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A Study of Financial Viability and Risk Assessment of Real Estate

Project undertaken by Ansal Housing in Jhansi





ROLL NO.06216603912_ BATCH NO. 2012-14




Submitted To:

University School of Management Studies,

Guru Gobind Singh Indraprastha University
Sector- 16C, Dwarka, Delhi 110075

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This to certify that I have completed the project titled financial aspect of project and
contract management under the guidance of Sanjay Dhingra in the partial fulfillment
of the requirement for the award of the degree of Master in Business Administration
from University School of Management Studies, New Delhi. This is an original work
and I have not submitted it earlier elsewhere.

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This is to certify that the project titled Financial aspect of project and contract
management is an academic work done by AMIT GOYAL submitted in the partial
fulfillment of the requirement for the award of the degree of Masters in Business
Administration from University School of Management Studies, New Delhi. under my
guidance and direction. To the best of my knowledge and belief the data and information
presented by him in the project has not been submitted earlier elsewhere.

Sanjay Dhingra

(Project Guide)


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I offer my sincere thanks and humble regards to University School of Management

Studies, GGSIP University, New Delhi for imparting us very valuable professional
training in MBA.

I pay my gratitude and sincere regards to Mr. Vineet Miglani, Additional general
manager (finance dept) my external guides and Sanjay Dhingra, my internal guide,
who has been constant source of inspiration and encouragement to me., my project Guide
for giving me the cream of his knowledge. I am thankful to him as he has been a constant
source of advice, motivation and inspiration. I am also thankful to him for giving his
suggestions and encouragement throughout the project work.

I take the opportunity to express my gratitude and thanks to our computer Lab staff
and library staff for providing me opportunity to utilize their resources for the
completion of the project.

I am also thankful to my family and friends for constantly motivating me to complete the
project and providing me an environment which enhanced my knowledge

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Student Declaration i
Certificate from Guide ii
Acknowledgement.. iii
Executive Summary. iv

Page no.
Executive Summary... 1
1.1 About the Industry 5

1.2 About the company

1.2.1 Mission

1.2.2 Vision..

1.2.3 Overview of the projects carried out by ANSAL Housing


2.1 Literature Review 11
2.2 About the Topic... 13


3.1 Purpose of the Study 15
3.2 Research Objectives of the Study.. 16
3.3 Research Methodology of the study.. 17
3.3.1 Research Design.. 17
3.3.2 Sample Design 18
3.3.3 Data Collection.. 19
3.3.4 Drafting of a questionnaire.. 19
3.3.5 Limitations 19


4..1 Analysis & Interpretation 20

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5.1 Findings.. 55
5.2 Suggestions.. 56

6.1 Conclusion 57


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We have worked on the Real Estate project Ansal Palm Court, Jhansi constructed by
Ansal Housing and construction Limited. The main objective of this project is to see
whether this project would be profitable to execute. For this purpose, cash flow
statements are calculated for the coming five years to see if returns generated from the
project are worth the investment.

To asses the financial viability of the project we have calculated the profit considering
three cases i.e.
1) Base Case: This is under normal circumstances. We get desired projected yield or
2) Best Case: it will occur in favorable conditions and will lead to higher yield and profit.
Here costs will be less and demand will be high.
3) Worst Case: it will occur under abnormal circumstances, this will help us to calculate
minimum profit or yield we get from the project under taken. Here costs will be high and
demand or sales will be slow.

According three cash flow statements are generated for each case to calculate the profit
and find out the financial viability of the Ansal Palm Court. The profit generated has
helped us to identify, if the project should be undertaken or not and the range of
maximum and minimum profit that can be earned.

The project seems to be profitable as inferred from the projected cash flow statement and
profitability statement.

Then we have also carried out a survey to study the real estate investments preferences of
people and find out if they are willing to relocate or invest in second and third tier cities
like Jhansi. We have also tried to find out the probable reasons for investing and not
investing in these types of cities.

Majority favored investing in these cities mainly because of cheaper rates, bright future
prospects of development and less congestion. Others who werent in the favor preferred
metropolitan cities mainly because of good water and electricity supply, better facilities
of schools, hospitals and shops etc. and less distance from their office.

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1.1 About the Industry


The Indian real estate and construction industry is an integral part of Indian economy and
plays an important role in the development of the countrys infrastructure base. The
contribution of the real estate sector to Indias gross domestic product (GDP) has been
estimated at 6.3 per cent in 2013, and the segment is expected to generate 7.6 million jobs
during the same period. It is also expected to generate over 17 million employment
opportunities across the country by 2025.

The sector comprises of four sub-sectors- housing, retail, hospitality, and commercial.
While housing contributes to five-six percent of the countrys GDP, the remaining three
sub-sectors are also growing at a rapid pace, meeting the increasing infrastructural needs.

Riding high on the back of rapid urbanization, positive demographics and rising income
levels, the Indian real estate sector has attracted significant investment over the past few
years. The growing stability of the market is reflected by the continuous growth of the
core investors, with over Rs 7,705 crore (US$ 1.14 billion) invested in ready office space
during the last three years.

Market Dynamics

The real estate sector of India is expected to post annual revenues of US$ 180 billion by
2020 as compared to US$ 66.8 billion in 2010-11, registering a compound annual growth
rate (CAGR) of 11.6 per cent. In fact, the demand is expected to grow at a CAGR of 19
per cent between 2010 and 2014, with tier I metropolitan cities projected to account for
about 40 per cent of this.

Mumbai, NCR and Bengaluru account for 46 per cent of total office space demand in
India. Demand growth projected to be the highest in Tier 2 cities such as Kolkata and
Chennai during 2010-14.


The prime office space segment across the countrys key cities- Mumbai, the National
Capital Region (NCR), Pune and Bengaluru has witnessed a fresh supply infusion of
more than 20 million square feet (sqft) in the first six months of 2013, witnessing a
growth of 16 per cent on year-on-year (y-o-y) basis, as per a report by CBRE.

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The country is ranked 20th among the top global markets for real estate investment in
2012, with investments worth US$ 3.4 billion during the year, according to a latest report
by Cushman & Wakefield. It is also estimated that foreign direct investment (FDI) into
real estate in India will increase to US$ 25 billion over the next 10 years.

