Real Estate

Commercial Residential Hospitality Special Economic

Retail Space
Office Space Space Space Zones (SEZs)

• The current contribution of Real Estate to India’s GDP is about 5%

• FDI inflows worth more than $2.8 billion between 2000 and 2009

• Market size is $50 billion

• Expected to be $180 billion by 2020

Source: IBEF report 2009

 Commercial Office Space
Growth Drivers
• Multinational companies (MNCs) and the growth of the services
sector.
• Significant growth in FDI

Market Structure
• Pan India presence
• International players

Segmentation
• CBD /EBD /ABD /SBD /PBD

Outlook
• Growth in services —telecom, financial services, IT& ITeS,
etc.,
 Commercial Office Space Absorption
Total: 45 mn sq.ft

10% 14%
Mumbai
8%
NCR
Hyderbad
Banglore
11% Chennai
23%
Kolkata
Pune

26% 8%

Source: E&Y estimates for top seven cities

 Companies wise trends in sales
Industrial
Crore
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
(224) (203) (173) (169) (159) (143)
Larsen & 5600 9636.53 10392.03 12622.50 18410.05 27456.22
Turbo
Bharat Heavy 1881.06 2743.71 2885.23 3803.77 3975.01 5261.15
Electricals
Punj Lloyd 1459.16 1380.72 1328.37 2180.98 4421.17 6734.56
ABB 603.56 1044.87 1422.88 2154.03 3295.49 3580.52
TOTAL

31%
Larsen &
Turbo
Bharat
52%
Punj Lloyd
ABB
6%
Others
8%
 Companies wise trends in sales
Industrial
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
(55) (60) (61) (65) (62) (59)

IVRCL 773.44 1053.49 1517.89 2334.88 3671.83 4951.56

Nagarjuna 728.62 1126.21 1774.43 2759.44 3397.99 4083.68
Simplex 641.34 999 1342.74 1708.21 2808.12 4653.87
TOTAL
 Residential Space
Growth Drivers
• Urban population estimated to reach 590 million by 2030
• Number of nuclear families estimated to cross 300 million
• 16 to 64 age group—almost 64% of the total population
• Growing demand for affordable housing
• Easier access to loans

Market Structure
• Unorganized
• Regional players are expanding to achieve a pan-India
presence
Segmentation
• Broad categories include low-cost, mid-market and premium
housing
 Outlook
• Current space shortage is close to 19.4 million units, largely in
the middle and low income groups
• Mortgage finance
Annual Home Loan Disbursal from
Formal Sector
45000
40000 7500
6500
35000
7000
30000
US$ million

5000
25000 HFCs
6000
20000 6000 36500 Commercial Banks
32500
15000 27000
23000
10000 18000
14000
5000
0
2005 2006 2007 2008 2009 2010
Source: Report of the 11th Five Year Plan (2007-12),
Working Group on Urban Housing
 Companies wise trends in sales
Housing
Crore
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
(157) (129) (105) (104) (92) (84)
DLF 442.52 411.77 983.94 1124.15 5516.39 2705.42
EmaarMGF 1026.90 926.22
Sobha 211.37 453.06 28.61 1056.52 1242.01 809.51
Ansal 149.45 184.32 319.08 718.25 823.02 631.70
TOTAL 3841.09 3909.79 5770.01 9428.56 16351.95 13986.87

19%
2008-09

DLF
7% EmmarMGF
Sobha
Ansal
6%
64% Others
5%
 Retail Space
Growth Drivers
• Growth in organized retailing
• Entry of international retailers

Market Structure
• Small proportion of the total real estate industry in India
• Dominated by unorganized retail
• Large corporate houses entering the organized retail sector
• International retail brands are tying up with Indian partners.

