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External Factor Analysis

Summary
Group 4 :
Amit Ranjan Gupta
Ashish Khandelwal
Bhupendra Malviya
Jagdish Agrawal
Mukunda Ramamurthy

Agenda
Introduction of EFAS
Brief Overview of Real Estate Industry
Opportunities for Real Estate Industry
Threats for Real Estate Industry
EFAS Analysis of DLF Pvt Ltd
EFAS Analysis of Shobha Developers
Conclusion

External Factor Analysis Summary

Limitation of SWOT Analysis


Uses only single level of analysis
No weights to reflect priorities

Advantage of EFAS
Two level of analysis
Study of Threats and Opportunities
Study of ability of the organization to respond to
above factors

EFAS provides weighted score

External Factor Analysis Summary (EFAS)

External
Strategic Factors
Opportunities

Weight
1

Total Weighted Score

Rating
2

Threats

1.00

Weighted
Score
3

Comments
4

Real Estate Industry


Real estate contributes about 5 per cent to
Indias GDP.
The total revenue generated in FY11 stood
at USD 66.8 billion.
The housing shortage in urban and rural
India will be around 21.7 and 19.7 million
units respectively in 2014 .

Real Estate Sector

Residential

Commercial

Residential Real Estate


Scenario
A localised, fragmented
market presents
opportunities for
consolidation
There are few large,
pan-India players like
DLF and Unitech

Key
Drivers
Rapid urbanisation
Decreasing household
size
Easy availability of
home loans

Trends
Demand expected to
grow at a CAGR of 19
per cent between 2010
and 2014 - Tier 1
metropolitan cities are
expected to account for
about 40 per cent of
this.
Demand-Supply gap is
highest in low and mid
income segments.
Demand exceeds supply
3 to 4 fold in low and
mid income segments.

Commercial Real Estate


Scenario
Few large developers
with a pan-India
presence dominate the
market

Key
Drivers
Rapid growth in services
sectors: IT/ITeS, BFSI
and Telecom
Demand for office space
in Tier 2 cities
Increase in tourism

Trends
The top three cities Mumbai, the NCR and
Bengaluru - account for
46 per cent of total
demand for office space
in India
Between 2010 and
2014, demand growth
projected to be the
highest in cities like
Kolkata and Chennai

Opportunities
Opportunities

Weight

Comments

Increased FDI Limit

0.15

Upto 100% FDI allowed with


Govt. Permission
FDI flows for the period
2012-13 stood at USD 1,260
million
Minimum 10 Hectares for
Ser ice housing plots and
50,000 sq. mts for other
projects.

Increased Per capita 0.1


income

Disposable income to invest


in real estate

Growing
Demand

Urbanization
Better Infrastructure

Government
Initiatives

constant 0.09
0.09

Allocation of USD 833


million for Rural Housing
Fund
Rajiv Awas Yojana

Threats
Threats

Weight

Comments

High Inflation

0.05

Interest rate risk.


Exchange rate risk.
Low savings.

Land Acquisition bill

0.15

Increased cost of project.


Deindustrialisation fear.

Direct Tax Code

0.15

No tax rebate on HRA.


No tax rebate on home loan
interest.
Increased tax on capital
gain.

Liquidity Crunch

0.15

D/E ratio requirement of


banks decreased to 3:7 from
5:7.
New loan disbursement
guidelines from RBI to banks.

Threats (Contd..)
Threats

Weight

Comments

Political Instability

0.05

New government.
Red Tape.
Parties favouritism.

Non transparency of 0.02


pricing

Total

No systematic way of
pricing.
No Regulator.
Multiple brokers mark up.

DLF LTD
External Factors
Opportunities

Weight

Weighted
Score

Rating

IncreasedFDILimit

Comments

0.15

4.00

NOFDIinvestmentandhigherallowedlimitsgiveopportunitytoraisefundin
future

0.60

PopularinNRIs,Highendresidentialprojectswillbegoodinvestment
opportunitiesforNRIs

Increasedpercapitaincomeand
NRIcustomersinterest

0.10

4.00

0.40

Growingconstantdemand

0.09

4.00

0.36

Projectover53MSFisunderexecution

Governmentinitiative

0.09

4.00

0.36

Presenceinalloverindiaprovideopportunityto

Threats

HighInflation

0.05

3.00

0.15

Interestraterisk,lowtendencytospendmoney

Landacquisitionbill

0.15

4.00

0.60

LandBankis314MSFasonSept2013in10majorcitiesofIndia

DirectTaxcode

0.15

3.00

0.45

Taxablehomeloanswilldiscouragetheinvestors

Liquiditycrunch

0.15

1.00

0.15

VeryHighDebt,Debt/EquityRatiois7:1

politicalinstability

0.05

3.00

0.15

Operationalmostlyinpoliticallystableregions

Nontransparencyofpricing

0.02

3.00

0.06

Pricebasedonbuiltupareaorsuperbuiltupareaaregenerallymanipulated

Total Scores

1.00

3.28

Outstanding

3
Average

1
Poor

Shobha Developers
External Factors
Opportunities

Weight

Weighted
Score

Rating

Comments

IncreasedFDILimit

0.15

3.00

0.45

100%ofFDIsubjecttocertaincriterionbut60%alreadyinvestedasper12-13
AR

Increasedpercapitaincomeand
NRIcustomersinterest

0.10

4.00

0.40

PopularinNRIs,Highendresidentialprojectswillbegoodinvestment
opportunitiesforNRIs

Growingconstantdemand

0.09

4.00

0.36

45OngoingprojectsmainlyinSouthernregions&NCR

Governmentinitiative

0.09

2.00

0.18

Threats

HighInflation

0.05

3.00

0.15

Interestraterisk,exchangeraterisk,lowsavings

Landacquisitionbill

0.15

2.00

0.30

Increasecostofprojects,LessLandbank

DirectTaxcode

0.15

3.00

0.45

Taxablehomeloanswilldiscouragetheinvestors

Liquiditycrunch

0.15

5.00

0.75

GoodDebt/Equityratioof3:5.Requiredbybanks5:5or3:7

politicalinstability

0.05

3.00

0.15

Operationalmostlyinpoliticallystableregions

Nontransparencyofpricing

0.02

2.00

0.04

Pricesarenottransparent

Total Scores

1.00

3.23

Outstanding

3
Average

1
Poor

Conclusion

EFAS score shows that both DLF and Shobha


Developers has average performance to the
factors in its external environment.

Thank You