India - Residential Real Estate Sector - August 2020 PDF

Residential Real Estate Sector
Research Report
On
By
August 2020
CARE Advisory Research and Training Limited.

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List of Abbreviations:
Abbreviation Full Forms

BPS Basis Point
CART CARE Advisory Research and Training
CAGR Compounded Annual Growth Rate
COVID-19 Corona Virus Disease 2019
CY Calendar Year
FDI Foreign Direct Investment
FY Financial Year
GDP Gross Domestic Product
GST Goods & Services Tax
GVA Gross value added
HFC Housing Finance Company
H1/1H First-Half Year
IIP Index of Industrial Production
IMF International Monetary Fund
MMR Mumbai Metropolitan Region
msf Million Square feet
MoSPI Ministry of Statistics and Programme Implementation
NBFC Non-Banking Finance Company
PAT Profit after Tax
PE Private Equity
Q1/1Q and
Quarter I and Quarter III
Q3 /3Q
RBI Reserve Bank of India
REIT Real Estate Investment Trust
Rs./INR Indian Rupee
Sq. Ft. Square Feet
TLTRO Targeted Long Term Repo Operations
US$ / USD United States Dollar
VC Venture Capital
WHO World Health Organization
WTO World Trade Organization
y-o-y/YoY Year on Year
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Table of Contents
1. ECONOMIC OUTLOOK................................................................................................................. 5
2. OVERVIEW OF REAL ESTATE SECTOR........................................................................................ 12
3. OVERVIEW OF GLOBAL RESIDENTIAL REAL ESTATE SECTOR .................................................... 21
4. OVERVIEW OF INDIAN RESIDENTIAL REAL ESTATE SECTOR ..................................................... 28
5. KEY DEMAND DRIVERS OF THE SECTOR ................................................................................... 41
6. CHALLENGES FACED BY THE SECTOR........................................................................................ 44
7. GOVERNMENT INITIATIVE ........................................................................................................ 47
8. DOMESTIC PLAYER OF RESIDENTIAL REAL ESTATE SECTOR ..................................................... 54
9. OUTLOOK FOR THE RESIDENTIAL REAL ESTATE SECTOR .......................................................... 58
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1. ECONOMIC OUTLOOK
1.1 Global Economy
Global growth for the year 2019 was at 2.9%. As a result of Covid-19 pandemic, the same is
expected to contract sharply to -4.9% in 2020. Also, it is expected that the pandemic will fades in
second half of 2020 and containment efforts can be gradually unwound, the global economy is
projected to grow by 5.4% in 2021, as per The World Bank, World Economic Outlook June 2020.
Summary of World Economic Outlook Projections is given below (in %):
2019 2020p 2021p

World 2.9 -4.9 5.4
Advanced Economies 1.7 -8.0 4.8
United States 2.3 -8.0 4.5
Euro Area 1.3 -10.2 6.0
Japan 0.7 -5.8 2.4
United Kingdom 1.4 -10.2 6.3
Canada 1.7 -8.4 4.9
Other Advanced Economies* 1.7 -4.8 4.2
Emerging market and developing economies
3.7 -3.0 5.9
(EMDEs)
Emerging and Developing Asia 5.5 -0.8 7.4
China 6.1 1.0 8.2
India** 4.2 -4.5 6.0
ASEAN-5*** 4.9 -2.0 6.2
Emerging and Developing Europe 2.1 -5.8 4.3
Latin America and Caribbean 0.1 -9.4 3.7
Middle East and Central Asia 1.0 -4.7 3.3
Sub-Saharan Africa 3.1 -3.2 3.4
Note: p- Projections
* Excludes the Group of Seven (Canada, France, Germany, Italy, Japan, United Kingdom, United States) and euro area
countries
** For India, data and forecasts are presented on a fiscal year basis and GDP from 2011 onward is based on GDP at
market prices with FY 11-12 as a base year.
*** Indonesia, Malaysia, Philippines, Thailand, Vietnam
(Source: World Economic Outlook June 2020 as published by IMF)
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Growth in the advanced economy group—where several economies are experiencing widespread
outbreaks and deploying containment measures—is projected at –8.0% in 2020. Most economies
in the group are forecast to contract this year. In parts of Europe, the outbreak has been as
severe as in China’s Hubei province. Although essential to contain the virus, lockdowns and
restrictions on mobility are extracting a sizable toll on economic activity. Adverse confidence
effects are likely to further weigh on economic prospects. In 2021 the advanced economy growth
rate is projected to strengthen to 4.8 percent, leaving 2021 GDP for the group about 4 percent
below its 2019 level.
Among emerging market and developing economies, all countries face a health crisis, severe
external demand shock, dramatic tightening in global financial conditions, and a plunge in
commodity prices, which will have a severe impact on economic activity in commodity exporters.
Overall, the group of emerging market and developing economies is projected to contract by –
3.0% in 2020. Downward revision to the 2020 growth projection reflects large anticipated
domestic disruptions to economic activity from COVID-19. In 2021 the growth rate for emerging
market and developing economies is projected to strengthen to 5.9 percent, largely reflecting the
rebound forecast for China (8.2 percent). The growth rate for the group, excluding China, is
expected to be –5.0 percent in 2020 and 4.7 percent in 2021, leaving 2021 GDP for this subset of
emerging market and developing economies slightly below its 2019 level.
Emerging Asia is projected to have a nominal decline rate in 2020 (-0.8%). The rebound in 2021
with projected growth rate of 7.4% in emerging Asia depends critically on the pandemic fading in
the second half of 2020, allowing containment efforts to be gradually scaled back and restoring
consumer and investor confidence. Several economies in the region are forecast to grow at
modest rates, including India at 1.9%.
Financial markets across the world are experiencing extreme volatility: equity markets recorded
sharp sell-offs, with volatility touching levels seen during the global financial crisis; flights to
safety have taken down sovereign bond yields to record lows; risk spreads have widened; and
financial conditions have tightened. Global commodity prices, especially of crude oil, have also
declined sharply in anticipation of weakening global demand on the one hand, and the failed
negotiations of the Organisation of the Petroleum Exporting Countries (OPEC) and Russia, on the
other.
Many central banks have eased monetary, liquidity and regulatory policies to support domestic
demand, including through emergency off-cycle meetings. The International Monetary Fund
(IMF) and the World Bank Group are making available US$ 50 billion and US$ 14 billion,
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respectively, through various financing facilities to their membership to help them respond to the
crisis.
1.2 Indian Economy
The annual growth of India for 2020 has been projected to be -4.5% as per IMF world Economic
Outlook June 2020. However, it is expected to rebound to 6.0% in 2021.
Statistics for Indian Economy is provided below:
I. Gross Domestic Product (GDP)
GDP is the sum of private consumption, gross investment in the economy, government
investment, government spending and net foreign trade (difference between exports and
imports). Sectorial GDP Growth is as under:
Sectorial Growth
Sectorial growth of GDP (in %) (At constant FY 11-12 prices):
9.4
8.2 7.7
6.8 8.8
5.7 6.1
7.3
5.6
2.4 4.6
3.7
2.8 0.9 3.0
Agriculture, Mining & Manufacturing Electricity, Gas, Construction THTCB FRP PAD
Forestry & Quarrying Water Supply
Fishing & other Utility
Services
-5.8 FY 19 FY20
(Source: MoSPI)
(Note: Agriculture includes Agriculture, forestry & fishing, Utility includes Electricity, gas, water supply& other utility
services, THTCB include Trade, hotels, transport, communication and services related to broadcasting, FRP include
Financial, real estate & professional services, PAD include Public administration, defense and Other Services).
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II. Gross Value Added (GVA) for FY 19-20
Gross value added (GVA) is the measure of the value of goods and services produced in an
economy. GVA gives picture of supply side where as GDP represents consumption.
Real GVA, i.e, GVA at Basic Constant (FY 11-12) Prices for the FY 19-20 is estimated to grow at
3.7% over Revised Estimates of GVA for the FY 18-19 as estimated by MoSPI.
Sector wise estimated contribution to GVA is provided below:
% contribution to GVA at Constant prices (FY 11-12) for

FY 19-20
Agriculture, Forestry & Fishing
13.58% 14.45% Mining & Quarrying

2.64%
Manufacturing
22.26% 17.39%
Electricity, Gas, Water Supply &
other Utility Services
Construction
7.82% 2.31%
19.56%
THTCB
(Source: MoSPI)
It may be noticed from the above that Financial, Real Estate and Professional services (FRP)
contribute highest followed by contribution from Trade, Hotels, Transport and Communication
services (THTCB). Share of Manufacturing and Agriculture sector was 3rd and 4th largest
respectively.
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III. Industrial Growth for FY 19-20
The cumulative Index of Industrial Production (IIP) growth during FY 19-20 was at -0.7%.
IIP Growth (%)

