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Techno Commercial Feasibility For Residential Township Project - Emerald Park

Mott MacDonald India Radhe Infrastructure & Projects (India) Ltd.

Radhe Infrastructure & Projects (India) Ltd. Chunibhai Chambers Behind City Gold Cinema, Ashram Road Ahmedabad 380 006

Techno Commercial Feasibility For Residential Township Project - Emerald Park

May 2008

Mott MacDonald India 501, Sakar - II, Near Ellisbridge Ahmedabad - Gujarat 380 006 India 0091 (079) 2657 5550 0091 (079) 2657 5558 zainab.kapasi@mottmac-india.com

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Techno Commercial Feasibility For Residential Township Project - Emerald Park

Mott MacDonald India Radhe Infrastructure & Projects (India) Ltd.

Techno Commercial Feasibility For Residential Township Project - Emerald Park

This document has been prepared for the titled project or named part thereof and should not be relied upon or used for any other project without an independent check being carried out as to its suitability and prior written authority of Mott MacDonald being obtained. Mott MacDonald accepts no responsibility or liability for the consequence of this document being used for a purpose other than the purposes for which it was commissioned. Any person using or relying on the document for such other purpose agrees, and will by such use or reliance be taken to confirm his agreement to indemnify Mott MacDonald for all loss or damage resulting therefrom. Mott MacDonald accepts no responsibility or liability for this document to any party other than the person by whom it was commissioned. To the extent that this report is based on information supplied by other parties, Mott MacDonald accepts no liability for any loss or damage suffered by the client, whether contractual or tortious, stemming from any conclusions based on data supplied by parties other than Mott MacDonald and used by Mott MacDonald in preparing this report.

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Techno Commercial Feasibility For Residential Township Project - Emerald Park

Mott MacDonald India Radhe Infrastructure & Projects (India) Ltd.

List of Contents Chapters and Appendices


1 Introduction 1.1 1.2 1.3 2 The Project Scope of Work Approach & Methodology

Page

6 6 7 9 11 11 11 16 19 19 20 21 22 26 30 31 31 32 33 34 47 49 51 51 51 51 51 52 52 53 53 54 54 4

Brief Profile 2.1 2.2 About the Client 2.1.1 Projects About the Consultant

Industry Analysis 3.1 3.2 Indian Real Estate Market Overview 3.1.1 Growth Drivers Indian Housing Sector Overview 3.2.1 Growth Drivers 3.2.2 Demand Supply Analysis Government Initiatives

3.3 4

Ahmedabad Market Assessment 4.1 4.2 4.3 4.4 City Overview Residential Realty in Ahmedabad 4.2.1 Major Growth Drivers Major Players in Ahmedabad Luxury Homes

5 6

Emerald Park Financial Aspects 6.1 6.2 6.3 Introduction Basis and Assumptions 6.2.1 Sales Distribution Pattern Project Cost 6.3.1 Land and Land Development 6.3.2 Utilities 6.3.3 Preliminary and Pre Operative Expenses 6.3.4 Provisions for Contingences 6.3.5 Summary of Fixed Capital Cost Sources of Finance

6.4

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Techno Commercial Feasibility For Residential Township Project - Emerald Park

Mott MacDonald India Radhe Infrastructure & Projects (India) Ltd.

6.5 7

Project Profitability

54 55 55 56 57 57 57

Strategic Analysis 7.1 7.2 SWOT Five Forces Model

Conclusions and Recommendations 8.1 8.2 Conclusions Recommendations

List of Figures
Figure 1.1: Emerald Park Layout Figure 1.2: Project Approach Figure 2.1: Takshshila Apartments Figure 2.2: Mandar Bungalows Figure 2.3: Tirthbhumi Figure 2.4: Tulsi Figure 2.5: Ganesh Plaza Figure 2.6: Abhinav Arcade Figure 3.1: Population Growth Comparison Figure 3.2: Major Contributors in World GDP Figure 3.3: Rising Urbanization in India Figure 3.4: Increasing shortage of housing in India Figure 3.5: Housing Finance Growth Rates for past 5 years Figure 3.6: Demand Drivers and Constraints Figure 5.1: Emerald Park Location 7 10 12 13 13 14 14 15 22 23 25 26 27 29 49

List of Tables Table 2.1: Radhes Prominent Projects Table 4.1: On going major residential projects in Ahmedabad Table 6.1: Sales distribution Pattern of Units Table 6.2: Sales Distribution Pattern of Plots Table 6.3: Land and Land Development Cost Estimates Table 6.4: Utilities Table 6.5: Preliminary & Pre-operative Expenses Table 6.6: Provisions for Contingencies Table 6.7: Summary of Fixed Cost Estimates Table 6.8: Means of Finance 12 45 51 51 52 53 53 53 54 54

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Techno Commercial Feasibility For Residential Township Project - Emerald Park

Mott MacDonald India Radhe Infrastructure & Projects (India) Ltd.

Introduction

Radhe Infrastructure and Projects (India) Ltd., hereafter referred to as RIPL or the Client, is an Ahmedabad based construction and development company established by Mr. Chunibhai C. Patel, an industry veteran of over 50 years. RIPL aimed at providing impeccable services in the field of construction and development of both residential properties and commercial complexes. In keeping with its objectives and business goals, RIPL is coming up a residential township in Ahmedabad and has approached Mott MacDonald to conduct the techno-commercial feasibility for the same. The report will not only serve as a bankable document for the purpose of procuring loan, but it will also enable RIPL to attain a better understanding of the current national and local real estate scenario. 1.1 The Project

Emerald Park is the latest offering from Radhe in the residential segment. It is a new age residential township on the outskirts of Ahmedabad. Since the client has already acquired land for the project and also begun preliminary construction on the site, it is apparent they are quite confident about the feasibility of the project. They however, would like to have a well articulated and more concrete assessment of the market as well as the financials of the project. With regards to this they have approached Mott Macdonald to carry out a detailed techno-economic and market assessment of the township project to validate their views on it. Emerald Park as the name suggests is designed to be a lush green township with designer landscaping in each plot surrounded by trees to give the residents the feel of living in the lap of nature. It also offers all modern amenities and luxuries that one can desire. In all it will be an enrich experience to live in such this township.

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Techno Commercial Feasibility For Residential Township Project - Emerald Park

Mott MacDonald India Radhe Infrastructure & Projects (India) Ltd.

Figure 1.1: Emerald Park Layout

1.2

Scope of Work

The basic objective of this study is to validate and if possible to strengthen / consolidate the various premises, assumptions and basis considered in the proposed Township Project. The study would encompass a macro view of the housing market and its key components like the raw materials market, housing demand and the competitive scenario. It will be followed by a detailed analysis of the micro market and supported by strategic analysis such as the Five Force Model. Study would also attempt to look broadly at various technocommercial aspects of the proposed venture like appropriateness of technology machineries and various facilities considered for the project, appropriateness of project cost and financial projections. Based on the brief discussions with client, consultants have devised following scope of work: (i) Assessment of proposed Township from the Market Angle

The assessment of housing market, various markets related factors and assumptions / basis considered for market projections would be carried out primarily through desk research and limited field research. Information collated through secondary research would be
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Techno Commercial Feasibility For Residential Township Project - Emerald Park

Mott MacDonald India Radhe Infrastructure & Projects (India) Ltd.

reviewed and analyzed to assess the overall market attractiveness (i.e. Potential Market and Competition Analysis). Information will be accumulated from diverse sources, such as books, newspapers, trade journals, white papers, industry portals, government agencies, real estate brokers, industry news and developments. Subsequently consultants would carry out a SWOT analysis with a view to conclude overall prospects for the proposed Township projects. (ii) Assessment of Appropriateness of facilities proposed to be acquired / built

Consultants shall evaluate the appropriateness of the project from technical angle, i.e. contemporariness of the technology to be used for construction & facilities proposed to be built, credentials of the suppliers / contractors, appropriateness in terms of operating & maintenance ease, appropriateness in terms of capital cost and operating costs. (iii) Assessment of Risk-Return profile

The assessment of risk-return profile of the proposed township project basically involves assessment of overall financial viability of the project followed by assessment of sensitivity / vulnerability / sustainability of the project under adverse circumstance, i.e. Decline in Housing demand, Construction cost escalation, Competition, etc. The financial viability exercise by consultants would include: Assessment of appropriateness of Project Cost, Occupancy Levels, Revenue estimates, Financial Analysis. Consultants would assess / appraise the all projections considering: Realistic Occupancy Pattern Realistic price realization estimated on the basis of current housing scenario and realty prices. The financial analysis carried out by consultants would include following analysis / statement as desired by most of the financial Institutions: Detailed Project Cost
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Techno Commercial Feasibility For Residential Township Project - Emerald Park

Mott MacDonald India Radhe Infrastructure & Projects (India) Ltd.

