Major Research Project

SCHOOL OF ECONOMICSDEVI AHILYA VISWAVIDHALYA, INDORE.

AMajor Research Project on

Market Analysis of Real Estate in India

(With special Reference to Indore City)

Submitted for the partial fulfillment of the degreeMaster of Business Administration In (International Business)

(Session 2008-2010)

GUIDED BY: SUBMITTED BY:Mrs. Rachana Jain Mam Suresh Kumar Tailor Lecturer M.B.A.(I.B.) IV SemesterSoE DAVV, Indore SoE DAVV, Indore

DECLARATION

I Suresh Kumar Tailor student of Master of Business Administration

(Intemational Business), School of Economics, Devi Ahilya Viswavidhalya,

Indore declare that I have completed this project on “Market Analysis of Real

Estate in India (With special Reference to Indore City)” in the academic year

2008-2010.

The information submitted is true and original to the best of my knowledge.

Suresh Kumar TailorM.B.A.(I.B.) IV Semester

School of Economics DAVV Indore

CERTIFICATE

TO WHOMSOEVER IT MAY CONCERN

This is to certify that Mr. Suresh Kumar Tailor student of MBA

(International Business), School Of Economics, Devi Ahilya

Vishwavidyalaya, Indore (M.P.), has undergone a Major Research Project on

“Market Analysis of Real Estate in India (With special Reference to Indore

City)”under my guidance and supervision. The work was carried out during

the session of MBA (IB) IVth sem. Jan. 2010 to June 2010.

His work is very much relevant in present circumstances & I am fully

satisfied with the project work and recommend its acceptance in the

partial fulfillment of the award of the degree of Master of Administration.

Mrs. Rachana Jain Lecturer

School of EconomicsD.A.V.V., Indore (M.P.)

ACKNOWLEDGEMENT

I would like to take this opportunity to thanks all those who have provided me

with necessary help over the entire period during the research project.

First and foremost, I would like to extend my sincere gratitude towards

Dr. Ganesh Kawadia (Head-School of Economics, DAVV Indore) for

providing me an opportunity to conduct this project. I am thankful to my

project guide Mrs. Rachana Jain for giving me valuable support as and when I

required. I am also thankful to all other staff without whose cooperation this

project wouldn't have materialized.

I am deeply grateful to Mr. Kantilal Bam Executive Director & Staff of M/s

Hope Textiles Ltd. For helping/guiding me in carrying forward my research.

My heart felt thank to him for devoting his precious time, his cooperation and

directions in using of the information of Indore development Plan &

Guideline.

Also my sincere thanks to the New Siyaganj Market Property Holders

(respondent) without whose cooperation the project would have not

completed.

In the end I would like to thank all friends, Juniors and others who helped me

in completion of this research work.

Suresh Kumar TailorM.B.A.(I.B.) IV Semester

School of EconomicsDevi Ahilya Vishva Vidyalaya

Takshshila Campus Khandwa Road Indore (M.P.)

INDEX

Sr. No. CONTENTS Page No.

1. Title of Project

2. Intoduction

a. Indian Real Estate Investment

b. Real Estate Growth in India

c. Macro Environment in India

d. FDI in real estate

e. Condition for foreign investment in Real Estate in India

f. FDI in Real-Estate -GOI guidelines

g. Implication of GOI guidelines

h. Real Estate Law in India

3. Review of literature

4. Objectives

5. Methodology

6. Analysis of data

a. Characteristics of the Real Estate in India

b. Utilization of Real Estate

c. Most preferred cities for investment

d. Amount of FDI inflows in India

e. Why foreign investors are flocking in India

f. Discouraging, aspect of the FDI policy in Real Estate

g. SWOT Analysis

7. Findings

8. Biblograohy

Market Analysis of Real Estate in India

(With special Reference to Indore City)

Introduction

India is huge with 1.2 billion people, even India’s modest 1.46% population growth

rate (there are 89 countries with faster growing populations) still creates 48,000

new souls each day that have to be fed, clothed and sheltered. While many of

these people are in relatively dire poverty, and therefore are not in the market to

purchase or rent real estate, the rapidly growing middle class is in increasing need

of places to live, offices in which to work and malls in which to shop. And with the

economy growing at 8–9% per year, it is clear that industrial and commercial

capacity is also being added at a pretty fast rate. It is these two factors, population

growth and economic growth, which are the main drivers in the real estate market.

As in any country, there will be periods of under-expansion and over-expansion on

the supply side of this market, with prices and lease rates reacting accordingly, but

the press of population and economic growth will require a long-term expansion in

residential, commercial and industrial real estate development.

Indian Real Estate is witnessing a boom and the scenario keeps evolving with every passing day. Indian

real estate is heating up big time no doubt. It is estimated that Indian real estate is presently growing at

20% per annum. Indian real estate industry is expected to grow beyond $120 billion in the near future. A

key point to note is that the Indian real estate is mostly privately owned, and is a highly unregulated,

unorganized market with huge potential. Indian Real Estate is certainly zooming away in the wake of

current scenario witnessing its being riding on high growth wave. Indian real estate is happening, and a

number of non-real estate companies are entering the sector to leverage the opportunities. Indian real

estate is a growing sector for both investors and people who are looking for a home. Indian real estate is

making rapid strides on the back of country's surging economy. From consultants to financiers to

developers and construction companies, Indian real estate is witnessing a sea change in terms of

operations.India Real Estate is on a rapidly increasing fling over the last few years with the fast developing trend observed in residential developments, malls, commercial centers, IT hubs. With the increase in population, the demand for houses has increased while simultaneous growth also in the IT centers.

Since the liberal policy adopted by the government, Real Estate India has become a lucrative field for the international players to make 100% investments. The fast growth of the India Real Estate boosted a new arena of opportunities in different fields like the metallurgy, raw materials, home decoration, electrical appliances, and finance. The development of Special Economic Zone (SEZ) in India has further favored the growth of the India Real Estate. The rapidly growing Indian real estate market is thus moving towards maturity offering a wide scope for local and international realtors.The India Real Estate is a profitable business for the all interested in the realty business like the developers, consultants and investors.

Top developers in India like the Accord Builders, Appaswamy Real Estates Ltd., DLF, Eldeco, K Raheja Group, Merlin Group, Omaxe, Parsvnath, Ansal, Omaxe, Sobha Developers, Bengal Ambuja, Unitech, Vatika and Sahara Infrastructure among a few have initiated large scale real estate developments in the residential sector catering to all segments of the society.

Real Estate Indore is one of the thriving sectors of the Indore economy. One of the forerunners of the booming real estate industry in Indore, the Indore Development Authority (IDA) was established by the government of Madhya Pradesh as per the regulations of the Madhya Pradesh Town and Country Planning Act of 1973. The objective of this council was to provide spacious, well designed and comfortable apartments and residential housing complexes for the citizens of Indore at affordable prices. The property dealers and real estate agents assist the potential buyers and sellers in all property related matters that include the purchase, sale and lease of all types of property all across the Indian subcontinent. The Madhya Pradesh Housing Board was established as a body corporate under the Madhya Pradesh Griha Nirman Mandal Adhiniyam, 1972 which replaced the earlier similar Act of 1950. The objective of Madhya Pradesh Housing Board is to deal with and satisfying the need of housing accommodation and for matters connected there-with.

The size of the real estate industry in India is estimated to be around US$ 120 billion. As per studies,

this figure is growing at a pace of 30% for the last few years. Majority of the real estate developed in

India (almost 80%) is residential space and the rest comprise office, shopping malls, hotels and

hospitals. This incredible growth is mainly attributed to the off-shoring business, including high-end

technology consulting, call centres and software programming houses. Evidently, this is the ideal time to

invest in the country, even as the policy makers have begun to emphasize on developing adequate

infrastructure for the country.

After agriculture, the real estate sector is the second largest employment generator in India. The

persistent demand from the Information Technology (IT) sector has also impacted the urban landscape

in India. As per estimates, there is demand for 66 million square feet of IT space over the next five

years. Several multinational companies continue to move their operations to India to make the most of

lower costs of skilled manpower and logistics. Human resources being the key element in the IT

industry, the hiring and housing of people, both at their work place and home, has assumed great

significance. As such, there is a persistent need to create space for people to work and live, which in turn

sets off the growth of other allied infrastructure.

PRICE TRENDS IN REAL ESTATE

Real estate markets in most countries experience cycles. The supply and demand

for real estate are rarely in balance for long. As this is written in early 2008, it

appears as though prices have turned soft in many urban areas. Too quick a run up

in prices combined with rising mortgage rates has made residential property much

less affordable and has begun choking off demand. Prices in Mumbai, Delhi and

Bangalore had at least doubled in four years and mortgage rates have raised about

300 basis points since 2005 and there were signs that prices had begun to fall in

some of the hotter markets. However, no one was forecasting anything like the

huge drop in property prices that occurred earlier from 1995.

Price Trend in Indore

Accordingly the Immovable properties' guideline for the year 2010-11 has been released on Wednesday. The hike in the rates of land in this guideline has perplexed every one. In certain localities the prevailing government rates of residential land have been raised by 50 to 100 per cent. There has been marginal increase in the rate of agricultural land.Dr S K Pandey, senior district registrar said guideline for the next fiscal for immovable properties in the district has been released. It has been forwarded to central evaluation committee and will be effective from April 1 after it is approved.The committee has display guideline rates on deputy registrar office's notice board. In this mat- ter public at large can submit written suggestions latest by March 8 to senior district registrar or the deputy registrar concerned. It is learnt through sources that mere single meeting of district valuation committee was convened and lone non-government representative MLA Sudarshan Gupta could not attend it. Collector Rakesh Shrivastava was not in favour of steep hike in guideline rates in view of the prevailing market condition. Municipal commissioner C B Singh was also of the same view.According to sources, rates of residential land in ward numbers 10, 36, 33, 39, 40, 41, 42, 48, 49 and 62 have been hiked by 50-100 per cent while rates in the central part of the city have been raised to some extent. The maximum hike in rates has been effected in eastern and southern areas of the city. Citizens were baffled when they learnt about the rates revised in the guideline released on Wednesday.On the basis of the Immovable Property’s Guideline from the year 2001-2002 to 2009-10 say that the prices increased @ the of

Residential properties are valued in square foot using mean and median price. The property market is divided into two equal parts by the median home price. One half of properties are valued below median and the remaining half above the median price. Due to the flourishing IT sector, the Indian real estate prices have exceeded the median home price.

