REAL ESATE INDEX

Equity Research And

Analysis Of BSE Realty
Index

Submitted to : Submitted by : Group No. (ER Group 2)

Mr. Ashish Pandey 1. Ashutosh Agrawal

2. Abhishek Jain
3. Ganesh Chand Bansal
4. Jaya Sarpal
5. Kanchal Sanyal
6. Mahal Singh
7. Priyanka Yadav
8. Rachana Sharma
9. Sonam Sharma

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 INTRODUCTION TO REAL ESTATE

Real estate is a business, not a profession. Real estate is sometimes inaccurately

spoken of as a profession, but it is essentially a business. A profession applies science,
art or learning to the use of others, the profit to the professor or person applying it being
incidental; whereas a business is engaged in primarily for profit, and the profit is to the
one engaging in the business.

A profession implies professed attainment in special knowledge. A person may engage

in business with or without special knowledge and no one else is concerned with the
question whether he has any knowledge of the business, because no one else is
affected by the result. If he is successful the rewards are his; if he fails he bears the
loss. But let him attempt to practice a profession and, if he be unskillful, others are
directly affected, and the fact that his reward is diminished thereby is merely incidental
to the fact that others suffer.

Ethics of the business.—But whether real estate be a business or a profession has no

connection at all with the body of ethics governing it.

Every business can be conducted upon a plane ethically as high as the ideals of any
profession, and the men who have been conspicuously successful in the real estate
business have attained success because they have applied to their business the
highest ideals of commercial fair dealing. This does not mean that there is any ethical
requirement for the seller or the purchaser to give away anything which belongs to him,
or for either one to disclose to the other his necessity for selling or his requirements for
buying; but the bargain having been made, it is absolutely necessary that it be lived up
to by both parties, according to its intent; and, if there be any doubt of the intent of the
bargain as it is expressed in writing, that the spirit of the transaction be carried out
rather than that the catch words of a written instrument should govern. Cases are
frequent of men who to their own detriment perform the thing which they have promised
to do although not legally obligated, and the bigger and more successful the man who
makes the promise the more surely will it be carried out. Important obligations are often
incurred upon the mere promise of a well-known man to sell an important piece of
property at a definite price, although no legal and enforcible obligation exist ; and the
promise is always redeemed if it is made by a man who knows the business, and it is
redeemed not merely from altruistic motives, but also for purely business reasons.
Divisions of the business.—The principal divisions of the real estate business are
investment, operation and agency. These differ from one another according to the aims
of the persons engaging in them and the methods by which those persons expect to
make their gains. To conduct either of the first two divisions of the business, investment
or operation, actual money capital is required. The most important capital in the agency
business is the good will of its customers, and that can be husbanded, increased and
made very valuable.

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 EXISTING PLAYERS IN REAL ESTATE INDUSTRY
Followings are the existing players in the Indian real estate industry.

(1) KOLTE PATIL DEV.

(2) ORBIT CORPORATION.
(3) PENINSULA LAND.
(4) ACKRUTI CITY.
(5) HDIL.
(6) ANSAL PROPERTIES
(7) PARSVNATH DEVELOPERS.
(8) ANANT RAJ INDUSTRY.
(9) OMAXE
(10) DLF.
(11) UNITECH.
(12) PHOENIX MILLS.
(13) GMR INFRASTRUCTURE
(14) IVRCL INFRA
(15) NAGARJUNA CONSTRUCTURE
(16) HCC
(17) JP ASSOCIATES
(18) SOBHA DEVELOPERS.
(19) INDIABULS REAL ESTATE.

An Overview

Key Growth Drivers: The propellants for the real estate sector are

 Growth of India's middle class creating demand for housing.

 Strong demographic impetus: India has the second largest population in the world
and the growth rate of population is still rapid.

 Rising FDI levels has increased commercial space requirements by foreign firms.

 Expansion of organized retail sector.

 Easy availability of finance.

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Retail Real Estate:

Today, the face of Indian retail sector is changing. The traditional stores are being
replaced by retail chains, shopping centres, supermarkets and hypermarkets. From the
beginning of 2006, the Government has allowed foreign direct investment in retailing,
with 51 percent participation. The retailing sector is projected to reach US$ 23 billion by
2010. This growth in the retail sector will inevitably provide strong impetus to the retail
real estate.

