Building, Construction and Realestateservices: Surabhi Agarwal Eram Khan Fatima Abbas Aarti Chaudhary

Building, Construction and
RealEstateServices
t Submitted By :
SURABHI AGARWAL
ERAM KHAN
FATIMA ABBAS
AARTI CHAUDHARY

ABHISHEK GANGWAR
ACKNOWLEDGEMENT
Before we get into thick of things, We would like to add a few words of appreciation for
the people who have been a part of this project right from its inception. The writing of this project
has been one of the significant academic challenges We have faced and without the support,
patience, and guidance of the people involved, this task would not have been completed. It is to
them We owe Our deepest gratitude.
It gives us Immense pleasure in presenting this project report on Real Estate Industry.
It has been our privilege to have a team of project guide who have assisted me from the
commencement of this project. The success of this project is a result of sheer hard work, and
determination put in by us with the help of my project guide. I hereby take this opportunity to add
a special note of thanks for Prof. as! "!r#d!ar, who undertook to act as our mentor despite his
many other professional commitments. is wisdom, knowledge, and commitment to the highest
standards inspired and motivated us. Without his insight, support, and energy, this project wouldn!t
have kick"started and neither would have reached fruitfulness.
We $on%ey our !eart full t!an&s to t!e 'e'(er fa$ult#es of IIPM) *#t! t!e#r !el+ and
$or+orat#on.
We are very thankful to our #roject guide Prof. "*at# "r#%asta%a,IIPM ) L&o- for her full support
in completing this project work.
$ast but not least, we would like to thank our families and %riends for their full cooperation &
continuous support during the course of this assignment.
The project is dedicated to all those people, who helped us while doing this project.
#age . of /0
1u#ld#n2) Constru$t#on
Industry and Real Estate
"er%#$es
Building, Construction Industry and Real Estate Services
Ta(le of Contents
'. ()ecutive *ummery
'.'. Industry si+e and ,rowth of -onstruction Industry ................................................................
'.
'./. Industry *egmentation ........................................................................................................ .... '0
'.1. 2eal (state *ector ................................................................................................................... /3
'.4. Infrastructure ............................................................................................................... ............ //
'.5. 6ey 2isk %actors for -onstruction Industry ......................................................................... /7
'.7. 8arket *tructure of -onstruction Industry ........................................................................... 13
'.9. 8ajor #layers ........................................................................................................................ 1'
'. :nalysis
'.' #(*T :nalysis;;;;;;;;;;;;;;;;;;;;;;;;;;.. 15
'./ *wot :nalysis;;;;;;;;;;;;;;;;;;;;;;;;;; 17
'.1 #orter<s %ive %orces 8odel;;;;;;;;;;;;;;;;;;;;;;19
'.4 2atio :nalysis;;;;;;;;;;;;;;;;;;;;;;;;;;;.4/
'.5 -:,2;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;44

3. 4nNur'
/.' #ower;;;;;;;;.........................4
.
/./ #orts;;;;;;;;;;;;;;..40
/.1 :irports;;;;;;;;;;;;;.40
/.4 2oads;;;;;;;;;;;;;;53

5. Resear$!
1.' :bstract;;;;;;;;;;;;51
1./ Introduction;;;;;;;;;;..;51
1.1 Objective of the *tudy;;;;;;;.54
1.4 ypotheses Of the *tudy;;;;;;.54
1.5 2esearch 8ethodology;;;;;;;54
1.7 =iscussion;;;;;;;;;;;....54
1.9 -onclusion and *uggestions;;;;....5.
L#st of 6#2ures
%igure '> Industry si+e and growth of -onstruction ,=# at constant prices ?2s. billion@...................... 4
%igure /> Indian -onstruction Industry $andscape ................................................................................. 5
%igure 1> *hare of 2eal (state and -onstruction by ,=# contribution.................................................. 5
%igure 4> 2eal (state *egments ............................................................................................... ............... 7
%igure 5> ousing *hortage by *tate over the (leventh %ive Aear #lan ?million houses ?B of share of
various states@.......................................................................................................................................... 9
%igure 7> *i+e of -ommercialC2etail -onstruction .............................................................................
.
%igure 9> -ommercial Office *pace :bsorption by location, /339 ...................................................
0
%igure .> =istribution of Outlay in Infrastructure *egments in Tenth and (leventh %ive Aear
#lans.. '3
%igure 0> Breakup of employment in Building, -onstruction and 2eal (state sector in India ........
'.
%igure ''> Dalue chain within the 2eal (state segment ....................................................................
/'
%igure '/> Dalue chain within the Infrastructure segment .................................................................
//
%igure '1> :ctivities in the #roject ()ecution stage ..........................................................................
//
%igure '7> Investment planned under EnFG28 totalling 2s. 1,15,333 crore ...................................
1.
%igure '9> Investments under various heads of EnFG28 ?2s. crore@ ...............................................
1.
%igure '.> *tate"wise investments under EnFG28.......................................................................... 10
%igure '0> Investments in #ower ,eneration, Transmission and =istribution up to /3/'"// ?2s.
crore@
......................................................................................................................................................... 10
%igure /3> *tate"wise investments in Transmission and =istribution.............................................. 43
%igure /'> #lanned Investments in 2oads in the (leventh %ive Aear #lan ?2s. crore@................... 4/
%igure //> #rojected 2eal ,=# of -onstruction sector ?2s. billion@ ............................................... 4/
L#st of Ta(les
Table '> Grban #opulation in India.................................................................................................. '1
Table /> Total #ower ,eneration -apacity in India......................................................................... '4
Table 0> :irports commissioned C granted approval C under consideration ...................................... 4'
Table '3> *hare of economic activity estimated in the Infrastructure segment .............................
Executive Summery
T h e p r o j e c t H 2e a l ( s t a t e i n d u s t r y H i s b a s e d o n t h e c u r r e n t i n d u s t r y
t r e n d s o f 2e a l e s t a t e s e c t o r . The 'a#n o(7e$t#%es of the project are>
Gnderstanding the functioning of 2eal (state Industry
:nalysing the industry performance on Iualitative and Iuantitative Basis.
%orecasting the %uture Investment in the *ector.
EnFurm *cheme in coming years.
To study the fundamental factors affecting the real estate value.
To e)amine the factors of real estate boom in /33..
To present the future constraints of real estate investment in India.
%or t hi s proj ect t he fi nanci al perfor mance of t he maj or pl ayer s of t he i ndust r y
was st udi ed and i nt er pret at i on wer e dr awn. We l earnt -umul at i ve :verage
,rowt h 2at e and -ompound :ver age ,r owt h rat e t o conduct Iuant i t at i ve
anal ysi s of t he Indust r y.
The 2eport Is =ivided Into Darious *ections>
Industry O%er%#e*
Thi s par t descr i bes t he I ndust r y pr of i l e. Thi s par t r ecogni +es t he
-har act er i st i cs of 2eal (st at e ,=riving %orces, it also gives little insights into 2eal (state
Investment Banking . This section also describes the 8ajor #layers Of the *ector.
Analys#s
Iuantitative and Iualitative analysis are conducted in this sector and 2ecommendation are the
output .
4nNur'
This #art =iscusses EnFurm *chemes and various investment to be made under this *chemes. It<s
(ffect on 2eal (state industry.
Resear$!
This #art -ontains the *tudy -onducted in year /33.. The factors in the present paper are the
8acro (conomic factors for which the secondary data is more suitable and reliable. The
collected in the aforesaid manner have been tabulated in condensed form to
draw the meaningful results. To analy+e the data tables, percentage and graphs
were used.
Findings
: =etailed :nalysis Of the industry *hows that ,rowth 2ate of The industry has declined since last
five years , showing the effect of ,lobal 2ecessions in India. :lthough India<s 2eal estate<s
situation is very much healthy against over countries of the World. But =evelopers did face the =rop
in demand of the properties which has decreased the prices of #roperties indirectly. :s companies
are trying to achieve large number but lower margin sales these day.
:t the end submitted to IIPM 8 l&o.
Industry Overview
Current "$enar#o of t!e Real Estate Mar&et #n Ind#a
-ommercial real estate sector is in boom in India. In the last fifteen years, post
liberali+ation of the economy, Indian real estate business has taken an upturn and is
e)pected to grow from the current G*= '4 billion to a G*= '3/ billion in the ne)t '3
years. This growth can be attributed to favorable demographics, increasing purchasing
power, e)istence of customer friendly banks & housing finance companies,
professionalism in real estate and favorable reforms initiated by the government to attract
global investors
C!ara$ter#st#$s of t!e Real Estate Mar&et #n Ind#a
,rowing 8arket =emand
J 2eali+ation of large commercial
projects
J I#Os by developers
J ,radual organi+ation of the markets in
the Tier I cities
,reater availability of
information
J (mergence of transparency and
liKuidity
J (ntry of international real estate
consultancies
J ,overning legal framework rela)ed
J -ompetitive pricing
Cause-Effect scenario leading to emergence of organized real estate market in India
The property market in India has traditionally been unorgani+ed and fragmented.
owever, the recent past has seen a consolidation of positions in the market as
developers are stretching their capacities to the ma)imum in order to meet the growing
market demand, which in turn has encouraged large projects with sourced financing. The
I#Os by large real estate developers like *obha, 2aheja and =$% have led to organi+ation
of the market in the Tier I cities, but the Tier II and Tier III cities still demonstrate the
traits of an unorgani+ed market. Whilst the Indian real estate market still lacks
transparency and liKuidity compared to more mature real estate markets, the increasing
reKuirements of multi national occupiers, as well as the influ) of international property
consultancies has led to the introduction of greater availability of market information,
both in published and private form pushing the sector to an organi+ed market form.
Dr#%#n2 6or$es
*tated below are the reasons that have led to the real estate boom in the country
J Booming economyL accelerated ,=# to .B p.a.
J India<s emergence as an attractive offshoring destination and availability
of pool of highly skilled technicians and engineers L =evelopment of large
captive units of major players include ,(, #rudential, *B-, Bank of
:merica, *tandard -hartered and :merican ()press
J 2ise in disposable income and growing middle class, increasing the
demand for Kuality residential real estate and real estate as an investment
option.
J (ntry of professional players eKuipped with e)pertise in real estate
developmentL
J 2ela)ation of legal rulings and processes by the governing bodies
encouraging investments in real estate
J Improvement in infrastructure facilities
Cate2or#9at#on
The demand for new office space in India has grown from an estimated 1.0 million sK. ft
in '00. to over '7 million sK. ft in /334"35. 93B of the demand for office space in India
is driven by over 9,333 Indian IT and IT(* firms and '5B by financial service providers
and the pharmaceutical sector. In /335 alone, ITCIT(* sector absorbed a total of appro)
13 million sK. ft and is estimated to generate a demand of '53 million sK. ft. of space
across major cities by /3'3. This data clearly demonstrates the growth of the real estate
sector in the country.
With reference to the availability of infrastructure facilities, following cities are currently
attracting 8F-sCcorporateCreal estate developers>
Tier I cities, 8umbai ?-ommercial hub@, =elhi ?#olitical hub@ and Bangalore
?Technological hub@>
J #referred option for many new market entrants
J -ommand the highest international profiles and significant proportion of
%=I
J Offer Kualified labor pool and the best infrastructure facilities
J ()hibit development of sub"urban commercial real estate
J Aield of 0.5 M '3B
Tier II cities, notably yderabad, -hennai, -handigarh, 6ochi, 8angalore, 8ysore,
Thiruvananthapuram, ,oa, Bhubaneshwar, :hmedabad and #une
J Aield of '3.5"''.5B
J Offer competitive business environments, human resources availability,
telecommunications connectivity, Kuality of urban infrastructure,
J :ttract high value IT, IT(* and biotech corporate houses
Tier III cities) like -uttack and Eaipur
J $ow liKuidity and still highly unorgani+ed.
