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Real estate-march-2014

The document discusses trends in the Indian real estate sector. It notes that the urban population in India is expected to increase to 600 million by 2031 which will drive demand for residential real estate. Foreign direct investment in the sector has grown substantially over the past decade and is expected to reach $25 billion annually by 2022. The Indian construction market is projected to more than double to $649.5 billion by 2020 due to rapid urbanization and economic growth.

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377 600 2011 2031 Urbanisation (in millions) 4 25 FY2012 FY2022 FDI Inflows (USD billion) Source: Ministry of Tourism, Census 2011, Aranca Research CAGR: 2.4% 360.0 649.5 2010 2020 Construction Market CAGR: 6.1% CAGR: 20.1% FDI in the sector is estimated to grow to USD25 billion in 10 years Fourth largest sector in terms of FDI inflows The number of Indians living in urban areas will increase from the current 377 million to about 600 million by 2031 Rapid urbanisation bodes well for the sector Indian construction market is expected to more than double to USD649.5 billion by 2020 from USD360 billion in 2010 Indian construction market is expected to be the world’s third largest by 2020
Growing demand Source: BMI (Business Monitor International), Department of Industrial Policy and Promotion, Aranca Research Notes: FDI - Foreign Direct Investment; 2020E - Estimate for 2020 Growing demand • Demand for residential properties has surged due to increased urbanisation and rising household income • Growing economy driving demand for commercial and retail space Attractive opportunities • Growing requirements of space from sectors such as education and healthcare • Growth in tourism providing opportunities in the hospitality sector Policy support • Allocation of USD2.8 billion for rural housing for FY14 budget • The government has allowed FDI of up to 100 per cent in development projects for townships and settlements Increasing Investments • FDI in real estate of USD22.67 billion between April 2000 and August 2013 • During April 2012–January 2013, the real estate sector accounted for 8.8 per cent of total FDI inflows into India 2010–11 Market size: USD55.6 billion 2020E Market size: USD180 billion Advantage India
• Fragmented market with few large players • Demand of over 3,00,000 units in the seven major cities in 2010. Residential space supply of nearly 1.4 billion sq ft is expected to come by 2015 out of the planned supply of 2.1 billion sq ft across 10 major cities Real estate sector Commercial space Retail space Hospitality space SEZs • Few players with presence across India • Of a total supply of 445 million sq ft of office space planned in 10 major cities, around 167 million sq ft would come up during 2013 -15 with the demand being 66 million sq ft during the same period • FDI in multi- brand retail to boost demand • Fragmented market with few national players • Of a total planned supply of 67 million sq ft across major cities, around 38 million sq ft would come up during 2013 -15 • A competitive market with many players • Over 121,000 hotel rooms in the country as of 2011 • The hotel industry grew 13 per cent during 2011–12 Residential space Source: Cushman and Wakefield, Knight Frank, CRISIL, Aranca Research Notes: SEZ - Special Economic Zone. IT - Information Technology, ITeS - Information Technology Enabled Services, * - As of March 2013 • The government has formally approved 577 SEZs* • Majority of the SEZs are in the IT/ ITeS sector
50.1 53.3 55.6 66.8 180 FY2008 FY2009 FY2010 FY2011 FY 2020E Market size of real estate in India (USD billion)Real estate contributes about 5 per cent to India’s GDP The market size of real estate in India is expected to increase at a CAGR of 11.2 per cent during FY2008 - 2020 The real estate sector is estimated to be worth USD180 billion by 2020 Source: BMI, Aranca Research Notes: CAGR - Compounded Annual Growth Rate, E - Estimates CAGR: 11.2%
Source: Ministry of Housing and Urban Poverty Alleviation, RBI, CRISIL, Aranca Research Note: E - Estimates Urban-rural housing shortage (million)The urban housing shortage is estimated at 18.7 million in 2012 The housing shortage in rural India stood at 47.4 million as of 2012 The housing shortage in urban and rural India will be around 21.7 and 19.7 million units respectively in 2014 Total rural housing shortage is estimated at 43.7 million during the period 2012-2017 Total housing shortage for XII plan period (2012-2017) is estimated to be 48.8 millions Significant increase in real estate activity in cities like Indore, Raipur, Ahmadabad, Jaipur and other two-tier cities; this has opened new avenues of growth for the sector 15 18 25 19 21 19 22 34 30 27 27 26 47 20 2001 2005 2007 2008 2010 2012 2014E Urban Rural
Scenario Key drivers Notable Trends A localised, fragmented market presents opportunities for consolidation Few large, pan-India players such as DLF and Unitech Rapid urbanisation Rise in the number of nuclear families Easy availability of finance Repatriation of NRIs and HNIs Demand to grow at a CAGR of 19 per cent between 2010 and 2014 - 40 per cent of this from Tier 1 cities At 3x to 4x, demand-supply gap is highest in the low and mid income segments Increase in real estate projects in two-tier and three-tier cities Scenario Key drivers Notable trends Demand projections across top 7 cities (‘000 units) 350 410 500 600 710 2010 2011 2012 2013 2014 Demand analysis of top 7 cities (‘000 units) 2010-14 830 800 300 220 180 160 160 Mumbai NCR Pune Bengaluru Chennai Kolkata Hyderabad Source: Cushman & Wakefield, Aranca Research Notes: NRI - Non-resident Indian; HNI - High Net-worth Individual
