Topic: Effects of Financial Crisis on the Profitability and Liquidity of Real Estate Companies

TABLE OF CONTENT

Certificate

Acknowledgement

Chapter -1 1-17

Introduction

o Objectives of the Study

o Research Methodology

Chapter -2 18-26

Review of Literature

Chapter -3 27-44

An Overview of Real Estate Industry in India

Chapter -4 45-57

Impact of Financial Crises on Indian Real Estate

Chapter -5 58-78

Data Analysis and Interpretation

Chapter -6 79-82

Suggestions and Conclusion

Bibliography 83-84
Chapter -1
Introduction
 Introduction
Looking forward to 2020 and beyond, the real estate investment industry will
find itself at the centre of rapid economic and social change, which is
transforming the built environment. While most of these trends are already
evident, there‘s a natural tendency to underestimate their implications over the
next six years and beyond. By 2020, real estate managers will have a broader
range of opportunities, with greater risks and new value drivers. As real estate is
a business with long development cycles – from planning to construction takes
several years – now is the time to plan for these changes. Already, thousands of
people migrate from country to city across Asia, the Middle East, Latin America
and Africa on a daily basis, attracted by the new wealth of these economies. By
2020, this migration will be firmly established. The cities will swell – and some
entirely new ones will spring up. Meanwhile, the growing emerging markets‘
middle class and ageing global population are increasing demand for specific
types of real estate. Subsectors such as agriculture, education, healthcare and
retirement will be far bigger by 2020.
The real estate sector comprises of five sub-sectors. They are Residential space,
Commercial space, Retail space, Hospitality space, and SEZs.
The real estate sector in India has come a long way by becoming one of the
fastest growing markets in the world. It is not only successfully attracting
domestic real estate developers, but also the foreign investors. The growth of the
industry is attributed mainly to a large population base, favourable demographics,
easy availability of finance, rising income level, and rapid urbanization. The real
estate sector in India assumed greater prominence with the liberalisation of the
economy, as the consequent increase in business opportunities and labour
migration led to rising demand for commercial and housing space. Traditionally,
the real estate sector has been fragmented with large number of developers. But
now the industry is witnessing a changing profile with shift in consumer
preferences and rising investor interest. Real estate developers are becoming
more organised and transparent to leverage opportunities in the market. The real
estate companies are coming up with various projects including residential and
non-residential to meet increased demand. This is largely driven by availability of
land at affordable prices backed by demand for office space, primarily from
services sectors such as IT/BPO, retail and BFSI. According to CREDAI Real
estate plays a crucial role in the Indian economy. It is the second largest
employer after agriculture and is slated to grow at 30% over the next decade. The
Indian real estate market size is expected to touch $180 billion by 2020.
The liberal economic policies, aimed at improving private participation, adopted
by the Indian Government has helped in capitalizing the strong fundamentals of
the Indian economy which include young population and rising urbanization.
Indian GDP has quadrupled to reach USD 1.8 trillion in 2012 and is expected to
become the third largest economy worth USD 6.6 trillion by 2028.
The National Housing Bank (NHB) has asked deposit-taking housing finance
companies (HFCs) to slightly increase their liquid assets, stepping in as some
sector players face a liquidity crisis.
The NHB, through a notification issued on May 25, has asked HFCs to keep 6.5
per cent of the public deposits in debt-free securities, instead of the 6-per cent
limit earlier.
HFCs have to in keep 13 per cent as liquid assets--instead of 12.5 per cent earlier-
-with the remaining share of public deposits to be kept in the form of term
deposits or certificate of deposits or in bonds issued by the NHB.
―The move is aimed to hedge the risk of public deposits in these HFCs,‖ said
a finance ministry official. There are 18 HFCs accepting public deposits
including ICICI Home Finance Company Ltd, PNB Housing Finance Ltd., L&T
Housing Finance Limited, among others.
The NHB notification came four days after cash-stripped Dewan Housing
Finance Ltd (DHFL) announced it has stopped accepting fresh public deposits
and renewal of existing deposits. DHFL‘s credit rating was downgraded last
week after the company missed an interest payment deadline on a set of non-
convertible debentures.
The NHB is also looking at replicating the Reserve Bank of India‘s recent
circular asking large non-banking financial companies (NBFCs) to maintain a
liquidity coverage ratio (LCR) in line with banks and carry enough collateral that
can be used for liquidity needs, starting from April 1 next year.
―We are looking at how we can issue a directive in line with the RBI‘s circular
for the housing finance companies,‖ the official said.
The NHB has held a series of meetings recently to deliberate upon the ways to
strengthen the regulatory norms for HFCs. Though the NHB is not empowered to
place its executive on the board of HFCs,
Recently, NHB directed HFCs with asset size of more than Rs 5,000 crore to
appoint a chief risk officer (CRO) in a bid to improve risk management practices.
The move followed a similar direction given by the RBI for NBFCs.
2018, the year real estate died
We all know somebody who has made a mini fortune by investing in a flat or
residential plot at the right time. Despite the usual ups and downs, there exists a
deep rooted sense among Indian investors that residential property is a sure-fire
investment which delivers excellent returns. This wisdom has been passed on
from generation to generation.
Yet, unless you‘ve been living under a rock, it‘s evident that residential real
estate has been down in the dumps. According to National Housing Bank data,
property prices in Mumbai and Bengaluru increased annually by just about 7.50%
and 5.75% respectively between June 2013 and September 2017. In Delhi, prices
actually fell by -0.70% annually during the same period. Beyond the data, we
hear numerous stories of investors in distress with their money stuck in delayed
projects. There are also stories of many brokers, in fact the entire realty
ecosystem, struggling to cope with this slowdown.
Expand
However, many feel that real estate has bottomed out. Their logic is that from
now on, or soon, the cycle will reverse and prices will start moving upwards. In
reality, this is either wishful thinking by people who are stuck with depreciated
assets or an illusion created by stakeholders. The fact is, investing in residential
real estate will not get you 20-30% annual returns or double your investment in
about 3-5 years any more, as it did back in the golden days of 2001-2007.
This time it is different. There are various factors which indicate that the lull in
the real estate is here to stay. Therefore, it certainly does not make sense to buy a
residential property from an investment point of view at this point in time.
―Considering the rising interest rates and high maintenance cost and tax on
rentals and capital gains, I would not suggest investment in physical real estate,".
The reason low returns are expected from real estate is that there has been an
irrational increase in property prices in the past. Moreover, even after prices have
remained largely stagnant for few years now, in many locations property is
overpriced. Many investors who bought property 3-4 years ago are finding it
difficult to get a buyer even after reducing the price lower than the purchase
value.
Remember, any asset class, be it realty, gold or equity, has its own cycle. No
asset classes will give you positive returns forever. Nor will it constantly give
you a negative return. With that caveat out of the way, read on to understand why
real estate will take much longer to recover.
Black swan moments
Demand in real estate started declining from 2013. By 2016, it had hit an all-time
low. The overall market was going through a bearish phase when it was impacted
by two major ‗black swan‘ events. In May 2016, the Real Estate (Regulation and
Development) Act or RERA was enacted. And six months later, the government
demonetized high-value currencies—it washed out 2016 and 2017 for residential
real estate.
One of the aims cited for demonetisation was that it would help curb the rampant
use of black money in real estate transactions, especially in the secondary market.
Black money is what lubricates the real estate sector, as anyone who deals in cash
finds it the easiest investment to channel funds into. This is so because of the
difference between the circle rate, which is fixed by the government, and the
market rate of properties. For instance, in Delhi‘s posh Defence Colony, circle
rates are around Rs 2.45 lakh per sq. m whereas the market rates are above Rs 5
lakh per sq. m. This is why homebuyers, who don‘t have unaccounted funds or
cash, find it difficult to buy properties in these localities.
―Initially, there was a setback, but once again cash is back in the market.
However, the magnitude of cash proportion has declined to some extent," said
Vasant Kumar, a south Delhi-based real estate agent. But the general attack on
black money has had some impact. Many buyers and sellers are now not
comfortable dealing with cash. What this translates into is a lower supply of
money flowing through the real estate segment—many feel that this will continue
for a long time.
On another front, it will take years for RERA to make any significant impact on
ground. Only a few states have implemented RERA effectively; many have
diluted the key provisions of the central act. These dilutions include exempting a
majority of under-construction projects from RERA‘s purview as well as easing
penalties for builders who do not comply with the act. Once all states implement
RERA, developers will take time to comply with the regulations. It is expected
that homebuyers or investors will also wait for things to settle down. Effective
implementation of RERA is important to restore confidence among homebuyers.
Until then, demand will remain muted.
Relax, pay more tax
The tax man has not been kind to the real estate sector. Now investors have to
calculate how much profit can be retained after taxes. The implementation of the
goods and service tax (GST) from July 2017 disturbed real estate transactions,
stretching the lull. In fact, over the past few years, the government has introduced
many changes in the tax regime, which have negatively impacted homebuyers
and investors.
While earlier, a service tax had to be paid for under-construction properties, now
GST has to be paid. The effective rate of service tax was 4.5% of the property‘s
value, while the effective rate of GST is 12% with inputs tax credit (ITC).
Though the government believes that after taking ITC into consideration, the tax
proportion would be lower. But, ―there is still confusion about the amount of
rebate that a prospective homebuyer is entitled to on the back of the pass-over of
ITC. The confusion is not only about the percentage of ITC but also the mode
and tranche of the rebate," said Anuj Puri, chairman, ANAROCK Property
Consultants.
In addition, after buying a property, the buyer has to register it by paying stamp
duty and registration fee, which are in addition to GST. Stamp duty is levied by
state governments and usually varies between 5% and 8%. This means that GST
and these other fees constitute about 20% of a property‘s value. Such high
transaction costs make real estate unattractive for investors. Worse, there are
other taxes: income tax is levied on rental income as well as capitals gains made
from property transactions. But, many tax benefits and exemptions of have been
scrapped or restricted in the last couple of years. In short, investing in real estate
is no longer tax friendly.
Supply, over supply
The slowdown will also linger because of an over-supply—a huge inventory
pileup—at developers‘ end. What makes it worse is the mismatch in demand and
supply. For instance; there are about 120,000 apartments in Pune lying unsold,
followed by Bengaluru with about 100,000 units lying unsold.
When the going was good, most developers were focusing on mid-category,
luxury and premium-housing projects. At the moment, the demand is for
affordable housing units. Therefore, there is huge unsold inventory of other units
across most micro markets, mostly in the suburbs and far-flung areas of metros.
―The developers failed to ascertain the need of homebuyers and launched projects
which were not in line with their demand," said Samantak Das, chief economist
and national director -research, Knight Frank India.
It‘s obvious that when there are few takers for the current inventory, developers
will not even think of launching new projects. Even clearing the inventory will
take time—at the current sales volume, it will take 85 months to clear the current
inventory in Greater Noida. Obviously, prices will remain subdued.
Clearly, greed, over-ambition and financial indiscipline of developers are the
main reasons investors are shying away from realty. According to
360realtors.com, a real estate portal, there are about 340,000 residential units
running behind schedule of construction in Mumbai. The situation is similar in
many other cities. There are many homeowners and investors who are stuck in
real estate projects, with their finances in a mess. They are paying rents and
paying off their loans, but possession is a distant dream.
The number of projects running behind schedule is reducing because developers
have stopped launching new projects. Even so, it will take a long time to bring
the sector back on track. As per ANAROCK , ―During 2017, out of the total 5.8
lakh residential units slated to be completed across the top seven cities in India,
4.3 lakh units (74%) actually missed their stipulated completion deadlines."
Even big developers like Unitech Group, Jaypee Group and Amrapali Group
have failed to deliver projects. The impact of long delays, poor quality of
apartments, failure to deliver the amenities promised and non-compliance with
rules and regulation will take a long time to fade away. Homebuyers will wait till
things improve or buy only ready-to-move-in apartments.
The investment scenario
To make matters worse for real estate, other investment avenues are flourishing.
According to data from Association of Mutual Funds in India (AMFI), total
assets under management by assets management companies (AMCs) as of 31
May 2018 was about Rs 22.6 trillion. On 31 may 2013, this figure was
aboutRs 8.68 trillion— that‘s an average year-on-year increase of 21%. During
the same period, according to www.valueresearch.com, hybrid equity oriented
funds had given an average annual return of 16% and liquid funds around 8% per
annum.
Since 2001, real estate has performed poorly in comparison to equity and gold.
―Real estate as an asset class has lost its sheen (in terms of investment asset)
given the various reforms (demonetization, RERA and GST) introduced in the
last two years and especially when other asset classes like equities have been
doing well," said Rahul Jain, head - Edelweiss Personal Wealth Advisory.
With all these factors working against real estate, we can at best expect a nominal
return in next decade or so. A low rental yield of below 3% is also a big
deterrent. At best, experts feel, one should invest in real estate for
diversification—irrespective of the low returns. ―Equity is a highly volatile,
whereas real estate is not that volatile. We must understand that real estate is
cyclical in nature," Binaifer Jehani, director, CRISIL Research, said. In the
present scenario, ―if you have a horizon of about 15 years, you can go ahead and
invest in real estate," she added. Clearly, invest in real estate only if you have the
patience to play a very long waiting game.
Impact of NBFC crisis on real estate sector in India
The debacle of one of the largest NBFCs in the country which surfaced in
September 2018 after a few consecutive defaults in repayments of maturing
commercial paper with corpus under Rs 500 crore, way smaller than the entire
debt portfolio of $12 billion, shook the entire Indian capital markets. The prime
reason behind default being cost overrun due to delays in various long-term infra
projects funded by the NBFC eventually resulting in defaulted repayments of
even short-term money market instruments like commercial papers majorly
invested by banks, insurance companies and mutual funds. This is a classic case
of Asset Liability Mismatch which in case of NBFC like IL&FS happened
because of the nature of projects, i.e. capital intensive and prone to cost
escalations due to market cycles, cumbersome approvals etc which started getting
funded by liquid instruments like commercial papers due to their cost of
borrowing being lower than term loans from banks. This resulted in aggressive
borrowing using short-term finance and lending it to long-term infra projects.
On the back of the above event as well as rising NPAs in the banking sector
itself, it became difficult for IL&FS to refinance its maturing CPs as banks and
other investors became risk averse to the same and redemptions across the sector
increased due to this escalating risk aversion. Because of the high redemptions of
CPs by the investor and limited reinvestment by the banks, the NBFC‘s overall
started facing liquidity crunch. This was seen amongst NBFCs‘ funding
consumption items too, including consumer durables, gold-loans, autos including
two wheeler loans and retail home loans or loan against property etc. Although
these NBFCs have a better asset quality as these loans are based on amortisation
repayment structure and have a diversified retail level portfolio, however, the
sources of funds got limited from NBFCs primary investors like banks and
debentures (almost 85% of financer for NBFC as per as FY2018).
NBFCs depend upon the wholesale lending for their capital requirements since
they cannot raise retail deposits from the general public. NBFCs‘ book grew 14
per cent CAGR over FY13-18. They moved from 21 per cent of bank credit in
FY10 to 34 per cent now. As per as June 2018 report, ICRA estimated that retail-
focused NBFCs – with an estimated portfolio size of Rs 7.5 lakh crore – would
need Rs 3.8-4 lakh crore of fresh debt funding in FY2019 to support their
envisaged portfolio growth of about 20 per cent in FY2019. That math has gone
for a toss now. In fact, as per as the report, about 50 per cent (NCDs-CPs) of
NBFC borrowings are largely at a fixed rate, while ~35% of bank borrowings get
repriced on a quarterly or annual basis. With the scarcity of refinance available
for NBFC the overall cost of borrowing shot up as high as 150BPS in a matter of
just one quarter i.e. Q3FY2019.
The NBFC crisis has been a tip of the iceberg of the ongoing headwinds faced by
the real estate industry with receivables cycles getting stretched unreasonably
causing developers to face the escalated heat of liquidity crisis on one side and
managing delivery pressure under RERA on another side. In addition to already
slowed sales momentum due to drastic steps taken by the government like
demonetisation and implementation of GST at exorbitant rates impacting the
affordability causing a dip in sales. In fact, as per recent reports from the IPC,
MMR region experienced 7% drop in prices with inventory overhang hitting low
of 2 years standing at 2.2 lakh units UNSOLD (down mere 3% Yoyo) with
~60,000 units launched in 2018 ironically of which 40% was in the affordable
housing segment of Rs 50 lakh & less.
The main reason which has initiated this liquidity crunch is mismanagement by
NBFCs, where they have been funding long-term asset with short-term
borrowings. This has severely impacted developers because NBFCs and HFCs
changed their asset portfolio mix with a higher share of long-term lending to
builders against projects whereas the sources of fund remained short-term
instruments largely. This portfolio shift from higher mix of retail home loans
earlier as assets to higher construction finance to developers has resulted into a
situation where NBFCs are not disbursing even loans which are smaller than Rs
20 – 30 lakh despite of sanctions received by the buyers for a home loan. Also, in
some cases where there have been part disbursements, NBFCs are
holding/delaying the disbursements.
This leads the home buyer and developer in a status quo situation as the transfer
from NBFCs to banks takes easily 2-3 months. Also banks have a stringent
framework when it comes to eligibility discarding a handful of cases leaving
developers with cancellations. The sudden changes in business environment
would result in customer defaulting on their dues raised by the developers and in
turn the developer will face a liquidity crunch as he has to continue doing the
construction on site.
Historically, Indian elections have always led to a slowed momentum of
investments in asset classes like real estate or equity markets. This pattern is
prominent especially in our country due to the fact that India has diverse political
parties and formation of a Central government with a thumping majority or with
various alliances causes an alignment or disaccord respectively in functioning
and implementation of progressive policies, causing investors as well as buyers to
take an overall cautious stand.
Considering the outcome of state elections in MP, Rajasthan, Chhattisgarh,
Telangana, and Mizoram, the 2019 election is hinting towards an unstable
alliance. Thus, cautiousness has increased all the more among investors and
buyers. Definitely, 1HCY2019 looks slow and lacklustre for real estate markets
with some revival expected may be in the last quarter.
In conclusion, it‘s a framework failure which was implemented on NBFCs &
HFCs, allowing them as high as 40% of borrowing from money market
instruments with maturity as short as quarterly to max annual with a dynamic
repricing. With the recent rate cut of 25 bps by the RBI and further expected rate
cuts to induce liquidity as the inflation is already in check, banks should start
lending again to NBFCs as the assets are inherently strong for these NBFCs with
diversified retail consumers and some tax-efficient investment vehicles should be
devised by the RBI to increase the share of source of fund to long-term
borrowings from the currently high short-term instruments.
The impact of COVID-19 on the global economy is likened to that of the Great
Depression of 1930s. The Real Estate Research Initiative (RERI) at IIM
Bangalore conducted a survey to understand the business impact of COVID -19
on real estate companies in India. To study the immediate Impact of the
lockdown on real estate sector, the steps taken by the companies to deal with
the lockdown and plans of developers on treading over the next 6 months to
reduce the impact of this pandemic.
1.2 Objectives of the Study
 To study the Real Estate Business in India and its performance
 To study the Profitability and Liquid of Real Estate Companies in India
 To analyze the effect of financial crises on Real Estate business in India
 To analyse the extent to which liquidity and financial performance of the
company affect each other.
1.3 Research Methodology
RESEARCH DESIGN
 Exploratory in Nature
Exploratory research often relies on secondary research such as reviewing
available literature and/or data, or qualitative approaches
The Methodology of the study consists of
 Source of data collection
SOURCE OF DATA COLLECTION
 The source of Data collection is secondary, Books, Magazine, Journals,
Newspaper & Internet.
SECONDARY SOURCES
 The data had been collected through Books, Journals and Websites,
Prowess, Economic Outlook and Industry Outlook, database of the
financials of Indian companies prepared and maintained by Centre for
Monitoring Indian Economy, India.
 References