1.3

Means of Finance Estimated Revenue Profitability analysis Projected cash flow and balance sheet Suggested means of finance Estimates of base indicators for: ROI, ROE, BEP, IRR, DSCR Etc. Approach & Methodology

The consultants have adopted a research based approach during the course of the assignment. The IMM team undertook extensive secondary research to collect information. The sources used in the secondary research were primarily: Information available with the Company Published information from Government Agencies Sector Reports Trade Information from Associations In house database of Consultants Interaction with technology suppliers Interaction with end users

Along with the secondary research a local level primary survey was also undertaken, wherein the major builders and developers of Ahmedabad were contacted. The findings of the primary survey were used as indicative of the Ahmedabad market. A team from IMM also interacted with the key Management, Manufacturing & Project personnel. The following report is based on the information collected from various sources indicated above and Client meetings. The approach followed by IMM in preparing the following report is as depicted in the following figure.

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Techno Commercial Feasibility For Residential Township Project - Emerald Park

Mott MacDonald India Radhe Infrastructure & Projects (India) Ltd.

Figure 1.2: Project Approach

MARKET ASSESSMENT

Indian Real Estate Market

Indian Housing Market

Ahmedabad Housing

Factors Considered
Growth drivers & constraints Supply demand scenario Price Trends

Luxury Homes

Factors Considered
Segment Growth Target Segment

FINANCIAL ANALYSIS

Revenue

Cost Stream

Investments

Financial Feasibility & Sensitivity Analysis

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Techno Commercial Feasibility For Residential Township Project - Emerald Park

Mott MacDonald India Radhe Infrastructure & Projects (India) Ltd.

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2.1

Brief Profile
About the Client

The journey for RIPL began in 1974 when M/s Jash Development Corporation was founded in partnership with Mr. Praful C. Patel who has 37 years of industry experience behind him. This was followed by the formation of a string of other establishments; M/s Radhe Construction in 1990, M/s Radhe Organizers, M/s Radhe Real Estate Developers, M/s Radhe Associates, M/s Radhe Consultancy and M/s Radhe Developers India Ltd., culminating in the formation of RIPL. RIPL has since its inception strived to provide innovative and elegant residential properties and urbane yet utilitarian commercial buildings. Leading and guiding RIPL in its endeavour is Mr. Praful Patel, the founder and chairman of the group and the dynamic Managing Director of the company, Mr. Ashish Patel. With more than 17 years of construction experience and his vision, Mr Ashish Patel plans to take RIPL to greater heights. Mr. Alok Vaidya, Mr. Nirav Desai and Mr. Prakash Shah are the other competent members of the Board of Directors of RIPL and have made substantial contributions in the success of RIPL. The group also boasts of a pool of young and self-driven professionals who uphold the ideals of RIPL and ensure that RIPL is synonymous with quality craftsmanship and expertise. 2.1.1 Projects

Radhe has completed a variety of residential and commercial projects in Ahmedabad. Each project has been a thoughtfully conceived venture providing the best of amenities and facilities. The execution of each project has been meticulous with a constant endeavour to ensure that the edifice fulfils every possible requirement and goes beyond it.

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Techno Commercial Feasibility For Residential Township Project - Emerald Park

Mott MacDonald India Radhe Infrastructure & Projects (India) Ltd.

(i)

Completed Projects

As mentioned before Radhe has completed projects of both residential and commercial nature and have achieved remarkable successful in both their endeavours. Each completed project is a milestone in Radhes journey towards excellence and establishing it as a one of the leading developers of the city. The most prominent projects of Radhe so far have been:
Table 2.1: Radhes Prominent Projects

Residential Projects Takshshila Apartments Mandar Bungalows Tirthbhumi Apartments On Going Projects Emerald Park Tirthdham Apartments

Commercial Projects Tulsi Complex Ganesh Plaza Abhinav Arcade New Projects Olympus Mall

Figure 2.1: Takshshila Apartments

The Takshshila Apartments are high rise flats located in one of the most happening places of Ahmedabad Vastrapur. Its spacious construction and proximity to Vastrapur Lake and other amenities around make it an ideal place to live in.
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Techno Commercial Feasibility For Residential Township Project - Emerald Park

Mott MacDonald India Radhe Infrastructure & Projects (India) Ltd.

Figure 2.2: Mandar Bungalows

Mandar bungalows are high end luxurious bungalows spread over sprawling plots in the Thaltej area of Ahmedabad. Thaltej touches the latest high street of Ahmedabad the S.G Road, it is a prime location for residential and commercial properties.
Figure 2.3: Tirthbhumi

Tirthbhumi like Takshshila are high rise deluxe flats with all the modern facilities. Again the location of the flats is also immaculate, it is located near the thriving Law Garden , Ellisbridge area and within great proximity to the commercial hub of the city; Ashram Road.
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Techno Commercial Feasibility For Residential Township Project - Emerald Park

Mott MacDonald India Radhe Infrastructure & Projects (India) Ltd.

Figure 2.4: Tulsi

The Tulsi Complex is located near the Mithakali six roads, a point of convergence of various commercial areas of repute. Mithakali six roads lead to areas such as Ashram Road, Laws Garden, C.G. Road and Navrangpura.
Figure 2.5: Ganesh Plaza

Ganesh Plaza is another remarkable structure constructed by Radhe. It is located in the Navrangpura area of the city and is a prominent business building with esteemed business houses setting up offices in it.
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Techno Commercial Feasibility For Residential Township Project - Emerald Park

Mott MacDonald India Radhe Infrastructure & Projects (India) Ltd.

Figure 2.6: Abhinav Arcade

The other major commercial building developed by Radhe is the Abhinav Arcade. All the projects mentioned here are testimonial to Radhes commitment to building structures of quality and durability. Customer satisfaction in all of Radhes projects has been outstanding and a fact of pride for Radhe. (ii) On Going Projects (Other than Emerald Park) Tirthdham

Another residential apartment scheme from Radhe - Tirthdham stands for luxury and tranquillity for the dwellers. The various facilities being offered in Tirthdham include Landscaped garden Well designed entrance foyer in each block Tarred internal roads with street lights Fully furnished club house Health club Childrens play area Master antenna with closed circuit video channel Bore wells with submersible pump set
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Techno Commercial Feasibility For Residential Township Project - Emerald Park

Mott MacDonald India Radhe Infrastructure & Projects (India) Ltd.

(iii)

Generator set Emergency light point in each foyer Two lifts in each block Limited allotted covered parking Future

Radhe is poised to take a big leap in the future and spread its wings across the nation. It is now giving birth to a new facet of modernism by blending material with technology and constructing an exciting landscape on the firm foundation of experience by combining progress with prosperity. The company has great future plans in terms of projects, both residential and commercial. It is coming up with a revolutionary concept of a mall in the city of Ahmedabad. It is also in the process of having tie-up with those of the most renowned and top-notch architects of India for its forthcoming projects. Radhe is determined to give a new dimension to the construction industry of India and is committed to deliver the most advanced and avant garde constructions 2.2 About the Consultant

Mott MacDonald Private Limited (IMM) is a leading multi-disciplinary management and engineering consultancy based in India, with offices nationwide. As part of the global Mott MacDonald Group headquartered in U.K., IMM is able to draw on world-class technical and managerial resources comprising over 13000 staff in more than 50 strategic centres world-wide. IMM is engaged in planning and development touching many aspects of everyday life from water, energy, industry, environment and transport to building, healthcare, tourism and social development.

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Techno Commercial Feasibility For Residential Township Project - Emerald Park

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Across these sectors IMM works for national and local governments, public and private utilities, industrial and commercial companies, investors, developers, banks and financial institutions, international and bilateral funding agencies and private entrepreneurs. IMMs strengths enable our clients to realize their projects optimally from concept to commissioning. (i) Management Consultancy Division

IMM provides business planning and project management for a wide spectrum of clients in industry, infrastructure and social development, including international development banks and funding agencies. IMM also helps clients such as accountancy firms, financial institutions and industrial companies in making a realistic appraisal of their fixed assets, and in preparing for disinvestment, mergers or de-mergers, acquisitions, takeovers, insurance or liquidation, collaborations and joint ventures. (ii) Social Solutions

IMM has undertaken numerous studies and advisory roles for leading development banks and funding agencies. Projects range from implementing vital AIDS eradication programmes and pro-poor initiatives to studies for institutional strengthening, sector reform and impact evaluation. IMM also offers specialist expertise in assisting with public consultation. (iii) Engineering Services

IMMs range of engineering services enables clients to realize optimal implementation of projects. IMM takes care of every stage site evaluation, basic and detailed engineering, contract preparation, project management, procurement, equipment inspection and testing, site supervision and commissioning.