Construction development sector (including townships, housing, built-up infrastructure &

construction-development projects) has attracted a cumulative FDI worth US$ 22,247.50
million from April 2000 to June 2013. FDI flows into the construction (infrastructure)
activities during the period stood at US$ 2,198.77 million, according to the department of
industrial policy and promotion (DIPP).

Some of the major investments in the Indian real estate sector are:

Peninsula Land has signed an agreement to buy a five-acre property in the

Byculla area of Mumbai from its joint owners, Mahindra Lifespaces, the realty
arm of Mahindra Group, and the Kanorias, for around Rs 650 crore (US$ 96.45
Godrej Properties Ltd (GPL) has entered into an agreement to develop 37 acres in
Panvel, Maharashtra. The company will receive 35 per cent of the profits from the
Cushman & Wakefield has entered into an agreement to acquire Singapore-based
project management specialist company Project Solution Group (PSG). The
acquisition is aligned with the firm's global strategy to strengthen its operations in
the Asia-Pacific
Reliance Industries is expanding its presence in Africa's real estate sector. The
firm acquired 10 prime plots of land in Nairobi, Kenya, for around Rs 202 crore
(US$ 29.97 million)
Germany-based SEA Group, engaged in the living space solutions segment, plans
to invest Rs 40 crore (US$ 5.94 million) over the next two years in its Indian

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1.2 About the company

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Company Overview

The Ansal Group is amongst the handful of Indian corporates that have built a global
reputation through a culture of innovation and excellence. Four decades ago, this
dynamic enterprise altered Delhi's corporate skyline. Today, its activity profile
encompasses the entire gamut of real estate development and construction activity, both
in India and abroad.

Bearing testimony to Ansals' unmatched expertise are a host of high-rise commercial and
residential complexes, environmental upgradation projects, farm lands, hi-tech
engineering projects, schools, technical and professional institutes, industrial estates, etc.
Colonization is yet another thrust area for Ansals. Several modern townships have been
developed by the group with various infrastructural facilities and amenities.

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To design, build and market residential and commercial complexes of international

Ansal Housing wish to leave no stone unturned to fulfill the dreams of their customers in
India & Overseas. Be it residence, recreation, office or shopping, they want to be present
in every sphere of your life, enriching the way you live. They are committed to achieving
new landmarks in property development - not only in India, but across the globe.

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A tomorrow where the world will see them as the most trusted and reputed company in
the real estate business in India and overseas.

To be rated as a company that should be emulated as the benchmark for

processes and practices in the real estate and construction segment.

To outperform peer groups through innovation and quality, and by offering

customer-oriented products at the most competitive prices with timely
delivery, corporate governance and management accountability.

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Ansal Housing is one of the Premier Real Estate Developers in India and Overseas who
have worked relentless for decades, to help build a stronger nation.
Since inception in 1983, Ansal Housing has given a new dimension to Indian
infrastructure development. The Company has developed world-class townships,
residential complexes, commercial complexes, retail space, hotels and movie-halls that
have set new standards in quality and architectural excellence, delivering the best to its
customers, stakeholders and investors.

Sources of Funds

In the real world businesses can use a wide range of sources of funds to help finance their
trading activities. Not all of them are in cash; some financing is done by taking loans
from the banks or any financial institutions.

A company would choose from among various sources of finance depending on the
amount of capital required and the term for which it is needed. Finance sources can be
divided into three categories, namely traditional sources, ownership capital and non-
ownership capital.

Traditional Sources of Finance

Internal resources have traditionally been the chief source of finance for a company.
Internal resources could be a companys assets, personal savings and profits that have not
been reinvested or distributed among shareholders. Working capital is a short term source
of finance and is the money used for a companys day-to-day activities, including
salaries, rent, payments for raw materials and electricity bills.

Sources of Finance: Ownership Capital

Ownership capital is the capital owned by the shareholders of a company. A company

can raise substantial funds through an IPO (initial public offering). These funds are
usually used for large expenses, such as new product development, expansion into a new
market and setting up a new plant.

Sources of Finance: Non-Ownership Capital

Non-ownership capital includes funds raised from lenders, such as banks and creditors.
Companies typically borrow a fixed amount from a bank, at a predetermined interest rate
and with a fixed repayment schedule.

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Ansals Palm CourtJhansi project is financed through bank. For a company to take a
corporate loan, a company should provide CMA data to the bank. But for a particular
project, the bank asks for the projected cash flow statement.

Bank gives loan for the construction and as the receivables starts to come, the loan is
repaid on regular intervals. Bank loan is the main source of funding the project.

Usually the company buys the land by way of equity or at times it goes for the
collaboration. The company collaborates with other company or individual and purchases
the land to build the group housing or commercial project.

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Strong Foothold - Presence across 21 cities in India

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Residential Projects

AnsalTown AnsalTown AnsalTown

Agra Muzaffarnagar Indore

Ansals Woodbury Apartments

AnsalTown Ansals Courtyard Zirakpur
Karnal Meerut

Ansals Courtyard AnsalsTanushree
Agra Ghaziabad

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Ansals Grace
AnsalTown Jammu AnsalTown
Rewari Alwar

Ansals Elegance AnsalTown Ansals Perth Paradise

Ghaziabad Meerut SriLanka

Ansals Palm Court

Ansals Whispering Meadows Ansals Orchid Greens Jhansi
Mulund (West), Mumbai Lucknow

Ansal Town
Ansals Suvarna Vilas AnsalsHermanCity Jagadhari, Yamuna Nagar
Shahpur, Maharashtra Kurukshetra

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Commercial Projects

AnsalsShivam AnsalPlaza AnsalPlaza Corporate Suites

Ghaziabad Vaishali Vaishali

Ansals Fortune Arcade Ansals Corporate Floors New Delhi
Noida (At AnsalsPlaza) Vaishali

AnsalsClassiqueTower AnsalsImperialTower
New Delhi New Delhi AnsalsLaxmi Deep
New Delhi

AnsalsVikas Deep AnsalsPragati Deep

New Delhi New Delhi

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Hospitality Projects

Chancellor Clubs Cusine The Great Kabab Factory

Lucknow, Vaishali, Ghaziabad Noida Noida

Marriott WelcomHotel
The Great Kabab Factory Cusine
New Delhi
Saket Vaishali

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Focus on Integrated Townships Focus on Tier II Cities

Residential Common branding under Ansal Look for Opportunistic
Courtyard or AnsalTowns development in Tier I Cities

Pure play in office spaces other Grow the existing marquee

Commercial than IT parks clientele base
Acquire , Develop and Sell Model Cautious foray into SEZs

Pioneer in Mall Development Explore creative retail formats

Retail Malls Develop Malls as a part of the Develop a niche in Mall
Integrated township strategy Management and
Adopt a Lease and Sell Model Development

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The real estate sector has become a major contributor of an economys growth. To
understand the significance of the sector and its implications there have been various
research on real estate industry both in India and abroad. The research are being
conducted to gain more knowledge about the various factors contributing to the growth
of the industry and also to analyse the factors which effect the decision of investment in
the sector. I have tried to study few such research papers to get a better idea about the
current scenario of the real estate sector.