India Real Estate Price RatesIndia real estate price rates have increased by leaps and bounds over the last few years. Interestingly, this rise in the real estate price rates in India has taken place not only in the big cities but even in the smaller ones.

Ever since India started taking giant strides in the domain of Information Technology, the Indian economy has been growing stupendously, at an average of 8% per year. These factors have led to the increase of the price rates of real estate in India.

Among all the cities in India, Mumbai has the highest real estate prices since Mumbai is the veritable commercial capital of the country. In Mumbai, the real estate price rates are:

Nariman point - 18000 to 40000 per sq.ft. Worli - 12000 to 35000 per sq.ft. Santacruz (west) - 7000 to 14000 per sq.ft. Chembur - 4000 to 7000 per sq.ft.

India real estate price rates have registered a sharp increase in the city of Bangalore as well since this is the city that has witnessed the highest IT boom in the country. In Bangalore, the real estate price rates are:

Brigade road- 3000 to 4600 per sq.ft. M.G road- 2900 to 4000 per sq.ft. White field area- 1700 to 2200 per sq.ft. Vasant nagar- 2000 to 2450 per sq.ft.

India real estate price rates have always been high in Delhi for it is the capital of the country. In Delhi, the real estate price rates are:

Connaught place - 3800 to 4800 per sq.ft. Minto road - 3000 to 5500 per sq.ft. Ashok nagar - 3000 to 5500 per sq.ft. Church road - 3000 to 5500 per sq.ft.

India real estate price rates in the city of Kolkata have risen steadily since Kolkata is being seen as the most promising IT destination now. In Kolkata, the real estate price rates are:

Park Street- 2500 to 3500 per sq.ft. Salt lake- 1100 to 1600 per sq.ft. Ballygunge- 1800 to 2800 per sq.ft. Lake gardens- 1200 to 1500 per sq.ft.

India real estate price rates have registered a sharp increase across the length and breath of the country but the government should take steps and measures to ensure that Indian real estate rates don't soar to an extent that they go out of the means of the average man.

Indore Real Estate Market

These industrial units and educational Institutes have forced the builders in India to develop large-scale housing and residential property in Indore. The commercial properties segment of Indore consists of small retail markets to sprawling shopping malls, amusement parks and entertainment hubs. The office spaces in Indore prime in areas like M G Road, Siyaganj, Hamilton Road and Jawahar Marg. Despite of such an astonishing rate of real estate developments, property prices and rates in Indore are quite nominal and thereby attracting potential investors to reap high capital gains once the real estate market in Indore is fully recognized.

Municipal Corporation of IndoreMunicipal Corporation of Indore came into being in order to provide essential civic infrastructure facilities in the city. The department is a local governing body that deals in making sure the availability of day-to-day needs of the people. It aims at building the city, which should incorporate all necessary amenities required by the people. The obligatory functions of the Indore Municipal Corporation include construction of educational centers, hospitals, dispensaries and houses as well as their maintenance with time. Besides undertaking the development of city roads, bridges and flyovers it also construct recreational centers like parks, community halls, museums and exhibition halls for the people. Nagar Nigam Indore takes measures in advance in order to prevent the spread of epidemics and seasonal diseases. Indore Municipality is also responsible for maintaining heritage buildings and evaluating environmental effects on them.

Including all these community services, the municipal is also in charge of issuing birth and death certificates and keeping a track of the growing population in the city. Municipal Corporation Indore / Nagar Nigam also levies property tax on residential as well as commercial properties and makes sure the implementation of buildings plans formulated by the state government.

Municipal Corporation in Indore also works for the betterment of slums and has the provision of giving shelters to the homeless. One can also visit their zonal offices, which work for the problems of the respective zones. Indiahousing.com recognizes the value of Municipal Corporation of Indore in efficiently providing essential requirements to the people and gives you the following link for in depth information: Website:http://www.indorenagarnigam.org/

Real Estate Agents in IndoreProperty dealers in Indore have helped develop the real estate market of the city into a professional set up. They provide you with complete real estate services including

property listings in all residential and commercial properties as well as complete assistance for buy, sell or rent of any property within Indore. Also known as real estate agents, property dealers in Indore are your guides for any property deal in the city.

Indore has seen some major real estate developments in the past. Residential group housing has paved its way into the housing markets in Indore, while the commercial properties are registering a rise in the number of state-of-the art shopping and business centers within the city limits. A change in the lifestyle pattern of the city dwellers can clearly be seen since the arrival of mall culture in the city. The number of shopping malls, plazas, multiplexes, entertainment zones and commercial complexes are rising rapidly signifying the change in the traditional trend.

On residential segment, we see the development of townships besides the construction of apartment houses, condominiums, bungalows, villas etc. at several locations. The city has already attracted a number of leading builders for various construction projects. All these development works are preparing the ground for the real estate boom to arrive in the city, which is not too far now. Hence, it seems the right time to invest in Indore properties according to the Industry experts. In such a scenario, the work of real estate agents in Indore gets more significant, as they are the people who set the trend of property development in a city.Indore Development Authority

Indore Development Authority was incorporated by the Government of the State of Madhya Pradesh in 1973 in the place of city Improvement Trust (formed in 1924 under the British Rule) under the Madhya Pradesh Town and Country Planning Act of 1973. The major task of Indore Development Authority Indore is construction of residential / housing societies but along with that it has undertaken several development projects like construction of roadways, traffic square areas and also Krishnapura Lake & Meghdoot Garden, etc.

The main function Indore Development Authority (IDA) is to implement the master plan made by Town and Country Planning Office, Bhopal. Besides this many other functions are performed by IDA, which includes construction as well as extension of roads, developing gardens, constructing railway over bridges, building swimming pool, parks, clubs, petrol pump and it also undertakes plantation work to fulfill its social responsibilities. In this way, IDA works towards improving infrastructure facilities in the city upon which the pace of real estate development depends much.

Indore Development Authority is entrusted with the development of the city according to the master plan. Hence, it becomes mandatory for private developers or builders in Indore to seek permission before executing their plans for residential or commercial construction. If the proposed plan does meet the criteria laid out in the master plan, IDA reserves the right to reject it. Thus, it keeps a control on the growth pattern of the city and helps in the planned development of the residential and commercial properties in IndoreWhether you wish to buy reasonable flats, big duplexes or plots, Indore Development Authority has a provision for all and offers them at the most reasonable prices. IDA Development projects are well planned by their Architects and cater to upper & middle class in accordance with their needs and budget.

If you wish to get further detailed information about their properties, properties and function, visit the following Indore Development Authority Website, provided by indiahousing.com:

Address:7, Race Course, IndorePhone:91-731-53131291-731-243451

Fax:91-731-2430553Website:http://www.idaindore.orgIndore Building ContractorsBuilding contractors in Indore are contributing in the expansion of the city horizontally as well as vertically. They look into the building design prepared by an architect for a housing project and then set out to gather all the resources needed to realize the visualization of developers and landowners. Builders in Indore also help the development authority of the city to build mass houses at reasonable prices. Nevertheless, a humble residential project for individual requirement is also acted upon with much sincerity. The ongoing development of the city has brought modern housing concept, which are increasingly being adopted by these building contractors in Indore. However, for much larger projects, such as the one being developed by Indore Development Authority and commercial complexes require the expertise of big construction companies, which usually possess a good staffs of varying skill sets. As the Indore properties are going great these days, it has become easier to locate builders or more commonly Home Builders anywhere in the city. You can also locate them using the list given below.

Latest Property Developments in IndoreLatest housing projects in Indore let people experience world-class living style within the boundaries of their city itself. The houses being built under such projects offer you the comfort and luxury that are so far unknown to the city dwellers. As the city is well on the path of huge real estate development, which has seen the prices of residential Properties in Indore rising consistently to scale a new height at every time interval, the demand for houses to cater to the needs of different sections of people has increased significantly. Hence, the solutions being provided through latest housing projects are much needed and are well received. You can get a variety of choices under these projects and can avail the facilities at affordable rates. To know more about the most recent housing projects in Indore and also about the projects that are currently being developed, click over the website links provided below.

Indian Real Estate Investments

Investing in India Real Estate is the most profitable business as it involves minimum risk

although one should not forget that the price or value of real estate is unpredictable and

irregular and depends on the forces of the market economy.

India Real Estate Investment has rising demand in every sector like commercial,

residential, retail, industrial and hospitality. But maximum demand is observed in the booming

IT sector. The India Real Estate Investment is facilitated by the liberal economic policies of the

government. Policy changes introduced by the Government in February 2005 allowed 100 per cent

foreign investments in construction projects with fast-track approvals. But the real attraction for foreign

investors is potential investment returns of 25 per cent and more in Indian projects that might be hard to

come by in the US and in Western Europe today.

The most crucial factors for India gaining its status as a highly favored investment destination through

FDI and funds. Property investment doors open for NRIs. The policies set out by the government

regarding property investment and repatriation, has made opportunities of investments in India even

more favorable.

Approximately 94% of the capital investment being made in property is in Mumbai, Delhi and

Bangalore. From Singapore, Lee Kim Tab Holdings is putting down its investment of US$115 million in

a 100-acre township, with commercial and social infrastructure adjoining, near Mumbai. Nevertheless,

the high profile investments which have arrived would have been unheard of as little at 10 years ago.

Real estate experts believe the country will need an investment in the order of US$75 billion to US$90

billion to bridge the expected deficit in housing, with only about 25% of that total being expected from

banks and other institutes, as well as central and state governments.

Factors Favoring India Real Estate Investment:1.Increasing growth in residential properties due to lower interest rates, easy availability of housing finance, rising income, better job prospects and increase of nuclear families. 2.Growth of retail market in India due to increasing demand from retailers, higher disposable incomes and opening up of FDI in Retail.3.Burgeoning IT and ITES industry 4.Growing commercial property market5.Emerging hospitality or hotel industry due to the exceptional boom in inbound tourism and the IT sector6.Development of the special economic zones

Real Estate Growth in India

Real estate maturity in India focuses on three primary areas: commercial, retail and residential.