Demand projections across top 7 cities (million sq ft) Source: Cushman & Wakefield, Aranca Research Notes: MNC - Multinational Corporation, BFSI - Banking, Financial and Insurance Services; CBD - Central Business District, SBD - Special Business District, NCR - National Capital Region Scenario Key drivers Notable Trends Few large developers with a pan-India presence dominate the market Operating model has shifted from sales to a lease- and-maintenance Rapid growth in services sectors: IT/ITeS, BFSI and Telecom Rising demand from MNCs Demand for office space in Tier 2 cities Mumbai, NCR and Bengaluru account for 46 per cent of total office space demand in India Demand growth projected to be the highest in Tier 2 cities such as Kolkata and Chennai during 2010- 14 Business activity shifting from CBDs to SBDs, Tier 1 to Tier 2 cities Scenario Key drivers Notable trends 33 36 39 42 44 2010 2011 2012 2013 2014 Demand analysis of top 7 cities (million sq ft) 2010-14 39 38 36 30 25 22 10 Bengaluru Mumbai NCR Chennai Hyderabad Pune Kolkata
Demand projections across top 7 cities (million sq ft) Source: Cushman & Wakefield, Aranca Research Currently, retail accounts for a small portion of the Indian real estate market Organised retailers are few, and the organised retail space is mostly developed by residential/office space developers Booming consumerism in India Organised retail sector growing 25-30 per cent annually Entry of MNC retailers NCR accounts for about 30 per cent of the total mall supply About 53 per cent of demand for total mall space in India expected to come from top seven cities Demand for retail space on high streets is quite high as well Increase in FDI limit for multi-brand retail will lead to significantly higher demand for retail space Scenario Key drivers Scenario Key drivers Notable trends 3 4 5 7 10 2010 2011 2012 2013 2014 Demand analysis of top 7 cities (million sq ft) 2010-14 8 7 6 3 2 2 2 Bengaluru Mumbai NCR Kolkata Pune Hyderabad Chennai
Source: Knight Frank India, Aranca Research Note: FSI - Floor Space Index NCR and Mumbai are by far the biggest hospitality markets in India, followed by Bengaluru, Hyderabad and Chennai Besides hotels, the hospitality market comprises serviced apartments and convention centres A robust domestic tourism industry The increasingly global nature of Indian businesses boosting business travel Tax incentives for hotels and higher FSI Serviced apartments appear particularly attractive within the hospitality space Government initiatives to promote tourism in Tier 2 and Tier 3 cities is generating significant demand for hotels in such cities, especially for budget hotels Scenario Key drivers Notable Trends Scenario Key drivers Notable trends Demand projections (no of rooms) Demand analysis of top 7 cities (no of rooms) 2010-14 32,660 35,503 38,789 43,828 2010 2011 2012 2013 10,519 10,519 4,821 3,945 3,506 2,630 1,315NCR Mumbai Hyderabad Bengaluru Chennai Pune Kolkata
Growth drivers Growth in tourism Epidemological changes Policy supportEasier financing Growing economy Urbanisation
Real GDP growth rates of major economiesThe Indian economy experienced robust growth in the past decade and is expected to be one of the fastest growing economies in the coming years Demand for commercial property is being driven by the country’s economic growth India’s real GDP growth rate is estimated to be 3.8 per cent in 2013 from 10.55 per cent in 2010. India’s real GDP is estimated to be 6.72 per cent in 2018 Source: IMF, Aranca Research Note: F - Forecast 0% 2% 4% 6% 8% 10% 12% 2010 2011 2012 2013F 2014F 2015F 2016F 2017F 2018F China India Advanced Economies Emerging Economies
Population breakup of India (million)The increasing urban population is expected to cross 600 million by 2031 Urbanisation and growing household income is driving demand for residential real estate and growth in the retail sector Source: Indian Census, Knight Frank, Mckinsey estimates, Aranca Research Note: E - Estimate 220 290 377 600 856 1,040 1,210 1,470 1991 2001 2011 2030E Urban Population Total Population
5.1 5.3 5.2 5.8 6.3 6.6 5.3 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 2007 2008 2009 2010 2011 2012 2013* Foreign tourists arriving in India (million)In 2012, 6.6 million foreign tourists have arrived in India Foreign Tourist arrival in India stood at 5.3 million during the period January-October 2013 The number of foreign tourists arriving in India expanded at a CAGR of 5.3 per cent during 2007–12 Source: Ministry of Tourism, Aranca Research Note: 2013* - Figures for the period Jan-October 2013 CAGR: 5.3%
10.7 11.8 11.1 14.2 16.6 17.7 14.6 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 20.0 2007 2008 2009 2010 2011 2012 2013* Foreign Exchange Earnings Foreign exchange earnings from tourism in India (USD billion) India is estimated to have earned about USD17.7 billion from the tourism sector in 2012 Foreign exchange earnings stood at USD14.6 billion during the period January-October 2013 The growing inflows from tourists is expected to provide a fillip to the hospitality sector Source: Ministry of Tourism, Aranca Research Note: 2013* - Figures for the period Jan-October 2013 CAGR: 10.6%
FDI in real estate as a per cent of total FDI in IndiaTotal FDI in the real estate sector during April 2000 – September 2013 stood at around USD22.7 billion Currently, real estate and construction accounts for over 22 per cent of total FDI, up from less than 4 per cent in 2006 Source: Dept of Industrial Policy & Promotion, Aranca Research 2.7% 6.3% 7.1% 7.4% 11.1% 0.7% 3.0% 8.9% 10.3% 11.0% 2006 2007 2008 2009 2010 Construction activities Real Estate
Source: Cushman & Wakefield, Venture Intelligence, Aranca Research Major acquisitions in real estate sector in IndiaThere have been 110 deals in the real estate space between 2001 and the first half of 2011 The biggest disclosed deal was the acquisition of DLF Assets’ shares by Caraf Builders for USD696 million Target Acquirer Value (USD million) Year Caraf Builders DLF Assets ltd 696.5 2009 Cowtown Land Dvlp Pvt Ltd Lodha Group 513.6 2011 Compact Disc Film City Jeff Morgan 320 2011 Oceanus Real Estate Warburg Pincus 318 2011 Indiabulls Properties Pvt Ltd Indiabulls Property Invest Trust 223.1 2012 Embassy Property Blackstone 200 2012 Zenith Capitals Limited India Mansa Developers Private Limited 1.4 2013
