Real Estate
Content
FINAL REPORT
On
―REAL ESTATE- INDIAN MARKET‖
INVESTORS CLINIC
(REAL ESTATE CONSULTANTS)
Submitted in partial fulfillment of the requirements of the Two-Year full-time Post Graduate Diploma in Management Programme PGD-IB
Submitted to: Prof. S.P. Ketkar
Submitted by: Sugam Guglani FT-10-IB-852
INSTITUTE FOR INTEGRATED LEARNING IN MANAGEMENT Graduate School of Management
16, Knowledge Park-II GREATER NOIDA.
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DECLARATION FORM
I hereby declare that the Project work entitled ―REAL ESTATE – INDIAN MARKET‖ submitted by me for the Final Report during the Two-Year Post Graduate Diploma in Management Program to Institute for Integrated Learning in Management, Greater Noida is my own original work and has not been submitted earlier either to IILM GSM or to any other Institution for the fulfillment of the requirement for any course of study. I also declare that no chapter of this manuscript in whole or in part is lifted and incorporated in this report from any earlier / other work done by me or others.
Place Date
: Faridabad, Noida. : 23.03.2012 SUGAM GUGLANI
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ACKNOWLEDGEMENT
This Report is all about INVESTORS CLINIC. and what its role in developing the economy of the country. It has been a good experience and we would like to thank our faculty Prof. Pitamber Dwivedi and Prof. S.P. Ketkar under whose guidance and assistance I made this project. I am very grateful for the support he gave and the way he helped me in compiling this project. While doing the report I came to know about many strategies which a company should use and the importance of Real estate in corporate world. It was a nice experience and this surely will play a vital role in my near future.
SUGAM GUGLANI PGDM (IB) FT-10-IB-852
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TABLE OF CONTENTS
Chapter No. CONTENTS Declaration Form Acknowledgement Executive Summary Objective of the Project Introduction of REAL ESTATE MARKET 1. Introduction of INVESTORS CLINIC 2. Mission & Vision 3. Real Estate- India 4. Some Specifics of Marketing Trend 5. Reasons to choose Investors Clinic Infrastructural Changes in Real Estate Determinants of Real Estate Growth in India 6. Challenges & innovative experiences 7.
8. 9. 10. Road Ahead Conclusion Bibliography
Page No.
6 7-10 13 14-15 17 18-19 20-26 27-30 31 32 33
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EXECUTIVE SUMMARY
This project is aimed at understanding Real Estate Marketing strategies, and govt. schemes with respect to real estate uplifment. The project begins with the introduction of the company i.e. company profile. This part companies history, profile, market performance, products and various facilities. So, in consideration my project is all about Order Sales strategies in Real Estate Department. To know the process that how it works, how order came and further executed and all other related fields like understanding the different markets, payment methods which is being learning a great experience and will help me in my future.
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Introduction
The Indian economy has witnessed robust growth in the last few years and is expected to be one of the fastest growing economies in the coming years. Demand for commercial property is being driven by India's economic growth. Real estate in India contributes about 5 per cent to India's gross domestic product (GDP). The total revenue generated in 2010-11 stood at US$ 66.8 billion. Demand is expected to grow at a compound annual growth rate (CAGR) of 19 per cent between 2010 and 2014—Tier 1 metropolitan cities are projected to account for about 40 per cent of this. Growing requirements of space from sectors such as education, healthcare and tourism provide opportunities in the real estate sector. FDI of more than US$ 9 billion was infused in real estate in the last decade. In 2010, over 11 per cent of total FDI in India was in the real estate sector. There have been 110 deals in this sector during the period 2001 to the first half of 2011. Urban population has been increasing and is expected to cross 590 million by 2030. Urbanisation and growing household income are some of the major factors that influence demand for residential real estate and growth in the retail sector. Real estate is "Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature; an interest vested in this; (also) an item of real property; (more generally) buildings or housing in general. Also: the business of real estate; the profession of buying, selling, or renting land, buildings, or housing
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Introduction of investors Clinic
Envisioned, initiated and managed by a visionary real estate professional, Mr. Honey Katiyal, Investors Clinic has registered phenomenal growth over the past few years and has emerged as North India's leading real estate consultancy that specializes in providing professional and independent consulting services to individual and institutional investors interested in investing in the real estate sector in India. Since its inception, Investors Clinic has established itself as a leader in the domains of valuation and real estate consulting services. His mission of Investors Clinic is to enable its clients in creation of value by empowering them to analyse and capitalize upon the vast real estate opportunities abundant in the Indian market. We aim to assist all our clients to properly analyze their invest portfolio and long term needs, formulate winning strategies and implement proven methodologies to enhance the net worth of their investment portfolios. Investors Clinic provides wide-ranging services including due diligence, selection, buy and sell transactions and management of property portfolios. We also specialize in promotion and marketing of real estate projects being executed in Delhi-NCR, especially those in Noida, Greater Noida, Noida Extension and Ghaziabad. Investors Clinic is an ISO 9001:2000 certified real estate consultancy that offers independent consultancy to its clients, in accordance with international professional and ethical standards.
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They have catered to numerous national and international clients belonging to various business domains. As a real estate company we have been redefining the standards of real estate and with our years of experience, we offer a wide range of services to fulfill our client's need. There bouquet of services includes but is not limited to
Investment Advisory Valuation & Due Diligence Property Management Marketing and promotion of real estate projects Corporate & Retail Loan Services
Our efficient and effective services have enabled us to domestic and global giants as satisfied clients. Investors Clinic has earned a strong reputation in the real estate industry as we strongly work for the satisfaction of our customers. We have catered to numerous national and international clients belonging to various business domains. As a real estate company we have been redefining the standards of real estate and with our years of experience, we offer a wide range of services to fulfill our client's need. INVESTORS CLINIC is an ISO 9001:2000 certified company operating across the globe. They deal in all kinds of property needs, whether it is industrial, commercial, residential or farm lands. Investors Clinic has earned a strong reputation in the real estate industry as they provide efficient and effective solutions and work for the satisfaction of the customers. They have catered to numerous national and international clients belonging to various business domains. As a real estate company they have been redefining the standards of real estate business and offer a wide range of services to fulfil their client's need.
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Investors Clinic has more than 4 years of collective experience in the real estate industry. The company’s motto is customer satisfaction at any cost. It's our efficient and effective solution that has given us domestic and global giants as satisfied clients. Investors Clinic has earned a strong reputation in the real estate industry as we strongly work for the satisfaction of our customers. We have catered to numerous national and international clients belonging to various business domains. As a real estate company we have been redefining the standards of real estate and with our years of experience, we offer a widerange of services to fulfill our client's need. We make it our business to understand your financial requirements. We have already served the premier corporate houses in both domestic and international arena. We have more than 2 years of collective experience in this industry. Our expertise is to make your money work for you and manage your investment portfolio .Our motto is customer satisfaction at any cost. WEALTH MAKES YOUR HEALTH, YOU DREAM AND WE DO IT. That is what Investors Clinic is all about. We deal in: Each and everything related to your property needs whether it is industrial, commercial, residential or farm land. To make it more crystal clear please call at the following customer care numbers given on Contact Us Page. Assurance from our end: We assure you to give best of our services & that to with the best competitive price.
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Specialties Real estate: Our Projects: 1- UNIHOMES 3, 2- Krown Plots, 3- Paras Seasons, 4Supertech Eco Village 3, 5- Paramount Emotions, 4- 3C Zing, 5- Supertech Eco Suite, 6- Era Divine Court, 7- Oxford Square, 8Sanskriti - Aapke Aadarsho Ka Ghar, 9- Logix Blossom Greens, 10- Amrapali LA- Residentia, 11- Amrapali Centurian Park, 12- NRI Township (SDS Plots), 13- Paramount Floraville, 14- 16th Avenue, 15- Amrapali Golf Homes, 16Orris Aster Court, 17- Amrapali Leisure Park,
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MISSION OF INVESTORS CLINIC
The mission of Investors Clinic is to enable its clients in creation of value by empowering them to analyse and capitalize upon the vast real estate opportunities abundant in the Indian market. We aim to assist all our clients to properly analyze their invest portfolio and long term needs, formulate winning strategies and implement proven methodologies to enhance the net worth of their investment portfolios.