Commercial Real estate refers to Office space; IT, BPO, KPO space leasing continues to boom with 12

million sft leasing across India; with 6 million square feet in Bangalore, and 7 million square feet

Mumbai.

Growth in commercial office space requirement is led by the burgeoning outsourcing and information

technology (IT) industry. One is a $200-million project for residential and commercial development on

42 acres in Bangalore's prime Whitefield suburb. Industry experts believe that Indian real estate has

huge demand potential in almost every sector - especially commercial, residential and retail.

As an indication of global interest in Indian real estate, LaSalle Partners, a major commercial real estate

firm with headquarters in Chicago, last month announced the opening of an office in New Delhi, India.

In India, banks had never thought of funding a commercial or residential real estate property a decade or

two ago.

Factors favoring Real Estate in India: The factors that favored the growth in the real estate market in this country is the most essential segment of the India Real Estate News. They are like:

Growth in residential properties due to lower interest rates, easy availability of housing finance, rising income, better job prospects and increase of nuclear families.

Exceptional boom in inbound tourism and the IT sector leading to rise in hotel industry

Development of the special economic zones as real estate property Influx of FDI in Retail business Burgeoning IT and ITES industry

Macroeconomic Environment

Powerful demographic impetus

About one in every sixth person on earth lives in India, and the growth rate of the population is still

rapid. The present fertility rate is just over three children per woman. Although considerably lower than

in the 1960s or 70s when women gave birth to an average of five to six children, it is still far higher than

in, say, China (1.7 children per woman) or Europe (1.4 children per woman). Since the lower birth rate

is primarily a reflection of better living conditions in India, the rate of population growth has moderated

to just 1.5% p.a. Since 1970, the improved conditions have also caused life expectancy to increase by 15

years to around 65 years at present. In addition, during this period, infant mortality has been halved. The

high birth rates and fall in infant mortality over the past few decades imply that India's population is

very young. One in every three Indians is under the age of 15, and only one in three is older than 35.

This compares it favorably against China, where nearly 50% of the population is older than 35, and

roughly 60% in Europe.

The three demographic trends, i.e. high but falling birth rate, increasing life expectancy and declining

infant mortality, are expected to persist in the coming. years. Only during the third decade of this

century will the population growth rate drop below

1 %. Consequently by 2030, India looks set to be the most populous country on earth.

By 2050, roughly 1.6 billion people will live on the Indian subcontinent, 200 million more than in

China. The already impressive number of 700 million people of employable age 1 in India is expected to

grow by another 250 million in the next 20 years. Additionally, the valuable economic reform policies.

The economy is booming

In the past ten years, real GDP accelerated to an average of 6% p.a., growing much faster than in earlier

decades. In 2005, real GDP is expected to accelerate at least 8% from the previous period, with

investment to remain a strong impetus to growth. There are at least three reasons for its sustained

acceleration. First, the economic liberalization in the early

1990s has integrated the country into world trade. This has benefited the services sector in particular,

with many companies from the United States and Europe discovering the subcontinent as an attractive

off shoring destination.

Second, India possesses a vast pool of highly skilled technicians and engineers. Some 200,000 engineers

graduate from Indian universities each year, roughly six times as many as in Germany.

But even this large number of graduates may fall short of meeting the strong demand for highly skilled

staff, A survey of Indian headhunters revealed that the number of urban area jobs soared by 21.5% in

2005, with a further 23% forecast for 2006.

This implies that salaries for university graduates are on course to increase markedly. This is already an

ongoing phenomenon. In a publication on salary trends in Asia, Hewitt Associates, a consultancy

illustrated that salaries in India rose by an average of 13.5% in 2005 from 2004, the steepest climb

among the countries reviewed. In the IT industry, pay packets were almost 18% bigger.

Third, public spending on road and transportation infrastructure is expected to climb. This is key to the

government's long-term growth strategy - and will serve as a positive stimulus to the construction

industry.

High growth trend in the long term

the economy and rising investment - will remain the key drivers of India's economic growth in the long

run. Deutsche Bank Research's long-term growth model, Forme-G, depicted India as the growth star

performer over the period 2006 to 2020 among 34 developed and developing economies. This puts it

ahead of China and Turkey. GDP per capita in terms of purchasing power parity (PPP) is expected to

climb by almost 4% a year over the next 15 years, with purchasing power doubling over the period. Real

GDP is expected to average 5.5% - with potential to rise even further to 6%, reflecting India's huge

efforts to build up its infrastructure.

Still major tasks ahead

This development, however, is taking place from a very low base. GDP per capita in nominal and PPP

terms in 2005 was only roughly USD 1,100 and USD 2,800 respectively, reflected in several social

indicators which remain inadequate. For example, although literacy standards in recent decades have

risen to about 65%, this still leaves around 400 million people who are illiterate, lending little scope for

pay increases. In addition, of the 40 million people registered as out of work (equivalent to an

unemployment rate of around 10%) the large majority presumably comes from this

category. But even this masks the true scale of the unemployment problem, given that of

the roughly 400 million people in the workforce, only about 27 million belong to the organised sector.

This implies that more than 330 million people are in the non-organised sector; hence, most are

underemployed. The low industrial base in India could explain the insufficient work for unskilled labour

and why more than 70% of the population still live in rural areas.

Regional differences important

In a vast and heterogeneous country as India it is evidently important whether a property is situated in a

rapidly expanding or a stagnant region.7 India has 28 states, six union territories and the capital Delhi.

Huge income disparities exist between these regions. In Delhi, for example, average net domestic

product (NDP) per person is 150% above the national average, ~hile Bihar in India's northeast - home to

no less than 90 million - is only 31 % of the Indian mean. Major regional differences also exist in terms

of economic momentum. Taking only the larger states with a population of at least 50 million, net

domestic product per capita rose by between 1.5% p.a. in Uttar Pradesh and 5.5% in West Bengal from

1993 to 2001. It is interesting to note that there are no trends towards convergence between the regions - at least, not in the past ten years.

In fact, a positive correlation can sooner be established between the level of NDP per capita from 1993

and the average growth rate up to 2001. Although not very marked, this does become more pronounced

if the statistical ''blip'' Tripura is excluded ftom the sample. This suggests that, if at all, the gap between

the regions has become wider rather than narrower during the upswing.

Finally, the existence of clear business clusters is also striking. In some smaller states the manufacturing

sector is virtually nonexistent, whereas in Goa, Gujarat or Jharkhand industry accounts for almost one-

third of economic output.

Current Scenario of the Real Estate Market in India

Commercial real estate sector is in boom in India. In the last fifteen years, post liberalization of the

economy, Indian real estate business has taken an upturn and is expected to grow from the current USD

14 billion to a USD 102 billion in the next 10 years. This growth can be attributed to favorable

demographics, increasing purchasing power, existence of customer friendly banks & housing fmance

companies, professionalism in real estate and favorable reforms initiated by the government to .attract

global investors

Foreign Investment (FDI) in Real Estate Sectors in India

Foreign Direct Investment is encouraged and permitted, subject to certain conditions, in the following

real estate sectors in India: 1. Hotel Development 2.Tourism 3.Hospitality

4.Township development 5.Developing Commercial Real Estate Built-up infrastructure

6.Housing and construction projects 7.Building Resorts 8.Building Hospitals

9.Building Educational institutions 10.Building Recreational facilities Infrastructure projects:

regional and local level 11.Special Economic Zones (SEZ's)

India Real Estate Developers

India Real Estate Developers forms an integral part of the Indian realty market. They together with the architects, engineers and managers have been successful in bringing about

a revolutionary change in the real estate market in India. Under the sincere efforts of the India Real Estate Developers Indian cities have witnessed a rapid growth in the construction of residential and commercial projects.

The government of India has been playing proactive role in the real estate market by the commencement of the liberal policies, under which along with domestic developers, many foreign builders are coming to participate in the Indian real estate market. The foreign direct investment can be extended to as much as 100% in the construction and development sector.

Factors favoring the growth of the India Real Estate Developers:

1.The increasing growth in residential properties due to lower interest rates, easy availability of housing finance, rising income, better job prospects and increase of nuclear families.

2.The emerging hospitality or hotel industry due to the exceptional boom in inbound tourism and the IT sector.

3.The development of the special economic zones as real estate property.

4.Moreover, the growth of retail market in India due to increasing demand from retailers, higher disposable incomes and opening up of FDI in Retail and the burgeoning IT and ITES industry are also responsible for the boom in the India Real Estate Developers sector in realty market.

Leading real estate developers:

There are many builders in the Indian real estate market of which the major developers are like-1.Ansal API2.Ashiana Group3.DLF Group4.Eldeco Infrastructure5.Hiranandani Developers6.K. Raheja Corp.7.Omaxe Limited8.Parsvnath Developers Limited9.Sahara Infrastructure10.Supertech Group11.Unitech Group12.Emaar MGF

India Real Estate AgentsIndian Real Estate Agents constitute an integral part of the Indian real estate market. They are responsible for providing details about the real estate market to their customers and guide them to meet their requirements without any inconvenience.

The real estate agents work in close coordination with real estate developers, real estate builders, and real estate consultants to help clients. It is due to their successful efforts that at present, the Indian realty market has been witnessing a great boom in the construction of residential, commercial, and recreational projects.

Some of the factors favoring the growth of the numerous upcoming India Real Estate agents are the growing number of residential projects which are made available to potential buyers through easy housing finances. High-end jobs, high disposable incomes, rise in the number of nuclear families, the boom in the tourism industry in India, inclusion of the SEZs within the real estate market of India - all these factors have greatly enhanced the demand for residential property in India. Along with these, the commercial projects are also increasing in number due

to the expansion of the industrial sector in India and the development of the IT industry in general

Some of the leading India Real Estate Agents playing an important role in the real estate market of India are:

Nexzen Agency India Pvt. Ltd. Anoop Asthana Properties Lakshmi Enterprises G.G. Builders Sri Srinivasa Constructions E City Property Management & Services (P) Ltd.