Graeme Newell and Rajeev Kamineni (April, 2007): In their research paper assessed the risk-
adjusted performance and portfolio divarication benefits for the real estate markets
(office, retailand residential) of New Delhi and Mumbai. The real estate markets were
found to under- perform the stock market in India over 1998 2005, with most markets
improving their performance in more recent years, although there was some loss of
portfolio diversification benefits for office and residential real estate with stocks.
Deregulation of the capital markets and international investment in India is also likely to
have significant impact on future FDI levels and the growth of real estate funds for real
estateinvestment in India. They also studied that offshoring in the cities like Delhi and
Mumbai has created huge demand for better infrastructure. This area of offshoring has
significant real estate investment issues; particularly concerning technology parks, access
to Grade A office space.

They have also concluded that deregulation of the Indian capital markets since 2004, and
less restrictive guidelines for foreign direct investment in real estate in India since
February 2005 have seen significant improvements in the real estate investment
environment in India for both local and international players. This has taken on increased
importance as India significantly expands its economic growth to potentially be the
worlds third largest economy by 2020, and international real estate investors seek global
investment opportunities; particularly in the emerging Asian real estate markets.
Theexpected development of REITs in India in the next few years will also expand the
real estate investment opportunities available in India.

Vandna Singh and Komal (2009): In their research paper found that as the GDPincreases the
real estate prices also increases because there is a high degree of Positivecorrelation
between the real estate prices and GDP. The Real estate prices also increases with
increase in the per capita income as there is high degree of positive correlation between
these two. The FDI into the country affects the real estate FDI and real estate having a
positive correlation leads to the boom in this sector. Increase in FDI from 2006to march
2007 is 10%. Earlier it was 16% and now in 2008 it is 25%.

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The interest rate also affects the real estate prices because it affects the lending
and borrowing by the investors. In residential segment, availability of easy home finance
and rising purchasing power has driven the growth. Builders are launching high-end, life
style residential products to cater to the growing bunch of high net worth individuals.

They suggested that due to high prices the lower income group is not able to purchase the
land, so govt. should take measures to protect the lower income group. The investors
should analyse the type of land in which they are going to invest and the potential
Returns from it. Due to lot of investment avenues in real estate in India, fraud cases are
also increasing day by day like in Delhi deconstruction of buildings. Thus careful
measures and laws should be enacted to deal with these types of situations.

Natalija stated that Advantage India Real estate is one of the fastest growing sectors in
India. Market analysis pegs returns from realty in India at an average of 14% annually
with a tremendous upsurge in commercial real estate on account of the Indian
BPO boom. Lease rentals have been picking up steadily and there is a gaping demand
for quality infrastructure. A significant demand is also likely to be generated as the
outsourcing boom moves into the manufacturing sector. Further, the housing sector
has been growing at an average of 34% annually, while the hospitality industry witnessed
a growth of 10-15% last year.

Jim Berry stated that the highest and best use analysis is another component of property
investment analysis, especially in the case of vacant land or deteriorated property that
needs to be redeveloped. Highest and best use is defined as the most profitable use at
which a site can be developed. Thus, highest and best use analysis is usually carried out
for land sites that are acquired for development purposes. A sites highest and best use
will depend on a number of factors including site physical characteristics, its location,
make up and purchasing power of the population in its area of influence,
competitive projects in its area of influence, market conditions and prospects at the time
of analysis, and other factors. If the land site is zoned in an urban use, the highest and
best use analysis will focus on the feasibility and profitability of developing the
alternative allowable uses.

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Future of Real estate in Indian Economy

Analysing the current scenario there has been various researches forecasting the future
of the real estate industry. According to them the Real Estate potential in India is vast.
The market is expected to grow at 33% through 2005-2010 to US 50 billion as per
Negandhis(2007) estimates. Tremendous potential demand along with an improving
regulatory landscape, robust economic growth and gradually improving 27 corporate
governance standards of developers makes the real estate market in India over the next
five years highly sustainable. This strong potential demand is expected to result in an
exponential growth in development plans of real estate companies. According to
Negandhi (2007),development is expected to reach 16 billion square feet across all
segments of the real estate market by 2010 The plan ahead seems sustainable; however it
would be unwise to forget the experience of the 1985-93 boom/bust in real estate that has
left industry players nervous about when it might happen again.
Kaiser (1997): Examines the possible causes and the periodicity of such major real estate
cycles. The evidence suggests that both periods of negative returns, (early 1930s and
early 1990s) were caused by excessive levels of new construction which caused an
inflation spike in the general level of prices, suggesting a 50- 60 year real estate bust
cycle. The paper safely concludes that India is not likely to witness another bust period
for real estate in thenext four decades.

The conclusions of Kaiser can be witnessed with the bullishness underlying in the
development proposed by the cumulative strength of the Indian developers. Historically,
Indian real estate companies have undertaken development of 1million- 3million square
feet of real estate annually. With strong growth in demand expected across segments
of real estate over the next few years
Desai &Rane (2006): estimate development plans of real estate companies to rise to
20million- 30million square feet annually. To sustain these growth levels, the flow of
capital into the sector will be carried out through REITs.. REITs is the future of the
Indian real estate market. It is expected to lend the much needed liquidity to developers
and allow them to take out their capital value off completed projects for deployment in
newer projects. REITs also serve as an effective vehicle for broader participation by
investors in the market.