Segmentation
• Organized retail contribution to the retail industry grew from
2% in 2003 to 5.5% in 2009
• International retailers are growing through the franchisee
route
 Outlook
• Relaxation in FDI norms
• Organized retail expected to grow at a compound annual
growth rate (CAGR) of 19 per cent over the next five years
Growth of Retail Industry

2010 30

2006 20
Organized
Unorganized
2005 15

2004 10

0 50 100 150 200 250 300

Source: Edeliwiss, E&Y Research

Absorption of Organized Retail Space
Total
6%
4%
NCR
9% Mumbai
Banglore
Kolkata
43% Pune
12% Chennai
Hyderbad

5%

21%

Source: E&Y estimates for top seven cities

 Hospitality Space
Growth Drivers
• Increase in tourism, including both business and leisure travel
• Medical tourism destination
• International events

Market Structure
• Existing hotel operators are scaling up their operations.
• Budget hotels and service apartments
• Increasing presence of International players

Segmentation
• Classification on the basis of star rating —one-star to five-star
deluxe
 Outlook
• The total estimated supply of hotel rooms is expected to
reach from 2.9 million to 6.6 million between 2010 and 2020,
respectively.
• Demand to grow at 10% CAGR for the next 5 years
• Service apartments, hospitals, wellness spa gaining
popularity
 Special Economic Zones (SEZs)
• Under the new SEZ Policy, formal approvals have been
granted to 577 SEZ proposals out of which 114 have started
operating providing direct employment to 5,50,000 people.

Industry - Wise classification of formally approved SEZs

11%
Electronics Hardware,
4% IT/ITES/
5% Biotechnology
2% Engineering
Others
5%
Gems & Jewellery
4% Pharmaceuticals
Textile
69%

Source: Edeliwiss, E&Y Research, ET 7 September

 FDI in Indian real estate
• US$ 2.80 billion in 2008–09, as per the Department of
Industrial Policy and Promotion (DIPP)

• Growing interest of foreign players in the Indian market

• West Asia and investors from the US and Europe, who have
shown keen interest in the launch of several real estate funds

• Expected to witness an increase of US$ 21 billion from the

current values over the next 10 years
 Regulations & Guidelines for FDI in Real Estate
Conditions for Development
• Minimum 10 hectares to be developed for serviced housing
plots
• For construction-development projects, minimum built-up
area of 50,000 square meters prescribed
• In case of a combination project, any one of the above two
conditions should be sufficient
• At least 50% of project to be developed within 5 years from
date of statutory clearances
 Conditions for Investment
• Minimum capitalization of US$ 10 million for wholly owned
subsidiaries & US$ 5 million for joint ventures with Indian
partners
• Infusion of funds within 6 months of commencement of
business
• Original investment cannot be repatriated before a period of 3
years from completion of minimum capitalization.
 Miscellaneous Conditions
• Investor not permitted to sell undeveloped plots
• Project should follow the norms and standards laid down by
respective State authorities
• Investor responsible for obtaining all necessary approvals as
prescribed under applicable rules/ by-Iaws/ regulations of the
State
• Concerned Authority to monitor compliance of above
conditions by developer
 FDI Experience in Indian Real Estate
12

10

8
US$ billion

8.2 Other Sector

6 Real Estate

4
4.7
3.2
2 2.1
2.1
0.4 0.6 0.8
0
2003-04 2004-05 2005-06 2006-07

Source: ASSOCHAM, E&Y Research

Major Countries investing in Indian Real Estate

2% 4%
10%

Dubai
Indonesia
Singapore
Malaysia
Others
25% 59%

Source: Industry sources, E&Y Research

 Foreign Investors

• Present in India since 1997

• Established a wholly owned subsidiary, Ascendas India Private
Limited
• Operating 5 IT Parks across Bangalore, Hyderabad and
Chennai having BUA of 4.4 million
• Plan to develop two new IT Parks in Pune and Nagpur at a cost
of US$ 375 million
 Dubai
• Present in India since 2005
• Developing integrated township at Mohali over 3000 acres
• Plans to develop integrated townships, commercial offices, IT
Parks, SEZs and Hotels
• Planning to venture into Healthcare and Education sector
• Joint Venture with MGF Development Limited, India
• EmaarMGF has JV with Accor Hotels (France) & Premier Travel
Inn (UK)
• Capital outlay of US$ 4 Billion for group projects in Real Estate
in India
 Indonesia
• Present in India since 2004
• Developing township at Howrah over 450 acres
• Plans to construct expressways and bridges and multi-product
SEZ in India
• Joint Venture with Unitech and Universal Success
• Plans to invest US$ 4.2 billion for projects in India
• Operating various asset classes in Residential, Commercial
and Retail segment
• Developed more than 7 million sq.ft. of Built Up Area (BUA)
• Specializes in planning Residential, Commercial, SEZ
development, Retail and Hospitality, Integrated townships
• 430 million sq.tf. of BUA under planned projects
• Major presence in National Capital Region and other areas
such as Kolkata, Chennai and Hyderabad
 Domestic Players