The services offered by the India Real Estate Agents are geared at delivering a wide choice of projects, including residential complex, office, retail, recreational, educational, and governmental buildings to interested buyers. The agents in the Indian real estate are professional in their services and concentrates on the task of providing complete satisfaction to their customers. They also provide valuable consultancy services related to real estate business. Thus, the India Real Estate Agents have successfully made the job of property dealing very comfortable and non-tedious for the clients. Not only this, some of the agent companies of Indian real estate also provide online portals for the convenience of the clients.

Boom in India Real EstateBoom in India Real Estate is being observed in the real estate of not only domestic property but also commercial properties.

According to industry estimates, the value of domestic Indian real estate market is about US$ 14 billion. Again, in the current financial year, 2006-07, it is estimated that the total FDIs will be worth nearly US$ 8 billion and the share of FDI influx in the India Real Estate Market 2007 will be about 26.5%. The boom in India Real Estate is observed in all sectors like the residential, commercial, retail, and recreational projects.

Factors responsible for the boom in India Real Estate:In recent years, India real estate has been in a burgeoning stage in not only the A1-tier cities of India, but also in other Indian cities. Some of the leading factors responsible for this are:

the increase in the population level the growth of the software IT based companies in India the accumulated resource capital with the new young generation working in the IT

companies the presence of NRIs and their interest in investing in the Indian real estate market the liberalization policies taken up by the Indian government to encourage the 100%

FDI participation the introduction of the Real Estate Investment Trust and the Real Estate Mutual Funds the development of the Special Economic Zones all over India into real estates the increase in the concept of nuclear families the rise in the tourism industry of India

There are many domestic as well as international players in the Indian realty business who are responsible for the boom in India Real Estate. Some of the prospective domestic real estate builders are like the Omaxe Constructions, Ansal Properties and Infrastructure, DLF, RMZ Corporation, Rungta Group, Hiranandani Group, Merlin Group, Kalpataru Group, Appaswamy Group of Companies, and K Raheja Group. There are also some foreign real estate developers who had been operating in the Indian real estate business like Lee Kim Tah Holdings, CESMA International Pvt Ltd., Evan Lim, Keppel Land, Salim Group, Emaar Group, Edaw Ltd., IJM, and Ho Hup Construction Co.

Real Estate Indore

Indore is indisputably known as the commercial capital of Madhya Pradesh.  Being one of the fastest growing Tier-III cities of India, it is the single largest business centre of the state commanding most of the volumes in trade, industry and services, over other cities in Madhya Pradesh like Bhopal, Jabalpur and Gwalior.

The real estate in Indore is quite upbeat. Presence of manufacturing units of India’s leading companies like Hindustan Motors, Eicher Motors, Bajaj, Force-Mann, Metalman Group, Nicholas Piramal, Bridgestone, Larsen and Toubro, Pratibha Syntex and Kirloskar Brothers Limited at the adjoining industrial hub of Pithampura plays quite a significant role in economic prosperity of the city and subsequently the simmering business activities have been translating into booming property market in Indore.

A number of software companies like CSC, Impetus Infotech, InfoBeans have also set up their offices in Indore that has tremendously enhanced city's image as a preferred business destination. The electronics complex in the city houses offices of some of the top telecom and electronics companies of the country and the real estate scene in the area is likely to improve further once the undergoing projects of Special Economic Zone (SEZ) and Software Technology Park (STP) turn on ground.

The biggest commercial project in Indore is coming in the form of automobile testing track at Pithampur. With investment to the tune of Rs 5,000 crore, the track will be the largest in Asia. Not to mention that the economic activities in the city will improve drastically once the same gets ready. As for now, a number of national and international automobile giants have already expressed their interest to begin their operations in Pithampura.

Indore has also emerged up as education hub of the central India with Indian Institute of Management (IIM) leading the trail of colleges for professional studies.

Mall culture

You find a booming mall culture in Indore that is nearly absent in other parts of the state. With the success of Fortune Landmark, which is the first mall of the state, three other malls viz. Treasure Island, Mangal City and Orbit have also come up fast to catch up with the flourishing retail business in the city.

As the commercial real estate and retail sector go hand in hand, demand for commercial properties in Indore also has been going up quite significantly.

Real Estate Scenario

With a number of mega projects in the pipeline the real estate market in Indore is going under absolutely amazing phase. Both commercial and residential properties in Indore especially near the proposed SEZ and STP have emerged up as the most popular one.

The industry experts on the other end are of the view that the real estate boom in Indore is yet to arrive and it is the right time to buy property in Indore. From investment point of view as well, purchasing real estate in Indore is a pretty lucrative proposition.

With national real estate developers like Sahara and Vian building their residential townships in Indore, you can avail of housing high in terms of quality and lifestyle.

On the other end, office spaces in Indore in and around MG Road, Jawahar Marg, Siyaganj and Hamilton Road are the hottest one. Interestingly though industry experts find Indore markets being realistically priced and away from speculations.

Madhya Pradesh – centrally located and rich in mineral and agricultural wealth, is on a growth trajectory that equals the pace set by other states which had started their industrialization process much earlier. With the advantage of having one of the best infrastructure services in the country, Madhya Pradesh is a preferred choice for foreign direct investment.

Eredene Capital of UK announced an investment of Rs. 570.5 million in Indore for a 19.52 acre site to develop an integrated retail, office, hotel and residential complex in October 2006. Similar investment from domestic players is also flowing in, encouraged by the MP Government’s commitment to economic development.

The State Government has identified readymade garments and textiles, agro industry, food processing, herbal, electronics and consumer electronics, medical and surgical appliances, automobiles, IT, biotechnology, pharmaceuticals, gems and Jewellery as its ‘focus sectors’. Though a late comer to the IT industry, it is pulling all stops to elevate it to a level achieved by frontrunner cities in India.

The MP Government accorded high priority to road development, and the state today supports a 10,000 km network. It also has the strongest Optical Fibre connectivity in every district.

Madhya Pradesh has set up a Facilitation Centre for Non Resident Indians who have shown keen interest in the investment opportunities in the state. Investments from NRIs in January 2007 amounted to almost Rs.400 billion. This included the Oberoi’s plans for a resort in Khajuraho and Lotus Niko’s hotel and convention centre in Sanchi, both world heritage sites.

The very heart of India is an exciting tourist venue, and Madhya Pradesh holds good opportunities for the hospitality sector to flourish. The tourism strategy outlines strengthenening of basic infrastructure at Orchha, Mandu, Panchmarhi, Kanha, Bandhavgarh, Panna, Satpura, Pench valley, Mandsaur, Mainpat, Tamia, Ujjain, Maheshwar, Omkareshwar, Chitrakoot, Amarkantak, and Rajim, apart from the other major cities in the state.

Real Estate Development in Madhya Pradesh

As in the rest of the country, real estate in Madhya Pradesh is growing proportionately with economic development. MP’s ambitious growth plans have seen India’s first “Greenfield” SEZ in Indore. The city also boasts of specialized infrastructure at the 21 acre Crystal IT Park and an Apparel SEZ. Already the IT hub of the state, the city is developing ultra-modern integrated townships that will have hypermarkets, shopping malls, multiplexes, residential apartments, banquet halls, health and educational facilities and an IT Park

Commercial property development in Madhya Pradesh has seen an Apparel Park come up in Jabalpur as well. Katni supports a Food Park, an Agri-Export Zones and a Stone Park.

Real estate developers like Satya, Prabhatam and Parsvnath have drawn up projects for Indore, Gwalior, Raipur, Jabalpur and Bhopal. DLF plans to invest Rs. 8000 crore over the next five years in Madhya Pradesh on real estate and infrastructure projects. Planned projects include housing, SEZs, IT Parks, hotels and convention centres in Bhopal, Gwalior, Indore and Jabalpur

As consumerism grows in these upcoming towns, retail malls are being developed – Prabhatam has a mega shopping extravaganza coming up over 10 lakh sq.ft in Indore, and a 4.5 lakh shopping mall in Jabalpur.Bhopal, the state capital, will soon have an integrated commercial-cum-residential space covering 14.5 lakh sq. ft. DLF will be developing the Bhopal airport, as part of its investment strategy for Madhya Pradesh.Gwalior is developing a City Mall on a grand scale befitting its royal status covering 2.25 lakh sq. ft. area and will play host to food parks, entertainment zones and anchor stores.

Madhya Pradesh’s industrialization plans received a boost when SEZs were notified in January 2007 by the Centre. These would be the Medicaps IT Park in Village Panda, and the M.P. Audoyogik Kendra Vikas Nigam, both located in Indore district.

With the inherent strengths that Madhya Pradesh possesses, of location, resources and an

efficient and responsive government, the future spells good times for real estate.

As in the rest of the country, real estate in Madhya Pradesh is growing proportionately with economic development. MP’s ambitious growth plans have seen India’s first “Greenfield” SEZ in Indore. The city also boasts of specialized infrastructure at the 21 acre Crystal IT Park and an Apparel SEZ. Already the IT hub of the state, the city is developing ultra-modern integrated townships that will have hypermarkets, shopping malls, multiplexes, residential apartments, banquet halls, health and educational facilities and an IT Park

Commercial property development in Madhya Pradesh has seen an Apparel Park come up in Jabalpur as well. Katni supports a Food Park, an Agri-Export Zones and a Stone Park.

Real estate developers like Satya, Prabhatam and Parsvnath have drawn up projects for Indore, Gwalior, Raipur, Jabalpur and Bhopal. DLF plans to invest Rs. 8000 crore over the next five years in Madhya Pradesh on real estate and infrastructure projects. Planned projects include housing, SEZs, IT Parks, hotels and convention centres in Bhopal, Gwalior, Indore and Jabalpur

As consumerism grows in these upcoming towns, retail malls are being developed – Prabhatam has a mega shopping extravaganza coming up over 10 lakh sq.ft in Indore, and a 4.5 lakh shopping mall in Jabalpur.Bhopal, the state capital, will soon have an integrated commercial-cum-residential space covering 14.5 lakh sq. ft. DLF will be developing the Bhopal airport, as part of its investment strategy for Madhya Pradesh.Gwalior is developing a City Mall on a grand scale befitting its royal status covering 2.25 lakh sq. ft. area and will play host to food parks, entertainment zones and anchor stores.