Source: Grant Thornton, Venture Intelligence, Aranca Research Top PE deals in Indian real estate sector in 2012Of the 43 private equity (PE) investments witnessed in the sector during 2012, 35 had an announced value of USD1.14 billion In terms of volume, residential projects accounted for 65 per cent of overall investments in the sector during 2012, while commercial projects accounted for 16 per cent Foreign funds constituted almost 80 per cent of total investments in the sector compared with 50 per cent in 2011 Mumbai continued to remain the hotspot for PE investments, followed by Bengaluru and NCR A shift in trend is evident from the fact that the maximum number of PE deals in the year were executed through Special Purpose Vehicles (SPV) as against via both entity and SPV modes in the previous year Another major trend evident in recent times is the increasing focus of private PE players on high-end and luxury projects Investor Investee Investment (USD million) Blackstone Manyata Embassy Business Park 160.0 APG and Group of investors Godrej Properties 140.8 Government of Singapore Investment Corporation (GIC) Godrej Properties 98.2 Morgan Stanley Real Estate Investment Supertech 91.4 Baring Private Equity Partners India Bengaluru based RMZ Corp 91.4 Morgan Stanley Sheth Developers Private Limited 84.8
Source: Grant Thornton, Venture Intelligence, Aranca Research Top PE deals in Indian real estate sector in 2013 Investor Investee Investment (USD million) Blackstone Group, HDFC, Embassy Group Vrindavan Tech Village 367 Blackstone HCC Real Estate Ltd - 247 HCC Park 169 Blackstone Panchshil Realty - Eon Free Zone 81.82 Red Fort Capital Lotus Green Developers 58.87 IFC Smart Value Homes Ltd 50 The PE investments in real estate stood at USD276 million during January-June 2013 with a total of 13 deals Real Estate constituted 9 per cent of the total PE deal value in Q3 2013 (July-September 2013)
For updated information, please visit www.ibef.org Share of SEZ exports in total exports of India100 per cent FDI permitted in real estate projects within Special Economic Zone (SEZ) 100 per cent FDI permitted for developing townships within SEZs with residential areas, markets, playgrounds, clubs, recreation centers, etc. Exports from SEZs registered a yoy growth of 30.6 per cent in FY13 and accounted for 29 per cent of total exports during FY 2013 Industry players, including realtors and property analysts, are rooting for the creation of "special residential zones" (SRZs), along the lines of SEZs Minimum land requirement has been brought down from 1000 hectares to 500 hectares for multi-product SEZ and for sector-specific SEZs to 50 hectares Source: Ministry of Commerce and Industry, Aranca Research Note: FY14* - April 2013 to June 2013 10% 12% 26% 28% 25% 29% 28% 90% 88% 74% 72% 75% 71% 72% FY08 FY09 FY10 FY11 FY12 FY13 FY 14* SEZ % of exports Other % of exports
For updated information, please visit www.ibef.org Ease in housing finances • Additional deduction of up to USD1,841 on interests payable on home loans of up to USD46,032 announced in the Union Budget 2013–14 • To liberalise scheme of interest subversion of 1 per cent on home loan by including loans of up to USD31,250 for houses that cost up to USD52,080 Housing for economically weaker sections • Allocation of USD1.1 billion for Rural Housing Fund in FY14 budget • Allocation of USD0.37 billion for Urban Housing Fund in FY14 budget to bridge the huge shortage of housing in certain urban areas FDI • The government has allowed FDI of up to 100 per cent in development projects for townships and settlements • FDI of up to 100 per cent is allowed in the hotel and tourism sector through the automatic route
Source: Company website, Aranca Research Note: sq ft - Square Feet 1940 1950 1980 1990 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Development of 22 Urban colonies Developed 3000 acre DLF City in Gurgaon Focuses on IT Parks and next generation malls Building India’s largest mall in Gurgaon Market capitalisation of USD7.32 billion as on 31 March 2013 Largest real estate company with revenues of USD0.72 billion (H1 FY14) Ventures into grade A office spaces Alliance with Hilton International Commenced development of DLF Cyber City, Gurgaon FY13 USD1.4 billion turnover Net land bank of 348 million sq. feet FY06 USD238 million turnover Founded by Chaudhary Raghavendra Singh
Distribution of ongoing projects by area (as of December 2012) Key Facts Started its first project in Mumbai in 1991 National real estate developer with presence across 12 cities Differentiated joint development business model resulted in a debt-equity ratio of less than one The current potential developable area stands at 88.7* million sq ft Ranked as one of India’s top 10 builders by Construction World Architect & Builder Awards, 2011 Five new projects with 4.3 mn sq ft of saleable area added to portfolio in FY13 YTD Added 11 projects with 9.7 million sq ft saleable area in the last six quarters 1 new project with 1.2 million sq ft of saleable area added in NCR in Q2 FY14 along with additional 37 acres of contiguous land added to Panvel township Source: Company website, Aranca Research Note: * - As on September 30, 2013 81.6% 18.4% Residential Commercial
23.7 34.2 44.8 41.4 53.2 29.3 0 10 20 30 40 50 60 FY09 FY10 FY11 FY12 FY13 FY14* 55.7 66.1 99.1 160.6 191.0 85.8 0 50 100 150 200 250 FY09 FY10 FY11 FY12 FY13 FY14* Profit before taxes (USD million)Total revenues (USD million) Source: Company Annual Report, Aranca Research Note: FY14* - Data for the period April 2013-September 2013 CAGR: 36% CAGR: 22%
Real estate demand in education sector (seven top cities) The entry of major private players in the education sector has created vast opportunities for the real estate sector The top seven cities i.e. Hyderabad, Bengaluru, Mumbai, Delhi, Pune, Chennai and Kolkata are likely to account for 70 per cent of total demand for real estate in the education sector Source: Cushman and Wakefiled, Aranca Research Note: F - Forecast 14 14.5 15 15.5 16 2010 2011F 2012F 2013F 2014F Area (million square feet)
Incremental demand across seven major cities (million sq ft) NCR is expected to have the highest incremental demand from the education sector The rising young population of India is expected to drive this space Source: Cushman and Wakefiled, Aranca Research Note: NCR - National Capital Region 0 1 2 3 4 NCR Mumbai Pune ChennaiKolkata Bengaluru Hyderabad
