PROJECT REPORT ON

AWARENESS AMONG CHANNEL PARTNERS

ABOUT IT –
ITES OFFICE SPACE IN REAL ESTATE

SUBMITTED IN PARTIAL FULFILLMENT OF DEGREE

OF MASTER OF BUSINESS
ADMINISTRATION

SUBMITTED BY:

SHAHIN ALI

DEPARTMENT OF MANAGEMENT STUDIES

JAMIA HAMDARD,
NEW DELHI – 110062
 Declaration

I, SHAHIN ALI, of JAMIA HAMDARD UNIVERSITY, of MBA – I,

hereby declare that I have completed a summer project on” AWERNESS
AMONG CHANNEL PARTNERS ABOUT IT-ITES OFFICE SPACE
IN REAL ESTATE”in the Academic year 2008-09. The information
submitted is true and original to the best of my knowledge.

(SHAHIN ALI)
 TABLE OF CONTENTS

1. Acknowledgment
2. Project title
3. Company introduction
(i) Brief history of the company
(ii) Ongoing project
(iii) Upcoming project
(iv) Realty boom in imt manesar gurgaon
(v) Map of the propsed project
4. Major competitors of the company
5. Common terms used in real estate
6. About the real estate industry in india
7. Adout IT-ITES sector in india
8. Market overview
9. Indian economy- overview
10. Future collaboration of real estate and IT-ITES sector in india
11. Ongoing real estate projects in IT-ITES sector
12. Scope of investment for small investors in real estate
13. Initative taken by yhe government to safeguard the interest of
investors in real estate
14. Propsed bill by the government
15. Regulatory development in real estate
16. Benefits of REMF
17. Cost-comparison of office space in india with other countries
18. demand of office space in different cities of india
19. Factors which are hindering the growth of real estate in india
20. The real approach of investors while investing in real estate
21. Effect of economic slowdown on real estate sector
22. Suggestion for effective development in real estate in india
23. Conclusion
24. Market strategy
25. questionare
 ACKNOWLEDGEMENT

I wish to take this opportunity to express my deep gratitude to the persons

and the organization that have helped, encouraged, inspired and
enlightened me with their constructive ideas and overall support towards
the completion of this project successfully. This project would have been
incomplete without the active co-operation and guidance of senior
persons of VIGNESHWARA DEVELOPERS [NOIDA BRANCH].

I am very thankful to Mr.MOHD SALEEM (branch manager), and his

senior staff members for helping me throughout my project showing me
the right direction towards the completion of my project.
I am very grateful to MR.KULDEEP TYAGI [SENIOR MARKETING
EXECUTIVE] for providing me their expertise in the completion of my
project.

I am thankful to MR.SHAHZAD ALAM for guiding me in referring the

books for my projects.
No words and language can ever be sufficient to express my gratitude to
the above-mentioned persons who provided me with the support to
prepare this project.

SHAHIN ALI
 Project title:

AWARENESS AMONG CHANNEL PARTNERS

ABOUT IT-ITES OFFICE SPACE IN REAL ESTATE

Project objectives:

 To learn how channel partners deals in the market

 To study how to maximise the communication channel with

channel partners.

 To study the different components of working methods of channel

partners

 To study how VIGNESHWARA DEVELOPERS should

penetrate the existing market
 COMPANY INTRODUCTION

ABOUT VIGNESHWARA DEVELOPERS

The company pride itself in pioneering the concept of integrated IT

Corporate Centre in India. Its efforts serve to create self sufficient
communities out of pockets of land and provide our customers the highest
lifestyle standards with ultra modern working environment. In the
company’s projects, your office, garden, shops, restaurants, swimming
pool, Club, Service Apartments, Basic Medical Facilities and other
recreational facilities will all be just a pleasant walk away within the
campus. The company’s commitment to employ environment friendly
processes and ensuring that the communities are lush and verdant will
give you the chance to enjoy a breath of fresh air right at your workplace.

Vision
To reach the pinnacle of industry by 2020 following high ethical
standards, transparency in transactions and quality in development.

Mission

To empower Indian real estate by inculcating knowledge and innovation

that will be the catalyst of growth for the nation. Impacting hitherto
unknown areas to drive growth by winning the customers buying
decesions through logical reasonoin and industry facts

PAST PERFORMANCE

It’s a 15 year old company, functioning earlier under the banner name of
Shree Ganesha Estate & Developers.
The company has developed several successful projects; some of them
are as follows
• Mohan Garden in West Delhi.
• Rural Infrastructure Township Project in Nahar Park, Faridabad
covering 400 acres of land with 300 farm houses.
• A Trans-Yamuna Group Housing Society development project
titled as “Rosewood Apartment” in Mayur Vihar.

UPCOMING PROJECTS

11 acres of Commercial district in Gurgaon

• Opposite proposed Metro Station
 • Office space, retail & recreation (Club, Hotel & Business
Centre)
11 acre Technology Park in Gurgaon
• Based on the unique idea of Work, Live, Shop, Play
• 24x7 ultra-modern campus
• Proposed helipad

400 acre Technology City on Sohna-Alwar Road

• Just 35 kms. From Gurgaon
• 30 mins shuttle service to major drop points in Gurgaon / Delhi
• Planned air strip for air traffic
 ABOUT THE LANDMARK OF IT PARK PROJECT IN IMT,
MANESAR:
DARSONS AND KISSONS I VALLEY PROJECTS.

It is in this strategic time and location, that the landmark project is

located. Vigneshwara Developers has acquired 10 acres out of the 150
acres plot allotted by HSIDC for the development of this project named
“Darsons & Kissons I – Valley”.

India is the fastest growing IT hub in the world and IT-ITes industry
outsourcing is growing at 58% (NASSCOM). Gurgaon has emerged as an
important hub for IT companies and MNCs in India. The Haryana
government is also taking some vital steps to support and promote
infrastructure development. Haryana State Industrial Development
Corporation (HSIDC), a Haryana Govt. undertaking, is promoting a
campus of 150 acres as a proposed Special Economy Zone (SEZ) for
Technology parks in IMT, Manesar. The proposed SEZ will be the
biggest IT corridor in North India.

The central government has promulgated the SEZ act in 2005; these SEZs
have been declared duty free enclaves with no restriction in investments
and import of goods and services. To attract FDI the government has
offered several incentives like:
 • Access to domestic tariff area.
• Hundred percent FDI under automatic route
• Flexibility w.r.t FOREX earnings.

The campus promoted by HSDIC for setting up the technology park can
be used for several purposes including
• IT /ITeS
• Robotics, Nano Technology.
• Chip Manufacturing
• Bio-Technology including Genetics.
• Research and Development facilities.
• Mobile Computing/communication, other frontier technologies.

OPERATIONAL FACILITIES AND INCENTIVES FOR END

USERS

• Being developed as ‘Ready to use Built-up Space’

• Income tax exemptions under section 10A of IT Act to
companies manufacturing or rendering the above mentioned services.
• Income tax exemption to investors under section 10 (23) G of
Income Tax Act.
• Investors eligible for income tax exemption u/s 88 of IT Act.
• Exemption from service tax.
• FDI permitted under automatic route.
• No Import License required.
• Duty frees Import of Capital Goods – New or second.
• No separate documentation required for customs and EXIM
Policy, in house Custom clearance.
• Full freedom for sub contracting in domestic area or even
abroad. No fixed wastage norms
• Job / work on behalf of domestic exporters for direct exports.