However, without demand and latent capital adequacy, none of these plans will
materialize effectively for the players in this segment and a good chunk of their demand
and capital is expected in the form of Foreign Direct Investments. The paper by
Henley(2004) compares the performance of India and China in attracting foreign direct
investment (FDI). FDI statistics suggest that India's performance has been significantly
understated but India still falls behind for several reasons such as high tariff

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structure, poor physical infrastructure, a regulatory system that is too often not business
friendlyetc. Nonetheless, India has displaced USA as the second-most favoured
destination for FDI in the world. ASSOCHAMs (The Associated Chambers of
Commerce and Industry of India) study on Future of Real Estate Investment in India
forecasts that of estimated US$ 60 billion future market size of real estate business in
India, the share of foreign investments will be within the range of US$ 25-28 billion by
2010. The overseas investments will also be finding larger space in Indian SEZs and
increasing number of shopping malls that will naturally fatten their share in real estate
market. Indian real estate sector is on boom and this is the right time to invest in property
in India to reap the highest rewards.

Real estate investment trust by KASB securities limited (2005): it came to light that since REIT
allows indirect investment in real estate for small investors who otherwise could have not
had this opportunity. And that it is one of the vehicles that have single taxation and it also
offer low volatility and ease of was suggested that REITs listed under NBFC
should be allowed to invest in real estate development and acquisition. Exposure limits
needed redefinition with respect to a REIT, REITs should be allowed to borrow.
Regarding Modifications to Income Tax Ordinance it was suggested that
-Gains from sale proceeds of land and or building to a REIT should be tax free
- REITs should be granted a status of investment scheme formed under NBFC Rules as a
result of which it would be tax exempted.
Changes in Voluntary Pension Rules suggested that Under Voluntary Pension
Rules, pension funds should be allowed to invest in REITs.
Various other recommendations included

The Land Record System should be computerized

Tenancy Laws should be strengthened and should be classified as criminal law

for settlement of disputes efficiently for property formed under REIT structure

Transaction costs should be reduced

Buyers of property from REITs should not be asked source of income.

Though the above recommendations were made however, it was concluded that the
markets will not function smoothly unless the rental yields improve, tenancy laws are
strengthened, official and unofficial pricing issue is settled, paghri system is abolished,
and the time consumed in legal proceedings is reduced.

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The ups and down of Real Estate Markets
Dirk Brounen (December, 2008) : Said that the Real estate markets around the world have
earned a complicated reputation. On the one hand, real estate markets offer investors
awide spectrum of profitable investments opportunities, investments that nowadays can
be executed by simply buying shares of stock listed by real estate investment companies.
Inthe first half of this inaugural address, the boom of these real estate stocks is discussed.
In less than three decades, the listed real estate market developed into a sector with
almost400 listed firms worldwide, representing a sum aggregate market capitalization of
around one trillion dollars by the end of 2007. Three relevant lessons regarding these
international real estate stocks are discussed in the first fifteen pages of this booklet,
lessons offered by real estate research from the Rotterdam School of Management. On
the other hand, real estate markets are notorious for attracting entrepreneurs with bad
intentions, seeking for opportunities to circumvent the strong arm of the law. These
activities have yielded many headlines in the daily press and have given real estate a
gloomy reputation. The dynamics of foreclosure auction of homes is an example of a
source of negative headlines, stressing that the suboptimal organization of these
auctions prohibits distressed sellers from earning a fair price for their home. In the second
part of this address, I focus on an empirical test of the matter. By analyzing over 700
auctioned homes the dynamics of the auction system is discussed objectively. This offers
a fair view on the problems at hand and searches for way to improve the system in the
near future.

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To study and evaluate growth and performance of the company and factors affecting
it through data collection, observation of balance sheet, sensitivity analysis of cash
flows, cost sheets and questionnaire.


1. To analyze various types of risks associated with the Jhansi project and hence
to find out financial viability of the project.

2. To study the performance of the company.

3. To study and analyze real estate investments preferences of people.


3.3.1 Research Design

The research design is Descriptive as well as Exploratory in nature.The contribution of the

real estate sector to Indias gross domestic product (GDP) has been estimated at 6.3 per
cent in 2013, and the segment is expected to generate 7.6 million jobs during the same
period. It is also expected to generate over 17 million employment opportunities across
the country by 2025.The sector comprises of four sub-sectors- housing, retail, hospitality,
and commercial. While housing contributes to five-six percent of the countrys GDP, the
remaining three sub-sectors are also growing at a rapid pace, meeting the increasing
infrastructural needs.

But since 2012 real estate is on decline. In midst of these situation it becomes necessary
to analyze and find where the company is going and find its future prospects and study
financial viability of any project it tends to undertake in the environment of uncertainty
and risks involved with the real estate sector.

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3.3.2 Data collection

DATA COLLECTION: The data collection methods include both the primary and
secondary collection methods.

It includes the data collected from the personal interaction with employees, telephonic
Interview, balance sheets, cost sheets, companys portal and cash flow statements etc.
Various liquidity, activity and profitability ratios have been used for analyzing the short-term
financial position of the dealers.
A total of 91 people were contacted through various mediums like phone, e-mail,
personal interviews, chats etc.
Additional sources of data were:
The brochures and material provided by Ansal Housing and construction Limited.
The data collected from the magazines, economic times, internet, books and journals etc.
The method of data collection used is SURVEY METHOD with the help of


SAMPLE SIZE: The sample size is 91 persons.
Sampling Method:-
Snow ball sampling
Snowball sampling uses a small pool of initial informants to nominate, through their
social networks, other participants who meet the eligibility criteria and could potentially
contribute to a specific study. The term "snowball sampling" reflects an analogy to a
snowball increasing in size as it rolls downhill

3.3.4 Drafting of a questionnaire:

To frame questionnaire or schedule, we have at first to decide regarding various questions

to be incorporated. This decision of the selection of questions depends upon the purpose
of enquiry. In this regard, precaution should be adopted to avoid irrelevant or
unnecessary questions. The questionnaire was formulated by keep in mind the following

Giving respondents clear understanding of the questions.

Inducing the respondents to be honest and help to fill in the entire questionnaire.
Giving instructions as to what is wanted.

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Identifying needs to be known.

