A

BRIEF REPORT
ON
REAL ESTATE SECTOR IN INDIA
January 2015

1. INDIAS REAL ESTATE SECTOR

2.1 Overview
The real estate sector in India has come a long way by becoming one
of the fastest growing markets in the world. It is not only successfully
attracting domestic real estate developers, but foreign investors as well.
The growth of the industry is attributed mainly to a large population
base, rising income level, and rapid urbanisation.
The sector comprises of four sub-sectors- housing, retail, hospitality,
and commercial. While housing contributes to five-six percent of the
countrys gross domestic product (GDP), the remaining three subsectors are also growing at a rapid pace, meeting the increasing
infrastructural needs.
The real estate sector has transformed from being unorganised to a
dynamic and organised sector over the past decade. Government
policies have been instrumental in providing support after recognising
the need for infrastructure development in order to ensure better
standard of living for its citizens. In addition to this, adequate
infrastructure forms a prerequisite for sustaining the long-term growth
momentum of the economy.
The Indian real estate sector is one of the most globally recognised
sectors. In the country, it is the second largest employer after
agriculture and is slated to grow at 30 per cent over the next decade. It
comprises four sub sectors - housing, retail, hospitality, and commercial.
The growth of this sector is well complemented by the growth of the
corporate environment and the demand for office space as well as
urban and semi-urban accommodations. The construction industry ranks
third among the 14 major sectors in terms of direct, indirect and induced
effects in all sectors of the economy.
It is also expected that this sector will incur more non-resident Indian
(NRI) investments in the near future, as a survey by an industry body
has revealed a 35 per cent surge in the number of enquiries with
property dealers. Bengaluru is expected to be the most favoured property
investment destination for
NRIs, followed by Ahmedabad, Pune,
Chennai, Goa, Delhi and Dehradun. Private equity (PE) funding has
picked up in the last one year due to attractive valuations.
Furthermore, with the Government of India introducing newer policies
helpful to real estate, this sector has garnered sufficient growth in recent
times.

2.2 Segments in the Indian real estate sector

Residential
space

Real Estate sector

Fragmented market with few large

players
Demand of over 300,000 units in the
seven major cities in 2010

Few players with presence across India

Commercial
Over 38.2 million sqft demand in 7
space
major cities in 2011

Retail space

FDI in multi- brand retail to boost

demand
Fragmented market with few national
players

Hospitality
space

A competitive market with many players

Over 121,000 hotel rooms in the
country as of 2011

SEZs

589 SEZs have been approved by the

government so far
Majority of SEZs are in the IT/ ITeS

2 REAL ESTATE MARKET

2.1

Market Size
The real estate sector in India
is being recognised as an
Growth in tourism
infrastructure service that is
driving the economic growth
engine of the country. The
Policy support
Indian real estate market size Urbanisati on
is expected to touch US$ 180
billion by 2020. Foreign direct
Growth drivers
investment (FDI) in the sector
is expected to increase to US$
25 billion in the next 10 years,
Growing economy
Easier financing
from present US$ 4 billion.
According to Department of
Epidemolo gical
Industrial Policy and Promotion
changes
(DIPP),
the
construction
development sector in India
has received foreign direct
investment (FDI) equity inflows
to the tune of US$ 23,874.1
million in the period April 2000September 2014.
The Indian real estate market size is expected to touch US$ 180 billion
by 2020. The housing sector alone contributes 5-6 per cent to the
country's gross domestic product (GDP). Also, in the period FY08-20, the
market size of this sector is expected to increase at a compound annual
growth rate (CAGR) of 11.2 per cent. Retail, hospitality and
commercial real estate are also growing significantly, providing the
much-needed infrastructure for India's growing needs.
Mumbai is the best city in India for commercial real estate investment,
with returns of 12-19 per cent likely in the next five years, followed by
Bengaluru and Delhi-National Capital Region (NCR). Also, Delhi-NCR
was the biggest office market in India with 110 million sq ft, out of
which 88 million sq ft were occupied. Sectors such as IT and ITeS,
retail, consulting and e- commerce have registered high demand for
office space in recent times.
The construction industry ranks third among the 14 major sectors in
terms of direct, indirect and induced effects in all sectors of the economy.
The industry's growth is linked to developments in the retail, hospitality
and entertainment (hotels, resorts, cinema theatres) sectors, economic
services (hospitals, schools) and information technology (IT)-enabled
services (like call centres) etc and vice-versa.
The sector is divided into four sub-sectors:
Housing