4.6 4.4
4 3.8
3.3
-0.7
(Source: MoSPI)
As per IIP, in view of the global COVID-19 pandemic and consequent nationwide lockdown
measures implemented since March, 2020, the data flow from the producing units was impacted.
As some of these units are yet to resume operations, the response rate has been lower than
usual. Consequently, the Quick Estimates are likely to undergo revision and will be incorporated
in subsequent releases as per the revision policy of IIP.
IV. Growth in Per Capita GDP, Income and Final Consumption
6.1%
5.1% 5.1%
4.2%
3.9% 3.9%
FY 18-19
FY 19-20
Per Capita GDP Per Capita GNI Per Capita PFCE
During the year FY 19-20, growth in per capita GDP, income and private consumption have
decreased compared to previous FY 18-19. It may be noted share of private consumption as %
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GDP has increased slightly from 56.7% in FY 18-19 to 56.9% in FY 19-20 indicating an increasing
share of private consumption in the country.
V. Indian Economy outlook
India has not been spared from the exponential spread of COVID-19. As per IMF, growth in India
is projected to be -4.5% in 2020 and “V” shape recovery with 6.0% growth in 2021.
While efforts are being mounted on a war footing to arrest its spread, COVID-19 would impact
economic activity in India directly through domestic lockdown. Second round effects would
operate through a severe slowdown in global trade and growth.
Domestic and global shocks to key conditioning variables such as global crude oil prices, global
trade and growth, the exchange rate, the monsoon outturn and the rising frequency of their
visitations make forecasting a challenging task. Such uncertainties make the forecasting of
growth highly challenging. The actual outturn would depend upon the speed with which the
outbreak is contained and economic activity returns to normalcy.
Private consumption, in particular, is at serious risk from the COVID-19 pandemic,

notwithstanding improved rabi prospects and the recent rise in food prices, and the
rationalization of personal income tax rates in the Union Budget 2020-21 along with measures to
boost rural and infrastructure spending. Aggregate demand is expected to be impacted adversely
by likely recession in the global economy, caused by disruptions in global supply chains, travel
and tourism, and lockdowns in many economies. Domestic production will also be impacted by
the nation-wide lockdown. In the near-term, the challenge is to mitigate the adverse impact of
COVID-19.
Since March 2020 the inflation outlook has become highly uncertain due to the COVID-19
outbreak turning into a pandemic. Crude oil prices have collapsed to lows not seen since early
2000s. With several major economies in lockdown mode, demand conditions may weaken
sharply. Accordingly, countries across the world are bracing up for deflationary forces to take
hold. India may not be immune to these extreme downside pressures imparted by the pandemic.
The pick-up in economic activity would be dependent on the easing of lockdown across the
country and the containment of the spread of the virus. The longer the economy at a standstill
the longer the return to normalcy. Even with easing of lockdown, revival across sectors would
vary significantly and be contingent on how they are able to address the challenges of liquidity,
labor, logistics, demand and capacity utilization.
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Significant monetary and liquidity measures taken by the Reserve Bank and fiscal measures by
the government would mitigate the adverse impact on domestic demand and help spur
economic activity once normalcy is restored. Still, the government would have to play a critical
role for the revival of the economy mainly through investments which could to an extent address
the dire employment situation and also prompt consumption.
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2. OVERVIEW OF REAL ESTATE SECTOR

 Real Estate
o Real estate is property made up of land and the buildings on it, as well as the
natural resources of the land including uncultivated flora and fauna, farmed crops
and livestock, water, and any additional mineral deposits.
 Types of Real Estate

o Land
 It includes vacant land, agricultural land, and ranches.
o Residential
 It includes houses, condominiums, and townhouses.
 The structures may be single-family or multi-family dwellings and may be
owner-occupied or rental properties.
o Commercial
 Commercial real estate includes non-residential structures such as office
buildings, warehouses, and retail buildings.
 These buildings may be free-standing or in shopping malls.
o Industrial
 Industrial real estate includes factories, business parks, mines, and farms.
 These properties are usually larger in size and locations may include access
to transportation hubs such as rail lines and harbors.
2.1 Global Real Estate Sector
The Global volume of Real Estate Sector in 2019 finished down on the record levels of 2018, but
were still the second highest on record. This fall was not for a lack of capital, rather a lack of
assets in the market.
By sector, offices and senior housing had the biggest growth in global investment volumes during
2019, both increasing by more than 5%. Industrial sector saw a more modest growth of 2.7%, but
the sector is now the third largest followed by more than 3% falls in residential investment and
18% fall in retail investment.
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Global Investment Volumes

GLOBAL INVESTMENT VOLUME ($ BILLION)
450 10
400
5
350
300 0
250
-5
200
150 -10
100
-15
50
0 -20
Office Residential Industrial Retail Hotel Senior
2018 390 260 185 195 90 19
2019 410 250 190 160 90 20
Change (%) 5 -3 2.7 -18 0 5
Note: Data till November 2019

*The Global data displayed is with respect to Calendar Year.
(Source: Savills report)
Mounting evidence suggests that global economic growth contracted in Q1 2020, marking the
first quarter of contraction in 11 years.
Direct investment in global commercial real estate dropped by 5% year-on-year in Q1 2020,

falling to US$ 200 billion.
Global industrial volumes rose by 7% in Q1 2020, while multifamily largely maintained its
performance relative to a very strong Q1 2019.
Fundraising by private closed-end real estate funds fell to its lowest Q1 level since 2013 with
US$22.3 billion rose through the first three months of the year.
The first quarter of CY2020 saw an increase in global cross-border purchases, which rose by 13%
year-on-year to US$55 billion, with the largest recipients being the office, multifamily and
industrial sectors and markets in the U.S., U.K. and Japan. Importantly, many of these
transactions were negotiated and finalized well before the COVID-19 outbreak.
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 Office Sector
o Leasing activity across all the regions softened in the first quarter of CY2020 with
global volumes 23% lower than in Q1 2019 as deals were canceled or delayed.
 Industrial & Logistics sector

o Occupier demand for industrial and logistics space across all regions has fallen,
although the full impact has yet to be reflected in the numbers.
o Compared with the five-year quarterly average, U.S. net absorption in Q1 CY2020
was down 9% and European gross take-up declined 13%; Asia Pacific net
absorption was 17% lower.
 Hotels & Hospitality sector

o Global hotel investment activity slowed in Q1 2020, with transaction volumes
totaling US$10 billion, marking a decrease of 29% from Q1 2019.
 Residential Sector
o Since 2010, global investment in the multi-family sector has risen at an annual
growth rate of 15.6%, putting it among the fastest-growing asset classes.
2.2 Indian Real Estate Sector
The Indian Real Estate sector is one of the largest employment generators only second to
agriculture and has a multiplier effect on various allied industries.
The Real Estate sector in India can be primarily categorized into:
1) Residential Housing & Commercial Sales

2) Commercial leasing
a. It shall comprise of sub sectors such as office space leasing, mall space leasing and
industrial leasing.
The year 2019 was a mixed bag for the industry having attracted investments worth around USD
5 billion and around 66% of these investments were in the commercial real estate market which
witnessed healthy increase in volumes of around 27% on y-o-y basis. The healthy demand has
been from private equity investors scouting for stable rent yielding assets. The residential
housing segment has been witnessing sluggishness in demand and lower absorption in the past
few years owing to structural reforms such as RERA, demonetization, and GST as the developers
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took time to re-align to the changing market dynamics and regulations. Further, economic
slowdown, NBFC crisis, low buyer sentiments too led to stagnant demand in the residential
segment.
 Indian Real Estate Market
o Real estate sector in India is expected to reach US$ 1 trillion in market size by
2030, up from US$ 120 billion in 2017.
o By 2025, it will contribute 13 per cent to the country’s GDP.
o India’s real estate market is estimated to grow at a CAGR of 19.5 per cent during
2017-2028.
Indian Real Estate Market

(US $ Billion)
Market
1000
650
180
120
2017 2020 2025 f 2030 f
f-forecast
(Source: Industry Sources, CARE Research)
 Urbanization
o Rapid urbanization bodes well for the sector. The number of Indians living in urban
areas is expected to reach 525 million by 2025.
o More than 70 per cent of India’s GDP will be coming from urban areas by 2020.
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Urban Population (in millions)

Urban Population (in millions)
525
461 460 471
429
2015 2018 2019 2020 f 2025 f
f-forecast
 Global Real Estate Transparency Index
India's Global Real Estate Transparency Index ranking has improved by one notch to 34 on the
back of regulatory reforms, better market data and green initiatives, as per property consultant
JLL. During 2018 bi-annual survey, India ranked 35th in the index, while the country was at 36th
position in 2016 and 39th in 2014.
Trend in Global Real Estate Transparency Index

