Housing Sector In India


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Presentation on Housing Sector In India
Real Estate in India

Adani Institute of Infrastructure Management

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Housing Sector In India

  2. 2. Demand Drivers • Population growth • Increase in proportion of working population • Economic growth • Urbanization • Nuclear families • Easier financing
  3. 3. Urban and Rural Housing Demand Supply Gap
  4. 4. Structure of Housing Industry State of the Industry Institutional Framework Central -MUD -MHUPA -Government Housing Finance Bodies State -HUDA -DDA Major Acts and Regulations Central -Ownership of Land for Development -Nature of Development -Operations of developers -Earnings & Profits of developers State -Rent Control Acts -Urban Development Acts -Agricultural Development Laws Policy Framework Central -NUHHP -JNNURM -2MHP -IHSUP FDI State -Examples of few states
  5. 5. Institutional Framework Role of Central Government: • Ministry of Urban Development -National Buildings Construction Corp Ltd. -Town & Country Planning Organization -National Institute of Urban Affairs • Ministry of Housing and Urban Poverty Alleviation -Several Initiatives, e.g., JNNURM, Interest Subsidy Scheme, Rajiv Awas Yojana etc. - National Buildings Organisation • Major Government Housing Finance Bodies -National Housing Bank -HUDCO Role of State Governments: • State and City Level Authorities
  6. 6. Major Acts and Regulations • GoI, in the constitutional Amendment Act 73 and 74 gave power of housing to local government agencies. • Housing a state centric subject • Centre gives policy guidelines, implementation is on state
  7. 7. National Level acts and regulations (A)Laws relating to ownership of land for development. 1. Urban Land Ceiling and Regulation Act, 1976 • Implemented in 1976 • Implemented to facilitate availability of urban land for MIG and LIG • Ceiling on ownership & possession of vacant land • Acquisition of excess land for common good • Payment of compensation for acquire land
  8. 8. Contd.. ULCRA failed to achieve its objectives • Instead of facilitating it lead to artificial scarcity • High Land prices • Central Govt. Repeal the Act by Passing UL (C&R) Repeal Act,1999
  9. 9. Contd.. 2 Registration Act, 1908  Purpose is to conserver evidence, assurance of title, publication of documents and prevention of fraud 3 Stamp Act • Stamp Duty needs to be paid on all documents • Rate of duty varies from state to state • High stamp duties are cited as a key reason for avoidance of registration • Calculated on the basis of the market value of property as quoted in the agreement
  10. 10. Contd.. 4 Transfer of Property Act, 1872 5 Indian Contract Act, 1972
  11. 11. (B) Laws Relating to nature of development 1 Coastal Regulation Zone Notification • Imposes restrictions on construction • Exceptions being facilities that are essential such as construction of ports etc. • Objective is to protect belt from unauthorized exploitation 2 The Environment Protection Act, 1986 • Aims at providing protection and improvement of the environment • Projects categories: – A : Central Level and monitored by EAC’s – B : State Level and under SEIAA
  12. 12. (C) Laws Relating to operations of developers 1 Building and Construction Workers Cess Act • Contract Labour Act, 1970 • Building and Construction Workers Act, 1996 • Minimum Wages Act, 1948 • Payment of Wages Act, 1936 (D) Laws Relating to earnings and profits of developers 1 Property Tax • Levied by the municipal authorities • In India owner is liable to pay • Basically calculated on reasonable rent
  13. 13. 2 Income Tax • Paid to Central Govt. 3 Capital Gains Tax • Classified as short term and long term • Short term – 3 years from date of acquisition and treated at par with regular income • Long term – Taxed at 20% , also if the amount is invested in house property it is exempted • Alternatively, if capital gain invested in securities such as NABARD etc can avail tax exemption under 54EC