Madhya Pradesh’s industrialization plans received a boost when SEZs were notified in January 2007 by the Centre. These would be the Medicaps IT Park in Village Panda, and the M.P. Audoyogik Kendra Vikas Nigam, both located in Indore district.

With the inherent strengths that Madhya Pradesh possesses, of location, resources and an efficient and responsive government, the future spells good times for real estate.

FDI in Real Estate: Basic Guidelines

The Department of Industrial Policy and Promotion (DIPP), vide Press Note No. 2 (2005), has permitted

FDI up to 100% under automatic route in townships, housing, built-up infrastructure and construction

development projects (which would include, but not be restricted to, housing, commercial premises,

hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level

infrastructure facilities, such as roads and bridges, transit systems etc.), subject to the following

guidelines:

1. The minimum area to be developed under each project would be as follows:

a) In case of development of serviced housing plots, a minimum land area of 10 hectares.

b) In case of construction development projects, a minimum built-up area of 50,000 sq.mts.

c) In case of a combination of the above two projects, any one of the above two conditions would

suffice.

2. The minimum capitalization norm shall be US$ 10 million for a wholly owned subsidiary and US$ 5

million for joint ventures with Indian partner/s. The funds would have to be brought in within six

months of commencement of business of the company.

3. Original investment cannot be repatriated before a period of three years from completion of minimum

capitalization. However, the investor may be permitted to exit earlier with prior approval of the

Government through the Foreign Investment Promotion Board (FIPB).

4. Development of at least 50% of the integrated project has to be completed within a period of five

years from the date of obtaining all statutory clearances. The investor would not be permitted to sell

underdeveloped plots (underdeveloped connotes, where roads, water supply, street lighting, drainage,

sewerage and other conveniences as applicable under prescribed regulations, have not been made

available). The investor must provide this infrastructure and obtain the completion certificate from the

concerned local body/service agency before being allowed to dispose of the serviced housing plots.

5. The project shall conform to the norms and standards, including land use requirements and provision

of community amenities and common facilities as laid down in the applicable building control

regulations, by-laws, rules and other regulations of the State Government / Municipal / Local Body

concerned.

6. The investor shall be responsible for obtaining all necessary approvals, including those of the building

/ layout plans, developing internal and peripheral areas and other infrastructure facilities, payment of

development, external development and other charges and complying with all other requirements, as

prescribed under applicable rules/bye-laws/regulations of the State Government / Municipal Body /

Local Body concerned.

7. The State Government / Municipal / Local Body concerned, which approves the building /

development plans, will monitor the developer’s compliance to the above conditions.

FDI in Real Estate - GO I Guidelines

One of the reasons often given for the real estate sector not really picking up has been the paucity of

fund flow into the sector. Real estate business in India has by and large remained in the unorganised

sector and thereby, has attracted little corporate funding. Few efforts have been made to streamline the

sector and its financial environment. One of the recent developments however appears to be a major shot

in the arm for the real estate sector. The decision of the Government of India to permit foreigh direct

investment ( FDI), a long pending issue, has been viewed by many as the much needed medicine to

bring about a competitive environment in the sector, thereby forcing smaller and unorganised players to

move out and make way for more professionally and globally sound players to do the production. The

Government of India, through the Ministry of Commerce and Industry, has stipulated the following

guidelines for FDI in the real estate sector:

1) The foreign company intending to invest shall be registered as an Indian company

under the Companies Act of 1956 and will henceforth be allowed to take up land assembly and

its development as a part of integrated township development. All such cases would be

processed by the FIPB on the recommendations of the Ministry of Urban Development and other

concerned Ministries and departments.

2) The core business of the company seeking to make investment should be integrated

township development with a record of successful execution of such projects elsewhere.

3) The minimum area to be developed by such a company should be 100 acres for which norms

and standards are to be followed as per the local byelaws. In the absence of such rules, a minimum of

two thousand dwelling units for about ten thousand population will need to be developed by the

investor.

4) The investing foreign company should achieve clear milestones once their proposal has been

approved.

5) The minimum capitalization norm shall be US $ 10 million for a wholly owned subsidiary and

US $ 5 million for joint ventures with Indian partners. The funds would have to be brought in

upfront.

6) A minimum lock in period of three years from completion of minimum capitalization shall

apply before repatriation of original investment is permitted.

7) A minimum of 50 percent of the integrated project development must be completed within

a period of five years from the date of possession of the first piece of land. However, if the

investor intends to exit earlier due to reasons beyond his control, it shall be decided by the FIPB on a

case to case basis.

8) Conditions regarding the use of land for commercial purposes, development charges,

external development charges and other charges as laid down in the Master Plan, byelaws, etc.,

preparation of layout and building plans, development of internal and peripheral development,

development of other infrastructural facilities, etc. shall be the responsibility of the invesrot as per

the planning norms and standards on similar lines as those applicable to local investors. In the

absence of such standards and norms, every state government may decide their own conditions for

which the UDPFI Guidelines may serve as a guiding principle.

9) Land with assembled area for peripheral services such as police stations, milk booths, will be

handed over tree of cost to the government or local authority as the case may be.

10) The developer will retain the lands for community sercices such as schools, shopping,

community centres, ration shops, hospitals, etc. These services shall be developed by the

developer himself and shall be made operational before the houses are occupied.

11) The develorer after properly developing playgrounds, parks, etc. shall make it

available to the local bodies free of cost.

12) The developer will ensure compliance of all norms and standards as applicable under local

laws.

13) For companies investing in SEZ, FIPB may accord exemption to any of the above

mentioned conditions on a case to case basis.

Based on the above guidelines, India's first FDI in real estate has already initiated its activity. Kontur

Bintang and Westport, two Malaysian companies, alongwith other foreign equity participants, propose

to develop a township in Gurgaon, the upmarket suburb of New Delhi.

Implications of GOI Guidelines on FDI in Real Estate

The detailed implications of the above guidelines have been discussed in the following sections.

S.No. Aspect Implications

1. Investment by

a 'company'

vs. 'public'

investments

The debate has for long been on the necessity of bringing foreign capital.

The basic issue being shortage of funds, money can be mobilized in either

of the two ways; from the 'public' or from 'foreign' investors. In various

sectors of the economy, the former was rejected on the pretext that the

'public' investor sentiment is not good while on the other hand, not only

foreign capital but foreign know how is also needed. Therefore, where

high technology and big finance are jointly involved, FDI has been found

to be the appropriate choice. In the particular case of the real estate sector

in India, whilst technology at home is almost on par with global standards,

public finances can be easily raised through real estate mutual funds

( REMF ) on the lines of REITS for which the path is more or less

cleared. That being the case, the very fundamental assumption as to

whether FDI by a foreign company is needed or not comes under scrutiny,

moreso when foreign money involves a certain level of cost of capital

2. Minimum Area

of 100 acres

One of the key guidelines is the stipulation of a minimum area of 100

acres of land to be assembled by the developer for the township.

Procuring such a size of land would certainly be a problem for the

developer. In most cities in the country, prime land parcels on the fringes

have been taken by local developers. Even otherwise, it would be difficult

for the foreign consortium to assemble several land parcels in order to

make up 100 acres. As a matter of fact, in the case of

Gurgaon, a similar condition exists and the developers have been facing a

lot of difficulty in assembling contiguous pieces of land. One can see

townships in Gurgaon in all odd shapes and sizes. Ultimately, this would

lead to haphazard spatiao spread, infrastructure development problems,

etc. as is already becoming visible in Gurgaon. Integrating such

developments at a latter date would be extremely difficult.

Further, in many states, the ULC has yet to be repealed and therfore, it

would not be possible for the mobilisation of such huge chunks of land.

3. Integrated

Township

The guidelines stipulate the development of an integrated township.

However, in practice, the demand for foreign investment in a particular

city may not be for an integrated township but for a specific development,

say for commercial mall complexes, entertainment complexes and so on.

The guidelines do not seem to accomodate this reality of the property

sector. This would therefore limit the entry of FDI.

4. Local

development

Laws

There are a host of local government laws which impact the real estate

development in Indian cities. Whilst the guidelines state that local laws

need to be followed, in almost all cities in India, the local laws may not be

appropriate at all for developments involving FDI. The high cost of

capital would automatically put a pressure on space utilization. The

density prescriptions, social facility area norms, etc. are very luxurious

and not conducive to intense utilization of the land available. FDI

developments demand high densities, so that the project becomes

economically feasible. Where high densities are not feasible, the project

would become extremely costly. In such cases, cross subsidization needs

to be done from other uses, such as commercial and so on. The

prescription of a gross residential density ( GRD ) of 100 ppa is therefore

too low for financial feasibility with affordable prices.

The situation therefore demands unique treatment and not on the same

lines as local projects. In fact, the Gurgaon public-private partnerships

have already demonstrated that the existing local laws are not at all

appropriate.

5. Physical

Infrastructure

A development involving 100 acres would obviously involve a huge

investment in infrastructure. Not only internal infrastructure needs to be

provided but also external infrastructure needs to be provided. While

internal infrasructure ( II )may not pose any problem since the same is

under the full control of the promoters, the external infrastructure ( EI )

would pose several problems. Ultimately, the development needs to be

linked up to the city system; it may not be possible to make the project

entirely 'stand alone'. Therefore, investments here would boost the product

pricing heavily. Secondly, invariably the government agencies viz. water

boards, electricity corporations, etc. would have to be involved. Delays

here would be obvious. Again, the existing public-private partnerships in

Gurgaon, UP, etc. have already given us lessons in government delays in

external infrastructure support mechanisms. This is one area which needs

detailed review in the guidelines.

6. Free Social

Amenity Transfer

The provision of social amenities is very much necessary and although the

industry has been opposing the same, this provision should remain and

free social amenity transfer needs to be insisted upon. Whilst the

government has permitted FDI, free social amenities is a small and

legitimate return to expect from the foreign investors/private sector. In

fact, quite a few social amenities can be retained by the developer as per

the stipulations.

7. Open Spaces

Transfer

The guidelines stipulate transfer of open spaces such as parks,

playgrounds, etc. to the local bodies. It is presumed that the 'transfer'

means transfer of ownership. However, the question of maintenance of

open spaces and their protection from encroachments needs to be viewed

in the current context of assets management practices.