Global Real Estate Transparency Index (GRETI)
48
39
36 35 34
Year 2012 Year 2014 Year 2016 Year 2018 Year 2020
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Note: The Index evaluates transparency based on over 210 variables relating to transaction processes, regulatory &
legal frameworks, corporate governance, performance measurement, data availability, sustainability and resilience,
health and wellness, prop-tech, and alternatives sectors.
(Source: JLL, GRETI-2020)
Transparency Index which covers 99 countries and territories and 163 cities globally.
India’s real estate market is presently placed in the 'semi-transparent' zone.
India has registered one of the largest improvements globally and regionally. This improvement is
led by the progress in the country’s REIT framework attracting greater interest from institutional
investors.
The structural reforms such as the Real Estate Regulation and Development Act 2016 (RERA),
GST, Benami Transaction Prohibition (Amendment) Act, 2016, Insolvency and Bankruptcy Code
and digitization of land records have brought about greater transparency in what was an
erstwhile largely unregulated sector a few years back, JLL said.
India has also edged into the top 20 for Sustainability Transparency through the active role of
organizations like the Indian Green Building Council and Green Rating for Integrated Habitat
Assessment.
 Investment in Real Estate Sector
 RBI proposed to allow banks to invest in real estate investment trusts and infrastructure
investment trusts, attracting more institutional investors to such assets.
 Indian Banks, which are allowed to invest about 20 per cent of their net-owned funds in
equity-linked mutual funds, venture capital (VC) funds and stocks, could invest in these
trusts within this limit.
 Between 2009-19, Indian real estate sector attracted institutional investment worth US$
30 billion and received US$ 5.15 billion in 2019.
 Investment from private equity (PE) players and VC funds reached US$ 4.47 billion in 2018
and US$ 1.47 billion in Q12019 in the sector.
 Real estate attracted around US$ 14 billion from foreign PE players between 2015 and
Q32019.
 Institutional investment into Indian real estate sector stood at US$ 712 million during
Q4FY20.
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 PE funds of around US$ 390 million and US$ 615 million were attracted by the
Information Technology (IT) hubs of Pune and Bangalore, respectively, in 2019. Both cities
witnessed an inflow rise by 210 per cent and 47 per cent, respectively in a year.
 Although, there was drop in PE funds in Hyderabad, the showstopper of 2018. It
attracted PE funds of just US$ 440 million in 2019 against US$ 1.1 billion a year ago.
According to experts this drop was expected as 2018 was a one-hit wonder rather than a
steady trend.
 The funding in logistics and warehousing witnessed a drop of 50 per cent attracting about
US$ 200 million in PE funds against the previous year.
 Mixed-use developments saw inflows of around US$ 155 million in 2019, as compared to
US$ 310 million a year ago.
Institutional Flow of Investment in

Indian Real Estate
Investment (USD million)
4,981 5,147
4,467
3,178
Year 2016 Year 2017 Year 2018 Year 2019
Page 18 of 59

Distribution of Institutional Investment in India

(2014-19)
3% 2%
8%
Office
10%
40% Residential
Entity Level
Retail
Mixed-use
Others
37%
 COVID-19 impact on Real Estate Sector
 The migration of labors post-lifting of lockdown kept the run rate for construction of real
estate projects low.
 Limited availability of construction materials due to logistics issue affected construction
activities, leading to delay in delivery of residential projects.
 As per HDFC securities research, “In Indian markets, the 1HCY20 residential
sales/launches were down 51%/24% YoY. In May 2020, the Tier 1 developers were
reporting about 40% of pre-COVID sales, while Tier 2 developers were at 20% of pre-
COVID sales.”
 Warehousing is seeing good demand as online retailers are doing well in the lockdown.
 Debt to equity is changing especially for under construction assets, from 70:30 earlier to
50:50 now as per HDFC Securities Institutional Research.
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 On the leasing front, new leasing activity is likely to be impacted and may see some delay.
However, commercial rental of operational assets is largely insulated.
 The worst hit segment is likely to be hospitality (low double digit occupancy at lower
realization leading to losses in division) with sharp decline in retail rental due to malls
closure and subsequent 50% rental waiver given by developers for lockdown period and
few months thereafter.
 The sales of key residential players such as Oberoi Realty and Brigade has been affected
and is expected to decline by 50% - 60% y-o-y Q1FY21E especially in MMR Region.
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3. OVERVIEW OF GLOBAL RESIDENTIAL REAL ESTATE SECTOR

Since 2010, global investment in the multifamily sector has risen at an annual growth rate of
15.6%, putting it among the fastest-growing asset classes. Investors have flocked to the sector
due to its mainly defensive qualities as well as the demographic and secular trends which have
underpinned demand. Multifamily product is often desired due to its resilient characteristics.
Markets with diversified economies, noteworthy tech and innovation sectors and/or affordable
costs of living are already showing signs of that resiliency in the U.S. If such trends persist, those
cities will be poised to benefit from elevated investor interest for the foreseeable future.
3.1 Residential Pricing
Global house price inflation had already lost significant momentum before the Covid-19
pandemic broke out. Year-on-year growth in real residential property prices for major advanced
economies (AEs) and emerging market economies (EMEs) slowed down to 0.9% in aggregate
during the last quarter of 2019, the lowest rate since 2015. Real prices all but stagnated in EMEs,
rising by a mere 0.2% years on year. In AEs, they continued to rise at a moderate pace (+1.8%),
which was significantly below the rates seen in 2014–18. Within the G20 economies, Germany,
Mexico, Russia and France saw the strongest annual real house price inflation in Q4 CY2019,
while only India recorded a marked decline.
Regional developments in real residential property prices, in per cent, Q4 CY2019:
Cumulative from 2010 Year-on-Year

All reporting countries 16 0.9
Advanced economies 18.8 1.8
Non-European countries 26.2 1.4
Euro area 5.4 3
European countries outside 19.7 0.3
the euro area
Emerging market economies 14.2 0.2
Latin America 14.5 1.4
Emerging Asia 24.5 -0.4
Central and eastern Europe -22.6 2.8
Middle East and Africa 8.9 -1.3
*all the Global data are Calendar year (CY) wise.
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Real residential property prices growth slowed in EMEs, from 1.4% in Q3 2019 to 0.2% year on
year in the last quarter of 2019. This was driven by developments in emerging Asia (–0.4%),
where real prices fell by 3% in India and by 1% in China.
3.2 Global House Price Index
The Knight Frank Global House Price Index tracks the movement in mainstream residential prices
across more than 50 countries and territories worldwide using official statistics.
India ranks 43rd out of 56 in the list with 2% increase in y-o-y growth rate in housing price
appreciation.
The top 10 Countries showing better y-o-y growth in Global House Price Index for the CY Q1 2020
is given in the following chart:
% Change
(CY Q1 2019 - CY Q1 2020)
15.0% 14.5%
13.8%
11.9% 11.1%
10.3% 10.0%
9.4% 8.9% 8.6%
(Source: Knight Frank Global House Price Index)
3.3 Global Residential Cities Index
The Knight Frank Global Residential Cities Index tracks the movement in mainstream residential
prices across 150 cities worldwide using official statistics.
The average annual growth rate across 150 cities is 4.3%. 85% of Cities tracked registered static
or positive price growth over the 12 month period.
Indian City Hyderabad ranks 20th on the list with 10% y-o-y growth while Delhi, Kolkata, and
Ahmedabad ranks 67th, 85th and 90th with a y-o-y growth rate of 4.5%, 3.1%, and 2.7%
Page 22 of 59

respectively. Mumbai, Pune and Chennai has shown de-growth of -2.5%, -3.0%, and -5.0%
respectively in the list.
The top 10 Global Cities showing the best growth is given in the following chart:
Global Residential Cities Index

% change (Q1 2019-Q1 2020)
22.2%
16.3% 16.3%
14.8% 14.7% 14.0%
13.4% 13.3% 12.9% 12.9%
(Source: Knight Frank Global Residential Cities Index)
3.4 House Price to Income Ratio
Price-to-income ratio is the ratio between the prices of a median home to that of the median
annual household income in a particular area.
House Price to Income Ratio

124.5
122.3
121.0
119.1 118.5
115.6 115.0 114.9 114.5
(Source: International Monetary Fund)
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3.5 Global Investment
The Global Purchase or Investment in the Residential sector depends on the Net-worth of
Individuals. As per The Knight Frank’s Wealth Report 2020, The World’s Ultra High Net-worth
Individuals population (those with net-worth of more than US$ 30 million or more) rose by 6% in
the year CY2019 to 5,13,244 individuals while the U.S. dominates the rankings with 2,40,575
UHNWIs that is more than Europe and Asia combined accounting for almost half the global.
Residential property accounts for a large proportion of total UHNWI wealth – almost a third,
according to the Attitudes Survey.
Ultra High Net-worth Individuals