 Gill, Amarjit S., Harvinder S. Mand and RajenTibrewala, Op. cit., 2012, p.
113.
 Kaiser, Ronald W., The long cycle in real estate, Paper presented to the
American Real Estate Society Conference Sarasota, Florida, 1997.
 Mehta, Rashi, A Study on the Indian Real Estate Market for Investment: A
qualitative approach, Dissertation, The University of Nottingham, 2007.
 Porter, Michael E., Competitive Strategy and Real Estate Development
Harvard Business School-remarks to the 1989 Harvard Business School real
estate symposium, 1989.
 Sanford J., Foreign attraction, Canadian Business, Vol. 79 (10), 2006, pp.
163-165.
 Singh Vandna, (Op. cit., 2009), p. 253.
 Singh, Vandna and Komal, Prospects and problems of real estate in India,
International Research Journal of Finance and Economics, Issue 24, 2009,
pp. 242-54.
 Tahsin Ahmad and Joy Sen, Evaluating the Growth Potentials of Real
Estate Market in Noida, International Journal of Advanced Research in
Management and Social Sciences, 3 (6), June 2014, pp. 220-232
 Vishwakarma, Vijay Kumar, The Journal of Applied Business Research–
January/February 2013, Volume 29 (1), 2013, pp. 167-172.
 Economic Survey 2070-18, Op. cit., p. 241.
 Chapter -2
Review of Literature
 REVIEW OF LITERATURE

Although industries around the world have been studied, the literature related
to study on fastest growing construction and real estate firms are not traceable.
Real estate is often considered synonymous with real property, in contrast with
personal property. Studying the nature of real estate is complex considering
that it is not a product or service, per se, but a whole sector, comprising of
distinct businesses. Indian real estate market is one of the emerging markets in
the less developed countries. Investment in the real estate market is one of the
popular investments because everyone needs a place to live. Real estate sector
is the second largest employment provider in India. Estimates show that for
every rupee that is invested in housing and construction, Rs. 0.78 gets added to
GDP. Housing ranks fourth in terms of the multiplier effect on the economy
and third amongst 14 major industries in terms of total linkage effect. The GDP
share of the real estate sector (including ownership of dwellings) along with
business services was 10.6 per cent in 2010-11. Studies reveal that there is a
high degree of positive correlation between the real estate prices and GDP .

Real estate in India has a strong demand backed growth due to population
growth, higher allocation to savings in real estate, actualization of mortgaging
by consumers and bridging the gap of the current housing deficit . The study of
Vishwakarma (2013) finds a sign of a positive periodically collapsing bubble
in the Indian real estate market. Even though ‗real estate is long cycle prone
business‘, size of the Indian real estate market is expected to reach US$ 180
billion by 2020. It is estimated that at the start of the 12 th Five Year Plan
(2012-17), the total housing deficiency in India is 18.78 million. The paper of
Tahsin Ahmad and Joy Sen (2014) reveals that the real estate market in India is
growing rapidity. On the contrary, Knight Frank, in their financial analysis of
the real estate companies (2014), points out that high interest rate regime and
higher prices coupled with uncertain job prospects discouraged real estate
investments in India.
The study of Grant Thornton India LLP and CII (2012) shows that Indian real
estate sector has emerged as an expanding base of developers, investors and
global stakeholders buoyed by the growing construction industry in the country
and has been undergoing corporatisation and professionalisation and
recognised as a vital sector for the economic growth and development of the
country [19]. The sector witnessed a slight correction due to dwindling in
demand owing to the global economic scenario, a slowdown in the domestic
economy, increase in input costs and controversies over land acquisition.
However, in the long run, urbanisation is unavoidable and this will contribute
significant demand for real estate. The study states that "finance has
unequivocally been the major challenge for Indian real estate sector". It has
affected the sector both by increased borrowing costs for the developers and
affected demand for real estate which is largely driven by bank finance.
Developers are focusing on latest and advanced technology as a device for
optimising the value of their businesses in the marketplace. This has resulted in
a reduction in wastage of time in designing to project execution and even in
marketing and customer service.

A study of Deutsche Bank Research report states that about one in every sixth
person on earth lives in India. Rate of population growth has moderated to just
1.5 per cent per annum. The high birth rates and drop in infant mortality during
the past few decades imply that population of India is very young. One in every
three Indians is under the age of 15, and only one in three is older than 35. It
seems, by 2030, India may become the most populous country on earth.
Further, by 2050, Indian subcontinent‘s population may become nearly 1.6
billion, 200 million more than in China. The United Nations Population
Division (UNDP) expects the degree of urbanization to grow over 40 per cent
by 2030, implying that urban population will grow by 2.5 per cent per annum
in the next 25 years. Hence, while the rural population increases only
marginally, urban population, by 2030, will double to approximately 600
million. Therefore, there is enormous scope for the real estate industry‘s
development.
Analysis of A.T. Kearney (2012) placed India as 5 th and pronounces that India
remains a high-potential market with accelerated retail growth of 15 to 20 per
cent expected over the next five years. The retail sector employs approximately
8 per cent of India's population, with demand for skilled workers expected to
rise. The Indian office market has benefited from off-shoring activities. A
report by NCAER (2011) reveals that by 2015-16, India will be a country of
53.3 million middle class households, translating into 267 million people
falling in the category. Currently, India has 31.4 million middle class
households (160 million individuals). The number of middle class households
in India by 2025-26 is expected to reach 113.8 million middle class, or 547
million people, an almost 3-fold growth from the current levels. As per the
study, households with annual income between Rs 3.4 lakh and Rs 17 lakh (at
2009-10 price levels) fall in the middleclass category. According to the report a
typical Indian middle class household spends about 50 per cent of the total
income on day to day expenses with the remaining is becoming savings. All
these prove the sustainability of the economy, presence of massive middle
class households with a sizable disposable income and savings and reveal that
there is enormous potential for India‘s real estate market.