Housing Real Estate Demand:

Several factors including rapid population growth, rising incomes, emergence of nuclear
families, tax incentives, availability of home loans at competitive rates are responsible
for the growing demand for houses and hence extensive residential construction. There
is currently a shortage of around 20 million units and the demand is expected to rise in
the forthcoming years. The current scenario is very conducive for investment in the
housing real estate sector.

Corporate Real Estate:

It sets the corporate image, impacts a company’s performance and worker productivity
and is the second largest expense in most income statements. Effective CRE
executives strive to proactively and strategically support the core business, align their
organizations and operations to rapidly changing corporate mandates and deal with a
constant stream of small and large issues — all requiring immediate attention. Among
the ongoing challenges faced by CRE executives are: improving department and
operating performance, lowering costs, time pressured decision making, managing
complex vendor relations, and never-ending compliance concerns.

Structure:

Real estate is a highly fragmented sector with only a few organized players. Most real
estate developers have only a local or regional presence and there is moderate
participation from large corporations till now. The top players in the real estate and
construction industry are Unitech, Hiranandani, DLF, Ansal group.

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 Sales Of The Real Estate Industry

Year Sales(in crore)

2007 8042.49

2008 15852.51

2009 9934.09

18000

16000

14000

12000

10000

Total Sale
8000

6000

4000

2000

0
Mar ' 07 Mar ' 08 Mar ' 09

Bar Diagram of Industry Sales

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Comments: According to industry analysis, many realty companies were banking
on the stock market and foreign investors for new projects. As those sources dry
up with the global meltdown, they will be forced to cash out, even if it means
selling existing stock at a lower price and end up with fall in sales in year 2008-09.

CAGR And Y to Y Analysis of last 3 year consolidated Sales:

CAGR:

(9934.09 / 8042.49)^1/2 – 1 = 0.11

Y to Y analysis of last 3 year consolidated sales:

Comparing Year Increase/Decrease in Sales

2007 - 2008 97 % increase

2008 - 2009 -37% decrease

Comments: Comparing to year 2007 sales in 2008 Real Estate Industry sales has
increased and it became almost double so we can say that as a hole this industry
performed very well in 2007 – 2008. After this in year 2009 industry sales has
decreased by 37% which is due to global crisis but this Industry was able to manage the
condition and now again they are doing well. Government and RBI policies has a very
big impact on Real Estate Industry sales because decide the cost of Home Loan.

Net Income Of The Real Estate Industry

In crore

Year Net Income

2007 2865.28

2008 7323.79

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 2009 4529.06

8000

7000

6000

5000

4000 Toatl
inc ome
3000

2000

1000

0
Mar ' 07 Mar ' 08 Mar ' 09

Bar Diagram of Industry net income

CAGR and Y to Y Analysis of last 3 year Net Income of the Industry:

CAGR Analysis:

(4529.06 / 2865.28)^1/2 – 1 = 0.26

Y to Y Analysis of last 3 year consolidated Net Income:

Comparing year Increase/Decrease in Net Income

2007-2008 155.6% Increase

2008-2009 -38.16% Decrease

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Comments: India’s property market has been among the hardest hit by the global
financial turmoil as high interest rates and gloomy economic prospects have
driven out buyers and squeezed funds for Real Estate developers.
Through this year, property prices have already declined more than 10-20%,
though in cities like Mumbai and Delhi, prices are still too high for a middle class
consumer. We can easily say that this sector is very sensitive to economic
conditions. Whenever there is a change in economic condition this sector reacts
very soon. As we have already seen downfall in sales same is here with net
income. In 2007-2008 when sales has increased by 97% the other side net income
has increased by 155.6% and in 2008-2009 the downfall is almost same.

