The real estate sector presentation


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The real estate sector presentation

  1. 1. The Real Estate Sector
  2. 2.  The Early human dwellings as pointed by archeological evidences started in caves Zhoukbodian caves system near Beijing, China dates at 500,000 years Chinese caves contain some of the earliest evidence of human use of fire, approximately 400,000 years ago Easily inhabitants of Australlia, the Middle east and the perusian Andes have also left remains in caves Gradually as agriculture became important to people, some 4500 years ago, people established villages of permanent houses and found new uses for hunting and herding activities
  3. 3. Key Features  The term ‘Real Estate’ is defined as land, including the air above it and the ground below it, and any buildings or structures on it. It is also referred to as realty  Real estate involves the purchase, sale, and development of land, residential and non- residential buildings  The activities of the real estate sector encompass the housing and construction sectors also  The real estate sector is a major employment driver, being the second largest employer next only to agriculture  About 250 ancillary industries such as cement, brick, steel, timber, building materials etc. are dependent on the real estate industry  India Still has a shortfall of 2.47 crores as on 2007Source:
  4. 4. Impact of Real Estate Industry on some other key industries Retail(Malls) Hospitality (Resorts, hotels, lodges, spa, inns) Entertainment Industries(Multiplexes, Theatres, Recreation centers ) Economic Services( Hospitals, school) Information technology(IT) Enabled companies( call centers)
  6. 6. Physical Targets for Infrastructure in the Eleventh Plan Power  Additional power generation capacity of around 78500 MW Roads and highways  Six- laning 6500 km of Golden quadrilateral and selected National Highways  Four laning 6736 km on North-South and East-West Corridors  Four-laning 20000 km of national Highways  Widening 20000 km of National Highways to two lanes  Developing 1000 km of expressways Railways  Constructing dedicated freight corridors between Mumbai-Delhi and Ludhiana-Kolkata  8132 km of new railway lines: gauge conversion of over 7148 Seaports  Capacity addition of 485 million tones in major ports, 345 million tones in minor ports Airports  Modernization and redevelopment of 4 metros and 35 non-metro airports  Constructing 7 greenfield airports  Constructing 3 airports in North-east region Telecom  Achieving a telecom subscriber base of 600 million, with 200 million rural telephone connections  Achieving a broadband coverage of 2-0 million internet connections Irrigation  Developing 16 million hectares through major medium, and minor irrigation works 2.18 millionSource: Planning Commission
  7. 7. FY06 FY101.10 % 16.50% Other FDI Housing & 83.50% Real Estate 98.90 %
  8. 8. • Increasing vacancy • Slowing down • Construction growth • Property price starting to fall Boom• Capital outflows• Declining prices• Lending curbs• Low consumption• High vacancies Recession
  9. 9. Total number of Census houses(in crores) 1.58 Total number of vacant censes houses Total number of Occupied census houses 23.33 Total number of houses: 24.91Source:
  10. 10. India’s Real GDP(at Constant 2004-05 Prices) Growth Rate Trend 14.00% 12.00% 12.40% 10.60% 10.00% 9.50% 9.70% 10.00% 9.20% Growth rate (%) 8.00% 7.40% 6.70% 6.50% 6.00% 5.90% 4.00% 2.00% 0.00% FY06 FY07 FY08 FY09 FY10 Growth rateSource: MOSPI
  11. 11. Total share in real estate sector25% Residential Segment Commercial Segment 75%
  12. 12. Indian Real Estate Market Size(USD Bn)200180 180160140120100 90 80 60 60 40 20 16 0 2006 2010 2015e 2020e
  13. 13. 100%90% 22.9880% 30.27 Others 40.27 36.1970% Depreciation60% 1.76 Interest paid50% Marketing expenses 25.07 22.6740% Advertising expenses 8.74 9.83 0.8330% 2.38 0.71 0.8 1.24 0.79 1.25 Compensation to 0.87 4.49 3.41 4.81 employees20% 3.27 Raw material expenses10% 14.16 13.47 16.75 11.19 0% FY07 FY08 FY09 FY10
  14. 14. Major challenges faced Land availability and acquisition issue Lack of Transparency High stamp duty charges Variable prices of raw materials Absence of a centralized regulatory authority Constraints of funds