3.3.5 Limitations at last

a. For performing these king of research large data base is required. The data
collected for this study is not sufficient to analyze the investment pattern
of investors in India.
b. There may be many variables which influences the result but this analysis
reveals only few variables.
c. There can be some deviations in the data as the human psychology
changes from time to time.
d. The feedback we got may not be correct as the respondent might have
filled in the information with no interest or in hurry.
e. Scientific research on the part of research is also required.
f. Accuracy level may be effected when data is subjected to weighing.
g. Time was the biggest constraint as these studies cannot be completed with
accuracy in two month.
h. Understanding the psychology of human is not the cup of every one tea so,
might be some interpretations go wrong.
i. Some respondents might have taken the question in different sense which
can change the data collected.

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Profit and Loss Statement (in crores)
Mar '13 Mar '12 Mar '11 Mar '10


Sales Turnover 427.62 400.01 292.78 205.82

Excise Duty 0.00 0.00 0.00 0.00

Net Sales 427.62 400.01 292.78 205.82

Other Income 8.03 3.39 11.64 21.10

Stock Adjustments -0.23 -0.87 3.40 2.91

Total Income 435.42 402.53 307.82 229.83


Raw Materials 0.00 0.00 0.00 0.00

Power & Fuel Cost 0.00 0.00 0.00 0.00

Employee Cost 23.77 21.92 17.15 14.56

Other Manufacturing Expenses 274.47 254.19 170.85 110.46

Selling and Admin Expenses 0.00 0.00 29.81 25.58

Miscellaneous Expenses 35.93 36.25 5.49 5.03

Preoperative Exp Capitalised 0.00 0.00 0.00 0.00

Total Expenses 334.17 312.36 223.30

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Mar '13 Mar '12 Mar '11 Mar '10

Operating Profit 93.22 86.78 72.88 53.10

PBDIT 101.25 90.17 84.52 74.20

Interest 45.09 35.75 38.67 45.66

PBDT 56.16 54.42 45.85 28.54

Depreciation 2.97 3.56 2.64 2.24

Other Written Off 0.00 0.00 0.00 0.00

Profit Before Tax 53.19 50.86 43.21 26.30

Extra-ordinary items 0.00 -0.95 -1.03 2.62

PBT (Post Extra-ord Items) 53.19 49.91 42.18 28.92

Tax 15.19 17.21 9.81 6.72

Reported Net Profit 38.01 32.75 32.37 22.21

Total Value Addition 334.17 312.36 223.30 155.62

Preference Dividend 0.00 0.00 0.00 0.00

Equity Dividend 4.75 2.00 1.55 1.48

Corporate Dividend Tax 0.81 0.33 0.31 0.25

Per share data (annualised)

Shares in issue (lakhs) 197.95 201.93 193.71 184.71

Earnings Per Share (Rs) 19.20 16.22 16.71 12.03

Equity Dividend (%) 8.00 10.00 8.00 8.00

Book Value (Rs) 187.21 168.41 153.07 142.06

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Balance Sheet (In crores)

Mar '13 Mar '12 Mar 11 Mar '10

Sources Of Funds

Total Share Capital 19.89 20.29 19.46 18.56

Equity Share Capital 19.89 20.29 19.46 18.56

Share Application Money 0.00 0.00 2.10 0.90

Preference Share Capital 0.00 0.00 0.00 0.00

Reserves 350.71 319.77 277.04 243.83

Revaluation Reserves 0.00 0.00 6.73 6.90

Networth 370.60 340.06 305.33 270.19

Secured Loans 249.80 186.87 236.51 227.93

Unsecured Loans 116.88 74.72 87.69 79.18

Total Debt 366.68 261.59 324.20 307.11

Total Liabilities 737.28 601.65 629.53 577.30

Mar '13 Mar '12 Mar '11 Mar '10

Application Of Funds

Gross Block 72.46 61.14 55.33 46.30

Less: Accum. Depreciation 22.68 18.80 15.47 13.31

Net Block 49.78 42.34 39.86 32.99

Capital Work in Progress 0.00 0.00 0.00 0.00

Page 37
Investments 22.93 20.39 20.39 25.04

Inventories 1,117.04 847.64 533.58 482.42

Sundry Debtors 166.91 120.89 65.57 60.99

Cash and Bank Balance 45.76 25.73 6.11 7.34

Total Current Assets 1,329.71 994.26 605.26 550.75

Loans and Advances 286.66 187.65 292.05 231.39

Fixed Deposits 0.00 0.00 11.85 8.64

Total CA, Loans & Advances 1,616.37 1,181.91 909.16 790.78

Deffered Credit 0.00 0.00 0.00 0.00

Current Liabilities 944.08 636.79 275.33 216.30

Provisions 7.73 6.21 64.54 55.21

Total CL & Provisions 951.81 643.00 339.87 271.51

Net Current Assets 664.56 538.91 569.29 519.27

Miscellaneous Expenses 0.00 0.00 0.00 0.00

Total Assets 737.27 601.64 629.54 577.30

Page 38
Ratio Analysis

Mar '12 Mar '11 Mar '10 Mar '09

Investment Valuation Ratios

Face Value 10.00 10.00 10.00 10.00

Dividend Per Share -- -- -- --

Operating Profit Per Share (Rs) 46.01 10.62 -22.21 -24.56

Net Operating Profit Per Share (Rs) 208.89 147.93 114.58 131.55

Free Reserves Per Share (Rs) -- 136.81 125.35 117.27

Profitability Ratios

Operating Profit Margin(%) 22.02 11.95 -19.38 -18.67

Profit Before Interest And Tax Margin(%) 20.93 9.60 -13.79 -14.27

Gross Profit Margin(%) 21.19 11.05 -20.49 -20.58

Net Profit Margin(%) 8.40 8.49 7.92 5.37

Adjusted Net Profit Margin(%) 8.40 8.36 7.92 5.37

Return On Capital Employed(%) 15.25 12.32 10.13 10.03

Return On Net Worth(%) 10.56 9.72 9.63 7.85

Return on Long Term Funds(%) 15.25 13.27 11.43 11.20

Liquidity And Solvency Ratios

Current Ratio 1.89 2.04 2.04 2.18

Quick Ratio 0.48 1.05 1.16 1.29

Debt Equity Ratio 0.82 1.13 1.26 1.36

Page 39
Long Term Debt Equity Ratio 0.82 1.13 1.01 1.13

Debt Coverage Ratios

Interest Cover 2.45 2.14 2.19 1.90

Total Debt to Owners Fund 0.82 1.16 1.26 1.36

Financial Charges Coverage Ratio 2.54 2.07 2.14 1.95

Financial Charges Coverage Ratio Post Tax 2.02 1.86 1.95 1.74

Management Efficiency Ratios

Debtors Turnover Ratio 3.84 3.91 2.93 2.79

Investments Turnover Ratio 0.46 0.52 0.43 --

Fixed Assets Turnover Ratio 6.46 4.85 3.65 4.54

Total Assets Turnover Ratio 0.68 0.46 0.36 0.42

Asset Turnover Ratio 0.67 0.47 3.65 4.54

Number of Days In Working Capital 489.01 751.78 939.52 812.59

Cash Flow Indicator Ratios

Dividend Payout Ratio Net Profit 6.49 6.37 6.93 5.73

Dividend Payout Ratio Cash Profit 5.91 5.82 6.33 4.60

Page 40


SALES (in crores)