INFRASTRUCTURE / OTHER FACILITIES

• Power Voice & Data Communications

• Air-conditioning
• Vehicle parking facility
• Security & Safety
• Environment - Sewage & Landscaping
• Water Storage
• Plug n play incubation centre for start up companies
 PROJECT I- VALLEY USP’S

The project is located approximately 3 km from NH-8, easily accessible

from Delhi by a new age 8 lane expressway; the travel time from Indira
Gandhi International airport is just 20 minutes.
This project is based on the unique idea of Work, Live, Shop and Play.
The Technology Park would have –
 International standard offices - covered in 85% area and with a total
of 6 towers.
 Service apartments – covered in 10% area
 Retail malls & Recreation clubs – covered in 5% area
 Proposed Helipad facility defining International work style
 Approximately 21 acres of 3 level basement parking space

EASY AND ATTRACTIVE MODE TO SUBSCRIBE YOUR

SPACE

Infrastructure investment is emerging as the most lucrative option today.

There is no limiting factor in the context of multiplier of money. So you
can invest your investments with the company for secure and guaranteed
optimum return of 12 %.

Current Price Rs.7, 500 per square feet

Minimum Area 500 Sq. Ft & its Multiples
Proposed Date of Completion Dec 2008
 PLANS AVAILABLE FOR INVESTORS

1. ASSURED RETURN PLAN

Investors get returns @ 12% per annum for 5 Years on their full deposit
against their investment for space they book.

Example:

Assured Return
Total Area Bought 1,000 Sq. Ft.
Rate per Sq Ft. Rs.7,500
Total Area (1000 Sq. Ft.) x Rate (Rs.7,500) =
Total Investment
Rs.75,00,000
Assured Rate of Interest per Annum 12%
ROI / Annum 75,00,000 x 12% = Rs.9,00,000
ROI / Month Rs.9,00,000 / 12 = Rs.75,000
ROI p.a. (Rs.9,00,000) x No. of Years (5) =
ROI for 5 Years
Rs.45,00,000
Industry Growth Rate(Real Estate) 30%
Total Value Rs.75,00,000 x 5Yrs x 30%=Rs.1,87,50,000
Rs.1,87,50,000-Rs.75,00,000+Rs45,00,000 =
Net Profit Rs.1,57,50,000

BUY BACK PLAN

 S.No. Name Plan
1. At the time of Booking 10% of Total Down
Payment
2. With in 45 days of Booking 90% of Total Down
Payment
Some investors prefer buyback option @ 61.5% capital appreciation after
2.5 Years. This is an assurance by the developer to provide the investor
an option of buying back his unit against the current booking over a
period of 30 Months.

Example:

Buy Back Plan

Total Area Bought 1,000 Sq. Ft.
Original Rate per Sq Ft. Rs.7,500
Total Area (1,000) x Rate (7,500) =
Total Investment Rs.75,00,000
Appreciation rate per sq. ft after 2.5 Years 61.5%
Rs.7,500 x 61.5 % =
Rate per Sq. Ft. after appreciation of 61.5% Rs.4,613
Rs.7,500+Rs.4,613 =
Total rate per Sq. Ft. after 2.5 years Rs.12,113
Buy Back Rate after 2.5 Years (30 Months) Rs.12,113
Total Value Rs.12,113 x 1,000 Sq. ft = Rs.1,21,13,000
Rs.1,21,13,000 – Rs.75,00,000 =
Net Profit after 2.5 Years Rs.46,13,000

PAYMENT PROCEDURE
Sample design of the New Propsed Project
Reality Boom in IMT Manesar(Gurgaon)

Real estate in NCR began with market expansion moving to Delhi’s

suburbs. However, the situation is a passé now. The property boom has
reached the second phase of development. After the Capital’s suburb, it is
a turn of Gurgaon’s suburb i.e. Manesar. Couple of years back no one
could have imagined such excellent real estate prospects for Manesar.

Some of the major points are given below:

1. The real estate market in Manesar, Gurgaon has been going at a

crazy pace ever since MNCs have taken the decision to set up their
establishments in this known city of Haryana. Manesar was earlier a
small village which has now been transformed into an industrial and
commercial hub over the past few years. The real credit goes to the
IMT Manesar Industrial Area, which has boosted up the
commercialization of the area.
2. Biggest ISBT and Metro connectivity in IMT Manesar as per
Master Plan 2021 has pushed the market to sky high.
3. Rates of commercial properties in Manesar have increased by 35-
60% in the last six months. Interestingly, residential properties in
Manesar have also got up on the boom bus, and have witnessed an
excellent jump of 35%.
4. The development of many Expressways mainly Dwarka-Manesar
Expressway (also known as Northern Peripheral Road) and KMP
(Kundli-Manesar-Palwal) Expressway is expected to cover a distance
 of 135 km - is believed to be the most expensive and the longest
Indian expressway to be constructed, has just pushed the property
prices in Manesar to sky high.
5. Direct connectivity from Main Gurgaon via NH-8 Delhi Jaipur
Express Way.
6. Saturated market & scarcity of land in Delhi-Gurgaon for
development purposes is one of the major reasons encouraging
property developers to move further afield to Manesar and scout new
construction prospects.

In addition to being an Industrial Town, a multitude of builders and

construction companies from Gurgaon and Delhi look at Manesar as their
next destination for construction purposes. Manesar would emerge as a

Mecca of industry specific infrastructure, service ancillaries, commercial

services, and an array of other essential services.

Manesar's inclusion in the integrated plan is good news for the entire
district. Home to global industrial units, and now part of the Millennium
City, it is all set to give competition to Noida.

Gurgaon: Manesar is no longer just a weekend getaway tucked away in

the Aravallis. Home to global industrial units, and now an integrated part
of the millennium city, it's a mega-city in the making. And if the
government's claims are anything to go by, it may even take on Greater
Noida very soon.
Managed by Haryana State Industrial Development Corporation
(HSIDC), and spread over 5,000 acres, the reasons for Manesar's
popularity is not hard to guess. Located on the Delhi-Jaipur highway, it is
extremely well connected to both Delhi and Gurgaon. It is just 32 km
from the international airport, 8 km from Gurgaon, and 45 km from
Connaught Place. This has made it a great favourite with investors from
Japan, France and UK who have set up about 450 industrial units here.
Now, a residential area spread over 900 acres is coming up here for the
employees of MNCs and HSIDC. Under the integrated master plan, the
residential sectors in Manesar have been increased from one to four to
allow the staff to stay around the industrial units and be able to simply
walk to office.

Competing with Noida

With the commercial and residential hub in Gurgaon town and the
industrial base in Manesar, the entire district is expected to gain an upper
hand over Noida. Said D S Dhillon, chief administrator of HUDA,
“Manesar has expanded very fast. Investments from all over the world are
pouring in. This needs to be encashed. Moreover, in order to curb illegal
developments which had started mushrooming; Manesar had to be
included in the integrated plan. This has benefited both Gurgaon and
Manesar. Manesar is located on the intersection of NH-8 and Kundli-
Palwal-Manesar expressway. This will show it in a better light than even
Noida.”
The development of Manesar will not only aid Gurgaon but also Delhi.
Said the deputy general manager of HSIDC, Rajesh Sharma, ``Almost all
industries of the Capital have their units in Manesar. The trend witnessed
a growth after the sealing drive in Delhi. We give incentives to
companies with an investment of

More than Rs 30 crore. Residents of Delhi who work in Manesar will

now be able to live in Manesar due to the new residential sectors.''