  15. 15. India’s leading Real Estate Companies(as per Total Income) Sr. No Company Name Total Inco01me( Rs. Cr) 1 DLF Limited 3220.43 2 National Buildings Construction 2947.73 Corporation Limited 3 DLF Home Developers Limited 2469.78 4 Unitech Limited 2221.71 5 Housing Development and 1599.58 Infrastructure Limited 6 Ahluwalia Contracts (India) Limited 1573.43 7 DLF Retail Developers Limited 1501.89 8 True Value Homes(l) Private Limited 1400.00 9 Emaar MGF Land Limited 1172.35 10 Sobha Developers Limited 1119.28Source : India’s leading Real Estate Companies 2010
  16. 16. India’s leading Real Estate Companies(as per net worth) Sr. No Company Name Net worth( Rs. Mn) 1 DLF Limited 128036.0 2 Unitech Limited 79032.3 3 Housing Development and 70385.8 Infrastructure Limited 4 Emaar MGF Land Limited 46093.7 5 Anant Raj Industries Limited 34967.2 6 D B Realty Limited* 30967.2 7 DLF Home Developers Limited 24733.7 8 IVRCL Assets & Holdings Limited 22884.8 9 Parsnath Developers Limited 22174.7 10 DLF Commercial Developers Limited 20966.8Source : India’s leading Real Estate Companes 2010
  17. 17. Year Building City Country Roof2010 Burj Khalifa Dubai United Arab Emirates 828m1963 KVLY-TV mast Blanchard United States 628.82011 Abraj Al Bait Towers Mecca Saudi Arabia 601m2011 Tokyo Sky Tree Tokyo Japan 634 m1962 BREN Tower Neveda Test Site United States 462 m1962 Lualualei VLF transmitter Lualualei United States 458 m1998 Petronas Twin Towers Kuala Lampur Malaysia 452 m1997 Ekibastuz GRES-2 Power Ekibastusz Kazakhstan 419.7 m Station2008 Dimona radar Facility Dimona Israel 400 m1987 Kiev TV Tower Kiev Ukraine 400 m
  18. 18. Breakthroughs
  19. 19. Burj Dubai Tallest structure ever built, and freestanding Highest elevators ever installed World’s fastest elevators at 64 km/hr. Worlds highest installation of an aluminum and glass façade, at a height of 512 meters Highest number of floors in a building – 160, breaking 110 of World Trade Center buildings
  20. 20. Stakeholders Constructing companies Developers Engineers Technicians Design consultants Landlords Foremen Clerical staff Skilled workers Unskilled workers Banks Insurance companies Tenants Suppliers of material( Electrical, Material, etc.) Buyers Government Licensing/ Registration offices( e.g. BMC)
  21. 21. Investments -Investors -Speculators -Specu-vestors -Investor-occupiers -Owner-occupiersOrganizations On the basis of size of- Govt. owned buildings family- Organizations/companies - Nuclear Family- Self rented - Extended Family Types of end - Joint Family users Type of occupation Budget • Service class • Small • Business class • Medium • Labor class • Large
  22. 22. Value Parameters(Residential) Price  Slum in the area Location  Quality of Amenities Upcoming projects, infrastructural Connectivity developments Neighbourhood  Developing/ Ready to possess buildings Access to facilities like hospitals,  Permissions by necessary Govt. bodies schools, gardens, markets etc.  Investment/ Lease / Self occupancy Future growth prospects  Parking Space Brand name Reputation of the builder Financial Aspects Lifestyle  Cash/ Cheque component Quality of construction  Home Loan Interest rates  Property and other tax Legality of construction  Terms of Payment Speed of Construction  Monthly outflow or maintenance cost Space ( S/B area vs. Carpet Area)  Down payment Environmental friendliness  Fixed/Floating Earthquake Resistance  Slab duration/ Security Parameters like distance  Difficulty in getting Loan from the police station, fire station.  Affordability
  23. 23. Comparative chart (on the basis of New worth)200000 128036180000160000140000120000 79032.3100000 70385.8 80000 46093.7 Net Worth(Rs. Mn) 60000 40000 34958.3 Net Profit(Rs. Mn) 20000 EBITDA( Rs. Mn) 0 Total income( Rs. Mn)
  24. 24. Comparative chart (on the basis of New worth)100% 1.9 2.5 2.4 3.1 7.3 3.2 11.8 5.7 90% 62.2 6 3.2 8.5 6.6 80% 8.1 4.1 11.3 8.9 8.3 70% 6.8 8.3 23.7 12.7 37.3 23.7 60% 50% 70.9 Interest cover(times) 40% Debt-to-equity(times) 30% 65 33.4 78.5 ROA(%) 48 20% 93.3 10% RONW(%) 0% ROCE(%) NPM(%) EBITDA Margin(%)
  25. 25. Distribution chain Portals like,, Property exhibitions Newspaper ads Property magazines Leaflets Agents, brokers Leaseholders Government allotments( MHADA, Tata Housing) Neighbors, friends, colleagues Word of mouth Auctions Banks Investment Banks
  26. 26. Backendsupply chain
  27. 27. Backend Supply Chain Land Architects Cement Industry Steel Industry Sandstone Petrol Prices Electrical wiring and hardware fittings Flooring( Tiles, Marbles, Granites) Paints Heavy equipments(Cranes, Land movers, etc.) Glass Industry Bank and Insurance companies Road and Infrastructure Government agencies for plan approval, NOCs, DCRs