VISION
Investors-clinic mission blossoms with its vision. At Investors-clinic, we have a mission of making the dreams of our customers true and real in real estates. We strongly combine our vision and mission with WEALTH MAKES YOUR HEALTH, YOUR DREAM AND WE DO IT. At Investors-clinic, for dealers our projects work as nest egg. With a short span of two years, we have already served the premier corporate houses in both national and international arena.
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REAL ESTATE- INDIA
Market forces of demand and supply are the most potent determinants of price and the developments in the real estate industry during year 2011. The stalemate between the buyers and developers is weakening as developers attempt to salvage their position by adopting to the last resort of reducing property prices although in a quiet manner for transactions on table or where a large upfront payment is agreed. Demand for real estate is a derived demand and thus the state of economy has a direct bearing on the sector. Since the slowdown in 2008-09 on the backdrop of global financial crisis, the Indian economy picked up really well in 2009 and 2010. However, a closer look at the quarterly GDP numbers indicates a receding growth sequentially for each of the quarters since Q1 2010 when the economy grew by 9.4%. The latest number for Q3 2011 indicates that the economy’s growth rate has come down to 6.9%. While the world economy was facing pressure of an imminent double dip recession and some European economies risked defaulting on their debt, inflation remained the primary concern for the Indian economy since the beginning of the year. While the central bank’s efforts centered on taming inflation, the fallout was high interest rate and tight credit scenario resulting in to faltering economic growth. Rising corporate governance issues and menace of corruption ensured that decisions on major reforms were delayed. While investment slowed on account of high interest rate and hiatus on major infrastructure projects, government’s ability to increase consumption, as witnessed during the 2008 downturn, was reduced because of rising fiscal deficit. The unfolding of these developments has resulted in a compromised economic growth and the real estate industry has taken the biggest hit. Thus, the year 2011 can be referred as a dull year on account of slack transaction activity, few project launches and stagnant property prices.
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While residential property price appreciated between 10% - 30% in 2010 across major cities like Mumbai, NCR, Bangalore and Chennai, it has declined by up to 10% in 2011. The pace of new project launches has severely been crippled in 2011. During 2010, 3,61,098 residential units were launched across the top 7 cities of Mumbai, NCR, Pune, Kolkata, Bangalore, Chennai and Hyderabad. However, in 2011 only 1,72,856 units were launched. This is a decline of 52% from the last year. Moreover, of the total housing inventory pertaining to the under construction projects, 39% or 3,06,859 units are lying unsold. A substantial portion of this unsold inventory belongs to the NCR market. Mumbai property market was even worse recording a sharp decline in the number of new project launches in 2011. Just about 19,470 units were launched in 2011 in comparison to the 54,968 housing units that were launched in the previous year. This decline of 65% fewer launches highlights the lack of buyer interest in the extremely expensive Mumbai property market. Moreover, 40,660 housing units or 32% of the inventory is lying unsold in the city. Although the situation remained grim throughout the year, there was a stalemate between the buyers and the builders, who remained in a denial mode with respect to lowering the prices. Commercial office space demand, which is driven mainly by the service sector industries like BFSI and IT/ITES, remained muted in 2011. Rentals in the top 7 cities remained under pressure as corporates trimmed hiring plans resulting in to reduced office space requirement. Of the total office stock of 367 mn.sq.ft. in these cities, 24% or almost 89 mn.sq.ft. remains vacant. NCR, Pune, Chennai and Kolkata have a high proportion of vacant stock followed by Mumbai and Bangalore. Hyderabad office market is relatively better placed in terms of the unoccupied stock.
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What is in store for the real estate sector in 2012 remains the biggest question. In terms of the residential segment, the deadlock between the buyers and developers should break in favour of buyers, according to Knight Frank research. As this happens, the pent up demand from the section of buyers that are sitting on fence in anticipation of price correction would translate into improved fortunes for residential property market. Employment scenario, inflation and interest rate have a bearing on the overall sentiment of buyers. Since, houses are bought by people who are confident, these factors will have a role to play and hence cues from the government action will be keenly observed. he realty industry today has changed so much that each sector needs special skills to make it work efficiently. All over the world, prices are fluctuating. Global agencies monitor trends in the top influential cities. With many foreign investments in India and NRIs returning, the Indian property market watch is on the top most of every big agency. Mumbai is the costliest city to live in Asia. To understand real estate marketing one should at least have the minimum knowledge required to step into the complex industry. Out there, plenty of smart operators are looking for suckers. They may not be dishonest but will technically confuse you to pay higher price and outsmart you. Therefore, if you know your onions and the deep layers beyond the skins it helps to get the best. The purchasing power of the new generation of Indians has increased. They are investing in real estate in a big way- in terms of investment and assets. People have acquired refined tastes in housing needs and become professional in dealing with builders. Financial companies and banks have given a boost to real estate marketing as well. To add to this the government has allowed foreign investors also to test the market conditions here have helped. Every area of real estate be it industrial, retail space, malls, office complexes, residential colonies, hospitals, clinics and other healthcare units have a vast potential for growth. As more opportunities grow for people to work they also wish to invest in places close by to live in. Builders or developers in various regions are now separately marketing each space. Even home loan companies and banks are independently marketing the properties they are giving loans. This helps them
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to guide their dedicated clientele and ensure the marketing trends remain closely monitored for future development. They generally have customer relationship executives who are assigned (usually area wise) to assist customers in making decisions. They do have good knowledge, are professionals on the job and customers do benefit if they are not very familiar with various technicalities. Each company has its own marketing device and portfolio to attract customers. Various tie ups with groups in India and overseas have taken place this year with increase in FDI. MGF Developments based in New Delhi and Emmar Properties based in Dubai have joined hands in the first quarter of 2006 for investments within the country. Nowadays most of real estate focus is on shopping malls and residential complexes. In some areas down south, the thrust is on IT parks, and corporate offices and resorts. However, on the other side everyone or every other executive does not feel the real estate sector in India is being well marketed or managed. Yes, there are some gray areas, which need to be covered up. For instance, foreigners who wish to invest or firms who are looking at Indian partners are feeling the crunch of bureaucracy and familial ways of working. This obviously makes it difficult for them to do business. The potential is there but it needs to be tapped wisely. A proper way is to have real estate marketing with the right professionals. Everyone wants to cash on the business.
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Some Specifics of the Marketing trends.
Real estate is the big limiting factor. While the government is the largest landowner in the country, very little has been done by way of real estate reforms. As real estate prices are sky high, most of the development work is taking place in out-of-town locations, like Gurgaon . But the real revolution will take place when the government allows redevelopment of space within the city centre where the consumers traditionally live. A For example, if we take New Delhi, South Extension (an up market shopping centre in the southern part of the city) seems, in many ways, a shopper's nightmare. There is no access; there is no proper parking area. In short, there has been no standardization in terms of development of that area as a retail option.
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Reasons to choose Investors Clinic :
» Brand Recognition: Investors Clinic has signed Yuvraj Singh as brand ambassador. » Largest Firm: Investors Clinic is the largest Real Estate consulting company of India with the strength of 1200+ marketing experts. » ROI: Real estate being the most flourishing sector in India, there is a high return on investment in this business. » Investor Clinic marketing expertise: Customer focus and knowledge driven real estate consulting company has ability to generate leads and build Investors Clinic as a brand through various media channel like print, electronic, Online, OOH, Carnivals etc. » Leading Developer Tie-ups/Channel Partner: Investors Clinic is working with all top real estate developers in India, also exclusive channel partners for lot of TIER I developers. » Track Record: Investors Clinic had sold more than 40000 properties till date, revenue generated of INR 110 cr in last financial year 2010-11.
» Awards & Accolades received: Investors Clinic has numerous awards in real estate sector globally. Investors Clinic has become multi-million in a short span of time. All the glory goes to a clear visionary Mr. Honey Katiyal (CEO, Investors Clinic) and also due to aggressive, passionate and dedicated team which made this unorganized sector into an organized sector.
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Infrastructural changes in Real Estate.