Better connectivity

Said Rajeev Arora, MD, HSIDC, “We are developing wide roads. The
area of the open space has been increased. There is a 12-km long green
belt traversing Manesar-Gurgaon boundary. HSIDC has a dedicated
power station of 220 KV and four substations of 66 KV to cater to the
needs of both the industrial and residential areas. Apart from the vast
industrial base, institutionally also, Manesar is being developed. We have
a resort, Heritage Village, the NSG base and the National Brain Research
Centre here which attract both MNCs and the general public.''

Favourite of MNCs, developers

MNCs and Indian corporate houses that are operational in Manesar

include Honda Motorcycle & Scooters India, Denso Haryana, Mitsubishi
Electricals, Maruti Suzuki Metal from Japan, Frigo Glass India from
Norway, Baxter India from USA, Johnson Matthey India from UK,
Jamna NHK Napino Auto, Bundy India, Munjal Showa, Hero Motors
Ltd, Samsung Telecommunications.

For developers also, Manesar has become a hot destination. DLF is

planning to come up with a SEZ around Manesar belt. Said a
spokesperson of DLF, “Manesar, with its excellent connectivity, an
established industrial base and a better law and order situation will act as
a catalyst in making Gurgaon more alluring. The government will benefit
by tapping all the investments pouring globally into Manesar.”

Earlier, Manesar was supposed to be developed as a joint effort of the

government of Haryana, Government of India and a Japanese firm, but
was finally acquired by the HSIDC in 1997 to be developed exclusively
as an industrial base. Manesar has been divided into four phases. HSIDC
developed 1,750 acres of land in phase I, while development of phase-II
and phase-IV are in progress. HSIDC has allotted around 600 acres in
phase-III to Maruti Udyog Limited for their expansion project.

Leisure activities

Other features in Manesar include an auctioned plot for service apartment

and budget hotel. A technology park spread over 150 acres is being
developed in Sector-8. Here, campus sites of 10 acres each have
already been allotted to 12 companies. HSIDC is also developing a golf
course for entrepreneurs, while a club is already in operation. HSIDC has
plans to develop three- to five-star hotels and a 100-bed hospital too.

Distance

8 km from main Gurgaon, 45 Km from Connaught Place

Connectivity

Located on the intersection of NH-8 and KMP (Kundli-Manesar-Palwal)

Expressway (under construction), also getting connected through
Northern Peripheral Road (expressway from Dwarka-Village Kherki
Daula on NH-8 with metro on it).

Moreover, biggest ISBT is also coming up near IMT Manesar, Gurgaon.

Map:
MAJOR COMPETITORS OF THE COMPANY:

 AMARPALI GROUP

 PURVANCHAL GROUP

 TDI LTD.

 MAPSKO DEVELOPERS.

 SPIRAL ADGE

SOME COMMON TERMS THIS IS USED IN REAL ESTATE

SECTOR

(i) Carpet area- Useable area that can be carpeted from wall to wall.
(ii) Covered area- Carpet area plus area of peripheral walls. As per
the industry standards, it is the sum of carpet area plus 4% of the total
carpet area.
(iii) Super area- Covered area plus 40% of the covered area. It means
covered area plus proportionate area that is used by the customers to
access a shop, like common passage, corridor, and stairways area.
(iv) Common Area Mall Maintenance (CAMM) - It is the cost of
utilities needed to heat, cool, light and clean and maintains common
areas such as atrium, corridors, toilets, etc. Including power
consumption and security. The operational cost of these services is
borne by the tenents of the unit/shops on pro-rata basis. It is charged
on super are on per sq.ft basis.]
ABOUT THE REAL ESTATE INDUSTRY IN INDIA

The Indian information technology sector has been instrumental in

driving the nation's economy onto the rapid growth curve. According to
the Nasscom-Deloitte study, the IT/ITES industry's contribution to the
country's GDP has increased to a share of 5.2 per cent in 2007, as against
1.2 per cent in 1998.

Further, the IT and BPO industries are poised to clock revenues worth
US$ 64 billion by the end of fiscal year 2008, registering a growth of 33
per cent with exports expected to cross US$ 40 billion and the domestic
market estimated to clock over US$ 23 billion, according to a study.
Simultaneously, the Indian IT services market is estimated to remain the
fastest growing in the Asia Pacific region with a CAGR of 18.6 per cent,
as per a study by Springboard Research.

India's IT growth in the world is primarily dominated by IT software and

services such as Custom Application Development and Maintenance
(CADM), System Integration, IT Consulting, Application Management,
Infrastructure Management Services, Software testing, Service-oriented
architecture and Web services.

A report by the Electronics and Software Export Promotion Council

(ESC) estimates software exports to register a 33 per cent growth in the
current financial year with export figures during FY 2008 expected to
reach US$ 45 billion. The country's IT exports have, in fact, come quite
far, starting from a few million dollars in the early 1990s. The
Government expects the exports turnover to touch US$ 80 billion by
2011, growing at an annual rate of 30 per cent per annum.

Outsourcing

A research by Gartner forecasts India as the undisputed leader in the

outsourcing space in the year 2008. The Outsourcing Service Provider
Performance Study 2007, undertaken by sourcing advisory firm Equa
Terra, reported that the majority of UK businesses offshore all or parts of
their IT functions to India and plan to continue with this strategy as India
emerged the favorite outsourcing destination for businesses in UK in
terms of satisfaction.

Another study conducted by Nasscom jointly with the Everest consulting

firm reports the Indian outsourcing sector logged a 35 percent annual
growth over the last five years with annual revenues touching US$ 11
billion, with the bulk coming from exports. India has ousted China as a
contender for offshore services and tops the list of 30 countries on
criteria’s such as language, government support, labour pool,
infrastructure, educational system, cost, political and economic
environment, cultural compatibility, global and legal maturity, and data
and intellectual property security and privacy.
No wonder, twenty-nine India-based companies have been listed among
the best 100 IT service providers in a new survey carried out with a view
to assist business heads of major outsourcers identify reliable, innovative
and tech savvy partners.

MARKET OVERVIEW

• Real estate industry is currently estimated to be US$ 16 billion with a

CAGR of 30%
• Total economic value estimated to be US$ 40-45 billion accounting
for 4-5% of the GDP (Source: UBS Investment Research)
• Growth driven primarily by IT/ITeS, growing presence of foreign
businesses in India, the globalization of Indian corporates, and the
rapidly increasing consumer class providing a huge market potential
• The real etate sector is in an early growth stage, can be segmented
into residential, commercial, retail and hospitality asset classes
• Demand-supply gap across all segments for quality real estate

Source: Industry Sources, E&Y Analysis

Commercial Office Space
Growth Drivers
• Growth in IT/ITES sector at 30% annually (source: NASSCOM)
• Significant growth in FDI

Market Structure
• Dominated by a few large national developers with pan-India
presence
• Regional players are expanding to achieve a Pan-India presence
• Shift in the type of operations from Sale Model to Lease & Maintain
Model

Segmentation

• Commercial Space can be classified broadly into Grade A and B

• Business activity shifting from CBD to SBD and from Tier I, II & III

Outlook

• Commercial market expected to grow at CAGR of 20-22% over the

next 5 years
• IT/ITeS sector expected to require in excess of 250 million sq. ft of
commercial office space by 2012-13
Residential Space