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Techno Commercial Feasibility For Residential Township Project - Emerald Park

Mott MacDonald India Radhe Infrastructure & Projects (India) Ltd.

(iv)

Infrastructure

One of the key strengths of IMM lies in large-scale integrated urban infrastructure development, encompassing water supply, drainage, solid waste, roads, sanitation and community buildings etc. Here our services range from planning and advisory assistance to detailed engineering and construction management. (v) Industry

IMM skills and experience have earned it a leading reputation especially in chemicals, textiles, oil and gas, food processing and life sciences, as well as bulk drugs, pharmaceuticals and biotechnology. IMM is known particularly for its expertise in process engineering and licensing for specialty chemical production based on laboratory/pilot plant know-how developed by R&D centres. (vi) Buildings

IMMs business covers all sectors from commercial and leisure to industry, education and healthcare. IMM provides the full range of architectural, structural, mechanical and electrical design skills, along with planning and project management expertise. Building services are a special capability, notably building management systems, vertical transportation, telecommunications and security. (vii) HVAC

Providing turnkey packages in heating, ventilation, air-conditioning and refrigeration is also IMMs forte IMMs track record includes systems for auditoriums, public buildings, industrial facilities, hospitals and research laboratories.

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Techno Commercial Feasibility For Residential Township Project - Emerald Park

Mott MacDonald India Radhe Infrastructure & Projects (India) Ltd.

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3.1

Industry Analysis
Indian Real Estate Market Overview

The Indian Real estate industry today is emerging as one of the most attractive sectors for investment for both domestic as well as foreign investors. It is growing at an annual compounded growth rate of approximately 30% every fiscal. In monetary terms, the Indian real estate is estimated to be worth US $ 16 billion and is predicted to be worth US $ 90 billion by 2015. The Indian real estate industry is the second largest employment providing sector in the country and more than 250 other industries are directly or indirectly related to it, such as cement, steel and brick. Thus, any investment made in this sector has a multiplier effect and generates more income. It is estimated that every rupee spent in real estate generates .78 paisa in the Indian economy and accounts for around 5% of the countrys Gross Domestic Product (GDP). Even foreign investors are keenly eyeing this sector and have lined up about US$ 10 billion worth of investment for it. Along with the global players also come global level architects and planners who will be dotting the Indian real estate with world class buildings. The Indian real estate sector can be broadly divided into three segments: 1. Commercial 2. Residential 3. Retail And there exists a demand supply gap across all the three segments with the demand far out stripping the supply. Indian real estate is also segregated into Tier I, Tier II and Tier III cities, and rural India which still accounts for more than 65% of India.

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Techno Commercial Feasibility For Residential Township Project - Emerald Park

Mott MacDonald India Radhe Infrastructure & Projects (India) Ltd.

Tier I cities comprise of the most developed agglomerations which have become the commercial, political and outsourcing hubs of the country such Mumbai and Delhi. These are followed by the Tier II and Tier III cities. The difference however between these two is diminishing as Tier III cities such as Ahmedabad, Indore Chandigarh are fast catching up with Tier II cities such as Hyderabad and Pune.
3.1.1 Growth Drivers

The major growth drivers of the Indian Real Estate Industry are: Infrastructure is the basis of all economic activity and the Governments increasing focus on Infrastructure is bound to have a positive effect on the real estate of the country. Areas with better roads and amenities immediately show appreciation in their prices, besides which the economic benefits of infrastructure development can be easily gauged by the fact that Indias GDP could be 2% higher were it not for the lack of appropriate infrastructure. The economic reforms that have taken place in the past few years have greatly benefited the real estate sector. The opening up of the economy and allowance of 10 % FDI investment in 200the sector has provided us with the funds required to develop the sector which would not have been possible by only domestic investment. One of the most preferred avenues of investment in the country, the capital markets have not been performing well in the past 6 months due to global volatility. This in inducing many prospective investors to invest in real estate instead.

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Techno Commercial Feasibility For Residential Township Project - Emerald Park

Mott MacDonald India Radhe Infrastructure & Projects (India) Ltd.

3.2

Indian Housing Sector Overview

Housing is one of the basic necessities of man and assumes great importance in an individuals scheme of things, which is why the housing sector, which comprises of approximately 80% of the real estate, is one of the most important sectors in the country and ranks third with respect to inter linkage and impact on other sectors of the economy. According to an IBEF (India Brand Equity Foundation) report, the housing sector is estimated to grow by a Compounded Average Growth Rate (CAGR) of 18 to 20% till 2010 and presents major investment opportunities. A Merrill Lynch report suggests that the housing sector in India will require investments worth more than US$25 million over the next five years. The housing sector is also the fourth highest income multiplier in the country ahead of agriculture. It is a major contributor of employment and income generation in the country. The supply demand gap of housing units in India is estimated to be around 33 million units with an addition of an annual deficit of around 5 million units each year. These figures have been arrived at only taking first time home owners into account. If second home owners are also taken into consideration the figures could be much higher. The housing sector can be said to comprise of mainly of three segments, which are 1. Low Cost 2. Affordable Housing 3. Luxury Homes It can also be divided into urban and rural housing and as per a recent study by the research firm, Indicus Analytics, the demand for urban housing in India will be over 24.3 million by 2015.

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Techno Commercial Feasibility For Residential Township Project - Emerald Park

Mott MacDonald India Radhe Infrastructure & Projects (India) Ltd.

3.2.1

Growth Drivers

The major demand drivers of the housing sector in India are: Population: India is the second most populous country in the world, with a population of approximately 1.1 billion people and accounts for around 17% of the worlds population. There is a high concentration of population in India, almost every one in six people in the world lives in India.
Figure 3.1: Population Growth Comparison

2000 1500
Million

1000 500 0 1950 1970 1990


India
Years

2010
China

2030
Europe

2050

This indicates the large and inherent demand for housing that exists in India. Economic Growth: India is the middle of a high growth phase. The Indian economy is blazing ahead with an average GDP of 8% for the past 3 years.

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Mott MacDonald India Radhe Infrastructure & Projects (India) Ltd.

India today is not only the fastest growing economy in the world; it is also the fifth largest economy in the world, accounting for more than 4% of the global GDP as can be seen in the graph below.
Figure 3.2: Major Contributors in World GDP
51%

60% 50% 40% 30% 20% 10% 0%

Percentage

23% 10% 7% 5% 4%

US

China

Japan Germany India


Countries

ROF

In monetary terms, the Indian economy has crossed the US $ 1.30 trillion mark and counting.

Of the many effects of the rapid economic growth of the country, the most obvious one is the appreciation in the real estate of the country as the demand for land increases, and as 80% of the Indian real estate comprises of the residential segment, the subsequent appreciation in the housing sector is only logical. Favourable Demographics: One of the major growth drivers of the Indian economy are the very favourable demographics that India currently boasts of. More than 50% of the Indian population is below the age of 25 years, that is more than 50 million Indians are youngsters who are the workers and consumers that will drive the growth of the nations economy. India is said to posses a middle class of over 900 million by 2015 and the worlds largest population of workers and consumers by the year 2020. Salary levels have increased by an average of 13.5% in past 5 years.
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This large proportion of the young middle class with increasing employment opportunities due to the improving employment rate in country will collectively have huge earning potential and present the major drivers of domestic consumption. Increase in Youth Earning Levels: With the increase in the earning power of the youth the disposable incomes have also increased consequently. This has allowed for a shift in consumer attitudes towards home ownership and spending behaviour; from the earlier save and buy attitude to the present one of buy and pay. The average age of a new homeowner has come down from 45 in 1996 to 32 in 2006. The nuclearization of Indian households is also a direct consequence of young people beginning to earn early in life and moving out for jobs and making their own homes. This is clearly reflected in the reduction of the average size of the Indian household from 5.7 in the 1970s to 5.1 in 2001. The confluence of all these factors is one of the major growth drivers for housing in the country. Urbanization: Another one of the major drivers of the housing sector is the steady urbanization of India. Though in comparison to the more than 40% urbanization in countries like China, the extent of urbanization in India, which is around 25% to 30% is still much below par, there is no denying the fact that it is on the rise.

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Mott MacDonald India Radhe Infrastructure & Projects (India) Ltd.

The United Nations Development Programme (UNDP) expects the degree of urbanization in India to grow to 40% by 2030, with the population growing at 2.5 % per annum for the next 25 years.

The top ten cities in the country have grown on an average at a growth rate of 7%.