UNHWI
240575
61587
23078 18776 17013 14367 10701 9325 8924 8395
(Source: The Wealth Report 2020-Knight Frank)
Asia is quickly closing the gap on Europe and our figures predict that by 2024 it will be the world’s
second largest wealth hub, with forecast five-year growth of 44%. However, even following this
heady rise Asia’s UHNWI cohort will still only be half the size of North America’s, which is
forecast to grow by 22% over the same period.
Over the next five years we forecast that global UHNWI numbers will grow by 27%. Of the top 20
fastest growing countries that we measure, six are located in Asia (led by India with 73% growth),
five are in Europe (led by Sweden with 47% growth) and three are in Africa (led by Egypt with
66% growth).
Page 24 of 59

Forecast in increase of UNHWI

(Top 5 countries)
Forecast
73%
66% 64%
58% 57%
India Egypt Vietnam China Indonesia
Property makes up the largest proportion of investment portfolios held by UNHWI. Equity comes
second at 23%.
UNHWI Asset Allocation

% percent
27%
23%
17%
11%
8%
5% 3% 1%
3.6 Prime International Residential Index
The Prime International Residential Index (PIRI) 2019 has 100 cities in its graph that shows the
Annual % price change in terms of Luxury Residential Property.
Page 25 of 59

78 of 100 locations in PIRI registered flat or positive price growth in 2019. The average annual
growth of PIRI 100 is +1.8% in 2019 which is more than +1.3% growth in 2018. The average
change in prime prices across Asian markets (the highest performing world region in 2019) is
+3.1%. Frankfurt has topped the list by showing a growth of +10.3% in 2019. Indian metropolitan
city Delhi and Mumbai has ranked 16th and 68th on the list with a growth of 4.7% and 0.5%.
Top 10 City in PIRI 100 list

% growth
10.3%
9.6%
8.9%
7.6% 7.4% 7.0% 6.6% 6.5% 6.5% 6.3%
3.7 Key Global Players
Following are the Key Global Players in the Commercial Real Estate Market:
i. Lennar Corporation
a. Lennar Corporation is a home construction and real estate company based in
Miami, Florida.
b. The company is ranked 154th on the Fortune 500 as of year 2019.
ii. D.R. Horton Inc.
a. D.R. Horton, Inc. is a home construction company incorporated in Delaware and
headquartered in Arlington, Texas.
b. The company ranked number 194th on the 2019 Fortune 500 list of the largest
United States corporations by revenue.
iii. Pulte Group
a. Pulte Group Inc. is a home construction company based in Atlanta, Georgia,
United States.
Page 26 of 59

b. The company operates in 44 markets in 23 states. It is ranked 312th on the

Fortune 500.
iv. NVR Inc.
a. NVR, Inc. is a company engaged in home construction. The company primarily
operates on the East Coast of the United States.
b. It also operates a mortgage banking and title services business.
v. Taylor Morrison
a. Taylor Morrison is one of the largest home building companies in the United
States.
b. The company formed when Taylor Woodrow and Morrison Homes joined forces in
July, 2007.
The Revenue data of these key Global Companies is provided in the chart below:
Revenue (in US$ billion)

22.3
17.593
9.915
7.221
4.8
Lennar D.R. Horton Pulte Group NVR Inc Taylor Morrison

Corporation
(Source: Company Annual Reports)
Page 27 of 59

4. OVERVIEW OF INDIAN RESIDENTIAL REAL ESTATE SECTOR

4.1 Introduction
Real estate sector is one of the most globally recognized sectors. It comprises of four sub sectors
- housing, retail, hospitality, and commercial. Residential segment contributes ~80 per cent of the
real estate sector. Housing launches across top eight Indian cities increased 23 per cent y-o-y in
2019 to 2,23,325 units. The growth of this sector is well complemented by the growth in 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) investment, both in
the short term and the long term. Bengaluru is expected to be the most favored property
investment destination for NRIs, followed by Ahmedabad, Pune, Chennai, Goa, Delhi and
Dehradun. Demand for residential properties has surged due to increased urbanization and rising
household income. India is in the top 10 price appreciating housing markets internationally.
Housing sales reached 2.61 lakh units in 2019 across seven major cities. The growing flow of FDI
in Indian real estate is encouraging increased transparency. Developers, in order to attract
funding, have revamped their accounting and management systems to meet due diligence
standards.
4.2 Housing Construction Industry
According to the data released by Department for Promotion of Industry and Internal Trade
Policy (DPIIT), construction is the fourth largest sector in terms of FDI inflow. FDI in the sector
(includes construction development and construction activities) stood at US$ 42.50 billion from
April 2000 to March 2020.
The trend in the % change in Total Income and Total Expense of Housing Construction Industry is
given in the following chart along with its forecast:
Page 28 of 59

Trend in Income-Expense of Housing

Construction Industry
Total Income (% change) Total Expense (% change)
25.02
14.18
10.38
7.14 6.22 6.13
4.25
1.63 0.91
2015-16 2016-17 2017-18 2018-19 2019-20

-2.11
(Source: CMIE)
The year 2019-20 has seen a slowdown in terms of growth in both Expenses and Income of
Housing Construction Industry.
Forecast in Income-Expense of Housing

Construction Industry
Total Income (% change) Total Expense (% change)
7.32 7.4
6.33 6.44 5.92
5.85 5.63 5.21
0.39
2020-21 2021-22 2022-23 2023-24 2024-25
-4.24
(Source: CMIE)
Due to pandemic impact, the country might observe de-growth in terms of Income generated
within the Housing Construction Industry and then may see a near constant growth from 2021-22
to 2024-25.
Page 29 of 59

4.3 Project Status in Pan-India
The country has announced nearly INR 1348 billion of 128 New Projects in the year 2019-20 and
completed 290 projects of nearly INR 991 billion during the same period while the details of the
rest is provided in the Chart below:
Project Status in the year 2019-20

14000
12000
10000
8000
6000
4000
2000
0
Projects
Projects Projects Projects Projects Projects Under
Announced Completed Dropped Revived Outstanding Implementa
tion
Price (INR in billion) 1348 991 523 46 11607 8141
Numbers 128 290 85 2 1844 1403
(Source: CMIE)
These new projects announced are located in the following states of India:
State-wise Project Announcement (2019-20)

Prices (INR in billion)
906.5
142.1
38.6 31.9 28.3
Andhra Pradesh Maharashtra Tamil Nadu Telangana Haryana
(Source: CMIE)
Page 30 of 59

The construction sector of India can be divided into:
 Government Sector
o Central Government
o State Government
 Private Sector
Sector-wise Newly Announced Project (2019-20)

Project Cost (INR in billion)
980.4
367.4
Government Private Sector
(Source: CMIE)
4.4 Demand-Supply in Residential Sector
Housing sales reached 2.61 lakh units in 2019 across seven major cities. NCR (National Capital
Region) is expected to generate maximum demand in MIG and HIG category followed by
Bengaluru. Developers are now focusing on affordable and mid-range categories to meet the
huge demand.
Page 31 of 59

Cumulative Housing Demand-Supply in Top 8

Cities ('000 units): 2016-20
Supply Demand
25
LIG
1982
647
MIG
1457
351
HIG
717
(Source: CARE Research)
4.5 New Launch Supply Trend
The Q1 CY2020 saw a marginal increase in new launches of residential units compared to the
same period last year. Q1 recorded new launches of 40,574 units (an increase of 3% when
compared to Q1 CY2019).
Mumbai and Bengaluru continued to dominate new launches and formed nearly 60% of the
overall launches during the quarter.
A closer analysis of launches during the first quarter of CY2020 shows a sizeable proportion of
62% in the affordable and mid-price segments.
Page 32 of 59

Trends in New Launches y-o-y

Units
42025 40574
39318 39330
25569
Q1 2016 Q1 2017 Q1 2018 Q1 2019 Q1 2020
(Source: JLL Research), *All numbers are Calendar year wise.
The developers across cities continued to launch new projects in the initial two months of the
quarter. It gradually slowed down in the beginning of March in line with growing concerns of
the impact of COVID-19 before it came to a standstill, on account of the nationwide lockdown.
Q2 CY2020 was the most impacted quarter with launches being the lowest since 2013. During
this quarter, new launch supply declined by 97% over Q1 CY2020 and 98% over the same period
last year.
The new launch supply in H1 CY2020 declined by 56% compared to H2 2019. The share of
affordable housing in H1 CY2020 new launches was around 36% of the total supply. This
decreased from 41% in H2 CY2019. In absolute terms, the half-yearly decline in this segment
was around 61%. No new supply was added in the affordable segment in Q2 CY2020.
All cities witnessed a reduction in supply in H1 2020.
The trend in new launch supply activity in the top 7 cities is given in the chart below:
Page 33 of 59