8. Maintenance One of the key issues that has not at all been addressed in the guidelines

has been the issue of asset maintenance. Assets worth crores of rupees are

to be developed through FDI. While private properties would be sold and

their maintenance would vest with private owners, the 'public properties'

which need to be maintained would become the responsibility of the local

bodies.

In such circumstances, one needs to see the question of the state of

finances of local bodies, their executive expertise and capacity to

undertake assets management, etc. Without the creation of appropriate

systems in this context, the assets created would become very expensive

in the long run to maintain.

9. Local Regulator There is a need for a local regulator to monitor the progress of the FDI

projects and ensure compliance of the guidelines. The real estate industry

in India has been notorious for non-compliance of various laws. In the

cities of India, there are a host of organisations which would come into

play. It may not be possible for foreign investor companies to liasion with

all these. There is thus an urgent need for apex Local Regulators to be

designated, so that they can act as a ' single window' for clearences,

monitoring, clarifications on rules and procedures, etc.

10. Detailed

Guidelines

In the ultimate analysis, it can be seen that the guidelines prescribed by

the government are too preliminary and general. A detailed set of

guidelines need to be evolved.

Real Estate Laws in India

Investing in real estate in India require compliance with various laws which run into dozens, some of

them more than 100 years old and some very new. In addition to federal laws of India, there are many

state laws governing real estate transactions and investment. The federal laws governing real estate

include:

Indian Transfer of Property Act

The Transfer of Property Act governs the transfer of property by various means. Sales, mortgages (other

than by way of deposit of title deeds) and exchanges of immovable property are required to be registered

by virtue of the Transfer of Property Act. Therefore, all the above documents must be in writing and

registered.

Indian Registration Act, 1908

The purpose of this Act is the conservation of evidence, assurances, title, publication of documents and

prevention of fraud. It details the formalities for registering an instrument. Instruments which require

mandatory registration include:

(a) Instruments of gift of immovable property;

(b) Other non-testamentary instruments which purport or opt to. creates assign, limit or extinguish,

whether in present or in future, any right,. whether vested or contingent, to or in immovable

property;

(c) non-testamentary instruments which acknowledge the receipt or payment of any consideration

on account of instruments in (2) above.

(d) leases of immovable property from year to year, or for any term exceeding one year,

or reserving yearly rent Sales, mortgages (other than by way of deposit of title deeds) and

exchanges of immovable property are required to be registered by virtue of the Transfer of

Property Act. Evidently, therefore, all the above documents have to be in writing.

Section 17 of the Act provides for optional registration. An unregistered document will not affect the

property comprised in it, nor be received as evidence of any transaction affecting such property (except

as evidence of a contract in a suit for specific performance or as evidence of part-performance under the

Transfer of Property Act or as collateral), unless it has been registered. Thus the doctrine of part

performance dealt with under Section 53 A of the Transfer of Property Act and the provision of Section

49 of the Registration Act (which provide that an unregistered document cannot be admissible as

evidence in a court of law except as secondary evidence under the Indian Evidence Act) together protect

the buyer in possession of an unregistered sale deed and cannot be dispossessed. The net effect has been

that a large number of property transactions have been accomplished without proper registration. Further

other instruments such as Agreement to Sell, General Power of Attorney and Will have been

indiscriminately used to effect change of ownership. Therefore, investors in real estate have to be careful

in their due diligence.

Indian Urban and (Ceiling and Regulation) Act, 1976 and Guidelines

This legislation fixed a ceiling on the vacant urban land that a 'person' in urban agglomerations can

acquire and hold. A person is defined to include an individual, a family, a firm, a company, or an

association or body of individuals, whether incorporated or not. This ceiling limit ranges from 500-2,000

square meters. Excess vacant land is either to be surrendered to the Competent Authority appointed

under the Act for a small compensation, or to be developed by its holder only for specified purposes.

This Act, 1976 came in force on February 17, 1976, in the state of Andhra Pradesh, Gujarat, Haryana,

Himachal Pradesh, Maharashtra, Orissa, Punjab, Tripura, Uttar Pradesh and West Bengal and all Union

Territories. Subsequently, the act has also come into effect in the state of Assam, Bihar, Madhya

Pradesh, Manipur, Meghalaya and Rajsthan.

The Act provides for appropriate documents to show that the provisions of this Act are not attracted or

should be produced to the Registering officer before registering instruments compulsorily registrable

under the Registration Act.

This legislation was repealed by the federal government in 1999. The Repeal Act, however, shall not

affect the vesting of the vacant land, which has already been taken possession by the State Government

or any person duly authorized by the State Government in this regard under the provisions of Urban

Land Act. The repeal of the Act, it is believed, has eliminated the large amount of litigation and released

huge chunks of land into the market. However the repeal of the Act has not been carried out in all states.

Initially the repeal Act was applicable in Haryana, Punjab and all the Union Territories. Subsequently, it

has been adopted by the State Governments of Uttar Pradesh, Gujarat, Kamataka, Madhya Pradesh and

Rajasthan. Andhra Pradesh, Assam, Bihar, Maharashtra, Orissa and West Bengal have not adopted the

Repeal Act so far.

Stamp Duty

Stamp duty is required to be paid on all documents which are registered and the rate varies from state to

state. With stamp duty rates of 13 per cent in Delhi, 14.5 per cent in Uttar Pradesh and 12.5 per cent in

Haryana, India has perhaps one of the highest levels of stamp duty. Some states even have double stamp

incidence, first on land and then on its development.

Stamp Duty in Indore (Madhyapradesh)

In Indore Madhya Pradesh the rate of Stamp Duty is 9.5% of Market Price of the Property Which is

declared by the Collector’s on the basis of Market Price by the District Surveyor Committee. For the

Female property holder there is provision for 2% relief.

Rent Control Acts

Rent legislation in India has been in existence for a very long time. Rent control by the government

initially came as a temporary measure to protect the exploitation of tenants by landlords after the Second

World War. However these rent control acts became almost a permanent feature. Rent legislation

provides payment of fair rent to landlords and protection of tenants against eviction. Besides, it

effectively allows the tenant to alienate rented property.

Property Tax

Property tax is a levy charged by the municipal authorities for the upkeep of basic civic services in the

city. In India it is the owners of property who are liable for the payment of

municipal taxes. Generally, the property tax is levied on the basis of reasonable rent at which the

property might be let from year to year. The reasonable rent can be actual rent if it is found to be fair and

reasonable. In the case of properties not rented, the rental value is to be estimated on the basis of letting

rates in the locality.

REVIEW OF LITERATURE

The global financial crisis and the resultant slowdown in the global economy during the year 2008-2009

have halted industrial and business expansion & led to real estate sector also.

According to a report released by UBS Investment Research in April 2009, unsold inventory with

developers in major residential real estate destinations in India is still high at around 18% of the

properties being promised for delivery over the next 12 months.

The inventory situation is not limited to the residential space. Recent data from Jones Lang Lasalle REIS

on supply and vacancy for office space in Delhi and Mumbai indicates that office vacancy rates are very

high. However, analysts and industry experts believe that long term prospects of the Indian real estate

sector remain promising.

The share of FDI in real estate is expected to increase manifold in the coming years with the

gradual relaxation of ceiling in construction space permitted to foreign investors.

India’s growing young population, rapid urbanization, growth in industry and services and rapid

development of tourism are factors that will propel real estate demand in the long term.

A number of reforms introduced by the Government in recent years have contributed to the scorching

pace of development of the Indian Real Estate Industry in the past and will facilitate future growth.

These real estate reforms include:

Allowing FDI upto 51% in single brand retail outlets and 100% in cash and carry

Regulations 1996 permitting the launch of Real Estate Mutual Funds (REMFs) in India. REMFs

are required to invest at least 35% of the net assets of the scheme directly in real estate.

Real Estate Investment Trusts (REITs) have been allowed entry into India. REITs cater to the

capital requirement of the real estate sector as it enables the company easy access to funds and

preferable exit options

The Indian urban land ceiling act : A critique of the 1976 legislation

Ballabh Prasad Acharya , a

aAsian Institute of Technology, Thailand

Available online 16 July 2002.

Abstract

The Urban Land (Ceiling and Regulation) Act was enacted in India in 1976 with a view to curbing land

price increases and promoting low-income housing through socialisation of urban land. This paper

critically examines the stated objectives of the Act and the major achievements after its implementation,

and finds that the Act has so far not lived up to its expectations. The paper begins with an introductory

background for the evolution of the Act and highlights its major provisions. A careful examination of

the limitations in the implementation of this Act and its major implications as per experience is then

presented. The paper concludes with the necessity for a thorough reappraisal of major policy

instruments, search for alternative strategies and consideration of the realities of the existing situation in

the country for possible improvement.

This paper is prepared as part of a research study on “Positive Land Management for Increasing Urban

Land Supply in India and South Asia” financed by the World Bank. The financial support provided by

the World Bank and the institutional facilities provided by the Division of Human Settlements

Development, Asian Institute of Technology, Bangkok are much appreciated.

Address for correspondence: A.I.T., Division of Human Settlements, G.P.O. Box 2754, Bangkok 10501,

Thailand.

RESEARCH OBJECTIVES

To find out the major player in Real Estate business in Indore City as well as India

To find out the growth rate of Real Estate in Indore City.

To Analysis of Current scenario of Real Estate in Indore City.

To Analysis of SWOT for Real Estate in Indore City.

RESEARCH METHODOLOGY

For this project I have used secondary data from various journals, magazines,

newspaper and websites of companies. I have tried to collect maximum data as

much as possible to analyze the data to relate current scenario.

Analysis

Characteristics of the Real Estate Market in India

Growing l\1arket Demand

Realization of large commercial

projects

IPOs by developers

Gradual organization of the markets in the Tier I cities

Greater availability of infolmation

Emergence of transparency and liquidity

Entry of international real estate consultancies

Goyerning legal tramework rela.~ed Competitive pricing

Emergence of transparency

and liquidity

Entry of international real

estate consultancies

Emergence of transparency

and liquidity

Entry of international real

estate consultancies

As per utilization, the real estate space can be classified as follows:

Real estate utilization

Listed below are the salient features of each category:

Commercial Real Estate

Office Space

Backed by strong infrastructure

. Promoted by increasing demand from IT industry

. Shift of focus from the traditional CBDs towards secondary centers owing sharply higher land prices

in the city centers.