The number of Urban Agglomerations with a population of more than a million has increased from 27 in 2001 to 44 housing more than 150 million people in total.
Figure 3.3: Rising Urbanization in India

80 70 60 Percentage 50 40 30 20 10 0 1971 1981 1991 Year


Urban Population Contribution to National Income Cities w ith population greater than 1 million

2001

2006

2011

Indian cities must thus brace themselves for rapid expansion and the drastic increase in demand for housing capacities in the near future. The credit market and in particular the housing finance sector of any country plays a huge hand in shaping the demand for housing in that country. . India has one of the most under developed credit markets in the world.

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Mott MacDonald India Radhe Infrastructure & Projects (India) Ltd.

The Mortgage to GDP ratio in India is a meagre 6% compared to rates of 60% and 70% in countries like the U.K and U.S.

Even in more comparable Asian economies, the mortgage to GDP ratio is around 20% to 30%.

This signifies how far behind India is in this regard and the potential that exists in the increasing penetration of the housing finance sector in India.

3.2.2

Demand Supply Analysis

The demand for housing in India far outstrips the supply present in the country. Indias housing shortage has increased from 19.4mn units in 2004 to 22.4mn units in 2005-2006. The Housing and Urban Poverty Alleviation Ministry estimates a shortage of 24.7 million houses in the country at the end of the 10th Five Year Plan. During the 11th Plan, the Group has estimated the total housing requirement (including the backlog) to 26.53 million units for 75.01 million households. The number is likely to grow exponentially. 99% of the shortage is for affordable housing stemming from the Middle and Low Income Groups. The shortage in past 4 years is given in the following graph.
Figure 3.4: Increasing shortage of housing in India

30 25 20
Million

19.4

22.4

24.7

26.3

15 10 5 0 2004 2005
Years

2006

2007

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On account of the increasing demand of housing, the residential sector is expected to continue to demonstrate robust growth over the next five years. Spending on new middle and higher income housing at Rs .17mn in fiscal 2005 and expects further growth at a CAGR of 18.6% over the next five years.
(i) Demand Constraints

The factors critical to the continued growth and success of the housing sector are: Sustainable economic growth. The rapid economic growth that India has witnessed in the past 5 years is one of the primary growth drivers of the real estate sector. This growth should needs to be sustained for a medium to long period of time, for the real estate sector to realize its full potential. Any slowdown in the economy could directly have a negating effect on the growth of the industry. Controlling inflation and rising interest rates. The rising inflation and ensuing increase interest rates are already starting to affect the industry, and if not brought under control could spell a lot of trouble for the real estate sector. The rise interest rates have caused buyers to become cautious and stall their buying decisions.
Figure 3.5: Housing Finance Growth Rates for past 5 years
73.9 49.5 26.6 29.1 48.6

80 70 60 50 40 30 20 10 0

Percentage

2006-07

2005-06

2004-05
Years

2003-04

2002-03

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Recent data reveals that on account of the increasing home loan rates, the sector has witnessed a massive fall of 26.6 per cent in 2006-07 from 29.1 per cent in 2005-06 and is expected to slow down further to touch between 17 and 20 per cent in the current fiscal. Prior to fiscal 2005-06, the preceding three fiscals had seen the housing sector record a year-on-year rise of 49.5 per cent, 73.9 per cent and 48.6 per cent respectively. The interest rates on home loans rose from 7 percent in 2002 to 12-14 per cent in 2007. This rate has made both lending and borrowing largely unaffordable. Speculative interest. The buying done by speculators can have both negative and positive effect on the industry. Heavy buying can bring the prices up, but it can also lead to over heating resulting in a fall in buyer demand. Many builders come out with schemes with very unrealistic prices, which cannot be accounted for in any manner. The demand for housing is not completely inelastic. The real estate market like every other marketing in India is subject to price sensitivity, though not to the extent as others. That is if the demand may continue if the prices increase within a reasonable range, but an unrealistic increase in prices may result in decrease in demand and sales. A recent report on housing sector estimated that an increase in house price by 10%, results in a 4.6% decrease in housing demand as affordability comes down. Improved regulatory frame work Stamp duty amongst the highest in the world in India. A very important aspect of the industry is the regulatory framework that it works within. The Indian real estate in many cities is heavily regulated by zoning and building restrictions, high property taxes and transaction costs. These need to be addressed and improved to facilitate the industry growth.

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(ii)

Supply Constraints

The notable supply constraints of the housing sector in India are: Increasing interest rates. With the rise in crude prices and the inflation, the RBI is taking strong measures to tighten the liquidity in the market and has increased the CRR and SLR ratios. This in turn has resulted in the banks increasing their interest rates, which may be a dampener on the growing real estate market. Cascading effect of US Sub prime crisis The sub prime crisis is in the US has had far reaching effects globally with the real estate industry in various countries being adversely affected by it. Though India has remained relatively unaffected by it so far there are concerns of the effects coming to surface in the near future. Many foreign banks present in the country have encountered huge losses in the sub-prime crisis which could cause them to cut down on their lending. Pressure on agricultural land. As more and more land is being used for commercial, residential and retail purposes, there is increasing pressure to use agricultural land for non-agri purposes
Figure 3.6: Demand Drivers and Constraints

Drivers
Population
Favourable Demographics Increased Earning Potential

Constraints
Rising Inflation and Interest Rates

Demand

Unrealistic Pricing

Steady Urbanization

Possible Slowdown in Economic Growth

Increased Nuclearization

Economic Growth 29
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3.3

Government Initiatives

The Government has introduced many progressive reform measures to unlock the potential of the sector, some of which are as follows: 100 per cent FDI allowed in realty projects through the automatic route. In case of integrated townships, the minimum area to be developed has been brought down to 25 acres from 100 acres. Urban Land (Ceiling and Regulation) Act, 1976 (ULCRA) repealed by increasingly larger number of states. Enactment of Special Economic Zones Act. Minimum capital investment for wholly-owned subsidiaries and joint ventures stands at US$ 10 million and US$ 5 million, respectively. Full repatriation of original investment after three years. 51 per cent FDI allowed in single brand retail outlets and 100 per cent in cash and carry through the automatic route.

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4
4.1

Ahmedabad Market Assessment


City Overview

Ahmedabad is the largest city and the commercial capital of the state of Gujarat, which is the western most state of India. It is also one of the most prosperous states in the country whose residents are well known for the entrepreneurial skills and purchasing power. It is also home to the largest investor base in the country contributing 14 % of the total stock exchanges of India. It is one of the leading industrialized and urbanized states of the country and has the highest number of SEZs setting up operations there. Ahmedabad has a population of roughly 5.6 million and is expected to reach 10 million by 2025. In a state which ranks third in the country, around 37%, in terms of urbanization, Ahmedabad accounts for 80% of the urban population of the state. It has a strong expatriate connection, with many NRIs hailing from the city, popularly referred to as NRGs Non Residential Gujaratis. Ahmedabad is also the only 'AA' graded city of Gujarat having 30.97 per cent share of total MPV (Market Potential Value) of the state of Gujarat and ranked seventh highest among 784 cities in India. The total market potential value of the city is 220.63 with Greater Mumbai, the city with maximum market potential, indexed at 1000. Ahmedabad enjoys an uninterrupted power supply that is a unique experience among Indian cities including those in tier I The major industries driving the growth of the city are textiles, chemicals, Pharma, engineering ancillaries and recently IT/ITES. The big industries based out of Ahmedabad include Pharma firms such as Zydus Cadila, Torrent Pharma, Core Healthcare; Chemical firms such as the Nirma Group; the Adani Group, a leading trading and infrastructure development; textile companies such as Arvind Mills, Reliance Textiles and Ashima Industries. Ahmedabad is widely known as the denim capital of the country and produces more than 230 million metres each year.

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Ahmedabad has also been making its presence felt on the IT/ITES scene of late. Recently NASSCOM ranked it as the fifth most competitive city in its survey of the Super Nine Indian Destinations for IT and IT-enabled services. The city is also the academic epicentre of the state with various world class institutes bringing students from all over the country to the city. The foremost among them is the Indian Institute of Management (IIM A), along with other renowned management institutes such as the Nirma Institute of Management (NIM), the Mudra Institute of Communication and Advertising (MICA). The Centre of Environment and Planning (CEPT), National Institute of Design (NID), the Entrepreneurship Development Institute (EDI), the Nirma University, the Gujarat University are the other notable institutes of academic excellence which draws thousands of students towards the city. Ahmedabad enjoys a very strategic location which has contributed greatly to its growth. It is located within great proximity of the two ports of Surat and Mundra in Kutch. Surat is the textile and jewellery hub of the country and is also growing at a scorching pace which indirectly benefits Ahmedabad too. The proximity to Mumbai, the financial capital of the country is also of significant importance to Ahmedabad.