Healthcare • The healthcare sector is estimated to grow at an annual rate of 15 per cent to USD100 billion by 2015 • India is expected to need additional 937,000 beds by 2015 • India still needs to add 3 million hospital beds to meet the global average of three for every 1,000 people Senior citizen housing • Emergence of nuclear families and growing urbanisation has given rise to several townships that are developed to take care of the elderly • A number of senior citizen housing projects have been planned; the segment is expected to grow significantly in future Service apartments • Growth in the number of tourists has resulted in demand for service apartments • This demand is likely to be on uptrend and presents opportunities for the unorganised sector Source: Fitch Ratings, Aranca Research
Source: Ministry of Tourism, BMI, Aranca Research Note: F - Forecast Forecasts of foreign tourists arriving in India (million) Foreign tourist arrivals are expected to increase at a CAGR of 11.7 per cent during 2012–15 The number of foreign tourists arriving in India by 2015 is anticipated to be over 9.2 million Foreign tourist arrivals during the period January to October 2013 were 5.3 million 6.6 7.9 8.5 9.2 2012 2013F 2014F 2015F CAGR: 11.7%
Source: BMI, Aranca Research Note: F stands for Forecasts Forecasts of foreign exchange earnings from tourism in India (USD billion) Foreign exchange earnings from tourism is expected to rise at a CAGR of 4.1 per cent during 2012–15 Foreign exchange earned is forecast to cross USD19 billion in 2015 Foreign exchange earnings from tourism during the period January to October 2013 were USD14.6 billion 17.7 18.1 19.0 19.9 2012 2013F 2014F 2015F CAGR: 4.1%
Source: BMI, Cushman & Wakefield, Aranca Research Note: F - Forecast Capacity of hotels in India (‘000)The number of hotel rooms in India as of 2011 stood at 121,000 50,000 new hotel rooms are expected to be added over the next 4–5 years across India’s top six cities The number of hotel beds in the country is expected to increase to 443,000 by 2015 98 109 121 135 154 176 197 210 241 262 295 339 392 443 2009 2010 2011 2012F 2013F 2014F 2015F Number of hotel rooms Number of hotel beds
Source: Jones Lang LaSalle, Aranca Research Office market in Southern India (in million sq ft)The Southern Indian States – Andhra Pradesh, Tamil Nadu and Karnataka – have been the major drivers of economic growth in India over the last decade. The three states together account for about 22 per cent of India’s GDP Nearly 45 per cent of India’s office stock is represented by these states; over 64 per cent of the country’s IT SEZs are housed in this region Office stock in the Southern cities is projected* to grow at a CAGR of 8 per cent between 2012 and 2016 0% 4% 8% 12% 16% 20% 0 5 10 15 20 25 2002 2004 2006 2008 2010 2012E 2014F 2016F Supply Net absorption Vacancy Rate - RHS Note: * - Projections by Jones Lang LaSalle
Source: Jones Lang LaSalle, Aranca Research Net absorption rate in Southern India’s residential market is once again climbing up to pre-crisis peaks; during 1Q12, net absorption rate stood at 15.1 per cent, compared to 17.8 per cent in 1Q08 A growing migrant population due to increasing job opportunities, together with healthy infrastructure development, is underpinning demand in the region’s residential real estate market Residential market in Southern India (number of units) 0% 5% 10% 15% 20% 25% 0 5,000 10,000 15,000 20,000 25,000 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 New launches Net absorption Absorption rate - RHS
The Confederation of Real Estate Developers’ Associations of India (CREDAI) National Secretariat, 703, Ansal Bhawan, 16, Kasturba Gandhi Marg, New Delhi – 110 001 Tel: (011) 43126262/43126200 Fax: 91 11 43126211 E-mail: info@credai.org Website: www.credai.org Builders' Association of India (BAI) G-1/G-20, Commerce Centre, J. Dadajee Road, Tardeo, Mumbai – 400034 Tel: 91 22 23514134, 23514802, 23520507 Fax: 91 22 23521328 E-mail: bai@vsnl.com, baihq.mumbai@gmail.com Website: www.baionline.in
BFSI: Banking, Financial Services and Insurance CAGR: Compound Annual Growth Rate CBD: Central Business District FDI: Foreign Direct Investment FSI: Floor Space Index HNI: High Net-worth Individual GOI: Government of India INR: Indian Rupee IT/ITeS: Information Technology/Information Technology enabled Services MNC: Multinational Corporation NRI: Non Resident Indian
SBD: Special Business District SEZ: Special Economic Zone USD: US Dollar Wherever applicable, numbers have been rounded off to the nearest whole number
Year INR equivalent of one USD 2004-05 44.95 2005-06 44.28 2006-07 45.28 2007-08 40.24 2008-09 45.91 2009-10 47.41 2010-11 45.57 2011-12 47.94 2012-13 54.31 2013-14 59.23 (April-October 2013) Exchange rates (Fiscal year) Year INR equivalent of one USD 2005 45.55 2006 44.34 2007 39.45 2008 49.21 2009 46.76 2010 45.32 2011 45.64 2012 54.69 2013 57.72 (Jan-October 2013) Exchange rates (Calendar year) Average for the year
India Brand Equity Foundation (“IBEF”) engaged Aranca to prepare this presentation and the same has been prepared by Aranca in consultation with IBEF. All rights reserved. All copyright in this presentation and related works is solely and exclusively owned by IBEF. The same may not be reproduced, wholly or in part in any material form (including photocopying or storing it in any medium by electronic means and whether or not transiently or incidentally to some other use of this presentation), modified or in any manner communicated to any third party except with the written approval of IBEF. This presentation is for information purposes only. While due care has been taken during the compilation of this presentation to ensure that the information is accurate to the best of Aranca and IBEF’s knowledge and belief, the content is not to be construed in any manner whatsoever as a substitute for professional advice. Aranca and IBEF neither recommend nor endorse any specific products or services that may have been mentioned in this presentation and nor do they assume any liability or responsibility for the outcome of decisions taken as a result of any reliance placed on this presentation. Neither Aranca nor IBEF shall be liable for any direct or indirect damages that may arise due to any act or omission on the part of the user due to any reliance placed or guidance taken from any portion of this presentation.

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Real estate-march-2014

  • 2.
  • 3.