New Launch Supply Trend

60000
50000
40000
Units
30000
20000
10000
0
NCR MMR Bengaluru Pune Hyderabad Chennai Kolkata
H1 2020 6190 10490 9190 8540 3380 3680 1140
H2 2019 13690 28100 19850 17890 5830 5940 5780
H1 2019 21600 49890 20080 28220 9000 7060 3640
(Source: CARE Research), *All numbers are Calendar year wise.
The situation is likely to aggravate the liquidity challenges faced by developers and restrict new
launches for some time after normal business conditions are restored. In the subsequent
quarters, developers are expected to focus on completion of under construction projects and
clearing their unsold inventory. Moreover, consolidation in the residential market with an
increasing number of joint developments will continue to be a major trend with the size of pie
belonging to reputed developers increasing consistently.
4.6 Sales Trend
India’s residential housing sales will decline sharply in the ongoing financial year. This will be on
account of current economic slowdown in the country. The lockdown has affected the businesses
across all the sectors and lead to several job losses and pay cuts. Therefore, several prospective
home buyers will defer their purchases owing to the COVID-19 led economic slowdown and
concerns over their job security.
The sales of residential units decreased by 29% in Q1 CY2020 over the same period last year.
The sales trend in the first quarter of Top 7 cities of the country is given in the Chart below:
Page 34 of 59

Trend in Sales of Residential Units

Units
42518
38628
30204
26861 27451
Q1 2016 Q1 2017 Q1 2018 Q1 2019 Q1 2020
Note: Top 7 cities include Delhi NCR, Mumbai, Bengaluru, Chennai, Hyderabad, Pune and Kolkata Mumbai includes
Mumbai city, Mumbai suburbs, Thane city and Navi Mumbai.
(Source: JLL Research) *All numbers are Calendar year wise.
The sales of residential units in Q1 CY2020 declined in all the seven major residential markets of
India as compared to Q1 CY2019. This was the second largest dip in residential sales in the last
five years, after Q1 CY2017, when the market witnessed a 37% y-o-y fall in sales due to
demonetisation. Bengaluru, which was the largest contributor to sales in Q1 CY2019 witnessed
the maximum decline in the offtake of units, registering a 52% fall in Q1 CY2020 on a y-o-y basis.
Mumbai, Delhi NCR and Bengaluru continue to account for majority sales.
Despite the prevailing unprecedented crisis created by the COVID-19 pandemic, 57,940 units
were sold, and sales continued to exceed launches in H1 CY2020. Sales decreased by 49% in H1
CY2020 compared to H2 CY2019 as every city underwent contraction. The contraction was in the
range of 46% to 51% across the top 7 cities of India. Sales in Q2 CY2020 accounted only for 22%
of H1 CY2020, which primarily led to an overall decline in half-yearly sales. Q2 CY2020 units sales
were 72% lower than the previous quarter and nearly 81% down from Q2 CY2019.
Page 35 of 59

Sales Trend
50000
45000
40000
35000
30000
Units
25000
20000
15000
10000
5000
0
H1 2020 10250 17530 11620 9360 3340 2670 3170
H2 2019 20530 35500 21710 17960 6760 5400 6380
H1 2019 26380 45370 28740 22830 9830 6420 7550
(Source: CARE Research), *All numbers are Calendar year wise
All cities witnessed a decline in sales to the tune of 46% to 51%, over the second half of CY2019.
In the subsequent quarters, the pick-up in sales will primarily hinge on enhanced consumer
confidence, which in turn depends upon the continued implementation of progressive
government policies amidst the gradual revival of the Indian economy at large. In the backdrop of
fears over timely deliveries and the financial health of developers, buyers will become even more
cautious. Traction in completed projects, especially by reputed developers is expected to aid the
recovery of the market.
4.7 Unsold Inventory Trend
The first quarter of CY2020 witnessed an increase in unsold inventory as launches outpaced sales
by a significant margin. Unsold inventory increased from 442,228 units in Q4 CY2019 to 455,351
units in Q1 CY2020. Moreover, Mumbai surpassed Delhi NCR to become the market with the
maximum quantum as well as value of unsold inventory.
Across the top seven cities, developers are sitting on an unsold inventory worth INR 3.7 trillion at
the end of March 2020.
Unsold Inventory has marginally decreased by 2% over H2 CY2019 to 6,33,070 in H1 CY2020, as

sales continued to surpass new launches.
Page 36 of 59

City-wise Unsold Inventory Trend

250000
200000
150000
Units
100000
50000
0
H1 2020 171020 209560 60390 91910 24250 33020 42920
H2 2019 175080 216600 62820 92720 24200 32020 44960
H1 2019 181930 224010 64680 92790 25130 31470 45560
(Source: CARE Research), *All numbers are Calendar year wise
Majority of the cities witnessed a decline in Unsold Inventory in the range of 1% to 5%.
4.8 Inventory Overhang
An assessment of years to sell (YTS) reveals that the expected time to liquidate this stock has
increased marginally from 3.2 years in the last quarter of 2019 to 3.3 years in Q1 2020. With
anticipated slower sales in the coming quarters, the time to sell is likely to increase. Thus, the
duration to monetize the existing inventory of around 6,33,070 units is expected to extend. The
RBI’s intervention to provide a 3-month moratorium on all term loans by financial institutions will
alleviate short-term liquidity concerns and help developers survive in these uncertain times.
Page 37 of 59

Inventory Overhang
Months
67
54
47 49
40
29
22
Inventory overhang increased from 30 to 44 months in last 6 months.
4.9 Property Prices
Since, the unsold inventory is going to stay for a while at least until the buyer are not confident
to invest. Hence, to sell these locked-in properties the developers are expected to cut down their
prices by 10-15%.
The prices of residential properties in the top 7 cities is shown in the Chart below:
Page 38 of 59

Pricing in Various Cities

Price psf
10610
5510
4580 4975 4935
4195 4385
4.10 Affordability Index and Housing Price Index
According to an affordability benchmark study by Knight Frank India, ideal affordability is

identified at 4.5 times the average annual household income in a city and except for Mumbai,
NCR and Hyderabad, all other markets are below the ideal affordability benchmark.
While Mumbai continues to be the most expensive housing market with affordability index of
7.1, it has seen affordability of homes significantly improve from 11 times the annual household
income in 2010. NCR and Hyderabad are marginally above the benchmark affordability with
scores of 5 each, while Bengaluru has an affordability index of 3.9. The affordability levels have
raised the most for Pune at just 2.5 times of their average household incomes.
NHB RESIDEX, India’s first official housing price index, was an initiative of the National Housing
Bank (NHB). NHB RESIDEX is designed to track changes in housing prices at neighbourhood, city
and national levels. Price changes will be measured over time and across cities and various
locations within cities. NHB RESIDEX will help recognize current trends in micro as well as macro
markets, and predict future behaviour of the housing market.
The HPI represents the price changes in residential housing properties. At present, the
geographical coverage consists of 50 cities in India including 18 State/UT capitals and 37 smart
cities, which will progressively be expanded to over 100 cities including all State/UT capitals and
smart cities. Measuring overall change in housing prices in India is complex and challenging
Page 39 of 59

because of various data sources with dissimilar data sets. The information on housing prices
varies according to the stage of transaction in which data is collected. As a result, three different
prices including registered price, assessment price, and market price may apply.
NHB Housing Price Index

Index
110.46
108.86
105.54 105.62
104.08
Sept'18 Dec'18 Mar'19 Jun'19 Sept'19
Page 40 of 59

5. KEY DEMAND DRIVERS OF THE SECTOR

The Key Demand Drivers of the Residential real estate sector are:
 Economic Growth along with Growing Urbanization is boosting Real Estate Demand
 The Indian economy has experienced robust growth in the past decade and is expected to
be one of the fastest growing economies in the coming years.
 India’s urban population is expected to reach 525 million by 2025, up from an estimated
461 million in 2018.
 Rising income and employment opportunities have led to more urbanization and more
affordability for real estate in cities.
Growth in Household Incomes in Indian Cities

(Year 2019)
percentage growth
10%
9% 9%
8% 8% 8% 8%
Mumbai Kolkata Pune Hyderabad Chennai Bengaluru Delhi NCR
Page 41 of 59

Population breakdown of India (million)

Urban Rural
880 893 900 909
525
461 483
429
2015 2018 2020E 2025E
 Government Policies are helping the Industry Prosper
 The real estate segment has received a massive boost from the government initiatives
such as Affordable Housing Scheme, Goods and Services Tax (GST) and the Real Estate
(Regulation and Development) Act, 2016 (RERA).
 Despite their initial troubles, developers and buyers now hail the moves as the increased
transparency and competence of the sector have not only boosted the confidence of
domestic investors but foreign as well, which has led to increased FDI into the sector.
 Rise in Number of Nuclear Families

