
3.1 On their current portfolio of investors
40% 37% 37%
35%
30%
26%
25%
20%
15%
10%
5%
0%
Tier I Cities only Tier I & II Cities only Tier I ,II& III Cities
The current portfolio of the investors is dominated by investment in Tier I cities.
30
3.2 On their indices impacting city evaluation:
Real estate
dynamics(demand supply
5% scenario,price
5%
movement,future outlook
9% etc)
32%
Economic and Industrial
Profile of the city
Social and Urban

infrastructure in the city
49%
Government
initiatives(inverstor
Friendiness,educational
Around 45% of the respondents ranked economic & industrial profile as the most
important parameter while evaluating city for investment.
3.3) On the presence of IT/ITeS Industries impacting investment decisions:
26%
42% Indifferent
no
yes
32%
42% of the respondents expressed that the presence of IT/ITeS industry has an impact on
the investment decision. Though IT/ITeS has remained a driver for Indian realty, a
sizeable of investors is willing to look beyond the IT/ITeS industry.
31
4. Prospective on Asset class:
4.1 On the current investment exposure to various Asset class:
6%
18%
Induatrial /IT Parks

Commercial office space
12%
Commercial retail
residential
Hotel/Resorts
6%
58%
Residential segment emerge as a clear winner with 58% of the total investment portfolio
into this residential segment. Primarily due to high returns and ease of exit, Residential
has remained the favorites asset class of the investors in Indian real estate.
4.2 On asset classes set to witness stagnation in returns:

45% 42%
40%
35%
30%
25%
21%
20%
15% 11%
10%
5% 5% 5%
5%
0%
e
rks
ts
l
rs
tai
ac
tia
or
pa
he
re
sp
en
es
Ot
l
sid
al
cia
e
l/R
fic
tri
re
er
te
us
of
mm
Ho
ind
l
cia
Co
d
er
an
mm
Z
SE
Co
Commercial retail will witness maximum stagnation in returns over the next 2-3 years,
followed by commercial office space with 21%.
32
4.3 Views of investors on the asset classes attracting investment in future:
Large format integrated

townships(>2000 acres)
0% 7%
20% Healthcare
13%
(hospitals)infrastructure
Logistic & Warehousing

infrastructure
Mass housing .slum

rehabitation
education
(Schools/institution
60%
/universities) infrastructure
others
Logistic and warehousing seems to be the next buzzword in the real estate sector.
4.4 Views of investors on the Preferred Asset class in Tier II & Tier III cities
6% 0%
11% Residential
0% Commercial office space
Retail & Entertainment
Others
Hospitality & Industrial

Parks
83%
83% of the respondents ranked residential development as their most preferred asset class
in Tier II & Tier III cities.
33
5) Key Risks and Concerns in the Indian Real Estate Market
5.1 On the impact of currency fluctuations:
45% 42%
40%
35%
30% 26%
25% 21%
20%
15%
10%
5%
5%
0%
Negative impact Negligible impact positive impact cant say
42% of the respondents ranked that currency fluctuation have negligible impact on the
investments.
5.2 On biggest deterrent to deploying funds in the Indian real estate market:
31%
Significantly High
High risk associated with

50%
land ownership
Lack of quality deals that
fiits investment profile
19%
Almost 50% of the respondents believed that significantly high (land) valuation
expectation of the Indian developers is the most significant deterrent to fund deployment.
Around 30% believed that lacks of quality deals that fit investment profile is the most
significant deterrent to the investment.
34
Land price has gone through the roof and investors are deeply concerned about deploying
funds at such valuations.
5.3 On the risks in the real estate business in India:
6%
12%
Demand & supply
dynamics
41% Land title & ownership
issue
Pace of Ecomomic
Reforms
Political Environment
41%
Land title & ownership issue, demand & supply dynamics are the main risks faced by the
real estate business in India.
CHANGING LANDSCAPE
• As the Indian real estate sector continue to trend the high growth trajectory ,the rules of
the game have been changing faster than ever before ,with the entry of global player
,inflow of foreign capital geographic diversification and introduction of reforms the
sector is poised to witness significant structure changes in the coming years .New
avenues of the business are likely to throw up new opportunity and challenges .The real
estate players having long term interest in the sector may have to keep pace with the
development by redefining markets. Adopting differentiating product formats and
ensuring quality deliverables to meet the expectation of a discerning customer.
Strategies adopted by the Government, developers and investors to counter these

hurdles is expected to play a defining role in shaping the future of the sector and impact
its sustainability.
Currently Indian real estate is in focus but we are not sure it will sustain how long .this
is due to expose Indian real estate to global liquidity and interest rate related risks,
besides threat from other emerging markets.
• The apex bank has been concerned about the growing exposure of SCBs (Scheduled
commercial banks to real estate constituting close to 91% of total lending to sensitive
sector. In 2006-07 the RBI constrict funds flowing into real estate sector are:
35
1) A clamp down on foreign debt into real estate.
2) Increase in risk weight for loans to commercial real estate to 150 %.
With real estate prices continuing to appreciate, we foresee the policy baton tightening
in the near future as well. Wit restriction on bank lending, real estate developers may
have little option and hence might resort to more expensive financing option.
• The Debt burden:
Indian real estate companies tend to have a high debt component in their capital
structure, thus restricting these companies ability to raise debt and securitize their asset.
• Pressure on margin: Growing hurdles for developers:
Another significant challenge that Indian developers have been witnessing in the last
Few years is the increasing pressure on their profit margins due to rise in input and
Overhead cost.
-It is estimated that cost of cement has increased by 30 % and that of steel by 10% as
Compare to last year.
-Developers tend to face stiff challenge on rising overhead costs related to human
resourcing and marketing.
-There is also stiff increase in marketing and advertisement expenditure.
• Execution challenge-capability constraints:
With limited presence of large organized construction companies possessing adequate

Technical, project management & special construction capabilities.
UPCOMING OPPORTUNITIES
Mega Integrated Townships
The growing rate of urbanization in India and subsequent pressure on infrastructure

is expected to drive the advent of mega integrated township projects across India.
High economic growth has resulted in higher rate of employment, increase per capita
income, and accelerated pace of development hurdles of the cities.
The traffic congestion, increasing travel times constrained power and water supply
and unavailability of land fills for municipal solid waste disposal are some of the
36
problems. Most of the townships being developed in the country till date are in the
range of 100-500 acres.
So, we can say that the sheer size and population of the country buoyed by a growing
economy is envisaged to present an unprecedented range of opportunities.
Urbanization, demographics, social and physical infrastructure are the key enablers.
The biggest push to the real estate sector in India is expected to come from huge
investment expected in infrastructure over the next four to five years. For this PPP
approach is best suited. As it supplements scarce public resources, create a more
competitive environment and help to improve efficiencies and reduce costs.
37
2.3) Ups and down from the real estate from the eyes of Ernst &
Young Quarterly reports
• Quarter ended June 2007
“Opportunities and challenges for the Indian Hospitality sector and its impact on real
estate sector”
The industry continue to witness a high level of activity in all areas-investment ,alliances
& new projects,retail,hospitality segments are witnessing increased development action.
Israeli company has started showing keen interest in the Indian real estate industry.
The RBI issued a notification banning real estate companies from raising funds through
ECB route even for developing integrated townships. RBI reduced risk weight on
housing loans up to 20 Lacs to individuals. The NHB has launched RESIDEX ,an index
to track the price movement in real estate ,especially housing prices for five cities:-Delhi,
Mumbai, Kolkata, Bangalore & Bhopal on pilot basis.
The quarter witnessed DLF’s IPO, the largest ever by an Indian company. Real estate
index closed the quarter with more than 30% increases from the opening value. In
contrast, the BSE sensex registered only 19.7% increase during the same period.
Challenges:
1) Land prices in India have escalated so rapidly today, that it is unviable to put up hotel
which is not a 4 star or above, in any of the top ten major cities in India.
2) A major bottleneck relates to government approvals and red tape. Since land is a state
subject, each status has its own endless, and often, incomprehensible rules relating to the
building and operationalizing of hotels.
3) The time taken to get approvals is generally more than the time taken to build a hotel.
4) Availability and cost of debt is also a grate challenge. Since hotels are treated as real
estate by banks, access to debt is difficult and the cost of leverage is high.
5) last is the absence of the basic infrastructure such as power ,fuel & water. All hotels in
India have to provided their own infrastructure/backup.
38
Regulatory update:
• Government approves plan to build 550,000 homes
The Government announced plans to build around 550,000 low cost houses for
the economically weaker sections in the next two years and aims to add nearly 1
million additional houses every year through PPP model to meet the housing
shortage.
• RBI notifies ECB guidelines for real estate
The RBI issued a notification banning real estate companies from raising funds
through the ECB route for developing integrated townships.
• RBI weight on homes loans trimmed to 50%
The RBI reduced the risk weight on housing loans up to Rs. 20 lacs to
individuals from the existing 75% to 50% to make them more attractive to
borrowers. It is also an encouragement to the housing sector as banks now have
an incentive to offer small value housing loans to their customers.
39
• Quarter ended September 2007
This report rolls out India’s most scientific and comprehensive framework to
identify the promising urban agglomerations in the country for the real estate
investments.
The National housing bank launched NHB RESIDEX, an index to track the price
movement in real estate, specially housing prices for five cities.
Ernst & Young Real estate index which closed the quarter with more than 175%
increase from the opening value. In contrast, the BSE Sensex registered only a
20.8% increase during the same period.
MOVING UP THE VALUE CHAIN:
1) First prominent trend observed is the forward and backward integration by

several firms in the real estate value chain. Infrastructure & Construction giants
playing a big role in the indian realty Sector.
2) Major corporate houses have commenced their foray into retailing & finance.
3) The project portfolios of major national construction giants such as Unitech,

DLF, Sobha, Parsvnath & Ansal have scale up drastically.
4) The real estate sector also witnessed diversification of project portfolios by

some of the major developers.
BROADENING OF CAPITAL MARKETS:
The IPO market has witnessed the shifting of focus to the realty sector in the year
2006-07.over 18 real estate and construction companies got listed in August 2006
to August 2007 and raised over USD 4,356.30
The listing of DLF, the largest Indian real estate developing country, launched
Indian largest ever IPO of over 2 billion, had impact on the market.
Not only this there were also listing of several other real estate companies on the
offshore exchanges like AIM, Singapore listed REIT, Singapore Stock exchange
etc.
40
PATH OF THE FUTURE
Real estate sector has grown very rapidly and that the window of opportunity is
limited in terms of time and finances. However, the six most developed markets
in India have already started becoming highly competitive.
IT /ITeS sectors shifted towards cities like Jaipur, Pune, Kochi etc .A shift
towards these cities with the medium term potential is perhaps primarily due to
the spill over of demand for commercial office space and to leverage inherent cost
and labor advantage.
Thus it make business sense to explore relatively new markets. The economic,
social and urban growth are critical growth factors for the city growth and an
assessment of this potential in different cities across India, could assist
Government ,Industry, developers & Investors to systematically plan the inflow of
investment and the development of the cities.
INDEX COMPOSITION
To evaluate each city, five critical indices were created based on essential
parameters on which any city is reliant to develop and grow.
City Prosperity, Urban Governance, Business Environment, Infrastructure and

quality of life. These were primarily based on general affluence of the residents
,government policies and regulations .Which influence the investment climate
,confidence of the private sector in investing in the city ,level of existing social
and physical infrastructure and the general quality of life in the city.
REGULATORY UPDATE
1) Karnataka revises land acquisition policy:
The Government of Karnataka revised the land acquisition policy by making it

mandatory for projects being set up on agriculture lands to offer 20% of the
developed property to farmers from whom the land has been acquired.
2) Real Estate company plan to enter into telecom sector:
Real estate Company like DLF, Unitech, Parsvnath and India bulls, announced
plans to enter the Telecom market
Source: The Economic Times, 25 September 2007
41
3) 12 Realtors join for Satyagriha alliance
Satyagriha to build 342,000 homes through about 100 projects across 15 cities in
India over the next six years.
4) DLF to develop middle income housing
DLF announced plans to develop middle income housing initially in cities like
Bangalore, Chandigarh, Chennai, Indore and Kolkata. The projects would
typically be 3 bed room apartments and would cost between INR 4.5-5 million.
5) State may acquire 30% land if private developer has 70%
The group of Minister on the relief and re habitation policy, Government of India
,is likely to allow the state government to acquire 30% of the land for SEZs if the
private developer has acquired the remaining 70%.Earlier,the Ministry of Rural
development was for the ratio of 90:10
42
• Quarter ended December 2007
“Indian Real Estate private Equity: A year in preview”
RBI announcing the guidelines for real estate investment trusts and repealing of the
ULCRA in Maharashtra.
The E & Y Real estate Index closed the quarter with over 42% increase from the opening
value. In contrast, the BSE Sensex registered only an 18.3% increase during the same
period.
In overall scenario the Industry growth potential is positive in Year 2008.
INDIAN REAL ESTATE PRIVATE EQUITY
With the DLF listing energizing the market, several developers proceeded to go public in
India. Creating a robust market place in retail investors to participate in the growth story.
This is expected to be broadened in 2008 with the advent of the REIT structure.
In the year 2007 several challenges also emerged like: rapidly rising prices of the
commodities, current fluctuations, Interest rate rising by 25 basis point and the global
specter of the credit crises all managed to put fund manager on defensive footing.
In 2008 three kit trends might be emerging which will help in shape the strategy for many
fund managers.
1) There is an increasing amount of attention to execution risk and physical underwriting.

Taking greater care to analyze the execution risks of a proposed project with careful input
from in-house civil engineers, architects and research professionals. This is increasingly
important as projects are becoming delayed due to a dearth of qualified project
management companies.
2) Funds are looking to blend the risk profile of their investments by coupling execution
and timing risk with price and valuation risk. We may look at investing in suburban
township, in which case the basis on the land is low and therefore our pricing risk is
mitigated ,however such a project is typically larger in terms of square footage and
requirement of new infrastructure and would require phasing and more diligent project
management.
3) Funds are increasing looking to invest in mixed use development projects. We have
found that there are synergistic benefits to having different asset types co-located. For
example, proximity of retail and office can drive revenues in a hotel while also boosting
residential pricing.
43
• Quarter ended March 2008
1) Source: E & Y Quarterly Report
This quarter saw the country’s biggest land deal, where a 95 acres commercial plot in
Noida was sold at over INR 50 billion.
The US sub prime crisis appears to have affected the realty stock in India. The Ernst &
Young real estate index decline by 44% during this quarter in comparison to the decline
of 24.3% in the overall market represented by the SENSEX.
2) Source: Indian Residential Property Market – Mid income Segment”
The housing sector is mirroring the rapid economic growth that the country is
experiencing. In 2006-07, while GDP recorded a 9.4% growth ,real estate grew by
11%.Residential segment is lending the growth trajectory of the fast expending real estate
demand originates from this sector.
Owning to sharp run in real estate prices over last couple of years, majority of the
developers graduated to high end housing tom fetch higher margins for them selves .In
the process the mid income homes segment got ignored ,leaving a large latent demand
waiting to be tapped.
The demand growth in mid income housing has also been fueled by easy availability of
home loans with tenors up to 20 years. This made housing affordable to the large section
of middle class, specially young working population ,who could now dream of owning a
house at the starting of their career. In the last financial year, home loans by the banking
sector grew by almost 80%.The young working population is also less price sensitive
and less averse to taking risks.
A Mckinsey report mentions that Indian will be world’s fifth biggest consumer market by
2025 and in next three years ,200 ,000 homes will be built in several biggest cities for the
middle and high income groups costing between INR 2.5 -5 million.
DLF strategy on mid income homes is to provide affordable housing to families with post
tax income of INR 1-1.2 million per annum. Based upon an affordability factor of 3.5 -4
,the mid income homes from DLF comes at a price point of INR 4-5,with sizes varying
from between 1250 sq ft.
A UN study opines that India’s rate for urbanization is faster than the rest of the world
and as per the state of the world population report 2007, Indian population in urban areas,
which currently is less than 30%, is expected to rise to 40.7% by 2030.This growing
urbanization will result in an incremental demand for housing in suburban locations of
urban areas.
44
3) In focus: Mid income housing
“The growth of the urban middle class is the principal demand driver for mid
income housing”
The demand for residential real estate has been fuelled, in general ,by increasing
urbanization, rising income levels, decreasing household sizes ,easy availability of home
loans, and tax incentives for borrowers.
There is huge shortage in Affordable Housing. Nearly the entire shortage falls in the
affordable housing segment. The provision of such housing has historically been the
responsibility of the Government and affiliates. Affordable housing does not provide high
margins.
3.1) Increasing urbanization:
Increasing urbanization and rising income levels have led to the growth of the middle
class segment in India. The degree of urbanization in India has increased steadily to
27.8% in 2001 and is expected to be reaching 33.4% by 2026.
3.2) Rising income leading to growth of the middle class:
Due to robust growth in the service sector and the economy as a whole has resulted in
rising house hold income level in the country. The number of middle class households
(INR 2,00,000 to INR 1,000,000) and rich households (INR <1,000,000) in the country.
By FY10 ,India is expected to have 28.4 million class and 3.8 million rich households.
3.3) Rising number of nuclear family account:
Nuclear family account is almost two third of the total urban households in India. The
disintegration of joint families has led to an increase in the number of first time home
buyers. This trend expected to accelerate, resulting in higher demand for small houses in
future.
3.4) Rising property price & home loan rates:
Property price have increased at a CAGR of 15-20% in many micro market in the country
over the past five years.
Homes loan rates are much lower than the rates in early 1990.They are steadly increasing
due to RBI measure to curb inflation. This has affected the demand in all major cities.
45
3.5) Large developers are foraying into the affordable housing segment:
Until now developers have been focusing on high end residential segment as they are
provided higher margins. The companies plan to retain such high margins even in the mid
income residential projects by selling large volumes of smaller sized homes without any
frills such as swimming pools and jogging tracks.
As cost conscious IT/ITES companies have diversified into small cities in search of
quality manpower. The number of young and financially independent people in these
cities has also increased. Fuelling the demand of affordable residential real estate.
Thus as the real estate industry grows with each passing day, the gap between people who
can afford housing and who can not afford is also widening. The gap can not be reduce
unless there is increased in participation from private developers.
REGULATORY UPDATE
FSI raised in Mumbai: The Government of Maharashtra announced its decision to

increase the floor space index in the suburbs from 1 to 1.33
Central Government plans new rent rules: The central Government announced its
plan to amend the rent Control Act. To authorize land owners to increase rent at Certain
intervals.
Karnataka Government to introduce E stamps: The Government of Karnataka

has decided to introduce e stamping of property document. This is to eliminate
corruption and faking of documents.
46
2.4) Overview of Economic Environment of Indian real estate from eyes
of various news papers
FACTS ABOUT INDIAN REAL ESTATE
Reality or Illusion?
E.T. 2nd February 2007
The current upsurge in the market is being driven by irreversible and sustained
fundamental factors
Growing at rate of 30% per annum, the Indian real estate sector is metamorphosing into a
very lucrative investment market offering attractive returns. At present, the sector is
estimated to be around $ 15 billion and is projected to reach $ 102 billion over the next
10 years. By 2010 there is going to be 200 million sq ft for organized retail and
furthermore, we are going to see about 5 times increase in office space and over 50,000
new hotel rooms being added over the next 5 years.
India is expected to experience a demand-supply gap of around 18 million housing units

by 2010. Commercial real estate demand is expected to be around 350 million sq ft. Out
of which IT/ITES and organized retailing sector would demand around 300 million sq ft.
Estimates also show that 42 million sq ft of space will be required every year until 2008.
Sector has witnessed a phenomenal growth in activities across key segments including
commercial, residential, retail and hospitality.
All indicators tell us that the current upsurge in the market is being driven by irreversible
and sustained fundamental factors. As long as the Indian economy continues to grow by
leaps and bounds, as all indicators show that it will, the built-up demand for real estate is
there to stay. Natural increase in urbanization of a I billion plus population has further
fueled the demand in the residential real estate segment.
Today, the young working population is a strong believer of “buy and repay” as opposed
to “save and repay” in the past. Consumption pattern of a young populace, is the basis of
an enormous demand for retail space. Finally, availability of a wide range of financing
options is also driving the Indian real estate boom.
Massive sums of strategic long-term investments are required to keep this industry on its
current growth path. With the launch of REMFs and REITs, domestic mutual fund
players and small investors, the largest source of investments that possibly exists, will
also soon be allowed to get a taste of the real estate pie. In addition, the introduction of
REIT and REMFs are expected to bring about positive structural changes by making the
Indian real estate sector more professional and transparent, REITs will also facilitate
smooth and easy exit routes for real estate private equity funds, encouraging even more
private equity play in this space.
47
Most real estate VC/PE funds in India are targeting an IRR between15% to 35%.
Average time horizon that a PE expects to remain invested is about 5 years. In fact, the
real estate market is showing tangible signs of becoming more mature and resilient.
PROPERTY BUYS FIND FAVOR AS TAXES & FUZZY NORMS

HIT INVESTMENT PRODUCTS
Dreams: Indian investors shun exotic for realty abroad
E.T , 25th February 2007
The government allows remittance of $2,00,000 by resident Indians and real estate is the
top investment choice under this window so far.
The trend of Indians investing in real estate overseas is driven by the fact that demand for
housing is drying up in many countries. The sub prime crisis and falling property prices
overseas have also played a role.
HOMING INSTINCT
Subprime crisis and falling property prices overseas have made realty an
attractive investment option.
Demand for housing is drying up in many countries following the subprime
crisis.
But HNIs in the country are taken in by the India growth story.
REALTY CHECK
Mint, 12th July 2007
An economy that’s expanding at 9% is creating more wealth and demand for commercial
space. While higher interest rates have crimped demand for residential homes as
individual buyers hold back, demand for office space is showing no signs of letting up.
India The land of opportunity:-
48
ET, Friday 16th November 2007
That world be the best way to describe the Indian Real Estate scenario right now, with
Foreign investments pouring into India and getting great returns too.
With a growth rate of 30 percent and projected figures of 90 billion US dollars, by 2015,
it can be safely said that the real estate sector in India is booming. High growth curve in
the real estate sector owes some credit to a booming economy and liberalised Foreign
Direct Investments (FDI) regime in the real estate sector.
This pace of economic growth shows no signs of slowing. India is expected to become
the world’s third largest economy by 2010. With the fundamentals of the Indian economy
apparently sound, and prospects for continued growth very good, the real estate industry
can only flourish. This in turn translates into great opportunities for real estate companies
providing quality township projects.
But the real story lies in the deeper changes within Indian society, that are expected to
have an even greater impact on real estate. India has a young profile today. Half of its
population is under 25 years and the country’s median age is 24 years (2005), compared
to 33 in China and 43 in Japan. The country is urbanizing at a rapid rate of 2.5 per cent
per year. The number of cities over one million is expected to double from 35 in 2001 to
70 cities by 2025. Mumbai and Delhi is projected to be the world’s second and third
largest cities by 2015. India’s large population is now being viewed as one of its key
strengths, especially a young and urbanizing population. Massive labour market
opportunities.
While India is still considered under performed as compared to China, as far as

investments are concerned. The Indian real-estate market is expected have access to
about $10 billion (Rs 41,000 crore) in private equity. The entry of Real Estate Mutual
Funds or Real Estate Investment Trusts will definitely ensure more availability of funds
to the developers and faster growth of real estate sector, according to industry experts.
Housing boom, but poor still homeless:-

Times Of India, 25 November 2007
National Building Organization estimated 24.7 million people in urban India without
houses and 97% of them will be from the low-income groups.
9% houses owned by them in urban areas are lying unoccupied.
Over 37% of the 66.3 million urban households do not have shelter.
49
The situation is only expected to worsen, with the number of those without homes
expected to go up to 26.5 million by the end of the 11th plan in March 2012.
The study says that the fiscal incentives given to the housing sector have been cornered
by the high income group and have not been availed by weaker sections of society.
Property boom is over:-
Times Of India, 25 November 2007
Unless the sector is brought under regulation, it will mop up funds of a dubious kind.
The cycles in the property sector are a result of its peculiarly unregulated nature. As a
result, a hype around property becomes easier to create.
The easing of interest rates on both loan and deposit sides was a correction that was
coming.
Housing finance companies and banks gave undue importance to property.
The hype around land banks also fuelled the rush into property.
With huge amounts having gone into buying land, they are short on funds needed to
create projects for which bookings and promises have been made.
Foreign direct investment will not come unless land management laws are regulated at
the central level. Black money is needed to purchase land.
The sector suffers from a resource crunch and oversupply. With speculators moving out
and end-users stepping in, prices should drop, except perhaps in the high-end market in
the metros.
The US sub-prime crash was caused by too much money going into mortgages which
turned into defaults.
Real estate companies are looking for equity partners, CRR is moving up, interest rates
are down, and professional players are moving into real estate sector. The rosy years and
months are over.
50
Global shocks can hit Indian Economy, Not Immune To US Crisis:-
Times of India, 20th December 2007
“We need to redouble our efforts to maintain the domestic drivers of growth and ensure
that policy facilitates even faster growth.”
Economy would be able to clock double digit growth rate in the 11th plan period on the
back of an average 9% growth rate in the last three years of the 10th plan.
Availability of food would be under stress.
“We probably need to enhance buffer stocks of foodgrains and also consider buffer
stocks for pulses and edible oil.
Plan has specific, focused programmes, both for skill development and education and
also for improving basic infrastructure.
Growth process that will achieve a rapid reduction in poverty, accelerate the pace of both
industrialization and employment generation, reduce rural-urban divide.
Aims to achieve an ambitious double digit growth by the end of the plan period.
Increasing total annual investment in infrastructure from 5% of GDP to 9% during the
five years and achieving 4% growth in the agriculture sector.
200 Companies turn to realty in two years

Mint, 25thDecember 2007
With real estate being hot property, many companies are altering the object clause of
their Memoranda of Association (MoA) to cash in on this boom.
About 200 companies have amended their MoAs in the last couple of years, according to
Sanjay Dutt, deputy MD of Cushman & Wakefield, “With valuations exceeding
expectations and lot of capital chasing many assets, the trend is likely to go up further.”
According to Company Law provisions, the objects clause have to be altered to enable
commencement of any businesses envisaged. Every firm irrespective of its size and scale
wants to be associated with the real estate segment.
Trend is largely noticeable in firms operating in the FMCG, pharma and financial
services segment. This is because growth in sectors like consumer products is
comparatively much lower than the current growth rate in the real estate industry.
51
CONSERVATIVE APPROACH
Hines India expects a correction in real estate markets:-