4.2

Residential Realty in Ahmedabad

Residential realty in Ahmedabad has been on the upswing for the past 2-3 years now, after long period of stagnation. Even the recent slight slowdown in the residential sector across India has not been able to dent the optimistic sentiments regarding Ahmedabad. Housing in Ahmedabad still offers a 20% to 30% cost benefit to those in the metros and Tier II cities. The current demand for residential property in the city is at much more than the supply which accounts for the 15-20% a year growth in the prices of residential property in the city. The major reasons for the growth of the residential sector in Ahmedabad are explained in detail in the following section.

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4.2.1

Major Growth Drivers

Ahmedabad A Mega City: The Governments announcement of Ahmedabad as a Mega city and plans to invest in Ahmedabad along with the other six cities from a corpus of Rs. 5,500 crores has sent the real estate market in Ahmedabad has gone into over drive. Land prices in Ahmedabad have risen in some areas by as much as 50%, and an average 20% price hike has been seen across most areas of western Ahmedabad.

The infrastructure in Ahmedabad is in accordance with the size of the city, and is being constantly upgraded to keep pace with its growth. The Government of Gujarat has a vision of developing Ahmedabad into a one of the premier cities of the country through comprehensive infrastructure development and the Gujarat Infrastructure Development Boards move to invite private participation in building roads, ports, power, railways, airports, urban infrastructure, water supply, information infrastructure and industrial parks is a step in that direction.

The governing bodies of Ahmedabads infrastructure and housing namely the Ahmedabad Municipal Corporation (AMC) and the Ahmedabad Urban Development Authority (AUDA) have spent Rs 2,000 crore on the development of the city over the past five years, besides the Rs 412 crore that is being spent on infrastructure development such as the construction of the ring roads, Ahmedabad already has 3 ring roads and a fourth is being planned to keep the city congestion free as it grows bigger. Further proofs of Ahmedabads developing infrastructure are the various projects under progress in the city at present; the 155 Kms arterial road network for the Rs. 950 crore Bus Rapid Transit System (BRTS), the various flyovers, the Rs 1,179 crore Sabarmati River Front Development Project.

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The proposed projects also boast of an impressive line-up; the Gujarat International Financial Tech City (GIFT) at Gandhinagar, the Rs 3,200 crore Ahmedabad Metro Rail Project, the new international airport and modernization of the Ahmedabad Railway Station. Besides all these projects, another Rs 10,000 crores have been committed to Ahmedabad for strategic planning under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) scheme.

All of these factors coupled with the state governments whole hearted endorsement of various kinds of townships such as Technology Park, education based townships, medical and healthcare townships, tourism-related townships, logistics Park and residential townships make Ahmedabad an ideal place to reside in. Many national real estate players have foreseen this prospect and are queuing up to buy prime land in and around Ahmedabad.

4.3

Major Players in Ahmedabad

Ahmedabad has a large number of local realty players who have done substantial work in the city. The major local realty players in the city are:
(i) Saumya Constructions

Saumya construction Pvt Ltd. is a well known builder and developer in Ahmedabad. The major projects of Saumya Construction are in residential and commercial development. Till now Saumya Construction has undertaken projects summing up to Rs.5000 million. Saumya Construction was the first to conceive and develop the concept of farm house type bungalows with rustic ambience and modern facilities, a combination which took off well in 1980s. Since then Saumya Construction has undertaken several such projects and there are others as well in the pipeline. Saumya Construction has also developed some of well known commercial projects like 10 Acres - Ahmedabad City Mall and Abhijeet I-VI. Saumya Construction has never publicised its projects on media, and their entire promotion of projects is achieved
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through word of mouth publicity only. Strategic location, excellent design, quality construction, clear titles as well as adequate infrastructure facilities and utilities are the hallmark of each and every project of Saumya. And this makes Saumya to be selective of the clientele. Projects: Saumyas first project was the Ankur Orchards (1984), a combination of farm house concept with modern facilities, which was a runaway success and was a harbinger for others to come. This project was also featured in the international magazine Time. Arjun Orchards (1987) followed the suite with greater grandeur. Amaltas (1991) was the first scheme of residential bungalows near IIM for high standards of living with excellent design, construction and finish. Ashima towers (1992) were built giving luxurious residential apartments meant for the executives in the Vastrapur area. Akashneem (1993) located in Vastrapur area giving all the amenities, is a luxurious residential bungalows scheme. Amrakadamb (1996) is a luxurious residential scheme of bungalows (1996), located in posh locality of Satellite and developed in a peaceful environment. Exquisitely designed Club house with Swimming pool, self contained utility infrastructure, security arrangement, Tree lined roads are the extra facilities that are provided. Amrashagun (1997) is a luxury bungalows scheme with a basement, ground floor and a first floor, with all the modern amenities and a built up area of 339 sq yd. Asopalav (2000) is another residential bungalow scheme executed near Thaltej, having 330 sq yd built up area comprising a basement, ground floor and a first floor. Amrapalash (2005) is a residential bungalow scheme in the peaceful and aristocratic area of Satellite; the scheme combines elegant designing with quality
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construction, earth-quake proof design and offering the best in contemporary living. Amrashirish (2006) is also a luxury residential project having 378 sq yd of construction, having all the modern amenities and constructed with a basement, ground floor and first floor.

(ii)

Sterling Greenwoods Ltd.:

Sterling Greenwoods is one of Ahmedabads leading real estate developers. Established in 1965, group is credited with 100% delivery record in its over 40 years of operation. It has established numerous projects for diversified customer groups apartments, commercial complexes, bungalows, row-houses, tenaments, residential plots, clubs & resorts, etc. Some of its successful projects include bungalow plot schemes like Sterling Park, Sunrise Park, and Vishrut, Greenwoods residential plots, Greenwoods farm plots, Greenwoods Sarovar I and Greenwoods Farms, Thol. Projects: Greenwoods, Thol is a scheme of plots nearby the famous Thol Lake, which is famous for its scenic beauty and a calm atmosphere away from the hustle bustle of the city. It is just 15 minutes drive from S.G. highway, 10 minutes from 200 wide Sardar Patel Ring Road and only 3 Kms from Khatraj Chokdi (Arvind mills) which makes this heavenly place a well connected site to the city. Plots of around 1200 sq. yds are being offered on first come first basis at a very reasonable price near this famous bird sanctuary.

(iii)

Shivalik Projects:

Shivalik Projects is a prominent player and among the top five in the city in terms of development of residential townships as well as commercial buildings and complexes. It has around 19 projects under its name currently in the city. It has been certified as an ISO 9001:2000 company by Bureau Veritas. It envisages expansion in the cities of state and
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pan-India starting from Rajkot. Its clientele includes Pallazio, Reebok, Samsung, Axis (UTI) Bank Ltd, Reliance Retail, Hero Honda, IDBI Bank Ltd, ICFAI,, ICICI Prudential, Essar Group, D Mart, etc. Projects: In the category of luxurious flats and apartments, it has under its hood the following projects Sanjay Tower, Sachin Tower, Kirtisagar Apartment, and Yash Tower. In the category of luxurious bungalows and other related schemes, it has under its hood the following projects Shivalik-Shivam bungalows,, Navnidhi Bungalows, Shaswat Bungalows, Samarth Bungalows, Shalin Bungalows, Shalin Bungalows, Swagat bungalows etc. In the category of showrooms and commercial complexes it has executed the following projects Parth, Shivalik Arcade, Shivalik Plaza, Swagat Plaza I & II, Amar complex, Bhikubhai chambers etc. (iv) Bakeri Engineering & Infrastructure Ltd.