 According to 2001 census, out of 19.31 crore households, 9.98 crore or 51.7% were
nuclear households. In the 2011 census, the share grew to 52.1% — 12.97 crore nuclear
out of 24.88 crore households.
 Nuclear family is a very well linked with the Rapid Urbanisation of the country.
 People migrate from one place to another in search of jobs which ultimately increases the
nuclear family counts. These people are most probably labours and account for a large
part of the society.
 By increase in Nuclear families, demand for residency will also increase.
Page 42 of 59

 Repatriation of NRIs and HNIs

 Due to COVID-19 pandemic, a lot many people have repatriated to India, this will lead to
more area of residency.
 Since, India’s is becoming the fastest growing economy many NRIs are repatriating to
their origin as they are seeing new opportunities in their own country.
 These NRIs are generally High Net-worth Individuals so are comfortable in purchasing
apartments for their comfortable residence.
 This will ultimately lead to demand in Residential Sector.
 Rise in disposable income
India's Disposable Personal Income

INR in Trillion
206.75
192.82
169.62
154.97
138.19
CY 2015 CY 2016 CY 2017 CY 2018 CY 2019
 India’s disposable income is rising year on year and has reached its top in the year 2019.
 The Disposable Personal Income has increased at a CAGR of 10.60% during the last 5
years.
 This growth in disposable income increases the Purchasing Power of an Individual that
may lead to a better way of living.
Page 43 of 59

6. CHALLENGES FACED BY THE SECTOR

The major challenges faced by the Residential real estate sector are:
 COVID-19
Due to lock-down, the real estate projects which were in various stages of construction,
development and completion have come to a standstill. The period for which the pandemic
will prolong is uncertain. The impact of lockdown on real estate sector is going to be huge
and one will see a lot of real estate insolvencies/bankruptcy in the times to come. COVID-
19 has severely hit residential real estate business and the sector has come to a standstill in
the short term. While the sector was coming out of the woods after the liquidity crisis
initiated by the IL&FS fiasco and subsequent fallouts of various financial institutions, the
pandemic outbreak could further impact residential sector.
According to industry estimates, 90% of the workforce employed in real estate and
construction sector is engaged in the core construction activities, while the rest 10% is
involved in other ancillary activities. Since majority of the workers are immigrants, labor
shortage could possibly pose a major challenge for the sector post COVID-19 lockdown.
Post Demonetization, RERA and Liquidity crisis, the survival of the fittest and financially
strongest has become the new norm in the Indian real estate sector and well capitalized &
established players have gained substantial market share over the years. This consolidation
phase is likely to continue amidst the current COVID-19 outbreak and probably accelerate,
as we emerge from this pandemic and many weak players may cease to exist.
 Land Availability
Another challenge that has affected the growth of the real estate sector and the
developers is litigated land. According to a survey conducted by the MahaRERA, around 16
per cent of projects and 31 per cent of built-up spaces are, or have been, in legal disputes.
In Mumbai, these figures tally to about 30 per cent of the real estate projects and 50 per
cent of the built-up space; for Thane, the corresponding figures are 26 per cent and 36 per
cent respectively.
Unavailability of affordable land is one of the biggest barriers to creation of affordable

housing in cities. The government has several urban land banks which are currently
unutilised. Such land can be allocated for affordable housing projects and the creation of
affordable housing can be driven via a PPP model.
Page 44 of 59

 Out-dated building Bye-Laws
With the current rate of population explosion, the demand for space is vital. Over 50 per
cent of the world's population lives in cities, and the number is expected to rise by 2.5
billion by the year 2050. However, the current Floor Space Index (FSI) norms in the cities
are not on par with the growing demands of the consumers.
 Tax and Demand Shifts
In addition to the previous financial challenges, the implementation of the GST is another
factor that haunts the real estate sector. Before the implementation of GST, a service tax of
4.5 per cent was applicable in the case of an under-construction property. However, post-
GST, the rate has risen sharply to 12 per cent, stealing the attractiveness of the ordeal for
property investors.
As buyers were paying registration charges and stamp duty on properties, the inclusion of
GST has increased the statutory cost of the property of the investor by 20 per cent.
 Approvals and Procedural Difficulties
The real estate sector in India is heavily regulated by the central, state and local
governments. Real estate developers are required to comply with a number of laws and
regulations, including policies and procedures established and implemented by local
authorities in relation to land acquisition, transfer of property, registration and use of land.
These laws often vary from state to state. If the project is in preliminary stages of planning
and any delay in obtaining approvals could warrant revised scheduling of project timelines.
It not only delays a project but also increases the cost of the property by 10-20% for both
buyers and developers.
 Speculation in Land and Real Estate Prices
The prices of land and real estate in India has increased exponentially in last decade and
causes overpricing of commercial or residential property. Further real estate agents or
brokers buy or sell property frequently with their own investments and cause of surging
prices in property.
 Sources of Finance
Finance is the key for development of any industry. The lending to real estate developers
by NBFCs and HFCs fell by almost half to about INR 27,000 crore in FY19, triggered by the
IL&FS crisis,. This NBFC crisis has further deteriorated the liquidity situation for smaller
Page 45 of 59

developers who had to resort to alternative funding in absence of long term loans from
banks. Due to poor image of Real Estate sector, banks are becoming reluctant to provide
loans and making regulation tougher to avoid the bad loans. Alternate sources of finance
are very costly and ultimately impact total cost of the project.
 High Input Cost
The real estate is a capital and labour intensive industry; thus rise in cost of labour and
construction material due to inflation poses many problems to real estate industry. Further
real estate builders many times raise a question about unfair practices in cement industry
for rise of price more than 50% in quick time.
Page 46 of 59

7. GOVERNMENT INITIATIVE
 Real Estate and Regulation Act (RERA)

 The real estate sector has benefitted by RERA, which was implemented from May
01, 2017, despite it being subdued for a few months as developers put their
operations on hold, to understand and comply with all the regulations.
 In the long run, RERA makes the real estate sector more transparent and process
driven. RERA has a direct implication on the ceramic sector as well.
 In a medium time frame, RERA is expected to bode well for the organized real
estate sector as well as the ICTI.
 It was brought into force with effect from August 1971 with a view of regulating
the import, manufacture, sale, transport, distribution and use of insecticides in
order to prevent risk to human beings and animals.
 Relief to Real Estate Projects (amid COVID-19 impact)

 Finance Minister has announced measures to relief and credit support related to
businesses, especially MSMEs to support Indian Economy to fight against COVID-
19.
 State Governments are being advised to invoke the Force Majeure clause under
RERA. The registration and completion date for all registered projects will be
extended up to 6 months and may be further extended by another 3 months
based on the State’s situation.
 The threshold of defaulting companies under Insolvency & Bankruptcy Code (IBC)
has raised, with immediate effect, from Rs. 1 lakh to Rs. 1 crore.
 Among the various measures announced, commendably its allotment of Rs 10,000
crore to National Housing Bank, is a big move for the real estate sector reeling
under the liquidity crisis. It will help provide capital to HFCs and eventually provide
major relief to developers battling liquidity issues in COVID-19 times,”
 The FM made the announcement of liquidity infusion to the tune of Rs 30,000
crore special for NBFCs/HFCs and MFIs in order to ease liquidity woes of the
stressed players. "This will also benefit the real estate sector significantly, given
that NBFCs and HFCs are major lenders to it. As per ANAROCK research, NBFCs and
HFCs together contribute almost 56 per cent of total lending to real estate in India
currently," said Puri.
Page 47 of 59

 Further, a window of Rs 50,000 crore under TLTRO will provide incremental

liquidity to NBFCs, MFIs, which could be utilised for onward lending to the real
estate sector.
 RBI has also reduced the reverse repo rates by 25 bps to 3.75%. This is another big
step as the rate cut will definitely send out positive signals in the current times,
and will enable banks to lend more.
 Taking cognizance of the challenges being faced, both the RBI and the Central
Government have introduced relief measures to counteract the effects of the
outbreak. The RBI has announced a 1-year extension for repayment of loans
availed by the commercial real estate projects which are delayed, for reasons
beyond the control of promoters.
 Foreign Direct Investment (FDI)

 In January 2018, the Government allowed 100 per cent FDI in single-brand retail
trading and construction development without Government approvals.
 The FDI caps were revisited for several industries and this promoted foreign
agencies to bring in their technology, expertise and money into India.
 New companies setting shop in India meant more office spaces, larger built-to-suit
technology centres and Special Economic Zones.
 Due to job creation, residentials segments demand will increase.
 Make in India
 This initiative was boosted by Government of India in the year 2014.
 The main motive behind the campaign was to foster manufacturing within the
country by focusing on bringing worldwide investment for this sector.
 The campaign has further heralded the development of townships, roads, bridges,
hospitals and other infrastructure.
 It has boosted a lot of investment growth in India.
 The Ease of Doing Business (EoDB) Rank of India has improved from 184 in 2014 to
27 in 2019. This improvement has been mainly on the account of decrease in the
number of procedures and time taken for obtaining construction permits in India.
 This will ultimately boost people to purchase residences near their office/business
centers.
Page 48 of 59