  28. 28. Top 10 Cement CompaniesName of the Company Annual Turnover Production Installed Capacity1. ACC Ltd. 9339.64 17902 186402. Ambuja Cements Ltd. 7998.55 15094 148603. Ultratech Cement Ltd. 13980.35 13707 170004. India Cement Ltd. 3667.16 14649 141155. Shree Cement Ltd. 3558.64 8434 88106. Rain Cement Ltd. 4965.76 6174 66807. Prism Cement Ltd. 3456.03 6316 65318. Madras Cement Ltd. 2644.71 6636 63009. Birla Cement Ltd. 2264.35 4550 547010. JK Cement Ltd. 2119.35 5150 5113
  29. 29. Brief about the industry  Indian Cement Industry is the Second largest in the world with 236.16 MT as on September 2011.  With the government of India giving boost to various infrastructure projects, housing facilities and road networks, the cement industry in India is currently growing at an enviable pace  Most of the cement Industries are located close to Madhya Pradesh, Andhra Pradesh, Rajasthan, Gujarat and Tamil Nadu because of the availability of Limestone, Gypsum and Coal.  Although this Industry got a boost post reforms in 1992 but the price of the Cement is still controlled by the government and due to economies of scale 95% of the sales come from the top 10 players.SOURCE:
  30. 30. Indian Steel Industry  India is the 8th largest producer of steel with a production capacity of 35MT.  There has been a significant growth in the production and consumption of steel in the domestic market.  The consumption of steel in the Country is a significant indicator of the development in the country owing to the use of steel in the infrastructure, housing and IndustrySOURCE:
  31. 31. Top 5 Steel companies in India(on the basis of production) Tata Steel Steel Authority of India Ltd. Bhushan Power and Steel Jindal Steel and Power Limited. Essar Steel
  32. 32. Petrol/Diesel A Price of Crude oil has a huge impact in the Realty market because of the rise in price of other raw materials. Highly regulated market with top leaders being IOCL, HPCL and BPCL
  33. 33. Glass Industry  The topmost glass manufacturers in India are Asahi India Glass, NSG Group, Saint-Gobain, Guardian Industries and Hindustan National Glass.  A strong demand and growth of infrastructure, liquor & other beverages, boom in building and construction will see the glass industry at its best in the coming years.  The industry is estimated at 5500 crores by the end of FY 11-12Source:
  34. 34. Paint Industry  Indian Paint Industry is valued at Rs. 11000 Crores by FY 2009-10.  The Ratio of the organized and unorganized sector is 65:35 with the unorganized sector’s involvement being more in the distemper coating  Top leaders are Asian Paints, Nerolac, Berger, Jenson and Nicholson, Dulux.Source:
  35. 35. Basis of questionnaire Current trend Expected trend Profit margins Overall market growth overview
  36. 36. Runwal Symphony, Vakola,Santacruz(east) Project  16 floors  2 wings  2, 3 bhk
  37. 37. • Total area- 10000 sq. ft.• Construction cost- Rs. 2500 per sq. ft.• Land cost – Rs. 2500 per sq. ft.• Other expenses- Rs. 600 per sq. ft.• Considering 30% area sold while booking or bhoomi poojan.• Interest = around 10-12%• Therefore total cost= 10000 * 5600= 5.6 cr• Total sales cost = 9800* 11000= 10.78 cr(avg out)• Booking sales= 4200(30%) * 8000= 3.36 cr[Construction cost averages out]• Total sales revenue= 10.78 + 3.36= 14.14 cr• Total profit % = 152% profit
  38. 38. Laws Governing Real Estate Market In India  Indian Transfer of Property Act  Indian Registration Act, 1908  Indian Urban Land (Ceiling And Regulation) Act, 1976  Rent Control Acts  The Town & Country Planning Acts
  39. 39. No specific tax incentives for real estate sector, however the following incentives will boost the real estate.  Excise duty rates on bulk cement and packaged cement brought on par; bulk cement to attract excise duty of Rs.400 per Metric Tone or 14 per cent ad valorem, whichever is higher  Cement clinkers excise duty at Rs.450 per Metric Tone.  General CENVAT rate on all goods reduced from 16 per cent to 14 per cent to give a stimulus to the manufacturing sector.  Reduction in the excise duty from 16 per cent to 14 per cent.  Reduction in customs duty from 5 per cent to nil on steel and aluminum melting scraps
  40. 40. Regulations from Primary survey Under the Income tax Act: Valuation of the property is done as per three values:  Fair Valuation  Municipal Valuation  Market Valuation Valuation can be done on the basis of any of the above three but the registration and stamp duty cannot be paid at a rate lesser than the Municipal Valuation, better known as Ready Reckoner rate of the property.
