Presentation on Housing Sector In India Real Estate in India Adani Institute of Infrastructure Management

1. HOUSING SECTOR IN INDIA
MITTAL NEERAJ SHAMAN

2. Demand Drivers
• Population growth
• Increase in proportion of working population
• Economic growth
• Urbanization
• Nuclear families
• Easier financing

5. Urban and Rural Housing Demand
Supply Gap

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. Contd..
4 Transfer of Property Act, 1872
5 Indian Contract Act, 1972

13. (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

14. (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

15. 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

16. 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

17. 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”

18. 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

19. 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

20. 5. FDI
100% FDI is allowed
under the automatic
route

21. 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

22. Industry Analysis

24. Funding Sources
• Initial Public Offering (IPO)
• Private Equity (PE)
• Qualified Institutional Placement (QIP)
• Non Banking Finance Companies (NBFC)

25. Challenges
• Land Acquisition
• Lack of Transparency
• Stamp Duty
• Raw Material Prices
• No Centralized Regulatory Authority
• Constraints on bank Credit

26. 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

27. 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.

28. 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.

29. 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.

30. 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

31. 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

32. THANK YOU