 Smart Cities
 The building and push towards SMART Cities also heralded the opportunity for
infrastructure development which includes roads, railways, commercial centres,
and much more.
 And with Government easing the transaction and compensation process around
land acquisition also helped developers overcome challenges and hurdles in
development projects.
 Housing and inclusiveness - expand housing opportunities for all.
 Land Acquisition Bill

 In December 2014, the Government passed an ordinance amending the Land
Acquisition Bill.
 This ordinance is intended to speed up the process for industrial corridors, social
infra, rural infra, housing for the poor and defence capabilities.
 Demonetization
 Introduced on 8th November, 2016, the demonetization move of the government,
putting a sudden ban on the then existing Rs 500 and Rs 1000 currency notes was
indeed a difficult move for many to deal with.
 And though, it did bring about multifarious challenges, it also eliminated some of
the prevalent malpractices in the real estate industry such as Black Money
transactions and helped to enhance transparency in the sector.
 Benami Transactions Amendment Act, 2016

 Before 1988, benami transactions were not illegal and there was no law for people
who commit fraud by entering in such transactions. The only thing that was not
allowed was to recover the property by the real owner from the benamidar.
 The initial act was Benami Transaction (Prohibition) Act, 1988. It was amended in
2016 and renamed as Benami Transaction (Prohibition) Amendment Act, 2016.
 Aimed towards regulating the unaccounted money into the economy, the said Act
is expected to bring lucidity in the ownership of property and result into bolstering
investor confidence.
 Real Estate Investment Trust (REIT)

 Approved by the Securities and Exchange Board of India (SEBI), REIT is a platform
to pool money from investors all across the country.
Page 49 of 59

 The introduction of REITs is aimed towards allowing the investors to make safe
investments into the real estate of India, and the amount so collected will
subsequently be utilised towards the development of commercial properties in
order to generate income.
 This is an initial step and may be in upcoming future, REITs also fund Residential
Segments.
 Change in Arbitration Norms for Construction Companies

 A series of initiatives on arbitration norms were approved by the Cabinet
Committee on Economic Affairs to provide a sigh of relief to the entities struggling
with liquidation issues.
 The said initiative was meant to resolve the arbitration cases sooner keeping in
mind the stalled construction of projects.
 Goods & Services Tax (GST)

 A revolutionary tax reform rolled out in July 2017, GST has indeed helped to
simplify the home buying process with its “One Nation, One Market, One
Tax” principle.
 The introduction of GST has further helped to streamline the real estate sector by
removing the possible ambiguities due to multiple taxation system, prevalent
erstwhile.
 Insolvency & Bankruptcy Code (IBC), 2016

 The fundamental features of the Code are that it allows creditors to assess the
viability of a debtor as a business decision, and agree upon a plan for its revival or
a speedy liquidation.
 The Code creates a new institutional framework, consisting of a regulator,
insolvency professionals, information utilities and adjudicatory mechanisms, that
will facilitate a formal and time bound insolvency resolution process and
liquidation.
 Pradhan Mantri Aawas Yojana-Urban (PMAY-U)

 Also called the Housing For All scheme, PMAY was launched in 2015 and aims to
deliver houses for the homeless by 2022.
 The Mission provides Central Assistance to the implementing agencies through
States/Union Territories (UTs) and Central Nodal Agencies (CNAs) for providing
Page 50 of 59

houses to all eligible families/ beneficiaries against the validated demand for
houses for about 1.12 cr. As per PMAY(U) guidelines, the size of a house for
Economically Weaker Section (EWS) could be upto 30 sq. mt. carpet area, however
States/UTs have the flexibility to enhance the size of houses in consultation and
approval of the Ministry.
 Under the scheme, the government will provide interest subsidy of three to four
per cent for a home loan amount of up to Rs 9 lakh and Rs 12 lakh.
 Government of India’s Housing for All initiative is expected to bring US$ 1.3 trillion
investment in the housing sector by 2025.
 Affordable Rental Housing Complexes (ARHCs)

 COVID-19 pandemic has resulted in reverse migration of urban migrants/ poor in
the country. Urban migrants stay in slums/ informal settlements/ unauthorised
colonies/ peri-urban areas to save cost on housing. They need decent rental
housing at affordable rate at their work sites.
 In order to address this need, Ministry of Housing & Urban Affairs has initiated
Affordable Rental Housing Complexes (ARHCs), a sub-scheme under Pradhan
Mantri AWAS Yojana- Urban (PMAY-U). This will provide ease of living to urban
migrants/ poor in Industrial Sector as well as in non-formal urban economy to get
access to dignified affordable rental housing close to their workplace.
 These complexes will ensure a dignified living environment for urban
migrants/poor close to their workplaces at affordable rates.
 This will unlock existing vacant housing stock and make them available in urban
space. It will propel new investment opportunities and promote entrepreneurship
in rental housing sector by encouraging Private/Public Entities to efficiently utilize
their vacant land available for developing ARHCs.
 Pradhan Mantri Gramin Awaas Yojana (PMGAY)

 Previously known as Indira Awas Yojna, this scheme focuses on providing pucca
houses with basic amenities to homeless families.
 To achieve the objective of “Housing for All” the target no. of houses to be
constructed by the year 2021-22 is 2.95 crore.
 Providing assistance in construction of 1 crore houses in rural areas over the
period of 3 years from 2016-17 to 2018-19.
 The minimum unit (house) size is 25 sq.m including a dedicated area for hygienic
cooking.
Page 51 of 59

 Assistance of Rs. 1.2 lakh in plain areas and Rs. 1.3 lakh in hilly states, difficult
areas and IAP districts.
 State Government Housing Scheme

 Housing Schemes such as Delhi Development Authority Housing Scheme, 2018;
Tamil Nadu Housing Scheme Board (TNHB); Maharashtra Housing and Area
Development Authority (MHADA), 2018; NTR Urban Housing Scheme.
 These State Government Schemes are generally divided into Lower Income Group
(LIG), Middle-Income Group (MIG), High Income Group (HIG), and Economically
Weaker Sections (EWS).
 These apartments are made and are given to the concerned people according to
their Annual Household Income at cost less than that quoted by the private
builders in the locality.
 These Schemes are linked to government’s central linked schemes or specific
states scheme.
 Policies to boost affordable housing segment

 Interest deduction benefit on affordable housing
 The Government in its attempt to boost affordable housing demand,
proposed to extend additional tax benefit of INR 1.5 lakh on interest paid
on affordable housing loans by one year till March 2021. The additional
deduction is over and above INR 2 lakh which was introduced in the
previous year’s budget.
 Tax holiday for Affordable housing developers
 In order to encourage developers to focus on affordable housing projects,
the Government extended the date of approval for these projects for
availing tax holiday on profit earned by developers by one year till March
2021. The tax holiday which was being provided under section 80-IBA for
approved projects during the period from June 1, 2016 to March 31, 2020
has been extended by a year.
 Rationalization of capital gains tax on difference between circle rate and
transaction rate
 Earlier for real estate transactions, if the consideration value was less than
circle rate by more than 5%, the difference was considered as income
accruing to both the buyer and seller and hence taxable to both. In order
Page 52 of 59

to facilitate real estate transactions and provide relief to the sector, the
government increased the limit from 5% to 10%.
 New income tax regime for taxpayers
 The Government introduced an alternative tax regime and in case an
individual moves to the new tax regime, the tax exemption including
deduction repayment of principal (for INR 1.50 lakh) and deduction on
interest payable on housing loan has to be forgone, which is potentially
negative for the sector.
Page 53 of 59

8. DOMESTIC PLAYER OF RESIDENTIAL REAL ESTATE SECTOR

The key Domestic players of the Real Estate Industry are both active in Residential segment are:
1. Macrotech Developers Ltd.