Bakeri is a major player in making residential complexes in Ahmedabad. It has completed several projects under over the years like Suvidhinath, Saujanya, Sujal, Sabar, Sakansh, Sujata, Samet, Sukruti, Sukit, Sulabh, Sumeya, Kherwanagar, Shrinand Nagar-I,Shilpa, Shrinand Nagar-II Shubh sonal, Suhavan, Kotharinagar, Shri Ram Nagar, Sankalp, Samay, Samta, Satej, Saket-II, Shrinand Nagar-IV, Saket, Saket-III, Sakal, Shantanu. Projects: Bakeris current residential complex project is Shrinand Nagar V near Vejalpur (on Makarba Road) comprising of 980 1150 sq ft. two/three bedroom apartments with parking and lift. Another project ongoing is on row houses and bungalows named Shukan Villas and Sulay row houses both on Makarba Road off Shrinand Nagar. Its forthcoming projects on residential complexes are nearby the aforesaid, named Shrinand nagar VI, VII and VIII on Makarba Road, Vejalpur.
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(v)

Agarwal Group of Companies:

Agarwal group of companies was established three decades back and today is among the reputed Building and Developer Company in Mumbai. Agarwal group is a professionally managed company with its operations and group companies in Hyderabad, Mumbai and Ahmedabad. The company uses high quality construction materials, ensures timely completion of projects, bears clear titles, and follows transparent documentation. This makes it a professionally driven company. Projects: Kadambari 1 at Rancharda near Saumya 2 and Tulip, has a farm house concept and is providing a guest house for the customers, which is fully furnished and having all the facilities. The location of the residential project is such that there is a school, a hospital and a dental college nearby. It offers the facilities like club house, road side and inside plantations, common overhead tank and water supply facility till the plot. The project is approved by two banks namely ICICI bank and IDBI bank for providing loans to the customers. Kanakdhara Villas near the AUDA ring road, Nandol, is a residential villas project. It is quite near to S.G.Highway (2.5 km) and there are many facilities in the vicinity like school, shopping centres, bank, temple etc. Common facilities provided include RCC Road, Street Light, 24 Hours Water, 24 Hours Electricity, Drainage, Children Park, Senior Citizen Corner, Lush Green Garden with Fountain & Landscaping and Multifunction Club House. Kanakdhara Villas is also approved by the above said two banks for providing loans to the customers. (vi) N G Group (N G Developers Pvt Ltd)

N G Groups Gallops mall was the first mall in Ahmedabad, which caught great attention. Others joined the rally and the city is now witnessing more and more malls coming up. N G Groups projects include Gallops mall, Ashwavilla, Ashwaraj II and Hi City.

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(vii)

Safal Group

Safal Group was established in 1995, focussing on innovations, quality, and closeness to nature. It has constructed commercial, residential, plotted lands, homes on over 16.28 million sq feet of land in and around Ahmedabad. Its commercial projects total to 14 with 1.9 million sq feet, residential projects total up to 13 with 2.16 million sq feet, plotted development total 6 with 4.60 million sq ft, and the upcoming projects are 4 in number adding up 7.6 million sq feet.

Their first project was launched in 1995, which was a residential project name Sakanksh. Later they started estate maintenance services for creating industry differentiation. First of its kind for children centric design residential project was launched by Safal by the name of Safal Parivesh. Safal group is diverse in executing the types of projects. Safal has also built a school for the TATA group in Kutch during the earth quake. It has also constructed a business park for the corporate. Projects: The current project of Safal Group is the Safal Vihaan near Eklavya School, Sanathal, constructed over 1,00,000 sq yds and comprising 91 units. All internal RCC roads, power back-up for common amenities, Mangalore ties on slopping roofs, 3 phase power supply, etc. (viii) Ganesh Housing Corporation Ltd.:

Ganesh Housing Corporation was established four decades back and since then it has been in the development of residential property only. The group has constructed over 16 million sq feet of residential space till now. The company is an ISO 9001:2000 certified by Intertek, USA. The total assets owned by the group are about Rs. 33000 million. Projects: Ganesh Housing has built several projects namely Ratnam an apartment of 216 flats with super built-up area of over 1, 96,000 sq feet.

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Maniratnam another residential project of 51 bungalows with construction area of over 80,000 sq feet, Maniratnam II a scheme of 92 bungalows with construction area of 1,20,000 sq feet

Mahalaya which is a project comprising 70 bungalows covering 1, 38,595 sq feet. Its current projects include Maple County which encompasses latest concepts in modern living offering 2100 2800 sq feet of super built up area.

Suyojan is 3 storey apartment schemes with 3 BHK homes of 265 sq yard super built up.

Mahalaya-II is a bungalow scheme that offers 2475 sq feet of super built up and has all the essential and innovative features.

Shangrila and Shangrila II a luxurious bungalow scheme of 255 sq yards onwards of super built up. The last one also provides a big balcony, utility and store room, specially designed dress areas and large covered parking space. The kitchen has a concealed gas pipeline, and the bathroom has anti-skid and leak-proof flooring. Other facilities include hi-tech security system, RO water purification system, inverter for emergency supply, anti-termite treatment guaranteed for 10 years and a solar water heater.

(ix)

J P Infrastructures Ltd:

JPIL has been in realty business with the name of ISCON group, from residential complex to shopping malls, from mega malls to townships, IT parks and hotels because of which they have rich and varied track record as a premier construction and real estate company. JPIL has completed more than 2.5 million sq ft of residential, office and commercial development in the state. The company is an ISO 9001:2000 certified company and has also won an award for the successful and timely completion of Star India Bazaar. They have properties worth 16 million sq ft in total at prime locations over the country, which will be used for the construction of multiplexes, new generation malls, offices, hotels, and IT parks. Projects:
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ISCON group has completed 3 major projects in residential apartment schemes, namely ISCON Residency in Navrangpura,

ISCON Park on Satellite Road, and ISCON Park on Gurukul Road in Ahmedabad. Its current project in residential scheme is ISCON Greens which is coming up at Bopal-Ghuma road, offering twin bungalows and row houses. The project will offer the customers various amenities like amphitheatre, table tennis, billiards, basket ball all in club house. Library, jogging track, swimming pool, multipurpose community hall and gymnasium are the common facilities that ISCON greens will offer. The total area is spread over 12.5 acres of rich land.

(x)

Maruti Group:

Maruti Group is the outcome of three young inspired entrepreneurs who aspired to deliver quality construction work which would be based on careful planning, meticulous time bound execution, keeping in mind the customer requirements and affordability. The projects undertaken by the company are situated in highly post and developed areas of Ahmedabad like Satellite, Shivranjani Junction, Prahladnagar, Bodakdev, Science City, Koba and Gurukul. Projects: Maruti Hills, located in Prahladnagar, Satellite, is a scheme of ten individual bungalows with decorative main gate and full security systems. Maurya bungalows are similar bungalow scheme residential units with a bore well for anytime water supply, intercom facility in every bungalow and a generator facility for power backup. The latter one is located in Satyam Complex, Science City main road. The upcoming project of Maruti Group is a 3 BHL luxurious flat scheme apartment at Motera, Ahmedabad.

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(xi)

Navratna Group:

Gulmohar bungalows, Aniket building, Ankur and Arjun farm houses, Amaltas bungalows, akashneem bungalows and Upvan apartments are the ones that are built by the Navratna Group via initially undertaking contracts and by which the group started operations in Ahmedabad. Thereafter it ventured into developing its own residential schemes by launching Kaivalya comprising 16 luxurious flats. This was followed by Kadamb, Kanishka, Kaushambi, Karma, and Kaivanna. Projects: Kalhaar is the recent project of Navratna Group which is a scheme of 181 bungalows near Thaltej area. It spreads over 250,000 sq yards and the work is already in progress. 50 bungalows of it have already been booked and this gives an approximation of the worth of project to be 4500 lakh rupees. (xii) Shaligram Buildcon Pvt. Ltd.:

Shaligram Buildcon Pvt. Ltd has completed years of operation in constructing luxurious residential bungalows and other residential properties. It has almost 10000 satisfied customers in the market. Shaligram too has pursued the policy of no media publicity and promotes each project by invitation only. Shaligram has been selective about the clientele as they prohibit bringing and eating of non-vegetarian items inside the premises of all their schemes. They are developing residential schemes of independent luxurious and twin bungalows in the areas of Thaltej and New Bopal. Shaligram-I and Shaligram-II in Thaltej and Shyam Villa-I and Shyam Villa-II in Bopal are the examples of fastest booking record. Currently there are no ongoing projects of Shaligram Buildcon. (xiii) Shree Ami Infrastructure:

Shree Ami Infrastructure was established in the early 1960s. Its name is taken amongst the first organised builders of modern Ahmedabad like first high rise building Royal Apartments (Khanpur), introduction of first twin bungalow concept in the city by

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Vaibhav Bungalows (Bhuyandev). The company has expertise in real estate for over 45 years and has completed more than 50 projects in 21 areas of the city. Projects: Vaibhav Homes at Adalaj was the pioneering project which heralded the concept of twin bungalows. Its in proximity to the capital city Gandhinagar and the 200 ft Sardar Patel Ring Road. It offers the two types of units 12 units of 3 BHK and 65 units of 4 BHK with a total development area of 2, 70,000 sq ft. Some of the features include intercom facility, multiple gates for easy access, club house, video security system, and RO system. (xiv) Siddhi Developers:

Siddhi Developers began its operations in 1990. It started with Ganesh Park, Aarohi Villa, Aarohi Vihar, and Aarohi homes and its recent offerings are Aarohi residency, Aarohi Royal, Shree Kabir Enclave and Aarohi Greens at Chekala on Sanand-Thor road. The company has developed over 5, 00,000 sq yards of land and constructed properties which include residential bungalows and plots and commercial complexes. Projects: Aarohi Greens is situated at the Chekala village on Sanand-Thor road, which offers plots having areas starting from 520 sq yards going up to more than 5000 sq yards. Aarohi Residency is situated approximately 4.5 km from Iskon temple and nearby by Aarohi homes. The scheme offers plot areas starting from approximately 170 sq yards. All amenities like schools, shops, petrol pump, hospital, stationary, vegetables etc are in the vicinity of the township. Aarohi Royale is a similar kind of residential project offering similar kind of units as Aarohi Residency. (xv) Sun Builders Pvt Ltd.