Rajkumar (2014), The findings of the study by saying that the financial leverage
has got a negative relationship with financial performance of John Keells
Holdings plc Sri Lanka during the periods 2006 - 2012. But financial leverage
has significant impact on financial performance. Similarly, the findings support
the work of Higgins (1972) and McCabe (1979) who suggested that debt has a
negative influence o the amount of dividend paid. This is because firms with
higher fixed charges pay lower dividends in order to avoid the costs of external
finance. The employment of debt in the capital structure of the companies may
make a negative impact on the performance.

Reddy kumar & Reddy Sivarami (2013), Long term funds constitute the major
source of financing the investments in the Indian Real-Estate Industry. Owners‘
funds are more significant than the long term borrowed funds. Equity base of the
industry is enlarged primarily because of substantial retention of profits. The
improvement in the internally generated funds shows a move towards self-
reliance of the industry. Long term funds are adequate to finance the fixed assets
and also a major chunk of current assets. The interest of long term creditors is
well protected because the size of ownership funds is large enough and even if
the assets value decline by cent per cent, creditors need not worry. The industry
in spite of its efforts could not improve the profits to the desired level. The
increase in the degree of financial leverage has not favourably impacted either the
ROE or EPS of the industry.

Gupta Naresh, Gupta Himani (2014),The research concludes there is both

positive & negative relationship between capital structure and financial
performance. And also, capital structure has very high significant impact on
financial performance of the firms in case of Return on Capital Employed and
Return on Assets and capital structure has less significant impact on the financial
performance of the firms in case of Gross Profit Margin, Net Profit Margin and
Return on Equity. So, we conclude that whatever be the pattern of capital
structure the financial performance of the firms are changing due to other factors
in the firms or in the economy. So, the firms should concentrate on the pattern of
capital structure as well as on the other variables such as government policies,
competition between rivalries, expansion of business etc to earn profit and carry
on their business successfully.

Edison J.(2017).The study has considered sales of the real estate industry as real
estate sector investment and carried out a linear regression analysis by taking
GDP as dependant variable and sales of the real estate industry as dependable
variable. The results indicate a positive relationship between both the variables.
The financial analysis of Indian real estate industry reveals that: (i) the real estate
industry is yet to recover from recession; (ii) the profit generated during an
accounting period against the total income generated was continuously declining
during the recent years; (iii) operating profit is decreasing; (iv) returns on funds
provided by its equity shareholders have declined considerably; (v) profitability
as a ratio of capital employed is currently having a downward trend (vi) there is a
drastic fall in returns that the Indian real estate industry generates on the fixed
assets created by it; (vii) asset utilisation points out a trend of increase in
expenditure; and (viii) able to give only a bare minimum amount of returns.

Bhatia S. & Barwal N.(2015), the industry has a very high percentage of current
assets and major portion of these are parked in the inventories. The working
capital practices of the firms in the real estate sector are not very efficient as there
is a very heavy dependence on one component of current asset. The industry is
also in sentiment driven sector. When, economy is having positive outlook,
investment and sales increase leading to profitability. The profitability of the
company is related to the working capital of the company.

Rudin, Nurdin & Fattah( 2016), the research concluded that: 1) liquidity and
leverage simultaneously have significant effect on profitability of property and
real estate industry in Indonesian stock exchange within the period of 2005-2010,
2) liquidity partially has no significant effect on profitability of property and real
estate industry in Indonesian stock exchange within the period of 2005-2010, and
3) leverage partially has significant effect on profitability of property and real
estate industry in Indonesian stock exchange within the period of 2005-2010. The
paper suggests that: 1) company‘s management should be able to increase the
company‘s profitability by enhancing the cost efficiency, in production aspect,
sale, financial, and marketing aspects; 2) investors in property and real estate
companies should also analyze the liquidity ratio, leverage, and profitability ratio
as consideration in making decision of investment.

Firstpost (2016), Demonetisation: Strong foundation laid for real estate but price
correction could be limitedemphasise that we must understand the cash-economy
of real estate transactions, and, the demand-mechanism. There is a general
anticipation of the removal of 20-30 percent cashdealings from the transaction
process. It leads people to conclude that the prices would fall by 20-30 percent.
The reason for such expectations is the climbing down of prices coupled with at
least two other factors such as an eventual interest rate decline and the
consequent rise in demand. There could be more factors. But even if we account
for these, the anticipated price-decline of 20-30 percent will get cushioned. In the
final form, the price-correction may not be more that 5-8 percent, which is
evident already.

Indian CEO (2016), SWOT On Impact Of Demonetization On Real Estate

Industry state that the Indian Housing sector itself contributes to 5-6% of
country‘s GDP and this sector owing to its behaviour of huge cash dealings is
bound to face major challenges in near future. The sector which has always been
the prodigy of black money has suddenly closed its doors and refused to be
tainted further. This will bring about a correction in property prices. The step will
also eradicate land mafias and curtail price inflations.
 References

 A.T. Kearney, Global Retail Expansion: Keeps On Moving, Global

Retail Development Index 2012.

 Deutsche Bank Research (2006). Building up India: Outlook for India‘s

real estate markets, Germany. pp. 9-10.

 Deutsche Bank Research, Building up India: Outlook for India‘s real

estate markets, Germany, 2006.

 Grant Thornton India LLP and CII, Emerging trends in real estate-India

2012, a study presented at 8th International Conference on Real Estate,

New Delhi, 2012.

 Porter, Michael E., Competitive Strategy and Real Estate Development

Harvard Business School-remarks to the 1989 Harvard Business School

real estate symposium, 1989.

 Singh, Vandna and Komal, Prospects and problems of real estate in

India, International Research Journal of Finance and Economics, Issue

24, 2009, pp. 242-54.

 Chapter -3
An Overview of Real Estate Industry in India
 An Overview of Real Estate Industry in India
Real estate sector is one of the most globally recognized sectors. It comprises of
four sub sectors - housing, retail, hospitality, and commercial. The growth of this
sector is well complemented by the growth in the corporate environment and the
demand for office space as well as urban and semi-urban accommodations. The
construction industry ranks third among the 14 major sectors in terms of direct,
indirect and induced effects in all sectors of the economy.
It is also expected that this sector will incur more non-resident Indian (NRI)
investment, both in the short term and the long term. Bengaluru is expected to be
the most favoured property investment destination for NRIs, followed by
Ahmedabad, Pune, Chennai, Goa, Delhi and Dehradun.
Market Size
By 2040, real estate market will grow to Rs 65,000 crore (US$ 9.30 billion) from
Rs 12,000 crore (US$ 1.72 billion) in 2019. Real estate sector in India is expected
to reach a market size of US$ 1 trillion by 2030 from US$ 120 billion in 2017
and contribute 13 per cent to the country‘s GDP by 2025. Retail, hospitality, and
commercial real estate are also growing significantly, providing the much-needed
infrastructure for India's growing needs. Indian real estate increased by 19.5 per
cent CAGR from 2017 to 2028.
Office space has been driven mostly by growth in ITeS/IT, BFSI, consulting and
manufacturing sectors. During 2019, the office leasing space reached 60.6 msf
across eight major cities, registering a growth of 27 per cent y-o-y. In 2019,
office sector demand with commercial leasing activity reached 69.4 msf. Co-
working space across top seven cities increased to reach 12 sq ft by end of 2019.
Warehousing space is expected to reach 247 msf in 2020 and see investment
worth Rs 50,000 crore (US$ 7.76 billion) during 2018-20. Grade-A office space
absorption is expected to cross 700 msf by 2022, with Delhi-NCR contributing
the most to this demand.
Housing sales reached 2.61 lakh units in 2019 across seven major cities.
Investments/Developments
Indian real estate sector has witnessed high growth in the recent times with rise in
demand for office as well as residential spaces. Real estate attracted around Rs
43,780 crore (US$ 6.26 billion) in investment in 2019. The retail segment
attracted PE (Private Equity) investment of around US$ 1 billion in 2019.
Institutional investment in the sector stood at US$ 712 million during the quarter
ended March 2020. Real estate attracted around US$ 14 billion from foreign PE
between 2015 and Q32019.
Export from SEZs reached Rs 7.01 lakh crore (US$ 100.30 billion) in FY19 and
grew by almost 14.5 per cent to Rs 3.82 lakh crore (US$ 54.66 billion) in
H1FY20.
According to the data released by Department for Promotion of Industry and
Internal Trade Policy (DPIIT), construction is the fourth largest sector in terms of
FDI inflow. FDI in the sector (includes construction development and
construction activities) stood at US$ 42.50 billion from April 2000 to March
2020.
Some of the major investments and developments in this sector are as follows:

 In March 2020, the Government approved proposals from TCS and DLF
to set up SEZs for IT sector in Haryana and Uttar Pradesh.
 Blackstone crossed US$ 12 billion investment milestone in India.
 Puravankara Ltd, a realty firm, plans to invest around Rs 850 crore (US$
121.6 million) over the next four years to develop three ultra-luxury
residential projects in Bengaluru, Chennai and Mumbai.
 First REIT, which raised Rs 4,750 crore (US$ 679.64 million), was
launched in the early 2019 by global investment firm Blackstone and
realty firm Embassy group.
 In January 2020, RMZ Corp entered into a strategic and equal partnership
with Mitsui Fudosan (Asia) Pte Ltd to expand its business footprint.
 Housing sales reached 2.61 lakh units in 2019 across seven major cities.
  In September 2018, Embassy Office Parks announced that it would raise
around Rs 52 billion (US$ 775.66 million) through India‘s first Real
Estate Investment Trust (REIT) listing.

Government Initiatives
Government of India along with the governments of respective States has taken
several initiatives to encourage development in the sector. The Smart City
Project, with a plan to build 100 smart cities, is a prime opportunity for real estate
companies. Below are some of the other major Government initiatives:

 In order to revive around 1,600 stalled housing projects across top cities in
the country, the Union Cabinet has approved the setting up of Rs 25,000
crore (US$ 3.58 billion) alternative investment fund (AIF).
 Under Pradhan Mantri Awas Yojana (Urban) (PMAY (U)), 1.12 crore
houses have been sanctioned in urban areas, creating 1.20 crore jobs.
 Government has created an Affordable Housing Fund (AHF) in the
National Housing Bank (NHB) with an initial corpus of Rs 10,000 crore
(US$ 1.43 billion) using priority sector lending short fall of
banks/financial institutions for micro financing of the HFCs.
 On February 29, 2020, India formally approved 417 special economic
zones (SEZs), of which 238 were already in operation. Majority of the
SEZs are in the IT/ ITeS sector.