• Largest Real Estate developer in India

• Developed Asia’s largest private township DLF City at
Gurgaon, Haryana spread over 3000 acres
• Present across all the asset classes : Residential, Commercial
and Retail
• Developed more than 220 million sq.ft. of BUA
• Specializes in planning Hotels, Infrastructure and SEZs 574
million sq. ft. of BUA under planned Projects
• Pan-India footprint, major presence in Gurgaon & Kolkata
• Operates primarily in Residential & Commercial asset classes
• Developed over 2850 acres in Gurgaon and Delhi
• Developing Integrated Townships, Malls, Hotels, IT parks and
SEZs
• Plan to construct 157.6 million sq.ft. of BUA
• Pan-India footprint with major presence in 16 North-Indian
cities across 4 states
• Present in Commercial, Retail & Residential asset classes
• Developed over 5 million sq. ft. of BUA
• Developing 15 self-contained townships and 10 Hotels
• Planning to construct 13.2 million sq. ft. of BUA
• Major presence in Mumbai with operations in Bangalore,
Ahmadabad, Goa, Pune and Hyderabad.
• Asset classes include Residential, Commercial, Development
of plots and Contractual projects
• Developed over 4.5 million sq. ft. of BUA
• Planning residential and retail projects
• 101 million sq. ft. of BUA is planned under various projects
• Major concentration in Bangalore with presence in other
areas such as Cochin, Chennai and Pune.
• Presence in Residential, Retail Commercial asset classes
• Developed over 3.8 million sq. ft. of BUA
• Plans to develop IT Parks and 12 SEZs across the country
• Planning to construct around 46.5 million sq. ft. of BUA
• Major Presence in National Capital Region
• Increasing Pan-India Footprint, active in over 46 cities across
17 states
 Residential Realty

• Residential property market is growing due to:

– Rising per capita income
– Increasing urbanization
– Increase in the working age population
– Increase in the lending of loans
 Per capita Income
60000 56530
50000
40000 38084
30000 25661
18885
20000
10000
0
2002-03 2005-06 2008-09 2011-12

Commercial Banks Contribution to Loan

30000
25000
20000
15000
10000
5000
0
2002 2003 2004 2005 2006 2007 2008 2009 2010
 Residential Realty
• The city of Mumbai has expanded vertically as much as it can
in the Last Decade and still continues to do so
• The Developments in the city at the present moment are
projects of Redevelopment:
 Slums
 Mills
 Dilapidated Buildings
Reason being the scarcity of open lands
• Saturation due to lack of Infrastructure in its place Which has
lead to the expansion of the city horizontally
 Current Trends in Mumbai

• To understand the Current Trends we have taken up two

Research reports conducted by
 Western
Suburbs

Venue: MMRDA Grounds, Bandra-Kurla Complex, Mumbai

Date: April 8-11, 2010
 Displayed Locations

1% Outside Mumbai
3% 3%
3%
Western Suburbs
5%
29% Thane

Central Mumbai
12%
Navi Mumbai

Kalyan / Dombivali

South Mumbai
15%
Western Suburbs beyond
Dahisar
29%
Ambernath / Badlapur
Apartment type showcased /Preferred Type of Apartment
1 -1.5 BHK
2BHK
2.5BHK 1BHK 1.5BHK
3BHK 2BHK 2.5BHK
>3BHK 3BHK 4BHK
RH / Bungalows / Plots >4BHK / Bungalow Studio