Real estate emerged as the popular sector for private equity funds who invested US$1,700 million in this sector during 2011. Private equity in real estate projects will fetch considerable returns by next year-end or early 2013, as per Vikram Hosangady, Partner, KPMG. Some of the recent investments in this sector are mentioned below:
Sahara India has joined hands with the US-based Turner Construction Company. The JV, Sahara Turner Construction, will build integrated townships called Sahara City Homes and other Sahara India projects in India worth US$ 25 billion over the next 20 years DLF acquired the additional 26 per cent stake in its joint venture company—DLF Hotels & Hospitality Ltd (DHHL)—from Aro Participation Ltd and Splendid Property Company Ltd, affiliates of Hilton International. At present, the company holds 74 per cent equity in DHHL Pride Group of Hotels, which owns a chain of upscale mid-market and business hotels is planning to set up a series of new properties and this will involve an investment of Rs 1,000 crore (US$ 203.18 million) over the next few years. The company plans to have a mix of owned and managed properties having 3,500 rooms by 2015-16
Government Initiatives
The foreign direct investment (FDI) up to 100 per cent is allowed with Government's permission for developing townships and settlements New home loan borrowers of up to Rs 1.5 million (US$ 30,477) will get Rs 14,865 (US$ 302) as interest subsidy from the Government, on the condition that the cost of the house should not exceed Rs 2.5 million (US$ 50,798) Allowing 100 per cent FDI under the automatic route in development of Special Economic Zones (SEZ), subject to the provisions of Special Economic Zones Act 2005 and the SEZ Policy of the Department of Commerce
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In the Union Budget 2011-12, Mr Pranab Mukherjee, Union Finance Minister presented various initiatives for the real estate sector, especially focussing on affordable housing. Some of these initiatives are listed below:
Increasing the limit on housing loans eligible for a 1 per cent subsidy in interest rates Widening the scope for housing under "priority-sector lending" for banks, making interest rates cheaper on them Allocating substantial amount to the Urban Development Ministry for spending on extension of Metro networks in Delhi, Bengaluru and Chennai Earmarking US$ 20.03 million for the urban infrastructure development project. The Urban Development Ministry received US$ 1.5 billion, an increase of US$ 68.53 million from the last fiscal 2010-11
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Determinants of Real Estate Growth in India
The real estate action is no longer limited to the large metropolises of India but has now permeated to the burgeoning smaller towns and cities. These emerging centres of growth are lending sparkle to India's booming economy. What is leading this transformation? The upswing of the Indian real estate sector has been an outcome of a number of positive micro and macro factors. Consistent and sustaining GDP growth, expanding service sector, rising purchasing power and affluence, proactive and changing government policies have all lent momentum to this rapidly growing sector. Accounting for almost 80 per cent of the total office space absorption, the Indian IT/ITES sector has been the primary demand driver. India's low cost-high quality and productivity model has given it a leadership position in the outsourcing arena. In a bid to scale up their operations and to remain globally competitive, the Indian IT/ITES companies are exploring the smaller towns and cities. Rising manpower and real estate costs, plaguing attrition levels and very often risk mitigation have been the key reasons for this movement. Positive economic growth has also translated in rising disposable incomes and growing aspiration levels across India. Rising consumerism has created a demand for new retailing and entertainment avenues. Realising that consumers across cities have similar needs, albeit the scale may vary, new age retailers are vying to cash in on the first mover advantage and are expanding into hitherto unexplored smaller cities.
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Advent of organised retailing has also translated into real estate growth in these emerging locations. Growth of the Indian 'Rich' (annual income>$4,700) and 'Consuming' (annual income $1,000-4,700) class coupled with falling interest rates and other fiscal incentives on home loans has increased the affordability and the risk appetite of the average Indian consumer thereby leading to a substantial rise in demand for housing.
This has been further fueled by the increase in the size of 25-55 age group of earning population and the emergence of double income, nuclear families. Over the last decade the average age of Indian home loan borrower has reduced by 10 years. Another variable facilitating real estate growth in India is the growing urbanisation. According to United Nations Population Division, the urban population in India will continue to grow at a rate of 2.5 per cent per annum for the next two and a half decade. As per the Census of India 2001, 41 per cent of the total population of India will be living in urban areas by 2011. The number of cities with a population of one million or more is also is expected to double from 35 recorded in 2001 to 70 by 2005. This increase in population will generate incremental demand for housing and other real estate components. All these factors together with increased liquidity in the real estate sector through the international real estate funds and private equity funds will result in radically transforming the real estate landscape over the next 3-5 years. India's investment scenario is already undergoing a sea change and has been seen to be making roads in rural India with telecom, rural retailing, agricultural supply chain and logistics facilities, micro-credit, etc. All these factors foretell that the real estate growth will soon spread out of the established boundaries.
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However, to support this growth and to make it more expansive, a lot needs to be done. Foremost is thethrust on infrastructure.
According to a World Bank estimate, India needs to invest an additional 3-4 per cent of its GDP on infrastructure to sustain its current levels of growth and to spread the benefits of growth more widely. Some positive steps have already been taken in this direction. Huge investments in infrastructure to the tune of $350 billion have been envisaged over the next five years. Connectivity may get a boost with the completion of 13,000 kms of roads under the Golden Quadrilateral, North-South-East-West corridor and with 4-laning of all the major national highways. This will further facilitate the economic development of smaller towns and cities in the country. Major real estate destinations of the country and some other emerging towns can be classified into three broad categories depending upon the stage of real estate development that each one of them is undergoing. As the Indian real estate sector moves higher on the growth curve, a number of state capitals and smaller cities which have relatively better infrastructure and are able to support higher economic growth have come into limelight. These emerging growth centres are characterised by low real estate costs, availability of land for development, untapped manpower pool and rising quality of life. Many of these towns have industrial and tourism driven economic base that can be leveraged for growth. Anticipating the latent demand in these markets, a number of real estate developers and retailers have chalked out expansive plans to harness the opportunity.
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Category Cities Tier I Bangalore, Mumbai and NCR
Characteristics *Fairly well established real estate market *Demand drivers quite pronounced
Tier II
Hyderabad, Pune, Chennai and Kolkata
*Growing real estate markets *Experiencing heightened demand and investments *Real estate markets yet to establish *Perceived to have substantial potential demand
Tier III Chandigarh, Ludhiana, Lucknow , Guwahati, Bhubaneswar, Jaipur, Ahmedabad , Surat , Nagpur, Indore, Goa , Vishakapatnam, Mysore, Coimbatore, Kochi, Vijaywada, Mangalore, Trivandrum and Baroda Summing up The study and analysis of the emerging growth centres of India has brought in to light several interesting facts. For arriving at the most attractive destination from among the 15 cities presented in this report, an analysis of five key parameters was undertaken. These parameters, as presented below, were selected on the basis of key decision making factors that are taken into consideration while choosing a location over another. Each of these parameters were further divided into sub-parameters and weights were assigned to each of them. The weights
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assigned were in accordance to the relative importance of these variables in determining the future attractiveness of a location.
Real estate -- In today's scenario, real estate is a major determinant of the general attractiveness of a city. Sub-parameters like real estate cost, availability and outlook were the variables considered here. These variables are decisive factors behind a corporate as well as an investor's plan to enter a city. Cost advantages have been seen to tilt the scales in favour of a Tier II or Tier III city, away from the established Tier I cities of the country. While high real estate cost in a city may bring down the attractiveness, good availability of real estate and positive outlook may push up the rating of that particular city. People -- People form the foundation of a city's strengths. Market potential of a city depend upon several people factors like decadal growth, purchasing power of the population as well as the literacy rate. These sub-parameters depict whether a city has the requisite catchment for retail success, as a city with high decadal growth and purchasing power would also denote a strong consumer base. Besides, a city with high literacy rate would score well as literacy is a reflection of general awareness level of the city populace.