Road Ahead
The Securities and Exchange Board of India (SEBI) has given its approval for the
Real Estate Investment Trust (REIT) platform, which will allow all kind of
investors to invest in the Indian real estate market. It would create an opportunity
worth Rs 1.25 trillion (US$ 19.65 billion) in the Indian market in the coming
years. Responding to an increasingly well-informed consumer base and bearing
in mind the aspect of globalisation, Indian real estate developers have shifted
gears and accepted fresh challenges. The most marked change has been the shift
from family owned businesses to that of professionally managed ones. Real estate
developers, in meeting the growing need for managing multiple projects across
cities, are also investing in centralised processes to source material and organise
manpower and hiring qualified professionals in areas like project management,
architecture and engineering.
The growing flow of FDI in Indian real estate is encouraging increased
transparency. Developers, in order to attract funding, have revamped their
accounting and management systems to meet due diligence standards.
Real Estate Industry Background
The real estate industry is a big business generating billions of dollars in revenue
annually, and there are ample opportunities for entrepreneurs to turn a profit. Last
year there were approximately 210,000 companies operating in the residential
brokerage and management field, which generated $200 billion in revenue; there
were 35,000 companies operating in the commercial brokerage and management
field, generating $35 billion in revenue.
Real estate is a cyclical industry, reacting to macroeconomic trends such as
interest rates, population growth, and economic strength. Real estate soared in the
post-World War II economic boom of the 1950s, sank in the inflation-riddled
1970s, rose again in the early 1980s until the depression at the end of that decade,
and was prosperous again by the end of the century. Low interest rates in the mid-
2000s allowed residential real estate to boom even when the economy was slow -
until the mortgage crisis hit, and prices collapsed.
However, despite what is happening with the greater economy and real estate
prices in general, the real estate industry offers diverse opportunities for the
entrepreneur, including some hedges against these trends when they‘re moving in
the wrong direction!
The real estate industry consists of three primary fields: brokerages, leasing, and
management.
Real Estate Brokerage
Real estate brokers bring together buyers and sellers of property, assist in price
negotiations, and facilitate the work involved in deals from initial interest
expressed through money being exchanged at closing. Examples of services
provided include property appraisals and inspections. Generally, the seller of a
piece of property pays a commission based on a percentage of the sale price
(usually 5 or 6 percent). This commission is split between the buyer‘s broker and
the seller‘s broker.
Since commission is based on property value, brokers make more money for
higher-priced deals. The value of a real estate investment is determined by many
things - but location is key (―location, location, location‖ as they say!). Factors
controlling the value of a location include public transportation access, the quality
of the roads and schools, income levels and the strength and stability of the local
economy.
Real estate brokers must be licensed in the state in which they work, and while it
is estimated that there are over 1 million licensed brokers, most are either inactive
or consider brokerage activity as a secondary line of work.
Leasing Agents and Management Companies
Leasing agents work with property owners to handle the complexity involved with
finding, vetting and signing tenants for their properties - and handling all the
paperwork!
Management companies operate buildings and other properties, making sure they
are running properly, paying utilities, hiring staff and performing maintenance.
Many management companies will also act as leasing agents for the property.
Since most property expenses are fixed, maintaining low vacancy rates is critical
to management companies profitability.
State of the Real Estate Industry in 2018
The real estate industry is divided into residential and commercial real estate
services, although some brokerages and management companies engage in both.
Both the residential commercial segments are quite fragmented. In each, the fifty
largest companies make up about thirty percent of the industry's total revenue.
Real Estate Industry Risks
Before considering an investment in any industry, it‘s best to be aware of the
risks. In the real estate industry these include (but of course are not limited to!) the
following:
  Macroeconomic factors beyond the control of the business owner, such as
downturns in the local or national economy
 Changing demand - a location once coveted can change quickly and
properties can become less desirable. Of course, the reverse is also true -
skilled selection of properties can reap profits in up and coming areas.
 Increased supply - building of new properties, and/or newly for sale
properties in the area can drive rental or property prices down as well.
 Changing priorities or requirements for building management
companies, particularly for aging properties. For instance, indoor air quality
liability can be a serious legal issue, as can required removal of mold growth.
Real Estate Industry Opportunity
More than ninety percent of people use the internet before purchasing real estate,
and brokers have embraced online marketing with pictures of properties and
virtual tours in order to prime their potential customers. Better educated
purchasers, while potentially more discerning, can also speed up the sales cycle by
knowing what they want and need.
While there are fears that this will eventually eliminate the need for brokers all
together, it‘s unlikely to happen anytime soon. There is an expertise and skill to
correctly marketing and showing a property - and it takes a lot of time. Property
owners, particularly homeowners, cannot dedicate the time to sell a home on their
own, even with online tools smoothing out the process.
Budget 2019 fails to address real estate sector's most pressing
concerns
Union Budget 2019-20 has evoked mixed reactions from the real estate sector,
with the push for affordable housing and infrastructure, along with the promotion
of rental housing, being lauded. However, builders and developers are miffed that
the Budget failed to address long-standing expectations regarding industry status
for the sector, single-window clearance and reforms in the Goods and Services
Tax (GST).
ANAROCK Property Consultants Chairman Anuj Puri said, "As far as real estate
is concerned, the Budget had a few hits and several misses." Puri said that from
the real estate perspective, the Budget did not meet many expectations, as it
failed to address the sector's most pressing concerns. He added that the sector
might not see consumers and investors return to the market in sufficient numbers,
barring in affordable housing. "The all-important 'industry status' remained
elusive, taxes were not sufficiently moderated and land reforms were not
mentioned at all."
Affordable housing push lauded, but glitches remain
While presenting her maiden Budget, Finance Minister Nirmala Sitharaman on
Friday raised the tax deduction limit to Rs 3.5 lakh on the interest paid on home
loans sanctioned during this financial year for the purchase of the first home
worth up to Rs 45 lakh. Stating that the interest paid on housing loans was
currently allowed as a deduction to the extent of Rs 2 lakh, the finance minister
said, "In order to provide a further impetus, I propose to allow an additional
deduction of up to Rs 1.5 lakh for interest paid on loans borrowed up to March
31, 2020, for purchase of an affordable house valued up to Rs 45 lakh."
Sitharaman also announced that under the Pradhan Mantri Awas Yojana-Gramin
(PMAY-G), 19.5 million homes would be provided to eligible beneficiaries till
2021-22. These houses would have amenities such as electricity, LPG
connections and toilets.
Housing.com, Makaan.com and PropTiger.com Group CEO Dhruv Agarwala
said that the standout announcement in Budget 2019 was the additional deduction
of Rs 1.5 lakh for those seeking home loans for affordable housing projects.
"This boost on the demand side was clearly needed, considering that many home
buyers have turned fence-sitters, awaiting such tax sops or a correction in prices.
On the supply side, over 8.1 million houses have been sanctioned, out of which
construction has been completed for 2.6 million houses under the PMAY Urban
scheme. This, too, shall continue to boost the market for affordable homes," he
added. Welcoming the move, Wealth Clinic CMD Amit Raheja said, "Additional
deduction of Rs 1.5 lakh on interest on loans will boost the buyers' sentiment."
Some industry players, however, have criticised the Rs 45-lakh cap on the value
of affordable houses eligible for the tax sop. ABA Corp Director and CREDAI
Western UP President (Elect) Amit Modi said that while the sector appreciates
that the Budget has emphasised on affordable housing and PMAY, at the same
time, the government has missed the bus when it comes to millions and millions
of first-time middle-class buyers who were looking forward to this Budget before
their first real estate purchase. "Even a small 1-2 BHK apartment in Tier-1 Metro
cities such as Delhi, Mumbai and Bengaluru will cost Rs 50 lakh and upwards.
These urban buyers, who were looking for ease of living in cities, have been
completely ignored in the process," he added.
ANAROCK's Puri said that the Rs 45-lakh budget bracket for properties that get
an additional Rs 1.5 lakh income tax deduction is also ineffectual for urban
homebuyers in the main cities. "The prevailing high property prices within the
municipal limits of the major cities prevent builders from launching affordable
housing projects there, while lack of basic infrastructure facilities in the
peripheral areas – where housing within Rs 45 lakh could be developed –
discourage buyers," he explained.
Bhutani Infra CEO Ashish Bhutani said that Budget 2019-20 continued the
government's consistent approach towards affordable housing. "However, with
the Budget only catering to low-cost housing, the middle-class housing segment
has been completely ignored,"
Infra, rental housing push and HFC regulation hit the spot
Agarwala said that initiatives such as improving roads, suburban railways and
metro connectivity, creating a robust water management system, working on the
'Ease of Living' and investing Rs 100 trillion in infrastructure over the next five
years would create more liveable cities and encourage people to invest in projects
even in peripheral areas, and not overcrowd the central and secondary business
districts.
ANAROCK's Puri said that a major boost has been given to infrastructure
development with regard to all forms of physical connectivity and through the
government's planned investment in the sector over the next five years. This
would significantly benefit the real estate sector and particularly increase the
demand for logistics and warehousing. "However, the actual benefit will depend
on its on-ground implementation," he added.
In her Budget speech, Sitharaman had said that several reform measures would
be initiated to promote rental housing. "Current rental laws are archaic, as they do
not address the relationship between the lessor and the lessee realistically and
fairly. A model tenancy law will also be finalised and circulated to the states,"
she added.
Regarding land parcels held by public sector units, Sitharaman said that large
public infrastructure and affordable housing projects could be developed there.
Gaurs Group MD and CREDAI Affordable Housing Committee Chairman,
Manoj Gaur, said that Budget 2019-20 has been heartening, where Confederation
of Real Estate Developers Association of India's (CREDAI's) long-standing
proposals to reform archaic rental laws and promote public housing on
government land have been among the immediate policy agendas outlined by the
finance minister.
In the Budget, the government also took away the powers of the National
Housing Bank (NHB) to regulate housing finance companies (HFCs) and handed
them over to the Reserve Bank of India (RBI). Experts have said that this would
ensure that there is greater parity in regulations for HFCs and NBFCs. Further,
this enables the RBI to directly give liquidity support to the HFC sector.
Gaur said that with the regulation of housing finance companies returned to the
RBI from the NHB, the sector hopes that the central bank would bring about
much-needed reforms for financing the real estate sector, like giving priority
sector status to housing finance and lowering the cost of funding. "HFCs coming
under RBI will also help in streamlining the financial situation," added Gulshan
Homz Director Deepak Kapoor.
Major misses on liquidity, GST and regulatory fronts
ABA Corp's Modi said that the legitimate sector concerns, including industry
status for the real estate sector and online single-window clearance, have been
missed out in this Budget. "We feel that these steps would have made a huge
difference in transparency and turnaround time in delivery of housing to the
masses across the country, while contributing towards the goal of 'Housing for
All' by 2022," he added. Concurring, Sushma Group Executive Director Prateek
Mittal said, "As a developer, we had certain expectations from the government
for this Budget that have not been fulfilled, which includes our demand for
industry status, single-window clearance and reinstatement of input tax credit
(ITC) in GST."
Industry status for the sector has been a long-standing demand. While the
government accorded industry status to the affordable housing segment in 2017,
builders and developers feel it should be extended to the entire sector. Experts
say that not having industry status has made it difficult for the real estate sector to
avail of legitimate finances from banks and other financial institutions.
Single-window clearance for projects is another long-standing demand, which the
sector expects the government to address. In a pre-Budget Business Standard
copy, ABA Corp's Modi had said that given the multiple permissions and
approvals that developers have to secure and the lack of single-window clearance
at present, it can take anywhere from 18 to 36 months before beginning any
project.
Further, in February 2019, the GST Council lowered tax on under-construction
properties to five per cent from 18 per cent, and affordable housing projects to
one per cent from eight per cent, with effect from April 1. This rate cut, in effect,
did away with the ITC or refund given to builders on taxes paid on inputs.
ANAROCK's Puri said that without ITC benefits, builders suffer a major cut in
their profit margins. "Not only are the consequent losses offset by higher prices
to buyers, but they also result in a curtailed supply pipeline, which does not bode
well for amenable pricing going forward," he explained.
The real estate sector was also hopeful that the government would resolve the
liquidity crisis it is facing. In September last year, the crisis became apparent
after infrastructure lending major IL&FS defaulted on a few of its commercial
papers, which impacted several segments, including the real estate business.
Puri said that to revive the ailing real estate sector and ease the liquidity crisis,
the government has to revive investor sentiment. "However, Budget 2019-20
failed to announce sufficient key initiatives and measures to bring investors back
to the real estate market and thereby help pump some badly-needed liquidity into
the system.
Residential Real Estate: Affordable Housing Plays Pied Piper
The fallout of RERA and GST was still very visible in 2018, but the dust began
to settle. With developers and brokers accepting the new market realities and
beginning to fall in line, the residential sector began to regain visibility and
viability. Transparency and accountability – never the defining characteristics of
Indian real estate – became the 'new normal' this year, and the market reacted
positively. 81% respondents in ANAROCK‘s Consumer Survey, which covers
both resident and non-resident Indians (NRIs), believe that Indian real estate has
become more credible and efficient.
Even though sales and new supply picked up q-o-q across the top cities, the issue
of stalled projects showed few signs of resolution in 2018. However, a number of
landmark court judgments strongly indicated that the Indian legal system is
awake and aware of the problem. 2018 was a year where consumers, previously
held hostage by lack of efficient regulation, finally felt that they are being heard
and represented. As is always the case, the process of resolving a problem starts
with acknowledging that a problem exists.
Average property prices remained largely static across the top 7 cities in 2018. In
fact, average property prices at the pan-India level saw only 1% increase in 2018
as against the previous year, from INR 5,491 per sq. ft. in 2017 to INR 5,545 per
sq. ft. in 2018.
At a city-level too, average property prices hovered mostly around the same
levels in 2018 versus last year. Q-o-q trends also suggest that there was no
headwind change across cities – remaining well within 3%.
 Source: ANAROCK Research 2018
Affordable housing, backed by a series of government sops during 2018, kept the
residential supply momentum ticking. In sharp contrast to earlier years where the
‗affordable‘ tag was considered down-market and avoidable, 2018 saw almost
every real estate developer – regardless of market footprint and previous category
orientations – eager to take a bite out of the affordable housing pie.
As per ANAROCK data, the new launch supply across top 7 cities is estimated to
be 1,93,600 units by the end of 2018 – at 1,46,850 units in 2017, this is
an increase of 32% over the previous year despite all headwinds.
 Affordable housing accounted for the lion‘s share of this supply with
over 41% of the new supply coming into this category.
 Housing sales in 2018 are estimated to be 2,45,500 units if we consider Q4 sales
to match those of the preceding quarter – at 2,11,140 units in 2017, this is an
annual increase of 16%.
 Unsold housing stock stood at 6.87 lakh units in Q3 2018. Considering that
unsold housing stood at 7,44,000 units in Q3 2017, the decline is a modest 8%
over the previous year.
 Ready-to-move-in properties garnered maximum buyer interest, with
ANAROCK‘s Consumer Survey indicating that 49% property seekers are intent
on buying RTM homes