Retail

Hospitality

Commercial

The housing sub-sector contributes five-six per cent to the country's

gross domestic product (GDP). Meanwhile, retail, hospitality and
commercial real estate are also growing significantly, catering to India's
growing needs of infrastructure.
The Indian real estate market size is expected to touch US$ 180 billion by
2020.
India is going to produce an estimated 2 million new graduates from
various Indian universities during this year, creating demand for 100
million square feet of office and industrial space.
2.2

Major acquisitions in real estate sector in India

Target
Caraf Builders
Cowtown Land
DvlpPvt Ltd
Compact Disc film
city
Oceanus Real
Estate
Indiabulls
Properties Pvt
Embassy Property

Acquirer
DLF Assets ltd
Lodha Group
Jeff Morgan
Warburg
Pincus
Indiabulls
Property
Blackstone

Valu
e ($
696.5
513.6

Year

320
318
223.1

2011
2011
2012

200

2012

2009
2011

3 MARKET PLAYERS
The Indian real estate sector has traditionally been an unorganised sector
but it is slowly evolving into a more organised one. The sector is
embracing professional standards and transparency with open arms.
The major established domestic players in the sector are DLF, Unitech,
Hiranandani Constructions, Tata Housing, Godrej Properties, Omaxe,
Parsvanath, Raheja Developers, Ansal Properties and Infrastructure and
Mahindra Lifespace Developers Ltd to name a few. International players
who have made a name for themselves in India include Hines, Tishman
Speyer, Emaar Properties, Ascendas, Capitaland, Portman Holdings and
Homex.
3.1

DLF Ltd
DLF group is a leading real estate developer in India since 1946. DLF
has been instrumental in putting Gurgaon on the urban landscape of
India. DLF has over 220 million sq. ft. of existing development projects
and 574 million sq. ft. of planned projects. DLF has so far developed 22
urban colonies, and an entire integrated 3,000-acre township - DLF
City. DLF's development projects across India span over 30 cities:
Gurgaon, Ambala, Shimla, Amritsar, Jalandhar, Ludhiana, Sonepat,
Panipat, Chandigarh, Panchkula, Noida, New Delhi, Jaipur, Indore,
Ahemdabad, Baroda, Lucknow, Faridabad, Mumbai, Pune, Nagpur,
Goa,
Kochi, Kokkanad, Chennai, Bangalore, Vytilla, Coimbatore,
Hyderabad, Bhubhaneshwar and Kolkata.

3.2

UNITECH
Established in 1972, Unitech is Indias leading real estate developer
in India. It is the first developer to have been certified ISO 9001:2000 in
North India.
Project Spectrum: Unitech offers diversified projects across residential,
commercial/IT parks, retail, hotels, amusement parks and SEZs
segments. Unitech was the first real estate company to be part of the
National Stock Exchanges NIFTY 50 Index. The company has over
600,000 shareholders. Unitech and Norway based Telenor Group came
together to build Uninor - a telecommunication services company
providing GSM services across India.

3.3

Ansal API
Established in 1967 as a family business, Ansal API today is clearly
amongst the real estate leaders of India. Having established itself very
strongly in the NCR region, Ansal API is now focusing on ventures in
cities like Bhatinda, Mohali, Amritsar, Ludhiana, Jalandhar, Jaipur,
Jodhpur, Ajmer, Sonepat, Panipat, Karnal, Kurukshetra, Faridabad,
Gurgaon, Greater Noida, and Ghaziabad, Meerut, Agra, Lucknow, to
name a few. Ansal API has till date, developed and delivered more than
190 million sq ft. The company currently has a land reserve of about
9,335 acres.