300 2009-10

250 2010-11

200 2011-2012

150 2012-13

2009-10 2010-11 2011-2012 2012-13

1) We can see that sales have increased considerable from 2009-10 to 2010-11 with
almost 50% increase. The probable reason for this is boom in real estate sector.

2) And from 2010-11 to 2011-12 we observe increase of 33% because of slow down in
the sector in the year 2011-12

3) From year 2011-12 to 2012-13 there is very small increase in sales i.e. 10% only. This
because of slow down in real estate sector, slow sales (small number of customers),
unsold completed projects and lack of funding. But we can still see that there is increase
in period of slow down which is because of scope and ever green nature of this sector.

Page 41







2009-10 2010-11 2011-12 2012-13

The average EPS from 2009-10 to 2012-13 is 16.26, with considerable increase of
39.23% in 2010-11. Then it has decreased in 2011-12 by 4.9% and then increased by
16.67% in 2012-13.
The trend shows increase in 2010-11 because of the boom in the real estate sector prior to
2010, as projects were taken up at that time, and money realized from selling these
projects, which got completed in 2010-11 and sold at that time. Whereas we see a decline
in 2011-12 because of slow down in real estate and numbers of unsold projects were very
high, as there were no buyers and many projects were sold at lower rates. But we see this
condition improved in 2012-13 as EPS gone up by 16.67%, this is because proactive
measures taken up Ansal like shifting their focus to Tier 2 cities, which have ample
opportunities for development, low building costs and cheaper rates.

Page 42









2009-10 2010-11 2011-12 2012-13

We can easily observe that this graph is similar to the previous one i.e. EPS. Hence bears
the same explanation.

Page 43


Spread across 17.08 acres (approx.) of prime land, the project integrates the spoils of life together
and presents a world class lifestyle.

ANSAL APLM COURTJHANSI is located on the Kanpur- Gwalior Bypass within the city of
Jhansi. Set in a verdant backdrop, the complex is a peaceful address with all the urban
convenience available nearby


It has almost all the modern amenities and thus introduces you to the world class lifestyle.

It reflects lush green landscape and surrounded by palm trees, ANSAL PALM COURTJHANSI
is the place to be in Jhansi.

Page 44

The life cycle of the project is of 5 years

After calculating the projected cash flows for coming 5 years, it can be inferred
that it is a profitable project, leading to a profit of Rs. 238 millions
The construction and the sales of the project will start from Quarter 3 of the year
It is assumed that the sales will be done by the first quarter of the year 2013
The construction will continue for three more quarters after the completion of the
Expenses like office overheads, contingencies and other overheads would be
incurred till the construction goes on
Interest on loan is at the rate of 12.50% per annum
The land has been bought by the company itself through equity
For the construction of the project, company has taken a loan of Rs. 200 million
When a bank finance any particular project, they keep receivables earned from the
project as a security

Page 45




Total area of site 17.08 69123
Area for road widening 0
Area under greens 0
Area under Residential (84%) 14.33 57993
Area under Commercial (14%) 2.75 11124
Area under internal roads and greenery 0

Floor area ratio (FAR): The ratio of a building's total floor area (Gross Floor Area) to
the size of the piece of land upon which it is built. The terms can also refer to limits
imposed on such a ratio.

As a formula: Floor area ratio = (total covered area on all floors of all buildings on a
certain plot, Gross Floor Area) / (area of the plot)

Super Area = It consists of Built up area and the proportionate area under the common
spaces of a building like lobby, staircases and elevators.




Page 46


ON GROUND (In Sq.Mt) Sq.Mt)
G+2, Type B 85 115.57 9823.45

3 Bedroom unit
S+10, Type C 4 92.9 371.6

2 Bedroom unit
Commerecial 11124 11124
Total 21319



G+2, Type B 85 24368

3 Bedroom unit
S+10, Type C 4 52520

2 Bedroom unit
Commerecial 16687
Total 93575


Page 47


G+2, Type B 85 25587

3 Bedroom unit
S+10, Type C 4 55146

2 Bedroom unit
Commerecial 16687
Total 96745



(In Sq.Mt) Sq.Mt)
G+2, Type B
477 115.57 55146.86
3 Bedroom unit
S+10, Type C
275 92.9 25586.5
2 Bedroom unit
Commercial Area 16013
Total 96745

(figure is taken directly from the blue print sanctioned by the Govt.)

Page 48


G+2 Type B 477 59593 Sq.Ft 1970 1169
S+10 Type C 275 275414 Sq.Ft 1979 545
COMMERCIAL 172364 Sq.Ft 3920 676
TOTAL 2390

Land (including stamp 82671 Sq. 1390.45 Per Sq.
duty) Yard Yard
Cost of Electrical 1041374 Sq.Ft 100 Per Sq.Ft
External Development 69123 Sq.Mt 250 Per Sq.Mt
Charges (EDC)
Interest @ 12% on EDC
(half yearly installment)
Internal Development 638075 Sq.Ft 30 Per Sq.Ft
Charges i.e. IDC
Construction Cost:
Residential G+2 593593 Sq.Ft 850 Per Sq.Ft 505
Residential S+10 275417 Sq.Ft 850 Per Sq.Ft 234

COMMERCIAL 172364 Sq.Ft 1000 Per Sq.Ft 213

Sales Cost 5% 120
Other Overheads (6% of IDC + Const. cost + 6%
elect. sub-station cost)
Contingencies (2% of land + EDC + IDC ) 2% 15
Maintenance Cost @ Rs. 1 Lac P.M. For 5
Office Overheads 10% 239
TOTAL 1749
Profit 641

Page 49
Risk Analysis

The profitability and the cash flows of any project are calculated on the basis of certain
assumptions. So, the risk is also associated with it. Project Risk Analysis is a process
which enables the analysis of the risks associated with a project.