Growth Drivers
• Rapid Urbanisation: Urban Population expected to touch 590
million by 2030
• Decreasing Household size: Average H/h size fell from 5.4 in 1981 to
5.1 in 2000
• Increasing working age population (Almost 64% in 16-64 age
group)
• Increasing income levels: Average salary levels increased by 13.5% in
2005
• Easier access to mortgae, long tenure loans and tax incentives

Market Structure
• Highly fragmented and unorganized
• Regional players are expanding to achieve a Pan-India presence

Segmentation

• Broad categories include Low cost/Mid market/Premium housing

• Luxury segment growing annually at 25-30%

Outlook
• Current shortage close to 25 million units, predominantly in
middle and low income group
• Expected to grow at CARG of 18-19% upto by 2010
• Mortage finance will be increasing penetration into the urban housing
finance sector

Retail Space
Growth Drivers

• Rising consumerism with doubling of disposable income

• Growth in Organized Retailing
• Entry of international retailers

Market Structure
• Dominated by unorganised retail
• Large corporate houses entering the organized retail sector
• International retail brands are tying up with Indian partners
Growth of Retail Industry
Organized
 Unorganized

FY2004 $210 billion
FY2005 $2224 billion
FY2006 $238 billion
FY2010 $306 billion

100

80

60 East

40 West
North
20

0
1st Qtr 2ndQtr 3rdQtr 4thQtr

Source: Edeliwiss, E&Y Research

Segmentation
• Organized retail contribution to the retail industry grew from 2% in
2003 to 4.4% in 2006
• International retailers are present through franchise route

Outlook
• FDI norms are likely to be relaxed in next 2-3 years
• Oranised retail expected to grow at around 30%
• Share of organised retail, by sales expected to reach 10% by 2010
Absorption of Organised Retail Space
Total Absorption: 19 million sq. ft (2006-07)

Source: E&Y estimates for top seven cities

21%
5%
12%
9%
4%
6%

Hospitality Space
Growth Drivers
• More than 4.4 million international visitors and 430 million domestic
tourist visits in 2006
• Low cost airlines
• India recquiring recognition as a medical tourism destination
• International events such as Commonwealth Games
• Imergence of India as a MICE destination

Market Structure
• Entry of several corporate houses such as Reliance
• Existing hotel operators are scaling up their opetations
• Developers are tying up with major international chains
• Developers have set up RE funds to finance their Ventures

Segmentation
• Classification on the basis of Star Rating of 1 to 5 star deluxe
• 100,000 hotel rooms in India in various categories, Five Star and Five
Star Deluxe contributing close to 30,000 rooms

Outlook
• Demand to grow at 10% CAGR for the next 5 years
• Room supply to increase
• Tremendous potential for budget hotels
• Service Apartments, Hostels, Wellness space gaining popularity

Special Economic Zones (SEZs)

• Under the new SEZ Policy, formal approvals have been granted to 366
SEZ proposals
• 142 have already been notified as SEZs, as on 30th August 2007
• Fiscal benefits to IT Parks expected to come to an end in 2009; SEZs
likely to be preferred for IT/ITeS commercial office space
development
• Policy allows usage of as high as 50% of area as non-processing zone,
offering immense potential for residential & other support
infrastructure.

Industry - Wise classification of formally approved SEZs

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

Key Regulations for FDI in Real Estate

Guidelines for FDI in Real Estate in India
Conditions for Development
• Minimum 10 hectares to be developed for serviced housing plots
• For construction-development projects, minimum built-up area of
50,000 square meters prescribed
• In case of a combination project, any one of the above two conditions
should suffice
• At least 50% of project to be developed within 5 years from date of
statutory clearances

Conditions for Investment

• Minimum capitalization of US$ 10 million for wholly

ownedsubsidiaries & US$ 5 million for joint ventures with Indian
partners
• Infusion of funds within 6 months of commencement of business
• Original investment cannot be repatriated before a period of 3 years
from completion of minimum capitalization.
• Investor may be permitted to exit earlier with prior Government
approval
Miscellaneous Conditions

• Investor not permitted to sell undevelopedplots

• Project to conform to norms and standards lay down by respective
State authorities
• Investor responsible for obtaining all necessary approvals as
prescribed under applicable rules/ by-Iaws/regulations of the State
• Concerned Authority to monitor compliance of above conditions by
developer

FDI Experience in Indian Real Estate

• Several Global investors & Developers keen on investing in India

• Share in FDI has increased from 4.5% in 2003 to an estimated 25% in
2006
• US$ 16.3 billion FDI committed for real estate projects

Major Countries investing in Indian Real Estate

Dubai
 Indonesia
 Singapore
 Malaysia
 Others


• Majority of the direct investment is from West Asia with overall

commitment of US$ 9.7 billion from Dubai based developers
• Further, investor from USA and Europe have shown keen interest with
the launch of several RE funds
Source: Industry sources, E&Y Research

Regulatory and Policy Interventions

Rationalization of process:
• Rationalization of the regulations in governance affecting real estate
• For example, improved land records, rationalizing stamp duty across
states, simplifying urban development guidelines etc.

Social Infrastructure:
• Focus from both public and private sector
• Different models for foreign investment being evaluated

Government incentives:
• SEZ Act, 2006 provides major Tax benefits,
• Tax relief and Single window clearance and approval

Urban Infrastructure Development:

• Focus on urban infrastructure
• Urban Reform schemes
 JNNURM
 City Challenge Fund
 Mega Cities Fund
Indian Economy Overview
1) Accelerated yet Stable Reforms Process
• Broad consensus on importance of reforms
• Reforms momentum continued despite changing leadership
especially in areas of FDI & infrastructure

2) Robust Economic Fundamentals

• 4th largest economy in the world in terms of PPP
• GDP growth rate of 9.4%
• Forex reserves at US$ 204 bn
• Services sector accounts for more than 50% of GDP, while
manufacturing sector average growth is at 6%,

3) Fast improving socio-economic profile

• Per Capita GDP is US$ 831 in 2006-07 and is expected to increase
further by 25% in 2007-08
• Favorable demographics with more than 60% of population
estimated to be in the working age (15-60 years) till 2050
• Growing lifestyle spending with increased expenditure on
consumer durables, eating out and communications.
4) Increased Foreign Investment
• India’s policy on foreign investment has been gradually relaxed
with sectors such as construction, telecom and banking allowed.
Another route of foreign participation is portfolio investments.
• Total FDI investment of about US$ 8 Billion in FY 2006-07

5) Focus on Infrastructure Development

 India has a well developed road and rail network. Large
investments are underway in areas of:
 Highway development & Air-connectivity (Domestic &
International)
 Upgradation of ports with their privatisation
 Power sector
 The Impact of Macroeconomic Factors on Demand &
Supply of Real Estate
 Economic Growth - Broad based GDP growth rate of 8-9 %
per annum forecast
 Demand driven by the growth in services sector
 Growth expected to fuel demand across all the asset classes
 Inflation - Has significant role in supply-demand of real
estate
 Continues to remain a major concern
 Money Supply - Growth is higher than RBI estimates
 Liquidity is key to inflation and over-heating
  Restricted availability to reduce options for
builders/developers
 Interest Rates - Higher rates lead to higher cost of borrowing
 Developers seeking other options, consumers are re-
evaluating options
 Credit Take-off - Easy availability of capital has led to
growth in valuations
 Restrictions have increased the cost leading to alternate
sources like PE/VC
 Economic Growth - Liberalization of FDI has led to an
interest from new players
 Valuation standards and greater transparency
 Service tax on commercial rental to affect retail space

