Real Estate Investment in India-2015. The Road Ahead.

1. INVESTING IN THE INDIAN REAL ESTATE MARKET- THE ROAD AHEAD
According to the National Housing Bank (NHB) Residex Index, residential property prices show an upward trend in
the second half of 2014. First half had seen property prices dip, as the weak rupee and high inflation had a
negative impact on spending. Needless to mention that 2015 will largely be about recovery. The RBI will most
likely cut interest rates and this will see more spending in the residential real estate segment. The Ministry of
Statistics Program and Implementation and PwC Analysis predict a growth of 8 to 9 per cent. Added to this, the
introduction of REITs, improved market sentiment and more efforts by the government to reduce project loopholes
and bottlenecks in transactions will go a long way in clearing the way for positive trends in 2015.
In India, real estate plays an important role, from affordable housing to infrastructure and generating employment.
Here are some of the reasons why:
 The Economic Survey of 2012-13 revealed housing to be the second largest industry that generates
employment, after agriculture.
 With more than 300 linked industries like steel, transport, construction, cement and brick, real estate
contributes significantly to the country's GDP share and capital formation.
 NHB's report places real estate as the third most impactful industry in India in terms of its effect on other
industries and fourth in terms of employment generation.
 The residential segment, comprising residential buildings, townships, schools, colleges and hospitals and other
projects, makes the maximum overall contribution in the real estate industry and commands the largest part of
its market share.
 The real estate sector employs more than 35 million people, especially low and medium skilled labour
 Directly impacts manufacturing
 Attracts a lot of money in foreign direct investment (FDI)
Recap of 2014, its main events and economic drivers
 According to Colliers Research, Bangalore and Chennai witnessed maximum demand and growth, while Kolkata,
Mumbai and Gurgaon were unchanged. Despite this, many developers launched new projects during the end of
2014.
 There is a backlog of unsold property. 2014 has seen delays in approvals, project clearances and targets, apart
from debt commitment on property and government spending less in this area and a huge delay in finishing
projects

2.  Construction industry has grown 2 per cent from 2014 to 2015.
Trends in 2015
 The Planning Commission estimates that by 2030, about 600 million people will live in cities. Affordable housing
therefore is a huge demand and the industry has a large gap to meet, with shortage seen among the low income
groups.
 International agencies like IMF and World Bank predict an increase in GDP.
 Real estate market is driven largely by sentiment.
 First half of 2015 will be largely recovery with property markets.
 ProjectVendor.com projects a 10 to 15 per cent increase in growth from FY14 to FY17 and 11 per cent growth in
FY15. Residential and commercial projects, organised retail will contribute to this growth significantly.
 Real estate construction market is poised to grow by 20 per cent between now and 2017.
 Both large and specialised players stand to benefit and gain equally.
 Real Estate Investment Trusts (REITs) and commercial real estate will make significant impact. REITs will have a
huge impact in 2015. It is an internationally tried and tested strategy, especially in the USA, Taiwan, South
Korea, Singapore and Australia. An REIT is a trust that buys, sells, develops and manages income-generating
real estate property such as malls, commercial office spaces and more, with the main intention of attracting
investors who can manage an interesting array of properties. Corporate investors benefit from tax exemptions.
It largely impacts small investors and encourages proper investment channels in large real estate accounts, and
is a better alternative to investing in stock, due to its higher returns and a diversified portfolio of investments.
Blackstone, Xander, Brookfield and more real estate funds intend to launch REITs in the country and DLF,
Phoenix and Prestige are expecting to make use of this huge opportunity.
 The residential real estate space in India is divided into affordable housing, mid-level priced houses and the
luxury segment. The onus on low cost housing is expected to put pressure on the luxury segment, but this is not
significant. 2015 will focus more on recovery and clearing inventory, construction deadlines and backlogs.
 Pricing is very important. Affordable price points will lead to higher absorption levels.
 Easing pressure on the rupee will also impact the industry positively.
 Can 2015 be the year of recovery for real estate market in Hyderabad? Analysts believe that post-
bifurcation and formation of a stable government in Telangana State and at the Centre in 2014 should
pave the way for the sector to recover in Hyderabad.
 In fact, a December-2014 Pan Indian real estate survey of Indiaproperty.com in Hyderabad, Delhi NCR,
Mumbai, Chennai and Bangalore says that “Everybody wanted a change and 2014 saw the formation of
new the governments. Many impact areas such as real estate, stock markets, fuel and gold prices were
buoyed by positive sentiments. These changes paved way for 2015 which is expected to be the year of
recovery”.
 The survey says that a major buying trend that can be seen in the real estate industry, include high
proportion of end-users looking for mid-segment properties, buyers giving importance to infrastructure,
presence of public transport and security before deciding the locality. Nearly 64 per cent of prospective

3. buyers who participated in the survey in Hyderabad have expressed an increase in confidence in real
estate.
 The top localities that have generated a lot of interest among buyers in Hyderabad are Uppal,
Chandanagar, Gachibowli, Kondapur, Kukatpally, Manikonda and Miyapur. Close to 78 per cent of the
respondents contacted in Hyderabad during the survey were looking for a property for end-use and 60 per
cent of buyers are first time home buyers.
 When it comes to purchasing property, apartments continue to be the most popular choice among buyers
in Hyderabad and elsewhere. More and more property seekers are also looking for affordable housing.
Demand for properties under Rs. 30 lakh has increased in most of the cities across India. Close to 44 per
cent of the buyers in Hyderabad prefer properties below Rs. 30 lakh. Only 27 per cent of persons in the
survey were looking to invest on land in Hyderabad.
 Keeping in mind the factors like rising income level of people, people of all age group interested in Real
Estate as an investment, predicted growth in the manufacturing and the service sectors, affordable
housing taking pace etc, we at RE/MAX India believe that the year of 2015 will bring back the lost
confidence and have a positive impact on the business environment of Real Estate. With the lowering
down of the rentals and the increased foreign investments in India, we can expect a hike in interest in
commercial spaces in 2015 and Mumbai, Delhi, Bengaluru can be looked as hot and preferred investment
destinations.
 The change in the FDI rules has already begun rewriting the script. For instance, the Singapore-based
wealth fund GIC with over $100 billion of assets under management recently announced its plans to buy a
controlling stake in Mumbai-based real estate firm Nirlon for around $200 million. Earlier this month, GIC
had entered into a joint venture with Indian firm Vatika Group to develop two residential projects in
Delhi's suburbs.
 Under the new rules, the minimum built-up area for projects in which foreign investment is allowed will be
reduced to 20,000 square metres from the earlier 50,000. For serviced plots, there is no minimum land
requirement now compared to 10 hectares earlier, while the minimum capital investment by foreign
companies has been cut from $5 million to $10 million. Under the earlier rules, the government allowed
100% FDI in real estate development but with strict riders, including a lock-in period of three years during
which the investment cannot be repatriated.
 Some developers, however, find the demand for housing on the positive side, particularly in tier II and tier
III cities. Brotin Banerjee, MD and CEO, Tata Housing Development Company, told dna, "The spurt in
urbanisation has been driving the demand for housing in tier-I cities but a shift has also been witnessed
towards tier II & tier-III cities like Pune, Nashik, Pantnagar, Rudrapur, Patna, Chandigarh, Ranchi, Jaipur,
Indore, Baroda, Surat, Mangalore, Mysore, Coimbatore, Trichy and Bhubaneswar, amongst others."