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Physical infrastructure -- The presence of quality physical infrastructure in a city bears importance as poor infrastructure could increase costs, thereby negating the cost advantage of locating in a Tier III city. Sub-parameters like road and air connectivity entail logistical advantage, easy commutability and a better set up for the organisations to conduct their businesses. Further, other sub-parameters like the telecom and power supply situation of a city provide the basic amenities to an IT/ITES establishment. These factors act as cost variants and affect the general attractiveness of a city. Social infrastructure -- The social infrastructure of a city is also acknowledged as one of the key decisive factors in a city selection exercise. Many corporates are driven by cost constraints and prefer to locate to cities with lower cost of living. Therefore, the sub-parameter of cost of living could take up or bring down the overall attractiveness of a city. Presence of quality educational institutes is another important subparameter and implies a qualified workforce in the region. Besides, it also provides employees with an incentive for relocating their families when a transfer to that particular location is proposed. Other social sub-parameters like hotels and entertainment avenues act as business support facilities. Business environment -- Congenial business environment of a city is important for the smooth functioning of an organisation. Sub-parameters of progressive government policies and positive state of economy of a city score high on the overall general attractiveness of a city. The investment scenario of the city is another important sub-parameter to determine the optimism in the business environment.
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These factors also determine the efficiency of conducting business in a particular city. Our study reveals that currently Chandigarh leads the way on the real estate front, owing to its ready availability of quality residential and office space with good prospects for future development. Kochi, witnessing hectic real estate development and being actively promoted as an IT/ITES destination by the state government, follows Chandigarh. Cities of Bhubaneswar, Ahmedabad, Nagpur and Mysore are next and rank equally on this parameter. This implies that all these four cities are evolving real state destinations and poised to take a quantum leap ahead. Guwahati and Surat score low on the real estate parameter as real estate development in both the cities is still in the infancy stage.
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Challenges ahead for Indian real estate industry
No doubt, Indian real estate has seen a sustained upsurge in recent years, but there are number of issues and challenges confronting the industry. Maharashtra’s draft housing policy is all set to be completed this month and will look into the areas of affordable housing, rental housing, transparency among other things. The best part about all this is that state government has accepted its role as a facilitator and enabler and is making attempts to erase the constraints faced by the real estate industry. ―The government could not be a mute spectator to the rising prices in residential real estate and affordable housing was a objective which it was striving towards,‖ pointed out SS Kshatriya, Principal Secretary, Housing Department, Government of Maharashtra. He also added that the sale and purchase of property on carpet area basis would be made mandatory. When asked about the issue of having a regulator for real estate, he said, ―When you liberalize a segment of industry, there is corresponding requirement for regulation, and real estate will follow power and telecom, in terms of having a regulator.‖ In my opinion, spectre of rising prices in real estate may need to be regulated as well, but if the industry would do it by itself there might not be the need for state government to step into the regulation aspect as regards to pricing levels. If experts are to be believed, the emphasis should be on creation of new areas with infrastructure and facilities rather than further developing existing urban areas. At present, land costs constitute around 50 percent of the total project cost and was largely responsible for the high prices. Until and unless supply increases, through freeing up of land locked under the Urban Land Ceiling and Salt Pan reservations, the concept of reduced prices will remain just a mirage. If one flat is chased by ten buyers, prices will always rise. ―While the unchecked speculation in North India has resulted in a price correction, other parts of the country have not witnessed a change in prices as yet,‖ pointed out Anuj Puri, Country Head, Jones Lang LaSalle Meghraj.
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The challenge lies ahead as to how to provide housing solutions for all segments. The government should go out of city centres and develop infrastructure. The secret of reducing prices is to create surpluses and that is only possible if restraints on FDI are removed.
The Renewal of the Sector: Some Innovative Experiences
10 Innovative Ways You Can Invest in Real Estate
1. Single-family rental – Many real estate investors start with their own home that is kept when a move is required to follow a career move to another location. The home is rented to a tenant and maintained over the distance. Rental income is used to pay the expenses to maintain the property. 2. Multi-family rental units – Duplex and four-plex housing units are purchased for rental income that is used to pay-off the property and maintain the condition. As property values increase, the units are updated or the entire building is sold for a profit that will be used in the next venture. [Kevin] Downside of this is that you have to manage the tenants, and from some of the stories I’ve read as well as personal experiences, this isn’t always fun! 3. Conversion property – Zoning laws within a city will often change the purpose of a property from residential to commercial. The investor can purchase a property within the reclassified zone and remodel the interior to serve a commercial purpose. Old homes with appealing exteriors become fascinating office spaces and the rental income can be substantially higher than simply renting the home as a residential property. [Kevin] I’ve seen this happen to small homes near busy roads. Some of these can become quite nice offices for accountants or notaries. 4. Passive landlord – When a buyer purchases a commercial or residential property and hires a property manager, the owner is considered passive. All maintenance and tenant interaction is handled by the manager. Properties that are owned in distant places are often managed professionally.
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5. REITs (Real Estate Investment Trust) – A fund created by a corporation that uses investors’ money to purchase and then manage investment real estate properties. To avoid federal income taxes, the corporation must pay out 90% of the annual profits in dividends to the investors every year. REITs are bought and sold on major financial exchanges in the same manner as stocks and bonds. 6. Real Estate Investment Group – A smaller fund where investors can participate in multi-unit ventures and the company manages the units. Each investor owns whole units that are then managed to collect rent and find tenants. The company retains a portion of the rent as payment for services. One advantage to this approach is the protection against income loss when the unit is vacant. Each investor contributes a certain amount of their monthly income to a fund to pay fellow investors when their units are vacant. 7. Leverage – Investors with an excellent personal credit rating can qualify for a second mortgage on their primary residence and invest only a fraction of the price of the rental property as a down payment. As long as the property is rented, the mortgage is covered and the property will gain value prior to a future date when it is sold. The loan payments are maintained, but the other property is leveraged as collateral on the loan for the rental property. Veterans can also compare VA home loan rates . [Kevin] This is a way that many have expanded their real estate holdings, but it only works well when prices are rising and rates are not too high. Such a strategy can crush you if you go overboard and leverage 5-6+ homes, and then prices fall. 8. Flipping property – Homes that have fallen into disrepair or commercial properties that are standing idle will be purchased in auctions or bank sales. Money invested in improving the property will become profit in the sale of the property. Many flipped properties are never inhabited prior to the sale.
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9. Appreciation of property – Rental properties that are held for a number of years will earn rental income and increase in market value. When the property is sold and a profit is realised, many real estate investors will take the entire yield from the sale and purchase two properties to expand their holdings. Location is the primary factor in the rate of property appreciation. 10. Buy below market – Real estate markets that fluctuate radically can be prime markets for investors with a keen sight for the upward turns. Every market will eventually recover from large drops in value, so the smart investor watches the area and buys at the lowest price. As the area recovers, the property is sold while the prices are still rising. [Kevin] I agree with this, and another tip is also to look for those looking to leave an area quickly or those that are fed-up with the property management game. They will often sell at a better price than those that are willing to wait for the best offer. Reams have been written about each of these techniques for real estate investment. Careful research will provide all the information necessary for educated decisions about the best method of investing. Consult a financial advisor to determine the threshold of investment that is affordable within your portfolio.
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Road Ahead
Real estate plays an important role in the Indian economy. This sector happens to be the second largest employer after agriculture and is expected to grow at the rate of 30 per cent over the next decade. The size of the Indian real estate market is expected to touch US$ 180 billion by 2020. The housing sector alone contributes to 5-6 per cent of the India's GDP. Retail, hospitality and commercial real estate are also growing considerably, providing the much-awaited infrastructure towards India's growing needs. According to a study by ICRA, the construction industry in India ranks 3rd among the 14 major sectors in terms of direct, indirect and induced effects in all sectors of the economy. A unit rise in construction spending generates five times the income, having a multiplier effect across the board. With backward and forward linkages to over 250 ancillary industries, the positive effects of real estate growth spread far and wide. Therefore, real estate acts as a catalyst for adding momentum to growth of the Indian economy.
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Conclusion
This is a project which comprises of all the marketing strategies of Real Estate. Real Estate market in India, Determinants of Real Estate growth. Where, how & when to invest, infrastructural changes in this market, Operations of Investors Clinic in the market, achievements of Investors Clinic. Hence, this is the project which has everything related to the operations and future aspects of growth in real estate market in India.