Demand Pull & Supply Push Factors

Supply Push Factors
 Policy & Regulatory reforms (100% FDI Relaxation)
 Positive outlook of global investors
 Fiscal incentives to developers
 Simplification of urban development guidelines
 Infrastructure support and development by Government
Demand Pull Factors
 Robust and sustained macro economic growth
 Upsurge in industrial & business activities, especially.
 new economy sectors
 Favorable demographic parameters
  Significant rise in consumerism
 Rapid Urbanization
 Gamut of financing options at affordable interest rates
Resultant Impact
 Entry of number of Domestic & Foreign players
 increasing Competition & Consumer affordability
 Easy access to means of Project financing
 Increases developers risk appetite and allows large scale
development
 Improved quality of real estate assets
 Development of new urban areas and effective utilization of prime

land parcels in large cities

 Resultant Impact
 Increasing occupier base
 Significant rise in demand for office/industrial space
 Demand for newer avenues for entertainment. Leisure & shopping

 Creation of demand for new housing

Booming Indian Real Estate

Growth Rate

• High growth of around 30% in last 2-3 years

• Expected to maintain the same growth in the medium term (5-7 years)
Structure
• Highly unorganized sector
• Entry of numerous new players
• Phase of consolidation expected in 5-7 years
• Entry of large number of international players
• Preference towards strategic development alliances Market
Concentration
• Highly concentrated within top 6- 8 cities in the country
• High concentration leading to significant property price rise in such
cities
• Growth to be driven primarily by Tier-II and Tier-III cities in the near
future, across segments
• Emergence of at least 10-15 new cities as growth centers
• Increased development of planned cities Competition
• High competition with 4-6 key national players and numerous regional
players
• Shift in competition towards product focus/ differentiation
Extent of Regulations
• Moderate-No functional regulatory body
• Region/Location specific building laws
• 100% FDI is allowed under the automatic route

• Stringent regulations expected to be introduced inline with

international norms
• Reforms in local development guidelines financing
• 30-40% annual increase in the home loan disbursements loan
disbursals from Indian housing finance companies
• Loan tenures have increased: 150 months (2001) to 173 months
(2006) due to declining age of borrowers
• Larger mortgage penetration
• Introduction of globally accepted instruments/modes such as REITs &
REMFs

Market Trends and Outlook

• Branding Penetration
• Low-Commoditized market in most regions
• Brand-consciousness growing in Tier-I cities
• Strong focus on brand development
• Developers to have multiple brands focused on specific
Product segments Product Focus
• Market driven product supply
• Developers undertaking activities across asset classes with not
much differentiation between product classes
• More focus to cater to the premium end consumer
• Enhanced focus on need driven product supply
• Emergence of firms with niche asset class focus
Ownership
• Developers prefer to exit through sale to end consumer
• Only few large developers prefer to hold properties. Most
developers prefer to sell

Foreign Investors
ASCENDAS, Singapore

• Present in India since 1997

• Established a wholly owned subsidiary, Ascenda India Private Limited
• Operating 5 IT Parks across Banglore, Hydrabad and Chennai having
BUA of 4.4 million
• Plan to develop two new IT Parks in Pune and Nagpur at a cost of
US$ 375 million
• Plans to invest another US$ 325 million launched in 2007
• Ascendas India IT Fund for US$ 520 million launched in 2005

EMAAR, Dubai

• Present in India since 2005

• Developing integrated township at Mohali over 3000 acres
• Plans to develop integrated townships, commercial offices, IT Parks,
SEZs and Hotels
• Planning to venture into healthcare and education sector
• Joint Venture with MGF Development Limited, India
• EmaarMGF has JV with Accor Hotels (France) & Premier Travel Inn
(UK)
• Capital outlay of US$ 4 Billion for group projects in real estate in
India

Salim Group, Indonesia

• Present in India since 2004
• Developing township at Howrah over 450 acres
• Plans to construct expressways and bridges, a multi-product SEZ in
Haldia and a Chemicals SEZ in East Midnapore and Health and
Knowledge “cities”
• Joint venture with Unitech and Universal Success
• Plans to invest US$ 4.2 billion for projects
Domestic Players in Real Estate
Unitech
• Operating various asset classes in residential, commercial and retail
segment
• Developed more than 7 million sq.ft. Of built up area (BUA)
• Specialises in planning residential, commercial, SEZ development,
retail and hospitality, integrated townships
• 430 million sq.tf. Of BUA under planned projects
• Major presence in National Capital Region and other areas such as
Kolkata, Chennai and Hyderabad

DLF
• Developed Asia’s largest private township DLF City at Gurgaon,
Haryana spread over 3000 acres
• Present across all the asset classes: Residential, Commercial and
Retail.
• Developed more than 220 million sq.ft. Of BUA
• Specialises in planning Hotels, Infrastructure and SEZs 574 million
sq. ft. of BUA under planned Projects
• Pan-India footprint, major presence in Gurgaon & Kolkata

K Raheja Corp
• Present in Commercial, Retail & Residential asset classes
• Developed over 5 million sq. ft. of BUA
• Developing 15 self-contained townships and 10 hotels
• Planning to construct 13.2 million sq. ft. of BUA
• Major presence in Mumbai with operations in Banglore, Ahamedabad,
Goa, Pune and Hyderabad.

Ansal Properties
• Operates primarily in Residential & Commercial asset classes
• Developed over 2850 acres in Gurgaon and Delhi
• Developing integrated townships, malls, hotels IT parks and SEZs
• Plan to construct 157.6 million sq.ft. Of BUA
• Pan-India footprint with major presence in 16 North-Indian cities
acress 4 states

Sobha Developers
• Asset classes include Residential, Commercial, Development of plots
and Contractual projects
• Developed over 4.5 million sq. ft. of BUA
• Planning residential and retail projects
• 101 million sq. ft. of BUA is planned under various projects
• Major concentration in Banglore with presence in other areas such as
Cochin, Chennai and Pune.

Parsvnath Developers
• Presence in Residential, Retail Commercial asset classes
• Developed over 3.8 million sq. ft. of BUA
• Plans to develop IT Parks and 12 SEZs across the country
• Plannin to construct around 46.5 million sq. ft. of BUA
• Major Presence in National Capital Region
• Increasing Pan-India Footprint, active in over 46 cities across 17 states

Low–cost Housing
Rationale for Investment

• Rural population of almost 72%

• Huge market potential
• A housing shortage of 23 million units and the need to invest over
US$ 97.6 billion over 10 years.
• Shift from rented to owned house
• Easy Access to financing
• Nuclear Families
• Government initiatives such as extension of benefits u/s 80i to mass
housing projects, scrapping of the Urban Land Ceiling Act,
implementation of the Securitization Act

Unlocking of Land Assets

National Commission recommendations for formation or
reorganization of Institutions

• Public Sector Units assessing their land holdings for commercial

exploitation
• Public Sector estimated to have more than 45,000 hectares of under-
utilized land
• VSNL – 300 Ha
• IDPL – 1000 Ha
• LIC – 400 Ha
• HIL – 20 Ha
• National Textile Corporation – 280 Ha
• Indian Railways – 43,000 Ha
Private sector also plans to exploit their land banks

• Private sector units assessing their land holdings to exploit them

commercially.
• Industrial houses are developing excess land adjacent to industrial
sites
• Major Private groups include Mukand. IVRCL, Kilburn Engineering,
Unichem, Indo Rama, Raymonds, Alembic Glass