Retail Space

Growth of 25- 30% expected in the organized retail sector (malls and multiplexes) leading to an

increased demand in real estate

. Affected by government policies for foreign retailers

. Pronounced in the Tier I, Tier II and Tier III cities.

Hospitality Space

Criteria Statistics

Annual growth rate of the industry 8%

Number of foreign tourists in 2005 4000000

Total number of five star rooms (2005) 96000

Total number of five star rooms needed by 2010 150000

Growing demand of real estate in the hospitality industry

Established brands in this sector include Asian Hotels, Indian Hotels, lTC, Le Meridien etc are in

expansion mode with many new players such as Accor Group, Marriot, Choice, IHG Group

Residential Real Estate

Development triggered by:

Low per capita housing stock

Rising disposable income

Easy availability of finance

Currently growing at 30-35% per annum

Driven by retail investors who view real estate as an attractive investment option

as compared to mutual funds and stocks .

Geographically widespread with townships being built in both the metros and the tier II and III

cities

Increasing demand of lodging in commercial cities such as Bangalore, Murribai, Delhi etc.

from business travelers.

Indian real estate market can be broadly divided into Agricultural farms

b. Residential properties

c. Commercial and office properties

d. Recreational properties

Salient points related to investments in agricultural prop~rties:

a. Bankers offer loans for purchase of farms. However, these loans are only for Indian

citizens.

b. Cultivating crops like vegetables, or horticultural produce brings in handsome profits. Indian

climate makes it a good place for growing flowers and fruits that are in demand throughout the year in

different parts of the world. Tea and coffee plantations are other forms of agricultural properties that

are not only located in beautiful places, but also fetch good returns.

c. Agricultural income is taxed at lesser rates than other non-agricultural incomes. However,

some agricultural incomes, like those from tea and coffee plantations, are taxable at normal rates

d. As of now, the government decides the prices of cash crops like rice, sugar and

wheat. Nothing, horever, prevents farmers from seeking better price for their produce.

e. Prices of farmlands vary from rupees twenty-five thousands per acre to rupees

10,00,000 per acre. Tea and coffee plantations may cost even more. Prices vary as per fertility

of the land 'i.e., annual yield from the land, proximity to cities, infrastructure like water, power and

roads, etc.

f. Farms can be given on lease. However, relevant regulations must be examined and local

practices must be studied to avoid any disputes.

g. Major risk factor is the dependence on monsoons for cultivation

h. It is advisable to purchase the property after consulting advocates

Salient points related to residential purposes:

a. Bankers offer housing rates at competitive rates, and on competitive terms. Even non resident

Indians can avail housing loans

b. Old buildings command lower price, when compared to new buildings. Cost of

construction is based on the quality of construction and amenities. Generally, the division

relates to clients from middle class, upper middle class and the rich. As of now, middle class

people go for constructions in the range of Rs.700 to 1750 per squar~ foot. Sometimes, they opt

for city outskirts, where they can buy independent houses in the same budget. Upper middle class

pays Rs.1800 to 3000 per square foot. The rich may pay Rs.5000 per square foot. Sanitary fittings,

flooring material, electrical fittings, painting and external elevation are the items, which the

builder manipulates. The rich get additional facilities like swimming pool, gym, club, etc., for what

they pay.

c. Middle class prefers proximity to transport, markets, schools, etc. The rich seek seclusion

somewhere within the city. Rich prefer independent palatial houses even though security is a

problem. By opting for group housing, or row houses, the rich are able to overcome their security

issues.

d. People with disposable incomes are now purchasing vacation homes and second homes. These

are generally located at far off scenic places. Sometimes, such properties also fetch rent.

e. Prices of vacant plots vary from city to city, and as per proximity to amenities and future

prospects of the region. Prices could be anywhere between Rs.800 per square yard and

Rs.75,000 per square yard housing lucrative

f Tax benefits in respect of interest component and loan components, and rental

receipts make inveltment in residential

g. Risks relate to title and quality

Salient aspects of commercial and office real estate:

a. Increase in businesses, whether Indian or foreign, is creating a dearth in commercial and office

real estate markets.

b. New types of businesses like business processing outsourcing and software require special

type of office accommodations.

c. Foreign goods are seeking a market in the country. They need more commercial space like

shopping malls, offices and marketing facilities.

d. Even health care systems have acquired some commercial angle to them, as more and more

hospitals are becoming corporate hospitals.

e. Location plays an important role for commercial and office complexes. As a result, cost of

commercial construction is also higher. It can range anywhere from Rs.5,000 per square foot. to

Rs.25,000 per sq. foot. depending upon the location.

f. Standard verification of title and approvals is essential.

Salient aspects of recreational real estate

a. Recreational real estate now covers buildings and land for parks, golf clubs, cinema halls,

swimming pools, etc.

b. Globalization has brought changes in these activities, as more and more foreigners and non-

residents are seeking facilities that they have abroad

c. Essel world, snow world, and water world, computer centers, billiards clubs, etc., are modem

places for entertainment.

d. All such recreational activities generate returns as charges are collected for their usage.

Division of cities into tiers:

Mumbai, New Delhi, Calcutta and Chennai are often discussed as first tier cities of the country.

Successive governments and municipalities have added new amenities to what they inherited from

British era. Large business houses provided large scale employment which lured a large populace to

these cities. This has increased the land prices in these cities.

Now, however, these cities are unable to keep pace with contemporary requirements of both external

looks as well as internal convenience within a building. Demolishing old structures and rejoins them is

uneconomical because of skyrocketing land costs. Even government is umible to acquire land to add

new facilities or expand existing ones.

This has proved as a disincentive for modem and sophisticated industries like software, and

biotechnology. They have relocated to second tier cities like Pune, Bangalore, and

Hyderabad, so that they can have vast and open campuses essential for their type of businesses. Land

prices in these second tier cities are still affordable, and large areas can be acquired, as these regions are

not bound by sea. It is also possible to redo them economically.

Higher cost of living in first tier cities also results in an additional burden of dearness allowance.

Amenities in second tier cities are soon catching up. Therefore, these cities offer better potential for real

estate appreciation now.

Most Preferred Cities for Investment

Delhi and NCR

Delhi and NCR with the happening and investment hub cities of Gurgaon and Noida are the hot markets

for real estate in India. This is due to the good infrastructure and quality of life provided in the city and

remains the basic cause for the large scale investments in the IT, ITES and the BPO sector in this region.

Delhi's residential real estate market is driven more by investors rather than by end-users. The

overheated markets like Delhi and NCR had as much as 100 percent escalation in property prices but

now there are already corrections happening in the market. The overheated property market in Delhi

which witnessed over 100 percent escalation in prices, still continue to rock as a hot destination for real

estate investment

Delhi has been losing steadily to its suburban counterparts in office market share primarily due to poor

quality of buildings and high real estate cost in the CBD. The residential property is going to witness

increase in prices on the strength of high-end housing. Even the rentals in CBD are expected to go up

with Delhi Metro becoming operational in that area this year.

Noida with well-defined master plan, good connectivity to Delhi and impressive infrastructure is fast

turning into an investor's paradise both in the residential and commercial sector. Moreover, the

government's initiative to invite investments has transformed Noida into an IT hub of the country

GUl1!aon on the o~er hand apart from being the corporate addresses of many MNCs is

fast turning into a CIty to hunt for luxury homes. And with job opportunities flourishing and burgeoning

disposable incomes, the cities in India are experiencing a shift towards premium living.

Mumbai continues to reign as the commercial and financial capital of India, the real estate prices in the

city are at an all time high. A survey reveals that an office space in Mumbai is more expensive than

Manhattan; ranking it as the world's 15th most expensive city. There has been a lot of real estate

investments in the retail and residential sectors in Mumbai and the growth of the IT and ITES sector is

reflected in the real estate boom in the satellite city ofNavi Mumbai

PUNE

Pune which has emerged as the IT, research and academic destination of India apart from being a major

industrial belt is seen as a winner in terms of real estate investments IT and retail are key drivers of real

estate in Pune that is witnessing its transition from a sedate industrial destination to a vibrant corporate

city. With a wide range of population

and service sectors to cater to and its close proximity to Mumbai has made Pune a hot destination for

real estate investors

Also the IT revolution in Pune has made it home to all major IT companies, bothJndians and

multinationals, making it today one of the most preferred IT lITES and BPO investment destination in

India. IT and ITES boom has given a big fillip to commercial space with demand touching 1.2msf

annually

Pune has witnessed frantic activity in the residential sector. To make most of this opportunity, several

Pune developers like Kumar, Magarpatta Panchsheel, Kolte, Embassy etc have joined the race to

develop township projects. The Magarpatta project is spread over 400 acres with IT, residential and

retail developments.

Kolkata

Kolkata is another emerging city in the real estate investors list. Apart from offering lucrative business

plans for investors in IT and retail sector, Kolkata is becoming one of the hottest cities for real estate

investors as the city is witnessing resurgence in its economy after years of stagnation into being the

business destination of India. Much of the credit for Kolkata's emerging as the investment destination

goes to the West Bengal Pune has witnessed frantic activity in the residential sector. To make most of

this opportunity, several Pune developers like Kumar, Magarpatta Panchsheel, Kolte, Embassy etc have

joined the race to develop township projects. The Magarpatta project is spread over 400 acres with IT,

residential and retail developments.

The IT boom in Kolkata is clearly evident from the huge investments by IT companies to set up their

base in the city. The 10,000 hectare Rajarhat is emerging as the next hot destination for the IT and ITES.

More IT parks are also growing up in Kolkata with Ascendas, DLF, Videocon-Salarpuria, Bengal

Intelligent Park, Technopolis, Infinity Benchmark, Infinity Waterside, Millennium and The Hub

together set to create over 37 million square feet of space in Rajarhat and Sector V.

Hvderabad

Hyderabad once famous as the city of pearls, Hyderabad is today known for it's IT and IT Enabled

Services, Business Process Outsourcing (BPO) firms Pharmaceuticals, Biotechnology and Entertainment

industries. The city harboring a number of IT Parks have established themselves as the IT hub of India.