In any project there will be risks and uncertainties of various types as illustrated by the
following examples:
The management and financial authority structure are not yet established
The technology is not yet proven
Resources may not be available at the required level.

All uncertainty produces an exposure to risk which may cause a failure to:
Keep within budget
achieve the required completion date
achieve the required performance objective.

Project risk:
Would the project, as defined, generate sufficient cash flows to meet its obligations?
Clear definition of project scope and specifications
Reasonableness and thoroughness of assumptions
Market factors such as demand, competition, pricing and cost structures

Construction and startup risk :

How likely is the project to be completed on time and within budget?
Experience of contractor and project complexity
Regulatory, political, legal and currency risk
Market and other factors such as labor, materials

In practice, a sensitivity analysis will be performed for more than one risk; perhaps all
identified risks, in order to establish those which have a potentially high impact on the
cost or time-scale of the project. The technique can also be used to address the impact of
risk on the economic return of a project.

Sensitive Analysis is a technique used to determine how different values of an

independent variable will impact a particular dependent variable under a given set of
assumptions. This technique is used within specific boundaries that will depend on one or

Page 50
more input variables. Sensitivity analysis is a way to predict the outcome of a decision if
a situation turns out to be different compared to the key prediction(s).
Scenario and Sensitivity Analysis

Here we do the analysis by taking 3 cases:

1) Base Case: under normal circumstances. We get desired projected yield or

2) Worst Case: it will occur under abnormal circumstance, this will help us to
calculate minimum profit or yield we get from the project under taken.

To incorporate worst case into the project we have taken 3 steps:

a) Decreased the selling rate by 2%: This may occur due to market
slow down or other reasons.
b) Increased the cost of construction by 2%: This will occur due
decreased selling rate, which will lead to less rate of capital and
hence slow construction which will lead to increased price of basic
material as time passes. Other reason could be shortage of building
c) Decreased the selling price by 2%: This may occur due to market
slow down or other reasons.
3) Best Case: it will occur in favorable conditions and will lead to higher
yield and profit.
To incorporate best case into the project we have taken 3 steps:
a) Increased the selling rate by 2%: This may occur due to market
speed up or other reasons.
b) Decreased the cost of construction by 2%: This will occur due
increased selling rate, which will lead to high rate of capital
generation and hence buy material in bulk because of speedy
construction which will lead to decreased price of basic material.
Other reason could be abundance of building material.
c) Increased the selling price by 2%: This may occur due to market
speed up or other reasons like new metro project or road widening
or development of that area by government.


Page 51
Value (in million Value (in Value (in million
Rs) million Rs) Rs)
Group Housing
G+2 Type B 1169 1067 1288
S+10 Type D 545 516 604
COMMERCIAL 676 660 700
TOTAL 2390 2395 2375

Land (including stamp duty) 115 115 115
Cost of Electrical Substation 104 104 103
External Development 17 17 17
Charges (EDC)
Interest @ 12% on EDC (half 2 2 2
yearly installment)
Internal Development Charges 31 31 31
i.e. IDC
Construction Cost:
Residential G+2 505 529 476
Residential S+10 234 246 210
Commercial 172 181 164
Sales Cost 120 120 119
Other Overheads (5% of IDC 37 39 35
+ Const. cost + elect. sub-
station cost)
Contingencies (2% of land + 15 16 14
Maintenance Cost @ Rs. 1 6 6 6
Lac P.M. For 5 Years
Office Overheads 239 239 237
TOTAL 1749 1804 1671

Page 52
PROFIT 641 590 704


Graphical representation of Income and Expenses






1) We can oberve that sales are maximum in the worst case(2395) and
minium(2375) in the best case , this is due to the fact we descreased the rate of
selling in worst case by 2% i.e. delayed payments or long term creditors and
hence more time locked up capital and hence they have to pay interests for longer
peroid of time which has increased our total sales. In case of best case rate of
selling has been decreased by 2%, which means capital is locked for lesser time.
And lesser interests paid by the creditors, hence lesser sale are oberseved. So an
illusion is created that worst case is better than best case because of interests
received from the creditors for longer period of time, but in reality its vice-versa
because faster we realise our money, faster we can invest , use it and get better
interests and exploit oppertunities with that money. The real estate involves huge
capital and hence interest received is also significant.

Page 53
2) Where as costs shows normal trend i.e. in case of worst case cost of construction
has increased by 2% and decreased by 2% in case of best case.


Series 1




500 550 600 650 700 750


Base case profit is 641

Best case profit is 704 i.e. 9.82% more profits from base case.
Worst case profit is 590 i.e. 7.95% lesser profit from base case.

So even in worst scenario there is 7.95% deviation from the base case, hence the projects
seems to be financially viable.

Page 54

There are certain questions which have been asked to the people for the
completion of this project.

1. Would you like to invest into Real Estate ?

Particular Percentage
Yes 83%
No 17%


Interpretation: Majority likes to go for real estates even in slow down because of
obvious reasons that financial markets is more uncertain and risky than real estate and
other securities like shares etc. will yield lesser returns and are less secure. Whereas
investment in real estate is like asset which is always appreciating.

Page 55

Age of people Percentage

Below 25 years 3%

25 to 55 years 75%

55 to 65 years 15%

Above 65 years 7%


beleow 25 years
25 to 55 years
55 to 65 years
abobe 65 years

This chart shows that there is majority of people of age between 25 to 55 years. They
have more capital to invest and want to save it for their future and family. They also have
much knowledge and experience where, when and why to invest. People below 25 years
have not much knowledge and access to large capital to enter in real estate. Majority of
people are those who want to make their money secure and prefer long time investment.

Page 56
Occupation of person Percentage

Salaried person 25%

Businessmen 75%

Salaried person

This chart shows that salaried people invest more in the market i.e. shares and other short
term investments. Whereas Businessmen invests in real estate because they have large
capital to invest and need lands and buildings to carry out their business operations and
expand them.