*pecial (conomic Nones>
J /. operational *(Ns in the country, including those converted from ()port
#rocessing Nones ?(#N@ to *(N
J =evelopment of *(Ns in various segments such as multi"product,
Information Technology, Bio"technology, ,ems and Eewellery, Te)tiles
and technology intensive industries
J :ttract both developers and corporate houses ?refer table for a list of
corporate that have shown interest in development of *(Ns@
Cor+orate Lo$at#on
2eliance Industries ,urgaon, 8umbaiCFavi 8umbai
:dani ,roup 8undra
T-, 2efineries aldia
*u+lon -oimbatore, Gdipi, Dadodara
indalco *ambalpur
,enpact Bhubaneshwar, Eaipur, Bhopal
Dedanta Orissa
Corporate interested in development of SEZs in India and the location of interest
:part for the corporate clientele, the *(Ns also attract a number of real estate developers,
including =$%, :nsals, Oma)e, #arsvnath, *hipra (state to name a few.
:s per utili+ation, the real estate space can be classified as follows>
2eal (state Gtili+ation
2esidential
-ommercial
Office
ospitality
2etail
8alls 8ultiple)es
Real estate utilization
$isted below are the salient features of each category>
Commercial Real Estate
ffice Space
J Backed by strong infrastructure
J #romoted by increasing demand from IT industry
J *hift of focus from the traditional -B=s towards secondary centers owing
sharply higher land prices in the city centers.
Retail Space
J ,rowth of /5" 13B e)pected in the organi+ed retail sector ?malls and
multiple)es@ leading to an increased demand in real estate
J :ffected by government policies for foreign retailers
J #ronounced in the Tier I, Tier II and Tier III cities.
!ospitality Space
Criteria Statistics
:nnual growth rate of the industry .B
Fumber of foreign tourists in /335 "######
Total number of five star rooms ?/335@ $%###
Total number of five star rooms needed by
/3'3
&'####
(ro)ing demand of real estate in the hospitality industry
J Increasing demand of lodging in commercial cities such as Bangalore,
8umbai, =elhi etc. from business travelers.
J (stablished brands in this sector include :sian otels, Indian otels, IT-,
$e 8eridien etc are in e)pansion mode with many new players such as
:ccor ,roup, 8arriot, -hoice, I, ,roup
Residential Real Estate
J =evelopment triggered by>
o $ow per capita housing stock
o 2ising disposable income
o (asy availability of finance
J -urrently growing at 13"15B per annum
J =riven by retail investors who view real estate as an attractive investment
option as compared to mutual funds and stocks
J ,eographically widespread with townships being built in both the metros
and the tier II and III cities
Real Estate In%est'ent 1an&#n2
2eal (state Investment Banking is an approach to real estate financing M providing the
client a host of services including the structuring of real estate projects, legal advice,
operative management of real estate projects and support in marketing properties. The
banking focus in 2eal (state Investment Banking is on structured financing products and
structuring of entire portfolios. ()tending on similar lines is the importance of
syndication that forms the base line of larger"si+ed transactions.
2eal estate investment banking focuses on the following target market as prospective
client base>
Real Estate Consultants
The increase in transparency and liKuidity in the real estate market in India is attracting
international real estate consultants to India. These consultants offer end to end solutions
for their clients< real estate needs. These services include strategic consulting to
developers, investors, advisors and lenders seeking assistance with e)isting assets,
potential acKuisitions, new development projects and properties slated for disposition,
feasibility studies, concept testing, business planning e)ercises, investment advice,
market research and analysis, demand forecasting, financial modeling and project
structuring e)ercises, portfolio optimi+ation and re"engineering strategies, e)pansion and
occupancy, location and entry, brokerage services, legal documentation review,
valuations etc.
2eal estate consultants also ensure that the financing needs of the client are well taken
care of by liaising with bankingCnon banking institutions and providing them with
investment and structured finance solutions including securiti+ation and sale &
leasebacks, structured finance facilitating eKuityCdebt into development projects on behalf
of private and government sector clients, structuring development financing, public "
private " partnerships, joint ventures, portfolio transactions and privati+ation e)ercises.
The recent players in the Indian market are Eones $ang $asalle, -olliers, -B2ichard
(llis, %rank 6night and Trammell -row 8eghraj.
*evelopers and Construction Companies
With the opening up of the real estate sector in the country, the construction houses are
scaling up the commercial and residential constructions. :n increasing number of
developers are offering I#Os for fund raising. :I8 too is a sought after solution to meet
the fund reKuirements for these developers.
,roup 2outeC8arket
#arsvanath I#O
*obha I#O
#yramid *aimira I#O
=$% Gniversal I#O
6 2aheja -orp :I8
Gnitech :I8
iranandani
-onstruction :I8
+und raising options ,y developers
*omestic Corporate !ouses
:s the land prices in the Tier I cities have always moved upward, land was regarded as a
safe investment which, regardless of how it was used, would produce capital gains far
above the inflation rate. It was thus common for companies in the manufacturing and
service industries to acKuire real estate even though they themselves were completely
unrelated to property rental or real estate investment, seeking collateral value and ta)
benefits from depreciated assets, and e)pecting unreali+ed gains to absorb business risk.
:cKuisition of real estate as an asset was further encouraged as part of a diversification
strategy in the investment portfolio of these corporate houses..
:s these real estate possessions are classified as fi)ed assets held for the company<s own
business purposes, it becomes feasible recent moves to increase real estate liKuidity often
involve the conversion of corporate real estate into commercial use. The corporate houses
in India are also demonstrating a shift from ownership to leasing. With the advent of
8F-s into the country, a growing number of companies no longer see real estate
ownership as an absolute necessity.
%rom the perspective of companies who want to sell off assets, securiti+ation schemes
provide a greater diversity of alternatives to liKuidate real estate. This has been greatly
encouraged by corporate restructuring and a return to focusing on core competencies.
Thus, there seems an opportunity to tap the corporate houses who have a large corpus of
real estate and are willing to trade this asset for want liKuidity.
+*Is-+IIs
#ost liberali+ation, the investment opportunities in real estate for the %=Is and %IIs have
greatly opened up. %oreign investors can now purchase commercial development projects
?under construction@ over 53,333 sK m ?543,333 sK ft@, or plotted residential
developments with a minimum si+e of '3 hectares. %oreign investors may purchase an
eKuity stake in an unlisted real estate company and thereby partner in its growth plans
across asset classes and cities. $isted real estate companies also offer good liKuid
investment opportunities routed into designated special purpose vehicles that hold the
asset?s@ being developed, thereby reducing risk. These investors look for innovative
financial products to suit their investing needs.
+inancial Institutions . Real Estate /utual +unds
8ajor financial institutions such as I-I-I, =%-, I$&%* and 6otak 8ahindra have all
launched real estate funds, either as joint ventures or sole investors. 8ost institutional
funds operate on a pan"Indian basis, and are increasingly looking at opportunities in Tier
III cities, in order to gain Ofirst mover advantageO.
0rivate E1uity-2enture Capital +unds
:s per the *ecurities and ()change Board of India ?*(BI@, %oreign Denture -apital
Investors ?%D-Is@ may invest in real estate assets, within the framework of *(BI. This
has paved the way for capital infusion into the market and a significant weight of foreign
capital is now chasing Indian real estate. Indirect real estate investments are made into a
pooled investment fundL such funds are usually created in partnership with domestic
developers or financial institutions. *uch D- firms, partnered with developers form a
potential client base, keen to invest in the real estate sector.
Real Estate and 6#nan$#n2 Trends #n Ind#a
Securitization and C/BS
%rom the perspective of companies who want to sell off assets, securiti+ation schemes
provide a greater diversity of alternatives to liKuidate real estate. *ecuriti+ation is
primarily used by the corporate houses to convert the corporate real estate to commercial
real estate.
Realty +unds- Realty /utual +unds in India
Initiated by *(BI, the 2(8%s true potential would be tapped only after the setting up of
2(ITs, as they infuse confidence among investors by serving as custodians of title deeds.
?2(ITs pool various real estate assets, including warehouses, buildings, industrial estates
and parks, malls, commercial and residential premises and get listed on the stock
e)change to enable investors to buy and sell. They afford an opportunity to diversify the
portfolio within that limited sense as well. owever, *(BI has not allowed the creation of
2(ITs in India as yet, though 2(ITs are well established in the more mature real estate
markets. @ -urrently the 2(8%s in the Indian market are targeted at the FI* and
corporate investors.
R#s&s #n%ol%ed #n t!e Real Estate In%est'ent Mar&et
3i1uidity risk
The real estate investment market is still in its infant stage. The time reKuired for liKuidity
of real estate property can vary depending on the Kuality and location of the property.
Regulatory risks
In terms of property ownership, permission from the 2eserve Bank of India is reKuired
for foreign investors. %or capital repatriation, investors need to apply for approval from
the 2BI, and foreign direct investment is limited to a limited set of opportunities ?e.g.
townships@. The 2(8%s work within the *(BI framework. Being a developing and
growing sector, the rules, regulations and legalities demonstrate freKuent changes,
making it seem as a cumbersome investment option to the investors.
0roperty market transparency risk
The Indian property market has low transparency when compared to the more mature and
developed real estate markets. :lthough market transparency has improved, reliable and
consistent information on the Indian property market is still not easily available. There
are also more professional due diligence and valuation institutions needed. This holds
true even for the Tier I cities.
/acroeconomic risks
Interest rates, inflation and e)change rate risks are amongst the important macroeconomic
indicators and have shown decreased volatility. The provision of facilities, is in many
regions, still inadeKuate ?education, transport infrastructure@. These risk factors are not
likely to disappear in the near future, impeding the development of the real estate sector.
)nership and 3and 4itle Issues
$ack of information and low transparency in the real estate segment in India, coupled with
the age old property related issues discourages the investment of the large players in the semi
urban and rural areas thus slacking an overall growth of the real estate sector.
Con$lus#on
The Indian real estate sector promises to be a lucrative destination for foreign investors into
the country. The Indian realty sector, if channeli+ed properly, could catapult the growth
of several other sectors in India through its backward and forward linkages. owever,
there are potential constraints for domestic as well as foreign investments in India.
:bsence of a single regulator to monitor business practices prevailing in Indian real estate
market is perceived to be a risk factor by investors. The *(N guidelines which are issued by
the -ommerce 8inistry are constantly modified, creating uncertainty. *ince the liberali+ation
of %=I norms, significant foreign investments have flown into real estateL but availability
of suitable e)it options for such investments is still constrained.
8aturity of the real estate markets will lead to infusion of foreign investment and
adoption of international best practices by real estate players. =evelopers will get more
organi+ed, and become more transparent to avail opportunities emerging in the market. With
the Indian securities market regulator *(BI allowing real estate mutual funds ?2(8%s@ in
India, eKuity investors will have an e)it option available to them. :ll these factors will
contribute in making the Indian real estate market more organi+ed and structured, thus
providing better investment opportunities.
En%#ron'ent "$ann#n2 and Co'+et#t#%eness of Constru$t#on Industry
.... Industry s#9e and Gro*t! of Constru$t#on Industry
The si+e of the -onstruction industry is around 2s. /.' trillion
'
in /33.. The -onstruction sector in
India is the second largest economic activity after agriculture and provides employment to about 11
million people. India!s -onstruction industry has grown at a -ompounded :nnual ,rowth 2ate
?-:,2@ of about ''.'B over the last eight years on the back of massive infrastructure investment and
rapid rise in housing demand. %oreign =irect Investment ?%=I@ inflow into the sector during /339"3.
is estimated to be around 2s. /43 billion. *pending on infrastructure sectors such as ports, power
plants and roads is projected at more than 2s. /.5 trillion annually for the ne)t si) years, and will
reKuire 0/ million man years of labour
/
.