Project Spectrum: Integrated Townships, Condominiums, Group Housing,

Malls, Shopping Complex, Hotels, SEZs, IT Parks and Infrastructure and
Utility Services

3.4

Sobha Developers Ltd

The Company was founded in 1995 by PNC Menon after he returned
home from the Middle East where he was acclaimed for quality interiors
and construction since 1977. Today, this Rs10 billion plus company is one
of the largest and only backward integrated company in the construction
arena. Its IPO in 2006 was oversubscribed by 126 times that created
history, being the first event of its kind in Indian capital markets.
Till date, Sobha has completed 47 residential projects, 13 commercial
projects and 166 contractual projects covering about 36 million sq.ft
area in 18 cities across India (as of 31 March 2010). The company
currently has 21 ongoing residential projects aggregating to 8.5 million
sq.ft, while 4.24 million sq.ft of contractual projects are under various
stages of construction.

3.5

Parsvnath Developers Ltd

Incorporated in July 1990 by Mr Jain in New Delhi, Parsvnath today has a
substantial pan India presence in over 45 cities across 16 states. The
company has emerged as one of the most progressive and multifaceted real estate and construction entities in India.
Project spectrum: Housing (premium, mid-market as well as affordable),
office complexes, shopping malls & hypermarkets, hotels, multiplexes, IT
Parks and SEZs.

4 POLICY INITIATIVES
4.1 Government Initiatives
Under the Sardar Patel Urban Housing Mission, 30 million houses
will be built by 2022, mostly for the economically weaker sections
and low-income groups, through public-private- partnership, interest
subsidy and increased flow of resources to housing sector.
The Government of India along with the governments of the
respective states have taken several initiatives to encourage the
development in the sector. Some of them are as follows:

The Securities and Exchange Board of India (SEBI) has notified final
regulations that will govern real estate investment trusts (REITs) and
infrastructure investment trusts (InvITs). This move will enable easier
access to funds for cash-strapped developers and create a new
investment avenue for institutions and high net worth individuals,
and eventually ordinary investors.
The Telangana Real Estate Developers' Association (Treda) plans to
host the Fifth Treda Property Show 2014 at Hitex Centre,
Hyderabad. The show will be open to a mix of the populace,
including prospective property purchasers, investors, architects and
others.
The State Government of Kerala has decided to make the process of
securing permits from local bodies for construction of houses
smoother, as it plans to make the process online with the launch of a
software called 'Sanketham'. This will ensure a more standardised
procedure, more transparency, and less corruption and bribery.
The Government of India has proposed to release the Real Estate
(Development and Regulation) Bill which aims to protect consumer
interest and introduce standardisation in business practices and
transactions in the sector. The bill will also enable domestic and
foreign investment flow into the sector.
As the Indian economy grows, the real estate sector keeps benefiting.
With the increase in foreign tourist arrivals (FTA) every year, there is
demand for real estate in the tourism and hospitality sector. Also,
with the entry of major private players in the education sector, the
major cities, that is Hyderabad, Bengaluru, Mumbai, Delhi, Pune,
Chennai and Kolkata are likely to account for 70 per cent of total
demand for real estate in the education sector. Demand for improved
healthcare facilities is also expected to provide a boost to the
construction sector in the country.

4.2 Investments
The Indian real estate sector has witnessed high growth in recent times
with the rise in demand for office as well as residential spaces. Some
of the major investments in this sector are as follows:

Assotech Realty has tied up with Lemon Tree Hotels to manage and
operate its serviced residences. The first project, 210 apartments
under the branding of Sandal Suites, will be launched in Noida in
2015. The companies will launch 8-10 similar projects in a phased