  14. 14. State Level Acts and Regulations 1. Rent Control Acts • Maharashtra Rent control Act, 1999 • Delhi Rent Control Act 2. Urban Development Laws • Determines the development and use of land – Maharashtra Regional Town Planning Act, 1966 3. Agricultural development Laws • Limits up to which an entity may acquire agricultural land • Purchase and transfer of excess land is considered void and taken over by state
  15. 15. Policy Framework Central Policies 1 National Urban Housing & Habitat Policy, 2007 – Provides Guidance to state governments to meet growing housing shortage – “Housing for all” ,focus on “affordable housing”
  16. 16. Contd.. 2 Two Million Housing Programme (2MHP) 3 Interest Subsidy Scheme for Housing the Urban Poor • MHUPA, GoI has designed an interest subsidy for EWS & LIG • Scheme provides home loans for 15-20 years • EWS and LIG – EWS- Avg. monthly income of Rs. 3300 – LIG- Avg. monthly income between Rs. 3302 and Rs. 7300
  17. 17. 3. Indira Awaas Yojana • Flagship scheme of Ministry of Rural Development • Aims at providing housing to BPL rural households primarily to SC’s and ST’s 4. Rajiv Gandhi Awas Yojana • Announced in 2009 targets slum- free India in 5 years • Main focus – Granting property rights to slum dwellers, provision of basic amenities like water etc ,subsidised credit for construction of houses to slum dwellers
  18. 18. 5. FDI 100% FDI is allowed under the automatic route
  19. 19. Policy Framework State Policies: Gujarat Gujarat Town Planning & Urban Development Act, 1976 – Provides Town planning schemes for development of land under PPP basis – reservation of land for EWS housing
  20. 20. Industry Analysis
  21. 21. Funding Sources • Initial Public Offering (IPO) • Private Equity (PE) • Qualified Institutional Placement (QIP) • Non Banking Finance Companies (NBFC)
  22. 22. Challenges • Land Acquisition • Lack of Transparency • Stamp Duty • Raw Material Prices • No Centralized Regulatory Authority • Constraints on bank Credit
  23. 23. Top Players : DLF • Founded in 1946 • DLF Group is one of the biggest real estate giants • Built many high-quality buildings across the country, specifically in Gurgaon • Tied up with Hilton Group to build whopping 100 hotels in India over the next few years. • In current expansion plans, DLF has over 425 million sq. ft. of development across its businesses, including developed, on-going and planned projects. • Spread over 32 cities, mostly in metros and key urban areas across India
  24. 24. Parsvnath Developers • It was incorporated on July 24, 1990 under the Companies Act, 1956. • With more than two decades of experience in its repertoire, the group has already stamped its presence already in seventeen states and going Pan – India. • It has made various developments in areas like GURGAON, Noida, South Delhi.
  25. 25. Unitech • Plans to invest US$ 720 million in building hotels in the country • Its partner for this venture is Marriott International. • Carved a niche for itself in India with its sprawling properties and projects in Bangalore, Gurgaon, Noida, Greater Noida and Kolkata • Unitech Group took over projects in International areas as well. • Actively involved in construction projects of power plants, expressways, highways, transmission lines, classrooms, amusement parks.
  26. 26. Ansals • Founded by Lala Chiranji Lal Ansal • By far most dominant activity of Ansals has been Real Estate Promotion & Development • Company has several landmark high-rise commercial building like Statesman House, Ambadeep, Antriksh Bhawan, Tolstoy House, Indra Prakash, Navrang House and Ansal Bhawan • Ansals have also completed several residential buildings like Gauri Sadan, Upasana at Hailey Road & Dhawan Deep at Jantar Mantar road, all in the heart of New Delhi at Connaught Place.
  27. 27. Top Players : Salient Features • DLF leverage (D/E) down from 10 to 1.09 • Other players  Leverage close to 0.5 • Unitech : – Low Liquidity Ratios – Net Profit > Gross Profit
  28. 28. Impact of Budget 2012 • Affordable Housing – ECB – Withholding Tax – Interest Rate Subsidy Continued • Capital Gains Tax Exemption – Equity – SME Equipment – Property / Tax Saving Bonds • Boost to Infrastructure and Construction • Service Tax Increase
  29. 29. THANK YOU