Sun Builders is a 26 year old company with more than 27 successful projects under its name. It has completed several residential projects since 1994. The recent projects are Sun
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Divine-2, Sun-Divine 3, Surya Shreeji, Sun House 1, and Suryarang Cottages and Sunspace Apartments. Projects: Sun Divine 2 is a scheme of 3 and 4 BHK low rise high end apartments located behind Star India Bazaar, Satellite. It uses innovative water harvesting and recycling technology. The scheme has 40 units and there are 2 units per floor. Sun Divine 3 is also in the same vicinity and is offering 3 BHK high end apartments n a high rise building. This also has employed innovative water harvesting and recycling technology. Surya Shreeji is a scheme of tenaments, twin bungalows and row houses, located near Bopal village. Sun House 1 is located 1 km away from Vijay Cross roads, and offers 15 fully furnished service apartments. (xvi) Vishwanath Group:

Vishwanath Group began as Vishwanath constructions and over the years has executed projects with quality construction and use of state-of-the-art technology. Sharnam offers daily amenities to the moderate income group; Ishan caters to the high income group and Shaligram to the premium segment. The lifestyle and standard of living separates all the three projects, but the quality of construction remains the same of all the three. Projects: Sharnam County is located on the landscapes of South Bopal. It is 10 minutes away from S.G. Highway and 15 min from Prahladnagar. It offers Twin and Row bungalows. Sharnam 12 provides quality and improved standard of living at an affordable price. It is offering 2 and 3 BHK plans.

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(xvii)

Shree Parshwanath Corporation:

Shree Parshwanath Corporation has been in the realty business since past 40 years and has completed 120 projects, with 1, 07, 00,000 sq ft of built up spaces and 2,60,00,000 sq ft of land development. Its projects include integrated townships, utilitarian homes, and giant infrastructure. Parshwanath has completed residential projects like New Amar Park and Parshwanath Raj Villas. Projects: Parshwanath Metrocity, located near New C.G. Road in Chandkheda is in the vicinity of the international cricket stadium and engineering college. Their upcoming projects are Parshwanath Mega City, Parshwanath Homes, and Parshwanath Smruti.
Table 4.1: On going major residential projects in Ahmedabad

Builder Saumya Construction Pvt Ltd Sterling Greenwoods Ltd Shivalik Projects

Current Project

Project type

Scheme types

Area

Greenwoods, Thol Shrinand Nagar V, Vejalpur Shukan Villas, Makarba Road Sulay Row houses, Makarba Road Kadambari - 1 Kanakdhara Safal Vihaan, Sanathal

Residential Property Residential complex Luxurious residency Luxurious residency Residential Units Residential Units

Plot Scheme

approx 1200 sq yards 980-1150 sq ft

2-3 BHK Villas Row houses Farm House Villas

Bakeri Engineering & Infrastructure Ltd.

Agarwal Group of Companies N G Group Safal Group

Residential Units

91 units over 1 Lakh sq ft

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Maple County Suyojan Ganesh Housing Corp Ltd

Luxurious residency Residential Appt 3 BHK

Mahalaya - II Shangrila & Shangrila - II

Bungalow scheme Luxurious residency Twin Bungalow & Row Houses Bungalow scheme Bungalow scheme Luxurious Appt 3 BHK

2100 - 2800 sq ft / unit 265 sq yd super builtup 2475 sq ft super builtup from 255 sq yards super built-up total area 12.5 acres

J P Infrastructure Projects

Maruti Group

ISCON Greens, Bopal Ghuma road Maruti Hills, Prahladnagar Maurya, Science city main road Name Unknown, Motera Kalhaar, Thaltej Shaligram-I and Shaligram-II, Thaltej Shyam Villa-I and Shyam VillaII, Bopal

Navratna Group

Bungalow scheme

181 units over 2.5 lakh sq yards

Shaligram Buildcon Pvt. Ltd.

luxurious and twin bungalows luxurious and twin bungalows

Shree Ami Infrastructure Aarohi Greens, Chekala Siddhi Developers Aarohi Residency Aarohi Royale Sun Divine 2 Sun Divine 3 Surya Shreeji
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Residential Plots Residential township Bungalow scheme low rise high end appt high rise appt Tenements
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520 sq yards - 5000 sq yards 170 sq yards

Sun Builders Pvt ltd

3-4 BHK 3 BHK

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Sun House 1 Vishwanath Group Sharnam County Sharnam 12 Parshwanath Metrocity upcoming projects: Parshwanath Mega City, Parshwanath Homes, Parshwanath Smruti Sentossa Greenland

Appt Twin and Row bungalows 2 - 3 BHK

15 flats

Shree Parshwanath Corporation

Satyam Developers

Luxurious residency / farm house

11 lakh sq feet

4.4

Luxury Homes

Luxury Homes refer to the segment of real estate which consists of sprawling plots, large bungalows, villas, penthouses, condominiums etc and state of the art amenities. These are generally the second homes of the buyers and are ideally weekend homes far way from the city. The target segments for premium housing are generally high Net worth individuals and non residential individuals who have surfeit balances to invest. These segments are relatively unaffected by the interest rate regimes as they do need to procure loans to make their payments, thus the demand in this segment is more or less consistent. The premium housing segment though only 10% of the housing segment, it has been growing at a rapid CAGR of 20% -30%. Inspite of the recent slowdown in the overall growth of the real estate industry that has taken place on the back of rising inflation concerns, lower than expected GDP figure and the volatile and weak capitals, the market for luxury home has continued in its growth path and is estimated to be worth around Rs.2,000 crore.

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The luxury homes segment in Ahmedabad too has been consistently on the rise with most of the local players offering a variety of schemes in the segment. In particular the farm house and high end township schemes are highly in vogue with the elite class in the city. The township model has particularly received a boost due to the Favourable township policy and ambitious plans by regional and national real-estate developers. The new township policy announced by the state has made the land acquisition process easy its talks about providing trunk infrastructure, developing green channel for fast track clearance, rating of developers and a lot more. The government has also stressed on rating of developers, which will examine the developers track record, organisational risk and financial risk. This rating will decide the benefits that will be offered in terms of support and flexibility in the township. The major township projects coming up in the city are 1. The IL&FS and GUDC joint venture. 2. The Adani groups 500 acres township Shantigram on the outskirts of the city with an investment of over Rs 2500 crore. 3. Sahara Groups Sahara city on S.G Highway near Nirma University. 4. Savvy Infrastructures township project at its 700-acre land around Nalsarovar. 5. Ganesh Housing Corporation Limiteds township at Godavi with an investment of around Rs 2000 crore. 6. Siddhi Developers 170 sq. yard Aarohi Residency 7. Sterling Greenwods residential township at Thol. It is evident from the number of luxurious townships under progress in the city that there is a huge demand for them amongst the prosperous residents of Ahmedabad. Many Non Residential Gujaratis and Non Gujarati Top Executive of the various organizations in India also form a substantial part of the demand generators.
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Emerald Park The project consists of 6 different types of units of 1000 sq. yards, 2500 sq. yards and 5000 sq. yards. The project is a reflection of the most contemporary and comforting lifestyle. It offers a total of 328 farm houses in different categories.

In addition to offering the most luxurious farm houses the project offers all the desired and deserved amenities like Garden in each plot, Lighting, 24 hours professional security agency, Children Park, Jogging Track, Ponds / Fountains, Power back up facility for street lights & 3 club houses, which include facilities like Coffee Shop ,Health Club, Volley Ball Court, Restaurant, Swimming Pool, Artificial Lake, Home Theatre, Tennis Court, Lake Restaurant, Library, Card Room, Basket Ball Court, Discotheque, Table Tennis etc.
Figure 5.1: Emerald Park Location

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It is located on the outskirts of the city, behind the Thor Lake on the Sanand - Kadi Highway, where another residential township Sterling Greenwoods is also being constructed. The location is 30 minutes from the city and provides an ideal gateway from the city life. The target segment for the project are Upper and Elite Class who have surplus income to invest and are desirous of a weekend get away or farm house to relax at. This segment is in abundance in the city of Ahmedabad and bookings for the project have already begun.