-onstruction investment accounts for around 5/.4B of the ,ross %i)ed -apital %ormation in India.
Investments in -onstruction have a positive domino effect on supplier industries, thereby contributing
immensely to economic development. The -onstruction sector has strong linkages with various
industries such as cement, steel, chemicals, paints, tiles, fi)tures and fittings. While in the short term it
serves as a demand booster, in the long term it contributes towards boosting the infrastructure
capacity.
Figure 1: Industry size and growth of Construction GD at constant !rices "#s$ %i&&ion'
3):;;
3);;;
.):;;
.);;;
',3.4
','/9
',/'9
''.'B
',5.
/
',17/
',.10
/,355
/,/71
:;;
<
3;;. 3;;3 3;;5 3;;/ 3;;: 3;;= 3;;> 3;;0
Source5 Economic Survey 6##7-#$ and I/aCS analysis
/
-onstruction Industry =evelopment -ouncil
..3. Industry "e2'entat#on
-onstruction sector can be broadly classified into / sub"segments>
'@ 2eal estate ?2esidential, -ommercialC-orporate, Industrial and *pecial (conomic Nones ?*(Ns@@
/@ Infrastructure ?Transportation, Grban development, Gtilities@
Figure (: Indian Construction Industry )andsca!e
-onstruction Industry
2eal (state
Infrastructure
2esidential
Gtilities Grban Infrastructure Transportation
-ommercial
*pecial
(conomic
Nones
#ower
Irrigation
2ailways
-ivil :viation
2oadways
Source5 I/aCS analysis
#orts
The 2eal (state segment contributes around /4B to the -onstruction ,=# of India while
Infrastructure segment contributes around 97B.
Figure *: Share of #ea& Estate and Construction %y GD contri%ution
2s ',507
Billion
97B
2s 534
Billion
/4B
2eal (state Infrastructure
Source5 Economic Survey 6##8-#7, I/aCS analysis
..5. Real Estate "e$tor
In terms of ,=# contribution, 2eal (state sector is estimated at around 2s. 534 billion in /339"3..
The market si+e of the Indian real estate sector is estimated to be around 2s. /,741 billion in /339"3..
The sector has been growing at a -:,2 of '/B. It is constituted of the 2esidential, -ommercial and
real estate activities of *pecial (conomic Nones.
Figure +: #ea& Estate Segments
-ommercial
C 2etail
0B
*(N
0B
2esidential
./B
Source5 I-Sec Research, /inistry of Commerce and Industry, I/aCS analysis
1$*$1$ #esidentia&
:t around 2s. /,'9' billion, the housing sector is estimated to grow at '/B in the long term. =emand
for housing is estimated to be around 4.. million houses per year over the (leventh %ive Aear #lan
period. In addition to the need for new housing tenements, the demand is also likely to be fuelled by
the housing shortages already prevalent in several states. The shortage of housing across several
states, as illustrated in the graph below, amounts to about /5 million houses in the period of the
(leventh %ive Aear #lan.
Figure ,: -ousing Shortage %y State over the E&eventh Five .ear &an "mi&&ion houses "/ of share
of various states'
:ndhara
#radesh
,ujarat
=elhi
'.'1
4B
Other *tates
5.''
/'B
'.05
.B
'.77
9B
6arnataka
'.71
9B
8adhya
#radesh
West Bengal
/.34
.B
Gttar #radesh
8aharastra
1.9/
'5B
Tamil Fadu 2ajasthan
'./0
5B
/.1.
'3B
/../ '
''B 4B
Source5 0lanning Commission 9orking (roup on :r,an !ousing, 6##8
1$*$($ Demand drivers for #esidentia& Sector
+avoura,le demographics - The demographics work strongly in favour of the Indian -onstruction
industry. India is the second highest populated country in the world after -hina. India!s estimated
population as of 8arch /33. is '.'4 billion, while the average age of Indians is /7 years. The
demographic profile indicates that India!s working population forms around 7'B of the total
population. India is and will remain one of the youngest countries in the world for some time. The
strong economic growth led to sharp income generation, which led to rise in middle class segment.
India currently has around /73 million persons in the middle class segment. This segment!s rising
purchasing power and propensity to consume is e)pected to drive and support a robust growth rate of
the economy in the coming years. The middle class along with robust macro"economic scenario and
changing demographic profiles has a major role to play in the growth and emergence of the
-onstruction industry in India.
:r,anisation and /igration " The decadal growth rate of urban population ?/3B between '00'"
/33'@ in India is higher than the rural population ?'.B during the same period@. :verage annual rate
of change ?::2-@ of the total population in India during /333"/335 is estimated at '.4'B with
/..'B for urban and 3../B for rural sectors. ::2- for urban areas by /3/5 will increase to /./5B
whereas the ::2- for rural population will decline to "3.4B showing a clear shift of population from
rural to urban areas
1
. The average household si+e has been estimated by the Fational *ample *urvey
Organisation as being around 4.49 in urban areas and only 79B of the houses are pucca units.
Though there is a slump in real estate activity in the last one year, investment over the long term will
be primarily led by housing, which is e)pected to account for nearly 03B of the total real estate
sector.
1$*$*$ Commercia&0#etai& Construction
The rapid growth of the Indian economy has had a significant impact on the demand for commercial
property to meet the needs of business, by way of offices, warehouses, hotels and retail shopping
centres. ,rowth in commercial office space reKuirement is led by the burgeoning outsourcing and
information technology ?IT@ industry and organised retail. %or e)ample, IT and IT(* alone is
estimated to reKuire '53 million sKuare feet across urban India by /3'3. *imilarly, the organised retail
industry is likely to reKuire an additional //3 million sKuare feet by /3'3
4
.
Figure 1: Size of Commercia&0#etai& Construction
2etail
2s ''1 billion
49B
Office
2s '/7 billion
51B
Source5 I-Sec Research, /inistry of Commerce and Industry, I/aCS ;nalysis
1
#lanning -ommission M Working group on Grban ousing for the ''
th
%ive Aear #lan
4
*ource> India Brand (Kuity %oundation ?IB(%@
Figure 2: Commercia& Office S!ace 3%sor!tion %y &ocation4 (552
Bangalore, /3
B
Others, .B
#une, .B
4otal 5 "' /illion S1uare
+eet
8umbai, 0B
F-2, '0B
yderabad, '
/B
-hennai, '/
B
6olkata, '/B
Source5 IBE+
1$*$+$ Demand drivers for Commercia&0#etai& Sector
The following are some of the demand drivers in the -ommercialC2etail *ector>
*harp growth in organised retailing M Organised retail, which is e)pected to grow at over /5B
in the ne)t few years, is likely to drive demand in the commercial real estate sector. ,rowth in
ITCIT(* sector at 13B annually " The investments in commercial -onstruction are e)pected
to grow faster than investments in housing mainly due to the spurt in office space construction
driven by ITCIT(* industry.
1$*$,$ S!ecia& Economic 6ones
Over the ne)t five years, growth in investments in Indian Industry will be driven by strong capacity
additions, led by strong growth in demand and high e)isting operating rates. *pecial (conomic Nones
?*(Ns@ will be at the forefront of this growth. :bout 1'5 *(Ns which have been notified as of now, of
which about /3/ belong to the ITCIT(* *ector.
../. Infrastru$ture
With the government!s focus on infrastructure development along with the active participation of the
private sector, this segment is growing rapidly. The #ower, Irrigation, Transportation including
2oadways, 2ailways, :irports and #orts, Grban =evelopment and -ommunications sectors have
witnessed investments of 2s. 7.0 trillion over the Tenth %ive Aear #lan ?'3
th
%A#@ and will witness
around 2s. '4.. trillion in the (leventh %ive Aear #lan ?''
th
%A#@.
Figure 7: Distri%ution of Out&ay in Infrastructure Segments in 8enth and E&eventh Five .ear
&ans
.)=;;);;;
.)/;;);;;
Rs ?:5 (#ll#on
.)3;;);;;
.);;;);;;
Rs :.> tr#ll#on
Co''un#$at#ons
Trans+ortat#on
0;;);;;
=;;);;;
/;;);;;
3;;);;;
<
Rs ?0? (#ll#on
Rs 3.3 tr#ll#on
Rs 503 (#ll#on
Rs ..;5 tr#ll#on
Rs 3.5 tr#ll#on
Rs ..3 tr#ll#on
Rs 3.. tr#ll#on
Rs /.0 tr#ll#on
@r(an De%elo+'ent
Irr#2at#on
Po*er
.;t! 6P ..t! 6P
Source5 Economic Survey 6##8-#7
India!s infrastructure is set to improve rapidly with an estimated -:,2 of '5B. #ublic spending
would continue to dominate this sector. The ,overnment of India projects that for the economy to
grow at 0B per annum over the (leventh #lan period the ,ross -apital %ormation
5
in the
infrastructure should increase from 5B of ,=# at the start of the Tenth #lan to around 0B at the end
of the (leventh #lan. The central government would contribute 19B, the state governments 1/B and
the private sector would contribute 1'B of the total investments in infrastructure for the ne)t five
years.
1$+$1$ #oads
2oads occupy an eminent position in India<s transportation as they carry nearly 75B of freight and
.5B of passenger traffic in the country. The ,overnment of India in the Tenth #lan provided for an
outlay of 2s.505 billion for development of roads. The largest highway project ever undertaken in the
country is being implemented by the Fational ighways :uthority of India ?F:I@. #hase I and II of
the Fational ighways =evelopment #roject ?F=#@ envisaged 4C7 laning of about '4,/90
5
8easure of the net new investment by enterprises, government and households in the domestic economy in fi)ed
capital assets, during an accounting period
kilometres of Fational ighways at a total estimated cost of 2s. 753 billion ?at /334 prices@. These
two phases consist of the ,olden Iuadrilateral, the Forth"*outh & (ast"West -orridors, port
connectivity and other projects. The upgradation of '/,'30 km of e)isting national highways has been
approved by the ,overnment under F=# #hase"III at an estimated cost of 2s. .37 billion.
The ,overnment has also approved si)"laning of 7,533 km of Fs comprising 5,933 km of the
,olden Iuadrilateral and balance .33 km of other sections of Fs under F=# #hase"D at a cost of
2s. 4'/ billion. The ,overnment has approved construction of ',333 km of e)pressways with full
access control on new alignments at a cost of 2s. '77 billion under F=# #hase"DI and the
construction of ring roads including improvement of F $inks in cities, grade separated intersections,
flyovers, elevated highways, underpasses and service roads at a cost of 2s. '77 billion under F=#
#hase"DII.
One of the physical targets for state infrastructure in the (leventh %ive Aear #lan is the construction
of a core network would include e)pressways, four"laned roads, strengthened pavements, and
pavements with good riding Kuality, bypasses, bridges, etc. for a length of about 9',533 km, with a
financial outlay of about 2s. .3,333 crore covering the states. This network could be based on the
Pcorridor concept<, such that a commercial vehicle can cover about 533 km on this network in one day
?.33 km or more on e)pressways@ with adeKuate road safety.
2ural roads would also be an important thrust area The ,overnment of India has launched the
#radhan 8antri ,ram *adak Aojana ?#8,*A@ which aims to provide good all"weather road
connectivity to unconnected habitations.