This year presents unique challenges for India‘s residential market. The implied
real GDP growth of 5 per cent for FY 2019-20 in the second advance estimates of
the National Statistics Office, is now at risk from the pandemic‘s impact on the
economy. The government has introduced several short-term relief measures to
uplift the Indian economy from the immediate impact of the lockdown.
In India, the impact of the ongoing pandemic on business activities became more
prominent since the beginning of March 2020. Even though new project launches
came to a standstill in March, Q1 2020 witnessed a rise of 3% in new launches as
compared to the same period last year. The homebuyer community deferred their
purchase decisions in light of the impending crises, which led to sales dipping by
nearly 30% in Q1 2020 on a y-o-y basis.
Launches and sales trends

Note: Top 7 cities include Delhi NCR, Mumbai, Bengaluru, Chennai, Hyderabad,
Pune and Kolkata. Mumbai includes Mumbai city, Mumbai suburbs, Thane city
and Navi Mumbai. Source: Real Estate Intelligence Service (REIS), JLL
Research

The recovery in the market will hinge primarily on the intensity, spread and
duration of the outbreak in our country. If the current lockdown is not extended
significantly, sales are expected to gain traction towards the end of 2020, with the
onset of the festive season.
 References

 Census 2011, Government of India; Urban scenario, Ministry of Urban

Development Website, http://moud.gov.in/urbanscenario, accessed 2 April

2014; KPMG in India analysis).

 Census 2011 Government of India

 The Changing Face of Commercial Offices in India, Jones Land Lasalle,

September 2011.

 CRISIL Research: CRISIL CRB February 2013.

 ―India Mall Stock and Supply Trends‖ December 2013‖, Jones Lasalle

Blog, 30 December 2013, ―Top seven metros account for over 70 per cent

of India‘s total retail stock‖.

 Report of the Technical Urban Group (TG-12) on Urban Housing

Shortage 2012-17, Ministry of Housing and Urban Poverty Alleviation,

September 2012.

 National Real Estate Development Council (NAREDCO), 11th National

Convention on ―Sustainable Housing for Masses‖ on 7 – 8 December

2012.

 Kerala State Housing Policy 2011, Department of Housing Government of

Kerala, 2011.
 Chapter -4
Impact of Financial Crises on Indian Real Estate
 Impact of Financial Crises on Indian Real Estate

A sudden ban on the existing Rs. 500 and Rs. 1000 currency notes shook the
Indian economy and real estate sector which was evident after the third quarter of
the financial year 2016-17. The announcement of demonetization and
implementation of the Benami Properties Act for unregulated properties took
place in the same year. Economists predicted the growth rate of the real estate
sector to slow down more than ever as a result. The sector has been ridden with
many challenges for the past few decades owing to lack of a uniform framework.
Demonetization brought about many challenges but also alleviated some of these
issues. For instance, the industry was predicted to face losses of up to Rs. 1
billion during the year, but the demand has been surprisingly steady due to many
factors. This article is an attempt to review some of the benefits and challenges
faced by India‘s real estate sector due to demonetization.
It will not be wrong to say that the Real Estate Sector of our country has seen a
lot of developments in a short span of time. While demonetization did stump the
sector for a while, The Real Estate (Regulation and Development) Act, 2016
(RERA) & Goods and Services Tax (GST) soon gave it the strength to be
functional in an efficient way. Highlighting the three biggest initiatives,
Demonetization, RERA & GST together are stimulating the existing uncertainty
in the market. It is ensuring transparency, efficiency, promote growth of buyer‘s
confidence and boosting investments in the real estate industry.
Demonetisation was a difficult move for many to deal with. However, it has
greatly contributed in the standardisation of the pricing in the sector. There is so
much transparency now. From a developer standpoint it has immensely helped us
in sourcing funding from the banks and we are assured that the source of our
funding is genuine. Many people out there believe that demonetisation had an
adverse effect on sales, but that‘s not true. It was the negative sentiment that due
to demonetisation the property costs will go down and that‘s exactly what the
people kept waiting for instead of investing. Beyond this it has also helped in
creating a cleaner image for Real Estate.
Last year on 8th November, 2016, demonetization was introduced and demonized
for bringing a prolonged slowdown in the real estate sector. True motive of
demonetization coupled with GST and RERA was to weed out these
malpractices. However, initially monetization gave a detrimental ripple effect.
The demonetization speculation around real estate has moved on to RERA
regulation and the effects are substantial. As real estate sector reflects realism
after the initial turbulence of demonetization, it is serving as a great opportunity
for investors and will benefit the overall economy.
Sales in real estate have been tepid in the recent past as compared to previous
years. The sentiment that immediately followed demonetization resulted in even
bullish buyers sitting on the fence. Demonetization was to impact primary market
sales via bank financing the least, and give larger impact on secondary market
transactions and land deals.
Demonetization was expected to impact primary market sales, but had a larger
impact on secondary market transactions, luxury segment and land deals. The
beginning of 2017 saw buyer sentiment improve with encouraging budgetary
reforms.
We have come a long way and this ripple effect has started to fade with time. It
has been exactly a year, 8th Nov, 2017 marks the first anniversary of
demonetization. The realty-preneurs who followed the best practices have
gradually benefitedfrom the policies. According to world bank report, India‘s
rank on the ‗ease of doing business‘ scale has risen from 130 to 100 this year,
boosted by a slew of reforms including demonetization, RERA and GST.
The debacle of one of the largest NBFCs in the country which surfaced in
September 2018 after a few consecutive defaults in repayments of maturing
commercial paper with corpus under Rs 500 crore, way smaller than the entire
debt portfolio of $12 billion, shook the entire Indian capital markets. The prime
reason behind default being cost overrun due to delays in various long-term infra
projects funded by the NBFC eventually resulting in defaulted repayments of
even short-term money market instruments like commercial papers majorly
invested by banks, insurance companies and mutual funds. This is a classic case
of Asset Liability Mismatch which in case of NBFC like IL&FS happened
because of the nature of projects, i.e. capital intensive and prone to cost
escalations due to market cycles, cumbersome approvals etc which started getting
funded by liquid instruments like commercial papers due to their cost of
borrowing being lower than term loans from banks. This resulted in aggressive
borrowing using short-term finance and lending it to long-term infra projects.
On the back of the above event as well as rising NPAs in the banking sector
itself, it became difficult for IL&FS to refinance its maturing CPs as banks and
other investors became risk averse to the same and redemptions across the sector
increased due to this escalating risk aversion. Because of the high redemptions of
CPs by the investor and limited reinvestment by the banks, the NBFC‘s overall
started facing liquidity crunch. This was seen amongst NBFCs‘ funding
consumption items too, including consumer durables, gold-loans, autos including
two wheeler loans and retail home loans or loan against property etc. Although
these NBFCs have a better asset quality as these loans are based on amortisation
repayment structure and have a diversified retail level portfolio, however, the
sources of funds got limited from NBFCs primary investors like banks and
debentures (almost 85% of financer for NBFC as per as FY2018).
NBFCs depend upon the wholesale lending for their capital requirements since
they cannot raise retail deposits from the general public. NBFCs‘ book grew 14
per cent CAGR over FY13-18. They moved from 21 per cent of bank credit in
FY10 to 34 per cent now. As per as June 2018 report, ICRA estimated that retail-
focused NBFCs – with an estimated portfolio size of Rs 7.5 lakh crore – would
need Rs 3.8-4 lakh crore of fresh debt funding in FY2019 to support their
envisaged portfolio growth of about 20 per cent in FY2019. That math has gone
for a toss now. In fact, as per as the report, about 50 per cent (NCDs-CPs) of
NBFC borrowings are largely at a fixed rate, while ~35% of bank borrowings get
repriced on a quarterly or annual basis. With the scarcity of refinance available
for NBFC the overall cost of borrowing shot up as high as 150BPS in a matter of
just one quarter i.e. Q3FY2019.
The NBFC crisis has been a tip of the iceberg of the ongoing headwinds faced by
the real estate industry with receivables cycles getting stretched unreasonably
causing developers to face the escalated heat of liquidity crisis on one side and
managing delivery pressure under RERA on another side. In addition to already
slowed sales momentum due to drastic steps taken by the government like
demonetisation and implementation of GST at exorbitant rates impacting the
affordability causing a dip in sales. In fact, as per recent reports from the IPC,
MMR region experienced 7% drop in prices with inventory overhang hitting low
of 2 years standing at 2.2 lakh units UNSOLD (down mere 3% Yoyo) with
~60,000 units launched in 2018 ironically of which 40% was in the affordable
housing segment of Rs 50 lakh & less.
The main reason which has initiated this liquidity crunch is mismanagement by
NBFCs, where they have been funding long-term asset with short-term
borrowings. This has severely impacted developers because NBFCs and HFCs
changed their asset portfolio mix with a higher share of long-term lending to
builders against projects whereas the sources of fund remained short-term
instruments largely. This portfolio shift from higher mix of retail home loans
earlier as assets to higher construction finance to developers has resulted into a
situation where NBFCs are not disbursing even loans which are smaller than Rs
20 – 30 lakh despite of sanctions received by the buyers for a home loan. Also, in
some cases where there have been part disbursements, NBFCs are
holding/delaying the disbursements.
This leads the home buyer and developer in a status quo situation as the transfer
from NBFCs to banks takes easily 2-3 months. Also banks have a stringent
framework when it comes to eligibility discarding a handful of cases leaving
developers with cancellations. The sudden changes in business environment
would result in customer defaulting on their dues raised by the developers and in
turn the developer will face a liquidity crunch as he has to continue doing the
construction on site.
Historically, Indian elections have always led to a slowed momentum of
investments in asset classes like real estate or equity markets. This pattern is
prominent especially in our country due to the fact that India has diverse political
parties and formation of a Central government with a thumping majority or with
various alliances causes an alignment or disaccord respectively in functioning
and implementation of progressive policies, causing investors as well as buyers to
take an overall cautious stand.
Considering the outcome of state elections in MP, Rajasthan, Chhattisgarh,
Telangana, and Mizoram, the 2019 election is hinting towards an unstable
alliance. Thus, cautiousness has increased all the more among investors and
buyers. Definitely, 1HCY2019 looks slow and lacklustre for real estate markets
with some revival expected may be in the last quarter.
In conclusion, it‘s a framework failure which was implemented on NBFCs &
HFCs, allowing them as high as 40% of borrowing from money market
instruments with maturity as short as quarterly to max annual with a dynamic
repricing. With the recent rate cut of 25 bps by the RBI and further expected rate
cuts to induce liquidity as the inflation is already in check, banks should start
lending again to NBFCs as the assets are inherently strong for these NBFCs with
diversified retail consumers and some tax-efficient investment vehicles should be
devised by the RBI to increase the share of source of fund to long-term
borrowings from the currently high short-term instruments.
Elimination of unsecured cash transactions
Post demonetization, there has been an increased transparency in the purchase
and payment system of property. The paper or market value of most properties in
India until recently was very less as compared to the cash or ‗black‘ value. Since
cash transactions were unregulated and unrecorded, it was almost impossible for
the government to levy taxes on them. Real estate had become a heaven for
people to park their unaccounted cash. However, a shift towards the cashless
economy has brought transparency in the valuation system as people could no
longer buy property using cash. Property prices which were skyrocketing earlier
stabilized considerably. Moreover, it enabled the government to detect frauds
more easily because it now kept a track of extremely large cashless transactions.
All these factors led to a boost in consumer confidence after the initial shock
subsided (Rathore, 2016).
Low home loan interests due to demonetization
The immediate effect of demonetization was increase in cash deposits in banks.
Banks which earlier encouraged customers to invest in deposit accounts suddenly
found themselves in a huge influx. The next problem was to dispense the cash
through various instruments. To encourage loans, the apex bank RBI to cut the
interest rate on home loans to attract masses towards real estate investment. This
resulted in increased demand for real estate in India. Also the lower interest rate
scheme benefited property builders in resuming their projects which were
discontinued due to lack of funds. One of the segments which benefited most
from the demonetization drive is the affordable housing segment. Affordable
housing came with lower EMIs due to various subsidies and became even
cheaper after demonetization (Pai, 2016).
Improved stock market performance and FDI
The Indian real estate sector attracted all time high foreign investment of US $
5.7 billion in 2016, despite demonetization (The Economic Times, 2017). Also
the performance of real estate firms on the stock market Bombay Stock Exchange
(BSE) improved by 50% during 2016-17, dispelling fears of ill effects of
demonetization. The country is on track to becoming the fourth largest economy
in the world with a growth rate of 7.5% by the end of 2022. A further increase in
private equity from foreign and local investors and other institutional investments
in the sector are certainly going to push for more transactions. The outlook for
the real estate sector is thus positive.
Slow purchases due to contraction in cash
Post demonetization there was a severe unanticipated cash crunch in the economy
and liquid cash became dearer. The demonetized currency constituted a total of
85% of the total money circulated in India at the time of demonetization. As
people were forced to deposit these notes in their bank accounts all cash was
flushed out of the system. This restricted the number of transactions they could
perform in cash, hence purchase of property slowed down. Purchase of new
property fell by up to 40% in major cities, while new project announcements fell
by 11% immediately after demonetization (Pai, 2016). However the effect lasted
only for a short while as buyers only deferred their purchase decision and not
discard it.
Slow down in construction work
The liquidity crunch hit real estate from all sides, even the supply. Construction
firms which dealt in cash until then suddenly found themselves unable to meet
their operational expenses like wages and raw materials. Wages were until then
paid only in cash as most construction workers did not have a bank account. The
reform removed cash entirely form the system, therefore constructors also could
not meet their expenses (Radhakrishnan, Selvan, & Senthil Kumar, 2017). Also
they were reluctant to borrow money due to uncertainty in the market.
Consequently, most of the under-constructions projects came to a standstill.
Metros such as Delhi, Mumbai and Chennai were the worst affected after
demonetization.
Low rental yield
Demonetization also left a huge impact on rental yields in India (Akhtar, 2017).
The figure below clearly depicts the fall in rental yield in three popular cities of
India post demonetization. This is because of the fall in prices of properties in
general and the effect lasted only a few months.
Rental yields in 3 major cities of India post demonetization (Source: Akhtar,
2017)
Current scenario of launched and absorption of India’s real estate sector
As discussed, demonetization impacted the real estate sector negatively only in
the short run. During the first quarter of FY 2017-18, demand picked up again,
resulting in reduction of unsold inventories (Tandon, 2015). This is exhibited in
the table below:
New Unit Wt. Avg Price Unsold Stock
Launches Absorbed (Unsold Units) (Units)