2%
7% 5%
13% 4%
10%
33%
15%

25% 34% 2%

2%
11%
37%
 Preferred Stage of Construction

6%

Ready for Possession

17%

Project near Completion

Project 50% completed

57%

20% Project Launch

 Their Findings

• Data shows that around 57% of the respondents were willing

to buy ready possession property.
• Around 33% of the respondents preferred 1 BHK unit type.
However, only 13% of the projects offered 1 BHK options.
• 1 BHK unit type appears to be a huge untapped potential for
developers.
• It can be seen that the LIG segment can afford an apartment
of around 650-700 sq. ft. However, there is a dearth of supply
for this configuration.
• The MIG would prefer an apartment size of more than 750 sq.
ft., but could afford to purchase only a unit size of around
550-600 sq. ft.
• The HIG segment, which generally would have a preference of
an apartment size of 1000 sq. ft. onwards, but could afford to
purchase an apartment size of only around 750-800 sq. ft.
• This possibly is an indicator that the increase in property
prices is not in commensurate with the improving affordability
of the masses at large.
Central Suburb Venue: R City Mall, Ghatkopar,
Mumbai
Date: February 5-7, 2010
Suburbs
Central
 Project Location Showcased/Preferred location

Central suburbs Thane

Kalyan Western Suburbs Central Suburbs South Mumbai
Navi Mumbai South Mumbai Thane Western Suburbs
Outsside Mumbai Kalyan Navi Mumbai
Ambernath Outside Mumbai

3% 3%
3% 1% 7%
6%
13% 34%
6%

6%
53%
16% 8%

13%
27%
 Apartment type Showcased/ Preferred Apartment type

1BHK 1.5BHK 2BHK 1BHK 1.5BHK

2.5BHK 3BHK >3BHK 2BHK 2.5BHK
3BHK > 3BHK / Bangalow
Commercial

1% 3%
4% 7%
16%
9%
24% 3% 38%

24%
16%
37%

18%
Findings based on the responses from visitors:

●
●39% of the respondents were in the age bracket of 26–35 years
●30% were 36-45 years
●

Age Profile ●14% of the respondents belonged to age group of 46-55 years
●

●Around 7% were above the age of 55 years

●

●
76% Salaried Class
Occupation ●
24% Self-employed Category

●
●46% of the respondents reported monthly income of Rs. 25,000
Monthly Income ●30% reported a monthly income in bracket of Rs. 25,001 – 50,000
●

●Remaining 24% reported in higher income group

●
 Preferred Budget

4% 9%
6%
Upto 10 Lac

10 - 20 Lac
16%
20 - 30 Lac

30 - 50 lac
42%
50 - 75 Lac

23%
Above 75 Lac
 Their Findings

• The data gathered from the exhibition shows that 38% of the
respondents prefer a 1 BHK apartment, whereas 1 BHK
properties were showcased only in 16% of the projects.
• 24% of the properties on display were 3 BHK. However, only
7% respondents preferred a 3 BHK apartment. This gap needs
to be addressed in the coming period, which would further
propel the housing demand.
• The market sentiment seems to have improved in recent
times which have resulted in further price escalations. Upon
comparison of the property prices at the start of August 2009
• With the improving consumer sentiments, the absorption has
picked up in recent times. However, the upward price march
should not negate the higher absorption trend.
 Our Observation

• The city is expanding horizontally

• The demands of LIG will be met in the outskirts of the city
• LIG and Low MIG would prefer to stay in the outskirts once
the infrastructure is in its place
• Residential space is expected to grow by 18-19% CAGR every
year
Mumbai Office Market Overview
 Key Micro markets– Corporate Office

Front Office Districts

Central Business District (CBD) Alternate Business District (ABD)

• Nariman Point
• Fort • Bandra Kurla Complex
• Cuffe Parade • Santacruz

Extended Business District (EBD) Secondary Business District (SBD)

• Lower Parel • Andheri East
• Worli • Vile Parle East
• Prabhadevi • Jogeshwari East
 Back Office Districts

• Thane
• Western Suburbs
• Malad
• Goregaon
• Navi Mumbai
• Central Suburbs
• Powai
• Vikhroli
• Kanjurmarg
Secondary Business
Thane
District

Alternative Business
District
Western Suburbs

Extended Business Navi Mumbai

District

Central Business Central Suburbs

District
 Major Movers – The shift away from CBD
Corporates preference for the EBD / ABD :

•Barclays
•Goldman Sachs
•Credit Suisse
•Societe Generale
•Citibank
•UBS
•JP Morgan
•Franklin Templeton
•Nomura India
•Daiwa Securities
•Dow Jones
•IFC
 Extended Business District – Worli / Prabhadevi