1$+$($ 3ir!orts
India has '/5 airports. Of these, '' are designated as international airports. :irports :uthority of
India ?::I@ has taken up the development of infrastructure in the country through the ### model.
Eoint Dentures formulated for the modernisation of =elhi and 8umbai airports, and development of
greenfield airports at Bangalore and yderabad are cases in point. ::I has also drawn an action plan
to develop and modernise 15 non"metro airports. :n investment of about 2s. 433 billion is projected
for the development of airports during the (leventh %ive Aear #lan.
1$+$*$ #ai&ways
The premier transport organisation of the country, the Indian 2ailways is the largest rail network in
:sia and the world<s second largest. owever there is a need to upgrade facilities to meet the growing
rail transportation needs. The proposed investment in railways over the eleventh five year plan is 2s.
/.. trillion. ### projects are estimated to account for 0B of total investment over the period to ramp
up infrastructure in // metropolitan city stations, increase terminal capacity by 41B and construct
/,933 km of rail lines.
The Tenth %ive Aear #lan document had envisaged construction of =edicated %reight -orridors
?=%-s@ on selected trunk routes. This has since been given effect to with the announcement of
construction of =%-s separating freight traffic from passenger traffic on trunk routes. The proposal
for capacity augmentation through construction of =%-s along the highly saturated freight routes is a
part of the new long"term strategy to provide premium services in freight and passenger travel.
: Western -orridor of ',470 km will connect Eawaharlal Fehru #ort to =adri and Tughlakabad in the
Forth. :n (astern corridor of ',/1/ km will connect $udhiana to *onnagar via =adri and 6hurja, thus
facilitating transfer from one corridor to another. The (astern corridor will further get e)tended to
6olkata region to connect the proposed deep"sea port. The estimated cost of construction of both
these corridors is e)pected to be around 2s. 19/ billion and it is likely to take about five years for
completion of these corridors and have a spill"over beyond the (leventh #lan.
1$+$+$ orts and Shi!!ing
There are '/ 8ajor #orts and '.5 8inor #orts along India<s 9,5'9 km long coastline. '33B %=I
under the automatic route is permitted for all port development projects. ### is seen by the
,overnment as the key to improve the e)isting facilities. This sector would see 2s. ' trillion
investments on shipbuilding and port infrastructure development within the ne)t 5 years.
The (leventh #lan outlay for the shipping sector is 2s. ',333 crore at /337M39 prices. The sector is
also e)pected to generate I(B2
7
amounting to 2s. '/,/.5 crore at /337M39 prices. In addition, the
budgetary support for ship"building and repairs is 2s. '53 crore ?2s. '93 crore at current price@. The
I(B2 for this sector is 2s. 553 crore at /337M39 prices.
The total projected outlay for the (leventh #lan for the =epartment of *hipping ?including #orts@ is
2s. 41,.94 crore at /337M39 price ?2s. 407/1 crore at current price@ which includes 2s. 4475 crore of
7
Internal & ()tra Budgetary 2esources
,ross Budgetary *upport at /337M39 price ?2s. 5,353 crore at current price@ and 2s. 10430 crore of
I(B2 at /337M39 price ?2s. 44591 crore at current price@.
The Indian shipbuilding industry is centred around /9 shipyards comprising . public sector ?7 yards
under -entral ,overnment and / under *tate ,overnments@ and '0 private sector shipyards. The
shipyards between them have /3 dry docks and 43 slipways with an estimated capacity of /,.',/33
=ead Weight Tonnage ?=WT@. : major share of this capacity is held by the . public sector yards and
only -ochin *hipyard $imited ?','3,333 =WT@ and *$ ?.3,333 =WT@ have the reKuired
infrastructure to build large vessels.
India<s share in the world shipbuilding market has increased from an insignificant 3.'B in the
beginning of Tenth #lan to '.1B in /337. On the e)port front, one public sector shipyard, that is
-ochin *hipyard $td ?-*$@, and three private sector shipyards, vi+., :B,, Bharti, and -howgule
performed remarkably well during the Tenth %ive Aear #lan period and were able to get e)port orders.
The Indian *hipbuilders :ssociation has estimated that the industry can grow at a rate of more than
13B and this momentum can be maintained for the ne)t '3 years to reach a level of 5 million =WT
order book for the (leventh %ive Aear #lan as against '.1 million =WT for the Tenth %ive Aear #lan.
1$+$,$ 9r%an Infrastructure
India<s total urban population is around /.5 million, which is 13Bof India<s population. There has
been significant growth of the urban population over the past decade and the trend is e)pected to
continue. This warrants an urgent up"scaling and up"gradation of urban infrastructure. This sector is
e)pected to be the second"largest contributor to infrastructure investments after roads.
8a%&e 1: 9r%an o!u&ation in India
ear .?0. .??. 3;;.
Nu'(er of 'etro $#t#es
,+o+ulat#on<. '#ll#on A-
'/ /1 15
Po+ulat#on ,'#ll#on- 4/ 93 '3.
Per$enta2e of total
ur(an +o+ulat#on
/7 1/ 1.
Source5 Report of the Steering Committee on :r,an *evelopment, &&th +<0, 0lanning Commission of India
Grban Infrastructure covers basic civil services such as water supply, sewerage, solid waste
management and urban transportation. Water supply and sanitation projects alone offer scope for
"our$e Central "tate Pr#%ate Total
Bydro 07.5 1735 1/71 '7551
T!er'al /7.33 /4149 9409 5.744
Nu$lear 11.3 3 3 11.3
Total 10.75 /905/ '3973 9.599
annual investment of 2s. /04 billion. Grban infrastructure investments will get a boost from the
Eawaharlal Fehru Grban 2enewal #rogramme ?EnFG28@. The programme was started in /335"37 to
enable sustainable urban infrastructure development of 71 mission cities. Gnder this scheme, the
programme receives 2s. 533 billion as central assistance and 2s. 533 billion from state governments
and urban local bodies. 2s. 1.1 trillion was allotted under the -ity =evelopment #lans scheme. *ome
other notable schemes for urban development include the 2s. /. billion sub"mission on infrastructure
development scheme and the 2s. ''.9 billion additional central scheme. -urrently, '33B foreign
direct investment ?%=I@ under the automatic route is allowed in townships, housing, built"up
infrastructure and construction"development projects. Grban transport development is currently
supported by the Fational Grban Transportation #olicy ?FGT#@.
1$+$1$ 9ti&ities "ower and Irrigation'
India has a power generation capacity of '// ,W. The sector has been growing at a -ompound
:nnual ,rowth 2ate of 4.7B over the last four years. India has the fifth largest electricity generation
capacity in the world. The 8inistry of #ower has formulated a blueprint to provide reliable, affordable
and Kuality power to all users by /3'/. This calls for an investment of 2s. 1.9 trillion in the ne)t five
years.
The gross electricity reKuirement by the end of the (leventh #lan projected by the #lanning
-ommission Working ,roup on #ower is ',31. Billion Gnit ?BG@ and peak demand estimation is
',5',333 8W. To fulfil the estimated electricity demand reKuirement, the Working ,roup
recommended the capacity addition programme initially of 9.,513 8W and updated at 9.,599 8W
during the (leventh #lan.
8a%&e (: 8ota& ower Generation Ca!acity in India
Source5 0lanning Commission, &&
th
+ive <ear 0lan
The emphasis of the -entral ,overnment to improve irrigation facilities in the country through
programmes such as Bharat Firman, :ccelerated Irrigation Benefit #rogramme ?:IB#@, and state"
level initiatives will be the main driver of investments in the irrigation sector. The plan outlay under
the Tenth #lan for irrigation sector was 2s. 0// billion. There is a renewed emphasis on this front
with states like :ndhra #radesh drawing ambitious plans. Increased focus on irrigation is evident from
the fact that the Tenth #lan irrigation outlay was 53B more over the Finth #lan. Investment in
irrigation in the (leventh #lan is projected to increase to 2s. /,511 billion from 2s.',''5 billion spent
in the Tenth #lan
9
.
;part from the a,ove, (overnment spending on infrastructure activities for defence and other
specialised construction )ould also ,e a demand driver for the sector=
1$+$2$ Demand drivers for Infrastructure Sector
(conomic growth would be around 9B -:,2 over ne)t decade
Increased domestic investments and foreign direct investment in sectors such as
communications
,overnment policies with a thrust on developing infrastructure and increased government
spending on transportation, urban development and utilities.
..:. Key R#s& 6a$tors for Constru$t#on Industry
/anpo)er Shortages - :lthough the construction industry employs 11 million people, second
only to the agricultural sector, the incremental workforce reKuirement is around four million
people per year over the ne)t seven years to sustain the current growth rate. The construction
industry is set to face a challenge in terms of sourcing manpower. :dding to this problem is
the shortage of contractors.
0rocedural and 3egal 2ulnera,ility - =evelopment projects entail clearances and permissions
from various government departments. =elays are tedious and vary from state to state
depending on local laws. ence this adds to overall comple)ities of transaction, increasing the
need for local e)pertise in each market.
3o) pro>ect risk, ,ut high payment receiva,le risk - The project risk for a contractor is low,
due to low financial commitments. 8ost construction projects are e)ecuted on a cash contract
basis and are funded and managed by the ownerCsponsor. The number of construction projects
with eKuity participation by contractors is limited to a few projects.. #ayment security
concerns are high, and they depend on the credit profile of the client. Gsually outstanding
payments and retention money payable to the contractor are delayed, as these payments are
made after the entire construction activity and project period is completed. This may affect
the smaller players in the industry.
9
#lanning -ommission, ,overnment of India
Infrastructure Bottlenecks - Infrastructure is a cause of concern in majority of cities across the
country as recent infrastructure developments have been slow and has not kept in pace with
the development. InadeKuate power, absence of drinking water, electricity failure, traffic
congestion and pollution are common features across the major cities in India. On the basis of
current plans, electricity generating capacity will rise by 7B annually over the period /339 to
/3'/, double the rate of the past five years and the second largest absolute increase in
capacity in the world. owever, this is still well below the likely growth rate of ,=#. #ower
shortage could be an impediment to construction activities in the future.
!igh level of fragmentation - The industry is highly fragmented, as the entry barriers are low
due to less fi)ed capital reKuirements. It is estimated that in /334, over 1 million construction
entities ?including housing contractors@ e)isted, of which only around /.,333 were registered.
owever, there is more fragmentation in the housing segment than the industrialC
infrastructure segment, as the unorganised sector accounts for 95B of the same. %urthermore,
the industrialCinfrastructure sector reKuires far more technical e)pertise and it is difficult for
smaller players in the unorganised sector to compete effectively.
4itle clearances for SEZs are invaria,ly delayed - Title clearance in India is a complicated
process in the absence of a central database of properties. This also adds to the costs and
delays in a project.
*elays in land ac1uisition5 =elays in land acKuisition is a major source of project delays and
escalating project costs. This is applicable to large infrastructure projects such as *(Ns, power
plants, and others.
*elays in /aster 0lan - *evelopment 0lan Revie) and Implementation - ()perience of
implementing the 8aster #lans has not been encouraging because of weak data base, financial
constraints, lack of resource mobili+ation, over ambitious plan proposals, lack of integration
between spatial planning proposals with economic development plans and inadeKuate
legislative support and enforcement.
+re1uent and e?pensive reconstruction " The maintenance reKuirement of the high density
corridor of Fs under construction and post implementation support is provided by F:I.
owever, the non"F=# F sections, which are maintained by *tate #W=s, are poorly
managed, primarily because the funds made available to them for maintenance are well short
of the reKuirement as per norms.