  41. 41.  (CLIS) Change of land Use NOC – At least in 2 stages Plan verification Registration NOC post completion As per new rule an additional Service tax of 2.5% will be levied on the registration value
  42. 42. Stamp Duty Rates Non-residential Properties – Flat 5% Residential Flats in a housing society and buildings covered under Article 25(d) of schedule I of Bombay Stamp Act 1958 attracts concessional rates depending upon the market rates depending upon its market value as follows:  Below 100000 - Nil  100000- 250000 - 0.5% of the value  250000- 500000 – 1250 + 3% above 500000  Above 500000 – 8750 + 5% of the value above 500000
  43. 43. Registration Post January 2010 the registration fees of a property in Maharashtra has gone up to 1% of the ready reckoner rate. Earlier this rate was Flat Rs. 30000.
  44. 44. TRENDS
  45. 45.  A large number of projects that have come up in the past decade have placed a lot of importance on additional amenities like swimming pool, gymnasium, etc thereby increasing the maintenance cost for thee projects. A lot of developers are now considering moving to the construction of 1BHK and BK apartments in prime locations because of growing demands for this particular format by the lower-middle and middle income groups
  46. 46.  Some of the builders that I visited have now gone on to make apartment sizes much larger than the ones prevalent for that particular segment. E.g. A normal 3 BHK should be between 1500-1700 sq. ft. RNA Builders are now coming up with areas like 2400 and 2800 sq. ft. These flats are brought over by a lot of investors Builders too are looking forward to developing compact houses with reduced space. For e.g. 3 BHK usually having 1500 to 1800 sq. ft are reducing their floor size to 1000 and 1200 sq. ft. catering majorly to the people with limited budget and higher requirement Concept of satellite cities like Amby valley and Lavasa too is experiencing a boom. Urban crowd are slowly moving from cities like Delhi to Gurgaon and Noida. This trend can also be seen in Mumbai in the past decade.
  47. 47. NEEDGAPS
  48. 48. Medical Travelers India has over 5 lakh patients travelling every year for medical purpose People from abroad travel to India for  Orthopedic surgeries like hip/knee replacement  Birmingham hip resurfacing  Cardiac surgeries like cardiac bypass  Valve replacement  Pediatric heart surgeries for congenital heart disease
  49. 49. Prevalent Long term illnesses Cancer – GIT(Gastro Intestinal Track) Cancer – Hepatocellular Carcinoma Bone Marrow Transplant( Leukemia, Hodgkins) Brain Cancer Pancreatic Cancer Terminal Stage of HIV( Full Blown AIDS) IVS( In vitro fertilization)
  50. 50. Top Hospitals In Mumbai Tata Memorial Jaslok Hospital Hinduja Hospital Amla Cancer Hospital KEM Fortis Bombay Hospital Leelawati Breach Candy Wockhard Asian Heart Institute
  51. 51. Proposal for Medical Tourism Setting up of medical service apartments These service apartments should be within the boundaries of the city because of our capacity to charge more Other business facilities like internet service, fax should be made to encourage them to stay with us Tie-Ups with the above mentioned hotels for this purpose should be a good idea Tie-Ups with people who are involved in medical tourism
  52. 52.  Recommend to construct and set up apartments in the vicinity of the city dedicated specially to cancer patients or long-term residential patients termed as ‘Medical Service Apartments’ 24 Hour Ambulance service in case of any Mishap Modern Pathology Laboratory to be set up for time to time examination Tie-Ups with Hospitals for the marketing of these Apartments
  53. 53. SATELLITE CITIES Development of satellite cities unlike Amby valley and Lavasa catering to the need of the lower-middle and middle age group. Basic Requirement of this particular segment being affordable houses with basic amenities and safety.