manner over the next seven years with an investment of Rs 80009000 million (US$ 129- 145 million) approximately.
Blackstone Group LP is all set to become the largest owner of
commercial office real estate in India after a three-year
acquisition drive in which it spent US$ 900 million to buy prime
assets. Blackstone has acquired 29 million sq ft of office space in
cities such as Bengaluru, Pune, Mumbai, and Noida on the outskirts
of New Delhi.
L&T Infra Finance Private Equity (PE) plans to raise Rs 37,500
million (US$ 607 million) in an overseas and a domestic fund, and
launch a real estate fund.
IDFC Alternatives Ltd has sold two of its real estate investments to
PE firm Blackstone Group LP. The assets - a special economic
zone (SEZ) in Pune and an information technology (IT) park in
Noida - were sold for a combined enterprise value of Rs 11,000
million (US$ 178 million).
Goldman Sachs plans to invest Rs 12,000 million (US$ 194
million) to build a new campus in Bengaluru that can
accommodate 9,000 people. The new campus is being developed
in collaboration with Kalyani Developers on the Sarjapur Outer
Ring Road, Bengaluru.
Snapdeal has entered into a strategic partnership with Tata
Value Homes to sell the latter's apartments on its e-commerce
platform, which marks the first time that an e- commerce
company has tied up with a real estate venture.

5 CHALLENGES &INVESTMENT OPPORTUNITIES

5.1 Challenges
The key challenges that the Indian real estate industry is facing today are:

lack of clear land titles,

absence of title insurance,

absence of industry status,

lack of adequate sources of finance,

shortage of labour,

rising manpower and material costs,

approvals and procedural difficulties.

5.2 Investment Opportunities

The real estate industry in India is yet in a promising stage. The sector
happens to be the second largest employer after agriculture and is
expected to grow at the rate of 30 per cent over the next decade. A
growing migrant population due to increasing job opportunities, together
with healthy infrastructure development, is underpinning demand in the
regions residential real estate market.
It is believed that the Finance Ministry's motivation through softening
of interest rates and lending more to the real estate sector will have
a positive impact on both developers and consumers. The real estate
market could start to perform better as the easing of FDI norms will
begin to show results during the second half of the year. The economy
will also recover in 2013 which in turn will perk up the real estate sector
in India. With the government trying to introduce developer and buyer
friendly policies, the outlook for real estate in 2013 does look
promising.
Real estate contributed about 6.3 per cent to India's gross domestic
product (GDP) in 2013. The market size of the sector is expected to
increase at a compound annual growth rate (CAGR) of
11.2 per cent during FY 2008-2020 to touch US$ 180 billion by 2020.
The Government of India has allocated US$ 1.3 billion for Rural
Housing Fund in the Union Budget 2014-15. It also allocated US$ 0.7
billion for National Housing Bank (NHB) to increase the flow of cheaper
credit for affordable housing for urban poor. The government has
allowed FDI of up to 100 per cent in development projects for townships
and settlements.
The entry of major private players in the education sector has created
vast opportunities for the real estate sector. Emergence of nuclear
families and growing urbanisation has given rise to several townships
that are developed to take care of the elderly. A number of senior

citizen housing projects have been planned, and the segment is expected
to grow significantly in future. Growth in the number of tourists has
resulted in demand for service apartments. This demand is likely to be on
the uptrend and presents opportunities for the unorganised sector.

Niche sectors expected to provide growth opportunities

The healthcare sector is estimated o grow at the rate of 15 per cen per a
India is expected to need additional 920,000 beds, entailing an investmen

Healthcare

Emergence of nuclear families and growing urbanisation has given rise to

A number of senior citizen housing projects have been planned; the segm

Senior citizen housing

Growth in the number of tourists has resulted in dem

This demand is likely to be on uptrend and present

Service apartments

5.3

Tourism market set for a

surge; hotels to increase
capacity

Foreign tourists arriving in India

(000)
10
9
8
7
6
5
4
3
2
1
0

Foreign tourist arrivals in India

are expected to rise at a
CAGR of 10.5 per cent during
2012-15
The number of foreign tourists
arriving in the country is
expected to be over 8.9 million
by 2015
The number of hotel rooms in
India as of 2011 stood at
121,000
The number of hotel beds in
the country is expected to
increase to 443,000 by 2015
from the current capacity of
262,000

CAGR:
10.5%

6.6

7.4

8.2

8.9

2012F

2013F

2014F

2015F

Capacity of hotels in India (000)

500
450
400
350
300
250
200
150
50
0

443
392

210

241

98

109

2009

2010

295

262
121

2011

135

2012F

339

154

2013F

176

2014F

197

2015F