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Bibliography
www.google.com www.investors-clinic.com www.indiaproperty.com www.timesproperty.com
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On
―REAL ESTATE- INDIAN MARKET‖
INVESTORS CLINIC
(REAL ESTATE CONSULTANTS)
Submitted in partial fulfillment of the requirements of the Two-Year full-time Post Graduate Diploma in Management Programme PGD-IB
Submitted to: Prof. S.P. Ketkar
Submitted by: Sugam Guglani FT-10-IB-852
INSTITUTE FOR INTEGRATED LEARNING IN MANAGEMENT Graduate School of Management
16, Knowledge Park-II GREATER NOIDA.
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DECLARATION FORM
I hereby declare that the Project work entitled ―REAL ESTATE – INDIAN MARKET‖ submitted by me for the Final Report during the Two-Year Post Graduate Diploma in Management Program to Institute for Integrated Learning in Management, Greater Noida is my own original work and has not been submitted earlier either to IILM GSM or to any other Institution for the fulfillment of the requirement for any course of study. I also declare that no chapter of this manuscript in whole or in part is lifted and incorporated in this report from any earlier / other work done by me or others.
Place Date
: Faridabad, Noida. : 23.03.2012 SUGAM GUGLANI
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ACKNOWLEDGEMENT
This Report is all about INVESTORS CLINIC. and what its role in developing the economy of the country. It has been a good experience and we would like to thank our faculty Prof. Pitamber Dwivedi and Prof. S.P. Ketkar under whose guidance and assistance I made this project. I am very grateful for the support he gave and the way he helped me in compiling this project. While doing the report I came to know about many strategies which a company should use and the importance of Real estate in corporate world. It was a nice experience and this surely will play a vital role in my near future.
SUGAM GUGLANI PGDM (IB) FT-10-IB-852
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TABLE OF CONTENTS
Chapter No. CONTENTS Declaration Form Acknowledgement Executive Summary Objective of the Project Introduction of REAL ESTATE MARKET 1. Introduction of INVESTORS CLINIC 2. Mission & Vision 3. Real Estate- India 4. Some Specifics of Marketing Trend 5. Reasons to choose Investors Clinic Infrastructural Changes in Real Estate Determinants of Real Estate Growth in India 6. Challenges & innovative experiences 7.
8. 9. 10. Road Ahead Conclusion Bibliography
Page No.
6 7-10 13 14-15 17 18-19 20-26 27-30 31 32 33
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EXECUTIVE SUMMARY
This project is aimed at understanding Real Estate Marketing strategies, and govt. schemes with respect to real estate uplifment. The project begins with the introduction of the company i.e. company profile. This part companies history, profile, market performance, products and various facilities. So, in consideration my project is all about Order Sales strategies in Real Estate Department. To know the process that how it works, how order came and further executed and all other related fields like understanding the different markets, payment methods which is being learning a great experience and will help me in my future.
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Introduction
The Indian economy has witnessed robust growth in the last few years and is expected to be one of the fastest growing economies in the coming years. Demand for commercial property is being driven by India's economic growth. Real estate in India contributes about 5 per cent to India's gross domestic product (GDP). The total revenue generated in 2010-11 stood at US$ 66.8 billion. Demand is expected to grow at a compound annual growth rate (CAGR) of 19 per cent between 2010 and 2014—Tier 1 metropolitan cities are projected to account for about 40 per cent of this. Growing requirements of space from sectors such as education, healthcare and tourism provide opportunities in the real estate sector. FDI of more than US$ 9 billion was infused in real estate in the last decade. In 2010, over 11 per cent of total FDI in India was in the real estate sector. There have been 110 deals in this sector during the period 2001 to the first half of 2011. Urban population has been increasing and is expected to cross 590 million by 2030. Urbanisation and growing household income are some of the major factors that influence demand for residential real estate and growth in the retail sector. Real estate is "Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature; an interest vested in this; (also) an item of real property; (more generally) buildings or housing in general. Also: the business of real estate; the profession of buying, selling, or renting land, buildings, or housing
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Introduction of investors Clinic
Envisioned, initiated and managed by a visionary real estate professional, Mr. Honey Katiyal, Investors Clinic has registered phenomenal growth over the past few years and has emerged as North India's leading real estate consultancy that specializes in providing professional and independent consulting services to individual and institutional investors interested in investing in the real estate sector in India. Since its inception, Investors Clinic has established itself as a leader in the domains of valuation and real estate consulting services. His mission of Investors Clinic is to enable its clients in creation of value by empowering them to analyse and capitalize upon the vast real estate opportunities abundant in the Indian market. We aim to assist all our clients to properly analyze their invest portfolio and long term needs, formulate winning strategies and implement proven methodologies to enhance the net worth of their investment portfolios. Investors Clinic provides wide-ranging services including due diligence, selection, buy and sell transactions and management of property portfolios. We also specialize in promotion and marketing of real estate projects being executed in Delhi-NCR, especially those in Noida, Greater Noida, Noida Extension and Ghaziabad. Investors Clinic is an ISO 9001:2000 certified real estate consultancy that offers independent consultancy to its clients, in accordance with international professional and ethical standards.
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They have catered to numerous national and international clients belonging to various business domains. As a real estate company we have been redefining the standards of real estate and with our years of experience, we offer a wide range of services to fulfill our client's need. There bouquet of services includes but is not limited to
Investment Advisory Valuation & Due Diligence Property Management Marketing and promotion of real estate projects Corporate & Retail Loan Services
Our efficient and effective services have enabled us to domestic and global giants as satisfied clients. Investors Clinic has earned a strong reputation in the real estate industry as we strongly work for the satisfaction of our customers. We have catered to numerous national and international clients belonging to various business domains. As a real estate company we have been redefining the standards of real estate and with our years of experience, we offer a wide range of services to fulfill our client's need. INVESTORS CLINIC is an ISO 9001:2000 certified company operating across the globe. They deal in all kinds of property needs, whether it is industrial, commercial, residential or farm lands. Investors Clinic has earned a strong reputation in the real estate industry as they provide efficient and effective solutions and work for the satisfaction of the customers. They have catered to numerous national and international clients belonging to various business domains. As a real estate company they have been redefining the standards of real estate business and offer a wide range of services to fulfil their client's need.
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Investors Clinic has more than 4 years of collective experience in the real estate industry. The company’s motto is customer satisfaction at any cost. It's our efficient and effective solution that has given us domestic and global giants as satisfied clients. Investors Clinic has earned a strong reputation in the real estate industry as we strongly work for the satisfaction of our customers. We have catered to numerous national and international clients belonging to various business domains. As a real estate company we have been redefining the standards of real estate and with our years of experience, we offer a widerange of services to fulfill our client's need. We make it our business to understand your financial requirements. We have already served the premier corporate houses in both domestic and international arena. We have more than 2 years of collective experience in this industry. Our expertise is to make your money work for you and manage your investment portfolio .Our motto is customer satisfaction at any cost. WEALTH MAKES YOUR HEALTH, YOU DREAM AND WE DO IT. That is what Investors Clinic is all about. We deal in: Each and everything related to your property needs whether it is industrial, commercial, residential or farm land. To make it more crystal clear please call at the following customer care numbers given on Contact Us Page. Assurance from our end: We assure you to give best of our services & that to with the best competitive price.
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Specialties Real estate: Our Projects: 1- UNIHOMES 3, 2- Krown Plots, 3- Paras Seasons, 4Supertech Eco Village 3, 5- Paramount Emotions, 4- 3C Zing, 5- Supertech Eco Suite, 6- Era Divine Court, 7- Oxford Square, 8Sanskriti - Aapke Aadarsho Ka Ghar, 9- Logix Blossom Greens, 10- Amrapali LA- Residentia, 11- Amrapali Centurian Park, 12- NRI Township (SDS Plots), 13- Paramount Floraville, 14- 16th Avenue, 15- Amrapali Golf Homes, 16Orris Aster Court, 17- Amrapali Leisure Park,
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MISSION OF INVESTORS CLINIC
The mission of Investors Clinic is to enable its clients in creation of value by empowering them to analyse and capitalize upon the vast real estate opportunities abundant in the Indian market. We aim to assist all our clients to properly analyze their invest portfolio and long term needs, formulate winning strategies and implement proven methodologies to enhance the net worth of their investment portfolios.