    377 600 2011 2031 Urbanisation (inmillions) 4 25 FY2012 FY2022 FDI Inflows (USD billion) Source: Ministry of Tourism, Census 2011, Aranca Research CAGR: 2.4% 360.0 649.5 2010 2020 Construction Market CAGR: 6.1% CAGR: 20.1% FDI in the sector is estimated to grow to USD25 billion in 10 years Fourth largest sector in terms of FDI inflows The number of Indians living in urban areas will increase from the current 377 million to about 600 million by 2031 Rapid urbanisation bodes well for the sector Indian construction market is expected to more than double to USD649.5 billion by 2020 from USD360 billion in 2010 Indian construction market is expected to be the world’s third largest by 2020
  • 4.
    Growing demand Source: BMI(Business Monitor International), Department of Industrial Policy and Promotion, Aranca Research Notes: FDI - Foreign Direct Investment; 2020E - Estimate for 2020 Growing demand • Demand for residential properties has surged due to increased urbanisation and rising household income • Growing economy driving demand for commercial and retail space Attractive opportunities • Growing requirements of space from sectors such as education and healthcare • Growth in tourism providing opportunities in the hospitality sector Policy support • Allocation of USD2.8 billion for rural housing for FY14 budget • The government has allowed FDI of up to 100 per cent in development projects for townships and settlements Increasing Investments • FDI in real estate of USD22.67 billion between April 2000 and August 2013 • During April 2012–January 2013, the real estate sector accounted for 8.8 per cent of total FDI inflows into India 2010–11 Market size: USD55.6 billion 2020E Market size: USD180 billion Advantage India
  • 5.
    • Fragmented marketwith few large players • Demand of over 3,00,000 units in the seven major cities in 2010. Residential space supply of nearly 1.4 billion sq ft is expected to come by 2015 out of the planned supply of 2.1 billion sq ft across 10 major cities Real estate sector Commercial space Retail space Hospitality space SEZs • Few players with presence across India • Of a total supply of 445 million sq ft of office space planned in 10 major cities, around 167 million sq ft would come up during 2013 -15 with the demand being 66 million sq ft during the same period • FDI in multi- brand retail to boost demand • Fragmented market with few national players • Of a total planned supply of 67 million sq ft across major cities, around 38 million sq ft would come up during 2013 -15 • A competitive market with many players • Over 121,000 hotel rooms in the country as of 2011 • The hotel industry grew 13 per cent during 2011–12 Residential space Source: Cushman and Wakefield, Knight Frank, CRISIL, Aranca Research Notes: SEZ - Special Economic Zone. IT - Information Technology, ITeS - Information Technology Enabled Services, * - As of March 2013 • The government has formally approved 577 SEZs* • Majority of the SEZs are in the IT/ ITeS sector
  • 6.
    50.1 53.3 55.6 66.8 180 FY2008FY2009 FY2010 FY2011 FY 2020E Market size of real estate in India (USD billion)Real estate contributes about 5 per cent to India’s GDP The market size of real estate in India is expected to increase at a CAGR of 11.2 per cent during FY2008 - 2020 The real estate sector is estimated to be worth USD180 billion by 2020 Source: BMI, Aranca Research Notes: CAGR - Compounded Annual Growth Rate, E - Estimates CAGR: 11.2%
  • 7.
    Source: Ministry ofHousing and Urban Poverty Alleviation, RBI, CRISIL, Aranca Research Note: E - Estimates Urban-rural housing shortage (million)The urban housing shortage is estimated at 18.7 million in 2012 The housing shortage in rural India stood at 47.4 million as of 2012 The housing shortage in urban and rural India will be around 21.7 and 19.7 million units respectively in 2014 Total rural housing shortage is estimated at 43.7 million during the period 2012-2017 Total housing shortage for XII plan period (2012-2017) is estimated to be 48.8 millions Significant increase in real estate activity in cities like Indore, Raipur, Ahmadabad, Jaipur and other two-tier cities; this has opened new avenues of growth for the sector 15 18 25 19 21 19 22 34 30 27 27 26 47 20 2001 2005 2007 2008 2010 2012 2014E Urban Rural
  • 8.
    Scenario Key drivers Notable Trends Alocalised, fragmented market presents opportunities for consolidation Few large, pan-India players such as DLF and Unitech Rapid urbanisation Rise in the number of nuclear families Easy availability of finance Repatriation of NRIs and HNIs Demand to grow at a CAGR of 19 per cent between 2010 and 2014 - 40 per cent of this from Tier 1 cities At 3x to 4x, demand-supply gap is highest in the low and mid income segments Increase in real estate projects in two-tier and three-tier cities Scenario Key drivers Notable trends Demand projections across top 7 cities (‘000 units) 350 410 500 600 710 2010 2011 2012 2013 2014 Demand analysis of top 7 cities (‘000 units) 2010-14 830 800 300 220 180 160 160 Mumbai NCR Pune Bengaluru Chennai Kolkata Hyderabad Source: Cushman & Wakefield, Aranca Research Notes: NRI - Non-resident Indian; HNI - High Net-worth Individual
  • 9.
    Demand projections acrosstop 7 cities (million sq ft) Source: Cushman & Wakefield, Aranca Research Notes: MNC - Multinational Corporation, BFSI - Banking, Financial and Insurance Services; CBD - Central Business District, SBD - Special Business District, NCR - National Capital Region Scenario Key drivers Notable Trends Few large developers with a pan-India presence dominate the market Operating model has shifted from sales to a lease- and-maintenance Rapid growth in services sectors: IT/ITeS, BFSI and Telecom Rising demand from MNCs Demand for office space in Tier 2 cities Mumbai, NCR and Bengaluru account for 46 per cent of total office space demand in India Demand growth projected to be the highest in Tier 2 cities such as Kolkata and Chennai during 2010- 14 Business activity shifting from CBDs to SBDs, Tier 1 to Tier 2 cities Scenario Key drivers Notable trends 33 36 39 42 44 2010 2011 2012 2013 2014 Demand analysis of top 7 cities (million sq ft) 2010-14 39 38 36 30 25 22 10 Bengaluru Mumbai NCR Chennai Hyderabad Pune Kolkata
  • 10.