Real Estate Development by Delhi Metro Rail Corporation

• Adopts a PPP model

• It leases out the land and private developer develops retail and
commercial offices
• Earned US$ 66 million from real estate segment and only US$ 25
million from traffic operations
• Real estate contribution increased from 6% to 25% for funding future
expansion of network
RISKS AND CONCERNS

Overheating market
• On the real estate front, persistent demand-supply gap has led to
spiraling property prices
• Capital values raised by more than 100% in all key markets
• Oversupply expected in few product classes – IT SEZs, Luxury end
residential

RBI’s measures to cool the real estate market

Change in preference share policy
• Foreign investment coming as non-convertible, optionally convertible
or partially convertible preference shares would be considered as
Debt and shall require compliance with ECB guidelines
Change in ECB Policy
• Utilization of ECB proceeds is no longer permitted in real estate;
exemption granted to integrated townships has been withdrawn

Risk weightage increase

• In 2006, RBI increased the risk weightage on bank exposures to
commercial real estate from 125% to 150%

Rising interest rates

• RBI has implemented various monetary measures to curb inflation and
growth in credit to real estate
• Rising interest rates may cause higher loan defaults

Absence of REITs
• REITs are a significant source of capital and liquidity for real estate
industry globally
• Absence of REITs in India has restricted retail investor participation
and limited capital flows

Regulatory issues
• ULCRA is yet to be repealed in some key states, such as Maharashtra,
Karnataka and West Bengal • Stamp duty rates are still high in many
states resulting in high transaction costs
• Tenancy laws are not in favor of owner

Unclear titles
• A high percentage of land holdings do not have clear titles
• Land is typically held by individuals/families, which hinders easy
transfer of title

Time-consuming Approval
• Approvals required from multiple agencies,
• Time consuming and circuitous procedures
• Leads to project delays and affects marketability of projects

High Dependence on NRIs

• Certain pockets are heavily dependent on NRI money
• Leads to speculation and an asset bubble kind of situation
• Prices become prohibitively expensive for domestic consumers

Speculative Supply
• Certain pockets witnessing speculative supply
• Some pockets are purely investor driven, end-user and genuine
consumers suffering
• Oversupply leading to downward pressure on prices - “price
correction”

Overindulgence
• Overindulgence of Developers on asset classes which are not demand
driven
 • Overstretched commitments and hence quality risks

Future collaboration of REAL ESTATE

and IT-ITES sector in INDIA

After IT Parks and IT SEZs, the government has cleared a proposal for
creating much larger Information Technology Investment regions (ITIRs)
to give a fillip to the country's growing IT and ITeS sector.The Cabinet
Committee on Economic Affairs, which met under the chairmanship of
Prime Minister Manmohan Singh on Thursday, cleared the policy for
setting up ITIRs, each having an area of at least 40 sq km.

"ITIRs were conceptualised keeping in view the need to boost the growth
of both IT/IT enabled services (ITeS) and Electronic Hardware
Manufacturing (EHM) units," an official statement said. These regions
would become major magnets for investment, creating employment
opportunities and economic growth in the area while reducing the
pressure on existing urban centres by enabling growth of new townships,
it added. The ITIRs will be much larger than IT SEZs. Each ITIR is
expected to be specifically notified investment region with minimum area
of 40 sq km planned for IT and ITeS and EHM units. The minimum
processing area would be 40 per cent of the total area of the ITIR.

The regions would be a combination of IT/ITeS and EHM units, public

utilities, residential areas, social infrastructure and administrative
services. According to the proposal, while the Centre will facilitate
development of national highways, airport and rail links towards the
ITIRs, states will help in the local infrastructure like power, water, health,
and education and state roads. The ITIRs would be developed in a phased
manner through Public-Private Partnership route.

Ongoing real estate projects in IT-ITES

sector

New Delhi: The realty sector is projected to grow at the rate of 30 per
cent annually over the next decade, attracting foreign investments worth
USD 30 billion, with a number of IT parks and residential townships
being constructed across-India, industry body Assocham said.

Currently, the domestic real estate market is expected to be worth 15

billion dollar in which the FDI is estimated to about 6 billion dollar, it
said.

At present, the foreign developers can undertake construction activities

on a minimum space of 50,000 sq ft, Assocham President Sajjan Jindal
said in a statement.

The ceiling of 50,000 sq ft would be lifted by the government in want of

more FDIs and would go to 2 lakh sq ft in next 10 years, as per
Assocham's estimate.

The sector would grow more as expected requirement by the IT sector

(like IT parks) will be about 200 million sq ft space across the major and
large townships, it added.

It is also estimated that in the residential sector, the housing shortage is

around 20 million units of which nearly 7 million units are estimated for
urban India, it said.

Commenting on the problem faced by the sector, the Assocham said that
the involvement of Center and a number of state agencies in setting up of
townships is needed.

SCOPE OF INVESTMENT FOR SMALL

INVESTORS IN
 REAL ESTATE SECTOR IN INDIA:

Is real estate financing one of the catalysts behind the boom that India is
witnessing in residential, retail and commercial real estate? Are REITs
and REMFs here to stay? What are the implications of these on the real
estate industry? These are some questions that one thinks of when
analyzing the trends of what used to be a largely disorganized industry in
the recent past. Read on for a perspective.

The Securities and Exchange board of India (SEBI) has been actively
screening proposals to structure an investment instrument known as Real
Estate Investment Trust (REIT). This comes in conjunction with the Real
estate Mutual Funds (REMF), for which norms are expected to be
finalized soon. Mutual Fund houses, such as Kotak Group, ICICI and
HDFC have already expressed interest in floating these funds.

While both these investment instruments are widely popular in the

developed economies, India is yet to witness the introduction of such an
investment option. Designed for a small investor, these instruments
enable you to benefit from the booming real estate industry. In a normal
scenario, you would need a lot of money to invest in real estate projects
but REITs and REMFs will enable you to invest even your little surplus
savings and reap substantial returns.
These instruments will attract investments from the small investor and
invest in projects, construction companies and commercial malls. The
valuation mechanism of these instruments is still a question because the
duration of projects may vary and so would the risk. While valuation
norms of such instruments need to be considered carefully, you cannot
ignore the benefits that these instruments will provide to the small
investors as well as to the real estate industry. Some such benefits are:

The money that these instruments raise will help structure the entire
financial system supporting the real estate industry.

These could potentially become instruments for long term savings for
small investors and help in diversification of individual portfolios.

An increased transparency in data pertaining to the real estate industry

will help the consumer, the developer as well as administrative
authorities to take well informed decisions.

These instruments will definitely enhance liquidity for housing finance

companies as they would be able to invest in secondary mortgage
markets.

Developers will have access to funds generated from across the country.
 INITIATIVES TAKEN BY THE
GOVERNMENT TO SAFEGUARD THE
INTEREST OF INVESTORS IN REAL ESTATE:

New law is being enected to regulate real estate developers. Now they
have to exclude common space and balconies, from the floor space of
residential units.Mandatory for the builder to specify the area of an
apartment in the sale agreement.
Builder will be required to provide a break-up of what is being charged
for the apartment, along with a separate calculation for charges lavied for
commen spaces like corridors, parking and lifts.

PROPSED BILL BY THE GOVERNMENT:

It will ask the developer to exclude the common spaces, balconies from
far calculation of apartments. Any delay in granting possession of the flat
will attract penalty for the developer. The sales agreement will have to
specify the extra cost of facilities, such as corridors, parking, lifts, etc.