Mint, 27th December 2007
It plans to be conservative in making investments because it believes the Indian real

estate market is overheated and ready for a correction.
Creating a new breed of rich among land owners,. The rapid escalation in land prices
suggests a bubble.
“The real estate bubble will not burst in the sense that prices will collapse,” There will
likely be a correction in prices up to 50%.
A bubble typically occurs when asset values get over-in-flated, and when investors no
longer see value in those assets it leads to a sell-off that can lead to a sharp downward
revision in prices.”
Hines, a real estate development and investment firm.
This even a real estate prices have already softened by 15-20% in overheated pockets
such as Gurgaon and Noida.
Land prices had shot up because of artificial constraints. “Ownership of land and land
titles are not clear in India. There are no clear land records here unlike in other
countries.”
Just as Hines is investing in Indian real estate despite its cautionary approach, overseas
money continues to pour into the sector.
Pump in as much as $10 billion.
Foreign real estate firms and private equity funds are keen on investing in the Indian real
estate market, as the return on investment is higher in India compared with more
developed markets such as the US. Hines expects to get a 20% return on its investments
after taxes after it exits the investments, typically over a period of three years.
Over the next three years, Hines plans to build one or more high-rise residential and
commercial towers in India and an integrated township spread across 100-200 acres in
partnership with local developers.
REAL INVESTMENT
52
Opening the flood gates:-
More than Us $ 50 billion is expected to flow into the country’s property market in the
next couple of years.
Opened the gates for property giants in Asia and the West. More than half a dozen realty
companies from the Gulf are eyeing India.
Emaar MGF Land Pvt Ltd, a joint venture between Emaar Properties PJSC and MGF
Developments Ltd has recently announced India’s largest FDI in real estate.
Managing Director of Emaar MGF, Shravan Gupta said, “This is an epochal moment for
the Indian real estate industry. The partnership is not merely about investment. It is about
bringing in technology, expertise and scale. We are looking at integrated communities
and homes which will make a real impact on the lives of the people.”
With foreign direct investment now allowed automatically in certain sectors of the
economy we see the next few years as an opportune time to invest in more projects that
help build the economy of India.
US-based realty major, Trump, is planning to invest in the Indian property market in the
next 18 months. Company’s focus area will be on high-end projects.
Trump believes that india’s spiraling realty prices are not as high as global property
prices and that with the emergence of nuclear families, the demand for real estate could
well drive the growth for high end developers.
Realtors body seeks recognition from PM:-

E.T. 28thDecember 2007
Builder community is quietly pursuing another agenda: ‘image building’ for itself. Now
want the government to recognize their contribution.
Builders Association of India, a representative body of the real estate industry.
Real estate sector as a whole contributes 7% to GDP, employs over 32 million people, of
which 18 million directly. Also, the sector accounts for about 40% of the gross
investment.
53
2.5) Indian Monetary policies & its impact
Current Indian monetary policy & its impact on real estate sector announcement
date Jan 29, 2008 by governor of R.B.I.
Monetary Policy
India Today, 1st Feb 2007
RBI has chosen to maintain high interest rates, as the spectre of inflation and a
stronger rupee on the back of strong capital inflows looms large
Ignoring a soft interest rate regime in the US, RBI Governor chosen to maintain a status
quo. Reddy says: “For us the domestic policy considerations dominate.” The indication is
clear that lending rates have peaked in India. Rather than getting carried away by what
the market and corporates want, Reddy has chosen to play it safe. By keeping all the key
rates unchanged, RBI has taken a neutral stance. RBI is right in adopting a wait and
watch policy before going in for a softening of interest rates.” Especially since fuel prices
have not changed since February 2007. Industrial production on the other hand has been
slowing down with the Index of Industrial Production (IIP) registering a slower growth—
9.2 percent in April-November 2007 compared to 10 percent in the same period. Industry
has been demanding a benign interest regime for its expansion plans, the central bank
obviously cannot take the risk of allowing a rally in the equity markets, which would
attract higher capital inflows and consequently result in a stronger rupee. Inflation has
been “artificially suppressed”. However, the central bank has kept the option of
increasing the crash reserve ration (CRR) at a later date in case US Federal Reserve’s rate
cut results in higher inflows. RBI has kept the option open because if capital flows pick
up due to aggressive Fed easing and RBI has to hike CRR, it would be very inappropriate
to decrease rates now and then decrease the quantity of money later. There is no doubt
that industrial activity has slowed down with slower demand for consumer goods due to
high interest rates. This slowdown has also impacted employment in the country. Reddy
has not done anything to improve the delivery of credit to these sectors, it’s evident that
selective measures will be taken for the same. So employment intensive industries can
expect some incentives soon.
● Industrial activity dipped to 9.2 per cent during April-Nov ‘07

● High forex inflows of $40 billion have pushed liquidity up
● The demand for consumer goods has slowed down due to high interest rates.
● Buyers of new houses and vehicles have had to pay high EMIs due to high interest
rates.
● Slower industrial activity has led to a decrease in employment in the country.
The wide differential between domestic and global interest rates. Differential in the
interest rates can lead to arbitrage and may even result in the rupee appreciating further.
54
Reddy’s stance on the quality of capital inflows and liquidity is enough to indicate that
some more belt tightening is round the corner. Indian exports can ill afford to have the
rupee strengthening any further.
Should Indian interest rates track US rates?
E.T., 6th Feb 2007
A clinically objective study o the crosscurrents faced by the RBI reveals that keeping
policy rates unchanged was possibly the right move.
Four key reasons:-

● The moderation in the economic activity has so far not been very pronounced. Neither
is it broadly based. Softening external demand will pose a slight downside risk to
growth.
● Investors and analysts are perhaps misreading the government’s preference of various
growth-inflation combinations. Record-high growth is great but Indian voters have
repeatedly shown that they are more averse to higher inflation than in favour of super-
high economic growth. In the run-up to the next election, the government probably does
not want to take nay chances with inflation.
● Widening interest rate differential with US rates matters, but it does not matter so much
that the RBI should blindly follow the bed. The differential is already so wide, and
hardly anyone expects the RBI to even significantly match the Fed’s recent and
expected rate cuts.
● There is scope for banks to cut rates despite the RBI cutting policy rates.
India’s interest rate cycle is poised to turnaround this year.
Indian interest rates should track US rates only it is in our interest to do so. In a high
population-density country, if capital is available at reasonable rates, there are many
productive opportunities for small enterprises that cannot borrow abroad.
Falling US rates are an opportunity to lower ours. The domestic cycle, there are sufficient
signs of a slowdown in activity to warrant the beginning of a rate cutting cycle.
Investment is driving current growth but investment can collapse rapidly without
consumer and export demand. A narrowing of the interest differential will help reduce
arbitraging inflows. If inflows continue, the only other high transaction cost alternative is
to impose more capital controls.
A central bank must raise interest rates if there is excess demand but falling rates of
manufacturing inflation suggest demand pressures are absent. Indian taxes on petroleum
products are among the highest in the world and there is room for rationalization. It high
interest rates harm growth, capital will flow out even while we pay more to keep it here.
Modern monetary policy tries to be forward-looking. First sins of change in the real
sector. The populist stance is anti-inflation, even at the cost of growth.
55
Interest rate differential between India and US has widened considerably. This would
lead to further capital flows in the economy. In an open economy the interest rate cycle
may depend on foreign economies especially with those having maximum trade linkages
with the home economy. The contribution of trade to the GDP has increased but growth
is still dependent on internal factors like consumption and investment. Distinguish
between equity and debt inflows. The equity inflows are driven by growth and return
expectations and debt inflows on the basis of interest and exchange rate differential. Fed
has been cutting its rates aggressively and the next question is should RBI revise its
stance. The US is expecting its economy to weaken considerably in 2008 whereas in
India the growth is still quite still high. It does not look like the RBI will revise its stance
unless thee are some unforeseen risks in the economy and the recoupling is much more
than expected. Indian is an emerging economy and requires more focus and factors like
inflation than other countries. Growth may not touch everyone but inflation impacts
everyone and more so the lives of the poor. The best strategy for the RBI is to wait and
watch the developments in the US.
CRR Raised To Check Inflation
Times of India, 11th February 2007
Interest rates are set to go up once again with the Reserve Bank of India’s decision to
raise the cash reserve ratio (CRR). The measure, which will significantly reduce the
amount of lendable funds with banks. CRR—the percentage o total deposits a bank must
keep with the central bank. An evacuation of about Rs. 14,000 crore of bank’s resources
that they could have lent. As a result, interest rates could go up by one percentage point.
As a bank does not get any return on the money kept under CRR with RBI, is cost of
lendable funds increases. Banks will have to increase interest rates to recover costs. With
RBI’s latest measure, the liquidity would further worsen and banks would be forced to
increase the deposit rate further to mop up resources to meet the credit demand. No
option to bank but to increase the lending rate as well required for banks to maintain
their profitability. A senior economist said this was harsh measure and could affect
economic growth adversely. It considers containing inflation more important than
maintaining high growth. Inflation is like a tax on the poor against which there are no
hedges available. Ensuring price stability, he said was, therefore, a societal compulsion.
Budget Hope
Sluggish demand and price correction, bearish stock market adding to this low sentiment,
Union Budget holds the key to putting real estate sector back on the growth path. The
exorbitant prices and interest rates kept home buyers off property. The government is
expected to provide fiscal stimulus and policy intervention. In a run-up to the Budget, the
cut in home load rates by several banks and Finance Minister P Chidambaram’s call to
bankers to reduce interest rates and increase housing loan tenures to ensure greater off
56
take of loan in a welcome move. But then on should bear in mind that it’s not just home
loan rates that have a crucial bearing on housing demand. More than that is exorbitant
home prices that re responsible for the slow down in housing demand. This is a disturbing
development, especially in view of the fact that 99% of the country’s housing shortage of
24.7 million units is of low-cost/middle-income dwellings.
The Budget needs to effectively address the problem of affordable housing through
various policy measures. The industry is also looking forward to reintroduction of tax
breaks and stamp duty relief for low-cost housing. Developers have been fighting shy of
affordable housing as profit margins are low. FSI incentives, coupled with faster
approvals, can help promote housing in general and affordable housing in particular.
Centre and state governments need to do something to cut down various taxes which
form over 30 percent of the home cost. Apart from this, abolition of service tax on rental
income from commercial property tax incentives for REITs on the lines of MFs,
simplification of income tax structure, infrastructure status of h9otel industry, lifting of
the 5,000-hectare cap and continuance of tax incentives for SEZs are other important
measures that can go a long way to provide the much needed boost to the real estate
sector.
Thrust real estate for growth
E.T., 15th December 2007
The budget for 2008-09 will be presented in an environment when the country is
apprehensive of a moderation In its economic growth to 8.7% from 9.6% recorded last
year. There is every likelihood of this impacting the real estate sector too. According the
latest government estimate, growth in construction sector in the country in 2007-08 will
come down to 9.6% from 12% last year. One of the major reasons for the moderation in
the growth is the slowdown in the real estate sector, which had a cascading effect on
several other sectors including banking and finance. Any slowdown in the real estate
sector, consultants feel will have a wide-ranging effect on the economy. It will not only
affect the demand for steel, cement, house fittings and furniture, but would also affect the
employment scene in the country. FM should spell out some measures so that the present
slowdown in the growth is arrested immediately. Interest rates in the system should be
brought down to 2003-04 level, which had created a demand in the real estate sector. The
low interest rates at around 7.5% had enhanced the affordability of average middle class.
But in the following year, interest rates rose to 11% in 2006 and 2007, which affected the
affordability of Indian middle class very badly. As a result of the rise in interest rates
from 7.5% to 11.5%, the equated monthly installment on a 20-year loan went up by over
32%. Government must work with the RBI to bring down the interest rates in the country.
This ill create new demands, which will fuel growth across sectors. The consultant said
that the government must work to 9improve the supply to contain the price instead of
brining down the demand artificially by raising the interest rates to improve the supply, a
senior developer said that central government must work with the state governments
expedite the clearance for real estate projects. The government must expedite the land
conversion and the grant of other licenses to developers to augment the supply of real
estate, taxbreak in the construction of low-cost houses. The provision, which was earlier
57
known as 80 IB, was allowed to lapse in 2007. under 80 IB, a profit made by a developer
by constructing a housing project where the size of the house in less than 1,000 sq ft in
Delhi and Mumbai and 1,500 sq ft in other cities is tax free. This used to prompt the
developer to build houses of smaller area, which are cheaper than the larger-sized houses.
Since 2007, builders normally avoid to venture in the construction of small houses. If the
government re-introduces provision, it will help in construction of the cheap houses.
PM may ask Reddy to redefine realty tag
The government is likely to urge the Reserve Bank of India (RBI) to tweak the definition
of real estate to exclude hotels, hospitals and educational institutions to encourage
lending to these segments. Finance Minister P Chidambaram is expected to call for fine-
tuning o the definition of real estate. There is a need to exclude them from this category
of commercial real estate. These segments do not contribute to the speculative asset
bubble. Banks should be encouraged to provide resources to hotels and hospitals. RBI
has used a direct tool to contain lending to real estate by hiking provisioning for this
sector from 1% to 2%. This was done in addition to the risk weights for capital allocation.
Credit to commercial real estate grew by 102%, a major part of which was accounted for
by hotels, hospitals and educational institutions. Fuelled by concerns on the over-heating
in the real estate sector, the RBI increased the risk weights for lending to commercial real
estate first in July 20058 from 100% to 125%, and further to 150% in April 2006.
FM to the rescue, PC asks PSBS to rein in home loan rate hikes
E.T., 6th January 2008
A government official said that since rentals have not gone up substantially,
commensurate increase in home loan rates were not justified at this point. Home loans
have edged up from 7% in 2004 to around 10% at present. The EMI on a home loan for
20 years has gone up by over 25% in the same period. During the period, banks have
already raised interest rates on home loans six times. Indian Bank increased lending rates
last week by 0.50% to 12.50%. this followed RBI’s move to raise repo rate by 50 basis
points to 7.50% making borrowing from the central bank costlier for banks.
Realty Wish List
E.T., 6th February 2008
The second largest employment generator in the country after agriculture simplification
of the income-tax structure, reduction in service tax and clarifications over FDI related
issues. Rental Housing and real estate investment trusts (REITs) to make housing more
affordable. The apex body of builders in India has asked for a total restructuring of
income-tax provisions currently governing the real estate sector. “We have asked the
58
government to have a relook into various I-T Sections like 80-IB (10). Tax Act for
facilitating affordable housing reducing various levels of taxation at Centre, state and
local governments. The lowering of the minimum threshold of FDI below 50000 square
meters. This would allow FDI to feature in inner city projects. The government needs to
further open up fund raising mechanism of the industry, remove the restriction imposed
on the borrowing programs like ECB.
Real Estate
Goldman Incentives for mass housing; Clarity

Sachs on taxation of REITs
Removal of service tax on

Merrill construction of residential units;
Lynch Restoring the exemption
under 801B.
Angel Exempt rental income from houses

below 150 sq mtrs from income and
service tax; introduction of stamp
Kotak duty
More clarity on taxation of REITs;

Software Technology Parks scheme
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2.6) Contribution of Indian Real Estate in Indian Economy
Real Estate Sector as a whole contributes to around 7% in GDP of India but it employs
over 32 million people of which 18 million employed directly. This sector is the biggest
employment creator after agriculture, the sector employ people from low skill to very
high skill & it is capital intensive in nature there fore it accounts for about 40% of the
gross investment.
The sector was mostly unorganised till 2002 when Govt. of India permitted 100% FDI
and also made a housing policy which facilitates private players incentive on income tax
for construction of houses, low rate of interest on housing loan, booming office
requirement for IT/ITES companies and organized retail has opened flood gates of
investment not only from inside the country but from outside the country also.
Around 200 companies changed their memorandum of Association to turn to real estate
business, sector starts growing leap & bounds at the rate of around 30%. More and more
companies become public and attracted huge public investment through their initial
public offers. Medical tourism, influx of multinational corporations added hospitality
requirement and many foreign real estate companies either come to India through joint
venture or invested in India through FDI, FLL or PE fund.
But the real story of real estate development lies within deeper changes in Indian
Societies. Population of more than 1.1 billion people decentralizing into nucleus family,
moving towards smaller cities and then towards metro cities in search of Jobs & quality
of life having more income due to growth of service sector in India & different govt.
incentives bent towards having their own houses especially in metros & bigger towns of
the country. Then came a collection of investors & speculators who saw great earning
potential in real estate & invested heavily into it, causing real estate to grow at the rate of
30% per annum for last 3 years the sector has given return around 15 to 35% which was
really attractive for investors & speculators.
On the supply side there was a change in structure real estate was not an Industry before
2002 influx of foreign capital & demand caused contractor’s to become bigger & bigger
in size their concert themselves as builders and then further concert into real estate
developers. Previously the sector was
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2.7) Impact of American Recession on Indian Real Estate
What is recession?
In pure technical terms, an economy goes through a recession when the country’s
national income (gross domestic product) registers negative growth in two consecutive
quarters of a year, in other words, during recession the GDP would actually fall as
compared to previous periods, unlike an economic slowdown where the GDP would
grow at a very small pace.
How does recession work?

It is important to keep in mind that national income or GDP is the sum-total of incomes
of all firms, individuals and other entitles within the economy. During recession, the
aggregate income of all individuals, firms, and other entities actually is less than what it
was during the previous period.
How does fall in national income come about?

Every individual and entity is a producer, a consumer or an intermediary in an economy.
A neighbourhood grocery store is a microcosm of this process. A consumer buys goods
from the store, which is an intermediary for the producers of these goods. A fall in the
consumer’s income would mean that it would buy less goods, resulting in less income for
the retailer and original producer. During recession, the process is replicated across the
economy resulting in fall of national income or GDP.
What is causing recession this time around?

Many analysts believe that the world’s largest economy, the United States, is heading
towards a possible recession. One of the reasons is believed to be a housing loan crisis
brought about by a competitive banking system as they resorted to sub-prime lending.
Banks extended housing loans to many customers who did not actually possess the
requisite repayment ability. The resultant payments default triggered massive fall in
banks’ and real estate incomes.
What is sub-prime?
Sub-prime, refers to a loan given to a borrower who does not qualify for a regular home
loan, because of a poor credit record, low income and no job security. In the current
context, in the US, banks gave out many such loans in their zeal to keep ahead of their
peers in the banking sector. The subsequent defaults coupled with high unemployment
resulted in major loss of income across the economy.
When was the last recession?

The last recession, in the US occurred during 2000 and 2001. GDP growth was negative
in the third quarter of 2000, followed by a negative growth in the first and third quarters
of 2001, triggered by a stock market crash as dot com companies went bust. The GDP
growth did not go over 3 per cent until September 2003.
61
How long is the current recession, if it happens, likely to continue?
Difficult to tell. The US government and monetary authorities are sure to provide
sufficient fiscal and monetary support to keep the economy on a positive growth
trajectory. The country goes into elections this year. Tuesday’s 0.75 per cent age point
rate cut by the Federal Bank is a case in point. It is expected to reduce the cost of
borrowing for US corporations and individuals.
Which have been other recessionary periods in the US?

The Great Depression between 1929 and 1933 is one of the most severe economic
downslides witnessed in modern history when GDP declined by almost 33 percent. In
most recent history, the worst recession in the US was from November 1973 to March
1975, where GDP fell by 4.9 percent.
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2.8) China versus India
E.T., 6th March 2007
At present China & India are the fastest growing economy in the world, incidentally both
are also most populous countries of the world and hence have biggest consumer market.
Their growing economy put more per capita income in the hands of their population
hence their purchasing power is increasing and the demand for higher quality goods &
services are also increasing. What India is good at but China is not. Reverse is also true.
But China is good at, India is not, but together the two countries are out to rock the global
economies. This has been explained by Professor Tarrun Khanna, in his new book
“Billion’s of enter renews: how China & India reshaping their future & yours “,
According to this book the most important policy differentiation is at the level of
population policy. Population of India is growing @ more than 1.5% while population of
China is coming down due to one child per family Policy.
China has grown as a communist country. Land is totally controlled by state. China uses
top down authority to channel entrepreneurship & in many cases the Govt. himself took
the initiatives, but in India it is contrast. India’s business is led by Private sector while
public sector undertaking’s in India is mostly inefficient. Govt. of China pushes the
initiatives and took the lead in removing all the constraints. While in India bureaucracy
puts all type of hurdles to cut down the initiatives taken by the private sectors. China
welcome foreign investment while India prefer indigenous entrepreneurs. China’s capital
market are not existent where as India’s are the best in the emerging markets. And Finally
China has a authoritarian Govt. which uses hard power to implement its project, whereas
India’s strength lies in its soft power i.e. movies, culture, yoga, music and software.
In China, 30 years of communism had destroyed even the concept of private property. All
land is owned by state and you can have a best buy with lease hold only but there is no
courts to adjudicate the disputes hence owning property is a risk in China. While in India,
it is the Judiciary that play a major role in upholding citizens right to own the property.
Most of the disputes in courts in India belongs to these categories, waisting enormous
energy of Indian population. In China it is the absence of property rights that allowed for
the development of huge Special Economic Zones (SEZ) and even allowed
redevelopment of entire cities like shanghai.That is the reason of fast development in
China. Today Shanghai has an airport that is better than any airport is USA and it has a
train that runs at 400 Km/hr to get you reach there.
Two of the most salient differences between the two countries are financial expertise and
organization skills as explained by Professors of University of Maryland. They say that
given the abundance of capital in China & the fact that most large domestic companies
are still state owned Chinese corporate leaders are at an early state in developing world
class financial skill. In contrast Indian corporate leaders, especially in vast private sector
are at leading edge.
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China is a command & control economy led by Confucian values. It is also a relatively
homogeneous society in terms of race, religion and language, while India is a ferociously
democratic country with one of the world’s largest intra country diversity on almost
every imaginable dimensions. Thus cultural roots of Indian Managers make them more
adept at horizontal integration, make them more skillful and collaborative than Chinese
managers. Finally Indian Managers have the obvious advantage of speaking English
which is incidentally the Global language of business. It makes easier for them to interact
& develop a bond with their counterpart at different parts of world.
Future growth of economy would now not only come from developed market
which is now going to age rapidly. but it will come from emerging economies like India
& China. Western Nation’s need to view these economies as an opportunities of growth
and not as a threat to their economies. The biggest reason for this is larger consumer base
& increasing per capita income of their population. Even biggest economic power’s like
USA and Japan cannot ignore this growing consumer base, therefore they will be forced
not to ignore these economics in future. But these countries are poorer as compared to
developed countries therefore a lot of innovation will be needed to enter into there market
with those products which can be afford by them.
Sri Jagdish N Seth economists says in Economic Times deted 8th Feb that “India’s
contribution to the global growth economies will be different from Chinese model, while
china will grow more on the basis of its local economy, India’s growth will be much
faster due to International acquisitions. Indian companies will undertake massive
acquisitions of corporation of other countries, it will not outsource anything but will
invest heavily in acquired markets and in this process it will not only grow for itself but
will also revitalize the acquired company and also make local economy of that country
grow, this will be a win-win strategy for Indian companies.
While World is increasingly growing vary of China due to their culture and poor
quality of cheap products. India is not only offer low end labour intensive manufacturing
but it offer value added products, this culture will make shift towards Indian products as
compared to china.
China & India are playing increasingly large role in world economy not only as
providing huge consumer market as written above, but also as a source of global talent, it
is expected that, China will outsource around 65 million people to global workforce with
their ageing population while comparatively younger population of India will source
around 120 million new workers till 2020. This has been revealed in a survey conducted
by Hewitt which is most renowned global HR outsourcing consultancy.
Though China work force will also be talented, innovative & low cost as
compared to Indian labour force but fluency of English language, established Indian
outsourcing linkages with International community & global acquisition by Indians will
make credibility of Indian workforce higher as compared to china.
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Moreover, success in today’s constantly changing business environment requires
a proactive strategic thinking coupled with systematic education and a result orientation
in diversely varied and complex working environment. Incidentally India have such
environment and its talent pool is accustomed to deal with highly complex & very
diversified Indian business situation and are trained to give result in such a condition.
This cannot be made possible without a higher level of involvement. As such a detailed
study of engagement levels in China & India find that average engagement in china is
50% while in India it is more than 65%. This engagement index & more proximity to
international business is bound to give a lead to Indian work force as compared to China
in coming future. It will be most Important asset for India to become global superpower
in coming future.
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2.9) Supply of Land
The Real Estate sector is growing at a rate of 30% per annum and in coming years the
sector is likely to increase at the same rate or even faster.
At the time of independence the population of the country was merely 35 crores. These
who saw the dream of independence also dreamt of a developed India which would have
well developed infrastructure food, cloth & home for all. Development of infrastructure,
Industries & real estate needed huge supply of land. Before majority of land acquisition
was done mostly by Government, at that time since vast area of land were available in the
vicinity of big cities Land acquisition does not posses big hurdle for these big projects.
But the time has changed now, at present since there is scarcity of land the price of Land
is going skyrocketing. The Population of country has now crossed billion marks. The
urban population of the country has increased manifold since independence. At present
India is growing at a rate of 8.5% per annum to maintain this growth the infrastructure of
the country needs to be improved at a very fast rate. The Real Estate sector has become a
barometer for the economy at large. Growth in Real Estate & Infrastructure means
generation of employment and a boost to construction sector. This growth needs acres of
land which is a basic raw material for their development. Since the land is becoming very
precisious assets for land owners, as we see most of the land acquisition cases, causes
mass dissatisfaction, political intervention and ends up in court. It is estimated that 90%
of the civil cases in this country’s court system relate to property dispute.
The apex court of the country has given the direction to the state Government relating to
land acquisition as:-
When the state intends to proceed with the acquisition of land, it must form an opinion
that lands which are going to be acquired are not good agricultural lands. Whenever a
company makes an application to the appropriate Government for acquisition of any land,
that Government shall direct the collector to submit a report to it after satisfying that:-
The company made its best efforts to locate land in the locality suitable for
acquisition.
The company failed to acquire the land despite reasonable efforts to get such land
by negotiations.
The land is suitable for the purpose.
Area is not excessive.
The company utilizes the land expeditiously.
The real estate sector in most Indian cities has been premised on large scale acquisition
and development by the state that has stifled the supply of land and hampered flow of
funds into this sector.
The Land acquisition is a burning topic in our country, we can’t compromise with the
development of nation, now the relevant question is can the industry that wants the land
66
compensate the person engaged in agriculture adequately so that they will want to give up
the land.
For large industrialization initiatives the state has to be involved and, at the same time, it
has to use market principles. Where some people are better off and no one is worse off, is
called a Pareto improvement. It is through successive Pareto improvements that a nation
develops.
There have to be clear rules like the acquisition price has to have large mark-up over the
market price-say 50% above it and a large percentage of the farmers must find the deal
worthwhile before the state steps into acquire the land.
An acre of farm land worth a few lakhs would command that many crores of rupees were
it to be converted into commercial land. Since this is done most selectively in return for a
fat share of the resulting profit, urban land remains in short supply feeding the frenetic
flow of funds into a resource whose scarcity drives its super profit.
Most Real Estate companies have amassed thousands of acres in various parts of the
country, even though they may not be developing all these properties at the same time.
Since there is scarcity of land in urban areas the centre has asked state Governments to
permit a higher population density for housing projects. At present, density norms in
various states allow of land to be inhabitant by 200-600 people, which translate into 40-
120 units.
To have a check on escalating land prices authorities should make a system for taxing of
land. The land tax has many advantages. It will reduce hoarding of land and will bring
more land into circulation and therefore reduce land prices, making it affordable for more
people to own land and housing.
Real Estate is no longer only a need – based activity and is a part of an investment
portfolio urgent need for a national level regulatory body to be put into place. One school
of thoughts feels such a regulator must be created through state laws as land is a state
subject in the constitution Land Management laws in the country need serious relook and
fresh thinking.
FUTURE LINE OF ACTION:- As we see most of the land acquisition attempts fails
with vast protest from tillers, riots and backfired with dirty politics. We have to think
deeply and come to a better solution for development of Infrastructure & real estate
industry. First of all a nationwide study has to be conducted that will give figures of
homeless families in rural & urban areas then there should also be figures of families
acquiring more houses/properties than needed. The hoarded properties should be taxed,
so that it could be owned by needed families. After these studies a collective effort should
be made by government & private developers to build homes for each class of needed
families. Because there left very little potential in horizontal expansion of cities, the time
has arrived when we have to rise vertically. Vast areas of land acquired by Government
67
in the heart of the cities could be utilized intelligently if we work on vertical expansion.
A same pocket of land say land acquired by Railway’s could be used for many purposes,
If we go vertical two or three floors could be used for railway platforms basement could
be used for parking of vehicles as well as bus stands, one floor could be shopping mall,
another could be reserved for school, another could be for hotel, for banking, for cinema
and many more.
For development of Infrastructure attempts should be made to utilize barren land or land
having minimum agricultural potential. Farmers honestly which could lure them to give
off their land for development of these projects.
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2.10) Infrastructure problem and its impact
Mint, 13th March 2007
Poor infrastructure, lack of skilled workers could slow growth: PM
Lack of skilled manpower and inadequate infrastructure, targeting 10% growth by the
end of the 11th Plan. India’s $906 billion economy has grown at more than 9% since April
2005, making it the second fastest after China among the world’s top 15 economies. The
government wants to boost growth to increase jobs and eradicate poverty in a country
where half the 1.1 billion population live on less than $2 a day, according to the World
Bank.
Spectrum availability could be a constraint to the growth of telecommunications in India;