Market Share of companies in terms Of Sales in Industry

In crore

Name of Company 2007 2008 2009

Acruti City 177.86 436.9 440.99

Anant Raj Inds 167.25 539.85 414.89

D B Realty

Dlf 1133.48 5532.84 2827.9

Hdil 1203.45 2379.87 1719.29

India Bulls 13.33 47.77 45.03

Realestate
Orbit Corp. 30.89 417.03 283.54

Parsvanath Dev 1236.14 1726.85 744.04

Peninsula Land 319.42 345.28 541.65

Phoenix Mills 61.74 198.78 87.64

Sobha Dev 1194.7 1422.6 974.7

Sunteck Realty 0.66 3.07 2.17

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 Unitech 2503.97 2802.27 1852.25

Total 8042.89 15852.51 9934.09

Market Share of various Real Estate Companies in Year 2007

Comments: The country’s largest property firm DLF’s scrip lost 54% while Unitech
shed 64% from its peak. The scrips of Delhi-based Parsvnath and Omaxe have lost
68% each since January.

Real estate sector is seeing a major slowdown in the sales volume in most
markets of the country. The speculators have exited the market and Mumbai and
NCR, the biggest real estate markets in the country, are seeing subdued sales

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 Market Share of various Real Estate Companies in Year 2008

Comments: Index shows in year 2008 market share of Real Estate Industry has
increased by more then 100% and in this DLF has highest market share. In year 2007
DLF had 14% of market share which has increased to 35% in year 2008 where market
share of Ackruti , Parsvnath, Peninsula, Sobha, Unitech and other companies has
decreased. So it clearly shows how DLF has dominated the Real Estate Market and
acquired the share of others.

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 Market Share of various Real Estate Companies in Year 2009

Comment:After year 2008 Real Estate market was affected very badly and in year
2009 Market share of Real Estate has decreased by just less then 100%. Real Estate
market is very volatile whenever there is a change in economy this sector reacts very
soon. So world faced the financial crisis this sector also affected and sale decreased.

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CAGR and Y to Y analysis of last 3 years each company’s market share in terms
of sales of the Industry:

Company Y to Y analysis(07- Y to Y analysis(08- CAGR

08) 09)
Acruti City 145.64% 0.94% 0.24

Anant Raj Inds 222.78% -23.15% 0.24

D B Realty

Dlf 288.13% -48.89% 0.25

Hdil 97.75% -27.76% -0.29

India Bulls 258.36% -5.74% 0.69

Realestate
Orbit Corp. 1250.04% -32.01% 3.59

Parsvanath Dev 39.65% -56.9 -0.7

Peninsula Land 8.1 56.87 -0.15

Phoenix Mills 221.96 -55.91 -0.29

Sobha Dev 19.08% -31.48% -0.59

Sunteck Realty 265.15% -29.32% 0.64

Unitech 11.91% -33.9% -0.63

Comments: In 2008 the economy slowed due to the global financial crisis, growing
7.3%.With foreign investment deserting the market, developers have been forced
to turn to domestic banks to finance construction activities. Developers’ finances
are strained, as some have amassed huge debts. For example, DLF’s debt stood at
INR140 (US$3) billion, as of June 2009. Many projects have been delayed or
halted, despite payments from buyers. Some buyers are demanding refunds for
delayed construction. So it leads to fall in deals and decreased market share of
companies in terms of sales of industry.

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 EPS History of Various Real Estate Companies in last 3 Years

Name of Company 2007 2008 2009

Acruti City 11.01 44.43 39.55

Anant Raj Inds 5.9 15.31 12.4

D B Realty 29.14

Dlf 2.66 15.1 9.12

Hdil 30.1 35.83 30.14

India Bulls 0.73 19.42 0.64

Realestate
Orbit Corp. 2.86 45.94 9.79

Parsvanath Dev 7.36 11.06 3.06

Peninsula Land 6.27 4.65 5.36

Phoenix Mills 27.26 12.28 5.42

Sobha Dev 22.15 31.32 15.05

Sunteck Realty 0.23 1.15 1.59

Unitech 12.12 6.35 4.56

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 Bar Diagram of various company’s EPS

Market Capitalization Of Reality Index

In crore

Full Float Free Float

3746.23 3760.86

Percentage of index capitalization of BSE Total Market Capitalization

As on 28 Oct. 2010 Value in Crores Percentage

BSE Market Capitalization 7250989.25 100%

Index Full Market 135389.00 1.87%

Capitalization

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 Security wise market capitalization of the Index (Full / Free Float)
Based on market capitalization weight of each security in the index