    Demand projections acrosstop 7 cities (million sq ft) Source: Cushman & Wakefield, Aranca Research Currently, retail accounts for a small portion of the Indian real estate market Organised retailers are few, and the organised retail space is mostly developed by residential/office space developers Booming consumerism in India Organised retail sector growing 25-30 per cent annually Entry of MNC retailers NCR accounts for about 30 per cent of the total mall supply About 53 per cent of demand for total mall space in India expected to come from top seven cities Demand for retail space on high streets is quite high as well Increase in FDI limit for multi-brand retail will lead to significantly higher demand for retail space Scenario Key drivers Scenario Key drivers Notable trends 3 4 5 7 10 2010 2011 2012 2013 2014 Demand analysis of top 7 cities (million sq ft) 2010-14 8 7 6 3 2 2 2 Bengaluru Mumbai NCR Kolkata Pune Hyderabad Chennai
  • 11.
    Source: Knight FrankIndia, Aranca Research Note: FSI - Floor Space Index NCR and Mumbai are by far the biggest hospitality markets in India, followed by Bengaluru, Hyderabad and Chennai Besides hotels, the hospitality market comprises serviced apartments and convention centres A robust domestic tourism industry The increasingly global nature of Indian businesses boosting business travel Tax incentives for hotels and higher FSI Serviced apartments appear particularly attractive within the hospitality space Government initiatives to promote tourism in Tier 2 and Tier 3 cities is generating significant demand for hotels in such cities, especially for budget hotels Scenario Key drivers Notable Trends Scenario Key drivers Notable trends Demand projections (no of rooms) Demand analysis of top 7 cities (no of rooms) 2010-14 32,660 35,503 38,789 43,828 2010 2011 2012 2013 10,519 10,519 4,821 3,945 3,506 2,630 1,315NCR Mumbai Hyderabad Bengaluru Chennai Pune Kolkata
  • 12.
    Growth drivers Growth intourism Epidemological changes Policy supportEasier financing Growing economy Urbanisation
  • 13.
    Real GDP growthrates of major economiesThe Indian economy experienced robust growth in the past decade and is expected to be one of the fastest growing economies in the coming years Demand for commercial property is being driven by the country’s economic growth India’s real GDP growth rate is estimated to be 3.8 per cent in 2013 from 10.55 per cent in 2010. India’s real GDP is estimated to be 6.72 per cent in 2018 Source: IMF, Aranca Research Note: F - Forecast 0% 2% 4% 6% 8% 10% 12% 2010 2011 2012 2013F 2014F 2015F 2016F 2017F 2018F China India Advanced Economies Emerging Economies
  • 14.
    Population breakup ofIndia (million)The increasing urban population is expected to cross 600 million by 2031 Urbanisation and growing household income is driving demand for residential real estate and growth in the retail sector Source: Indian Census, Knight Frank, Mckinsey estimates, Aranca Research Note: E - Estimate 220 290 377 600 856 1,040 1,210 1,470 1991 2001 2011 2030E Urban Population Total Population
  • 15.
    5.1 5.3 5.2 5.8 6.3 6.6 5.3 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 2007 20082009 2010 2011 2012 2013* Foreign tourists arriving in India (million)In 2012, 6.6 million foreign tourists have arrived in India Foreign Tourist arrival in India stood at 5.3 million during the period January-October 2013 The number of foreign tourists arriving in India expanded at a CAGR of 5.3 per cent during 2007–12 Source: Ministry of Tourism, Aranca Research Note: 2013* - Figures for the period Jan-October 2013 CAGR: 5.3%
  • 16.
    10.7 11.8 11.1 14.2 16.6 17.7 14.6 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 20.0 20072008 2009 2010 2011 2012 2013* Foreign Exchange Earnings Foreign exchange earnings from tourism in India (USD billion) India is estimated to have earned about USD17.7 billion from the tourism sector in 2012 Foreign exchange earnings stood at USD14.6 billion during the period January-October 2013 The growing inflows from tourists is expected to provide a fillip to the hospitality sector Source: Ministry of Tourism, Aranca Research Note: 2013* - Figures for the period Jan-October 2013 CAGR: 10.6%
  • 17.
    FDI in realestate as a per cent of total FDI in IndiaTotal FDI in the real estate sector during April 2000 – September 2013 stood at around USD22.7 billion Currently, real estate and construction accounts for over 22 per cent of total FDI, up from less than 4 per cent in 2006 Source: Dept of Industrial Policy & Promotion, Aranca Research 2.7% 6.3% 7.1% 7.4% 11.1% 0.7% 3.0% 8.9% 10.3% 11.0% 2006 2007 2008 2009 2010 Construction activities Real Estate
  • 18.
    Source: Cushman &Wakefield, Venture Intelligence, Aranca Research Major acquisitions in real estate sector in IndiaThere have been 110 deals in the real estate space between 2001 and the first half of 2011 The biggest disclosed deal was the acquisition of DLF Assets’ shares by Caraf Builders for USD696 million Target Acquirer Value (USD million) Year Caraf Builders DLF Assets ltd 696.5 2009 Cowtown Land Dvlp Pvt Ltd Lodha Group 513.6 2011 Compact Disc Film City Jeff Morgan 320 2011 Oceanus Real Estate Warburg Pincus 318 2011 Indiabulls Properties Pvt Ltd Indiabulls Property Invest Trust 223.1 2012 Embassy Property Blackstone 200 2012 Zenith Capitals Limited India Mansa Developers Private Limited 1.4 2013
  • 19.
    Source: Grant Thornton,Venture Intelligence, Aranca Research Top PE deals in Indian real estate sector in 2012Of the 43 private equity (PE) investments witnessed in the sector during 2012, 35 had an announced value of USD1.14 billion In terms of volume, residential projects accounted for 65 per cent of overall investments in the sector during 2012, while commercial projects accounted for 16 per cent Foreign funds constituted almost 80 per cent of total investments in the sector compared with 50 per cent in 2011 Mumbai continued to remain the hotspot for PE investments, followed by Bengaluru and NCR A shift in trend is evident from the fact that the maximum number of PE deals in the year were executed through Special Purpose Vehicles (SPV) as against via both entity and SPV modes in the previous year Another major trend evident in recent times is the increasing focus of private PE players on high-end and luxury projects Investor Investee Investment (USD million) Blackstone Manyata Embassy Business Park 160.0 APG and Group of investors Godrej Properties 140.8 Government of Singapore Investment Corporation (GIC) Godrej Properties 98.2 Morgan Stanley Real Estate Investment Supertech 91.4 Baring Private Equity Partners India Bengaluru based RMZ Corp 91.4 Morgan Stanley Sheth Developers Private Limited 84.8
  • 20.