the world’s fastest growing major mobile phone market. The country needs to double
spending on roads, ports and other infrastructure by 2012 or risk derailing. The country
needs as much as $1.6 trillion for infrastructure in the next 10 years, or about 10.5-12%
of its GDP, to maintain the current growth.
India’s electricity shortage reached an eight-year high. Highways, which move almost
80% of the goods transported in India, account for only about 2% of the country’s roads.
It takes an average 85 hours to unload and reload a ship at India’s major ports, 10 times
longer than in Hong Kong or Singapore.
India’s unprecedented 9% growth has exposed its antiquated transport and power
networks, which are “highly unproductive by world standards”.
Prime Minister Singh wants to copy the success of neighbouring China, three times the
amount spent by India. That has helped China attract an average $60 billion of foreign
direct investment each year since 2004, more than four times the flows into India,
creating more jobs and spurring growth. China’s economy expanded 11.5% last quarter.
India must also allow expansion of pension and insurance businesses, to mobilize the
savings of the nation’s 1.1 billion people.
80% of India’s population has no insurance cover and 88% of the workforce doesn’t
contribute to pension plans, pension business is not open to foreign investors and there is
a 26% limit on overseas investment in local insurance companies.
About 40% of adults in India are illiterate. Only 10% of Indians in the 18-24 age groups
are enrolled in higher education, compared with 45% in developed countries.
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Infrastructure development
E.T., 8th April 2007
Infrastructure development is likely to emerge as one of the key drivers of real estate
growth in 2008, Jones Lang LaSalle Meghraj. No less a person than finance minister P
Chidambaram has said that infrastructure shortcomings are costing India at least 1.5-2%
GDP growth every year. It is estimated that spending on infrastructure needs to rise from
4.6% of GDP to 7-8% over the next five years.
This would result in a total of $320 billion being spent on infrastructure development
over five years. A large part of these investments is expected to come through public-
private partnership.
Some of the major infrastructure initiatives and their impact on the growth of the real
estate sector.
CORE CONCERN
E.T., 8th April 2007
India’s Infrastructure vis-à-vis BRIC countries
INDIA CHINA BRAZIL

2001-05
RATING* 3.1 4.5 5.4
RANKING 75 55 47
2006-10
RATING* 4.1 5.4 5.9
RANKING 75 54 49
*(Out of 10) Source: Economic Intelligence Unit, country monitor (through finance
ministry)
The government’s efforts to improve the country’s creaking infrastructure to sustain the
rapid growth in the economy have shown mixed results so far.
In the last 10 years of India’s PPP experience, the model has proved to be successful in
sectors like telecom, power, roads and ports. As of January 2008, 221 PPP projects are
underway with at a project cost of Rs 1, 29, 575 crore. Of this, 170 are roads, followed by
38 ports and five airports. Other projects are in railways and urban development although
few in number, port development projects account for about half of the total project
value. However, the model has not been much of a success in areas like education and
health.
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The perception by the common man against a private player providing an essential
service is a major road-block to PPPs taking off in a major way. People’s concern is that
user charges might go up once a private player is allowed to provide a service.
One cannot compare China’s performance in infrastructure with India’s as Asia’s other
giant first built infrastructure using state funds and then transferred it to the private sector
for operation. There is little transparency about the project cost there. India’s plan,
however, is to make use of the private sector’s efficiency right from the beginning of the
project, but the country is exploring if it could learn anything from China on
infrastructure development.
MONEY IS THE CORE

Economic Times, 29th November 2007
The 9% economic growth cannot be sustained in the 11th Plan unless the
government takes steps to resolve governance issues and brings in institutional
reforms to encourage infrastructure financing.
THE DEEPAK Parekh committee on Infrastructure had said that a significant amount of
infrastructure investment is required to sustain a high GDP growth rate in the medium
term.
It has specified the bulk of investments are required in sectors such as power, roads and
urban infrastructure, where it would be difficult to collect adequate user charges. The
other mode to meet the infrastructural funding requirements is to encourage private
investments in infrastructure sector. This would require better regulatory environment
and efficient financing system.
It, therefore, suggests a prescription. Accordingly, most important task in front of the
government is to develop a domestic debt capital market, tapping the potential of
insurance sector, enhancing participation of banks, financial institutions (FIs) and large
NBFCs in infrastructural financing, facilitating equity flows into infrastructure, inducting
foreign investments, utilizing forex reserves and attract investments through some fiscal
reforms.
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THE GOVERNANCE ISSUE
E.T.,30th November 2007
Firstly, the government should evolve regulatory frameworks in areas like airports and
offer stability in policies, they say. Urban infrastructure can improve only when local
bodies follow good governance practices, they say.
State government policies are crucial for investments as many infrastructure sectors are
regulated by them. Some states like Gujarat have a well established framework for
government-private partnerships, “If the private sector is to cough up one third of the
total investment requirement, central and state governments should be committed to have
an investment friendly administration”.
“Unless the governance issues (Such as those relating to competition in service provision,
collection of user charges, institutional capacity, regulation and dispute resolution) are
adequately addressed, neither would the most efficient financing system be able to
mobilize the required resources, nor will we be able to create a large enough pipeline of
bankable projects.”
There is a need to evolve a strong regulatory regime to attract private investments in

infrastructure projects. Unless rules of the game is not defined, investors would refrain
from taking the risk.
INDIA’S INFRASTRUCTURE: A REALITY CHECK

E.T.,2nd December 2007
Absence of enabling environment, dearth of quality human resources and lack of

pride.
India’s physical infrastructure is pretty abysmal is an accepted fact. What is heartening is

that it has started getting the kind of attention which is essential for catapulting is to the
top of the national agenda.
The planning Commission has, in a recent paper, made projections during the eleventh
and the twelfth plans. It has been estimated that for the economy to continue to grow at
9%, the total investment in infrastructure during the eleventh and twelfth plan periods
would have to be of the order of Rs 2018,709 crore and Rs 40,55,235 crore respectively.
What remains an area of concern, is the excruciatingly slow pace of infrastructure

improvements at the ground level.
Even if the required funds are made available, the economy does not have the absorptive
capacity to spend them within the projected time-frame.
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The capacity of the Indian economy to absorb investment of this scale would largely
depend on three crucial factors – the regulatory environment for attracting private
investment, the intellectual capacity of managers, both public and private, to structure
projects in a transparent and achievable way, and a ‘fire-in-the-belly’ attitude to deliver
quality products before deadlines. Much is made of the different political structure in
China to explain its ultra-quick advances in infrastructure and to justify why we lag
behind.
The sector is spread over many ministries, each wanting its say in deciding how projects
are to be structured and bid while many related issues are dealt with exclusively by the
ministry of finance. Understanding vary widely from state to state. There is a crying
need for a ministry of infrastructure development, directly under the PM, to put in place a
standardized and seamless regulatory environment in the entire country for infrastructure
development.
The second factor refers to the quality of education and training of the managers of the
stakeholders. The reality is very different and the quality of conceptualization of PPP
projects has been rather poor till now.
China is light years ahead of us in core infrastructure. The challenges before the country
are not dearth of public funds and private investment but absence of enabling
environment, dearth of quality human resources and lack of pride.
CLOSING THE GAP

Mint.,5th December 2007
NOW, INDIA MUST BUILD INFRASTRUCTURE TO SUSTAIN GROWTH:ADB
Rajat Nag, managing director general of the Manila based bank, said on Tuesday he was
sticking to a forecast of 8.5% growth for 2008. India’s economy is largely driven by
domestic demand and exports are now more service- and technology-oriented, which
made them less vulnerable to volatility in the US, he said.
“Strengthening of the rupee, higher oil prices are of course risk factors. But the most
fundamental one we feel is the infrastructure deficit.”
The Indian economy, the world’s fastest growing major economy after China, has grown
at an average 8.6% in the past four years and is likely to grow at similar levels in the
current fiscal as well. But this scorching pace has left roads, ports and airports choked
with traffic and goods, and chronic power shortages.
Nag said India needs to urgently implement key infrastructure projects, and it was
imperative to build effective public-private partnerships.
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2.11) Raising Fund other than I.P.O. & Foreign Investment
Realtors take AIM for alternate funding option
The alternate investment Market (AIM) of the London Stock Exchange. AIM is turning
out to be a Mecca for these companies, just like the Nasdaq was fro technology
companies in the late 90s and early 2000s. however, the regulations on the AIM are far
more flexible compared with those on the Nasdaq, making it easy for real estate firms to
chase their billion-dollar dreams. Companies looking to raise capital on AIM do not need
to have a 3-year track record. AIM, essentially, allows overseas investors to pick
exposures in projects where 100% FDI is allowed. The SPV route seems to be the
preferred approach for Indian construction companies. It enables them to raise cash
without diluting equity in the main company.
Ansal takes QIP route to raise Rs 680 cr
ANSAL Properties and Infrastructure is raising Rs 680 crore through the qualified
institutional placement (QIP) route. According to sources, the company will issue 67.5
lakh shares priced at Rs 1,010 per share. QIP issue to part-finance expansion plans in the
existing business as well as diversifying into some other business. Entry into the
hospitality business is top on the company’s priority. The company also learnt to be
evaluating options for listing on London Stock Exchange’s Alternative Investments
Market (AIM) next year for raising close to $500 million. Experts say that in the coming
times, an increasing number of companies are likely to opt for the QIP route as the
regulator hiccups involved in the process are comparatively lesser than that in the issue of
GDRs. “It also les time consuming and a company can easily save 3-4 weeks.
Through the magnifying glass
The Economic Times, 9th February 2007
FDI share in the domestic real estate market will increase to 26% by March 2007 from
16% in fiscal 2005-06. The RBI has warned that such massive flows could lead to
speculation and over-heating of the real estate sector.
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Fund flow
India today, Sep-Nov (2007)
The recent phenomenon of numerous initial public offers (IPOS), on the Indian bourses,
from domestic real estate players, requires a deeper look. Internationally risks while
investing in real estate are partially captured through legislation governing the property
market. Emergence of private equity players, alternate investment market (AIM) listings
in the UK, setting up of venture capital funds dedicated to real estate will ensure there
will be an increasing activity in this space during the coming years. The sector has caught
the eyes of both domestic and international investors and contributing factors for such a
movement are: a booming economy, an ever growing IT/ITES industry and a retail boom
that is being envisaged and planned for Indian and international players. In the past two
years the market cap of nine large listed real estate companies has grown by more than 50
times, m-cap is anticipated to expand further. This would mean higher interest from
investors and an even higher need for risk mitigation.
Risks to be considered
Liquidity: Increase liquidity risks with respect to availability of rationally priced land
parcels. High land costs would result in cost being transferred to the end buyer and at
current levels in a few markets; it would only reduce buyer interest.
Political uncertainties: Land acquisition for large projects valuing a company on the
basis of an “in-principle” SEZ approval can be a source of valuation risk. There is also
the potential risk of a slowdown in the economy.
Interest rate risk: The rate hike would impact the housing finance customer and carries
a risk of reduction in the number of serious end-users.
Potential oversupply: Certain markets may witness an oversupply. Entry of international

developers and new comers would only increase the total stock available in the market.
Real Estate IPOs on the Indian bourses
The Economic Times, 16-Jan-2008
The recent spate of IPOS by real estate firms has brought the sector firmly in the
spotlight. Parsvnath IPO was over-subscribed 62 times and mopped up $250 million from
the market. The public offer of Sobha Developers to raise $125 million was also over-
subscribed by 108 times. On the other end of the spectrum are already listed real estate
and new real estate firms which are looking towards international markets or raising
funds through private placement route. Unitech raise approximately 700 million funds on
the Alternative Investment Market (AIM) Exchange of the London Stock Exchange
raised 350 million pounds on LSE and so similar lines. Hiranandani Constructions raised
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$750 million via IPO route on LSE. Indian real estate market has witnessed considerable
change in scale, profitability and demand trends.
Future Outlook
Attracted internationally big names to India. Morgan Stanley has invested $68 million in
Mantri Developers a mid-sized construction firm in Bangalore, and Merrill ynch, has
invested $50 million in Panchsheel Developers. GE Commercial Finance Real Estate has
invested $63 million in a $800 million fund that is building IT parks.
As per a study conducted for ASSOCHAM, the current real estate sector is valued at $12
billion and is expected o grow at a compound annual growth rate (CAGR) of 30 per cent
annually to $90 billion by 2015.
REALITY CHEQUE
The Economic Times, 25th January 2008
Goldman Sachs gets into action
Goldman Sachs, which has committed investments worth over $ 2 billion in india, has
identified real estate and infrastructure as the key sectors for investment.
Notwithstanding, a certain cooling off in recent quarters, the returns from the Indian real
estate sector is still seen as one of the best in the Asia Pacific region.
FAR SEE
● By 2010, the premium office segment alone will need at least 55 million sq m
● The booming retail segment would need 600 new shopping centres by 2010
● By 2030, there will be an annual requirement of up to 10 million new housing

units
● The total stock of commercial property is estimated at over $300 billion.
Goldman, Unitech crank up SPV for real estate drive
Unitech is the largest listed real estate company in India with a market capitalization of
Rs 37,406.62 Crore. The company has real estate projects, both residential and
commercial, across the country. Unitech is also developing two SEZs in West Bengal and
Haryana.
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Real Act
Unitech to invest Rs 600 cr in cash & land

Unitech interested in projects in NCR and areas near various ongoing SEZ projects
Skill & Talent Shortage
10 million people a month, up from 2.5 million
Economy & Politics, 7th December 2007
Drivers, electricians, paramedics, midwives, cooks and beauty parlour workers might
soon be able to get government recognized certificates after they finish courses at private
institutions and then take a standardized test. A public private partnership (PPP) model to
enable skill development through short-term vocational courses, which may range from
six months to a year. “According to the planning commission’s proposal, students who
acquire a certificate from private institutions can o in for a national test organized by the
government and, once they clear the national test, they will get a certificate, which will
enhance their job prospects. “Private sector should play and important role in the
certification business.”
Growth pangs: too many firms, not enough architects around
Pantaloon Retail Ltd, Godrej Industries
Mint, 30 December 2007
The Indian real estate was pegged at $16 billion in 2006-07 and is likely to reach $60
billion by 2010, growing at a compounded annual rate of 30%, according to an Ernst &
Young report. Unitech Ltd, the country’s second largest real estate developer by market
capitalization, behind DLF Ltd, has just assigned one of India’s most expensive
commercial buildings that will come up in Mumbai. The complex will be designed by
Skidmore, Owings & Merrill Llp., which designed Burj Dubai, world’s tallest building
when it’s finished in 2009. “Leading construction companies are even willing to pay Rs
4lakh per month to hold on to skilled professionals.”
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Realty check: skills shortage may put brakes on growth
Mint, 1st January 2008
India’s booming real estate sector that has seen record growth in the last three years may
be forced to slow down as it battles an acute shortage of project managers, architects,
skilled construction labour and even building materials, say many consultants and
developers. There will be inevitable time delays as the experience to develop large tracts
of land is not there. The Indian real estate industry does not have enough skilled people to
ensure the projects are completed on time. The industry also has relative newcomers with
large projects. While experienced developers will have some advantage, the new
developers could face delays in delivery of projects. “Project management is crucial in
real estate,” “Managing the whole process of development will be a steep learning curve
for new players.” “The ability to execute depends on ability to create a management
team, which can, in turn, execute.” Builders are finding it difficult to ensure a steady
availability of construction workers. DLF Ltd, India’s largest listed real estate developer,
is tackling this problem by bringing in workers from West Asia. “Some workers may be
wanting to relocate back to India and we could look at the possibility of absorbing them
in our projects here. Construction raw material is also in short supply. There is a shortage
of bricks, cement sand and even steel. India produces 165 million tones (mt) of cement
annually. But the working group on the cement industry for the 11th Plan has projected
cement demand of 257mt by 2011-12. In the case of overseas developers, especially from
West Asia, while they do have certain advantages in terms of superior technical know-
how, operating in India isn’t easy as he legal and regulatory environment in India is
different from West Asia. Obtaining the large number of pre-and post-construction
approvals from a variety of agencies is a complex and time consuming procedure. The
timely delivery of projects could soon become the differentiating factor for the real estate
industry. Customers will start looking at the track record of developers before in vesting
in a property. The market is going to evolve into a buyers market, eventually.
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2.12) Climatic concern & carbon Credit
ENVIRONMENTAL NORMS FOR BUILDERS TO BE EASED SOON
ET 25th June 2007
Easier environment clearance guidelines for builders that could significantly cut down the
time needed for getting plans approved. Experts believe that tough environment clearance
requirement have been one of the major dampers for FDI in real estate.
In many countries such as U S and UK, property developers do not require any
environment clearance for setting up real estate projects.
THE TIME TO ACT IS NOW:” Climate change could affect peace and Stability”
Times of India ,23rd October ,2007
High concentration of greenhouse gases in the atmosphere that are causing climate
change has been created cumulatively by developed countries. Some of the worst
sufferers are the poorest societies largely in Africa and parts of Asia.
The most significant impact of climate change is expected in respect to availability of

water.
A major impact climate change resulting from sea level rise would be the threat of coastal
flooding.
The danger of environmental refugees on account of climate change such as due to

coastal flooding, acute water scarcity and extreme precipitation events and heat waves
could disrupt peace and security in several regions of the world.
GLOBAL WARMING EARTH ON FIRE

Times of India ,28th November 2007
Developed countries should cut their carbon emissions at least by 80% by the year 2050,
with 20-30% cuts by 2030, if the earth has to be saved from a complete environmental
catastrophe.
Drawing upon the Scientific evidence revealed by the Intergovernmental Panel for
climate change (IPCC) The UN report says that there is a small window of opportunity in
this century for limiting the global temperature increase to 2 degrees Centigrade If this is
not done, humanity will face a series of climatic changes that will wreak havoc on the
Planet. These will include flooding of coastal areas, crop failures, epidemics, severe
water scarcity and increase in natural disasters.
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INDIA CHALLENGES UNDP REPORT
Mint 28th November, 2007
Developing nations are not keen on accepting mandatory cuts as this will involve
significant expenditure in clean technology, crimping their ability to spend on
developmental projects.
India has been stressing the fact that its per capita emissions are 20 times lower than that
of the US and about 10 times lower than that of the UK. Developed countries are failing
to meet their forgets for cutting green house gas emissions under the Kyoto Protocol.
“The logical right to emit should be equal and should give more right to those who have
emitted quite low comparatively.
RESPONSIBLE DEVELOPMENT: ENORMOUS OPPORTUNITY IN

SUSTAINABLE REAL ESTATE
Times of India, 14th December 2007
Sustainable real estate presents India with a unique and enormous opportunity to make
concrete progress to improve its environment.
Research report titled ‘Sustainable real estate Development in India’. Jones Lang La Salle
Meghraj highlighted the increasing trend of sustainable development in India. Sustainable
development, corporate social responsibility and triple bottom reporting becoming more
common in the real estate industry.
40 construction projects that are currently underway are registered with the leadership in
Energy and Environment Design (LEED).
Vincent Lottefier, CEO, sustainable real estate is not a passing trend but is a new way of
doing business in real estate as sustainable building provide considerable financial
saving.”
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CLIMATE CHANGES FOR INDIA
Times of India 16th December
Bali Break through & our
Balance – Sheet
Wins: -
1. No talk on commitments from developing nations.

Implication: - India does not have to worry about meeting targets for cuts in
green house gas emissions at the cost of economic development.
2. Technology transfer to developing countries.

Implication: - India can look forward to getting cleaner technologies from
industrialized countries at subsidized costs to help reduce its carbon footprint.
Losers: -
1. Might have to report on even domestic actions to reduce green house

gas emissions.
Implication: - India could become answerable to international community for
what it does domestically on climate change.
2. No funds for Indian Forestry.