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6
6.1

Financial Aspects
Introduction

This chapter deals with the economic viability of the proposed project. A spreadsheet model has been developed for financial analysis with a view to assess impact of changes in project parameters like project cost, input costs and other parameters. 6.2 Basis and Assumptions

The important basis & assumptions, which are considered for the analysis, are enlisted below: 6.2.1 Sales Distribution Pattern Table 6.1: Sales distribution Pattern of Units
Platinum 100% 2009-10 Silver Platinum Gold Silver Platinum Gold 100% 2010-11 Gold Silver Silver 50%

Units to be constructed over Year Distribution Pattern proportion of total respective units Corresponding number of units minimum land area 2008-09 Platinum Gold

3 Years

33.33%

33.33%

25.00%

33.33%

33.33%

25.00%

33.33%

33.33%

0.00%

15.33 275.00

41.00 175.00

39.75 155.00

15.33 275.00

41.00 175.00

39.75 155.00

15.33 275.00

41.00 175.00

0.00 155.00

Table 6.2: Sales Distribution Pattern of Plots


Year Months Distribution 2007-08 AprOct June July-Sept Dec 2008-09 July- Oct Sept Dec 33.33% 2009-10 AprOct June July-Sept Dec Jan-Mar 33.33%

JanAprMar June 33.34%

JanMar

6.3

Project Cost

The Financial requirement for the proposed project is estimated in this section. It primarily looks into the Capital Expenditure to be incurred for the project. Capex estimates will include estimates for its various components such as land and land development, common area construction work, utilities, other fixed assets, preliminary and pre-operative expenses and finally the provision of 51
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contingency for the proposed project to cover modification, alteration as well as unforeseen expenses for various project components.

On the basis of fixed cost estimates the Block capital cost of project will be worked out. This will be total cost of project, and to meet this cost, means of finance will also be estimated. Means of finance will include promoters contribution in terms of equity, internal accruals and unsecured deposits As there is no debt or term loan to be taken to finance the project, it will be done from the equity poured in by the promoters and the booking advances paid by the members of the project.

6.3.1

Land and Land Development

Radhe has purchased 752223 sq. yard of land on the Kadi Sanand highway, behind the Thor Lake on the outskirts of Ahmedabad. Table 6.3: Land and Land Development Cost Estimates Sr. No 1 2 Description Cost of Land (752223 sq. Yard @ 100 Rs/sq. yard) Cost of Land Development Total Estimated Cost Cost In Rs Crores

7.52 38.47 45.99

The land development cost includes the cost of construction of common facilities such as roads, compound walls, landscaping as well the clubhouses. The civil cost of utilities such as borewell and electricity has also been taken into account under the same head.
6.3.2 Utilities

Radhe plans to set up 3 D.G. Sets of 50 KV each to fulfil its power requirements during the construction phase of the project, the residents of the project will be obtain power for their respective plots from GEB at their own cost and thus is not a relevant component in utilities cost of the project. 52
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Table 6.4: Utilities


Sr. No 4 5 Utilities Cost DG sets HVAC Total Quantity 3 Rate/Unit 500000 Per each of 50 KV Amount 0.15 0.50 0.65

6.3.3

Preliminary and Pre Operative Expenses

There are several expenses associated with starting of project, which is clubbed under preliminary expenses. There are some expenses which are incurred prior to start of commercial production in the plant and these are classified under pre operative expenses. Preliminary and pre operative expenses are taken together in the cost estimates. Total estimate for preliminary and preoperative expenses is Rs. 8.08 Crores.

Table 6.5: Preliminary & Pre-operative Expenses


Percentage Per Sq. Yard 0.1 0.05 0.02 0.04

Sr. No 3 4 5 6

Preliminary Expenses Overhead Expenses Office Expenses Marketing Expenses Architect/ Structural & Landscape Total

Rs Per Sq. Yd 51.141 25.5705 10.2282 20.4564

Amount 3.85 1.92 0.77 1.54 8.08

6.3.4

Provisions for Contingences

NTIL will have to make provisions of contingencies which will be appropriated in the respective
heads where there is a cost escalation and requirement of contingency. Due to such appropriation of contingencies there is also increase in respective cost estimates in fixed assets. The total provision of contingencies to be made for the project is Rs.4.41 Crores.

Table 6.6: Provisions for Contingencies


Sr. No 1 2 Description Land and Land Development Cost Other Costs Total Contingency Amount in Crores 3.85 0.57 4.41

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6.3.5

Summary of Fixed Capital Cost

In the previous paragraphs cost estimates for main fixed asset heads have been described. To give an overview of the project investment, a summary of the Project Cost is given in the following table

Table 6.7: Summary of Fixed Cost Estimates


Sr. No Description Land Cost Land Development Cost Plant and Machinery Furniture, Fixtures & Clubhouse Equipment Common Utilities Preliminary expenses Contingency Total Project cost Rs. Crores 7.52 38.47 0.00 5.00 0.65 8.08 4.41 64.13

1
2 3 4 5 6 7

As observed from the above table total fixed cost estimates for the proposed project is Rs. 64.13 Crores. Preliminary and preoperative expenses and contingencies are also included here, since they would be appropriated to the fixed costs.

6.4

Sources of Finance

Proposed sources of finance for the project are summarised in following table Table 6.8: Means of Finance
Sr. No 1 2 Particulars Booking Advances Equity Total Means of finance Rs. Crores 20.31 43.82 64.13

6.5

Project Profitability

The various indicators of Project Feasibility are given in the following tables attached at the end of the Report:

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7
7.1

Strategic Analysis
SWOT

Strengths Location Western style club houses and amenities, lush green premises and surroundings Close to industries Scheme of Luxurious farm houses Proximity to Nal Sarovar and holiday spots Demand for holiday homes Well established and prominent player in realty Availability of cheap land Equity financing only Weakness Municipal drinking water not available Close to industries Limited public transportation Opportunities Industrial development around the city Growing NRI investments in the country and particularly in Ahmedabad. Growing Elite Class Growth in realty sector and particularly housing Threats Sterling Greenwoods a similar kind of city offering is coming up in the same area Other townships and schemes from Ahmedabad competitors Adverse effects of fluctuations on the cost of raw materials

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7.2

Five Forces Model

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Conclusions and Recommendations

8.1

Conclusions

8.2

Recommendations

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Profit and Loss Statement

Particulars

200708

Year 2008200909 10

201011

Sales / Revenues Plots Unit Platinum Gold Silver Total Construction Revenue Interest on Maintainance Deposit Booking Advance Total Revenue Expenses Write-Off Construction Cost all inclusive Overheads Total Cost of Construction Gross Profit Net Profit Before Taxes Tax on Profit Profit After Tax Net Cash Accruals

0.00 0.00 0.00 0.00 0.00 0.15 13.54 13.69

27.08 4.22 7.18 6.16 17.55 0.31 6.77 51.71

33.85 4.22 7.18 6.16 17.55 0.93 52.33

0.00 4.22 7.18 0.00 11.39 1.43 12.82

8.02 0.00 0.14 8.15 5.540 5.54 1.88 3.66 3.66

32.07 14.04 0.52 46.63 5.089 5.09 1.73 3.36 3.36

24.05 14.04 0.52 38.62 13.712 13.71 4.66 9.05 9.05

0.00 9.11 0.13 9.24 3.578 3.58 1.22 2.36 2.36

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Cash Flow Statement

Particulars Sources of Funds : Promoter's Contribution Maintainance Deposits Written off Net Profit Before Tax & Interest Sub- Total (A) Disposition of Funds : Capital Expenditure Transfer of Maintainance Deposit Income-Tax Sub-Total (B) A-B Opening Cash Balance Closing Cash Balance

2007-08 10.00 3.76 8.02 5.54 27.32 9.34 0.00 1.88 11.22 16.09 0.00 16.09

Years of Operation 2008-09 2009-10 10.00 7.52 32.07 5.09 54.68 38.35 0.00 1.73 40.08 14.60 16.09 30.69 23.82 5.64 24.05 13.71 67.22 16.44 0.00 4.66 21.10 46.12 30.69 76.81

2010-11 0.00 0.00 0.00 3.58 3.58 0.00 16.93 1.22 18.14 -14.56 76.81 62.25

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Balance Sheet

Particulars Liabilities Share Capital Reserves Long term loan Maintenance Deposit Total Liabilities Assets Capital Work In Progress Less: written off Net fixed assets Debtors and other assets Cash and Bank balance Total Assets

2007-08 10.00 3.66 0.00 3.76 17.42 9.34 8.02 1.33 16.09 17.42

Year 2008-09 2009-10 20.00 7.02 0.00 11.28 38.30 39.68 32.07 7.61 30.69 38.30 43.82 16.07 0.00 16.93 76.81 24.05 24.05 0.00 76.81 76.81

2010-11 43.82 18.43 0.00 0.00 62.25 0.00 0.00 0.00 62.25 62.25

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