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8/3/2019 Indian Real Estate Sector (1)
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REAL ESTATE SECTOR IN
INDIA
www.studygalaxy.com
8/3/2019 Indian Real Estate Sector (1)
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Contents
Growth in Real Estate Sector
Why to Invest In Indian Real Estate Sector
Opportunity of Investor in Indian Real Estate SectorIntegrated Township
Retail Sector and Real Estate Sector
Latest trends of FDIs and Guidelines for FDIs
Real Estate Mutual Funds
Special Economic Zones (SEZs)
Key trends in Real Estate boomMajor players
References Websites
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Growth in Real Estate
Investment of US$320 billion required in next five years ininfrastructure.
Real Estate sector is registering an annual growth rate of30%. Investment of US$ 16 billion expected over the nextfive to six years in Real Estate.
Credit to the housing sector has continued to be strong andbenefited from low interest rates and incentives.
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Growth in Real Estate (C
ontd.)
1.1% of the GDP constitutes FDI in real estate
sector.Returns in India range between 12-15% compared
to 3-4% in the advanced countries.
Merrill Lynch forecasts that the Indian real estate
sector will grow from US$ 12 billion in 2005 toUS$ 90 billion by 2015.
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Why Invest in Indian Real Estate
Sector
The Economy is growing with GDP Rate 9.2%
IT, ITES and Business Process Outsourcing (BPO) India
has shown its expertise in sectors like auto-components,chemicals, apparels, pharmaceuticals and jewellery whereit can match the best in the world.
Presence of a large number of Fortune 500 and otherreputed companies
India is going to produce an estimated
2million newgraduates from various Indian universities during this
year, creating demand for 100 million square feet of officeand industrial space.
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Opportunity in Indian Real Estate
Sector
Commercial Ventures
Retail Outlets and Malls
Sprawling Malls and Multiplexes
Building of Apartments
In Hotel Industry
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Integrated Townships
Central Government permitted setting up integratedtownships at the following places:-
Gurgaon (Haryana)
Hyderabad (Andhra Pradesh)
Mohali (Punjab)
Jaipur (Rajasthan) Bangalore (Karnataka)
Kolkata (West Bengal)
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Retail and Real Estate Sector
Spurt in extremely large retail spaces.
Shopping malls with over 1 million sq ft of space have
become the order of the day. About 20 of these are now at various stages of construction
across the country.
In the National Capital Region (NCR), Unitech's GreatIndia Place has a million square feet (sq ft) of retail space.
In Mumbai, at least 8 malls with over 1 million sq ft. each.
In Bangalore, at least 3 malls with similar dimensions areunder development.
Ludhiana will soon have a 1.6-million sq ft mall by Today
Homes.
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Latest Trends Of FDIs
100% FDI is allowed under automatic route intownships, housing, built-up infrastructure and
construction-development project (including but notrestricted to housing, commercial premises, hotels,resorts, hospitals, educational institutions, recreationalfacilities and regional level infrastructure), subject tocertain conditions.
FDI up to 51% is allowed through FIPB route in singlebrand retail shops.
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Guidelines for FDI in Real Estate
Minimum area to be developed under each project
would be as under: In case of development of serviced housing plots,
a minimum land area of 10 hectares
In case of construction-development projects, a
minimum built-up area of 50,000 sq.mts
In case of a combination project, any one of the
above two conditions would suffice
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Guidelines for FDI in Real Estate
The investment would further be subject to thefollowing conditions:
Minimum capitalization of US$ 10 million for whollyowned subsidiaries and US$ 5 million for joint ventureswith Indian partners. The funds would have to be brought in within six months of commencement of
business of theC
ompany. Original investment cannot be repatriated before a
period of three years from completion of minimumcapitalization. However, the investor may be permittedto exit earlier with prior approval of the Government
through the FIPB.
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Guidelines for FDI in Real Estate
At least 50% of the project must be developed within aperiod of 5 years from the date of obtaining all statutory
clearances. The investor would not be permitted to sellundeveloped plots.
Undeveloped Plots, here will mean where roads,water supply, street lighting, drainage, sewerage, and
other conveniences, as applicable under prescribedregulations, have not been made available. It will benecessary that the investor provides this infrastructureand obtains the completion certificate from theconcerned local body/service agency before he would
be allowed to dispose of serviced housing plots.
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Real Estate Mutual Funds
(REMFs)
SEBI has recently approved the scheme of REMFs/
This scheme has an objective to invest directly orindirectly in real estate property.
The units of REMFs will be compulsorily listed instock exchanges and Net Asset Value (NAV) of thescheme will be declared daily.
SEBIs has permitted to mutual funds companies tolaunch REMFs. It announced that all REMFsplanswill be close ended.
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REMFs (C
ontd.)
REMFs can invest directly in real estate
properties within India, mortgage (housinglease) backed securities, equity shares,
bonds, debentures of listed and unlisted
companies, which deal in properties and
also undertake property development and in
other securities.
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Special Economic Zones
(SEZs)
SEZ is a specifically delineated duty free enclave and isdeemed to be foreign territory for the purposes of trade
operations and duties/tariffs. To augment infrastructurefacilities for export production it has been decided to permitthe setting up of SEZs in the public, private, joint sector or
by the State Governments.
SEZ Act 2005 has now come into effect. SEZ Rules 2006were also issued in February. The above Act and Rulesenable India to leverage SEZs, like many East-Asianeconomies, to push investments and growth to a higherlevel.
Details at: www.sezindia.nic.in
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SEZs (C
ontd.)
So far 63 SEZs are functional.
237 SEZs have been approved.
Total investment in SEZs is expected to be
over US $ 8.8 billion in the next five years.
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Key trends in real estate boom
Legislation
Transaction Costs
Absence of REITs and REMFs
Land Acquisition
Lack of corporatization
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Major Players
Real Estate Developers
DLF Universal
OMAXE Ltd.
ANSAL BUILDWELL Ltd
REVFs/REMFs
Indian companies: IDFC, Kotak Mahindra, DewanHousing Finance, HDFC, etc.
Foreign companies: Blackstone, Dawnay Day,Savvils, Macquarie Bank, etc.
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Major Players Citigroup is investing around $400 million of equity
from a recently raised fund in India.
Hilton Hotels Corporation (HHC) has announced a
joint venture company with DLF Ltd to develop
and own 75 hotels and serviced apartments over7
years.
Dawnay Day International, the UK-based
investment company, plans to invest US$ 1.5
billion in Indian real estate in the next two years.
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References Websites
www.indianground.com
www.indianrealestateforum.com
www.assocham.org
www.sezindia.nic.in
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REAL ESTATE IN INDIA