Q1 2017-18 22,897 28,131 6,185 471,855

Q4 2016-17 28,428 28,472 6,290 487,043

Demand and supply of real estate in India for FY 2016-17 and 2017-18 (Source:
Tandon, 2015).
Let's focus on the impact on the various aspects:
With demonetisation, the real estate sector witnessed a disruption of sorts
especially because real estate sector happens to be one of the most sentiment-
driven business too. Given that the sector's contribution towards the GDP is
considerable, the industry couldn't afford the uncertainty for long. Within the
industry, stakeholders will agree that 2017 did see a consolidation within the
industry with multiple developers combining forces to sustain through RERA
implementation. This year, the focus was on fewer launches as the Real Estate
Law did not allow anyone the luxury of shared mind space for multiple projects
at a time. The focus was on the buyer and his needs and to provide that, the
industry had to go through a clean-up. After all this, sales were slow but we are
expecting a sustained pickup after the third quarter. It is the most crucial time for
industry where survivor will be winner in the long run. The foundation for future
growth has been setup and the economics has started falling into place.
Primary market
Ready-to-move-in and new projects dominate this segment and this market didn't
have much to lose given the way it operates. It caters to end-users who depend on
banks or financial institutions. Therefore, if loans were to be provided by the
banks, the investor or end-user is not affected and hence transactions did not take
as bad a hit. Nevertheless, sentiments did take a blow and the effect of this would
seep through for the next two quarters or three.
Secondary market
Primarily consisting of resale units, this segment took a big hit given the nature
of transactions which involved a huge cash component. The extra cash vanished
overnight and those looking at homes for an investment purpose, lost their
appetite for the same. Scarcity of cash and the uncertainty about the future of
paper currency too led to potential buyers opting for a step back just to wait and
watch. A few who could afford the volume of cash component through legal and
valid channels could however sail through. On the whole, such home buyers too
waited for prices to correct and the market to settle.
Luxury homes
Large amounts of cash is involved in this segment, too. With affordable homes
being the cry of the common man and with demonetisation trying to make the
market a level-playing field, luxury homes too suffered a hit. But the silver lining
was that such properties would have to bank on lower capital values, a difficult
but only way to sustain their survival. For the buyer, this meant having a wider
bandwidth to choose from.
The other giants
The Real Estate Law, the Goods and Services Tax (GST) and the Union Budget
2017, too, slowed down the market for a while. With the Law around,
homebuyers felt they should wait for some clarity and a certain price cut.
However, delays in operations and setup of state regulators led to the market
thinking positive but acting stable.
The GST has been hailed as a tax reform but as with all policies and reforms, it
takes time to settle the unsettled market. The impact of GST was studied by
experts, discussed and debated across platforms until all stakeholders understood
how it was to impact the market and respective businesses. In short, this too led
to a delay in real estate's recovery. Going forward however, GST will drive GDP
growth and, in turn, boost demand for homes. In fact, there is little doubt that the
GST rollout will prove a shot in the arm for the country´s economy in the
medium to long term.
With Budget 2017, those aspiring for a second home changed their mind. The
government had capped the tax benefits on purchase of second homes and the
maximum deduction on interest was be capped at Rs 2 lakh as against the entire
interest that was previously, tax-free. The losses however could be carried
forward in the next 8 years. But those who planned on a second home at this
juncture understood, they would be in for a loss given that interest on loan and
rental income would both be taxable. All of the above together did slow down the
sales and revenue for businesses.
Area and property wise impact
Small cities such as Surat, Indore, Jaipur where businesses dominate and business
families are the ones buying homes saw a sharper impact of demonetisation.
Land parcels in off-municipality areas could also see price correction in the
medium to long run. Also, areas where supply was way higher than the demand
could meet some price cuts given all other economic and sentimental
determinants remain stable.
Impact on home loans
From the previous 8.9 per cent to eight per centc, the country's largest bank, State
Bank of India (SBI), on January 1 announced a reduction of 90 basis points in its
marginal cost-based lending rates (MCLR) for one-year tenure. MCLR is the
benchmark lending rate at which banks price their loans. The new lending
benchmark came into effect from April 1, 2016, and has replaced the base rate
system. Similarly, Punjab National Bank (PNB), Union Bank of India, ICICI
Bank, IDBI Bank lowered their lending rates. This meant more spending capacity
for a home buyer.
Impact on NRIs
Indians residing abroad have not kept away from Indian real estate.
Demonetisation did send out panic waves but because Indian currency means
nothing to such folks abroad, sentiments were hardly hit. However, it may not be
wrong to say that the hope of a better, price-corrected market may have kept
them holding on for a while longer before they purchased.
Impact on developers
The long and short of has already been studied. With RERA being announced in
2016, demonetisation was a lesson in making this class of stakeholders stronger
and quicker to adapt to change. In fact, in the months that followed, many
policies, amendments and reforms, although difficult for developers were taken
up stoically- be it GST, implications of RERA and benami transactions or also of
insolvency and bankruptcy proceedings. In months to follow after
demonetisation, only genuine developers held on to the market. Multiple reforms
made it difficult for the ingenuine ones to survive.
What will matter in days to come?
Credibility of the developer and his firm and the affordability factor is what will
be most talked about and sought after. As businesses wrap up or reinvent, we
understand that post demonetisation, the sector has stood the test of time,
emerging stronger and sturdier.
COVID-19: Impact on Real Estate Industry In India
The year of 2020 brought the world to a screeching halt as the COVID 19
pandemic unsettled various verticals of the world. The businesses are struck hard,
the markets have seen a record low and COVID-19 has also disrupted the real
estate sector, which was on a growth trajectory since the last few years. The
major industry contributing to national economy stalled as almost 1.3 billion
people went under quarantine since 21st march 2020.
As per ANANROCK H1 2020 PAN India Residential Market report - Q2 2020
was the most impacted quarter with launches being the lowest since 2013. During
this quarter, the new launch supply declined by 97% over Q1 2020 and 98% over
the same period last year.
Both the residential and commercial real estate sectors are hit in terms of launch,
sale and purchase. The lack of materials and labours have made the whole
process slow and unpredictable. Although the investors and builders have braced
themselves for the delays, the recovery of the real estate sector has been pushed
farther away!
The bounce-back of Real estate sector majorly depends upon the labours. And the
situation of labours is not looking very promising!
The effects of this pandemic can be divide into three parts – the situations of
labour, the current status of the market and the road of recovery ahead.
As soon as the lockdown was announced, the labours and lower segment families
started facing a financial crisis. The people with daily wages also came face to
face with their worst nightmare and had a hard time sustaining the living here.
Most of the workforce migrated to their home towns, and the ones stuck here did
not have any source of income.
Talking about the situations of labour, we can say that they are in a catch 22 – a
vicious circle wherein the symbiotic relationship is disrupted by the lack of either
of two. In this case, the labours do not have any work as the construction material
is not available as per the requirements, and if there is sufficient availability of
the raw materials, many of builders have paused the work.
According to the expert property consultants ANAROCK 4.7 lakh, residential
units planned to complete in 2020 may face hurdles due to migrant workers
heading home and the chains of the raw material disrupted.
In these times of crisis, companies took it upon themselves to make the survival
of the labours easy. The labours, site workers and other human resources at
construction sites were provided basic health kits, dry rations, a shelter to live
and financial backing.
Although the nationwide lockdown imposed in March 2020 severely impacted
the new launch activity in Q2 2020, labour shortage will not alter the work at
projects as a major component of workers decided to stay back and continue
working. Hence, there won‘t be any foreseeable delays in deliveries.
However, the situations seem to be improving. The work is gearing back and the
Real Estate sectors, both commercial and residential, is setting up for a great
start. The supply of construction materials have started, and the manpower is also
coming back to the site.
With the hope that the fiscal year second half brings good news to the Real-estate
developers, the companies are making amendments in their ways of working.
Companies have also reformed their ways and has worked like a Trojan to align
with all the current technological means to improve customer interaction and
communication. Even though RE sales is highly dependent on physical site
inspections, Customers are now interested in virtual site visits and are opting for
online payments.
According to a futuristic perspective, the builders and developers are now
looking forward to the government schemes, subsidies, relaxation on loans and
interest rates. However, the experts predict that financially strong and organized
players are likely to occupy 75%-80% market share in the coming years.
With builders pulling all levers to stay ahead in the game, going digital is the way
forward as developers with end-to-end digital solutions performed noticeably
better in the lockdown as well.
However, it‘s not all gloomy and dark in the corona-age, there are also a few
learnings that the real estate developers have taken with them. Let‘s start by
saying that it‘s always a good idea to innovate with time and rectify any inherent
flaws. Also, it is vital to adapt to technology to deliver the best to the customer.
 References

 Akhtar, F. (2017). Future of PE investments in real estate.

 Pai, S. (2016). Demonetisation and its impact on real estate.

 Radhakrishnan, S., Selvan, K. G., & Senthil Kumar, S. (2017). Impact of

Demonetisation on Construction Industry. SSRG International Journal of

Economics and Management Studies, 24–27.

 Rathore, D. S. (2016). Anticipated impact of demonetisation on rental real

estate market.

 Tandon, S. (2015). Unsold property in NCR at five-year high – The

Financial Express.

 The Economic Times. (2017, March 1). 6 Major trends in Indian Real Estate

in 2016. The Economic Times.