Scrip Name of Close Full Free Float Free Mkt. Weight in

Code Company Price Mkt.Cap.in Adj. Cap. In Index (%)
Crore Factor crore
532799 Acruti City
476.05 3,462.59 0.20 692.52 1.37
515055 Anant Raj
Inds 132.90 3,921.83 0.40 1,568.73 3.10

533160 D B Realty
432.40 10,518.51 0.15 1,577.78 3.12
532868 Dlf
355.15 60,284.66 0.25 15,071.17 29.79
532873 Hdil
251.60 10,441.50 0.65 6,786.98 13.42
532832 India Bulls
196.80 7,907.24 0.80 6,325.79 12.50
Realestate
532837 Orbit Corp.
117.40 1,290.95 0.60 774.57 1.53
532780 Parsvanat
h Dev 68.00 2,700.31 0.30 810.09 1.60

503031 Peninsula
Land 63.40 1,770.14 0.50 885.07 1.75

503100 Phoenix
Mills 249.35 3,611.72 0.35 1,264.10 2.50

532784 Sobha Dev

361.70 3,546.97 0.40 1,418.79 2.80
512179 Sunteck
Realty 674.60 4,247.70 0.35 1,486.70 2.94

507878 Unitech
86.20 21,684.87 0.55 11,926.68 23.58

Total
135,388.99  50,588.97

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 P/E and P/BV ratio of the Index and Each Security

P/E and P/BV ratio of the Index:

P/E P/BV

38.08 3.81

P/E and P/BV ratio of the Each Security:

Name of Company P/E P/BV

Acruti City
19.09 2.38
Anant Raj Inds
18.41 1.14
D B Realty 3.4

Dlf
68.96 4.7
Hdil
14.25 1.45
India Bulls Realestate
175.71 2.19
Orbit Corp.
13.36 1.53
Parsvanath Dev
22.47 1.31
Peninsula Land
5.75 1.36
Phoenix Mills
58.53 2.35
Sobha Dev
18.7 2.08
Sunteck Realty
710.53 12.13
Unitech 37.48 2.74

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 Last 1 Year Returns comparison of Sensex vs Index

Month Realty Index Sensex Index Returns Sensex

Returns
Oct. 09 - -
3,827.13 15,896.28
Nov. 09 -4.36 6.48
3,660.45 16,926.22
Dec.09 5.34 3.18
3,855.78 17,464.81
Jan. 10 -9.22 -6.34
3,500.22 16,357.96
Feb.10 -7.53 0.44
3,236.69 16,429.55
Mar.10 1.14 6.68
3,273.56 17,527.77
Apr.10 6.65 0.18
3,491.18 17,558.71
May.10 -11.26 -3.5
3,097.92 16,944.63
Jun.10 3.19 4.46
3,196.82 17,700.90
Jul..10 5.51 0.95
3,372.93 17,868.29
Aug..10 -1.22 0.58
3,331.76 17,971.12
Sep..10 11.86 11.67
3,726.86 20,069.12
Oct.10 -2.46 -0.18
3,635.12 20,032.34

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 Last 1 Year Returns comparison of the BSE Sensex vs Index vs each security
comprising the index

Month Acruti City Anand Raj Inds Dlf Unitech

Oct. 09 501 130.5

370 82.25
Nov. 09 539.45 133.35
351.6 79.40
Dec.09 554.3 135.35
361.15 82.30
Jan. 10 506.45 122.9
332.8 74.40
Feb.10 518.95 132.7
297.15 71.80
Mar.10 533.4 127.15
308.9 73.40
Apr.10 470.5 106.55
311.25 84.90
May.10 476.6 116.8
276.35 72.50
Jun.10 496.95 119.7
288.2 74.55
Jul..10 519.6 126.9
301.3 81.25

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Aug..10 507.6 140.45
301.75 77.55
Sep..10 473.8 129.85
377.3 88.20
Oct.10 493.8
350.1 86.60

Comparison of Acruti City vs index vs sensex and DLf vs.

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