Implication: - For now, rich countries may not pay for upkeep of Indian forests,
which India maintains as global reservoirs at the costs of its own economic
development.
NEW HOPE ON CLIMATE CHANGE
E.T. 2nd January 2008
By agreeing to the Bali Action Plan at the global negotiations in Indonesia last month.
First, the world was sufficiently united that if forced the United States to end its
intransigence. Second, the road map marks a sensible balance of considerations. And
third realistic solutions are possible, which will allow the world to combine economic
development and control of greenhouse gases.
The Bali Action Plan addresses all three concerns. The plans main point is to establish an
Ad Hoc working Group to reach a detailed global agreement by 2009 that will set
“measurable”, “reportable and verifiable” commitments to reduce greenhouse-gas
emissions.
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Sustainable development, meaning that “economic and social development” and poverty
reduction are global priorities.
The most important challenge is to reduce, and eventually nearly eliminate, carbon
dioxide emissions from burning fossil fuels such as natural gas and coal.
Such emissions can be eliminated by either shifting to renewable forms of energy or

reducing the emissions from fossil fuels.
We need new environmentally sound technologies in each of these sectors, the world can
combine growth with declining emissions of carbon dioxide. 190 countries agreed on a
sensible plan, and the underlying science and technology gives us realistic hopes for
achieving it.
CLIMATE CHANGE COULD HIT BUSINESS THE MOST
Times of India, 23rd October 2007
Earth temperature rose by 0.74 degrees in the last century, equivalent to what had
happened in the previous 1300 years. This temperature could rise between 1.8 and 4
degrees in the coming century. “There’s more carbon dioxide now in the atmosphere than
there has been in the last 650000 years,” he said.
The sea levels, which have risen a total of 17 cm over the course of the 20th century,
would rise anywhere between 18 cm and 59 cm as a result of higher temperatures and a
higher sea –level could lead to greater floods and hurricanes, as a result of extreme
precipitation.
DEVELOPERS THINK GREEN WHILE PLANNING PROJECTS
Mint
Green buildings are those that use eco-friendly technology to reduce the consumption of
electricity, water and other natural resources and minimize the impact of the building on
the local environment.
Residential and commercial buildings are responsible for 25-40% of total energy use, 30-
40% solid waste generation and 30-40% of global green house emissions.
The Indian Green Building council (IGBC) started a system of certifying buildings, know
worldwide as lead (Leadership in energy and environmental Design) Green Building
rating system. Under this system, buildings can be certified as silver, gold, platinum.
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The New-Delhi based the energy Research Institute (Teri) has also instituted a
certification programme, known as Griha that offers star rating.
“One reason that many developers are opening up to the idea of green buildings is that
the costs have become more easily recoverable with rising rentals.”
Worldwide, the popularity of green buildings has grown.
Vincent Lottefier, Chief Executive Officer, “sustainable real estate is not a passing trend
but is a new way of doing business in real estate as sustainable building provide
considerable financial savings.”
SMOKE-FREE REALTY
Smoke-Free Apartments The Next Realty Phenomenon
Between 2000 and 2007, more than 30 prominent cities across the globe have become
smoke-free.
Developing countries like India have also shown interest in the idea and this year
Chandigarh became the first city to become smoke-free.
The step may be ecologically sound, but does it really affect real estate? Taking a cue
from places like California, Washington, New York, Toronto, Ontario and others, which
have become smoke-free; one can be assured that like these places, smoke-free homes,
apartments and condos will be the new standard in Indian real estate also.
Builders and developers and positioning their ‘smoke-free’ products as one that provide
health and economic benefits, including reduced fire risk and lower cleanup costs for
multi-unit housing. A large rental unit chain ‘Guardian Management.’
WEF, CII list water among 6 key risks facing India
FOCUS on education, improving employability and reducing the rich-poor divide will go
a long way in helping India deal with some of the key risks that could turn into threats, if
left unaddressed. World Economic Forum and CII have listed six key risks facing India –
economic impact of demographics, loss of freshwater, economic shocks & oil peaks, geo-
political risks, climate change infectious diseases.
CII director general SS Mehta said that India has a demographic advantage with over half
the population under the age of 25 but this could turn into a liability if enough jobs are
not created.
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3. RECENT MARKET DEVELOPMENT
GLOBAL REAL ESTATE INVESTMENT TO TAKE 30 PERCENT-HIT, SAYS
REPORT
ET, 11th April 2008
After a record year in 2007 for direct real estate investment globally, with volumes up 8% year-on-
year to $759 billion, the investment outlook for 2008 expected to be down over 30% on 2007. The
Americas and European investment Markets will certainly see a material decline in full year
volumes and, although Asia may be more resilient, volumes will not achieve the heights of 2007,
said Jones Lang LaSalle in its latest ‘Global Real Estate Capital’ report.
Reduced debt availability and investor confidence are likely to stay for much of the first half of
2008 as the impact of the debt squeeze continues to ripple through Markets
Jones Lang LaSalle sees a number of factors that will constrain volumes this year; buyers and
sellers adopting ‘wait and see’ strategies; prices having peaked in 2007 in many major Markets; a
misalignment between buyers’ and sellers’ price expectations; reduced availability of debt,
tougher lending criteria and increased debt costs; reduced willingness and capacity to transact
large lots sizes, a narrower spectrum of investors; and more exacting due diligence which leads
to longer transaction processes.
US HOUSING CRISIS MELTS INDIAN REALTY VALUATIONS
ET, 18th April 2008
The subprime crisis may have struck in the US, but real estate companies around the world are
feeling the heat. The meltdown in property firms’ valuations in other economies, including India,
China, Japan and the UK, has surpassed that of the US with Indian real estate companies
witnessing one of the biggest falls. Some leading Indian real estate firms are trading at about 34
percent discount to their net asset values (NAVs), which implies that property firms are being
valued at just two-thirds of the assets they hold.
Analysts say the discount to NAV shows that the Indian property market is on a downswing.
According to ICICI Direct real estate analyst Rupesh Sankhe, “Historically, when the property
market cycle is on an upswing, firms trade at a premium to their NAVs, and during a downturn,
this tends to get reversed with shares trading at a discount. Since real estate stocks are high risk,
the trend gets amplified.”
Real estate consultancy firm Cushman & Wakefield joint managing director Sanjay Dutt says high
interest rates have made property firms with high debt exposure prone to rapid erosion of
corporate valuations. He added that each segment of the domestic real estate sector is facing
problems: “With the exit of speculators from the residential market, the transaction volume is
down by almost 40 percent.
Secondly, a large part of the IT & ITES space is occupied by US and Europe-based MNCs, but in
the first quarter of this year, a majority of them didn’t commit to any space and we don’t expect it
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to change in the second quarter either. In the office space, rates have started softening due to
new supplies. Majority of the mall developers are also hit as cost of servicing debt has gone up
and private equity funds are being cautious in investing in the sector.”
MAH LIFESPACE, AYALA LAND JV TO SET UP TOWNSHIP
ET,22nd April 2008
Mahindra Lifespace Developers, the real estate company of the Rs 18,000 crore Mahindra group,
has entered into a joint venture with private equity fund ARCH Capital Asian Partners to develop
a residential township at the Mahindra group’s special economic zone, Mahindra World City, near
Chennai.
The Mahindra group will have a 51 percent stake in Mahindra Residential Development, the JV
company and ARCH Capital will hold 49 percent.
The project, on 55 acres, will have 750 residential apartments apart from retail and recreational
facilities. It did not disclose financial details, pending the announcement of its financial results.
ARCH Capital is part of the $4.3 billion Philippines realty company Ayala Land, which is into
developing upscale malls, hotels, high-end office and residential complexes.
Banking on returns in excess of 25 percent, a slew of private equity funds have been investing in
Indian real estate. Global private equity funds such as Citigroup, Blackstone, 3i, and doemstic
funds such as HDFC, Kotak have invested, or have committed nearly Rs 20,000 crore in the
Indian property sector in the past year and a half.
REALTY DEALS BRING RS 23,000 CRORE DURING JANUARY-MARCH
ET,23rd April 2008
Slowdown in the real estate market notwithstanding, land deals in India are thriving. According to
a recent study, the total value of such deals, in the first three months of 2008, have touched
around Rs 23,000 crore, while another Rs 10,000-crore worth deals are in the pipeline.
As a reflection of this slowdown, developers’ plans including malls, complexes and residential
projects are all being kept under wraps. Property prices and rentals have been falling which was
also seen in the loss of investor interest and an erosion in the market capitalisation of large listed
players such as DLF and Unitech. The slowdown is also aided by the fall in stock markets as
there is now a lack of capital among investors to invest in real estate projects.
All leading developers have also scaled up their development plans as well as made fresh land
reserve acquisitions. “The fundamentals of Indian real estate are very strong. More and more
global funds are entering India,” said real estate consultancy Jones Lang LaSalle Meghraj
chairman and country head Anuj Puri.
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HOME LOANS MAY BECOME CHEAPER
ET,30th April 2008
Banks now need to set aside less capital for loans of up to Rs 30 lakh; they should be in a
position to pass on the savings to customers in the form of lower rates.
Home loans for amounts upto Rs 30 lakh may become cheaper. That's because the Reserve
Bank of India (RBI) has reduced the risk weight -the amount of capital set aside for a loan--on
home loans above Rs 20 lakh and upto Rs 30 lakh to 50 percent from 100 percent earlier." Banks
may want to pass on the benefit to customers in the form of lower interest rates.
In May 2007, the RBI had reduced the risk weight on housing loans for up to Rs 20 lakh from 75
percent to 50 percent. Currently, home loans upto Rs 20 lakh qualify as priority sector loans.
Rising home loan rates have lead to a slowdown in the growth of home loans over the past year.
The home loan portfolio of banks grew at just 12 percent between April, 2007 and February 15,
2008 ----Rs 26,930 crore as on February 15, 2008) as compared to 25.8 percent growth (Rs
46,019 crore) in the corresponding period of the previous year.
SBI, UNITECH MULL PE REALTY FUND
ET,2nd May 2008
Just a week after the State Bank of India (SBI) announced a $2 billion (Rs 8,100 crore)
infrastructure fund with Australia’s Macquarie Group, the nation’s largest lender is set to
tie up with an affiliate of Unitech Ltd, the country’s second biggest publicly traded real
estate company, to float a private equity (PE) real estate fund.
OMAXE TO INVEST $20 BILLION TO BUILD 10 LAKH AFFORDABLE HOMES
ET, 15th May 2008
At a time when the burgeoning middle-class and high-income people are becoming a preferred
target for property developers, realty firm Omaxe has lined up a $20-billion (Rs 80,000 crore)
investment to develop 10 lakh "affordable" homes for low-income consumers.
The company is planning to offer these housing units, to be developed in the next five years, in a
price range of Rs 3-15 lakh per flat, sources said.
However, these units may not come up in metro cities like Delhi and Mumbai due to high land
costs and the company is rather targeting tier-II and III cities such as Sonepat, Nimrana, Bhiwadi,
they added.
BSE-listed Omaxe has set up a new subsidiary 'National Affordable Housing and Infrastructure
Ltd' to develop these affordable housing units. When contacted, Omaxe chairman and managing
director Rohtas Goel confirmed the development and said, "We will deliver 10 lakh affordable
housing in the next five years". However, he did not wish to comment on the investment figures.
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"Affordable housing is a big issue in the country. There is a shortage of 24 million housing units in
the country, a majority of which are in the economically weaker section, LIG, and Janta flat
segments," Goel said. The project cost for developing 10 lakh units would be about Rs 80,000
crore at an average cost of Rs 1,000 per square feet on land, construction, and marketing,
sources said.
SUSTAINED REAL ESTATE DEMAND HAS BEEN A RESULT OF IT & BPO BOOM
Hemamalini Venkatraman, May 18, 2008
Speculation might be the buzzword in the realty market in major metros, but in Chennai, it is a
serious buyers’ domain. Largely, it is end-users driving the residential property segment, while the
commercial segment is growing in tune with demand from other sectors.
According to HDFC (TN &Kerala) regional manager Mathew Joseph, there has been no
slowdown in credit off-take. Mature first-time buyers are graduating to larger apartments, given
their rising incomes.
“Very few realty markets globally have undergone such a dramatic change in a short span of
time. Reflecting the diverse nature, the next few years would see tremendous growth
opportunities. Sustained demand has largely been a result of growth spearheaded by a spurt in
the knowledge sector, essentially the IT and BPO-led businesses,” says Jones Lang LaSalle
Meghraj (Chennai) MD Ramesh Nair.
RIL MAKES BILLION-DOLLAR REALTY FORAY WITH VORNADO
HT, 19th May, 2008
In what could mark its foray into the real estate and hospitality sectors, Reliance Industries has
sealed a $1-billion joint venture with the New York Stock Exchange-listed Vornado Realty Trust to
set up a real estate fund that will develop a network of mega malls and highway shopping centres
in India.
CENTRE OKAYS MAHARASHTRA SEZ ACT, LABOUR LAWS INTACT
ET,20th May 2008
In what may be a sign of the changing political environment ahead of general elections, the
Centre has turned down the Maharashtra government's proposal to provide labour law flexibility
in special economic zones.
The SEZs in Maharashtra are expected to see investment of over Rs 120,000 crore ($30 billion)
and may generate 3-4 million direct and indirect jobs.
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INCREASING DEMAND FOR AFFORDABLE HOUSING UNITS
ET, May 21st , 2008
When M L Tayal, principal secretary to Haryana chief minister, said earlier this week that “the
government is seriously considering a proposal to increase prescribed population density (PPD)
and floor area ratio (FAR) in select cases,” he struck the right chord with a host of developers and
other stakeholders. Developers have been struggling with category, area and density norms to
arrive at optimum unit sizes that would match the market needs today.
“As long as the markets were booming everything was fine,” says Sunil Agarwal, head of SARE
Capital, a leading real estate fund. The problems started arising when the markets bottomed out
after the hike in interest rates in March 2006. The average buyer was hit with a double whammy.
So how do density norms affect the number of units per acre? Every city in the country touts
different floor area ratios. Pune allow a meagre 0.5 floor space index (FSI) while Bangalore has a
whopping 3.75 FSI. But there are some norms that are common to all. These are severe density
norms.
The government determines that in Manesar, in Gurgaon, for instance, the density of persons
allowed per acre is 100. Each group housing unit should be deemed to house five persons per
family. This norm is much higher for economically weaker sections (EWS) which is deemed to
hold family sizes of nine on a minimum area of 450 sq ft and for no profit no loss (NPNL) the
family size is calculated at 13.5 each.
Take the actual instance of a developer who had 110 acres of land for development in Manesar.
As per by-laws, in the group housing segment 65 percent units can be for regular sale at prices
determined by the developer. Another 20 percent have to be sold under the EWS category and
15 percent at NPNL rates.
At an FSI of 1.75 and taking these density norms into consideration, the number of saleable units
that the developer found he could build 110 acre plot would be 175 EWS units of 504 sq ft, 136
NPNL units of 896 sq ft each and 548 normal units of 2016 sq ft each. This is against the market
demand for unit sizes of 450 for EWS, 800 for NPNL and 1800 for normal housing, as computed
by the fund based on its survey.
REALTY MARKET INVESTMENT TO RISE TO $20 BN BY 2010
ET,23rd May 2008
Investment in the Indian realty market is likely to increase to $20 billion by 2010 with a boost from
Real Estate Mutual Funds and Real Estate Investment Trust, a recent report said.
"The Indian real estate sector has emerged as one of the most appealing industries for both
domestic and foreign investors and is presently the second-largest employing sector linked to
about 250 ancillary industries," Deloitte Hakins & Sells' Partner Jayesh Kariya said.
However, REMF seems to be more preferred vehicle in view of beneficial tax treatment and ability
of foreign investors to invest in the schemes, Deloitte National Director Tax Lakshminarayanan
said. The REMF regulations provide a much larger and liberal canvas, he added. The regulations
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would provide realty sector with much needed alternative source of raising funds considering the
increasing restrictive scenario.
MMRDA TO BUILD 500,000 LOW-RENT HOUSES
ET, 24th may 2008
Under the Slum Prevention Programme (SPP), the Mumbai Metropolitan Regional Development
Authority (MMRDA) will build 500,000 houses in the Mumbai Metropolitan Region (MMR) over the
next five years. Of this, 50,000 houses would be built over the next year, said metropolitan
commissioner Ratnakar Gaikwad.
Under the SPP, 160 sq ft houses with attached toilets will be made available for a rent of between
Rs 800 and Rs 1,500. The MMRDA had earmarked Rs 100 crore for the SPP, said Gaikwad.
"In Mumbai, we would like to go for the PPP model. Just as in the case of infrastructure projects,
where the project-affected persons (PAPs) are rehabilitated by the developer on his own land and
in lieu gets transferable development rights (TDR) for both land and construction, we will be
offering TDR to the builder for making housing stock available," Gaikwad said.
"However, outside Mumbai, in MMR, the PPP model will not be feasible as TDRs don't fetch the
price which they get in Mumbai. So, the MMRDA will develop the housing stock on its own.
REAL ESTATE
June 02, 2008

The Times of India (Delhi edition)
Expected growth $60 billion by 2010
India's real estate sector is the cynosure of international investors thanks to the opening up of
certain sectors to foreign direct investment (FDI). Global real estate developers and investors
from across the world, especially from the Middle East, South-East Asia and Europe are foraying
into the Indian market.
There has been an unprecedented growth of 35-40% in the last three years. And the market is
expected to grow to $60 billion by 2010.
Total real estate demand is expected to grow to more than 20,000 million sq ft of space in the
next four years involving a whopping investment of $90 billion in the seven active markets alone.
PEs SEEK HIGHER RETURNS AS REALTY MARKET TUMBLES
ET,7th June 2008
There’s nothing stopping the ongoing slump in the real estate market. Analysts say land values
and the selling price of real estate projects across the country are expected to slide further.
At the same time, investors are becoming more cautious in the face of the rising cost of money
and growing market risks.
The high-risk scenario has resulted in private equity (PE) players increasing their internal rate of
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return (IRR) expectations from projects. A big PE player says its expectation is up from 20-25
percent about a year ago to around 25-30 percent.
“There has been a correction in the market and the values are expected to go down further. So,
most investors are safeguarding their interests by inking structured deals,” explains Maheshwari.
A number of deals are being structured in a way that the investor is entitled to a preferred or a
priority return and even capital protection in some cases.
DLF, PARSVNATH & UNITECH LINE UP FOR AFFORDABLE HOUSING IN PUNJAB
th
ET,13 June 2008
Major real estate players including DLF, Parsvnath, Omaxe, TDI, Ansals and Unitech have shown
interest in joining hands with the Punjab government in its bid to provide ‘affordable houses
costing not more than Rs 1 lakh each’ in the state.
REAL ESTATE SECTOR FACING SEVERE CASH CRUNCH
ET,16th June 2008
The recent bloodbath in the real estate sector has started taking a toll. Almost all large
developers are now facing a severe cash crunch and finding it difficult to complete their ongoing
projects. In fact, the situation is so bad that most of them have reported a 50-70% cash shortfall.
Industry sources told Sunday ET that the liquidity crunch has forced many developers to pick up
cash from the unorganised market at interest rates as high as 35% to 50% annually. The lending
rate of banks is between 18% and 20%.
The grade A developers which are facing crash crunch include DLF, MGF Emaar, Shobha
Developers, Unitech, Omaxe, Parsvnath Developers, Hiranandani Group, Ansal API, BPTP
Developers and TDI Group.
As a result of the crash crunch many developers have started going slow or even stopped
construction of projects which are either in their initial stages of development or which would not
affect their bottomline in the near future.
“There are visible signs that the global liquidity crunch has started to impact real estate
companies in India. It is becoming extremely difficult for both small and large realty companies to
organise financing, given the global liquidity crisis. The recent slowdown in demand, high interest
rates, rising input costs and meltdown of realty stocks have only added to their problems” says
Cushman & Wakefield executive MD (South Asia) Sanjay Verma.
Many in the industry feel that notwithstanding the final verdict on the extent of global economic
slowdown and recovery of financial institutions, real estate players in India may continue to face
liquidity problems in the near future due to global credit crunch and unfavourable stock market
conditions for raising capital.
What’s more, bankers say they may now get more cautious towards lending to real estate
developers. “Real estate companies have many projects at hand and the sales have been
constantly dwindling.
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Industry experts feel the only avenue available for raising capital in the current situation is at the
project SPV level and by way of private equity or similar sources, which is generally the most
expensive method of raising capital and has limitations on the over all extent of financing that is
required. The primary source for institutional funding will, therefore, now be private equity,” says
JLLM chairman & country head Anuj Puri.
DLF TO GET 5K ACRES BELOW MARKET RATES
HT,23rd June 2008
Real estate developer DLF will soon get around 5,000 acres near Greater Noida at less than
market rate under the Taj Expressway Industrial Development Authority’s (TEA) scheme. Jaypee
Group, too, has qualified for allotment of 2,500 acres, while Unitech and Punj Lloyd are in queue
for 2,500 acres each.
TEA additional CEO C S Verma said that the authority would complete the process of acquisition
of 7,500 acres in three months, following which it will be allotted to DLF and Jaypee Group. “We
are negotiating with farmers and should be able to finalise the acquisition rate in the first week of
July. Once the rate is finalised, it wouldn’t take us long to acquire the land,” he said.
TEA will transfer the land to realty developers at acquisition cost from the farmers, which is likely
to be much cheaper than the market rate developers have been paying privately. The ability to
buy large tract of land at a cheaper price without spending much time and energy in the process
is what is driving realty players to TEA’s Special Development Zone scheme. As realty sector
boomed in the past few years, land prices too surged and farmers became more demanding
while negotiating a rate with developers.
Most importantly, with government shifting the onus of land acquisition on to the developers for
the special economic zones (SEZ), the hardship in land acquisition increased manifold.
Developers needed to acquire contiguous piece of land from farmers at market rate, which shifted
the balance in favour of farmers. Therefore, developers had to commit more men, time and
money in land acquisition making the entire project more expensive. DLF hasn’t yet been able to
acquire the land for its 5,000-acres multi-product SEZ in Haryana, according to a company
spokesperson.
Unlike SEZ, special development zone does not offer any tax benefit, but offers land at a much
cheaper rate and without much loss of time. SDZ scheme requires the developer to allocate 35
percent of its total land to a core activity, which could range from industrial activity to sport and
institutional.
IT/ITeS will form DLF’s core activity, while Jaypee’s will be sport. Jaypee plans to build Formula
One racecourse in its SDZ. Jaypee, which is building Taj Expressway, says its proposed SDZ has
a synergy with company’s other projects. Jaypee has other real estate projects in Greater Noida
and around the expressway and is also a contender for building the proposed airport at Jewar, 40
kilometer from Greater Noida.
REAL ESTATE FDI INFLOW UP NEARLY FIVE-FOLD
ET,25th June 2008
The Indian real estate and housing space emerged as the darling of foreign investors in
2007-08, clinching FDI equity inflows of about Rs 8,749 crore, a near five-fold increase
over FY07.
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“The investors have seen that the real estate potential in India is huge. The returns are
quite attractive. In fact, we see the trend picking up even further this year as the prices are
getting more attractive for investors,” Ramesh Sanka, Chief Financial Officer at DLF
said.
Late last year, DLF Ltd had sold 49 percent stake in eight residential project SPVs to
private equity investors for a total consideration of Rs 1,675 crore.
A Merrill Lynch & Co entity had bought 49 percent equity in seven residential projects in
Chennai, Bangalore, Kochi and Indore for Rs 1,481 crore. The company — headed by
K.P. Singh — has also diluted 49 percent stake, in another middle-income housing
project in Panchkula, Haryana, to Brahma Investments for Rs 194 crore.
According to data released by the Government on Tuesday, the real estate sector, thrown
open in 2004-05, saw the FDI picking up significantly between FY05 and FY08; it was
Rs 171 crore in 2005-06 surging to Rs 2,121 crore in 2006-07.
“Over the last three years, there has been a build-up in investor interest. We saw the
impact of that interest and euphoria for FY07 and FY08 as new townships and projects
were announced. Depending on the asset class within real estate sector, the average rate
of return stood at 25-35 percent for India, against a global average of single digit return,”
Sanjay Verma, Executive Managing Director, South Asia, of Cushman & Wakefield said.
“However, at the beginning of the current year we have seen some asset bubble deflation.
With prices moving southwards, choppiness in the stock markets, pressure on interest
rates and global issues, while deals will still happen, pricing will be the question,” Verma
added.
PARSVNATH, OTHERS TO HIKE PRICES
ET,30th June 2008
Surprising, it may sound, but property builders are gearing up to raise prices of their existing
projects in the months to come. This is in spite of the fact that realty sales are down by over 25
percent this season.
Builders blame the hike on rising input costs of materials like steel, cement and others by over 50
percent in the last one year.
According to industry estimates, the overall construction cost has increased by 20 percent in the
first quarter and by more than 50 percent in the past one year. This includes cost of steel,
cement, wire and cabling, labour and interiors.
Another reason for realtors to increase prices is because many of them have taken project loans
from financial institutions and are incurring high interest costs. Besides, to attract the upmarket
customer, most of them have built-in amenities that are very expensive.
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REALTY FEELS PINCH OF HIGH RATES
The rise in the interest rates is likely to affect real estate sector growth in the country. In a report,
global real estate consultancy firm CB Richard Ellis said with demand going down, both the
capital as well as rental value of office space have come under pressure.
According to the report, the global economic conditions seemed to have affected plans of the
companies, with some of them deferring their real estate decisions. Under such condition, the
excess supply of office space is likely to affect the market values in the coming quarters.
DLF TO BUY BACK SHARES WORTH UP TO RS 1,100 CRORE
HT, 11th July 2008
Realty giant DLF today said it would buy back up to 2.2 crore shares from the market at a
maximum price of Rs 600 each, as the firm's intrinsic value and future growth potential is not
reflected in its current share price, which has dipped below the IPO price of Rs 525.
At a meeting held earlier today, the company's board has approved the buyback plan for
purchasing shares worth up to Rs 1,100 crore that would come through internal resources.
About a year ago, the company had sold its shares to the public for Rs 525 each in its IPO and
the shares had soared to a life-time high of Rs 1,225 on January 15 this year.
However, the stock has been on a sharp downslide since then and hit a life-time low of Rs 350.30
on July 2 - the day when the company first announced its intention for buying back the shares.
Following the announcement, shares rose sharply by about 15 percent that day.
The promoter holding in the company is currently worth about Rs 70,000 crore (over 15 billion
dollars).
"The company's aim has always been to maximise shareholders value and we see the share
buyback decision as a highly attractive opportunity for out shareholders," DLF Vice Chairman
Rajiv Singh said in a statement.
"While we respect the market, we believe that our current price do not reflect the intrinsic strength
and future growth potential of DLF," Singh added.
REALTY PEs TO EXECUTE REAL ESTATE PROJECTS ON THEIR OWN
ET,12th July 2008
Private equity (PE) funds in the real estate space are starting to don the developers’ hat. Funds
such as Trikona Capital, South Asian Real Estate (SARE) and Yatra Capital have started to
create in-house teams that can execute real estate projects on their own.
For some, the opportunity has already arrived. For the funds, the idea is to have better control
over their development partners while others are clear that they also want to make the kind of
margins that construction offers (25-35 percent). Apart from the cost advantage, this would also
mean a lower dependence on construction companies in a scenario where execution capability
bottlenecks are threatening to derail projects.
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DLF BAGS TWO MEGA DEVELOPMENT PROJECTS ALONG TAJ EXPRESSWAY
“When economic development comes, it would automatically result in removing disparity between
the rural and the urban populace.” In fact, the SDZs are part of the extensive master plan, which
foresees the development of a city all along the stretch upcoming 165-km Taj expressway—from
Greater Noida to Agra.
ANSAL API TO INVEST RS 13000 CRORE ON HI-TECH CITY AT DADRI
ET,14th July 2008
Realty firm Ansal API is pumping in Rs 13,000 crore to develop a township, touted as one of the
biggest hi-tech cities in the country, spread over 2,500 acres adjoining Greater Noida.
The company is expecting revenue to the tune of a whopping Rs 26,000 crore from the township,
to be named 'The Megapolis' located at Dadri. It would be completed in the next eight years.
"We have successfully bagged a hi-tech city project from the UP government covering 2,500
acres," Ansal API Chairman Sushil Ansal said.
He said the size of the project could be extended up to 9,000 acres as per government's hi-tech
policy.
"The project will have a sale value of Rs 26,000 crore and the total investment will be Rs 13,000
crore," he said.
Ansal said, approvals for the project have already been obtained and a memorandum of
understanding (MoU) along with a development agreement have also been signed.
The company expects to book a net profit of Rs 9,000 crore from this project.
"This project will give a big boost to our turnover and profitability. It will be a shot in the arm for
the company as well as shareholders," Ansal said.
Investments to be made in developing the landmark project would be funded through a mix of
internal accruals, bank loans and equity dilution at project level, he said, adding the company
would divest up to 40 per cent stake in the project.
"We have sold 8.5 per cent stake to HDFC AMC for Rs 225 crore and are talking to few other
people," Ansal said.
Highlighting the features of the project, Ansal said it would have an education city, a medicity and
one 18-hole signature golf course designed by Nick Faldo, apart from polo and equestrian
facilities.
"We will also provide global business park and modern office buildings. We are putting bio-tech
and IT parks too," Ansal said.
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HOUSING PROJECTS FOR GOVT STAFF TO BE OPENED FOR PRIVATE PLAYERS
ET,15th July 2008
The UPA government is mulling to open the construction of accommodation for government
employees to private players, a move that would allow real estate biggies such as DLF, Unitech
Ltd, Ansal Housing and Construction Ltd and Shaporji Pallonji Group to get an entry in to the
sector, which so far has been reserved for government agencies.
Given the shortage in housing space for government employees and the resource crunch faced
by the government, the idea is to put the construction of government houses under the public-
private partnership route (PPP) so that the problem of housing is addressed at the earliest with
minimum pressure on the exchequer.
The Planning Commission’s proposal, after intense debate within the the panel itself, has been
sent to other ministries and departments for their feedback.
As per the Commission’s proposal, the government would start with PPP in housing for the para-
military police force and then move on to attend to the housing and office needs of the
department of posts and the defence ministry as well which requires a large number of housing
units at family stations.
The scheme would be based on design-build-finance-operate (DBFO) model. The construction