 Chapter -5
Data Analysis and Interpretation
 Data Analysis and Interpretation
Real Estate Industry Analysis
In order to carry out ratio analysis of firms under study current ratio, quick
ratio, debt to equity ratio and return on assets are applied. Analytical tools used
for the industry analysis are financial ratios of the real estate industry
pertaining to margins on income, returns on investments and efficiency ratios
were analysed. Following financial ratios are applied for the real estate
industry analysis.
Margins on income on total income
i. PBDITA as percentage of total income
ii. PBT as percentage of total income
iii. PAT as percentage of total income
iv. Cash profit as percentage of total income
Margins on income on total income net of prior period income and
extraordinary income (P&E)
v. PAT net of P&E as percentage of total income net of P&E
vi. Cash profit net of P&E as percentage of total income net of P&E
Margins on income on sales
vii. PBDITA net of P&E&OI&FI as percentage of sales
PBDITA, net of P&E&OI, is profits before depreciation, interest, tax and
amortisation, net of prior period and extra-ordinary transactions and excluding
other income. It also excludes income from financial services. These are
essentially interest and dividends. This is a close approximation of what is
usually called the operating profits of the firm.
Returns on investments on net worth
viii. PAT net of P&E as percentage of net worth
ix. PAT as percentage of net worth
x. Cash profit as percentage of net worth
Returns on investments on capital employed
xi. PAT net of P&E as percentage of capital employed
xii. PAT as percentage of capital employed Returns on investments on total
assets
xiii. PAT net of P&E as percentage of total assets excluding revaluation
xiv. PAT as percentage of total assets excluding revaluation
Returns on investments on Gross Fixed Assets (GFA)
xv. PAT net of P&E as percentage of GFA excluding revaluation
xvi. PAT as percentage of GFA excluding revaluation
Asset utilisation (times)
xvii. Total income / total assets
xviii. Total income / compensation to employees
Financial Aggregates of the Indian Real Estate Industry
Firms in the sector generated a total income of Rs. 329 billion and sales of Rs.
276 billion in 2017-18. Net worth and profit after tax was Rs. 679 billion and
Rs. 22 billion respectively during the same period (Table 1).
Table 1 and figures 1 and 2 reveals that all the financial aggregates of the
Indian real estate industry, such as, total income, sales, net worth and profit
after tax is reducing. At present, real estate industry in India is facing a
slowdown in sales. This brings about a moderate growth in demand for input
industries of real estate industry. A probable revival in the construction and
real estate sector in the coming years may drive the demand for input industries
upwardly. The real estate demand has been weak largely due to the slowdown
in economy, weak macro-economic indicators and weakness in the global
market, increased property prices and high interest rates due to the tight money
policy . On the other hand, return on assets of the real estate industry in India is
growing (Figure 3). This shows that the efficiency level of real estate industry
is increasing.
 Table 1. Financial Aggregates of the Real Estate Industry in India.
(in Rs. Billion)
Particulars 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18

Total
111 193 396 359 360 432 384 350 373 329
income
Sales 100 169 354 297 319 370 328 299 303 276
Net worth 104 163 506 616 753 821 779 787 816 679
Profit after
15 46 93 60 61 84 45 34 27 22
tax
Total assets 482 703 1,731 2,185 2,162 2,324 2,198 2,199 2,367 2,003
Total
108 195 397 363 356 403 374 342 385 330
expenses
Operating
90 163 309 265 268 303 282 255 277 227
expenses
Investments 39 49 214 165 279 285 289 292 290 220
Return On
0.024 0.009 0.030 0.016 0.027 0.033 0.024 0.023 0.013 0.027
Assets
Sample size 346 502 699 929 1,083 1,079 896 757 624 568

Source: Compiled from Industry Outlook, Centre for Monitoring Indian Economy, India.

Figure 1. Financial Aggregates of the Indian Real Estate Industry.

1800

1600

1400

1200

1000 Profit after tax

800 Net worth

600 Sales
Total income
400

200

Source: Compiled from Industry Outlook, Centre for Monitoring Indian

Economy, India.
 Figure 2. Total Asssets, Investments, Operating Income and Expenses.

2500

2000

1500
Total expenses
Total income
1000
Investments
Total assets
500

Source: Compiled from Industry Outlook, Centre for Monitoring Indian

Economy, India.
Figure 3. Return On Assets of the Indian Real Estate Industry

Return On Assets
Return On Assets

0.033
0.03
0.027 0.027
0.024 0.024 0.023

0.016
0.013
0.009

2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18

Source: Compiled from Industry Outlook, Centre for Monitoring Indian

Economy, India.

Buyers expect a correction in prices owing to increase in cost of borrowings.

Reserve Bank of India is also expected to cut rates in the near-term. However,
as a result of high cost of construction and cost overrun due to execution
delays, the builders are not expected to reduce prices considerably .
Real Estate Industry and Growth of Indian Economy
The general belief is that there is a strong correlation between real estate
industry and economic growth. In order to substantiate this, a model was fitted,
using simple linear regression analysis, by taking log of sales of the real estate
industry (real estate sector investment) and GDP (at constant prices).
Table 2. GDP and Sales of Real Estate Industry.
Sales of Real Estate Growth of
GDP(in Rs. Growth of GDP*
Year Industry Sales*
Million) (in percentage)
(in Rs. Million) (in percentage)
1998-099 17377410 - 7,213 -
1999-2000 18763190 7.97 14,154 96.24
2000-01 19570320 4.30 10,115 -28.54
2001-02 20878280 6.68 12,473 23.32
2002-03 22462760 7.59 12,734 2.09
2003-04 23427740 4.30 16,201 27.22
2004-05 24720520 5.52 22,554 39.21
2005-06 25706900 3.99 25,977 15.18
2006-07 27778130 8.06 47,198 81.69
2007-08 29714640 6.97 58,694 24.36
2008-09 32530720 9.48 100,358 70.99
2009-10 35643630 9.57 169,049 68.45
2010-11 38966360 9.32 353,803 109.29
2011-12 41586750 6.72 296,902 -16.08
2012-13 45160710 8.59 319,067 7.47
2013-14 49185330 8.91 370,286 16.05
2014-15 52475290 6.69 327,640 -11.52
2015-16 54821110 4.47 298,696 -8.83
2016-17 57417910 4.74 302,781 1.37
2017-18 - 275,602 -8.98
Source: Compiled from Economic Outlook and Industry Outlook, Centre for
Monitoring Indian Economy, India.
A linear regression model is fitted in order to establish the relationship between
real estate industry and Indian economy (GDP). The results reveal that sale of
real estate industry is an important determinant of GDP.
The table 3 presents the model summary of regression analysis. R squared
indicates that the model explains around 93 percent.
 Table 3. Model Summary.
Model R R Square Adjusted R Square Std. Error of the Estimate
1 .964(a) .929 .925 .10683
Predictors: (Constant), Sales
Table 4 shows the coefficients of regression analysis and the simple linear
regression equation are as follows:

Table 4. Coefficients (a).

Unstandardized Standardized
Model t Sig.
Coefficients Coefficients
Std.
B Std. Error Beta B
Error
1 (Constant) 14.436 .191 75.677 .000
Sales .255 .017 .964 14.915 .000
Dependent Variable: GDP
Table 5 shows the ANOVA of the regression analysis as follows:

Table 5. ANOVA (b).

Sum of
Model df Mean Square F Sig.
Squares
1 Regression 2.539 1 2.539 222.455 .000(a)
Residual .194 17 .011
Total 2.733 18

Predictors: (Constant), Sales

Dependent Variable: GDP

Summary statement of linear regression report is as follows:
The equation of the straight line relating GDP and sales of the real estate
industry is estimated as: GDP=(14.43)+(0.25) sales of the real estate
industry using the 19 observations in this dataset. The y-intercept, the
estimated value of GDP when sale of the real estate industry is zero, is 14.43
with a standard error of 0.19. The slope, the estimated change in GDP per unit
change in sales of the real estate industry, is 0.25 with a standard error of 0.02.
The value of R-Squared, the proportion of the variation in GDP that can be
accounted for by variation in sales of the real estate industry, is 0.929. The
correlation between GDP and sales of the real estate industry is 0.964.
A significance test that the slope is zero resulted in a t-value of 14.87. The
significance level of this t-test is 0.00. Since 0.00<0.05, the hypothesis that the
slope is zero is rejected.
The estimated slope is 0.25. The lower limit of the 95% confidence interval for
the slope is 0.22 and the upper limit is 0.29. The estimated intercept is 14.43.
The lower limit of the 95% confidence interval for the intercept is 14.03 and
the upper limit is 14.84.
Real Estate Industry Ratio Analysis–Results and Discussions
Margins on Income
In order to evaluate the profitability of the real estate industry, parameters of
margins on income, viz., (i) return on total assets, (ii) return on income, (iii)
return on total income net of P&E and (iv) return on sales are analysed. Results
of the analysis are as follows:
On the Basis of Return on Total Income
To facilitate evaluation of margins on income of the real estate industry,
parameters of margins on total income, viz., (i) PBDITA as percentage of total
income, (ii) PBT as percentage of total income, (iii) PAT as percentage of total
income and (iv) cash profit as percentage of total income are analysed.
PBDITA is a reasonable measure of the operating profit. Normally, a
firm/industry should make sufficient profits at the PBDITA level so that it can
account for depreciation and amortisation, pay for its debts and then if there is
still a surplus left, pay direct taxes. PBT as percentage of total income
measures the profit before tax as a per cent of the total income. This is among
the most comparable measures of profitability when it comes to comparing
companies, or even industries. PAT as a per cent of total income is the final net
profit that is made over the total income generated by the firm. Cash profit
measures the firm's/industry‘s ability to generate cash from the business it does
in a year.
The study examined profitability ratios, viz., PBDITA as percentage of total
income, PBT as percentage of total income, PAT as percentage of total income
and cash profit as percentage of total income, for analysing return on total
income. The return on total income had a steep rise in 2006-08. It shows that
income of the firms reduced after 2007-08. The PBDITA as percentage of total
income figures reveals that profitability as a ratio of gross income to net
income has reduced from 2008-09 level and started gaining momentum in
2014-5 (refer Figure 4). The other profitability ratios too follow similar trend
except PBT as percentage of total income. Therefore, it appears that margins
on income on the basis of return on total income of the real estate industry are
yet to recover from recession.
Figure 4. Margins on Income on the Basis of Return on Total Income

Source: Compiled from Industry Outlook, Centre for Monitoring Indian Economy, India.
On the Basis of Margins on Total Income Net of P&E

A supplementary ratio considered for assisting evaluation of margins on

income of the real estate industry, parameters of margins on total income net of
P&E, viz., (i) PAT net of P&E as percentage of total income net of P&E and
(ii) Cash profit net of P&E as percentage of total income net of P&E are
analysed.
To derive at a more accurate estimate of the profits generated, during an
accounting period, it is useful to remove the impact of transactions that pertain
to prior periods (P) or are extra-ordinary (E) in nature. PAT net of P&E is such
a measure. Cash profit net of P&E as percentage of total income net of P&E
compares the cash generated during an accounting period against the total
income generated during the same period after having netted out the prior
period and extra-ordinary transactions from both the numerator and the
denominator.
PAT net of P&E as percentage of total income net of P&E shows that the
profitability as a ratio of gross income to net income is having an upward trend,
however, it was negative in the first three years under study. Cash profit net of
P&E as percentage of total income net of P&E reached 25 in 2006-08 and
reduced during subsequent two years and grown to be around 20 in 2010-11
and reduced continuously during 2012-15 (Figure 5). The above ratios indicate
that the profit generated during an accounting period against the total income
generated is continuously declining during the recent years.
 Figure 5. Margins on Income on the Basis of Margins on Total Income net of P&E.

Source: Compiled from Industry Outlook, Centre for Monitoring Indian Economy,
India.

On the Basis of Margins on Income on Sales

An additional ratio considered for supporting evaluation of margins on income

of the real estate industry on the basis of PBDITA net of prior period and extra-
ordinary transactions and other income to sales is analysed (Figure 3). PBDITA
net of PE&OI is a reasonably close measure of operating profits. It indicates a
decrease after 2009-10. Moreover, the average during the first half of the
period under study (2005-10) was over 32% while the second hand it (average)
was only around 27%. Consequently, the trend of PBDITA net of P&E&OI&FI
as percentage of sales indicates that the operating profit is decreasing (Figure
6).
 Figure 6. Margins on Income on the Basis of Margins on Income on Sales

Source: Compiled from Industry Outlook, Centre for Monitoring Indian Economy,
India.

Returns on Investments

In order to evaluate the profitability of the real estate industry, parameters of

margins on income, viz., (i) return on net worth, (ii) return on capital
employed, (iii) return on total assetsand (iv) return on gross fixed assets are the
investigated. Results are as follows:

On the Basis of Return on Net Worth

Profit after tax (PAT) net of P&E as percentage of net worth is one of the
measures of the returns that a business generates on funds provided by its
equity shareholders. Equity shareholders fund, or net worth, is the sum of the
funds provided by the equity shareholders and the accumulated reserves of the
firm. Net worth is always net of revaluation reserves, if any. PAT net of P&E
is a better measure of returns on net worth than PAT alone. PAT as percentage
of net worth is the ratio of PAT generated by the firm during a year (an
accounting period, to be more precise) and the average of the net worth of the
firm at the beginning of the year and at the end of the year. Cash profit is the
profit after tax adjusted for the effect of non-cash transactions. Principally,
these non-cash transactions are depreciation, amortisation and write-offs.
These and other similar non-cash charges are added back to the PAT.
Correspondingly, non-cash incomes are deducted from the PAT to derive the
cash profit generated by a business during a year.