..=. Mar&et "tru$ture of Constru$t#on Industry
The -onstruction industry is highly fragmented, as the entry barriers are low due to less fi)ed capital
reKuirements. 2eportedly, in /334, over 1 million construction entities ?including housing contractors@
e)isted, of which only around /.,333 were registered
.
.
owever, there is more fragmentation in the housing segment than the industrialCinfrastructure
segment, as the unorganised sector accounts for 95B of the same. %urthermore, the
industrialCinfrastructure sector reKuires far more technical e)pertise. :round 07B of construction
companies are classified as small and medium enterprises.
..>. Ma7or Players
#ost independence, in the %irst %ive Aear #lan, construction of civil works was allotted nearly 53B of
the total capital outlay. The first professional consultancy company, Fational Industrial =evelopment
-orporation ?FI=-@, was set up in the public sector in '054. *ubseKuently, many architectural, design
engineering and construction companies were set up in the public sector ?Indian 2ailways
-onstruction $imited ?I2-OF@, Fational Buildings -onstruction -orporation ?FB--@, 2ail India
Transportation and (ngineering *ervices ?2IT(*@, (ngineers India $imited ?(I$@, etc.@ and private
sector ?8 F =astur and -o., industan -onstruction -ompany ?--@ etc.@.
The Indian -onstruction industry comprises of about /33 firms in the corporate sector. In addition to
these firms, there are about ',/3,333 class": contractors registered with various government
construction bodies. There are thousands of small contractors, which compete for small jobs or work
as sub"contractors of prime or other contractors.
The major players in the construction industry are>
-ompanies such as $&T, Gnitech, ,82 Infrastructure, --, ,ammon, Eaypee group,
Eaiprakash associates, B$ 6ashyap etc. which undertake large infrastructure projects.
-ompanies such as ID2-$, Fagarjuna, $&T, =$%, Oma)e etc. involved in the construction
of flyovers, pipelines, apartments and housingCoffice spaces.
-ompanies such as =$%, #urvankara, 2aheja and others are engaged in the construction of
residential and office space.
.
#lanning -ommission M (leventh %ive Aear #lan
Organi+ed 2eal (state Industry in India is only a couple of decades old .2eal (state Industry in India
took off with the global boom in the 2ealty *ector which percolated down to India as well.$ack of clear
land titles and litigation has made this industry one of the most opaKue and corrupt ones.=ue to the
massive price appreciation and huge valuations,$and *cams have become Kuite common with -hief
8inisters,,enerals,Top Bureaucrats all involved in the murky environment of 2eal (state in India.The
most recent scam related to bribing of top public banks officials in the $I- ousing %inance *candal has
again put Kuestion mark on the fundamentals of the industry.Daluing the industry and making a real
estate investment remains one of the most difficult investing tasks in the Indian *tock 8arket.(ven %und
8anagers are staying away from the *ector due to lack of trust in the %inancial *tatement given by the
industry.That said modern India presents a booming picture of tall buildings and huge office areas &
shopping malls. : list of the chief players in Indian market is given below>
DL6C =$%<s chief business is to develop housing, marketable and retail properties. -urrently it
has undertaken the development of 93 million sK ft of housing projects which it intends to finish in
the ne)t three years. =$% has joined hands with =elhi =evelopment :uthority to develop townships
in :mritsar, #une, ,urgaon, 8umbai, -hennai and ,oa. =$% has been the construction company
behind different malls in the major cities in India. The company is also developing 53"95 hotels
along with ilton otels and infrastructure and *(N in India in collaboration with $aing O<2ourke
?G6@.The current market cap is around 2s.5',.1/.// crore.
Tata Pro7e$tsC Tata #rojects registered an annual turnover of 2s /,133 crore on Euly ', /339.
With more than ',533 professionals the company has emerged as one of the chief player in (#-
projects. Over the last four years, it has attained a -:,2 of 53 per cent which Kuadrupled its
annual turnover of /337"39. Tata #rojects functions in concentrated divisions like broadcast and
distribution, steel, power production, oil, gas and hydrocarbons and industrial infrastructure.
"o(!a De%elo+ers LtdC With an annual turnover of 2s ','.0 crore, *obha =evelopers $td was
initiated by the now chairman #F- 8enon in the year '005. On Eune 13, /339, the company has
1,937 skilled professionals working for it. :t present it owns 2s 1,533"acre land in eight Indian
cities namely -oimbatore, Bangalore, 8ysore, -hennai, Thrissur, 6ochi, #une and osur. The
company<s clientele include some of the top players in IT, hotel and construction sector such as
ewlett #ackard, 8ico, Infosys, 2amaraju =evelopers, =ell, Timken, etc.
"!a+oor7# Pallon7# D CoC The -ompany has more than 1,533 professionals working for it and
is largely driven by its loyalty to consumer satisfaction. *ome of the major projects undertaken by
*hapoorji #allonji & -o are World Trade -entre, 8umbaiL T($-O industrial comple), #uneL
Bhabha :tomic 2esearch -entre, 6alpakkamL *B- Bank, 8umbaiL otel Taj Intercontinental,
8umbaiL Bank of India, 8umbaiL Indira ,andhi International :irport, Few =elhi, etc. the company
has created magnum opus of construction and has been a consistent e)ecuter of challenging
projects.
@n#te$!C 2ecently 2amesh -handra, Gnitech<s -hairman has declared the investment of Q 9/3
million by his company in the coming four years to develop /. hotels along with 8arriott
International. The market capitalisation of the company is 2s.'7,.79.43 crore.Its chief activities
include construction, e)pansion of real"estate, consultancy in associated sectors, hotels,
electrical broadcast and information technology.
Ind#a 1ulls Real EstateC One of India<s largest listed developers developing residential and
commercial real estate. Being a focused regional player, more than 03B of IB2($<s portfolio by
value is in the three major markets of 8umbai, F-2 and -hennai. (stablished in /333, the
company has grown into one of the leading Indian business houses with its companies being listed
on Indian and overseas financial markets having a combined net worth in e)cess of 2s. '.,333
crores. the current market cap being 2s.7,545.'9 crore.
BDILC 2anked as India<s fastest growing real estate company by -onstruction World"FI-8:2
in October /339 & with a current market cap of 2s..,579.97 crore, ousing =evelopment &
Infrastructure $imited has established itself as one of India<s premier real estate development
companies, with significant operations in the 8umbai 8etropolitan 2egion. =I$ is a public listed
real estate company in India with shares traded on the B*( & F*( *tock ()changes. With
operations spanning every aspect of the real estate business, from residential apartment comple)es
to towers & townships, commercial premium office spaces and retail projects like world"class
shopping malls. it is India<s largest slum rehabilitation company, & was given the 8umbai
International :irport *lum 2ehabilitation project in October /339,one of the largest urban
rehabilitation projects in India..
E'aarr<MG6> One of the world<s leading real estate developers company in India and
=evelopment of properties in the residential flats, -ommercial #roperties, premium apartments etc.
The P-ommonwealth ,ames Dillage builder< is still trying to get listed on F*(. -urrently not
listed.
Analys#s
3na&ysis
Iuantitaive
Pest Analys#s of Ind#an Real Estate "e$tor
The various factors which influenced the 2eal (state segment were #olitical, Technological, *ocial and
(conomical factors.
#O$ITI-:$ %:-TO2*>
,overnment<s regulations and policies in
favour of real estate sector.
eaviest ta) imposed on the construction
industry.
%=I e)perience in Indian real estate market.
(-OFO8I- %:-TO2*>
-ontrolled Inflation levels.
$ow Interest 2ates.
#rovides further $iKuidity

*O-I:$ %:-TO2*>
Increase in consumption.
Grbani+ation.
Increase in per capita income ?current
prices@.
2ise in =emand for Iuality ousing
#rojects.
T(-FO$O,I-:$ %:-TO2*>
Internet revolution
8edia
"WOT analys#s
"tren2t!
employment and training opportunities in the field of construction
#rivate sector housing boom and commercial building demands
-onstruction of the multi building projects on the feasible locations in the country.
,ood structured national network facilitates the boom of construction industry.
$ow cost well" educated and skilled labour force is now widely available across the country.
*ufficient availability of raw material and natural resources in the country is supportive for the
industry.
2eal estate development is on high and it is attracting the focus of the industry towards
construction.
Weakness
-hances of Fatural disadvantage are there.
=istance between construction projects reduces business efficiency.
Training itself has become a challenge.
-hanging skills reKuirements and an ageing workforce may accentuate the skills gap.
Improve in long"term career prospects is highly reKuired to encourage staff retention and new
entrants.
()ternal allocation of large contracts becomes difficult.
$ack of clearly define processes and procedures for construction and its management.
uge amount of money need to be invested in this industry and inefficiency may lead to high
level of risk.
Opportunity
continuous private sector housing boom will create more construction opportunities.
#ublic sector projects through #ublic #rivate #artnerships will bring further opportunities.
=eveloping supply chain through involvement in large projects is likely to enhance the chances
in construction.
2enewable energy projects will offer opportunities to develop skills and capacity in new
markets.
8ore fle)ible training delivery techniKues are now available.
%inancial supports like loan and insurance and growth in income of people is in support of
construction industry.
istorical cultural heritages like the T:N 8::$ encourage and provide a creative platform
for the industry.
2emote areas in the country are easily accessible and plenty of land is available in the country.
Threat
$ong term market instability and uncertainty may damage the opportunities and prevent the
e)pansion of training and development facilities.
-urrent economic situation may have an adverse impact on construction industry.
#olitical and security conditions in the region and $ate legislative enforcement measures are
always threats to any industry in India.
Infrastructure safety is a challenging task in construction industry.
PorterEs f#%e for$es Model
'. Intensity of Industry 2ivalry ?Feutral to %avorable@
-ompared to many other industries, the intensity of rivalry among developers in residential
development is relatively low. The area where it is felt most is in competition for development
land. When it comes to selling end units, developers typically try to avoid competing directly by
'@ developing products in different markets C locationsL /@ launching products at different time
periodsL 1@ differentiating product types.
The key factor is that residential property is sufficiently differentiable and not subject to
any sort of perishibility or technological obsolescence such that developers have much
more fle)ibility with the timing of producing and selling their end product.
/. Threat of new entrants ?Feutral to Gnfavorable@
When an industry has over 73,333 registered participants, it is hard to conclude that
barriers to entry are high. :lthough the number of entrants varies over time and
according to market condition, they are sufficiently low relative to other
industries that new entrants can continue to enter and eventually push above
average returns back to historical means.
,enerally speaking, the potential barriers to entry to any industry fall into
several broad categories> '@ capitalL /@ technologyL 1@ legal authori+ationL and 4@
e)pertise and know"how.
$egal authori+ation is necessary for certain types of industries such as telecoms
and utilities. The number of participants in these industries is limited due to the
nature of the businesses ?Rnatural monopoliesH@ or the return profiles ?massive
upfront investments which can only be recovered through limited operating
competition@.
%or most real estate development, no special legal authority is needed to enter
the industry. That is why many non"property companies find it relatively easy to
migrate into this industry as and when returns become attractive or simply out of
interest.
%urthermore, the technological and e)pertiseCknow"how component of this
industry is not particularly high. =esigns, names and concepts can all be copied as
there is less ability to protect these through patents or copyright. $arge value supply
chains such as agents, consultants, property managers and employees of rivals can all
be hired or co"opted.
-apital can be considered a barrier but mostly to larger scale projects. The gross
amount of capital needed to RenterH the industry is paltry compared to the likes of
steel mills or chip fabs.