would be done on government land, as per government specifications and standards. The
builders would maintain the housing complexes for a period of 20 years before handing it over to
the government. It is likely to be done on annuity basis, a member of the Commission said.
The private service provider (PSP) would be selected through a transparent bidding process and
the PSP would have to bear the risks of finance, construction and maintenance. A model
concession agreement (MCA) to look into the issues of limited recourse financing, risk allocation,
identification and enforcement of performance standards and safeguarding public coffer and user
interests would be worked out along with a manual of standards and specifications.
LIQUIDITY PRESSURE COULD LEAD TO SHAKEOUT IN REALTY: CRISIL
ET,16th July 2008
A number of medium-sized and small real estate developers could face a liquidity crunch in the
months ahead. Many such developers have stretched themselves operationally, and borrowed
heavily, to benefit from the real estate upturn of the past three years. The current slowdown in
demand for realty, coupled with declining internal accruals and reduced funding options, exposes
them to the downside of this aggressive strategy: there are large amounts of debt already on their
balance sheets, and external funds are increasingly hard to come by, believes CRISIL.
The rating agency foresees delays in many ongoing and planned real estate projects, thereby
leading to the possibility of sale of projects or even enterprises. This will result in some
consolidation in the sector. From among the larger developers, those that are not over-leveraged
operationally are well placed to tide over the current crisis and even emerge stronger.
Increasing real estate prices over the last three to four years resulted in a large number of
developers acquiring land at high rates in anticipation of a further increase in prices, and scaling
up their operations multifold. While some developers have managed to finance this growth
through a prudent debt-equity mix, most medium-sized and small developers have relied heavily
on debt.
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The current situation exposes the pitfalls of such a strategy. There has been a slowdown in the
sale of real estate projects across India since early 2008, across the residential, commercial, and
retail segments. Demand has moderated with the sharp increase in real estate prices, coupled
with rising interest rates that have made housing loans progressively expensive. In particular,
residential projects, which have been funded largely by customer advances, have been severely
hit by the slowdown in bookings.
Further, the sharp increase in the cost of land and construction materials (primarily steel and
cement) has pushed up input costs by 20 to 30 percent over the past two years.
This combination of sluggish sales and rising costs is expected to adversely affect the profitability
and cash accruals of real estate companies in the near to medium term.
Declining internal cash generation has been accompanied by a progressive drying up of funding
options. Stringent Reserve Bank of India norms for bank loans to real estate, and high interest
costs for most corporate, have made bank borrowings less attractive. The restrictions on external
commercial borrowings and classification of preference shares as debt, announced in May 2007,
have cut down two other funding sources. Foreign direct investment norms do not allow real
estate investments below a certain size and value.
Compounding the effect, the recent fall in equity markets has derailed the plans of many real
estate companies to access the domestic or international market for equity issues.
These unfavourable real estate and financial market conditions have coincided with a sharp
increase in the scale and size of projects executed and planned over the past two years. As a
result, many builders—mainly small and medium-sized ones—are operationally at full stretch,
besides being financially leveraged. Added to this, some projects have been funded through high-
cost short-term borrowings, weakening the developers’ financial risk profiles even further. These
developers will be the most vulnerable to the current slowdown in real estate, resulting in delayed
or stalled projects.
Over the long term, CRISIL expects the sector to revert to its strong uptrend, and perform in line
with the overall economy. In the short to medium term, the current slowdown creates a very real
risk of a shakeout among medium-sized and small players. The extent of the shakeout would
depend upon the duration and depth of the current trough in the sector’s performance.
CITI, WARBURG EYE 15 PERCENT IN ANSAL API DADRI PROJECT
ET,17th July 2008
Citigroup and Warburg Pincus are in talks with Sushil Ansal-promoted Ansal API to pick up a 15%
stake in its Rs 13,000-crore Dadri Megapolis project. Ansal is expected to get Rs 1,900 crore
form the stake sale. The deal is likely to be finalised in two months.
“We are close to signing the deal with a PE player in two months. The 15% stake sale would be
part of the first tranche, as we would gradually sell at least 40% of our equity in the project.” Ansal
API marketing president Kunal Banerjee said without disclosing identities of the PE firms. It is
understood from company sources that Ansal API is close to finalise the deal with Citigroup and
Warburg Pincus. Finally, the company would offload a total of 40% stake in 2,500 acre, high-tech
city project to various PE funds.
The Megapolis, located at Dadri, would be completed in the next eight years. The project will
have a sale value of Rs 26,000 crore and the total investment will be Rs 13,000 crore. Approvals
for the project have already been obtained and an MoU along with a development agreement
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have also been signed, Banerjee said.
Ansal has a land bank of 7,000 acres with 17 townships, 15 shopping malls and three Special
Economic Zones under different stages of development across the country. The company, which
is a listed real estate firm, had posted a total income of Rs 1,011.36 crore in 2007-08 with a net
profit of Rs 173.51 crore.
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4. Statistical facts and regulatory regime
1) Total area of India is 3,28,7263 Sq Km (Against World Surface Area 135.79
Million sq km ) which is 2.42% of world land area
2) Total agriculture area of country – 141.23 million hectare – 43% of total land area
3) Total population of country (As Per Census 2001) – 102.87 crore
4) Total urban population (As Per Census 2001) – 28.61 crore
5) Indian population in percentage of world population – 16.71%
6) Density of Population – 325 per sq km
7) Birth Rate (2006) – 23.5 per thousand population
8) Death Rate (2006) – 7.5 per thousand population
9) State with highest density of population – West Bengal – 904
10) State with highest population – Uttar Pradesh – 16.62 crore as per 2001 census
11) Per capital income at current price – Rs. 29, 642 (For 2006-2007)
12) Gross domestic saving rate for 2006-2007 – 34.8%.
13) Whole sale price index (for 2006-2007) Base 1993-91-100 – 206.2
14) Total inflow of FDI between (August 1991-Nov 2007) -- $ 65.769 million
Service sector attracted – 20.22% while housing & real estate – 11.44%
15) Monetary & Credit Policy : -
Bank Rate 6% (w.e.f. April 29, 2003) 6%
Cash Reserve Ratio (CRR) 7.5% (w.e.f. November 10, 2007) 8.75%(30th
June ,2008)
Statutory Liquidity Ratio (SLR) 25% (Unchanged since October 25%
25, 1997)
Repo Rate 7.75% (Since March 31, 2007) 8.5%
Reverse Repo Rate 6.0% (Since July 25, 2006) 6%
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16) Targets of 11th Plan (2007-12)
Growth Rate (Annual) 9.0% (By 2012 to become 10%)
Agriculture Growth Rate 4%
Growth Rate of Industry & Services 9 to 11%
Saving Rate 34.8% of GDP
Investment Rate 36.7% of GDP
Literacy Rate 64.8% (2001) – to 80% in 2012
17) India vision 2020 (A document made by Planning Commission)
INDIA VISION – 2020

( A document made by Planning Commission)
IMPORTANT TARGETS (PROJECTIONS)
Indicator Present Projections
Levels for 2020
1. Adult Male Literacy 68% 96%
2. Expenditure on Education(% in GDP) 3.2% 4.9%
3. Life Expectancy (Years) 64 69
4. Infant Mortality Rate (Per 1000 Live 71 22.5

Births)
5. Computer Availability (Per 1000 2.3 3.3

People)
6. Agriculture Share in GDP 28% 6%
7. Industry Share in GDP 26% 34%
8. Service Sector Share in GDP 46% 60%
9. Foreign Capital Investment Share in 2.1% 24.5%

Gross Capital Formation
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18) Sectoral Real Growth Rate
Sectoral Real Growth Rates in GDP at Factor Cost (At 1999-2000 Prices)
Sector IX 2004- 05 2005-06 2006-07 X Plan 2007-08
Plan
Construction 7.1 16.1 16.5 12.0 12.9 9.6
Financial 8.0 8.7 11.4 13.9 9.5 11.7
Real Estate
& Housing
Source : Central statistical Organisation
19) GDP growth rate in 10th plan & target growth rate for 11th plan
GDP Growth Rates in 10th Plan Years

(In % at Factor Cost 1999-2000 Prices)
Year Growth Rates
2002-03 3.8%
2003-04 8.5%
2004-05 7.5%
2005-06 9.4%
2006-07 9.6%
Average of the 7.8 %
10th Plan
Target for 11th Plan 9.0%
20) As per the current released data by CSO the saving rate (i.e., Gross saving as a
proportion of GDP at current market prices) touches a record level of 34.8 per
cent in 2006-07 as compared to 34.3%, 31.8%, 29.8%, 26.4% and 23.5%
respectively.
Source : Central Statistical Organisation
21) The share of agriculture in the gross domestic product has registered a steady
decline from 36.4 per cent in 1982-83 to 18.5 percent in 2006-07.
Agriculture in our country provides livelihood to about 64% of the population
Agriculture sector provides employment to 58.4% of country’s work force and is
the single largest private sector occupation.
22) Key Recommendations of the Parekh Committee Report on Infrastructure

Financing
• No withholding tax on foreign borrowings by infrastructure firms.
• Allow refinance of rupee loans through external commercial borrowing.
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• Extend the tax rebate on individual investments in ultra mega power projects.
• Relax cost ceilings for subordinated debt and mezzanine debt (debt that
incorporates equity-based options).
• Infrastructure holding firms should not be subjected to the same norms as

non-banking finance companies (NBFCs).
• Investments in unlisted shares should be taxed at the same rate as listed

shares.
• Rationalise dividend distribution tax to reduce tax burden.
23) In it’s just released 2007 Revision of World Urbanisation Prospects. UN

Population Division has said that by the end of this year half the world’s 6.7
billion people would be living in urban areas. However, India with about 30% of
its population in urban areas at present, “is expected to remain the country with
the largest rural population during most of the future decades, “said Hania
Zlotnik, Director of the Population Division of UN’s Department of Economic
and Social Affairs (DESA) while releasing the report. As per the projections,
India’s urban population as per cent of total population would cross the halfway
mark only in the 2040s.
24) Salient Features of Indian Economy
Low per Capita Income: - Per capita income level is much low in India as
With other developed country. According to World Development Report (2007)
India’s per capital income was $ 720 in 2005. the per capita income in India is
about 1/60 of US level of per capital income.
Disparities in Income Distribution: - High degree of disparity in income/wealth

distribution is found in India. Though the objective of establishing a socialistic
society was adopt in second five year plan but truly speaking it ahs not yet
achieved. According to the data shown by NSSO, 39% of rural population
possesses only 5% of all the rural assets while, on the other hand, 8% top
households possess 476$ of total rural assets.
Income disparities are some what more intensive in urban areas as compared with
those of rural areas.
Dominance of Agriculture Heavy population Pressure on Agriculture : - Per

capital land availability is very low and on the contrary, labour use per hectare is
very high in India. Agriculture sector today provides livelihood to about 65% to
70% of the total population and contribute 22% of Gross Domestic Product.
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Over Population: - India is over-populated. In every decade Indian population
gets increased by about 24%. During 1991-2001 population increased by 21.5%.
The compound annual growth rate of population during 1991-2001 was 1.95%
again the level of 2.16% during the preceding decade (1981-91). With the high
growth rate of the population about 1.7 crore new persons are added to Indian
population every year. According 2001 census, the total Indian population stand
at a high level of 102.87 crore which is 16.7% o the world’s total population. To
maintain this 16.7% of world population India holds only 2.42% of total land area
of the world.
Unbalanced Economic Development: - India has not yet achieved the goal of
balanced economic development. According the latest world development report
2007 about 64% of total labour force is dependent on agriculture, 16% on
industries and rest about 20% on trade, transport and other services.
Lack of Capital: - Saving is low in India due to low national income and high
consumption expenditure. Gross domestic savings which were 23.1% of GDP in
1990-91, increased up to a level of 34.8% in 2006-07.
25) Government Approves New Rehabilitation Policy For Farmers
The government has approved the new national policy on rehabilitation and
resettlement 2007 which has replaces policy of 2003. Due to controversy over
land acquisition for SEZs (Special Economic Zone) and other project, government
has approved this new policy for providing allotment of land in return of land.
The government ahs also declared to bring a legislation to amend the land
acquisition 1894 to implement the new rehabilitation policy.
The silent features of the newly approved rehabilitation policy are as follows: -
● Policy covers all cases of involuntary displacement
● No project involving displacement of family beyond defines limit will be

Undertaken without a detail social impact assessment, which will take into
account the effect on project on community and other common asset
● Tribal Development Plan for displacement of more than 200 Scheduled

Tribes families.
● Consultation with Gram Sabhas of Public Hearing made compulsory.
● Principle of Rehabilitation before displacement
● If possible land for land as compensation
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● Skill development support and preference for jobs (one per nuclear family)
in the projects coming up on their plots
● Entitled person will have the option to take up 20 per cent of the
rehabilitation grant and compensation amount in the form of shares of the
requiring body
● Rehabilitation Grant in lieu of land or job

● Housing benefits to all affected families, including the landless
● Lifetime monthly pension to the vulnerable such as the disabled destitute,

orphans, widow unmarried girls, abandoned women and persons above 50
year
● Monitoring benefits linked to the consumer Price Index, also to be revised

suitably at periodic intervals
● Necessary infrastructure facilities and amenities at settlement areas
● Periphery development by project authorities
● Rehabilitation and resettlement Committee per each project, to be headed

by Administrator
● A strong grievance redressal mechanism, which include setting up of

committees at the district and project levels with provision of an
Empowered Ombudsman.
● National Rehabilitation Commission for external oversight will be set up
26) Land Acquisition Bill Introduced in Parliament
The government on December 6, 2007 introduced the much awaited Land

Acquisition (Amendment) Bill and Resettlement and Rehabilitation Bill 2007 in
the Parliament. The land acquisition Bill seeks to limit the government’s role in
land acquisition for government projects. The Resettlement and Rehabilitation (R
& R) Bill seeks to set up a Land Acquisition Compensation Disputes Settlement
Authority and delineate the compensation packages to be awarded in case of land
acquisition by government.
Apart from landowners, both the Bills give rights of compensation to tenant
farmers, agricultural and non-agricultural labourers whose livelihood will be
impacted by the acquisition of land and displacements. The Bill also provides that
land which is not put to use for the purpose for which it was acquired with in five
years, has to be reverted back to the government.
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The important features of the Bills are as follows –
• Provisions of the Resettlement and Rehabilitation Act, 2007 will apply only to
Central and state governments. Companies have been removed from the ambit
of the Act.
• A social impact assessment should be carried before acquisition.
• Compensation will be based on the market value of the land as determined by

the District Collector.
• Part of compensation can be through shares, debentures.
• Land acquired if unutilized for five years will return to appropriate

governments.
• Compensation to be made within 60 days of acquisition; higher compensation

will be provide in urgent cases.
• For speedy disposal of disputes, a Land Acquisition Compensation Disputes

Settlement Authority would be formed at the Centre and the respective states.
• Land acquired under the Act cannot be transferred to any other purpose except
public purpose.
• Tribals and other traditional forest dwellers and people with tenancy rights
will also be covered.
27) India Attains Faster Urbanisation Growth : UN Report
In the United Nations Population Fund’s latest report entitled “State of World
Population 2007”, India has been shown as a country having a faster growth rate
of urbanisation than the rest o the world. As per the estimate shown in the repot,
by 2030, 40.7% of India’s population will be living in urban areas. Report says
that at present 28.7% o India’s area is urban as against the global average of
48.7% but the growth rate of urban areas in india in 2005 was 2.3% as against the
world average of 2 per cent. Report finds Maharashtra and Tamil Nadu as states
witnessing rapid urbanisation due to better job opportunities and higher wages
while Bihar and Orissa have been listed at bottom with least urbanisation in the
UN Report. In India, Tamil Nadu tops the list with 43.9% of the total population
living in urban areas followed by Maharashtra (42.4%) and Gujarat (37.4%).
According to the report, only 10.5% of the population of Bihar lives in urban
areas while 12.7% population of Orissa lives in urban areas.
It is also worthnoting that among factors contributing to urbanisation, the report

gives 61% weight to natural increase in the urban area, 22% to rural migration to
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urban areas as urban. The report also draws attention of the government to the
challenges with the country has to face during urbanisation process. The report
finally advocates pro-poor policy in urban areas to provide basic services and
maximize human contribution.
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Extract of Salient Points from National Urban Housing and
Habitat Policy 2007
Preamble
● This policy intends to promote sustainable development of habitat in the country

with a view to ensuring equitable supply of land, shelter and services at affordable
prices to all sections of society.
● The policy will seek to promote various types of public-private partnerships for
realizing the goal of Affordable Housing For All.
The Need for Policy
Focus Areas
● The policy seeks to promote to symbiotic development of rural and urban areas.
● The core focus of this Policy is provision of “Affordable Housing For All” with
special emphasis on vulnerable sections of society.
● Policy seeks to assist the poorest of poor who cannot afford to pay the entire price
of a house by providing them access to reasonably good housing on rental and
ownership basis with suitable subsidization.
● It gives a menu of actionable points which inter-alia includes Public-Private-

Partnerships, conservation of natural resources and formulation of regulations &
bye-laws that are environment-friendly, investment-friendly and revenue-
generating.
● Policy seeks to emphasize appropriate fiscal concessions for housing and

infrastructure.
● Policy aims to promote development of cost-effective, quality approved building

materials and technologies with a view to bringing down the cost of EWS/LIG
houses.
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Aims
The National Urban Housing and Habitat Policy aims at: -
Urban Planning
● Promoting balance urban-rural planning.
● Planning of Mass Rapid Transit Systems.
Affordable Housing
● Accelerating the pace of development of housing and related infrastructure.
● Creating adequate housing stock both on rental and ownership basis.
● Using technology for modernizing the housing sector for enhancing energy and
cost efficiency, productivity and quality. Technology would be harnessed to meet
the housing needs of the poor. The concept of ‘green’ and ‘intelligent’ buildings
would be put in place on the ground.
Increase flow of Funds
● Promoting larger flow of funds governmental and private sources for fulfilling
housing and infrastructure needs by designing innovative financial instruments.
● Removing legal, financial and administrative barriers.
Spatial Incentives
● Relaxation of Floor Area Ratio (FAR) for ensuring that 20-25% of the FAR are
reserved for EWS/LIG and issuance of Transferable Development Rights (TDR)
for clearance of transport bottlenecks.
● Careful review of authorized Floor Area Ratio (FAR) in line with international
practices for allowing more efficient use of scarce urban land by construction of
high rise buildings.
Increase Supply of Land
● Facilitating accessibility to serviced land and housing.
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Employment Generation
● Upgradation of construction skills and accelerated development of housing and

infrastructure sectors.
Healthy Environment
● Developing cities/towns in a manner which promotes a healthy environment,

encouraging use of renewable energy resources and ensuring effective solid waste
management.
Specific Areas of Action
Land
● Land assembly, development and disposal will be encouraged.
● Private sector will be allowed to assemble a reasonable size of land.
● 10 to 15 percent of land in every new public/private housing project or 20 to 25

percent of FAR / Floor Space Index (FSI) which is greater will be reserved for
EWS/LIG housing through appropriate legal stipulations.
● Beneficiary-led housing development will be encouraged.
Finance
● National Shelter Fund to be set up under the control of the National Housing Bank
for providing subsidy support to EWS/LIG housing.
● Efforts should be made to encourage Foreign Direct Investment (FDI) from Non
Resident Indians (NRIs) and Persons of Indian Origin (PIOs) in the housing and
infrastructure sector.
● Central Government and Governments of States/UTs will promote innovative

forms of public-private partnerships.
● Rental housing provides a viable alternative option to the home seekers.

Incentives are to be provided for encouraging lendings for rental housing.
● Micro-Finance Institutions would be promoted to expedite the flow of finance to

urban poor.
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Legal and Regulatory Reforms
● Regulation of land supply with a view to reducing speculation.
● A single window approaches for approval.
Technology support and its transfer
● Low energy consuming and using renewal form of energy for construction
techniques and rain-water harvesting technologies will be encouraged.
● Use of prefabricated factory made building components will be encouraged for

mass housing, so as to achieve speedy, cost effective and better quality
construction.
● Transfer of proven, cost-effective building materials and technologies would be

encouraged by transfer from lab to land.
Infrastructure
● Development of a Mass Rapid Transit System at the sub-regional level around

metropolitan cities will be encouraged.
Sustainability Concerns
● Growth of a city beyond reasonable limits imposes unbearable strain on its

services. City planners would be encouraged to lay down norms for development
of urban sprawls and satellite townships.
● Reduction in the rate of in-migration into mega and metro cities is urgently
needed through preparation of State/UT level regional Plans based on fast
transport corridors for balanced growth.
Employment issues relating to the Housing Sector
● Efforts will be made to provide good quality training to construction workers with
a view to improving their skills.
● Land pooling and sharing arrangements would be encouraged in order to facilitate

and development and improvement of basic amenities in slums.
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The Ultimate Goel
● The ultimate goal of this Policy is to ensure sustainable development of all urban
human settlements, duly serviced by basic civic amenities for ensuing better
quality of life for all urban citizens.
● The National Urban Housing and Habitat Policy, 2007 also lays special emphasis
on provision of social housing for the EWS/LIG categories so that they are fully
integrated into the mainstream of ecologically well-balanced urban development.
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5. OBSERVATIONS
Following Points emerged with Explorative Research of E.T. Intelligence Group:-
Right to a shelter is must to enjoy a meaningful right to life as per article 21 of

Indian constitution.
Housing shortage in India is mainly due to following factors: -
a) More than average growth of population in India as compare to the world.

b) Dis-integration of Indian joint family system.
c) Migration of population from rural to urban area.
d) Increase in per capita income of young group – Age profile of home buyer
decreasing.
e) Incentive in the form of Income Tax rebates.
f) Increase in urbanization due to emergence of new service sector
g) Real estate treated as an investment option.
h) Trend of ownership increasing rather than taking house on rent due to easy
availability of finance.
Indian Real Estate market can be compared only with China and USA
Till 2005, Indian Real Estate market was unorganised. There were no large
players with a National Presence.
Till 2006, the software & BPO industries are taking up 2/3 of new office space
that is built.
With the allowance of F.D.I. in Real Estate, Overseas Investment poured into
Real Estate forcing Real Estate Industry to play on a much large scale and in
professional manner.
Real Estate construction business plays key role in development of cities and
cities then became engines of growth of Indian Economy.
Rapid rise in population of India translate into higher demand of dwelling units
for residential purposes. Government realized that they alone can not meet this
demand.
Census data revealed that there is clear trend towards increased ownership of
homes.
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Another clear trend was increasing number of pucca houses even in villages.
Another trend is shift of preference towards larger dwellings probably due to

increased per capita income.
In National Housing & Habitat Policy, 1998 it was recognized that no

significant headway can be achieved without massive participation of the
private sector. The policy envisaged change in Role of Government from a
regulator to a facilitator. This policy emphasized sustainable development of
infrastructure. However, since housing was a state subject primary
responsibility for achieving physical targets were left to state governments.
In tenth five year plan the compulsion to attract private finance in Real Estate
Sector was recognised.
Review of Ernst & Young Annual Report on Indian Real Estate
This report covered period of 2006-2007 during which period Real Estate Sector
was booming and there was massive induction of F.D.I. in the field. All the
segments i.e. residential, retail, office, hospitality were at peak and there was
emergence of few big players in the market. The big players draw huge money
from Banking System and the sector was “Overheated” in terms of R.B.I. The
report points out: -
Increase in spending trend by Indians and rising tourist flow in the country has
fuelled demand for Retail and Hospitality sector.
To cool off the overheated Real Estate Sector, Reserve Bank of India increased
interest rate and risk weightage for Banks.RBI also restricted Real Estate
companies from borrowing debt from International Market.
It was pointed out in the report that yields from Indian Real Estate are among
the highest in the world.
Commercial Real Estate witnessed a dominance of IT/ITES sector accounting

nearly 70-75% of total commercial office space.
Rental values of commercial office space and Retail found highest appreciation.
Favorable policy change in FDI for township projects coupled with robust
demand not only by end users but also by Investors resulted in explosive growth
of residential segment of real estate.
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Emergence of nuclear families and youngsters whose income was more and
their was need for Income Tax savings, invested in residential sector heavily.
Product in mid and premier residential sector was basically produced during this
period.
Govt. Policy of creating SEZ invited new era of controversy for land acquisition
and rehabilitation of displaced persons assumed greater significance.
Govt of India proposed few changes in “Land Acquisition Act” which are yet to
be approved from Parliament and also launched a Rehabilitation Policy for
those whose land has been acquired. This has covered additional burden on
developer.
Due to various measures taken by Reserve Bank of India to cool off overheated
Real Estate Sector, Private Equity emerged as one of the most preferred option
for the foreign investor.
Various State Governments issued new master plans for their cities and
suddenly infrastructure became most important to release supply of developed
land. Government invited private sector to participate in such project since there
was shortage of funds and government level.
New trend of strategic alliance and collaboration emerged. Most of the alliances
are for the objective of fulfilling the funding requirement, mitigating risk in
project, obtaining technical know-how and for enhancing project execution
capability.
International developers preferred strategic alliance model for bidding for large
scale development project on PPP model.
A detailed survey conducted by Ernst & Young indicated following: -
Foreign Investor rate India as their very good investment destination.
They felt that the growth momentum of Indian Reality will continue for next
five years.
Foreign investor prefer SPV model of investment.
Equity emerges most preferred investment instrument amongst investors.
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Residential segment has been the most favourable among the investors in Indian
Real Estate.
Commercial Retail and Office segment were found to be stagnant while

logistics and warehousing seem the next buzzword in real estate sector.
Foreign investors found significantly high land valuation as the most significant
deterrent to fund deployment.
Land title, ownership issue with demand-supply dynamics was the main risk
factors for investment in Real Estate Business in India.
With the entry of Global Players in Real Estate, the rules of the game is
predicted to change faster, the sector may undergo structural changes.
The RBI has been concerned about overheating in the sector –since exposure of
commercial Banks was increased to 91% of total lending, making it most
sensitive. R.B.I. has therefore stopped funding in this sector by two means:-
A. Total Ban on accepting foreign debt
B. Increase in risk weightage for loans to Real Estate to 15%.
Real Estate price continue to appreciate in 2006-07 with restriction from RBI,
Real Estate sector may resort to more expensive finance from PE Investors
which may make prices shooting up further.
Profit margin of Real Estate Sectors goes down due to following three important
factor:-
A) High cost of capital
B) Rise in price of cement by 30%(which constitute 25%
component in cost) and steel by 10%(which constitute 15%
component in cost)
C) High cost of human resource and marketing expenditure.
Real Estate Developer unable to transfer cost of price escalation of material due
to their pre-launch and post launch system of sale, where sale take place much
before the actual construction of property.
E & Y report predicted following three trends in coming future : -
A. Though there are doubts about sustainability of growth of