    Source: Grant Thornton,Venture Intelligence, Aranca Research Top PE deals in Indian real estate sector in 2013 Investor Investee Investment (USD million) Blackstone Group, HDFC, Embassy Group Vrindavan Tech Village 367 Blackstone HCC Real Estate Ltd - 247 HCC Park 169 Blackstone Panchshil Realty - Eon Free Zone 81.82 Red Fort Capital Lotus Green Developers 58.87 IFC Smart Value Homes Ltd 50 The PE investments in real estate stood at USD276 million during January-June 2013 with a total of 13 deals Real Estate constituted 9 per cent of the total PE deal value in Q3 2013 (July-September 2013)
  • 21.
    For updated information,please visit www.ibef.org Share of SEZ exports in total exports of India100 per cent FDI permitted in real estate projects within Special Economic Zone (SEZ) 100 per cent FDI permitted for developing townships within SEZs with residential areas, markets, playgrounds, clubs, recreation centers, etc. Exports from SEZs registered a yoy growth of 30.6 per cent in FY13 and accounted for 29 per cent of total exports during FY 2013 Industry players, including realtors and property analysts, are rooting for the creation of "special residential zones" (SRZs), along the lines of SEZs Minimum land requirement has been brought down from 1000 hectares to 500 hectares for multi-product SEZ and for sector-specific SEZs to 50 hectares Source: Ministry of Commerce and Industry, Aranca Research Note: FY14* - April 2013 to June 2013 10% 12% 26% 28% 25% 29% 28% 90% 88% 74% 72% 75% 71% 72% FY08 FY09 FY10 FY11 FY12 FY13 FY 14* SEZ % of exports Other % of exports
  • 22.
    For updated information,please visit www.ibef.org Ease in housing finances • Additional deduction of up to USD1,841 on interests payable on home loans of up to USD46,032 announced in the Union Budget 2013–14 • To liberalise scheme of interest subversion of 1 per cent on home loan by including loans of up to USD31,250 for houses that cost up to USD52,080 Housing for economically weaker sections • Allocation of USD1.1 billion for Rural Housing Fund in FY14 budget • Allocation of USD0.37 billion for Urban Housing Fund in FY14 budget to bridge the huge shortage of housing in certain urban areas FDI • The government has allowed FDI of up to 100 per cent in development projects for townships and settlements • FDI of up to 100 per cent is allowed in the hotel and tourism sector through the automatic route
  • 23.
    Source: Company website,Aranca Research Note: sq ft - Square Feet 1940 1950 1980 1990 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Development of 22 Urban colonies Developed 3000 acre DLF City in Gurgaon Focuses on IT Parks and next generation malls Building India’s largest mall in Gurgaon Market capitalisation of USD7.32 billion as on 31 March 2013 Largest real estate company with revenues of USD0.72 billion (H1 FY14) Ventures into grade A office spaces Alliance with Hilton International Commenced development of DLF Cyber City, Gurgaon FY13 USD1.4 billion turnover Net land bank of 348 million sq. feet FY06 USD238 million turnover Founded by Chaudhary Raghavendra Singh
  • 24.
    Distribution of ongoingprojects by area (as of December 2012) Key Facts Started its first project in Mumbai in 1991 National real estate developer with presence across 12 cities Differentiated joint development business model resulted in a debt-equity ratio of less than one The current potential developable area stands at 88.7* million sq ft Ranked as one of India’s top 10 builders by Construction World Architect & Builder Awards, 2011 Five new projects with 4.3 mn sq ft of saleable area added to portfolio in FY13 YTD Added 11 projects with 9.7 million sq ft saleable area in the last six quarters 1 new project with 1.2 million sq ft of saleable area added in NCR in Q2 FY14 along with additional 37 acres of contiguous land added to Panvel township Source: Company website, Aranca Research Note: * - As on September 30, 2013 81.6% 18.4% Residential Commercial
  • 25.
    23.7 34.2 44.8 41.4 53.2 29.3 0 10 20 30 40 50 60 FY09 FY10FY11 FY12 FY13 FY14* 55.7 66.1 99.1 160.6 191.0 85.8 0 50 100 150 200 250 FY09 FY10 FY11 FY12 FY13 FY14* Profit before taxes (USD million)Total revenues (USD million) Source: Company Annual Report, Aranca Research Note: FY14* - Data for the period April 2013-September 2013 CAGR: 36% CAGR: 22%
  • 26.
    Real estate demandin education sector (seven top cities) The entry of major private players in the education sector has created vast opportunities for the real estate sector The top seven cities i.e. Hyderabad, Bengaluru, Mumbai, Delhi, Pune, Chennai and Kolkata are likely to account for 70 per cent of total demand for real estate in the education sector Source: Cushman and Wakefiled, Aranca Research Note: F - Forecast 14 14.5 15 15.5 16 2010 2011F 2012F 2013F 2014F Area (million square feet)
  • 27.
    Incremental demand acrossseven major cities (million sq ft) NCR is expected to have the highest incremental demand from the education sector The rising young population of India is expected to drive this space Source: Cushman and Wakefiled, Aranca Research Note: NCR - National Capital Region 0 1 2 3 4 NCR Mumbai Pune ChennaiKolkata Bengaluru Hyderabad
  • 28.