PAT net of P&E as percentage of net worth was very high during 2006-07 and
began deteriorating during period 2007-15. It has declined to 3% (2014-15)
from 38% during 2006-07. Similar trend can be observed in the case of cash
profit as percentage of net worth and PAT as percentage of net worth (Figure
7). This proves that the returns that the Indian real estate industry generates on
funds provided by its equity shareholders have declined considerably.
Figure 7. Returns on Investments on the Basis of Return on Net-worth.

Source: Compiled from Industry Outlook, Centre for Monitoring Indian

Economy, India.
On the Basis of Return on Capital Employed

This is one of the measures of the returns that an enterprise generates on funds
provided by its shareholders and lenders.PAT net of P&E is a measure of
profits that is net of prior period and extra-ordinary transactions. Prior period
and extra-ordinary incomes are removed and similar expenses are added back
to derive a measure of PAT that corresponds better to the current year's
activities. It removes the impact of transactions that are not directly related to
the current year's operations. PAT as percentage of capital employed is a ratio
of PAT generated by the firm during a year and the average of the capital
employed by the firm as of the beginning of the year and end of the year.
Figure 8. Returns on Investments on the Basis of Return on Capital Employed.

Source: Compiled from Industry Outlook, Centre for Monitoring Indian Economy, India.

Both PAT net of P&E as percentage of capital employed and the PAT as
percentage of capital employed indicates that profitability as a ratio of capital
employed is currently having a downward trend (Figure 8).
On the Basis of Return on Total Assets

This is one of the measures of the returns that an enterprise generates on the
total funds deployed by it in the business. It is a measure of profits that is net
of prior period and extra-ordinary transactions. In order to facilitate assessment
of returns on investments of the real estate industry, PAT net of P&E as
percentage of total assets excluding revaluation and PAT as percentage of total
assets excluding revaluation are analysed.

Both the ratios reveals that returns generated on the total funds deployed by
real estate industry in the business was negative in the initial year under study
and it became maximum in 2006-07 and fell down drastically in the subsequent
years. During 2010-11 it started improving and the further years show drastic
decline (Figure 9). This establishes that there is a drastic slump in returns that
the Indian real estate industry generates on the total funds deployed by it in the
business.
Figure 9. Returns on Investments on the Basis of Return on Total Assets.

Source: Compiled from Industry Outlook, Centre for Monitoring Indian

Economy, India.
On the Basis of Return on Gross Fixed Assets

This is one of the measures of the returns that an enterprise generates on the
fixed assets created by it. Two ratios are studied returns on investments on the
basis of return on gross fixed assets: (i) PAT net of P&E as percentage of gross
fixed assets (GFA) excluding revaluation and (ii) PAT as percentage of GFA
excluding revaluation. Since fixed assets are usually maintained at prime
productivity levels, un-depreciated gross value of all fixed assets is
denominator in the ratio. Prior period and extra-ordinary incomes are removed
and similar expenses are added back to derive a measure of PAT that
corresponds better to the current year's activities. The numerator of this ratio is
the PAT net of P&E generated by the firm during a year. The data on both the
ratios indicates the same trend of return on total assets. Return on gross fixed
assets real estate industry was highest in boom period and started declining
significantly. Both the ratios became half in 2008-09 from the previous year.
Recovery started in the last year, i.e., 2010-11 further years show severe
decline (Figure 10). These ratios, currently, became a little over 6% from
around 100% (2005-06). This establishes that there is a drastic fall in returns
that the Indian real estate industry generates on the fixed assets created by it.
 Figure 10. Returns on Investments on the Basis of Return on Gross Fixed
Assets.

Source: Compiled from Industry Outlook, Centre for Monitoring Indian Economy,
India.

Asset Utilisation (Times)

Low ratios of total income and total assets (Figure 11) show that profitability
of the industry is sinking. This indicates that the real estate industry‘s
efficiency in using its assets to generate revenue has reduced. Ratios of total
income and compensation to employees were 29.18 in 2006-07 and it reached
20.26 in 2007-08. It became 21.59 in 2014-15 from 19.34 in 2012-13 (Figure
8). This indicates a trend of increase in expenditure.
 Figure 11. Asset Utilisation Ratios.

Source: Compiled from Industry Outlook, Centre for Monitoring Indian Economy,
India.

Liquidity Ratios

Current ratio of Indian real estate industry began to show a slight upward trend
in 2014-15. This reveals that the real estate industry may be able to meet its
short-term obligations and regain financial health in the coming years. This can
be supported by the improvement in the quick ratio and debt to equity ratio of
the Indian real estate industry (Figure 12). Return on assets indicates inefficient
performance of the industry because it is able to give only a small amount of
returns.
 Figure 12. Liquidity Ratios

Source: Compiled from Industry Outlook, Centre for Monitoring Indian Economy,
India.
CMIE‘s data on total expenses on raw-material, power, fuel and water charges,
compensation to employees, etc. (Table 4), indicate that the firms in the real
estate industry are reducing raw-material stock as a result of fall in sales in
2008-09. The situation started improving from 2009-10. Current liabilities
figures confirm an increase in liabilities due to low sales in recent years.
Change in stock became-48.88 per cent in 2008-09 from 63.23 per cent in the
preceding year indicate that the firms are reducing raw-material stock. Another
notable point is that the gross fixed assets reduced a lot in 2007-08; growth of
the gross fixed assets became 0.31 per cent in 2007-08 from 59.10 per cent in
2006-07. This signifies that firms purchased land and sold it. Similarly, a three-
fold growth from previous year is recorded in 2008-09 in depreciation
allocations. This means firms in the real estate industry were buying
equipments in large quantities in 2007-08. All these indicate the fact that the
firms expected a steady growth in the subsequent years. Therefore, it appears
that the industry did not have awareness on the business cycles and could not
foresee a downturn in the economy.
The real estate demand is determined by population growth, personal income
of the people, employment rates, interest rates, and access to capital. The
profitability of individual firms depends on property values and demand, which
are both impacted by general economic conditions.

Decadal growth of population from 2000-01 to 2010-11 was 16.84.

Employment for the five year period from 2005-06 to 2009-10 was 2.70 crore,
2.73 crore, 2.75 crore, 2.82 crore and 2.87 crore respectively . This indicates
that there is a steady growth in employment in India.

The per capita income at current prices during 2011-12 is estimated to be Rs.
60,972 as compared to Rs. 53,331 during 2010-11, showing a rise of 14.3 per
cent . It was Rs 46,492 in 2009-10.
 Chapter -6
Suggestions and Conclusion
 Suggestions and Conclusion

Suggestions
 Real-Estate Investment Trusts (REITs). The concept of REITs has been
implemented in countries like the USA successfully. This system will give
individuals an opportunity to add real estate to their individual portfolios
along with corporatization of real estate.
 The banks should reduce their paper work and lengthy procedure. The
customer have faced several difficulties while obtaining the housing loans
from the banks such as large number of formalities, delay in processing
and sanctioning of loan, un co-operative attitude of the staff members etc.
 The procedure must be simple and easy to understand. The bank should
dispose borrowers‘ applications very quickly.
 The bank should have to satisfy the customers. The bank should
strengthen the friendly and trustworthy relationship with the customers.
 Generally, the relation with customer is good up to the regular payment of
installments but not good on non-payment of installments

Conclusion
The study has considered sales of the real estate industry as real estate sector
Profitability and Liquid carried out a linear regression analysis by taking GDP
as dependant variable and sales of the real estate industry as dependable
variable. Therefore, it is essential to augment the real estate industry‘s sales so
that growth of the economy can be improved through estate industry‘s
backward and forward linkages.
The financial analysis of Indian real estate industry reveals that: (i) the real
estate industry is yet to recover from recession; (ii) the profit generated during
an accounting period against the total income generated was continuously
declining during the recent years; (iii) operating profit is decreasing; (iv)
returns on funds provided by its equity shareholders have declined
considerably; (v) profitability as a ratio of capital employed is currently having
a downward trend; there is a drastic slump in returns generated on the total
funds deployed by it in the business; (vi) there is a drastic fall in returns that
the Indian real estate industry generates on the fixed assets created by it; (vii)
asset utilisation points out a trend of increase in expenditure; and (viii) able to
give only a bare minimum amount of returns.
The data reveals that the firms in the real estate industry were accumulating
fixed assets and raw-materials before the economic slowdown (2007-08) due to
expectation of a steady growth in demand in the subsequent years.
Subsequently, they have reduced fixed assets and raw-material stock
considerably as a result of fall in sales in 2008-09. It appears that the industry
lack awareness on the business cycles and could not foresee a downturn in the
economy.
The firms in the real estate industry were accumulating fixed assets and raw-
materials before the economic slowdown (2007-08). This indicates the fact that
the firms expected a steady growth in demand in the subsequent years.
Subsequent to economic slowdown the scale of operations and sale of the real
estate industry declined. The situation is further aggravated by the increase in
exchange rate. Burden of interest payment of the firms increased on account of
increase in exchange rate and dear money policy of the Reserve Bank of India.
Therefore, they have reduced fixed assets and raw-material stock considerably
as a result of fall in sales in 2008-09. It appears that the industry lack
awareness on the business cycles and could not foresee a downturn in the
economy.
In view of the fact that all the macro-economic factors and decisions of the
economy gets reflected in the real estate industry, the firms should plan their
scale of operations by taking into account the macro-economic factors of the
economy as well the global economic scenario.
Liquidity is the ability to meet cash requirements at the time the need occurs. It
is required for uninterrupted supply of materials, honouring short term cash
requirements & routine obligations. Further it is also required for availing
certain benefits like discounts; exploring favourable opportunities like
purchasing land or premises etc. Liquidity and profitability are inversely
related; higher liquidity leads to blocking of funds in current & liquid assets
which may remain idle. The company should have adequate liquidity which
will honour short term obligations on time and work on making the operating
cycle fast.

Impact of COVID-19 on Indian Real Estate Sector

In the last few months, COVID-19 pandemic has changed the way we live, work
and socialize. The long-term effects of this pandemic are expected to bring in
lasting changes in our built-environment, transforming the real estate landscape
around the world. Real estate sector in India is coming to terms with this reality
and companies are working towards adapting to the new normal.

IIMB‘s Real Estate Research Initiative (RERI) has commenced a project to

understand the impact of COVID-19 on the Indian Real Estate sector. As a first
step, RERI in association with the Confederation of Real Estate Developer‘s
Association of India (CREDAI), conducted an extensive survey of real estate
developers across India in the week beginning 25th April 2020 and received 294
responses.

The lock-down impacted both residential and commercial sectors – while 73% of
the residential developers witnessed a complete standstill in sales, more than 90%
of the commercial developers witnessed delay in (either whole or part of) their
 rental receipts, reduced footfalls in retail malls and less than 5% occupancy in
hotel properties. With cashflows impacted, companies had enough liquidity to
address fixed costs and debt servicing for less than 3 months.

In response to the current situation, several developers have adopted strategies

such as price discounts, incentives, virtual tours and contactless online booking to
improve sales in the residential segment. To ensure profitability, most developers
are focusing on reducing fixed costs (36%) and pay cuts (41%). Close to 20% of
them are also considering workforce reduction. While pay cuts may be in the
range of 10%-25%, workforce reduction may be in the range of 10%-30%. 56%
of the respondents chose to retain migrant labourers on site during the lockdown.

Industrial and warehousing segment is expected to lead the recovery process in

less than 6 months, followed by residential segment (6-12 months). Office, retail
and hospitality segments are expected to take longer than 12 months to recover.

The top three expectations of the developers from the government were:

 Reduction in interest rates to increase liquidity,

 Relaxation in project delays for RERA compliance

 Tax breaks for developers including input tax credit on GST.

Some of the above steps have been taken by the government post this survey.

While most developers identified cash crunch, debt, marketing and sales as well
as labour shortage as key areas of weakness during this phase, they have
identified digital/online marketing, better processes, branding and timely delivery
as the key focus areas in the coming months to ease the impact of this pandemic.

RERI plans to take up more such surveys in the due course to chronicle the long-
term impact of this crisis on businesses.
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Topic: Effects of Financial Crisis on the Profitability and Liquidity of Real Estate Companies