REGULATORU DEVELOPMENTS IN REAL ESTATE:

Indian venture capital firms are now allowed to invest in real estate
companies and projects. The cabinet committee of economic affairs of
India has allowed 100% FDI in the construction sector under the
automatic route. Foreign investors can now invest in commercial real
estate developments projects with a minimum built area of 50,000
sq.mtrs. Minimum area threshold for FDI in integrated township projects
has now been reduced to 25 acres from 100 acres. SEBI has also recently
approved for the guidelines for REMF, allowing them to invest directly in
real estate properties in India.
BENEFITS OF REAL ESTATE MUTUAL FUND (REMF):

REMF by SEBI would provide institional mechanism to the small

investors. REMF will help developers currently reeling under liquidity
crunch with low sales, lower margins and costly fund sourcing, as they
will now have access to alternate sources of funding.
It requires lakhes to invest in a physical property, under REMFs, people
can own a piece of property in the form of stock exchange traded units
with a mere investment of Rs. 10,000. REMFs and REITs will provide
safe investment with a very low ticket size. REMFs will derive much
better tax benefits in comparison to investment in physical real estate
property.

BIG PLAYERS OF REMF:

 HDFC PROPERTY FUND.

 DHFL VENTURE CAPITAL FUND.

 KOTAK MAHINDRA REALTY FUND.
COST-COMPARISON OF OFFICE SPACE IN INDIA WITH
OTHER COUNTRIES

The demand for office space in India continuous to be strong, despite

fears of some moderation in economic growth. According to the latest
report of global consultancy firm CB Richard Ellis (CBRE) on fastest
growing occupancy costs of office in the world, Mumbai, Banglore and
Delhi fetured at 8th, 22nd, and 45th positions.

While rentals in Mumbai grew at 40.7% in the last one year, they went up
by 22.6% in banglore and by 15.3% in Delhi. However, Mumbai slipped
from 2nd place in November 2007 to the 4th place at present. On the scale
of most expensive office markets in the world, London’s west end,
Moscow and Tokyo dominate the list of costliest places in the world, in
that order, Delhi continuous to be at 7th spot.

The drop in the ranking in most of India’s cities is due to the significant
increase in the rentals in Moscow, where they almost doubled in the last
one year. Although the number four position fo Mumbai is still very high
and is reflective of the tight supply of prime office space in Mumbai and
Delhi, and demand remaining constantly active
According to the report, office space in Mumbai and Delhi are costlier
than Paris, New York, Stockholm, Milan, Geneva, among others.

This clearly suggests the non-availability of office space in India at

competitive rates. The report also says that although absorption of office
space remained brisk in most markets, continous increases in occupancy
costs have driven some companies to relocate beyond prime locations in
cities including Tokyo, Hong Kong, Singapore, and Mumbai.

According to the report, rentals in Central Bussiness Districts (CBD) in

Mumbai and Delhi are Rs.738 per sq.ft per month ($210.97 per sq.ft per
annum) and Rs.508 per sq.ft per month ($145.16 per sq ft per annum) As
against this, rentals in London are $300 per sq.ft per annum,$142per sq.ft
per annum in Paris, and $103.43 per sq.ft per annum in New York

By the report, in India, supply remained limited inCBD areas, while

facilities in secondary locations like Gurgaon, Noida have attracted office
occupires due to availability of superior facility office space.

What is encouraging in all this that no one doubts the Indian growth story
on a long term, despite the fact that stock market is in jittery. Inflation is
high and RBI’s measure to contain inflation has created a liquidity crunch
in the market. This might affect the economic growth in near future
DEMAND OF OFFICE SPACE IN DIFFERENT CITIES IN INDIA

Despite correction in the stock market, demand for office space in the
country remained buoyant with some moderation. According to a report
on office space by Cushman and Wakefield, the demand for office space
during jan-march 2008 remained upbeat across major cities and stood at
approximately 14 million sq.ft
There has been certainly a marginal slowdown in the rate of growth
across all segments of real estate and its probably good news for the
industry to have some degree of correction, since the long-term demand
continues to look robust and next cycle could be more sustainable and
strong
However, good demand growth for the real estate space suggests that
demand for residential real estate will pick up sooner or later. When
CITIES 2007(S) 08(S)* Q1/08(S) ABSORPTION PRE-COMMIT DEMAND
/Q1/08 /Q1/08 /Q1/08
BANGLORE 9.59 14.7 5.95 3.63 1.51 5.14
CHENNAI 10 12 1.09 0.83 0.55 1.38
HYDERABAD 4.10 6 0.37 0.30 0.38 0.68
MUMBAI 0.45 13.7 2.13 2 0.60 2.60
PUNE 7.8 12.8 2.52 1.22 0.14 1.36
KOLKATA 2.25 4.5 0.70 0.38 0.74 1.12
NCR 11.5 18 2.78 0.62 1.58 2.20
TOTAL 45.6 82.8 15.54 8.2 5.5 14.48

space is readily not available, tenants commit for the space that is likely
to be built shortly. Such demand is known as pre-commited demand.
In the first quarter of the FY 2008, the NCR of Delhi witnessed a supply
of 2.8 million sq.ft, accounting for 15% of the total supply likely to enter
during the year. The entire supply likely was concentrated in Gurgaon
and Noida, with each accounting for 1.4 million sq.ft. The IT-ITES sector
accounted for about 65% of the total supply in the first quarter, of which
major portion came from Noida.
Interestingly, as more supplies are expected to enter the market, the
demand has also increased. This has resulted in the rental value.
 90
80
70
60 BANGLORE
50 CHENNAI
40
30 HYDERABAD
20
10 MUMBAI
0
PUNE

08

8
)

08
S)
)*
(S

KOLKATA

/0
(S

8(
07

1/
1/

Q1
08

/0

/Q
/Q
20

NCR
Q1

D/
IT
ON

AN
M

TOTAL
TI

M
RP

CO

DE
SO

E-
AB

PR

S-SUPPLY
Values in million sq.ft
Sources: Cushman and Wakwfield Research
*Expected

FACTORS WHICH ARE HINDERING THE GROWTH OF REAL

ESTATE IN INDIA AT PRESENT:

 In the last half of the year the cost of cement, steel and other

necessary materials have increased manifold.

 Market correction, lak of buyer and increase in the cost of primery

materials are making the realtors worried.

  There is an increased value of 20% to 25% in the material cost.

 High rate of inflation

 Increased value of EMI for buyers

 Shortage of liquidity volume in the market.

THE REAL APPROCH OF INVESTORS WHILE INVESTING IN

REAL ESTATE

All developers would make us believe that the projects are primarily end
user driven. But, the fact remains that majority of the investment is being
done by the hardcore investors, who is characterized as an early entrant in
a project, especially at the launch stage , and he exit equally fast, as
opposed to the end user who enters at the fag end of the project and stays
on until he occupies the premises.

In the absence of any real single window offering generic advice on

investment in real estate and giving the overall real estate picture,
speculation has been the name of the game.There has been no organized
manner for advising investors and they have banked on gut instinct.

To avoid any malpractices by the developers and middle-men an investor

should keep in mind the following points-

 An investor should know his actual time for entering and exiting
from a project, one must take in view the targeted ROI(return on
investment) and than decide to exit a project
 Before foraying into new geographies, one should assess the place,
the developer and type of project.
 Investment in commercial projects yields high return but with high
risk factor. It will require a minimum investment of Rs. 50 lakh.
 The decision of investment should be best on factors such as
demand and affordability and hence certain price points where one
could look at investing to grow money
 It is worthwhile to talk to the developer who may give the sense of
what RoIs to expect from any investment.