    Healthcare • The healthcaresector is estimated to grow at an annual rate of 15 per cent to USD100 billion by 2015 • India is expected to need additional 937,000 beds by 2015 • India still needs to add 3 million hospital beds to meet the global average of three for every 1,000 people Senior citizen housing • Emergence of nuclear families and growing urbanisation has given rise to several townships that are developed to take care of the elderly • A number of senior citizen housing projects have been planned; the segment is expected to grow significantly in future Service apartments • Growth in the number of tourists has resulted in demand for service apartments • This demand is likely to be on uptrend and presents opportunities for the unorganised sector Source: Fitch Ratings, Aranca Research
  • 29.
    Source: Ministry ofTourism, BMI, Aranca Research Note: F - Forecast Forecasts of foreign tourists arriving in India (million) Foreign tourist arrivals are expected to increase at a CAGR of 11.7 per cent during 2012–15 The number of foreign tourists arriving in India by 2015 is anticipated to be over 9.2 million Foreign tourist arrivals during the period January to October 2013 were 5.3 million 6.6 7.9 8.5 9.2 2012 2013F 2014F 2015F CAGR: 11.7%
  • 30.
    Source: BMI, ArancaResearch Note: F stands for Forecasts Forecasts of foreign exchange earnings from tourism in India (USD billion) Foreign exchange earnings from tourism is expected to rise at a CAGR of 4.1 per cent during 2012–15 Foreign exchange earned is forecast to cross USD19 billion in 2015 Foreign exchange earnings from tourism during the period January to October 2013 were USD14.6 billion 17.7 18.1 19.0 19.9 2012 2013F 2014F 2015F CAGR: 4.1%
  • 31.
    Source: BMI, Cushman& Wakefield, Aranca Research Note: F - Forecast Capacity of hotels in India (‘000)The number of hotel rooms in India as of 2011 stood at 121,000 50,000 new hotel rooms are expected to be added over the next 4–5 years across India’s top six cities The number of hotel beds in the country is expected to increase to 443,000 by 2015 98 109 121 135 154 176 197 210 241 262 295 339 392 443 2009 2010 2011 2012F 2013F 2014F 2015F Number of hotel rooms Number of hotel beds
  • 32.
    Source: Jones LangLaSalle, Aranca Research Office market in Southern India (in million sq ft)The Southern Indian States – Andhra Pradesh, Tamil Nadu and Karnataka – have been the major drivers of economic growth in India over the last decade. The three states together account for about 22 per cent of India’s GDP Nearly 45 per cent of India’s office stock is represented by these states; over 64 per cent of the country’s IT SEZs are housed in this region Office stock in the Southern cities is projected* to grow at a CAGR of 8 per cent between 2012 and 2016 0% 4% 8% 12% 16% 20% 0 5 10 15 20 25 2002 2004 2006 2008 2010 2012E 2014F 2016F Supply Net absorption Vacancy Rate - RHS Note: * - Projections by Jones Lang LaSalle
  • 33.
    Source: Jones LangLaSalle, Aranca Research Net absorption rate in Southern India’s residential market is once again climbing up to pre-crisis peaks; during 1Q12, net absorption rate stood at 15.1 per cent, compared to 17.8 per cent in 1Q08 A growing migrant population due to increasing job opportunities, together with healthy infrastructure development, is underpinning demand in the region’s residential real estate market Residential market in Southern India (number of units) 0% 5% 10% 15% 20% 25% 0 5,000 10,000 15,000 20,000 25,000 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 New launches Net absorption Absorption rate - RHS
  • 34.
    The Confederation ofReal Estate Developers’ Associations of India (CREDAI) National Secretariat, 703, Ansal Bhawan, 16, Kasturba Gandhi Marg, New Delhi – 110 001 Tel: (011) 43126262/43126200 Fax: 91 11 43126211 E-mail: info@credai.org Website: www.credai.org Builders' Association of India (BAI) G-1/G-20, Commerce Centre, J. Dadajee Road, Tardeo, Mumbai – 400034 Tel: 91 22 23514134, 23514802, 23520507 Fax: 91 22 23521328 E-mail: bai@vsnl.com, baihq.mumbai@gmail.com Website: www.baionline.in
  • 35.
    BFSI: Banking, FinancialServices and Insurance CAGR: Compound Annual Growth Rate CBD: Central Business District FDI: Foreign Direct Investment FSI: Floor Space Index HNI: High Net-worth Individual GOI: Government of India INR: Indian Rupee IT/ITeS: Information Technology/Information Technology enabled Services MNC: Multinational Corporation NRI: Non Resident Indian
  • 36.
    SBD: Special BusinessDistrict SEZ: Special Economic Zone USD: US Dollar Wherever applicable, numbers have been rounded off to the nearest whole number
  • 37.
    Year INR equivalentof one USD 2004-05 44.95 2005-06 44.28 2006-07 45.28 2007-08 40.24 2008-09 45.91 2009-10 47.41 2010-11 45.57 2011-12 47.94 2012-13 54.31 2013-14 59.23 (April-October 2013) Exchange rates (Fiscal year) Year INR equivalent of one USD 2005 45.55 2006 44.34 2007 39.45 2008 49.21 2009 46.76 2010 45.32 2011 45.64 2012 54.69 2013 57.72 (Jan-October 2013) Exchange rates (Calendar year) Average for the year
  • 38.
    India Brand EquityFoundation (“IBEF”) engaged Aranca to prepare this presentation and the same has been prepared by Aranca in consultation with IBEF. All rights reserved. All copyright in this presentation and related works is solely and exclusively owned by IBEF. The same may not be reproduced, wholly or in part in any material form (including photocopying or storing it in any medium by electronic means and whether or not transiently or incidentally to some other use of this presentation), modified or in any manner communicated to any third party except with the written approval of IBEF. This presentation is for information purposes only. While due care has been taken during the compilation of this presentation to ensure that the information is accurate to the best of Aranca and IBEF’s knowledge and belief, the content is not to be construed in any manner whatsoever as a substitute for professional advice. Aranca and IBEF neither recommend nor endorse any specific products or services that may have been mentioned in this presentation and nor do they assume any liability or responsibility for the outcome of decisions taken as a result of any reliance placed on this presentation. Neither Aranca nor IBEF shall be liable for any direct or indirect damages that may arise due to any act or omission on the part of the user due to any reliance placed or guidance taken from any portion of this presentation.