Real Estate Sector in India – E & Y expect massive
urbanization may result into Mega Integrated Township
Projects.
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B. E & Y expect further boost to the sector due to massive
Infrastructure investment by Govt of India and States
through PPP Mode.
C. E & Y expect more competitive environment with more
efficiency and reduce cost.
Ernst & Young quarterly reports pointed out following important economic
variation in real Estate Market: -
Quarter Ended June 2007
Industry continued to witness high level of activity in all the segments.
RBI ban ECB route & also reduced risk weightage for housing loan up to 20
lakhs.
This quarter will be remembered in History of Indian Real Estate for massive
success of IPO of DLF.
E & Y generated Real Estate Index got 30% increase against only 19.7%
increase in BSE sensex.
The major bottleneck of Real Estate Projects is multifaceted Government

Approvals and red tape.
Lands & Housing are in state subject hence every state government has different
rules regarding their land and different policy for housing and investment.
Availability and cost of fund became real challenge for the developers.
Quarter Ended Sept 2007
E & Y Real Estate Index increased by 175% while there is only increase of
20.8% in BSE sensex.
It was observed that there is forward and back integration taking place in Real
Estate value chain. Major players are entering into Retailing & Financing.
There is visibility of conglomerate diversification when DLF, Unitech,

Parswanath and India Bulls announced their plan to enter Telecom Sector.
There is unique collaboration seen in south where 12 realtors joined for

satyagriha alliance and announced their intention to build 3,42,000 houses
through 100 projects across 15 cities.
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DLF announced their intention to enter into Mid-Income Housing Segment.
E & Y Report Quarter Ended December 2007
E & Y Real Estate Index closed over 42% increase against only 18.3% increase
in sensex.
Funds are looking to invest in mixed use project and they are giving more
importance to mitigation of risk as projects are being delayed.
E & Y Report Quarter Ended March 2008
The US subprime crisis appears to have affected the realty stock in India. E & Y
Real Estate Index decline by 44% during the quarter against only 24.3% decline
in sensex. E & Y find a steeper fall in reality against sensex.
It was found that majority of the developers are entering to high end housing
due to higher margin and in this process mid segment housing got ignored,
leading to large latent demand.
DLF strategy on mid income homes is to enter between price range of Rs. 45 to
Rs. 50 lakhs but below this price level there was no big developer available for
housing. Hence, affordable housing up to 30 lakhs has been left untouched.
Report points out that large developer are entering into a Affordable Housing
Segment.
Important Observation from National Level News Papers
It was found till feb 2007, that growth of Real Estate is based on sustainable
fundamental factors and is irreversible in nature. At that time economy was
growing at a faster speed and all indicators has pointed out robust demand. This
time most of the VC/PE funds are targeting an IRR between 15 to 35% and their
average time of investment was about 5 years.
Even till July 2007, economy was expanding and demand for commercial space
has shown no sign of slowdown even after U.S. subprime crisis.
Till Nov 2007, Real Estate Sector was growing at the rate of 30% and ET
reported that his sector is booming. High growth was due to booming economy
due to liberalized FDI in Real Estate.
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The cause of real estate boom was also due to deeper societal changes India is
predicted to have young profile and its half population was under 25 years of
age. The median age of India in 2005 was 24 years, compared to 33 in China
and 43 in Japan. E.T. reported on Nov 16, 2007that urbanization in happening at
a much faster speed of 2.5 percent per year. Sentiments were positive and the
large population of India was considered to be an asset, specially since they are
young, energetic and urbanized.
It was observed through TOI 25 Nov 07 that though there is a housing boom in
India but people are homeless. NBO estimated 24.7 million people in urban area
lack their own houses and 97% o them from low-income group, thus they found
over 37% urban population do not have shelter.
In the TOI on 25th Nov 2007, predicted that property boom is over. They found
Real Estate to be unregulated and also found that there is over supply in certain
segments and predicted that sector suffers from Resource Crunch. At this stage
the basic reason was that CRR was moving up, deposit rates were down. They
predicted that Rosy Year for Real Estate is over.
It was in December 2007, TOI found that “Global Shocks can hit Indian
economy. India is not immune to U.S. crisis. It was observed that india need to
redouble its effort to keep domestic drivers of growth in place and make
regulatory regime such that is facilitates faster growth – However increasing
inflation later on forced GOI to compromise on growth.
Dec 2007 was a time when on one side TOI reported global slow down and its
adverse impact on Real Estate in Indian but at the same time it was found by
MINT on 25th December that lured by fantastic growth of the sector 200 non
reality companies get their constitution changed and entered into Real Estate
Sector. Cushman & Wakefield found that this time valuation of Indian realty
companies was exceeding expectations and lot of capital chasing many assets. It
was predicted that this trend is expected to go up further. I observe that this time
entry of so many companies who were not previously connected with real estate
increased number of players significantly in the market.
At this time, Hines India expected a correction in Real Estate market. They
reported in MINT on Dec 27 that land prices in India had shot up due to
artificial constraints and land record and titles are not clear. They also said that
foreign Real Estate are keen to invest in India due to high return of real estate
market but unclear land title and ownership record are deterrent to investment.
Meanwhile one another important player Trump believed that with the
emergence of nuclear families in India, the demand of properties is bound to
increase. We will later on analyze how there expectation went wrong and how
India is looking to the slowdown at present.
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It is also very important that Real Estate Industry though contribute 7% to GDP
of India but it is still not considered an Industry. Builder Association of India
pointed out to Prime Minister that this industry, though still unrecognized
employ 18 million workforce directly and 32 million indirectly. They also
pointed out that 40% of gross investment came from this sector.
I have also analyzed the impact of Monetary Policy on Indian real estate and
found following :-
• During 2005, Interest rate on housing loan was reduced and several
incentives in Income Tax have been granted which spurred demand of
Real Estate especially in Residential Housing Segment.
• Later on continuously increasing CRR and bank rate affected housing
loan and number of person applying for loan reduced however
quantum of loan may increase due to higher cost of property. Hence
increase in CRR and bank rate adversely affected residential segment
of real estate and demand went down. This caused reversal in trend of
owning houses.
• RBI has now reduced risk weight on houses up to 30 lakh which has
given incentive to bank to offer more loans to house seekers.
• Economic times found that interest rate cycle is expected to reverse,
i.e. previously lower rate of interest has generated more demand for
residential segment while its reversal may adversely affect the
demand.
• It was predicted that US economy is slowing down in 2008 and if
monetary policy raises CRR to suck liquidity from system and also
raises interest rate on house loan they will make the demand go down
steeply.
I have also analyzed the Budget of GOI for 2008-2009 and observed following:-
• Since Dec 07, it was found that growth of Real Estate was slowing
down due to various factors hence developers have few hopes from
central budget.
• Exorbitant rate on housing loan has adversely affected the demand
hence it was expected that GOI may give some incentive.
• Industry expected some incentives for Affordable Housing Segment.
• They were hoping for one window approval system but nothing
happened.
A strong movement was made to redefine Real Estate sector by excluding

Hotels, Hospitals and Educational Institutions from the list of segments to ease
out flow of debt capital to them but till now it has not happened. It was found
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that RBI found Real Estate overheating in July 2005 and since then it has
increased risk weight for lending to commercial real estate first time in July
2005 from 100% to 125% and then increased to 150% in April 2006. this step of
RBI has tightened debt flow to Real Estate Sector.
Impact of US – Recession & Sub Prime crisis on Indian Real Estate
• US recession is primarily caused by Sub Prime crisis i.e. by extending

loan to those borrowers who are normally not eligible to pay. All such
loan belongs to housing sector. This has caused banking and its credit
system move towards failure. This has created shock waves around the
world and banks and investors became highly cautious while funding
real estate projects. This has choaked normal supply of fund to real
estate sector.
• Due to high risk of investment, Banks has almost with drawn
themselves to extend credit to real estate sector and P.E/VE funds has
raised their IRR requirement. This has increased the cost of capital
which further increases the price for end users.
• FII have approx 35% investment in Indian Stock Exchange. They are
very sensitive to US slowdown and international economic
movements. There sudden selling during Jan 08 caused market to
tumble down. Most of the volatility in market is due to them.
• Indian Real Estate prices and stock exchange move in similar fashion.
A downward stock therefore represent slowdown of real estate sector.
• Real Estate Sector is capital-intensive sector, hence it is affected more
due to variations in stock prices.
• Hence, though Indian Real Estate has no direct connection to US slow
down or subprime crisis but now most of big players are listed and
hence they are affected by International Movements.
Lessons to be learned from China: - I found that India and China both are
rapidly growing economics of the world, both are most populous and have large
number of consumers but while population of India is still growing @ 1.5%, the
net population of China is reducing.
China, being a communist country controls over whole of land resource. Since
they control most important resources of Real Estate they can plan and get any
real estate or infrastructure project very speedly and without any hurdle. In India
this critical resource is the biggest hurdle in the way of growth of real estate
industry. Moreover titles and ownership are also not clear in India which make
investors too cautious about their investment.
Govt of India neither control land nor now willing to acquire it for real estate
development due to political reasons. Therefore assembly of land in bigger
areas poses the greatest difficulty before developer.
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Govt of China has a culture to develop big infrastructure project on their own an
then allow developers to develop pockets of land as per their plan.
Indian population is younger than china, it is expected to contribute more

towards Indian economy if their skills are properly upgraded. This factor may
give competitive advantage to Indian economy.
Control over Supply of Land
Land is most important resource for real estate sector but the ownership of this
land vest with mostly individuals and government.
One can find,
Unclear land title and ownership record gives maximum trouble to developer
while purchasing land for any of their projects.
This gives less confidence to investors and they are worried about litigations
over land causing investment to stick on.
There is no system of assembly of land in huge chunk. Developers who tried to

assemble even 100 acres of land find it very difficult to pursue few non willing
sellers.
Though urban ceiling act has been repealed in almost every state in India but
rural land ceiling is still in place in most of the states. This ceiling restricts
assembly of land.
Supply of developed land is controlled by government. Infrastructure projects

are surely executed by government, private participation is still limited. Hence
more private participation in infrastructure projects should be encouraged.
Land and housing is a state subject. Various state has different sets of rules to
regulate their land. These acts are normally a hurdle to purchase a land for
private developers.
Some times government auctions developed land auction for various purposes
between builders. Auction is accepted in favour of higher bidder, the rate of
which becomes a bench mark for other land dealings. This is main reason for
escalation of land prices of India.
Now a day government is very reluctant to acquire land in favour of any private
developer. Government assurance to acquire balance 30% land after purchase of
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70% by developers is effected by red tapism and resistance from wasted
interests. This makes land acquisition most difficult in India.
In India neither land nor is property market regulated. If the situation continues
it may lead to collapse of capital market and make heavy unemployment. Land
market directly affects the urban environments and quality of life of people in
cities. Hence in my opinion efficient and equitable land market should be
developed in India for well functioning of their cities. Land is one of the three
basic factor in any economy hence top most priority should be given to land
market looking to fast urbanization requirement of Indian cities.
Rental land market or lease hold market is still not very developed in India. This
causes slums to adjust. Rental laws should be amended in India so that tenure
ship right of individual is effectively implemented and housing can be made
more affordable, especially in those cases where land cost is the most important
hurdle in providing affordable housing to the masses.
Government of India and State Governments holds huge chunk of vacant land in
their position. Most of the school, colleages, trust, railway station, bus station
had huge land area which is under utilized. These land area should be
effectively utilized with public private partnership model. So the optimum
utilization of scares resource can be made.
Efficient functioning of land market requires updated land registration system

which clearly indicates ownership. The Indian system of making registration
and keeping mutation different invites maximum trouble. A system should be
evolved so that ownership transfer can happen at the time of registration itself.
This single step has great potential in attracting foreign investment for Indian
real estate business.
Land information system is not adequate in India. Any person who tried to
locate their township project on wasteful land, or on non agriculture land did not
find adequate information.
India consists of 17% of world population who have to be housed in 2.42% of

land area. This require densities of Indian cities to be much higher then normal
world standard. Urban planners are still not open to glaring fact and normally
prescribe low density, low FAR and low FSI in their master plan.
In China government develop infrastructure first from their own funds and then
allocate land to real estate developers for further developed. In India
infrastructure development and real estate development both has to be done by
private developer and if they try to do it so they will be charged with license fee,
registration fee, supervision fee and heavy external development charges. This
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system is like taxing a person who is engaged in welfare of the state. In such
cases role of government should be of a facilitator.
Slum development and redevelopment of already developed old city areas for
the purpose of improvement in density is definitely required but government has
to facilitate it. So far government regulations are silent on these points.
So far there is no taxation on vacant land or access land holding in India.
Indians cities are characterized as engines of growth but in the India job sector
and residential sector are normally located at different locations and
commutation between these two places is the real wastage of time and money of
individuals. Multi storied buildings who can have offices and also residences at
their different floor can be answer to such problems. Government should
increase supply of land to poor people so that they can also have housing. It is
my firm opinion that poor as individual are seldom able to afford land and
housing. International experience has shown that the poor as a group are able to
afford not only land but also housing. Hence microfinance should be encourage
with community participation in housing. Community based saving and credit
scheme may help in affordable housing
Infrastructure Development
Infrastructure development is the real key driver of real estate growth that will
now happen in India in future. The short comings of infrastructure development
are costing India at least 1.5 to 2% GDP growths per year, as per JLLM report
published in Economic Times on 8th April.
Indian experience of public private participation for infrastructure project has

been highly successful but it is still not standardized and regulated.
Funds for infrastructure projects are one of the most important problem a
developer really face. High gestation period and high volume of funds makes
credit more difficult in private sector. Government only arrange for viability gap
funding. Foreign capital flow should be facilitated to give boost to infrastructure
development.
Sustainability of Indian growth is dependent on the growth of infrastructure as

demonstrated by China. ADB has reported that India must built its infrastructure
to sustain its growth as reported in Mint on 5th December.
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Raising funds for real estate sectors
My observation is that Reserve Bank of India has choaked almost all the routes
of debt from commercial bank. Only FDI has been permitted in township
projects that to under certain conditions.
External Commercial Borrowing Route has also been blocked for real estate.
In such a condition only PE funds, venture funds and fund through REIT and
REMF are only available.
REIT and REMF funds are still not properly developed in India. Hence only
available funds are PE funds which are charging very high cost of capital due to
greater uncertainty of real estate market, uncertainty over valuation of land and
unclear land titles; this causes prices to rise high.
Funds through joint alliance in SPV model, AIM route, QIP route is still
possible but few companies have such opportunity.
Opening of FDI in real estate sector in 2002 and then liberalizing its norm in
2005 is the most important reason for boom in real estate and this is the main
factor which brought transparency in market, better quality of product and
makes the market more organised.
IPO route is still available but looking to the uncertainty in the market no real
estate developer can hope to collect good funds through IPO. Therefore, I am of
firm opinion that real estate industry should make them more transparent, more
professionally organised so that they can attract more foreign investment
through PE funds, QIP route or through SPV with foreign collaborator.
Skill and talent shortage
Availability of professionally trained managers, civil engineers, architects and

skill labour force is the primary requirement of growing real estate sector. The
sector is in great need of this human resource as reported in Economic and
Politics on 7th December, Mint on 30th December and 1st January.
C.B. Richard Ellis predicted that timely delivery of project could soon be a
differentiating factor between real estate developers. They also predicted that
the real estate market is soon going to evolve as a buyer market. Hence it needs
more Professionalization.
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Latest Developments
The most significant impact of climate change is expected to be in respect of

availability of water and rise in sea level which may cause coastal region to
submerge there by reducing land area of few countries.
In fact India is always stressing that developed countries are culprit of

environmental changes hence they should pay for it. It has been found that per
capita emission in Indian is 20 times lower than US and 10 times lower than
UK.
Sustainable real estate development, corporate social responsibility and tipple

bottom reporting is the new trend in Real Estate Indus industries as per JLLM.
We need environmentally sound technologies now in Real Estate since

international community is pressing upon each country to cut their carbon
dioxide emission.
Developer is thinking of Green Buildings now since there cost is easily

recoverable due to rising rentals of these buildings. Hence, popularity of these
buildings are going up.
Smoke free apartment is the next reality phenomenon in Real Estate on the
pattern of cities like California, Washington, New York, Toronto etc.
E.T. reported on April 11th, 2008 that the investment in Real Estate for 2008
may be down by 30% as compared to 2007. JLLM reported that reduced debt
availability and investor confidence are low and likely to stay for first half year
of 2008.
JLLM also reported that buyers and sellers both are adopting “Wait and See”
strategies, the prices which has peaked in 2007 may see a correction, tougher
lending conditions, high debt cost are going to be the new hurdles for real estate
developers in 2008.
E.T. reported on April 18, 2008 that Indian real estate firms are trading at about
34% discount to their NAV. This lower, approximately two third valuation may
be due to U.S. This can be treated as most visible impact of U.S. slow down on
Indian Reality.
Since Real Estate are considered to be of high risk the trend of stock market gets
amplified for them.
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Cushman and Wakefield reported on E.T. 22nd April 2008 that due to exit of
speculators from the residential market, the transaction has slowed down by
almost 40%.
Cushman and Wakefield also reported that IT & ITES companies which have
base at US & Europe has not committed any space in first quarter of year 2008
causing office demand to go down. This trend is expected to be continued in
second quarter also. However new supply are being released which causes rates
to move southward. Majority of the mall developers are also hit as cost of
servicing debt has gone up and P.E. funds are adopting more cautious approach
with increased IRR expectations due to higher perceived risk.
Mahindra Life space developers has entered into a joint venture with
International private equity fund ARCH capital Asian Partner to develop a
residential township as reported in ET on April 22nd , 2008. This signals era of
SPV model of working where PE funds became a 49% partner in real estate
venture.
ET reported on April 23rd, 2008 that property prices and rentals have been
falling; this shows loss of investment by investors. This is also visible by
erosion of market capitalization of large real estate players like DLF and
Unitech. The slow down in further added because falling prices of stock erodes
capital of investors who then fail to invest in real estate. However JLLM points
that the fundamentals of real estate are very strong hence more and more global
funds are entering into India.
ET reported on 29th April 2008 that Deutsche Bank with invests $ 1 Billion into
Indian reality especially in Affordable Housing projects in India.
ET also reported on 29th April 2008 that the rising home loan rates have lead to
a slowdown in the growth of home loan. This is a clear indication that demand
of residential segment has been adversely affected by the increase of home loan
rates.
ET reported on May 2nd that SBI has announced formation of infrastructure

fund with Australia’s Macquarie Group. Capital will be utilized for some of the
projects of reality major UNITECH.
BSE listed Omaxe Ltd has announced its plan to invest $ 20 Billion for
Affordable Housing as their exist huge demand.
It was found that sustained real estate demand has been caused due to IT & BPO
boom in India.
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IT in expected that REIT and REMF will provide a boost to Indian real estate
market. Investments to the tune of $ 20 Billion are expected from these sources.
This may provide much needed alternative source of fund for real estate
considering increasing restrictive scenario.
MMRDA, announcement in ET on 24th May 20078, to build 5,00,000 low rent

houses. It once again proved high demand of Affordable Housing and crying
need for it. Affordable housing is put up under PPP model first time in India—
just similar to infrastructure sector. MMRDA is offering TDR to the builder for
making such houses available to community. However they also said that PPP
model proposed for Mumbai will not be feasible in other areas because TDR are
not so attractive there.
ET reported on June 2nd, 2008 that real estate is expected to grow to $ 60 billion
by 2010 and it will attract additional investments from FDI and PE funds from
Middle East, South East Asia and Europe. They also expect demand to grow to
20, 000 million sq ft of space in next four year which may involve investment of
$ 90 Billion in active markets.
ET reported on June 7th, 2008 that PE funds seek higher return now due to
increased uncertainties in real estate sector. Analyst has reported that land
values and selling prices of real estate projects are expected to decline further.
Investors have become more cautious. High risk scenario has resulted into PE
funds increasing expectation from IRR. Expectations for IRR are up from 20-
25% last year to 25-30 percent now. PE funds are also looking for structured
deals.
DLF, Parsvanath & Unitech lined up for affordable housing project in Punjab –
reported by ET on June 13th 2008.
ET reported on 16th June 2008, that Real Estate facing severe cash crunch
causing projects to slow down. It is visible sign of global liquidity crunch
impacting Indian real estate companies. There is slow down in demand, high
interest rate further slows down the demand, cost of rising inputs like cement
and steel squeezes the margin of developers and melt down of general stock and
specially realty stock has caused valuation to go down –this all added to the
problem of developers and they are facing peculiar situation this time which has
been never faced in recent past by developers.
Only avenue available for fund is PE funds which now want to take toll by
raising their expectation and entering into SPV mode which is the most
expensive way of raising capital.
U.P. has shown a new way of increasing land supply by allocating 5000 acres of
land for DLF and 2500 acres each to Jay Pee, Punj Lyod and Unitech under Taj
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Expressway Industrial Development Authority as reported by HT on June 23rd,
2008. The cost of land allocated may be lower than market price and huge
allocation made possible by synergising affect between government and private
real estate players.
HT reported on June 24th, 2008 that real estate project worth Rs 8000 crore will
be delayed. The chief cause of the delay is rising cost of input specially cement
and steel which has doubled in last three to four years. Labour cost and their
unavailability has also increased, which have further complicated the problem.
ET reported on June 30th, 2008 that global economic conditions have affected
plans of real estate companies who are deferring their plans of expansion.
Excess supply of office space is affecting market value and prices.
On July 12th ET reported that reality PEs to execute real estate projects on their
own. Funds like Trikona Capital, South Asian Real Estate and Yatra Capital
have started creating their own teams for real estate projects. Apart from cost
advantage, more profitability this trend would lower down their dependence on
Developers especially in a more uncertain scenario.
ET on 15th July 2008 reported that Government wish to open up housing for
own staff to Private Developers. This will be a additional opportunity to real
estate companies but organizations like CPWD, State PWD and Housing Boards
of state will suffer.
CRISIL reported on July 16th, 2008 through ET that liquidity pressure on real
estate developer may shake-out whole sector. This appear eminent as small and
medium developer do not have opportunity to comply with the requirement of
international PE funds, which is the only fund available at the moment, hence
they are bound to sell out and be forced to exit the sector. Since this is the only
but painful option available before them. But this exit route is also not easy to
follow since consolidation with bigger developer has to cross heavy bargaining
and ultimate looser will be small players.
ET reported on 17th July, 2008 about Citigroup & Warbug Pincus are trying to
have 15% stake in Ansal API project. This system to equity dilution with
foreign players is one viable option but open to only big real estate developers
and may be based an case to case i.e. project to project basis.
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6. TRENDS & PATTERNS
Trend 1:-
SECTOR BECOMING MORE ORGANISED AND TRANSPARENT:
Though seeds of the real estate development can be traced back to nineties after the
liberalization of our economy but it is National Urban Housing and Habitat Policy of GOI
released in 1998 which clearly identified that Government wishes to play the role of
fecilitator and they invited private players to take part in housing on a big scale. By
assuming the role of fecilitator GOI has taken policy initiative for induction of private
players in Real Estate.
Next in 2002, Government of India allowed “FDI” in real estate sector under certain
conditions. This started the process of growing up of Real Estate Developers on a big
scale. Companies started organizing them to take benefit of good opportunity to scale up
size of their operation but there was certain hurdles due to certain conditions of inflow of
F.D.I. which did not allow developers to grow much.
It was 2005, when Government of India relaxed certain conditions of F.D.I. inflow in
country, the boom period of Real Estate started. This was coupled with good growth of
Indian economy who is putting more disposal funds in the hand of population, lower
level of inflation, lower rate of interest, lower rate of interest in housing, incentives given
on income tax has increased demand of residential segment. Mean while growing service
sector of India due to IT & ITES propelled new demand for world class office space,
hospitality space & premium housing segment. Growing consumerism changed the trend
of shopping and we have seen various malls coming up between 2005-2007. Increasing
tourism, medical tourism, announcement of common wealth games in 2010 cause real
estate to celebrate boom, in 2006-07.
Real Estate companies multiplied in size heavy funding requirement forced them to go
for public listing and IPO route. The requirement of SEBI, valuation by foreign PE funds,
international collaboration forced these companies to organize themselves on
professional lines and make themselves transparent before the eyes of SEBI and foreign
players and even customers. Most of the companies went for ISO 9001:2000 certification
which regularized their process of working on professional lines and also made them
effective. Government have withdrawn themselves slowly from the sector, hence public
came to private sector to fulfill their requirement of residence, Shops & Retail, Hotels,
Resorts offices etc and real estate developers responded to their need by offering more
and more quality product and a lifestyle which has not been seen in India.
Real Estate was at boom in 2007 in India and the position continued till Dec 2007 but
from Jan 2008 stock market crumbled and valuation of reality stock eroded more rapidly
than other sectors. This sent panic waves among developers.
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Reserve Bank of India found the sector overheating in 2007, hence they clamped various
bans on external commercial borrowings, real estate developers forced to became
transparent and more organized in order to attract private equity funds and fund through
special purpose vehicle with international players. They entered in several strategic
alliances with international agencies which make them more professional and organized.
On domestic front strict regulation of SEBI, several rulings of Supreme Court of India
and High Courts and National Consumer Forum tried successfully in regulating the
operation of real estate companies and making them more responsive to public.
Though Government of India has proposed a scheme of Real Estate Regulator and Govt
of Maharashtra has instructed builders to sale flats on carpet area basis but we still found
that so many deals by real estate developers are not equitable and transparent. The sector
still have big role of black money. Title of land is not clean and ownership record is
doubtful in so many cases.
As such, I found that the Real Estate Sector is gradually organizing itself on professional
lines and making them more transparent due to various business compulsions from
foreign players and strict regulation by SEBI and RBI. However for the common public,
the image of sector is yet to be improved. Though a Regular for may solve some
problems faced by public and can make the sector more transparent but it may force a
new era of bureaucracy, red tepism and corruption. In my opinion industry bodies like
CREDAI and NAREDCO should come forward and try to self regulate the sector which
can be more fruitful for this sector. So, I observe
1. Real Estate Sector is far more transparent and organized today than it was five
or ten years before.
2. SEBI disclosure norms for listed companies help to bring more transparency.
3. Choking of credit by Reserve Bank of India and more dependence on foreign