EFFECT OF ECONOMIC SLOWDOWN ON REAL ESTATE

SECTOR
The impact of economic slowdown is now visible on the demand for the
commercial office space in india. According to the real estate consultant
group Cushman and Wakwfield, both Indian and international companies
are deferring their expansion plans. This has also affected the rentals of
the office space in the country.
The rentals of IT office space have declined between 3% to 13%. In
NOIDA particularly, the decline in the rentals of the IT office space is
maximum at 13% during the quarter ending june 2008. At present, the
space according to the report is available at Rs. 39 per sq.ft per month. In
GURGAON, the rentals for IT offices have declined by around 3%
during the period to Rs.76 per sq.ft per month.
The slowdown in the office space uptake will effect the demand for
residential units. Because of rise in the interest rate in the last one year,
the demand for residential accommodation is already under pressure.
With the slow down in the economy, demand is likely to further dwindle.
This will put pressure on the real estate prices in the country, which has
already shown some sign of decline in the last three months.
 SLOWDOWN IN OFFICE DEMAND

CITY T.P-08 S-Q1-08 A-Q1-08 P-C-Q1- D-Q2-08

08
BANGLORE 14.73 3.11 1.97 - 1.97
CHENAI 12.66 3.80 0.91 0.64 1.55
HYDERABAD 4.88 0.75 0.10 0.37 0.47
KOLKATA 4.17 0.66 0.08 0.11 0.19
MUMBAI 13.89 4.09 0.69 0.31 1.00
NCR 18.28 4.34 2.13 1.17 3.30
PUNE 10.42 1.02 0.44 0.75 1.19
AHMEDABAD 0.43 0.30 0.04 0.03 0.07
TOTAL 79.46 18.07 6.36 3.38 9.74

100
80
60 East

40 West
20 North
0
1st Qtr 2ndQtr 3rdQtr 4th Qtr

T.P- TOTAL PROJECTED

S- SUPPLY
A-ABSORPTION
P-C-PER COMMITMENT
D-DEMAND
Suggestions for effective development in REAL ESTATE in INDIA:

(i) Dearth of knowledge in this booming industry should be

acknowledge
(ii) Sustained industry dialogue should be maintained
(iii) Lack of PPP should be shorted-out
(iv) Need to strengthen technical know-how
(v) Research and adaptation of best practices alongwith sub-sectors of
real estate
(vi) The discussions shought to bridge this knowledge gap and
crystallise possible research areas.
(vii) Lack of transparency and credibility should be checked out.
(viii) Acute shortage of data and academic research and last a lack of
uniform laws and regulatory systems should be formulated.
 CONCLUSION
By the research itself I come to know that real estate in india is now
gearing up to proceed in the next phase of development which seems to
be true with adequate support from the government, interest of big
companies in real estate sector due to its high potential of profit, entry of
professional corporations in Indian market, etc.
The Indian real estate has never been in such a dynamic condition as like
now. With per annum growth of 30% its going to be one of the most
prolific industry in Indian economy at par with telecom, banking,
insurance, retail, etc. With growing potential of profit due to the huge
demand in future most of the big Indian companies as well as reputed
international companies are making tailor-made strategies for entering
Indian real estate sector.
Keeping apart the growth and development in real estate, right now due
to various negative factors in the economy the growth has been dwindling
for a while. High inflation rate , lack of liquidity volume, increased rate
of EMI, increased rate of material goods like cement, steel. Are making it
difficult for developers to control their operation cost which increases the
actual cost of finished product.
The silver lining in this difficult time is that by every research and survey
conducted upon real estate segment in Indian economy shows that in
long-term after correction of the market trend the sector will start to grow
rapidly also a very small market is yet tapped by the developers and a big
chunk is yet to be attained mostly in 2nd and 3rd tier cities which could
yield high rate of return as these locations dose not requires huge amount
of investment and with the availability of skilled men-power with low
maintenance would become a big profitable venture specially for IT-
Companies.
MARKET RESEARCH STRATEGY:

 SURVEY LOCATION- NOIDA (NCR OF DELHI)

 TARGET OBJECT FOR THE SURVEY- PROPERTY

DEALERS.

 VOLUME OF SURVEY NUMBER- 100

 MODE OF CONDUCT OF SURVEY-

 PERSONAL VISIT TO THE OFFICE OF PROPERTY DEALER.

 TELEPHONIC INTERVIEW.

 SOURCE OF CONTACT-

 NEWS PAPERS.

 INTERNET.
  LEADS GIVEN BY THE OFFICE.

QUESTIONAIRE FOR MARKET SURVEY

Name –
Address –
Mob. No -

i. Why you deal in real estate?

(1) Profit (2) Low risk (3) Future growth (4)
Others

ii. Have you heard about Vigneshwara Developers ?

(1) Yes (2) No

iii. If yes than from where?

(1) Electronic Media (2) Print Media (3) Friends
(4) Others
 iv. Are you interested in investment in real estate ?
(1) Yes (2) No (3) In future

v. Have you heard about Vigneshwara developer’s IT-Park Project in

Gurgaon-Manesar corridor ?
(1) Yes (2) No

vi. Which developer’s IT-Park Project you have heard about ?

Ans-

vii. Which is the best product of real estate?

(1) IT-Park (2) Commercial (3) Residential (4)
Others

viii. Why ?
Ans-

ix. Given the option which one will you opt for investment ?
(1) Residential (2) IT-Park (3) Commercial (4)
Others

x. Why investment in residential ?

Ans-

xi. Why investment in IT-Park ?

Ans-
 xii. Why investment in commercial ?
Ans-

xiii. Out of the following which one you think is the best option for
investment?
(1) Real estate (2) Mutual Funds (3) Stocks (4)
Others

xiv. Why ?
Ans-

xv. (15) Have you heard about Real Estate Mutual Fund [REMF] and
Real Estate Investment Trust [REIT]
(1) Yes (2) No

xvi. (16) Do you refer to real estate magazines and journels before
nvestment in real estate ?
(1) Always (2) Sometimes (3) Never

xvii. You see investment in real estate as-

(1) Long term investment (10 years and above)
(2) Medium term investment(5- 10 years)
(3) Short term investment (1-5 years)
xviii. (18) Which is the most compelling factor for investment in real
estate ?
(1) Long term investment (2) Good return on investment
(3) Better option in comparison to mutual funds, stocks, ulip, etc.
(4) Others

xix. (19)Which is the most important parameter while investment in

real estate ?
(1) Location (2) Return on investment
(3) Developer’s plan (4) Others

xx. (20)Which is the most important factor which deters from

investment in real estate ?
(1) High risk (2) Lack of transperancy
(3) Other better options (4) Others

Remark for Real Estate sector-

Remark for Vigneshwara Developer’s-

 OBJECTIVE OF MARKET SURVEY

i. To get the insight about the function of channel partners in the

market.

ii. To know how channel partners react to the certain real estate
products like commercial, residential, hospitality, and it-ites sector.
iii. To know the market strategies of the competitors.

iv. To get the feedback about the company’s ongoing project.

v. To know what is the current trend in real estate market.

BIBLIOGRAPHY

www.realestateonline.in
www.indianrealestateforum.com

www.ibef.org

www.realtybytes.com

www.zameen-zaidad.com

Times of India

Hindustan times

Business Today

Business World