VISION
Investors-clinic mission blossoms with its vision. At Investors-clinic, we have a mission of making the dreams of our customers true and real in real estates. We strongly combine our vision and mission with WEALTH MAKES YOUR HEALTH, YOUR DREAM AND WE DO IT. At Investors-clinic, for dealers our projects work as nest egg. With a short span of two years, we have already served the premier corporate houses in both national and international arena.
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REAL ESTATE- INDIA
Market forces of demand and supply are the most potent determinants of price and the developments in the real estate industry during year 2011. The stalemate between the buyers and developers is weakening as developers attempt to salvage their position by adopting to the last resort of reducing property prices although in a quiet manner for transactions on table or where a large upfront payment is agreed. Demand for real estate is a derived demand and thus the state of economy has a direct bearing on the sector. Since the slowdown in 2008-09 on the backdrop of global financial crisis, the Indian economy picked up really well in 2009 and 2010. However, a closer look at the quarterly GDP numbers indicates a receding growth sequentially for each of the quarters since Q1 2010 when the economy grew by 9.4%. The latest number for Q3 2011 indicates that the economy’s growth rate has come down to 6.9%. While the world economy was facing pressure of an imminent double dip recession and some European economies risked defaulting on their debt, inflation remained the primary concern for the Indian economy since the beginning of the year. While the central bank’s efforts centered on taming inflation, the fallout was high interest rate and tight credit scenario resulting in to faltering economic growth. Rising corporate governance issues and menace of corruption ensured that decisions on major reforms were delayed. While investment slowed on account of high interest rate and hiatus on major infrastructure projects, government’s ability to increase consumption, as witnessed during the 2008 downturn, was reduced because of rising fiscal deficit. The unfolding of these developments has resulted in a compromised economic growth and the real estate industry has taken the biggest hit. Thus, the year 2011 can be referred as a dull year on account of slack transaction activity, few project launches and stagnant property prices.
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While residential property price appreciated between 10% - 30% in 2010 across major cities like Mumbai, NCR, Bangalore and Chennai, it has declined by up to 10% in 2011. The pace of new project launches has severely been crippled in 2011. During 2010, 3,61,098 residential units were launched across the top 7 cities of Mumbai, NCR, Pune, Kolkata, Bangalore, Chennai and Hyderabad. However, in 2011 only 1,72,856 units were launched. This is a decline of 52% from the last year. Moreover, of the total housing inventory pertaining to the under construction projects, 39% or 3,06,859 units are lying unsold. A substantial portion of this unsold inventory belongs to the NCR market. Mumbai property market was even worse recording a sharp decline in the number of new project launches in 2011. Just about 19,470 units were launched in 2011 in comparison to the 54,968 housing units that were launched in the previous year. This decline of 65% fewer launches highlights the lack of buyer interest in the extremely expensive Mumbai property market. Moreover, 40,660 housing units or 32% of the inventory is lying unsold in the city. Although the situation remained grim throughout the year, there was a stalemate between the buyers and the builders, who remained in a denial mode with respect to lowering the prices. Commercial office space demand, which is driven mainly by the service sector industries like BFSI and IT/ITES, remained muted in 2011. Rentals in the top 7 cities remained under pressure as corporates trimmed hiring plans resulting in to reduced office space requirement. Of the total office stock of 367 mn.sq.ft. in these cities, 24% or almost 89 mn.sq.ft. remains vacant. NCR, Pune, Chennai and Kolkata have a high proportion of vacant stock followed by Mumbai and Bangalore. Hyderabad office market is relatively better placed in terms of the unoccupied stock.
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What is in store for the real estate sector in 2012 remains the biggest question. In terms of the residential segment, the deadlock between the buyers and developers should break in favour of buyers, according to Knight Frank research. As this happens, the pent up demand from the section of buyers that are sitting on fence in anticipation of price correction would translate into improved fortunes for residential property market. Employment scenario, inflation and interest rate have a bearing on the overall sentiment of buyers. Since, houses are bought by people who are confident, these factors will have a role to play and hence cues from the government action will be keenly observed. he realty industry today has changed so much that each sector needs special skills to make it work efficiently. All over the world, prices are fluctuating. Global agencies monitor trends in the top influential cities. With many foreign investments in India and NRIs returning, the Indian property market watch is on the top most of every big agency. Mumbai is the costliest city to live in Asia. To understand real estate marketing one should at least have the minimum knowledge required to step into the complex industry. Out there, plenty of smart operators are looking for suckers. They may not be dishonest but will technically confuse you to pay higher price and outsmart you. Therefore, if you know your onions and the deep layers beyond the skins it helps to get the best. The purchasing power of the new generation of Indians has increased. They are investing in real estate in a big way- in terms of investment and assets. People have acquired refined tastes in housing needs and become professional in dealing with builders. Financial companies and banks have given a boost to real estate marketing as well. To add to this the government has allowed foreign investors also to test the market conditions here have helped. Every area of real estate be it industrial, retail space, malls, office complexes, residential colonies, hospitals, clinics and other healthcare units have a vast potential for growth. As more opportunities grow for people to work they also wish to invest in places close by to live in. Builders or developers in various regions are now separately marketing each space. Even home loan companies and banks are independently marketing the properties they are giving loans. This helps them
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to guide their dedicated clientele and ensure the marketing trends remain closely monitored for future development. They generally have customer relationship executives who are assigned (usually area wise) to assist customers in making decisions. They do have good knowledge, are professionals on the job and customers do benefit if they are not very familiar with various technicalities. Each company has its own marketing device and portfolio to attract customers. Various tie ups with groups in India and overseas have taken place this year with increase in FDI. MGF Developments based in New Delhi and Emmar Properties based in Dubai have joined hands in the first quarter of 2006 for investments within the country. Nowadays most of real estate focus is on shopping malls and residential complexes. In some areas down south, the thrust is on IT parks, and corporate offices and resorts. However, on the other side everyone or every other executive does not feel the real estate sector in India is being well marketed or managed. Yes, there are some gray areas, which need to be covered up. For instance, foreigners who wish to invest or firms who are looking at Indian partners are feeling the crunch of bureaucracy and familial ways of working. This obviously makes it difficult for them to do business. The potential is there but it needs to be tapped wisely. A proper way is to have real estate marketing with the right professionals. Everyone wants to cash on the business.
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Some Specifics of the Marketing trends.
Real estate is the big limiting factor. While the government is the largest landowner in the country, very little has been done by way of real estate reforms. As real estate prices are sky high, most of the development work is taking place in out-of-town locations, like Gurgaon . But the real revolution will take place when the government allows redevelopment of space within the city centre where the consumers traditionally live. A For example, if we take New Delhi, South Extension (an up market shopping centre in the southern part of the city) seems, in many ways, a shopper's nightmare. There is no access; there is no proper parking area. In short, there has been no standardization in terms of development of that area as a retail option.
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Reasons to choose Investors Clinic :
» Brand Recognition: Investors Clinic has signed Yuvraj Singh as brand ambassador. » Largest Firm: Investors Clinic is the largest Real Estate consulting company of India with the strength of 1200+ marketing experts. » ROI: Real estate being the most flourishing sector in India, there is a high return on investment in this business. » Investor Clinic marketing expertise: Customer focus and knowledge driven real estate consulting company has ability to generate leads and build Investors Clinic as a brand through various media channel like print, electronic, Online, OOH, Carnivals etc. » Leading Developer Tie-ups/Channel Partner: Investors Clinic is working with all top real estate developers in India, also exclusive channel partners for lot of TIER I developers. » Track Record: Investors Clinic had sold more than 40000 properties till date, revenue generated of INR 110 cr in last financial year 2010-11.
» Awards & Accolades received: Investors Clinic has numerous awards in real estate sector globally. Investors Clinic has become multi-million in a short span of time. All the glory goes to a clear visionary Mr. Honey Katiyal (CEO, Investors Clinic) and also due to aggressive, passionate and dedicated team which made this unorganized sector into an organized sector.
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Infrastructural changes in Real Estate.