In addition to the above factors, the wide range of different types and scales of
development each entail different barriers to entry. Obviously larger, more
speciali+ed developments in top tier cities would have much higher barriers to entry
than a small residential project1. Threat of substitutes ?%avorable for (nd GseL
Feutral for Investment@
2eal estate development involves different types of products " residential, office,
retail and industrial being the most common. To narrow the scope of discussion, we
will just consider private residential real estate.
-urrently in -hina, residential real estate is in high demand both for its utilitarian
value as accommodation and also for its investment value as a stable, inflation"
proof store of wealth. :s such we need to consider the substitutability on both
fronts.
:s accommodation, new private housing from any firm can be replaced by '
competitive product from another developerL /@ e)isting private housing for sale or for rentL 1@
social housing either for sale or rent. :ny specific developer can lower the risk of
substitution by differentiating their product offering by i@ locationL ii@ type and iii@ Kuality.
The more generic a developer<s productthe more substitutable . =evelopers that have
managed to distinguish their product or image will fare the best.
The threat from the secondary market varies by city. In T' and large T/ cities, a
sufficiently large stock of housing e)ists for the secondary market to be a viable
choice for potential homebuyers. In many T1 and T4 cities, there are either not
enough secondary units for sale or the market is simply is too illiKuid.
The threat from social housing e)ists but not significant. Gsually, those allowed to
buy or rent social housing would only be able to enter the low end of the private
housing market anyway " if at all. 8oreover, resale and other restrictions make it a
far less liKuid asset class. %or that reason, the threat is only to the lower end of the
private housing market.
,iven -hina<s current state of negative real interest rates and capital controls, most
individuals have limited channels for savings and investment. 2eal estate has helped
fill this void. If investors were given more alternatives and if other asset classes
such as eKuities start to perform better, investment demand for real estate would
Kuite likely cool.
4. Bargaining power of suppliers ?%avorable@
Overall, developers are in a favorable bargaining position relative to the key
suppliers in the industry. The 1 key suppliers to any residential developer are '@
land sellers ?usually cities or other developers@L /@ construction contractorsL 1@
building materials and home furnishing C eKuipment manufacturersL 4@ capital
providers. This situation is more or less reflected in that the typical cost of sales
for any developer is made up of roughly 'C1 land, 'C1 construction and 'C1
financing costs.
: typical developer<s bargaining position relative to a land seller varies according
to '@ nature of sale and /@ location of sale. =evelopers typically prefer to buy
land through direct bilateral negotiations with the government or 1rd party
rather than be involved in a multi"party bidding ware. :uctions are the least desired
channel for land acKuisition but sometimes a necessity. %or land bought in smaller cities
or newer areas of larger cities, developers wield a lot more bargaining power. *maller
cities are generally eager to entice well known national developers. %or e)ample, if
Danke or -O$I buys into a smaller T1C4 city, it would signal to other developers that this
city is worthy of investment. In such cases, local officials are willing to give a discount to
entire desired players. This logic is also true of newly emerging districts in T'C/ cities.
-onstruction companies do not command much if any pricing power and many
work on thin margins. :lthough developers can backward integrate and take on
construction duties themselves, this is often more for ensuring timeliness of
completion or maintaining Kuality standards than for cost savings. :lso, the
construction materials and household furnishings that developers buy are mostly
commodity goods for which the manufacturers not only command no particular
pricing power but would also yield a discount on bulk or volume purchases.
$astly, capital providers, be they banks, shareholders or bondholders, may have
different investment appetite for this industry at different times but whether
investors or bankers demand a specific risk premium to provide capital is more
dependent on the perceived risks at any point in the property cycle and not any kind
of structural risk premium.
5. Bargaining #ower of Buyers ?Feutral@
Of all the five forces, this is perhaps the most dependent on '@ the stage in the
industry cycleL /@ regulations to protect consumer interests and 1@ financial state
of individual developers. ,iven this wide variance, it is very difficult to conclude
definitively that buyer power is always strong or always weak. The truth is buyer
power will fluctuate greatly. Thus developers that have a larger proportion of
their business in markets with weaker buyer bargaining power will obviously
reali+e higher returns.
Fear the peak of a property cycle, the
combination of investment and end
user
demand generally outstrip
available supply. This gives
developers tremendous pricing
power and leads to outsi+ed
returns.
-onversely, near the bottom of
the cycle, developers are
usually overstocked and
must cut prices to move units.
In the transaction of any
large si+ed
purchases, information is
the key to
knowing what a
reasonablSprice to pay is.
%igure ' #roperty -ycle
In the absence of rules and
regulations,
developers often ma)imi+e revenue by
trying to e)tract the ma)imum possible price for each unit. They can do this by '@
not publishing any standard price lists and /@ not reporting critical information
such as how many units have been sold and at what price. This situation is
generally known as asymmetric information and gives the developer tremendous
power. owever, in most large markets, regulators are aware of this and have
enacted laws to protect consumer interests by making information more
transparent and readily available. In general, all else being eKual, consumers in
T'C/ cities or those with consumer protection laws have more bargaining power
than cities without protection.
$astly, developers that are on solid financial footing ?larger resulting from a more
prudent management of working capital@ would generally have greater pricing and
operational fle)ibility than those that are financially overstretched heading into a
cyclical trough.
Fuant#tat#%e
Real Estate IndustryC A 6#nan$#al Analys#s
I have attempted to capture the current trends in the Indian real estate industry through financial
analysis of a sample of listed companies. This section provides a brief overview of the performance of
the sample of listed real estate companies.
The sample selected for this analysis comprised listed real estate companies that had total income of
953 mn and above. We then narrowed down its choice to a fair representative list of 13 companies for
which financial information was available for the past five years.
It further categorised the 13 real estate companies into large"si+e, mid"si+e, and small"si+e companies
based on their total income, by using the .3>'5>5 principle. Based on this categorisation, '/, '3, and .
large"si+e, mid"si+e, and small"si+e companies respectively were chosen.
This classification primarily aims to study the dynamics and operating efficiencies of the chosen
companies in the real estate industry. Of the 13 companies under study, in %A'3, large companies
contributed .3B of total income and had 43B representation.
De(t< eGu#ty Rat#o
2eal estate companies reKuire significant resources to fund their projects. Thus, they went on an eKuity
capital raising spree during %A37M%A3. to scale their operations aggressively. These companies also
procured considerably high debt to finance their capital"intensive projects.
owever in %A30 and %A'3, growth in eKuity and debt declined due to decreased demand, a downtrend
in sales, stoppage in e)ecution of projects, rising interest e)penses and the credit crunch arising out of
the global financial crisis.
The global financial crisis, volatile capital markets, slowdown in %II flows made it difficult for
companies to raise funds through eKuity markets.
%urther, in %A'3, the focus of companies was to enhance cash flows, release cash blocked in non"core
assets, increase process improvements and cost cutting, and achieve better working capital management
along with real estate development. This resulted in renewal and progress of certain stalled projects and
new launch announcements.
ROCE
The return on capital employed ?2O-(@ is a measure of returns that a company is realising from capital
employed. 2O-( is defined as the ratio of profit before interest and ta)es ?#BIT@ to capital employed.
:nother factor that led to a sharp decline in 2O-( of real estate players is increase in capital employed
at a higher pace than #BIT growth. In fact, small and large companies registered a sharp decline in #BIT
as against a positive growth in capital employed, which had a double effect on 2O-(. In %A'3, #BIT of
mid"si+e companies grew at a lesser rate of '0.9B compared with /9..B growth in capital employed.
owever, large and small companies saw a decline in #BIT of /3B and 13./B compared with /5.1B
and ..7B growth in capital employed.
%i)ed :sset Turnover 2atio
%i)ed :sset Turnover ratio shows that '/.1/B . %:T2 is mostly modest leaving one firm, which tell
that most of the companies were able to sail out with much fi)ed asset harm.
Co'+ound Annual Gro*t! Rate < CAGR , Re%enues -
Co'+any
Na'e
Mar$!
3;.3
MarE.. MarE.; Mar ;? Mar ;0 CAGR
DL6 '3,/39... '3,30'.54 9,90'.1' '3,10/.55 '4,755.3'
"7.0.B
O'aHe 7/.03 7/.5'
03.99 9..'/
10...3 "13...B
@NITECB 1/7.9'
5'3.3. 544.13
910.77 '313.7. "/3.51B
AN"AL API
'3.1/ '3.55 7.4' '3.37
9./4 9.10B
Pars%nat!
De%elo+ers
Ltd.
/5.51 95.4.
'11..5 ''1.34 43..94 "4/.59B
GODRE4
PROPERTIE"
LTD
.'.17 '37./4
'/'..4
94.94
95..0 '.49B
Real Estate
'39'4.9 '3.57.4
.7...4.
'377..5'
'7/97.17 <0.;3I
Where,
%ormula
> start value, > finish value, > number of years.
:ctual or normali+ed values may be used for calculation as long as they retain the same
mathematical proportion.
The -:,2 can also be calculated as the geometric mean of ' plus each year!s return ?i.e. T1B
becomes '.31 and "/B becomes 3.0.@, minus '
3na&ysis:
C3G# of #ea& Estate industry has :een ;7$5(4 which c&ear&y signifies that industry has %een
suffering from &ow earning ca!a%i&ity over , years or so$ 8he main reason for such Drastic fa&& is
<recession= 4 which has made consumer re&uctant to invest$ It was %ac>ed %y #aising interest #ates$
Cumu&ative 3verage Growth #ate
Interpretation
2eal (state is suffering from down turn of cumulative average growth rate.
: "143 B of decrease show that industry is not healthy right now.
2ecession has had adverse effect on Indian real estate industry.
*uggestion
2eal estate companies has to inject money to start new projects.
-ompanies have to formulate effeicient policies to skip florclosures.
4nNur'
3.=. Prof#le of In%est'ents and Pro7e$ted Industry "#9e
,iven the skill reKuirements outlined in the earlier section, it is also necessary to forecast the human
resource reKuirement reKuired in the Infrastructure and 2eal (state sector. The first step is to forecast
the industry si+e.
In this section, we will analyse the profile of investments planned in each of the sectors and arrive at
the projected industry si+e.
($1$1$ ?n@9#A
:ccording to India!s -ensus in /33', more than /.5 million people ?/9..B of the total population@
live in urban areas. With this large base, which is growing at the rate of around /.9B annually, India
has the world!s second largest urban population. ,iven the current trends in population growth and
migration, India!s urban population is estimated to reach 595 million by /313. -onseKuently, the
Eawaharlal Fehru Fational Grban 2enewal 8ission ?EnFG28@ was set up to encourage reforms and
fast track planned development of identified cities. %ocus is to be on efficiency in urban infrastructure
and service delivery mechanisms, community participation, and accountability of Grban $ocal Bodies
?G$Bs@C#arastatal agencies towards citi+ens. The current list of 75
'/
cities under EnFG28 together
host around '/3 million residents, which constitutes 4/B of all urban residents in the country, or '/B
of total Indian population.
%or the 75 cities identified under the EnFG28, the total investments are e)pected to be over 2s.