Key Characteristics
• Central Mumbai
• Preferred location for large Indian and international corporate
entities.
• Financial institutions and large Indian corporate houses.
• Average Rental Values (Grade A) : INR 275 - 325 per sq ft
month ($ 5.50 – 6.50)
• Average Capital Values (Grade A) : INR 30,000 – 35,000 per sq
ft ($ 600 – 700)
• Rental Trends: Q-on-Q: ↔ Y-on-Y: ↓ 25% Vacancy: 6%
 Pros Cons
• Connected from South • Location prone to traffic
Mumbai and Suburbs • Limited accessibility from
• Retail and entertainment. Western & Central Railways
• Proximity to good hotels
• Residential projects in close
proximity
• Connectivity with Western
suburbs with the opening of
Worli sea link.
• Established corporate office
location (Siemens, Aditya
Birla)
 Infrastructure Initiatives

• Western Freeway Sea Link Project

• Phase I: Connecting Bandra with Worli 8-lane bridge with

length of approx. 5.6 kms

• Phase II: Connecting Worli to Nariman Point approx length

12.8 kms(Expected to be completed in 4 years from the start
of construction)

• Mumbai Metro Rail – Sewree – Prabhadevi(3.5 Kms) Phase III.

 Alternate Business District

Key Characteristics
• Bandra East, Santacruz and Kurla.
• Emerged as the new financial and business hub of Mumbai.
• Large Indian and international corporate.
• Average Rental Values (Grade A) : INR 225 - 275 per sq ft
month ($ 4.50 – 5.50)
• Average Capital Values (Grade A) : INR 27,500 – 32,500 per sq
ft ($ 550 – 650)
• Rental Trends: Q-on-Q: ↑ 6% Y-on-Y: ↓ 24% Vacancy: 18%
 Pros Cons
• Planned micro market with • High capital & rental values
good Infrastructure • Limited food &
• Ample car parking facility entertainment options
available
• Connected with Western,
Central & Harbour Railways
• Domestic/ International
airport and good hotels
• Mono and Metro rail
planned within the micro
market
 Infrastructure Initiatives

• Western Freeway Sea Link Project

• Mumbai Metro Rail – Charkhop – Bandra – Mankhurd
(32Kms)
• Mumbai Metro Rail – BKC – Kanjurmarg Via Airport (19.5Kms)
• 5 minute drive to eastern and western express highway
 Secondary Business District
Key Characteristics
• Western Suburbs from Andheri East to Goregaon East
• Preferred location for corporate that are cost sensitive.
• Major Occupants – FMCG, pharmaceuticals and IT / ITES.
• Average Rental Values (Grade A) : INR 100 - 150 per sq ft
month ($ 2.00 – 3.00)
• Average Capital Values (Grade A) : INR 11,000 – 16,000 per sq
ft ($ 220 – 320)
• Rental Trends: Q-on-Q: ↓ 8% Y-on-Y: ↓ 34% Vacancy: 30 %
 Pros Cons
• Proximity to • Poor state of roads resulting
International/Domestic into traffic congestion
Airport • Lack of planned
• Proximity to good hotels – development
ITC, Leela, Hyatt, • Limited options available for
Intercontinental, Marriott car parking
• Lower rental & capital • Low lying and prone to
values flooding
• Metro rail would ease the
traffic congestion once
operational
 Infrastructure Initiatives

• JVLR – 6-lanes 10.3 kms concrete freeway connecting Western

and Eastern corridor
• Mumbai Metro Rail - Versova – Andheri – Ghatkopar 11.4kms
metro rail project will reduce travel time by an hour. Work has
commenced and is expected to be operational by 2012. Major
initiative to connect Western and Eastern Suburbs
• Mumbai Metro Rail – Charkop – Dahisar (7.5 Kms).
Phase III
• Mumbai Metro Rail – Charkop – Bandra - Mankhurd
(38 Kms)
 Emerging assets
Logistics and warehousing Healthcare infrastructure
• Booming Trade • Expected to grow at a CAGR
• MNC of 12% for next 5 years
• Medical tourism
• Large infrastructure and
engineering projects

Education infrastructure Low-cost housing

• Huge market • Housing shortage expected
• Demand for literacy 19.4 million units
• Research laboratories • Easy access to finance
(global outsourcing) • Nuclear family