investment make the sector professionally organized.
4. Growing size of Real Estate Companies, ISO certification, growing public

awareness, interference from various courts and consumer forum forces the
sector to organize itself on professional lines and be more responsive to
customer.
5. So, far Real Estate Sector which is emerging since 1998 has not seen any
slowdown. Year 2008 may bring slowdown in this sector and may force several
structural changes and consolidation. Smaller players may vanish and medium
and big players have to reorganize themselves through process of re-
engineering. Slowdown may force more professionalization in Real Estate.
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Trend 2: -
Global Environment has major impact on Indian Real Estate.
Indian economy was liberalized in nineties. Real Estate Sector was open for private
players through government of India housing policy 1998 where government assumed the
role of facilitator and invited private sector to play major role in housing. Foreign Direct
Investment was opened up for Real estate in 2002 and then further liberalized in 2005.
this has opened floodgates of foreign funds in real estate.
Real Estate has grown at the compound rate of more than 30% in last five years and it has
offered most attractive investment option for world level investors. Foreign Direct
Investment, Foreign Institutional Investment, External Commercial Borrowings (which
was banned in 2007), Private Equity funds etc flow in Indian market due to its better
return and massive demand.
Reserve Bank of India found in 2007 that this sector is overheating hence choked fund
flow from domestic commercial banks and through foreign debt. This has increased
dependence of Indian Real Estate companies on F.D.I., stock option sale, equity
participation with foreign players at project level through SPV and private equity
investment. This overdependence of sector on foreign funds has several affects.
1. U.S. Economy is slowing down due to sub prime crisis in housing sector. This has
created shock waves throughout the world and housing sector is being treated as
most vulnerable. This increased uncertainly and down sentiments, has raised the
expectation level of foreign players, they are becoming more cautious, challenges
the valuation of Indian companies several time and increased cost of capital.
Increase in cost of capital eroded profit margin of Real Estate Firms and sector is
loosing its attractiveness. I find various bigger real estate players like Unitech and
DLF diversifying in unrelated areas like Telecom, Hoteling and Retailing.
2. Govt of India imports 70% crude oil from OPEC countries over which India has
no control. Continuously rising unexpected level of oil prices is the main
contributor behind rising inflation in India. To control inflation RBI has increased
CRR and bank rate which has made housing loan costly causing dipping in
demand.
3. Boom in real estate was caused due to high demand of office space, premium
housing and world class shopping space spurred by IT & ITES sector. U.S.
slowdown have also impacted them, US election has created uncertainty about
future of outsourcing hence we have seen no further booking of office space and
less demand in premium housing segment during Jan 2008 to June 2008. This has
impacted real estate sector adversely and we are able to see slow down first time
since 1998.
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4. FII have became more volatile due to international uncertainty. They have 35%
stake in Indian Stock Market. They have invested bigger share in reality also.
Their sudden withdrawl of funds due to lower international sentiments and
uncertainty is chief cause of erosion of valuation of Indian real estate.
Hence, we can see that globalization is having impact on Indian real estate hence
the sector needed to be more nature and professionalize to withstand such down
turns.
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Trend 3: -
Real Estate Market and Stock Market are correlated but rise or decline
is steeper in case of Real Estate.
Since January 2008 the blood bath in the stock market may have shaken investor’s
confidence across many businesses. Real Estate developers and analysts are saying that
the demand in the property market will likely stay robust.
There could be a short term liquidity problem affecting installment payments, but there
can’t be fall in demand. The fluctuation in reality market is not as violent as stock
market. Today there are more end user buyers than speculators. Still there could be
decline in property prices especially in suburbs.
It is also believed that the blood bath on the Dalal Street would have a snowball effect
over other asset class especially Real Estate. As has been observed in the past, Real
Estate prices and stock market are highly correlated. The reason being that in a rising
stock market, real estate becomes a favorite avenue for high net worth individuals to park
surplus funds. The decrease in investor’s wealth means that the market gains, which
were converted to cash for reinvestment in property, have been sucked out of the system,
thereby reducing demand in the reality sector. This leads to spiral of price corrections.
Due to this crises in Real Estate market, some of the small builders who hold on projects
keeping price inflated artificially would now have to start selling their projects to avoid
facing liquidity crisis but there is no correlation when it comes down to actual buyer.
There is correlation at the level where people are doing investment and buying large
chunk of property.
The major impact of this fall in stock market is on investor, who currently wanted to sit
on the cash rather than investing but there is no impact on the demand. There is no
correlation between sensex and end users
Past Trend:
The crash in Stock market is cause for concern. Bull runs of the past couple of years has
been largely fuelled by FII, who, in effect represent large pool of saving from all over the
world. These FII are guided by global concerns like indications that the crisis in the US
may deeper. Sensex has been hit by global uncertainties and local unwinding of
speculative positions. The main problem lies in speculative culture which is part of
baggage of market economies.
It has also been seen over the past few years or more that the increase in profitability and
the sensex has had a definite impact in the liquidity and sentiment of an average home
buyer.
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The stock market has helped boost housing in two way, it has helped drive the
ownership rate to its highest level in the history as the sales of the apartments over the
past three years have gone up and it has enable many people to buy more expensive
homes than they might have otherwise purchased.
Since 2004, the stock market has played a key role in that and there has been a noticeable
increase in more expensive houses.
In any case, a first home buyer will remain a home buyer by default even if the stock
markets or property markets are impacted either way. It has been found that most
buyers place only 15 to 30% of their own funds and the rest is taken by homes loans paid
over 15-20 years. So, even if the markets are impacted negatively, they have their own
homes to live in and a good time frame of 10 to 20 years to pay out
Investors who tread on both sides by earning from their stocks and using to pay their
profits as EMIs for their property purchase are usually the most affected, as they are
hedging completely on their profits from the stock market. If the stock market remain low
for some time, it will be better for the real estate market.
So we have seen in over the past few months, builders have increased prices in line
with the Sensex and there has been a parallel growth ,as the stock market grew real
estate price continued an upstream steady move and vice versa.
June 2007
1) Ernst & Young Real estate index closed the quarter with more than 30% increases
from the opening value. In contrast, the BSE sensex registered only 19.7% increase
during the same period. We can see that when BSE rate increase by 20% reality increases
far steeper by almost 30%, so steeper rise.
September 2007
2) Ernst & Young Real estate index which closed the quarter with more than 175%
increase from the opening value. In contrast, the BSE Sensex registered only a 20.8%
increase during the same period. This also show steeper rise in reality stock.
December 2007
3) The E & Y Real estate Index closed the quarter with over 42% increase from the
opening value. In contrast, the BSE Sensex registered only an 18.3% increase during the
same period. This further strengthens the trend of steeper rise in reality stock.
March 2008
4) The US sub prime crisis appears to have affected the realty stock in India. The Ernst &
Young real estate index decline by 44% during this quarter in comparison to the decline
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of 24.3% in the overall market represented by the BSE SENSEX. This shows steeper fall
in reality than general stock.
We have observed growth of price rise in reality with rise and fall of BSE stock and
found following noticeable pattern:-
From the above Graph it is clear that major super growth in Real Estate Sector was in-
between 2002-2007, In-between 2006-07 there were tremendous growth in real estate
sector, when sensex has touched approximately 21,000 points. FII were jumping into
Indian market like anything but suddenly in January 2008, the stock market crashed and
fall to 15,000 points and it is still on in same pattern. On 15th July 2008 market touched
near about 12,500 point.
It was predicted by Crisil Rating agency that the number of medium-sized and small real
estate developers could face a liquidity crunch in the months ahead.
It foresees delays in many ongoing and planned real estate projects, leading to the
possible sale of projects or even enterprises. This will result in some consolidation in the
sector. From among the larger developers, those who had not over-leveraged
operationally were well placed to tide over the current crisis and even emerge stronger.
The agency in its recent report ‘Liquidity pressures in realty could lead to shakeout’
said that increasing real estate prices over the last three to four years had resulted in a
large number of developers acquiring land at high rates in anticipation of a further
increase in prices, and in them scaling up their operations multi-fold.
While some developers managed to finance this growth through a prudent debt-equity
mix, most medium-sized and small developers relied heavily on debt.
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The current situation exposes the pitfalls of such a strategy. There has been a slowdown
in the sale of real estate projects across India since early 2008 — across residential,
commercial, and retail segments.
From the above scenario I observe:
1) There is strong positive correlation between Real Estate Market and Stock market.
2) The Real Estate market was on its boom in between 2002-07 when stock market
has touched near about 21,000 points.
3) From January 2008 stock market started falling and real estate market was started
eroding with almost double pace than stock market.
4) Stock market boost housing in two ways:-

a) Help to drive ownership rate
b) Enable many people to buy expensive house.
5) Due to this situation of crises there may be short term liquidity problem but there
could not be fall in demand.
6) The impact of fall in stock is not on end user but on investors & speculators.
There are no more investors present in the market, which hits the premium
housing badly.
7) Slowdown in the Indian real estate market has cast a shadow on the property
funds. All Major players in real estate are going down. On an average, they
registered an 18% negative return over the last two months. The market
capitalization of all the Indian developers has eroded around 60-85% during the
past few months (January 2008-July 2008).
8) From among the larger developers, those who had not over-leveraged
operationally were well placed to tide over the current crisis and even emerge
stronger.
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Trend 4: -
Investor and speculators support Real Estate Companies during upturn

but work against during down turn:
During 2005-07, Real Estate sector was growing up and it was providing average profit
of around 30% and sometimes more than this. Huge profits attracted lots of smaller
investors and speculators who purchased property at the time of pre-launch in the
expectation to release them at appropriate time to fetch good return. During this period of
upturn Real Estate Companies launched huge number of project and investors and
Speculators were much ahead to grab them. Thus demand appeared inflated. End users
were missing. This fact is visible from the very low habitation of fully sold up and
completed projects.
When the downturn started in January 2008, investors released their properties at the rate
lesser than of developers. This pattern blocked sale ability of property of Developers who
started facing credit crunch for their projects.
Developers have to resort to aggressive marketing during down turn. This added to their
cost, squeezed the margin further but they are unable to sale since Investors are offering
same property at lower rate then the developer. Developer even can not reduce the rate of
his property because it will start a chain reaction in which he will be looser. This explains
the fact why Real Estate Developers are unable to revise the price downward even when
market is down and demand is less.
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Trend 5: -
There is shift expected in preference of customers towards luxurious

living, high quality branded product, studio apartment or make shift
accommodation
BETWEEN 2006 and 2016, India’s population is expected to increase from 1,108 million
to 1,269 million. While overall population is expected to grow to an annual rate of
~1.4%, India’s urban population is expected to grow at ~2.3% in the same period to reach
~400 million.
India’s projected economic prosperity is likely to be spearheaded by a real GDP growth

of 8-9% with a possible annual per capita income of ~Rs 50,000 by 2012. This macro
growth would make significant trends like rapid increase in high-income (super rich)
households, led primarily by urban India.
URBANISATION TREND
While public memory is constantly refreshed that India lives in villages, with
urbanization levels slated to cross 31% by 2016, the urban population will be ~400
million.
Urbanisation trends across geographies indicate that states with high urbanization have
higher income levels and tend to urbanize faster than others. Thus, current high income-
high urbanization states like Delhi, Tamil Nadu, Karnataka, Punjab, Haryana,
Maharashtra and Gujarat would assume greater importance in future.
LARGE CITIES
By 2026, the number of million plus cities is expected to increase from 35 to 75. The
contribution of these 75 cities to the total urban population is likely to go up from 48% in
2001 to ~63% in 2026.
URBAN CONSUMER
Incomes are slated to increase faster in urban India than in rural India. The ratio of per
capita incomes in urban to rural India Is expected to go up from 3.3 in 2004-05 to 3.7 in
2010-11. Expectedly, share of urban India in the country’s net domestic product would
go up from 52% in 2000 to over 60% in 2011.
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IMPLICATIONS
There would be a shift towards value-added products as we move higher up the income
pyramid. This demand shift is likely to be spearheaded by urban India with its faster
growing incomes and favorable consumer preferences. This will increase demand of
Luxurious housing; branded housing and nuclear families may opt for studio apartment or
make shift accommodations.
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Trend 6: -
Established Real Estate companies diversifying in unrelated areas while

companies from other sectors are entering into real Estate.
From the literature review we have found that during 2006-08, around 200 companies of
India has changed their Memorandum of Objective to enter into real estate business while
we found following development in case of established real estate companies.
“DOT gives licenses to UNITECH for 22 circles of Telecom
Times of India, 28-Feb-2008
It is expected that Unitech will be signing licenses for its 22 circles in the next few days
under different names such as Nahan, Volga, Adonis, Hudson, Aska and Azari”
“Realty firms in diversification drive to tap underserved sectors
Mint, 19-Oct-2007
Indian real estate developers are increasingly diversifying into new businesses such as
hospitals, logistics and warehouses, mass housing, and slum rehabilitation. What’s
driving all this activity is large unfulfilled demand. According to industry estimates, he
size of the logistics business in the country is around Rs 4 trillion, but the total
warehousing capacity—the value of the goods that can be stored in warehouses—is less
than one-tenth of that. “We plan to address the need for modern warehouses in the
agriculture markets of India given the boom in the commodity sector,” says Mufotraj
Munot, chairman of Kalpataru Properties. Another factor that could drive the logistics
business is the growth or organized and formal retail. “Local developers tying up with
FMCG and retail firms to develop logistic and warehousing facilities will be another
trend to look out or in the coming years.” Around 40 million sq. ft of warehousing space
is available in the country today, and demand is expected to grow at around 5 million sq.
ft per year riding on the back of organized retail. In health care, too, it is a story of large
unmet demand. The past year has seen the entry of real estate developers not as
contractors who built the hospitals and go their way, but as participants in the sector.
“Traditionally, the own-and-operate model worked, as most hospitals had les than 100
beds. But as hospitals grow bigger and reach sizes of over 500 beds, the management of
the real estate component has become increasingly important and developers have come
in to manage the large formats involved. Many leading developers themselves are getting
into developing health care-focused real estate.” Most of the hospital chains are being
talked about as a part of mega townships. “An integrated township has everything –
schools, colleges and hospitals. That is the reason most developers are tying up with
hospital chains and vice versa. In mass housing and slum rehabilitation too, demand far
exceeds supply. With a current housing shortage of 24.7 million units, which is estimated
to go up to 26.5 million by 2012, mass housing for the middle-income and lower-income
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categories, and rehabilitation of slums in large cities such as Mumbai, Kolkata and New
Delhi is another area that is expected to emerge as a big opportunity for real estate firms
in the coming years. Much of the slum rehabilitation initiatives have been in Mumbai,
where two large swathes—the 535 acre Dharavi, Asia’s largest slum, and the 600 acres of
mill lands—are being redeveloped by public private partnerships. The Dharavi initiative,
says architect Mukesh Mehta who drew up the redevelopment plan, has attracted most of
the big names in the Indian real estate business because of the sheer scale of
redevelopment.”
“Ansal looks at port development, tie up with Malaysia group
Mint, 20-Oct-2007
Looking to diversity beyond its core real estate business. “UEM Group has expertise in
building ports,” said Pranav Ansal, vice-chairman of Ansal API. “We might look at
partnering with UEM to develop ports in India. Ansal API is initially looking at
developing mid-sized ports in North India. DLF Ltd, Unitech Ltd and Parsvnath
Developers Ltd are also diversifying into infrastructure projects. Real estate companies
are diversifying into the infrastructure sector after the yearly doubling o prices o the last
three years is starting to slow down. Ansal, for instance, has already invested in wind
farms to generate power fro some of its projects in a country.”
“DLF teams up with Prudential for asset Management Company
Mint, 5-Dec-2007
Asset Management Companies looks for business with high returns on low investment.
“We are looking at this business only as a good investment,” Rajiv Singh, vice-chairman,
DLF Ltd said. The company offers products and services including life insurance,
retirement-related services and real estate services.”
“DLF enters MF business
Times of India, 5-Dec-2007
DLF also plans to launch a real estate investment trust once Indian government permits,
Singh said. DLF has already formed on another JV with PFI to ventures into life
insurance business. Singh said investment in financial sector gives good return to share
holders in the long run.”
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Emaar eyes: Education, Hospitality
E.T., 4-Dec-2007
One of the world’s largest real estate companies enter the education and healthcare
sectors in India through its existing joint venture, Emaar MGF. To get a foothold in the
education sector, Emaar Properties had acquired Singapore-based education chain Raffles
Campus last September. It runs nurseries, international schools, business schools and
universities. “Education will be an important thrust area as far as our growth plans are
concerned. For Emaar MGF, diversification into education and healthcare will be in sync
with company’s crore business of real estate. Proximity to good schools and hospitals
would play a role in choosing a house.”
Thus we found trend of conglomerate diversification incase of real estate companies.
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Trend: - 7
Redevelopment of slums
New trend of Slum development, Dharavi leads the way.
Shanghai skyline on Dharavi debris
H.T., 8-Feb-2008
The final redevelopment map shows precisely how the 551-acre land in the middle of
central and suburban Mumbai will look like. If the plan is any indication, Dharavi might
be Mumbai’s first step towards Shanghai. The buildings will have on an over age15-18
storeys and will match the best in the world. The bids are supposed to open this week. “It
was delayed as Kushman Wakefield, which was checking the bid documents, made some
mistakes.
Residents, Landlords to have a stake in Mumbai chawls makeover project
Mint, 25-Jan-2008
If builder Lalit Gandhi of Lok Housing and Constructions Ltd succeeds in his ambitious
plan of redeveloping the entire 221-acre spread of C3 and C4 wards, better known as the
Chira Bazaar and Kalbadevi areas, the two women could see their lifelong dream come
true. Gandhi plans to rebuild the entire area over 7-10 years and estimates that the project
can cost as much as Rs 60,000 crore. Lok housing is a mid-sized real-estate company,
listed on the Bombay Stock Exchange. Six months ago, Gandhi floated the Remarking of
Mumbai Federation, a loose body of tenants associations, builders, architects and
prominent citizens, to push his idea. In November, RoMF made a presentation to the state
government in response to an expression of interest invited by it for a pilot project to
redevelop the older parts of the city. Gandhi has suggested redeveloping the 221-acre
sprawl of C3 and C4 ward areas into separate residential and commercial zones and
releasing 70% of it for open spaces, schools and hospitals. He has suggested that the
tenants, landlords and businessmen in the area should all become partners in a
commercial venture being floated by federation. Gandhi claims that the government will
earn around Rs700-800 crore in the form of stamp duty and other taxes from the sale of
additional homes and business premises that will be built as part of redevelopment. Under
Mumbai’s existing building bylaws, any redevelopment in the island city releases
additional floor space and it is from the sale of this space that Gandhi will make his
profit. He want the government to help with transit accommodations. In the other
redevelopment programme currently under way for Dharavi, the transit accommodations
are being build by the developers themselves. Gandhi’s challenge will be to ensure that
the planned transit camps provide enough space for continued business operations with
accessible godowns and storage. Milind Deora, a member of Parliament from South
Mumbai, feels the government should invite bids from all builders for a project of this
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size, following the Dharavi model. Dharavi is following a public-private partnership
(PPP) model, with the government implementing the project along with private builders.
I found that Dharavi model of slums redevelopment will have a new way of re-
development of older cities of India and private developers have a new opportunity to
develop old but central part of city which may fetch good returns to them.
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Trend 8: -
Growing tie up with facilitators—like educational School chain,

Hospital chain, Hotel chain by Realtors. Foray Into Related Areas.
Ansal API forays into education with Edu comp
H.T. 25-Jan-2008
ANSAL API has tied up with e-learning service provider Educomp Solutions to build
schools in townships being developed by the realty major, emulating a model that has
already become popular in some other parts of world. Ansal will build the schools and
Educomp will manage them, a top official at Educomp said. Tie up with Educomp marks
a major push into the education sector. “It is a natural progression fro a developer to
foray into related sectors like education, as schools form an integral part of a township.
Although Ansal could be the first in India to venture into such business, several real
estate companies overseas have had success with this model. Dubai-based Emaar
Properties acquired Singapore-based education chain Raffles Campus and then expanded
its business.
We found that Real Estate developers moving up and down in the value chain and are
exploring opportunity for strategic alliance which may benefit both the parties. We
expect this trend to continue in future also.
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Trend 9: -
Reversal of Trend in IPO market

One of the most important channel through which real estate companies are collecting
huge money for their projects is by way of making themselves or their subsidiary going
public and getting funds through equity. During last three years, it was assumed that real
estate investment provide great returns, this was evident also by looking to the prices of
real estate products which was almost doubled in last two or three years.
The IPO rally in real estate was led by DLF who invited 175 million shares with a price
band between 500 to an attempt to raise approx Rs 9625 crores.
The offer was opened on 11th June 2007 and was over subscribed multiple times. DLF
was successful in concerning massive Rs 9088 crores and got itself listed on July 5th 2007
at a price which was at the premium of 8.5% over offer price of Rs 525. However just
before the offer it was considered deeply that the price band offered by DLF which was
50 times its face value was much higher looking to counterparts registered at that time.
Thereafter other real estate companies like Omaxe, Sobha developer also entered the field
and got huge premium on their offer prices.
Looking to this trend EMMAR/MGF land Limited also came with the second biggest
IPO in real estate when they offered 102,570,623 shares of face value of Rs 10 at a
premium which was initially priced at Rs 610-690 price band i.e. 61 times the face value.
This was offered in the month of Feb-2008 when sensex has already suffered a great
downfall in the month of January and Reliance energy has already collected huge money
from the market. The issue came at a time when there is a fear of US economy slowing
down into recession, there was huge sale of stocks by FII and sensex was trying to
recover from the great fall of January. The issue was reprised looking to the sentiments at
the price band of Rs 540-630 but on the day of closer on 6th February only 75% part can
be subscribed.
EMAAR/MGF reprised the issue downward to the price band of Rs 530-630 and
extended the time till 11 February – 2008. This action of downward revising the price
band two times and extending the issue time was totally against the wind which has been
set by DLF and indicates that all is now not well, with real estate.
The threat of US recession is booming in the market and it seems that investors are in no
mood to put money on giants with revenues only projected in future, instead it seems that
investors are opting for smaller players with established revenue record. It looks investors
wished to be more sure regarding their investment than to speculate. There are two
factors that can make a share offering work are: -
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1. A buoyant market which was there at a time of DLF
2. The attractive price of the offer
The price offered here by EMAAR/MGF was more than DLF and could not be justified
looking to lesser presence of EMAAR/MGF. There is also negative sentiments in the
market due to trickling down effect of slowdown of American economy.
It looks that the timing of the issue was wrong since market is neither stable nor buoyant
and upper valuation of the issue forced the promoters revising offer prices twice and even
extending the date of issue. These steps and additional advertisement has definitely
increased cost of the capital for the company. That is the reason the issue has struggled in
the market.
Looking to the fate of IPO of EMAAR/MGF other real estate and infrastructure
companies who were planning to come to market soon got a set back and has to look
back again, before joining the mad pace of collecting the huge capital through the way of
IPO. This has also attacked the sentiments of the investors who may think twice before
going for issues of real estate companies. This will make collection of capital more
difficult for real estate companies in future.
Hence, we find that timing of the market and correct pricing are two very essential thing
to look before going for an IPO. Positive public sentiments are essential before entering
the market and we should have learned from this episode.
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Trend 10: -
Affordable Housing
Affordable Housing is the next big thing
JLLM chairman point out in Mint on Jan 28, 2008
“Most large real estate developers have woken up to the fact that affordable housing
projects (featuring flats in the price range of Rs. 35-40 lakh) have the fastest absorption
rates and are focusing on this hitherto neglected sector. It, therefore, goes without saying
that with this, mid-income housing is once again a star in real estate investment
prospects.
Affordable housing makes both social and business sense. It makes business sense in
terms of the volumes the market is offering for developers and social sense because it
provides budget conscious buyers more options to choose from. The demand in terms of
units is phenomenal and developers getting into this segment can build for years to
come.”
Current market dynamics
There are various factors aiding the mid-income segment. Thanks to higher incomes and
the availability of housing loans, buyers are no longer as price sensitive as they were in
the past.
The present generation is not conservative about home loans, and is also less averse to
risk. Moreover, there is now a decided shift from the joint family to the nuclear family.
Most developers have identified these factors and zeroed in on them by making
affordable housing available to these buyers. The buyers get what they want, and the
developers benefit by the sheer economics of scale.
Looking to the present downward trend of real estate, I found that there is stability only at
the bottom of pyramid as noted by Sri. C.K. Prahlad. Hence, affordable housing Rs. 3 lac
to Rs. 20 lacs gives new opportunity for developers.
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7. PESTEL ANALYSIS
Analysis of Business Environment on following factor to derive Business Strategy:
• Political Environment:
General Elections are due next year therefore politicians are now more sensitive
towards their voters and therefore exploring deeply about various methodology to
cater to basic needs of population, specially the weaker section who constitute major
vote bank. Therefore Government is focused towards inclusive growth i.e. extending
majority of benefits towards lower section of population.
Housing is one of the basic needs. Government estimates a whooping shortage of