1,15,333 crore directed towards Grban Infrastructure and ,overnance ?GI,@, Basic *ervices to Grban
#oor ?B*G#@ and -apacity Building and Institutional =evelopment ?-BI=@. Of these investments in
Grban Infrastructure and ,overnance ?GI,@ account for over .3B of the total investments under the
EnFG28, as below>
'/
Including inputs on addition or deletion of citiesC G:sCtowns, the total number of cities under the
EFFG28
will remain around 73 M the figure of 71 cities has recently been revised to 75 cities.
g
G
t
y
n
=
s
*
8
0
3
/
a
.
e
n
-
e
0
Figure 11: Investment !&anned under ?n@9#A tota&&ing #s$ *4*,4555 crore
Basic *ervices
to rban #oor
?B*G#@
'9B
-apacity
Building and
Institutional
= velopment
?-BI=@
'B
Grban
Infrastructure
nd ,overna ce
?GI,@
./B
:s part of Grban Infrastructure and ,overnance, investments are being made under the heads of
Grban Transport, Water *upply, *ewageC*anitation, =rainageC*olid Waste =isposal, 82T*, and
*olid Waste 8anagement. Of these, the investments in Grban Transport, Water *upply, *ewage
C*anitation account for about .3B of the total investments under the EnFG28, with Grban Transport
alone accounting for over 53B, as seen below>
Figure 12: Investments under various heads of ?n@9#A "#s$ crore'
Grban Transport
'19,10'
Water *uppl
43,37/
*ewage C *anitation
11,1/4
=rainage C *W
/3,'33
Others
'7,97/
82T
'/,353
*W8
7,.30
" /3,333 43,333
73,333 .3,333 '33,333 '/3,333 '43,333 '73,333
With respect to the states, investments in 8aharashtra, Tamil Fadu, :ndhra #radesh, =elhi, Gttar
#radesh, 6arnataka, 6erala, ,ujarat, Eharkhand and West Bengal account for over .3B of total
investments under the EnFG28, as seen below>
d
a
T
a
s
r
B B
8
?
h
Figure 17: State;wise investments under ?n@9#A
West
1B
4B
,ujarat
5B
Other
'.B
8aharashtra
'.B
Tamil Fadu
'1B
6arnataka
9B
Gttar # adesh
=elhi ?F-T@
:ndhra #radesh
'/B
6erala
7B
9B 9B
($1$($ ower
The total installed capacity of power currently in India is over ',53,333 8W. This is e)pected to
increase to over 1,'.,333 8W by /3/'"//. ence additional capacity of about ',7.,333 8W will be
needed. %or this, it is e)pected that about 2s. 9,39,533 crore will be needed for ,eneration and about
2s. 7,'0,333 crore will be needed for Transmission and =istribution, as seen below>
Figure 1B: Investments in ower Generation4 8ransmission and Distri%ution u! to (5(1;(( "#s$
crore'
Transmission
and
=istribution
49B ,eneration
51B
The infrastructure for Transmission and =istribution needs to be set up in each state based on the
additional capacity reKuired in that state. The investments in power ,eneration cannot be attributed to
y
5
n
u
h
a
B
the state which has the demand, since the power need not be generated at the same location where it is
needed. Thus, while the state"wise breakup of investments for Transmission and =istribution are as
seen below, investments in power generation cannot be attributed to particular states.
Figure (5: State;wise investments in 8ransmission and Distri%ution
West Bengal
4B
Bihar
4B
6arnataka
4B
Others
'.B
=elhi
Gttar #radesh
'3B
:ndhra #radesh
0B
Tamil Fadu
0B
8aharastra
0
,ujarat
8adhya
#radesh
5B
2ajasthan
5B
#unjab
9B
9B
4B
aryana
5B
($1$*$ orts
India currently has '/ major ports and '.9 minor ports. In /339"3., major ports accounted for about
93B ?5'0 million tonnes@ of the total port traffic in
remaining 13B ?//3 million tonnes@.
India, while minor ports accounted for the
:s regards investments going ahead, the investments in minor ports will account for abut 53B of the
total investments in ports.
($1$+$ 3ir!orts
India has a total of '/5 airports and currently all '/5 airports are owned and operated by the :irports
:uthority of India ?::I@. The ,overnment aims to attract private investment in aviation
infrastructure, as seen in the cases of privatisation of the =elhi and 8umbai airports as well as the
new international airports at Bangalore and yderabad. The latest status of airports that have been
commissionedCgranted approvalCare under consideration is as below>
8a%&e B: 3ir!orts commissioned 0 granted a!!rova& 0 under consideration
Na'e "tate "tatus
1an2alore Internat#onal
a#r+ort
6arnataka -ommissioned
Bydera(ad Internat#onal
a#r+ort
:ndhra #radesh -ommissioned
Mo+a a#r+ort ,oa :pproval ,ranted
Na%# Mu'(a# Internat#onal
a#r+ort
8aharashtra :pproval ,ranted
Kannur a#r+ort 6erala :pproval ,ranted
1#7a+ur a#r+ort 6arnataka :pproval ,ranted
"#'o2a a#r+ort 6arnataka :pproval ,ranted
Bassan a#r+ort 6arnataka :pproval ,ranted
Gul(ar2a a#r+ort 6arnataka :pproval ,ranted
"#nd!udur2 A#r+ort 8aharashtra :pproval ,ranted
Da(ra A#r+ort 8adhya #radesh :pproval ,ranted
Dur2a+ur A#r+ort West Bengal :pproval ,ranted
Greater NOIDA Gnder
#nternat#onal a#r+ort
Gttar #radesh
-onsideration
C!a&an #nternat#onal a#r+ort 8aharashtra
Gnder
-onsideration
Kara#&al a#r+ort #uducherry
Gnder
-onsideration
4!a77ar a#r+ort aryana
Gnder
-onsideration
Lud!#ana #unjab
Gnder
-onsideration
Palad#<Ra's#n2!+ur 2ajasthan
Gnder
-onsideration
1!aru$! ,ujarat
Gnder
-onsideration
Ra'es*ara' Tamil Fadu
Gnder
-onsideration
Itana2ar :runachal #radesh
Gnder
-onsideration
($1$,$ #oads
India has an e)tensive road network of 1.1 million km M the second largest in the world$ 2oads in
India carry about 75B of the freight and .3B of the passenger traffic. The ,overnment of India plans
to spend about 2s. 53,333 crore per annum on road development over the ne)t five years. 2oad
projects in India consist of the Fational ighways that are being constructed under 9 phases of the
Fational ighway =evelopment #roject ?F=#@, *tate ighways, 2ural 2oads and the Forth (ast
roads *pecial :ccelerated 2oad =evelopment #rogram, the investments in which are as below>
Figure (1: &anned Investments in #oads in the E&eventh Five .ear &an "#s$ crore'
2ural 2oads
17,.33
'/B
F( roads *pl
:cc 2oad =ev
#rogram
4,.33
/B
*tate
ighways
''7,333
19B
Fational
ighways
'54,133
40B
($1$1$ roCected Size of the Infrastructure and #ea& Estate sector
1*
,iven these investments, we forecast that the real ,=# of the Building, -onstruction and 2eal (state
sector to grow at a -:,2 of 0.5B to '3B till /3//, in real terms. The ,=# economy of -onstruction
would be about 2s. .,333 billion in constant prices at /3//.
Figure ((: roCected #ea& GD of Construction sector "#s$ %i&&ion'
?);;;
0);;;
>);;;
=);;;
:);;;
/);;;
5);;;
3);;;
.);;;
<
"
0.5B to
/,/71
1,4/9
5,.11
9,0/5
3;;0 3;.3 3;.0 3;33
Source5 I/aCS analysis
'1
Our overall approach to macro"economic modeling and forecasting is e)plained in a separate anne)ure
While 2eal (state ?including housing and commercial@ would account for 13B of the activity, the rest of
the infrastructure activity ?93B@ would be shared across the following areas in the proportion
indicated below.
8a%&e 15: Share of economic activity estimated in the Infrastructure segment
Source5
0lanning
Commissi
on@s 4enth
and
Eleventh
+ive <ear
0lan and
I/aCS
analysis

A(stra$t
4he (lo,al Credit Crises that ,egan like a small fire in the :S housing finance market in 6##8 spread
and ,ecame a forest fire that first engulfed the :S, then the 9estern economies, and eventually the
rest of the )orld, including India= 4he crisis is clearly the deepest and the most )idespread economic
meltdo)n that the )orld has faced since the (reat *epression= Indian industry started e?periencing
"e$tor #n Infrastru$ture I of e$ono'#$ a$t#%#ty
Ele$tr#$#ty 1/.4B
Road and 1r#d2es '5.1B
Tele$o''un#$at#on '/.7B
Ra#l*ays ,#n$lud#n2 MRT"- '/.9B
Irr#2at#on '/.1B
Water "u++ly and
"an#tat#on
9.3B
Ports 4.1B
A#r+orts '.5B
Ot!ers '.0B
the real impact of the glo,al financial meltdo)n from the last 1uarter of 6##7= 4he Indian
economy, )hich )as on a ro,ust gro)th path up to 6##8-#7, averaging at 7=$ per cent during the
period 6##A-#" to 6##8-#7, )itnessed moderation in 6##7-
#$, )ith the deceleration turning out to ,e some)hat sharper in the third 1uarter= I4 industries,
financial sectors, real estate o)ners, car industry, investment ,anking and other industries as )ell
are confronting heavy loss due to the fall do)n of glo,al economy= 8he #ea& Estate :usiness has
seen 1( !er cent dec&ine in revenues4 ,7 !er cent dec&ine in :DI84 and 27 !er cent dec&ine in net
!rofit4 %etween Aarch (557 and Aarch (55B$ 8his dec&ine has %een accom!anied %y a
significant fa&& in the !ro!erty !rices in India$ 4he importance of the real estate sector in India
cannot ,e understated given the strong for)ard and ,ack)ard linkages that it generates= 4he sector
has demand implications for intermediate inputs like steel, cement, etc=, )hile keeping afloat the
)hole construction industry including transport and other intermediate la,our services= (iven its
importance for the economy it is )orth)hile to see ho) adverse e?pectations are playing a role in this
sector and )hat the possi,le solutions are=
Introdu$t#on
R8arch '7, /33.> Bear *tearns is acKuired for Q/ a share against its 5/"week high of Q'14. Euly
'4, /33.> Oil hits Q'45 a barrel and then collapse to Q14 within si) months. *eptember '5, /33.>
-ollapse of $ehman Brothers. Fovember /3, /33.> =ow Eones at a record low of 9,440 points. Eune ',
/330> ,eneral 8otors files for bankruptcy. We are living in a time that has seen unprecedented
volatility. %rom boom to bust in a matter of monthsH.
To begin with let us define the term 2ecessionL Urecession is a decline in a country!s gross domestic
product ?,=#@ growth for two or more consecutive Kuarters of a year. : recession is also preceded by
several Kuarters of slowing down .
:n economy which grows over a period of time tends to slow down the growth as a part of the normal
economic cycle. :n economy typically e)pands for 7"'3 years and tends to go into a recession for
about si) months to / years. : recession normally takes place when consumers lose confidence in the
growth of the economy and spend less. This leads to a decreased demand for goods and services, which
in turn leads to a decrease in production, lay"offs and a sharp rise in unemployment.
The 2eal (state industry in India witnessed unprecedented growth in a relatively short span of time.
With most companies having seen only the upward swing, the economic downturn proved to be a
litmus test. -ompanies with stronger fundamentals and ability to make Kuick strategic decisions
continued to operate, though with reduced visibility and si+e of operations, the weaker ones found it
challenging to retain their position and image as a 2eal (state developer.
As !as (een sa#d) 1us#nesses *#t! t!e r#2!t strate2y and %#s#on $o'e out stron2er fro'
t#'es of de+ress#on.
In order for -ompanies to gear up to face the challenge, it is imperative to understand how the real
estate market has been impacted. There is an overall slowdown in demand across India as has been
e)perienced by industry players. #roperty prices and rentals are correcting which have led to the erosion
in market capitalisation of many listed players like =$% and Gnitech. 8any current projects of real
estate developers have been stalled due to lack of funds and investors either do not have funds to invest
or are reluctant to do so. -onseKuently, companies are forced to sell of the properties at a lower value.
This scenario is ascertained by the fact that finding buyers is also proving to be a challenge.