Real estate emerged as the popular sector for private equity funds who invested US$1,700 million in this sector during 2011. Private equity in real estate projects will fetch considerable returns by next year-end or early 2013, as per Vikram Hosangady, Partner, KPMG. Some of the recent investments in this sector are mentioned below:
Sahara India has joined hands with the US-based Turner Construction Company. The JV, Sahara Turner Construction, will build integrated townships called Sahara City Homes and other Sahara India projects in India worth US$ 25 billion over the next 20 years DLF acquired the additional 26 per cent stake in its joint venture company—DLF Hotels & Hospitality Ltd (DHHL)—from Aro Participation Ltd and Splendid Property Company Ltd, affiliates of Hilton International. At present, the company holds 74 per cent equity in DHHL Pride Group of Hotels, which owns a chain of upscale mid-market and business hotels is planning to set up a series of new properties and this will involve an investment of Rs 1,000 crore (US$ 203.18 million) over the next few years. The company plans to have a mix of owned and managed properties having 3,500 rooms by 2015-16
Government Initiatives
The foreign direct investment (FDI) up to 100 per cent is allowed with Government's permission for developing townships and settlements New home loan borrowers of up to Rs 1.5 million (US$ 30,477) will get Rs 14,865 (US$ 302) as interest subsidy from the Government, on the condition that the cost of the house should not exceed Rs 2.5 million (US$ 50,798) Allowing 100 per cent FDI under the automatic route in development of Special Economic Zones (SEZ), subject to the provisions of Special Economic Zones Act 2005 and the SEZ Policy of the Department of Commerce
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In the Union Budget 2011-12, Mr Pranab Mukherjee, Union Finance Minister presented various initiatives for the real estate sector, especially focussing on affordable housing. Some of these initiatives are listed below:
Increasing the limit on housing loans eligible for a 1 per cent subsidy in interest rates Widening the scope for housing under "priority-sector lending" for banks, making interest rates cheaper on them Allocating substantial amount to the Urban Development Ministry for spending on extension of Metro networks in Delhi, Bengaluru and Chennai Earmarking US$ 20.03 million for the urban infrastructure development project. The Urban Development Ministry received US$ 1.5 billion, an increase of US$ 68.53 million from the last fiscal 2010-11
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Determinants of Real Estate Growth in India
The real estate action is no longer limited to the large metropolises of India but has now permeated to the burgeoning smaller towns and cities. These emerging centres of growth are lending sparkle to India's booming economy. What is leading this transformation? The upswing of the Indian real estate sector has been an outcome of a number of positive micro and macro factors. Consistent and sustaining GDP growth, expanding service sector, rising purchasing power and affluence, proactive and changing government policies have all lent momentum to this rapidly growing sector. Accounting for almost 80 per cent of the total office space absorption, the Indian IT/ITES sector has been the primary demand driver. India's low cost-high quality and productivity model has given it a leadership position in the outsourcing arena. In a bid to scale up their operations and to remain globally competitive, the Indian IT/ITES companies are exploring the smaller towns and cities. Rising manpower and real estate costs, plaguing attrition levels and very often risk mitigation have been the key reasons for this movement. Positive economic growth has also translated in rising disposable incomes and growing aspiration levels across India. Rising consumerism has created a demand for new retailing and entertainment avenues. Realising that consumers across cities have similar needs, albeit the scale may vary, new age retailers are vying to cash in on the first mover advantage and are expanding into hitherto unexplored smaller cities.
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Advent of organised retailing has also translated into real estate growth in these emerging locations. Growth of the Indian 'Rich' (annual income>$4,700) and 'Consuming' (annual income $1,000-4,700) class coupled with falling interest rates and other fiscal incentives on home loans has increased the affordability and the risk appetite of the average Indian consumer thereby leading to a substantial rise in demand for housing.
This has been further fueled by the increase in the size of 25-55 age group of earning population and the emergence of double income, nuclear families. Over the last decade the average age of Indian home loan borrower has reduced by 10 years. Another variable facilitating real estate growth in India is the growing urbanisation. According to United Nations Population Division, the urban population in India will continue to grow at a rate of 2.5 per cent per annum for the next two and a half decade. As per the Census of India 2001, 41 per cent of the total population of India will be living in urban areas by 2011. The number of cities with a population of one million or more is also is expected to double from 35 recorded in 2001 to 70 by 2005. This increase in population will generate incremental demand for housing and other real estate components. All these factors together with increased liquidity in the real estate sector through the international real estate funds and private equity funds will result in radically transforming the real estate landscape over the next 3-5 years. India's investment scenario is already undergoing a sea change and has been seen to be making roads in rural India with telecom, rural retailing, agricultural supply chain and logistics facilities, micro-credit, etc. All these factors foretell that the real estate growth will soon spread out of the established boundaries.
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However, to support this growth and to make it more expansive, a lot needs to be done. Foremost is thethrust on infrastructure.
According to a World Bank estimate, India needs to invest an additional 3-4 per cent of its GDP on infrastructure to sustain its current levels of growth and to spread the benefits of growth more widely. Some positive steps have already been taken in this direction. Huge investments in infrastructure to the tune of $350 billion have been envisaged over the next five years. Connectivity may get a boost with the completion of 13,000 kms of roads under the Golden Quadrilateral, North-South-East-West corridor and with 4-laning of all the major national highways. This will further facilitate the economic development of smaller towns and cities in the country. Major real estate destinations of the country and some other emerging towns can be classified into three broad categories depending upon the stage of real estate development that each one of them is undergoing. As the Indian real estate sector moves higher on the growth curve, a number of state capitals and smaller cities which have relatively better infrastructure and are able to support higher economic growth have come into limelight. These emerging growth centres are characterised by low real estate costs, availability of land for development, untapped manpower pool and rising quality of life. Many of these towns have industrial and tourism driven economic base that can be leveraged for growth. Anticipating the latent demand in these markets, a number of real estate developers and retailers have chalked out expansive plans to harness the opportunity.
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Category Cities Tier I Bangalore, Mumbai and NCR
Characteristics *Fairly well established real estate market *Demand drivers quite pronounced
Tier II
Hyderabad, Pune, Chennai and Kolkata
*Growing real estate markets *Experiencing heightened demand and investments *Real estate markets yet to establish *Perceived to have substantial potential demand
Tier III Chandigarh, Ludhiana, Lucknow , Guwahati, Bhubaneswar, Jaipur, Ahmedabad , Surat , Nagpur, Indore, Goa , Vishakapatnam, Mysore, Coimbatore, Kochi, Vijaywada, Mangalore, Trivandrum and Baroda Summing up The study and analysis of the emerging growth centres of India has brought in to light several interesting facts. For arriving at the most attractive destination from among the 15 cities presented in this report, an analysis of five key parameters was undertaken. These parameters, as presented below, were selected on the basis of key decision making factors that are taken into consideration while choosing a location over another. Each of these parameters were further divided into sub-parameters and weights were assigned to each of them. The weights
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assigned were in accordance to the relative importance of these variables in determining the future attractiveness of a location.
Real estate -- In today's scenario, real estate is a major determinant of the general attractiveness of a city. Sub-parameters like real estate cost, availability and outlook were the variables considered here. These variables are decisive factors behind a corporate as well as an investor's plan to enter a city. Cost advantages have been seen to tilt the scales in favour of a Tier II or Tier III city, away from the established Tier I cities of the country. While high real estate cost in a city may bring down the attractiveness, good availability of real estate and positive outlook may push up the rating of that particular city. People -- People form the foundation of a city's strengths. Market potential of a city depend upon several people factors like decadal growth, purchasing power of the population as well as the literacy rate. These sub-parameters depict whether a city has the requisite catchment for retail success, as a city with high decadal growth and purchasing power would also denote a strong consumer base. Besides, a city with high literacy rate would score well as literacy is a reflection of general awareness level of the city populace.