24.7 million houses. 97% of the shortage belongs to the people in economically
weaker section, lower and lower middle income group. These people constitute major
vote bank who actually participate in voting therefore they form most sensitive lot
from the view point of politicians.
Any strategy which provides a viable medium to serve this community, through
Affordable Housing is definite to attract political support. The agenda of mission
affordable housing will not be an ideology based issue therefore every political party
will have to support this issue
• Economic Environment:
After the liberalization in ninty’s, the Indian economy is on a higher growth trajectory
which is only lesser than China in absolute terms. The world economy is growing at
the rate of only 2 to3 % while Indian economy is growing at the rate of more than 8
%. Growing Indian economy creates huge demand in every sector and per capita
income of the population also increases. This results into rigorous effort to at least
fulfilling their basic needs of housing.
However the growth of Indian Economy is not inclusive. The gap between rich and
poor is increasing.
The Real-estate developers in India are mostly catering to growing housing demand
in high end segment due to more profitability.
The less privileged are unable to get their houses due to challenges of affordability.
This situation has left huge demand of 24.7 million houses in affordable housing
segment which is a great opportunity.
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• Social Environment:
India was basically an agriculture dominated society. Unfortunately the agriculture

land holding got divided in successive generations and now not able to support
livelihood of about 60 % of the farmers. Therefore, these farmers who are unable to
support there families on the basis of Agriculture income alone will definitely migrate
to city for the alternative employment.
Migration from villages to smaller cities, smaller city to bigger cities and than bigger
cities to metro is increasing. People migrate in search of better employment
opportunities, better and higher education for their children, better medical facilities
and better quality of life. This migration puts huge demand for housing in cities,
which needs adequate supply of housing stock basically in affordable housing
segment.
Socially, Every marriage create a nuclear family which intern demand a new house.
Continuous growing Indian population, segmental growth in youth population, there
better earning capacity puts more demand for housing
Brake down of combined families i.e. emergence of nuclear families creates

additional demand of housing.
Penetration of education in villages has affected the mind set of rural population and a
little educated youth does not like farming or becoming a labour. This mindset
increases migration thereby creating additional demand of housing in cities.
• Technological Factors:
Indian Building Industry is very slow in absorbing new technology and it is basically
labor intensive. Mechanization, pre-fabrication did not find mass utilization.
It is still not technically and economically feasible to pre-fabricate the components

of houses, transport them to the site and assemble them there due to various
infrastructural constraints. Even ready mix concrete has excess to only high class
segment.
Indian mind set also does not accept innovative technologies. How ever looking to
high percentage of uneducated population in India, it needs labor intensive
technology in such a manner where productivity of the labour can be increased to the
certain extent
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• Environmental Issues:
1. Land: It is an inflexible resource. India consists of 18 % of world population

while it has only 2 % world land area. This call for great care in insuring optimum
utilization of this rare resource.
2. Food and Shelter are two of the basic needs of the population. Indian population
is growing at the rate of 1.6% which require additional shelter as well as
additional food for their balanced growth. This call for a critical balance between
agricultural and non agriculture use of land. This is a delicate issue which is
politically sensitive also.
3. Scarcity of Water-Growing Indian population needs more water not only for
their drinking but for agriculture and for other uses. Every resource is limited and
supplying potable water to Indian citizens living in cities becoming a challenge.
Tapping rain water, recycling sewage water or treatment of sea water to make it
potable may be one option but this may not be economical on the large scale.
4. Sewerage Disposal-Disposal of huge quantity of sewerage which has toxic

ingredients and gases is a challenging problem. Undesirable practice of disposing
the sewer into rivers and nalas has polluted rivers to the great extent.
5. Waste Disposal: Growing number of houses generates huge quantity of

biodegradable and degradable waste. Challenge is to find innovative methodology
so that this waste can be converted into some useful product. Waste like
polythenes has even endangered the life of our cattle stock.
6. Power/ Electricity supply: Quality of life improvement demands for huge power
to be consumed not only for household sector but also for Industrial sector,
commercial sector etc. The capacity of hydro, thermal and wind power is limited
while demand is excessive. The gap between demand and supply is increasing and
atomic energy can be one option but it is politically sensitive. Plan for any
housing colony demand for planning of power supply which is a challenge.
7. Global warming: Global warming put yet another challenge for world. Doha
round of talk has imposed certain restriction on developed country and in Bali
summit there was a thought to impose same restriction on developing country
likes India also. Thus imposition of different restriction regarding Carbon ignition
and green house gases requires construction of a different type of houses and
massive technological innovation. This may add further cost to already
unaffordable housing.
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• Legal
Real estate market attracts great challenge due to multiple regulations which are
mostly conflicting in nature and slow judicial delivery system.
1. Land market is neither efficient nor transparent.

2. Land titles are neither clear nor insured.
3. Multiple regulations dealing transfer of property.
4. Rent laws make eviction of tenant almost impossible, discourage rental housing.
5. Multiple regulatory authorities requiring multiple approvals.
As such legal regime is not conducive for growth of housing in India.
Initial Strategy
• In above challenging and multi dimensional restricting environment but looking

to huge demand, great opportunities exist for affordable housing.
• The concept of SRC can solve many of the above challenges.
• Innovative solution can be further explored through world wide competition.
• Regulatory regime of government may be smoothened by creating an
environment in which Government come forward to facilitate looking to their
political compulsions.
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8. SWOT ANALYSIS
● This analysis is done always with respect to a firm who is operating is an open
environment. Firms have to accept the environment and generally firm is unable
to change it. Hence, the first premise to develop strategy is that “Environment is
given to the firm and it has little choice to influence it.”
● I am assuming a Real Estate firm whose core competences in real estate is good
quality construction backed by sound financial position. It is further assumed that
this firm has approach to normally available building technology in the market
and it did not possess any potential weakness.
With such premises, I found following opportunity after deeply scanning the
Environment: -
● there is shortage of 24.7 million housing units in the country as on 01-04-2007.
● 97% of the shortage belong to EWS, LIG, MIG category who desire their houses
up to Rs. 25.00 Lacs as on 01-04-2008 price level.
● Govt of India and several governments wish to support the cause of providing
affordable housing for the masses but there is lack of proper regulatory, fiscal and
administrative mechanism to support affordable housing.
● Governments are willing to extend support to private players who come forward
for affordable housing.
● Any new model of Public Private partnership will be welcomed by government.
● Demand of affordable housing is increasing with increase in population, increase

in per capita income and increase in migration.
There are following major threats from environment: -
● General market and growth of Indian Economy is slowing down. Growth rate is
expected to be down from above 9% to below 7.5%. Slowdown in growth of
economy puts lesser increase in per capita income to its population.
● Slowing growth coupled with rising inflation further reduces disposal income of
population and it may lower down house purchasing capacity of individual.
● Real Estate prices move in tandem with stock prices and growth or decline of
reality stock is steeper than the market. Slowing market has already eroded much
of the valuation of companies in July 2008.
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● Reserve Bank of India has already choaked almost all funding options available to
real estate sector since 2007. The only fund available is PE funds which may be
costly due to uncertain market conditions.
● Cost of cement which has almost 10% contribution and cost of steel which has
15% contribution are rising steeply. There is no control of Government over oil
prices, 70% of which is being imported from OPEC countries. Rising cement,
steel and oil prices may erode profit margin of firm.
● Housing and land both is in state control. Govt of India can only give a policy
guideline which has been given through Housing Policy on 2007 but how much of
it is implemented by state is unpredictable.
● Rising cost of land and its availability are two most important threats to
Affordable Housing.
● Indian population does not readily accept new technology. If I adopt a new
technology to reduce my cost, it may not sell. However, technology is also not
readily available.
Looking to all above factors, scanning the environment deeply, going through
the policy initiatives by government and housing market I found: -
● Great opportunity of huge untapped demand exists in the form of housing

shortage, which is one of the most basic needs.
● 97% demand exist for people from EWI, LIG and MIG category, say for housing
costing up to Rs. 25 Lacs where there is lack of suppliers.
● Regulatory regime is favourable to Affordable Housing.
● Cost effective funds from National Housing Banks can be availed and PE funds
can be negotiated on the basis of heavy assured demand.
● There is no need of investors and speculators and market is open with end users.
● Being a basic requirement, people will strive hard to get their sweat own home
inspite of several hurdles.
● Hence, one can conclude that a suitable strategy has to be worked out on the basis
of following three parameters: -
▪ Availability of cheaper land.

▪ Cost efficient, energy efficient and time efficient technology and
▪ Incentives from Govt of India and state governments
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Study of Latest available strategy for Affordable Housing
We found that there exist two national associations of Builders or Developers. These are
CREDAI and NAREDCO.
CREDAI on Jan 7th, 2008 organised a seminar and its president Mr. Kumar Gera who is
also CMD of Gera Development Private Limited mooted a strategy called “SRZ: Special
Residential Zones”. This whole strategy was published in Real Estate observer in March
2008 issue. It is being enclosed at Annexure I.
Deep study of this strategy revealed following factors which are the extract
from the strategy of Mr. Gera:-
Genesis
“India has a workable model in place in the form of SEZ is to bring in economic
prosperity to the region by creating conditions that attract establishments to set up
organized commercial micro markets. These conditions in the form of wavier of various
duties, exemptions from taxes, State and Central levies create the right reward
management systems which motivate investors, Developers, State and Central levies
create the right reward management systems which motivate investors, Developers, State
and Central Governments as well as other beneficiaries to invest in land-use plans”.
Special Residential Zones (SRZ)
“As of December end 2007, the PAN-INDIA average rate (per sq. ft) for a residential
apartment is around Rs. 2,700/- of which Rs. 700/- per sq. ft (little over 25%) can be
directly attributed to various Local, State and Central Duties and Levies and Direct &
Indirect taxes, some of them are outlined below: -
a. VAT
b. Service Tax
c. TDS
d. Stamp Duty on Sale
e. Stamp Duty on Land
f. Income Tax on Profit of development, materials, services
g. Municipal premiums and Development charges
h. Excise on materials
i. Octroi
This tax component is prohibitive and acts as a significant barrier for parties interested in
developing large scale housing projects for the cost conscious urbanized mass market
basic definition and concept of an SRZ.”
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“A Special Residential Zones (SRZ) is a notified geographical region that is free of
domestic taxes, levies and duties (both for the creation of, operation and maintenance of
the SRZ) with special development rules to promote large scale, Greenfield, affordable
housing projects for the country’s masses. The SRZ would have a prescribed minimum
number of swelling units with a maximum prescribed size, and each SRZ would require
adequate social infrastructure including schools, medical facilities etc.”
“The key idea is to create an interdependent living system which is not only self-
sufficient but also has the potential to grow and inject growth into geographical areas
around the SRZ.”
Benefits
a. “Decreased Housing Cost | Bringing good quality low cost greenfield housing to
the mass market supported by a sustainable living infrastructure with integrate
schools, medical facilities, play grounds etc.”
b. “Uniform Infrastructure & Housing Plan | The SRZ would bring housing
activities under one umbrella leading to better organization and implementation of
national specifications & policies on a Pan-India basis.”
c. “Employment & Per Capita Income | Massive employment generation in and

around the SRZ leading to an improvement in the per-capital income and the GDP.”
d. “Economic Growth of the region | A large concentration of population would

generate allied benefits with business activity rapidly proliferating around the
peripheral areas of the SRZ. It also provides opportunity for home based activities.”
e. “Planned Urban Development | Systematic Urban Agglomeration instead of an

Organic one resulting in better redistribution of resources and upliftment of living
standards.”
f. “Lesser Time to Development | Time taken for sanctions and approvals can be
reduced significantly by genuine single window clearances leading to a faster rate
for project completion.”
g. “Revenue for Government | The revenue generated from duties, taxes and other
levies from the resultant growth in economic activity as a result of the SRZ would
ultimately benefit the government at the Centre, State and local levels.”
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Guidelines
“SRZ’s are primarily SEZ’s applied to a different sector, most administrative laws
pertaining to the functioning of SEZ’s would remain the same.
Contain low sized units (typically in the range of 300 sq. ft. to maximum of 750 sq. ft,
limited to a maximum permissible average of 500 sq. ft)
The funds of JNNURM could be used for connecting the SRZ’s with the nearest urban
agglomeration.
Notification process for the SEZ’s could be on the same pattern as the current notification
process for SEZs.”
The Way Forward
“An SRZ layered with the right economic benefits in the form of specific waivers and
exemptions from Direct & Indirect taxes and duties & levies across the board would
create the right environment for developers and the government to come together and
create something special for the urbanized Indian mass market consumer who needs basic
affordable housing.”
Close review of the strategy of SRZ revealed that it needs further modifications to
make it more practicable and acceptable:-
1) Strategy of SRZ talks about new townships situated away from existing with no
provision of job centres hence will not be sustainable in mine opinion. People
migrate nearer to job centre and if any development is done in isolation, it may
not be sustainable.
2) Isolated SRZ Township will require huge funds for infrastructure connectivity
which may not be feasible looking to shortage of funds at government level and if
Developer is asked to provide such heavy infrastructure, the land cost may not be
that affordable.
3) SRZ concept has been copied form SEZ, which are basically export oriented job
centres earning money for country hence got several concessions. Government
may or may not be willing to extend these benefits to SRZ.
4) The size of housing units has been limited between 300 sq ft to 750 sq ft. This
limits puts severe constraint cross Subsidization from MIG and HIG will not be
possible, hence its business model may not be workable.
5) SRZ model does not utilize existing infrastructure and are for creation of all new
infrastructure which may not be a viable option.
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Proposed New Strategy
As such we are proposing a new strategy by refining the old strategy of SRZ to be
known as “Special Residential Corridors” on the same premises and for similar level
of environment but with the aim of removing the short comings.
Strategy of Special Residential Corridors (SRC)
Instead of developing all new isolated township without any job centre SRC proposes
development of a residential corridor along both side of city connecting roads.
Corridor will be in the form of 1 Km to 2 Km wide strip and will not be isolated
chunk hence will get adequate recharge of ground water and will be free from
pollution. Benefit of existing job centres of the city will automatically accrue to these
corridors. These corridors will be less costly since they utilize already developed
infrastructure of the city. The only need is provision of fast mass public transit system
like Metro on divider of city connecting road itself. This cost can be separately meet
through revenue collection system and long gestation loan can be made available for
such project, hence it will not give additional burden to housing in the corridors.
Following will be the additional benefits of SRC: -
● The cost of land at outskirts will be much cheaper than city land hence it may help
in affordable housing.
● People in the SRC will remain connected to their job centres, hence prefer to
relocate themselves by purchasing houses in SRC.
● Scarcity of water will not be there due to huge recharge area on both side of the
corridor.
● There will be almost minimal pollution due to narrow width of corridor with
greenfields on both sides.
● The SRC will take benefit of natural development which always comes along city
connecting roads, hence the resistance from farmers can be mitigated while
aquiring land.
However, we feel that such a massive development can not happen by working alone
either by Government sector or by private sector hence the concept of SRC should be
implemented in PPP mode where government should initiate the process by notifying
SRC for public purposes and inviting developers to quality for SRC. Different stretches
be allocated to different developers who will also develop “Mass Rapid Transport
System” on toll collection basis. Funds from JNNURM can be extended to connect
MRTS with existing city infrastructure.
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Interview of Sri Vipin Aggarwal, Executive Director, Omaxe
Question: Your Company is among the top Real Estate Company of India. Can you
explain the factors which are responsible for fantastic progress?
Answer: Indian Economy has grown since 2002; lower Rate of interest, growing demand
from IT, ITES companies, our construction & Contracting background coupled with
superior quality of our products are the main factors behind our progress.
Question: What is the future of Real Estate in India?
Answer: We see very bright future on long term basis. Quality will be of paramount
importance. Real Estate Market is inelastic market. Retail Segment coupled with budget
housing segment will be the future of Indian Real Estate. We also anticipate more
participation by foreign real estate companies in Indian market.
Question: Can you elaborate how Real Estate industry differs from other Industries?
Answer: Real estate industry is highly sensitive to interest rate movements and capital
intensive in nature.
Question: In your opinion what type of professionals will be required in future to

manage Real Estate Business?
Answer: Real Estate is an interdisciplinary business. Professionals from civil

engineering, Architecture, Finance and Marketing are mainly required but in future we
may need infrastructure specialist, green building professionals and environmental
professionals.
Civil Engineers & Architects if further trained in interdisciplinary field of finance and
marketing and with complete knowledge of environmental and green building
technology, i.e. hybrid professionals especially with civil engineering background will be
very much needed in Real Estate.Infact we also need civil engineers who are trained for
infrastructure and real estate projects.
Question: Real estate Companies were unorganised in India. We find a trend of

continuous reorganization and improvement in their working between 2002-07, but still
people complain about shabby deals or unclear terms and conditions of the contract. This
is a blow to the image of Real Estate Companies. Do you think a regulator is necessary to
improve the situation?
Answer: Yes, we very much require a strong regulator like SEBI.A regulator will not
only control irregularities of real estate business but since he will be an insider, he will
have a good interface with government and he may help solve genuine problems of real
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estate industry. We need open minded and progressive regulator, who should include real
estate professionals from industry over his board.
Question: We find Stock Market index and Reality index moving on similar pattern,
while growth or decline of reality is much steeper than general stock. Can you explain
this trend?
Answer: Real estate industry is most interest sensitive sector. This is also categorized by
high debt industry. Hence interest rate guides this sector. Stock market is governed by
sentiments of the people and reality is also affected by it.
Question: Can you list out few causes of this slow down in reality, which was booming
till December 2007 and was expected to grow further?
Answer: The important causes for present slow down in reality are higher inflation,
higher interest rate and over supply in some of the segments. Higher cost of raw material
and uncertain global and national condition further added to this slow down.
Question: What should be the best strategy for Real Estate Companies in such slow
down period? When you feel the market will regain?
Answer: Industry has to move to that segment in which huge demand is there. Budget
housing segment have such demand. We have to control our expenditure, cut cost to the
maximum level possible, and have to bring down the debt level. Overall Real Estate
companies have to consolidate their operations.
Real estate business like other business is definitely cyclic in nature and it will regain
upward movement after the down ward cyclic is over. This downward cycle is expected
to last some times between 1.5 to 2.0 years.
Question: During 2005-07, more than three hundred companies had changed there
Memorandum of Objective to include real estate business. Most of them have entered
into the market but we found that big companies like DLF & UNITECH are diversifying
in Telecom, Hospitality & Retail Business. Can you explain the reason for this
conglomerate diversification? Whether Reality has lost its attractiveness?
Answer: Reality has not lost its attractiveness. The companies who came into this sector
have tried to gain from the opportunity, which is obvious and reflect market
phenomenon. Diversification of Unitech & DLF is there because they don’t want to put
all their eggs in one basket and its sounds logical and good business strategy.
Question: Reserve Bank of India has choked almost all funding options available to Real
Estate Companies on the reason of overheating of sector. Several companies are facing
huge credit crunch during present period of slow down. What is the way out for
companies in such a situation? Should they lobby or surrender before increasing
conditions of PE funds?
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Answer: Inflation destroys competitiveness of the country. People from lower strata have
to suffer more. Controlling inflation is top most agenda before RBI and Government of
India. Hence, RBI is forced to increase interest rates and have some restriction over some
overheated sectors. At present PE Funds are available, what you need is good project and
good bargaining power.
Question: Looking to high credit crunch, slowing down of demand, high interest rate,
high cost of capital what is the option available before real Estate Companies in a period
of slow down?
Answer: “Go to the segment where demands is and consolidate your business” is the
only mantra during this period of slow down.
Question: Do you feel that there is any impact of slow down of global economy or U.S.
sub prime crises on Indian Real Estate?
Answer: Yes, It is obvious .Almost 80% funds came from U.S.A. and if there is slow
down in U.S.A then their funds are stopped coming into Indian market .It is like a chain
reaction our market will also go down due to US Slow down, because economics are
more integrated now.
Question: Do you feel that entry of REMF or REIT will in any way benefit real estate
industry or will they be able to ease out credit requirement of real Estate Companies?
Answer: Yes, but only in the long-term not in short term.
Question: We find that investors & Speculators support Real Estate Companies during
upturn but work against them during down turn, your opinion?
Answer: We can not say because Investors & Speculators always move in area in which
they get advantage. This is but natural.
Question: We find there is upward and downward integration in value chain for real
estate companies. Can you please explain the reason for this trend?
Answer: The upwards and downwards integration in real estate is done by companies
which have huge free cash flow. In present scenario it is not a time of upwards and down
wards integration because most of the real estate companies are facing cash crunch.
Question: During 2007 several companies brought their IPO and succeeded in collecting
huge funds from market, but after the failure of EMAAR MGF, no real estate company
coming forward for an IPO. What is the future of IPO?
Answer: IPO future is indirectly linked to the sentiments of the public and time is also
important factor. EMAAR MGF failed because they entered at wrong time in the market.
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Question: We find that there is over supply in office segment, less demand in retail and
premium housing segment but huge untapped demand in Affordable Housing segment.
Do you find any scope for Affordable Housing during this period of slow down?
Answer: Real Estate is price inelastic market. There is huge gap between demand and
supply in this segment. This gives good opportunity.
Question: People say that Real Estate business is cyclic in nature, do you agree to it?
Any idea about period of downturn and upturn of business cycle in real estate?
Answer: Yes it is but it is difficult to predict the period of cycle.
Question: What steps from government can help real Estate Companies tide over the
slowdown?
Answer: For first 2-3 years Government should support industry building first 50,000
Budget houses either by providing land or through some sort of subsidies.
Question: Do you see any increase in role of professionals during period of Slowdown?
Answer: The roles of professionals are imperative either in upwards or in down wards
period. Professionals are always a necessary part of the business of a company. However,
more professionalized approach is a necessity during downturn.
161
Conclusion
This way instead of having circular cities, we will have longitudinal cities in future,
which will also be able to de-congest existing one and also save existing infrastructure of
city from collapse. Hence strategy of SRC can be considered as an refinement of SRZ
strategy.
Concept of SRC will augument huge supply of land which will stabilize the land market
and increased supply may check undue escalations and speculation of land prices.
Cost effective, energy efficient and time efficient technology can be obtained through a
world wide international design competition.
However, any business strategy would not suceed till it is made implementable through
business plan. A business plans is the only tool which may keep strategy into correct
perspective hence I produce a business plan covered by this strategy (Annexure II).
A perusal of business plan will reveal that affordable hosing is still possible in India
provided Government gives adequate priority to it and private developers come up to tap
huge untapped demand.
As such my research has shown a way of professional development in real estate. Hence,I
conclude as below:-
• Deeper study of history of real estate and stages of its development

make one able to understand the various forces which have shaped the
industry and hence essentially important for formulation of strategy.
• Study of recent strategy points out towards the weakness, which can be
studied and improved further.
• Business plan is essential to check the viability of strategy.
• Mine observation and understanding has been validated through the

interview of Sri. Vipin Aggarwal, Executive Director of Omaxe Ltd.
May God help me
A.K. Srivastava
162

Explorative Study of Real Estate

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SOCIO ECONOMIC ENVIRONMENT OF REAL ESTATE

ITS HISTORY AND IMPLICATION IN STRATEGIC

Since Beginning till July 2008

Prepared Under the Supervision of

2.1) History of real estate in India: Economic Times 12 23

2.2) Maturing real estate from the eyes of Ernst &

2.3) Ernst & Young Quarterly reports on 41 49

1) June 2007 ………… 41 42

2.4) Overview of Economic Environment of Indian Real

2.5) Indian Monetary policies & its impact on

2.6) Contribution of Indian Real Estate in Indian 63 63

2.7) Impact of American recession on Indian Real 64 65

2.8) China verses India………………………………….. 66 68

2.9) Supply of Land…………………………………….. 69 71

2.10) Infrastructure problem and its impact……………. 72 76

2.11) Raising Fund other than I.P.O. & Foreign 77 81

6.6. Established Real Estate companies diversifying in unrelated

6.7. Redevelopment of slums: New Trend: Dharavi leads the way

6.9. Reversal of Trend in IPO Market……………………… 149 150

10. Validation of studies through expert interview……….. 162 165

11. Conclusion…………………………………………….. 166 166

1. Special Residential Zones Strategy by CREDAI

A Business Firm also operates in an open environment where it is affected by forces of

a) Economic Times survey on Real Estate published by ET intelligent Group in

A strategy of Special Residential Corridors was conceived and presented in the

The formulation of this strategy will be studied in the background of Strategy of

2.1) History of Real Estate in India as evident from Economic Times

Following observations emerged out of study of publish literature

(Source: - ET Intelligence Group)

“Shelter – a basic human need

Defined by the WHO in 1961, housing is the residential environment,

Housing shortage is attributed mainly to:

(a) growth of population

(Source: - ET Intelligence Group)

(a) amendment of Land Acquisition Act or enactment of a new law for

Global Real Estate – The earth is not enough

(Source: - ET Intelligence Group)

The most important of these measures were :

(Source: - ET Intelligence Group)

Real Estate Construction – Residential

(Source: - ET Intelligence Group)

□Bangalore’s growth is attributed primarily of the software industry. The city is

(Source: - ET Intelligence Group)

Large Developers – Hands On

(Source: - ET Intelligence Group)

Commercial Market : Room with a view

(Source: - ET Intelligence Group)

FDI is Real Estate : Opportunity Knocks

□100% FDI permitted in real estate sector

The investment will be subject to a minimum capitalization of $10m for wholly-

The investor will not be permitted to sell undeveloped plots. □ ‘Undeveloped

(Source: - ET Intelligence Group)

That the cities can be dubbed as ‘engines of growth’ is historically acknowledged

(Source: - ET Intelligence Group)

(Source: - ET Intelligence Group)

The First-Year Plan (1951-56) – Emphasis was given on building different

The National Housing and Habitat Policy 1998

The development of satisfactory housing is always the priority in both policy

The National Housing Policy of 1998 was formulated to ensure sustainable

Since ‘housing’ is a state subject, the primary responsibilities of fulfillments of

(Source: - ET Intelligence Group)

A) SCALING NEW HEIGHTS: Sectoral snap shots

• The commercial real estate segment witnessed a dominance of IT/ITeS –