Increasing input costs has led to margin shrinkages, in fact, companies with ordinary supply chain
management have stalled their projects.
2ising costs, lack of capital, reluctance of buyers have all contributed to the current scenario. This
paper aims to analyse various strategic initiatives by companies to combat the e)isting times and sustain
their businesses through future turbulent times.
O(7e$t#%es of T!e "tudy
%ollowing are the objectives of the study>
'. To study the impact of ,lobal recession on India s real estate sectors foreign direct
investment flows, rate of growth, sales and profit after ta) ?#:T@ and
/. To analyse various strategic initiatives by companies to combat the e)isting times and sustain
their businesses through future turbulent times.
1. To give suitable conclusion & suggestion.
By+ot!eses of T!e "tudy
'. There is no significant impact of recession on Indian real estate market ?o@
/. ,lobal recession has a definite impact on development of Indian real estate market ?a@
Resear$! Met!odlo2y
The study is primarily based on secondary data collected through journals, periodicals,
Websites and newspapers
Results and D#s$uss#ons
The real estate market in India remains unorgani+ed, fragmented and characteri+ed by small
players with a local presence. The growth of the real estate sector is attributed to various factors
such as growing economy, growing business needs etc. owever, this boom is restricted to areas
such as commercial office space, retail and housing sectors. The major concerns of this sector
namely are skill shortage, non"availability of statistics, lack of low cost"affordable housing, lack
of sustainability and to meet a future that might have downturn due to oversupply.
The industry is presently facing a major resource crunch M an obvious lack of Kualified and
skilled people. -oupled with this manpower shortage is the shortage of availability of relevant
statistics, which has created an ambiguity as to how much construction activity is actually taking
place and one cant gauge the demand and supply trends accurately.
The major issues that plague this industry is tremendous shortfall of middle class housing as
majority of the developers are involved in developing high class housing. *o, there is a dearth of
low cost affordable units.
2ecession in G* economy has caused great impact on Indian real estate business. The real estate
industry was a booming industry in pace with information technology ?IT@ industry. =emand for
it space and from high net worth individuals had created opportunities for the this sector.
6#2ure .C Fuarterly Est#'ates of GDP At Constant ,.???<;;- Pr#$es<Gro*t!
Rates
>
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)$)% )' )&
"our$eC Reser%e 1an& of Ind#a 1ullet#n
The Indian industry has dealt with economic slowdowns in the past but this one is in the nature
of contagion effect of the western recession. The full spectrum of the shades of the contagion is
not evident in the ,=# growth trend. Fumbers alone would indicate that economic slowdown, so
far, has been barely a two"Kuarter phenomenon. In figure ', the real slowdown was seen only in
the last two Kuarters of /33."30. *ales growth respectively dropped to 0.5 per cent and '.0 per
cent in I1 and I4 with much worse impact on the net profits that respectively fell by 51.1 per
cent and '0.0 per cent.
6#2ure 3> "ales And Prof#t After TaH Trend of Ind#a Real Estate "e$tor
0
(000
&(00
&000
'(00
'000
%(00
%000
$(00
$000
(00
0
real-estate sales
real-estate pro*it
The trend in sales and net profit of Rworst affectedH 2eal (state is given in figure /. The 2eal
(state has been 7/ per cent decline in revenues, 5. per cent decline in #B=IT, and 9. per cent
decline in net profit, between 8arch /33. and 8arch /330. This decline has been accompanied
by a
significant fall in the property prices in India. owever, the sector shows a moderate
R
s
.

i
n

C
r
o
r
e
s
recovery in the Kuarter after 8arch /330.
Ta(le .C Rate Of Gro*t! At 6a$tor Cost At .???<3;;; Pr#$es ,Per Cent-
?
/331"
34
/334"
35
/335"
37
/337"
39
/339"3. /33."
30
:griculture, forestry &
fishing
'3 3 53. 4 4.0 '.7
8ining & Kuarrying 1.' ../ 4.0 ... 1.1 1.7
8anufacturing 7.7 ..9 0.' ''.. ../ /.4
(lectricity, gas & water
supply
4.. 9.0 5.' 5.1 5.1 1.4
-onstruction '/ '7.' '7./ ''.. '3.' 9./
Trade, hotels &
restaurants
'3.' 9.9 '3.1 '3.4 '3.' 0
Transport &
communication
'5.1 '5.7 '4.0 '7.1 '5.5 0
Real estate D 6#nan$#n2 :.= 0.> .../ .5.0 ...> >.0
-ommunity, social &
personal services
5.4 7.. 9.' 5.9 7.. '1.'
Total GDP at fa$tor $ost ..5 9.5 0.5 0.9 0 7.9
"our$eC Central "tat#st#$al Or2an#9at#on
6#2ure 5C 6DI EGu#ty In Ind#an Real Estate 1us#ness
.;
$&000
$%000
$%6%$
$0000
"!&#
"000
6000
&000
%000
%$%$
&$%%
$&&%
0
%006-0! %00!-0" %00"-0#
"our$eC R1IEs 1ullet#n Au2ust 3;;? ,Ta(le No. /= 8 6ore#2n In%est'ent Inflo*s-
:bove Table no ' reflects how the steady growth rate of real estate sector was slowed down in
year /33."30 due the recessionary trend prevalent in the economy .this proves our hypothesis
?a@ that recessionary effects were responsible for downtrend in the real estate sector and null
hypothesis is rejected from the observations made. In figure 1, it is seen that %=I eKuity in
Indian
2eal (state Business is increasing but in reality it is not so. In the year /339"3. it is increased
by
4'/ per cent and in /33."30 it is only increased by '44 per cent. *o it is not rise as it is accepted
by the 2eal (state 8arket.
"trate2#es To Co+e @+ W#t! T!e A(o%e "#tuat#on
-hallenging times present an opportunity for -ompanies to capture market share by
outperforming competitors. : Kuick analysis of the market conditions and Kuicker response to
mitigate e)isting risks differentiates companies.
There can be multiple reasons why some companies continue to tread well while some
companies falter badly, when faced by serious challenges. But, invariably, the most
significant role here is played by the strategic decisions taken by the company.
When the global economic crisis, compounded by the local economy issues, started hitting real
estate demand in India, different companies reacted in different ways.
.- 6#nan$#al De$#s#ons
Initially, developers were reluctant to reducing real estate prices in order to revive demand.
owever, with no immediate respite and growing pressure to cut down losses, a gradual slash
down in prices was introduced.
The worsening situation of credit availability led developers into liKuidity crunch. 8any
developers succumbed to borrowing at a very high cost, #rivate (Kuity which was once easily
available became a very distant option.
3- D#%ers#f#$at#on of 1us#ness
2ecogni+ing the need of developing multiple streams of revenue, some cash"rich developers
vertically diversified ?or attempted to diversify@ their businesses into telecommunications,
financial services, insurance, etc. ori+ontal diversification into services related to property
management and leasing also surfaced up as a preferred strategy for dealing with the downturn.
Owing to increased competition in metropolitan cities, developers opted to diversify
geographically as well. Tier II and Tier III cities thus came under their radar. Interestingly, one
can easily find developers cheering their strategy of foraying in smaller cities, which are
relatively less"affected of the ongoing economic turbulence.
8aintenance of high eKuity
:s part of long term strategy, instead of selling off properties, developers began to enter onto
lease agreements with larger companies for commercial space. The long term rental arrangement,
though at reduced rates, guaranteed a steady stream of income.
5- Cost Control
In the wake of controlling cost like most other sectors of the economy, Indian real estate
companies also embarked upon various cost cutting strategies. -apital intensive projects that
had no impact on company s revenues in the short term were either put on hold or scaled
down, and even cancelled. IT related projects were among major ones in this case.
owever, some significant projects such as those including the use of IT to improve investor
access to information are important, and most developers appear to agree on this. Therefore,
projects meant for maintaining a fair interface between the company, investors and customers
hold water, especially during the turbulent times.
: number of companies also downsi+ed their e)tra manpower. owever, in many instances, this
was not done in a thoughtful manner, thereby putting companies on the risk of losing essential
talent in e)change of short term cost savings.
: number of real estate companies in countries such as the G* and the Gnited 6ingdom ?G6@
don t hesitate in outsourcing their marketing activities after carrying out the necessary due
diligence. This acts as a measure to infuse efficiency and cut unnecessary costs involved in
many of the related processes.
/- 6o$us On Custo'er "at#sfa$t#on
The ongoing condition of economic contraction has also resulted in improved services to the
customer. In order to shed off an image of being non"transparent and unorganised, a number
of developers increased their focus on customer satisfaction.
: customer was provided the facility of checking the status of construction of his property by
logging on to a website. (arlier, this was possible only after visiting the site and following up
with the concerned officials.
With such initiatives, developers are fast changing their image as professionally
managed corporate houses, committed for meeting customer e)pectations and empathetic in
resolving the concerned issues.
Con$lus#ons D "u22est#ons
Owing to the correction in real estate prices and re"aligning of business strategy, as per the
ongoing business environment, has resulted in some signs of revival in the Indian real estate
sector, in the recent past. : stable political scenario has also boosted confidence in the Indian
capital markets, and the overall business environment. This was further complemented with the
Indian economy managing to achieve a growth rate of 7.9B during /33."30, despite recession
in the global economy.
:t the first instance, such positive indicators reinforced the potential of Indian domestic
economy, while uplifting sentiments otherwise enshrouded by negative movements on the front
of employment and deepening financial crisis in the global economy.
These small packs of positive developments slowly flowing into the economy have also started
generating interest amongst customers, and some developers have e)perienced
improving situation in terms of demand of real estate in select pockets. The recent situation,
however, has sent the message home. The Indian real estate companies are urged to focus
on customer satisfaction. The industry is no more dominated by a developer, putting customer
e)pectations at the backstage and carrying on operations at his own sweet will.
8ore significantly, the ongoing correction in the real estate market has indicated towards its
fundamental strength wherein it tends to correct itself with any e)cesses on the front of prices,
and other demand relating factors. Fevertheless, real estate companies are fast"learning to lay
emphasis on retention of e)isting customers and acKuire new customers. The present times have
been calling for a fair level of fle)ibility, which even the real estate companies have been
e)pecting from their suppliers and service providers. :t the same time, many developers have
found a viable strategy in forging collaborations M leading to cost benefits, synergies, and mutual
strength. The potential areas of collaboration include supply chain, procurement, production and
brand promotion.
Fevertheless, this phase of market consolidation is a real opportunity where weaker players will
be defragged and stronger ones will increase their market share through well"thought business
strategies, and further tighten their belts for high growth in the future. The Budget /3'3
presented a mi)ed bag for real estate sector in India. owever, it has failed to address some of
the key demands of the real estate developers, including infrastructure status to the real estate
sector, rela)ation of e)ternal commercial borrowings to fund projects, provision of separate
deduction of 2s. ' lakh for housing loan repayment or increasing the overall .3- deduction to
2s. / lakhs etc.the key to growth of this sector lies in growth of disposable income with the
population and willingness of property developers to build affordable homes for middle class.
RIt is said, that success is not about how high you rise, but about how high you bounce back
when you hit rock"bottom. 2eal (state companies today are at that strategic inflection point,
where they must define new imperatives to be successful once again. Bridging the gap between
the customers and themselves, taking a harder look at resource"sapping processes, and above
all gaining agility and fle)ibility as organi+ations, will be the stepping stones to success.H
" Dinamra *hastri
Bead 8 "trate2#$ "er%#$es D Partner) Grant T!ornton Ind#a
+i,lo-raphy
CCI.com
Research Papers
Kodatsecurities.com
Moneycontrol.com
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