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Physical infrastructure -- The presence of quality physical infrastructure in a city bears importance as poor infrastructure could increase costs, thereby negating the cost advantage of locating in a Tier III city. Sub-parameters like road and air connectivity entail logistical advantage, easy commutability and a better set up for the organisations to conduct their businesses. Further, other sub-parameters like the telecom and power supply situation of a city provide the basic amenities to an IT/ITES establishment. These factors act as cost variants and affect the general attractiveness of a city. Social infrastructure -- The social infrastructure of a city is also acknowledged as one of the key decisive factors in a city selection exercise. Many corporates are driven by cost constraints and prefer to locate to cities with lower cost of living. Therefore, the sub-parameter of cost of living could take up or bring down the overall attractiveness of a city. Presence of quality educational institutes is another important subparameter and implies a qualified workforce in the region. Besides, it also provides employees with an incentive for relocating their families when a transfer to that particular location is proposed. Other social sub-parameters like hotels and entertainment avenues act as business support facilities. Business environment -- Congenial business environment of a city is important for the smooth functioning of an organisation. Sub-parameters of progressive government policies and positive state of economy of a city score high on the overall general attractiveness of a city. The investment scenario of the city is another important sub-parameter to determine the optimism in the business environment.
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These factors also determine the efficiency of conducting business in a particular city. Our study reveals that currently Chandigarh leads the way on the real estate front, owing to its ready availability of quality residential and office space with good prospects for future development. Kochi, witnessing hectic real estate development and being actively promoted as an IT/ITES destination by the state government, follows Chandigarh. Cities of Bhubaneswar, Ahmedabad, Nagpur and Mysore are next and rank equally on this parameter. This implies that all these four cities are evolving real state destinations and poised to take a quantum leap ahead. Guwahati and Surat score low on the real estate parameter as real estate development in both the cities is still in the infancy stage.
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Challenges ahead for Indian real estate industry
No doubt, Indian real estate has seen a sustained upsurge in recent years, but there are number of issues and challenges confronting the industry. Maharashtra’s draft housing policy is all set to be completed this month and will look into the areas of affordable housing, rental housing, transparency among other things. The best part about all this is that state government has accepted its role as a facilitator and enabler and is making attempts to erase the constraints faced by the real estate industry. ―The government could not be a mute spectator to the rising prices in residential real estate and affordable housing was a objective which it was striving towards,‖ pointed out SS Kshatriya, Principal Secretary, Housing Department, Government of Maharashtra. He also added that the sale and purchase of property on carpet area basis would be made mandatory. When asked about the issue of having a regulator for real estate, he said, ―When you liberalize a segment of industry, there is corresponding requirement for regulation, and real estate will follow power and telecom, in terms of having a regulator.‖ In my opinion, spectre of rising prices in real estate may need to be regulated as well, but if the industry would do it by itself there might not be the need for state government to step into the regulation aspect as regards to pricing levels. If experts are to be believed, the emphasis should be on creation of new areas with infrastructure and facilities rather than further developing existing urban areas. At present, land costs constitute around 50 percent of the total project cost and was largely responsible for the high prices. Until and unless supply increases, through freeing up of land locked under the Urban Land Ceiling and Salt Pan reservations, the concept of reduced prices will remain just a mirage. If one flat is chased by ten buyers, prices will always rise. ―While the unchecked speculation in North India has resulted in a price correction, other parts of the country have not witnessed a change in prices as yet,‖ pointed out Anuj Puri, Country Head, Jones Lang LaSalle Meghraj.
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The challenge lies ahead as to how to provide housing solutions for all segments. The government should go out of city centres and develop infrastructure. The secret of reducing prices is to create surpluses and that is only possible if restraints on FDI are removed.
The Renewal of the Sector: Some Innovative Experiences
10 Innovative Ways You Can Invest in Real Estate
1. Single-family rental – Many real estate investors start with their own home that is kept when a move is required to follow a career move to another location. The home is rented to a tenant and maintained over the distance. Rental income is used to pay the expenses to maintain the property. 2. Multi-family rental units – Duplex and four-plex housing units are purchased for rental income that is used to pay-off the property and maintain the condition. As property values increase, the units are updated or the entire building is sold for a profit that will be used in the next venture. [Kevin] Downside of this is that you have to manage the tenants, and from some of the stories I’ve read as well as personal experiences, this isn’t always fun! 3. Conversion property – Zoning laws within a city will often change the purpose of a property from residential to commercial. The investor can purchase a property within the reclassified zone and remodel the interior to serve a commercial purpose. Old homes with appealing exteriors become fascinating office spaces and the rental income can be substantially higher than simply renting the home as a residential property. [Kevin] I’ve seen this happen to small homes near busy roads. Some of these can become quite nice offices for accountants or notaries. 4. Passive landlord – When a buyer purchases a commercial or residential property and hires a property manager, the owner is considered passive. All maintenance and tenant interaction is handled by the manager. Properties that are owned in distant places are often managed professionally.
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5. REITs (Real Estate Investment Trust) – A fund created by a corporation that uses investors’ money to purchase and then manage investment real estate properties. To avoid federal income taxes, the corporation must pay out 90% of the annual profits in dividends to the investors every year. REITs are bought and sold on major financial exchanges in the same manner as stocks and bonds. 6. Real Estate Investment Group – A smaller fund where investors can participate in multi-unit ventures and the company manages the units. Each investor owns whole units that are then managed to collect rent and find tenants. The company retains a portion of the rent as payment for services. One advantage to this approach is the protection against income loss when the unit is vacant. Each investor contributes a certain amount of their monthly income to a fund to pay fellow investors when their units are vacant. 7. Leverage – Investors with an excellent personal credit rating can qualify for a second mortgage on their primary residence and invest only a fraction of the price of the rental property as a down payment. As long as the property is rented, the mortgage is covered and the property will gain value prior to a future date when it is sold. The loan payments are maintained, but the other property is leveraged as collateral on the loan for the rental property. Veterans can also compare VA home loan rates . [Kevin] This is a way that many have expanded their real estate holdings, but it only works well when prices are rising and rates are not too high. Such a strategy can crush you if you go overboard and leverage 5-6+ homes, and then prices fall. 8. Flipping property – Homes that have fallen into disrepair or commercial properties that are standing idle will be purchased in auctions or bank sales. Money invested in improving the property will become profit in the sale of the property. Many flipped properties are never inhabited prior to the sale.
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9. Appreciation of property – Rental properties that are held for a number of years will earn rental income and increase in market value. When the property is sold and a profit is realised, many real estate investors will take the entire yield from the sale and purchase two properties to expand their holdings. Location is the primary factor in the rate of property appreciation. 10. Buy below market – Real estate markets that fluctuate radically can be prime markets for investors with a keen sight for the upward turns. Every market will eventually recover from large drops in value, so the smart investor watches the area and buys at the lowest price. As the area recovers, the property is sold while the prices are still rising. [Kevin] I agree with this, and another tip is also to look for those looking to leave an area quickly or those that are fed-up with the property management game. They will often sell at a better price than those that are willing to wait for the best offer. Reams have been written about each of these techniques for real estate investment. Careful research will provide all the information necessary for educated decisions about the best method of investing. Consult a financial advisor to determine the threshold of investment that is affordable within your portfolio.
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Road Ahead
Real estate plays an important role in the Indian economy. This sector happens to be the second largest employer after agriculture and is expected to grow at the rate of 30 per cent over the next decade. The size of the Indian real estate market is expected to touch US$ 180 billion by 2020. The housing sector alone contributes to 5-6 per cent of the India's GDP. Retail, hospitality and commercial real estate are also growing considerably, providing the much-awaited infrastructure towards India's growing needs. According to a study by ICRA, the construction industry in India ranks 3rd among the 14 major sectors in terms of direct, indirect and induced effects in all sectors of the economy. A unit rise in construction spending generates five times the income, having a multiplier effect across the board. With backward and forward linkages to over 250 ancillary industries, the positive effects of real estate growth spread far and wide. Therefore, real estate acts as a catalyst for adding momentum to growth of the Indian economy.
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Conclusion
This is a project which comprises of all the marketing strategies of Real Estate. Real Estate market in India, Determinants of Real Estate growth. Where, how & when to invest, infrastructural changes in this market, Operations of Investors Clinic in the market, achievements of Investors Clinic. Hence, this is the project which has everything related to the operations and future aspects of growth in real estate market in India.
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Bibliography
www.google.com www.investors-clinic.com www.indiaproperty.com www.timesproperty.com
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