a. Macrotech Developers Limited (Formerly known as Lodha Developers Limited) was
incorporated as ‘Lodha Developers Private Limited’ on September 25, 1995 in the
state of Maharashtra at Mumbai as a private limited company under the
Companies Act, 1956, as amended and converted into Public ltd company w.e.f
March 14, 2018.
b. Lodha Group is a company with presence in India and the United Kingdom.
c. The Group is developing an estimated 31.25 msf of prime real estate with large
land reserves in the Mumbai Metropolitan Region (MMR).
d. The company have a large land reserves of over 4,500 acres with an estimated
saleable area of 385 msf as of September 30, 2019.
e. In FY 16-17 alone, they completed 7.76 msf and 5,677 units across projects. In FY
17-18 they completed 13.75 msf and 11,544 units whereas in FY 18-19, they
completed 5.99 msf and 5,712 units across projects. In FY 19-20, they had
delivered 13 msf of projects.
f. The Company generated INR 81.15 billion standalone revenue in FY 20 which is
14.72% less than that generated in FY 19 of INR 95.16 billion.
g. The Net Profit of the company stood at INR 4.33 billion in FY 20 which is 64.27%
less than that achieved in FY19 of INR 12.12 billion.
2. DLF Limited
a. DLF is a Gurugram based Commercial Real Estate Developer founded in the year
1946.
b. DLF has developed ~153 real estate projects and developed an area of
approximately 330 msf. DLF Group has 221msf (approx.) of development potential
across residential and commercial segment.
c. The company has ready to sell inventory worth nearly INR 90 billion.
d. The company has planned new projects across of approx. 19 msf in FY20.
e. The company has gross sales of INR 34.5 billion in FY20 that is 10% more than
FY19 and net sales booking of INR 24.85 billion in FY20.
f. The Company generated INR 23.70 billion revenue from Operations standalone in
FY 20 which is 28.08% less than that generated in FY 19.
g. The consolidated Net Profit of the company stood at INR 26.64 billion in FY 20.
Page 54 of 59

3. Prestige Estates Project Limited

a. Prestige group is a property development company established in 1986 in
Bangalore.
b. The company has pre-sales of INR 45.61 billion and total collections of INR 46.76
billion.
c. The company launched 17.12 msf of project across various segment and
geographies.
d. The company completed 19.32 msf of projects across various segments and
geographies.
e. The company has generated total consolidated revenue of INR 57.16 billion in
residential segment in FY 19-20.
f. The company has completed 118 projects (89 msf) while 28 projects (32 msf) is
ongoing and 17 projects (31 msf) under planning stage.
g. The Company generated INR 33.56 billion revenue from Operations standalone in
FY 20 which is 37.47% more than that generated in FY 19.
h. The consolidated Net Profit of the company stood at INR 2.62 billion in FY 20.
4. SOBHA Limited
a. SOBHA Limited is an Indian multinational real estate developer incorporated in
1995 and based in Bangalore.
b. As of 31st March 2020, SOBHA has overall completed 109.74 msf of area.
c. The company currently has ongoing real estate projects aggregating to 39.36 msf
of developable area and 27.41 msf of saleable area.
d. The company has a real estate presence in 10 cities, viz. Bengaluru, Gurugram,
Chennai, Pune, Coimbatore, Thrissur, Kozhikode, Kochi, Gujarat (Gift City) and
Mysore. Overall, SOBHA has a footprint in 27 cities in 14 states across India.
e. In the residential space, we completed 5.86 msf of developable area during the
financial year.
f. The Company achieved 4.07 msf of new sales area which is the highest since its
inception. The total value including joint development share at INR 28.81 billion at
an average price realization of INR 7,075 per square feet.
g. The Company generated INR 37.56 billion revenue from operations standalone in
h. The Net Profit of the company stood at INR 2.90 billion in FY 20.
Page 55 of 59

5. Godrej Properties Limited

a. The company was established in the year 1990 and is a subsidiary of Godrej
Industries Ltd.
b. The Company achieved sale of 7,415 homes and sale volume of 8.8 msf and
booking value of 59.15 billion in FY20. This is a growth of 11% from FY19 in
booking value.
c. The company delivered ~5.3 msf across 5 cities in FY20.
d. The Company launched 17 new projects/phases in FY20.
e. The Company generated INR 17.47 billion revenue from Operations standalone in
f. The Net Profit of the company stood at INR 3.13 billion in FY 20.
Trends in Revenue of Key Domestic Players
100.00
90.00
80.00
INR in billion
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
Prestige
Macrotech
Estate Godrej
Developers DLF Ltd. Sobha Ltd.
Projects Properties
Ltd.
Ltd.
FY 20 81.15 23.7 33.56 37.56 17.47
FY 19 95.16 32.95 24.41 33.99 14.34
(Source: Company Annual and Financial Report)
Page 56 of 59

Trends in Net Profit of Key Domestic Players

25
20
INR in billion
15
10
0
Macrotech Prestige
Godrej
Developers DLF Ltd. Estate Sobha Ltd.
Properties
Ltd. Projects Ltd.
FY 20 4.33 22.64 2.62 2.89 3.13
FY 19 12.12 6.86 2.89 2.87 2.09
(Source: Company Annual and Financial Report)
Page 57 of 59

9. OUTLOOK FOR THE RESIDENTIAL REAL ESTATE SECTOR
 In 2020-21, the industry’s sales revenue will continue to decline as sluggish economic
growth will impact housing sales. Profitability of the industry will be under tremendous
pressure as realty developers will look to reduce their housing inventory by offering
discounts on home purchases.
 Real estate project completions will see a sharp decline in 2020-21. During the year
projects worth Rs. 686 billion are expected to be completed, 35% lower as compared to
the year 2019-20.
 Consolidation in residential units is going to rise in the short-term future causing branded
players to gain market share to the tune of 75%-80%.
 Township project that accounts for only 5% across the major cities are likely to rise in the
future as residents would prefer to work-live-play in controlled environment.
 The design specifications are likely to be altered going forward as there will be a higher
demand for flexible homes that are capable of functioning as office and classrooms if
required.
 Realty developers that are low on cash will turn towards financially sound builders to
take-over stuck projects. Stressed Realty developers will form Joint Ventures, monetize
their land and extend development management contracts across major cities.
 Prices are likely to remain range bound as developers will be keen to liquidate existing
inventory.
 New Real estate project announcements across the country will see a sharp decline in the
year 2020-21. Real Estate developers will look to clear existing inventory instead of
announcing new projects.
 Moreover, lack of funding sources due to tighter lending norms by banks and other
financial institutions and delay in payments from housing units already sold will also
affect cash flow of developers, which in turn will impact new project announcements.
 Work from home is likely to find acceptance in the Indian corporates, causing a spike in
reverse migration of professionals. As a result, housing demand may gain momentum in
tier II and tier III cities.
 The nature of the Residential market is expected to be Buyer’s market and not Seller’s
market due to decrease in Buyer’s market confidence.
 The decline in Residential housing demand will trigger a fall in housing prices across all
segments.
Page 58 of 59

 Lenders are now facing the risk that the value of the collateral for which the loan is
disbursed may go down in future as housing prices are projected to decline. This may
create a situation similar to the sub-prime crisis in the US in the year 2008. Therefore,
lenders are more cautious while disbursing home loans.
*****
Page 59 of 59

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Residential Real Estate Sector

Residential Real Estate Sector

CARE Advisory Research and Training Limited.

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CART is not responsible for any errors or omissions in analysis/inferences/views or for

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Abbreviation Full Forms

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2. OVERVIEW OF REAL ESTATE SECTOR........................................................................................ 12

3. OVERVIEW OF GLOBAL RESIDENTIAL REAL ESTATE SECTOR .................................................... 21

4. OVERVIEW OF INDIAN RESIDENTIAL REAL ESTATE SECTOR ..................................................... 28

5. KEY DEMAND DRIVERS OF THE SECTOR ................................................................................... 41

6. CHALLENGES FACED BY THE SECTOR........................................................................................ 44

7. GOVERNMENT INITIATIVE ........................................................................................................ 47

8. DOMESTIC PLAYER OF RESIDENTIAL REAL ESTATE SECTOR ..................................................... 54

9. OUTLOOK FOR THE RESIDENTIAL REAL ESTATE SECTOR .......................................................... 58

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Summary of World Economic Outlook Projections is given below (in %):

2019 2020p 2021p

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1.2 Indian Economy

Statistics for Indian Economy is provided below:

I. Gross Domestic Product (GDP)

Sectorial growth of GDP (in %) (At constant FY 11-12 prices):

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II. Gross Value Added (GVA) for FY 19-20

Sector wise estimated contribution to GVA is provided below:

% contribution to GVA at Constant prices (FY 11-12) for

Agriculture, Forestry & Fishing

13.58% 14.45% Mining & Quarrying

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III. Industrial Growth for FY 19-20

IIP Growth (%)

IV. Growth in Per Capita GDP, Income and Final Consumption

Per Capita GDP Per Capita GNI Per Capita PFCE

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V. Indian Economy outlook

Private consumption, in particular, is at serious risk from the COVID-19 pandemic,

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2. OVERVIEW OF REAL ESTATE SECTOR

 Types of Real Estate

2.1 Global Real Estate Sector

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Global Investment Volumes

Note: Data till November 2019

(Source: Savills report)

Direct investment in global commercial real estate dropped by 5% year-on-year in Q1 2020,

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 Industrial & Logistics sector

 Hotels & Hospitality sector

2.2 Indian Real Estate Sector

The Real Estate sector in India can be primarily categorized into:

1) Residential Housing & Commercial Sales

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 Indian Real Estate Market

Indian Real Estate Market

2017 2020 2025 f 2030 f

(Source: Industry Sources, CARE Research)

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Urban Population (in millions)