Page 57

Reason for not investing Number

Time constraint 50
Financial constraint 84
Lack of knowledge 28
Volatile market 12









Time constraint Financial constraint Lack of knowledge Volatile market

Interpretation: The major factors affecting the investment in real estates are time
constraints and financial constraints. As dealing in real estate needs a lot of time and
formalities like payments and registrations. Also large capital investment is needed to
invest in real estate which acts as a major constraint especially in the period of slow down
where it is difficult to get liquid money and arrange for loans.

Page 58
5. Would like to invest in second or third tier cities like JHANSI?

Particular Percentage
Yes 68%
No 32%



Interpretation: 32% of the people dont like to invest in second and third tier cities like
Jhansi because they are less developed than Metropolitan cities like Delhi and Mumbai,
less facilities, water supply and electricity problem. So people prefer to live in Delhi even
if they are living in small space or on rent. Whereas majority, of about 35% would like to
invest in cities like Jhansi because of cheap and affordable prices. These cities have
bright future prospects of development because they are being developed on new/modern
plans and possess huge scope for improvement, unlike cities like Delhi which are already
so congested and it is difficult to rebuilt at majority of its places.

Page 59
6. What factors attract you to invest in Tier 2 and Tier 3 cities?

Factors Number

Cheaper rates 79

Bright future prospects 66

Less congestion 62

Built on modern plan 44






40 Number




Cheaper rates Bright future Less congestion Built on modern
prospects plan

Interpretation: Majority of people choose cheaper rates and bright future

prospects. As rates in these cities are very less than those of metropolitan cities,
flats are available at affordable prices. From the point of view of investors these
cities have bright future prospects and rates of flats here are very much likely to
increase at rapid pace with more and more people coming and settling here and
rapid development of these cities. The flats in these cities are built on modern
plan, which provide spacious rooms with hygienic conditions and greenery

Page 60
7. Major reasons for not investing in these types of cities?

Factors Number
Inadequate power and water supply 82
Far off from metropolitan cities 54
Inadequate facilities like schools, hospitals 46
and shops etc.






40 Number




Inadequate power and Distance Inadequate facilities
water supply

Interpretation: Major reason for not investing is inadequate water which contributes
90% followed by distance and inadequate facilities like schools, hospitals and shops etc.
These cities face problems of inadequate water and power supplies, so they are more
dependent upon huge water tanks to store water, more use of underground water and
generators to generate electricity, which adds to the cost of living in these places. Long
distance from offices, schools etc. is also a restraining factor, but we can see good roads
and high ways built up to improve the connectivity to various parts of the city.

Page 61
8. Purchase through?

Options Number
Local Dealers 73
Others(OMAXE,DLF,TDI) 35









Ansal Local Dealers Others

Interpretation: The majority like to go for local dealers and builders because they are
easily available, approachable and ubiquitous. Whereas big companies who have huge
and long duration projects, and people who go for quality and brand names prefer
brands like ANSAl, OMAXE, DLF etc. Also these major developers like ANSAL,
OMAXE and DLF etc., dominates in the developing cities like Jhansi.

Page 62

Page 63
1) Real estate sector continues to make good profit because of its ever green nature,
lesser risk and lucrative returns even in the periods of slow down.

2) Ansal Housing is showing good EPS, PAT and sales value in real estate sector.
Although values of PAT and EPS have declined in 2011-12.

3) There can be various factors that can affect the viability of a project major ones
are government plans and policies, cost of labour and material and selling rate.

4) To take up a project or not a sensitivity analysis is done to calculate profit in

Base, Best and Worst Case. And subjected to these values the project is taken up.

5) Sometimes an illusion can be created that worst case is better than best case. This
because of the interests accumulated in late payments in case of worst case.

6) Majority of people prefer to invest in real estate because of less risks (secure
investment) and high returns. But major drawback is it involves large investments
and duration involved is also high.

7) People like businessmen having access to large capital go for real estates and
people those who are employed go for small investment opportunities like FDs,
shares and bonds.

8) People in age group of 25-55 years are major participants of real estate, as they
have sufficient experience, knowledge and access to large capitals which they
have accumulated over the time.

9) Since the costs of property has increased tremendously in metropolitan cities like
Delhi, Mumbai and Bangalore etc., people prefer relocating to second tier cities
like Jhansi because of cheaper rates, development opportunities and scope.

Page 64

1) The real sector helps in countrys development, as it generates employment,

infrastructure development and better standard of living, hence the government
should liberalize its policies regarding investment in real estate.

2) The government should create awareness amongst the general public about REIT
as most of the people are not investing in it due to lack of awareness .It is a good
investment option but people are not benefiting from it as they are not aware
about it.

3) The government should lower the interest rate as it is one of the major factors that
determine the investment decision of the investor. If the government wants to
increase the investment in the real estate sector then it will have to reduce the
bank rates so that it increases the money in the hands of people and they invest in
real estate.

4) Investors have high hopes from the real estate industry, even though they are
aware about the delays in the projects due to recession, Still they are positive
about the future prospect of the real estate industry.

5) As we see more and more people are coming to metropolitan cities making it
congested and difficult to live, causing traffic and high rates. So awareness must
be spread among people about to relocate to cities like Jhansi, Sonipat, Gurgaon
etc. which are connected to metropolitan cities through well-built highways. And
employed people can up down easily.

Page 65

Page 66
Ansal Palm court, Jhansi is a huge project and also seems to be a profitable one. From the
projected cash flows we can see that even in the worst case scenario, project is yielding a
profit of Rs. 641 millions. Though the profitability is calculated on the basis of
assumptions, but even taking the worst scenario, project is coming to be profitable.
Assumptions can be risky as well but then to minimize the risk; company can go for
various advertisement and promotional activities so as to increase their sales.
Road shows in nearby small cities like (Paricha, Grassland, BHEL, Lalitpur,
Datia, Uraietc)
Regular Advertisement in local newspaper to create awareness
Publishing on the website
Use of posters and bill boards
Pamphlets can be distributed

By using these promotional activities, sales might increase and revenue can be generated

Page 67

Graeme Newell and Rajeev Kamineni (April, 2007):


Vandna Singh and Komal(2009):



Desai &Rane (2006):

KASB securities limited (December, 2005):

Dirk Brounen (December, 2008) :


Page 68

Indian retail sector report

Newspaper and various magazines

Page 69

Excel sheet 1- cash flow and income statement

Page 70