Hyderabad is a major center for pharmaceuticals with companies such as Dr. Reddy's'

Laboratories and is fast developing into a centre of biotechnology sector in India. Genome Valley and

Nanotechnology Park are some ofthe upcoming projects. This sector is surely going to spur up the

economy of the city with more companies willing to set up its operations in the coming years.

But as of now, IT and ITES sector attract the maximum investors to Hyderabad. Several MNCs have

opened their base in Hyderabad and both Indian and global companies are changing from smaller

operation to big operations. A few names among them are: Motorola, Google, Dell, Deloitte, Microsoft

R&D India Pvt. Ltd., Wipro Technologies Ltd, Tata Consultancy services and Infosys Technologies

Limited.

Banealore

Bangalore over the years has transformed itself from being a 'Pensioner's Paradise' to the 'Silicon Valley'

of India. It is recently evolving into a R&D destination attracting real estate investors to cash on into the

demand for residential and commercial properties in the cities. Riding high on the IT boom, Bangalore is

maintaining its position as a prime destination for property investments.

The booming IT sector which is responsible for the real estate growth in the city has also

collaborated to making it one of Asia's fastest growing cities with annual growth rate of 3.5 percent. The

city also accounts for more than 35 percent of the software exports of our country with largest number of

software companies; which is the main driver of commercial property in Bangalore.

Chennai

Chennai, the automobile capital of India has also developed into an IT and ITES hub in the recent years;

mobilizing the real estate investors to take note of it as a promising destination of the future. The IT &

ITES boom coupled with expats choosing Chennai as their operational bases has given a real boost to

the real estate. The commercial real estate has been on the upswing as IT companies were the prime

occupants of commercial spaces.

Areas with proximity to the IT/ITES hubs have emerged as localities with major demand for residential

development in Velachery, Madipakkam and Tambaram to name a few.

Prices have been significantly going up in southern Chennai because of its proximity to IT/ITES nerve

centre and as the preferred locality of the expats.

Localities like A\warpet, Boat Club, and Poes Garden have come up as upmarket residential areas. 'On

the other hand, places such as Velachery, Mogappiar and Thiruvanmixur are the favourite spots for

budget apartments.

Real Estate Indore is one of the thriving sectors of the Indore economy. One of the forerunners of the booming real estate industry in Indore, the Indore Development Authority (IDA) was established by the government of Madhya Pradesh as per the regulations of the Madhya Pradesh Town and Country Planning Act of 1973. The objective of this council was to provide spacious, well designed and comfortable apartments and residential housing complexes for the citizens of Indore at affordable prices.

The property dealers and real estate agents assist the potential buyers and sellers in all property related matters that include the purchase, sale and lease of all types of property all across the Indian subcontinent. Property Indore deals with the purchase and sale of flats, plots, row houses, bungalows, office space as well as agricultural land. The Indore real estate agents offer assistance and consultancy services on the rent and lease of properties, title deed verification, assistance in property documentation, construction consultancy services, relocation as well as liaison with the concerned government departments.

The real estate agents of Indore provide service and assistance in the property sector at a highly competitive price. It is always advisable to seek the assistance of the Realtors when it comes to making a good buy since these agents have a proper knowhow of the real estate market. Be it renting a room, leasing out a flat, buying a property or even acquiring home loans, the real estate agents in Indore provide it all.

Amount of FDI inflows in India during 2006- 2007:

The amount of FDI Inflows in India during 2006- 2007 that included, only the equity inflows, came to

US$ 15.7 billion, which is a growth of around 185% in comparison to 2005- 2006. The amount of FDI

Inflows in India during 2006- 2007 that included, reinvested earnings, equity inflows, and other inflows

of capital, came to US$ 19.5 billion, which is a growth of around 153% in comparison with the previous

year.

Financial Year 2006-2007 (April-March) Amount of FDI inflows

(In Rs. Crore) (In US$ mn)

1. April 2006 2,972661

2. May 2006 2,443 538

3. June 2006 2,405 523

4. July 2006 5,235 1,127

5. August 2006 2,878 619

6. September 2006 4,222916

7. October 2006 7,7181,698

8. November 2006 5,157 1,151

9. December 2006 9,108 2,040

10.January 2007 8,514 1,921

SECTORS ATTRACTING HIGHEST FDI EQUITY INFLOWS: Amount Rupees in crores (US$ in million)

Ranks

Sector 2006-07 (April-March)

2007-08 (April- March)

2008-09 (April-March)

2009-10 (April- November ‘09)

Cumulative Inflows (April ’00 - November ‘09)

% age to total Inflows (In terms of rupees)

1. SERVICES SECTOR (financial & non-financial)

21,047 (4,664)

26,589 (6,615)

28,411 (6,116)

16,566 (3,438)

101,019 (22,687)

22 %

2. COMPUTER SOFTWARE & HARDWARE

11,786 (2,614)

5,623 (1,410)

7,329 (1,677)

2,763 (575)

42,259 (9,529)

9 %

3. TELECOMMUNICATIONS (radio paging, cellular mobile,

2,155 (478)

5,103 (1,261)

11,727 (2,558)

10,811 (2,223)

39,179 (8,600)

8 %

basic telephone services)

4. HOUSING & REAL ESTATE

2,121 (467)

8,749 (2,179)

12,621 (2,801)

10,565 (2,189)

34,348 (7,701)

7 %

5. CONSTRUCTION ACTIVITIES (including roads & highways)

4,424 (985)

6,989 (1,743)

8,792 (2,028)

8,380 (1,754)

30,557 (6,945)

7 %

6. POWER 713 (157)

3,875 (967)

4,382 (985)

5,994 (1,238)

20,006 (4,428)

4 %

7. AUTOMOBILE INDUSTRY

1,254 (276)

2,697 (675)

5,212 (1,152)

4,499 (934)

19,566 (4,322)

4 %

8. METALLURGICAL INDUSTRIES

7,866 (173)

4,686 (1,177)

4,157 (961)

1,485 (309)

12,990 (3,032)

3 %

9. PETROLEUM & NATURAL GAS

401 (89)

5,729 (1,427)

1,931 (412)

1,084 (219)

11,261 (2,612)

2 %

10. CEHMICALS (other than fertilizers)

930 (205)

920 (229)

3,427 (749)

1,000 (209)

10,567 (2,343)

2 %

Note: Cumulative Sector- wise FDI inflows (from April 2000 to November 2009) - Annex-‘B’.

It show that the rank of Real Estate & Housing is 4 th and and the total inflows (in terms of Rupees) is 7%.

Sectors attracting FDI inflows in India during 2006- 2007 are:

Real estate \

Construction activities

Services sector

Telecommunications

Electrical equipments that includes electronics and computer software

Countries contributing to FDI inflows in India during 2006- 2007 are:

USA, Singapore , UK, Netherlands . Mauritius

Growth in Real Estate Investment after FDI

In 2006-07, FDI comprised 2.31% of the GDP of India. This was merely 0.77% in 200304. FDI

comprised 6.42% of total investments in India in 2006-07 which was a significant growth 2.55% in

2003-04. The remarkable growth of FDI in India during 2006-07 had major impacts on the economic

growth of the country boosting output and employment significantly

FDI IN REAL ESTATE IN INDIA (in US$ billion)

Year FDI Share of real estate in FDI

2003-04 2.70 4.5%

2004-05 3.75 10.6%

2005-06 5.54 16%

2006-07 * (estimated) 8.00 26% *

Major Overseas Companies in Real Estate

Companies Overseas Real Estate Investors Plan (in

US$ )

Royal Indian Raj Intl' 2.9 billion

Blackstone Group 1 billion

Goldman Sachs 1 billion

Emmar Properties 800 Million

Pegasus Realty 150 M

Citigroup Property Investors 125 M

Lee Kim Tab Holdings 115 M

Salim group 100 M

Morgan Stanley 70 Mi

GE Commercial Finance Real Estate 63 Million

Why foreign investors are flocking to India

High returns

Investors are attracted to the strong commercial property yields across metros, the high capital and rental

value appreciation, and the availability of quality supply in the country. With real estate yields in mature

economies narrowing, India's current commercial property yield of 10-11 % is viewed as attractive.

Moreover, rental rates for grade A commercial properties in Tier-I cities ofMumbai and Delhi have

appreciated by more than 100% in the last 15-18 months.

The growth of the real estate sector is expected to continue with strong ITITES, banking, financial

services and insurance (BFSI) and corporate demand driving the office sector. The growth rate for the

retail market is expected to be around 35%, with organised retailing currently at a mere 3% of total

retail. Foreign private equity funds expect a return of 20-25 % from investments in greenfield projects.

Growing confidence

Investors have now developed confidence in the India growth story. The average growth in India's real

GDP over the last six years has been 7.1 %. According to government estimates, India's GDP is

expected to grow at 9.2% in FY07. This is expected to translate into massive demand for all segments of

real estate. In addition, India's sovereign ratings (both by Moody's and S&P) have gone up and are now

at investment grade, implying lower risk.

Investors have now developed confidence in the India growth story. The average growth in India's real

GDP over the last six years has been 7.1 %. According to government estimates, India's GDP is

expected to grow at 9.2% in FY07. This is expected to translate into massive demand for all segments of

real estate. In addition, India's sovereign ratings (both by Moody's and S&P) have gone up and are now

at investment grade, implying lower risk.

In the residential sector, a growing middle class is enjoying rising income levels. Combined with smaller

household sizes, this demographic change has boosted demand for more modem housing and home

loans. Meanwhile, increasing consumer spending power has encouraged growth in organized retailing -

both feeding off and contributing to the spread of 'mall culture' and the popularity of other large-scale

retail property developments.

Favourable Changes in Demographic Profile

Increasing Income levels

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India offers a wonderful opportunity. And the reasons being:

a. Indian economy is in good shape. Its GDP has shown sound growth over the last ten years.

Increase in per capita income is leaving more disposable incomes in the hands of individuals.

b. More disposable incomes means more demand for goods, and more demand for goods and

service translates into good prospects for other industries. This in turn increases disposable incomes in

the hands of others also. Substantial amount of these disposable incomes is finding its way into real

estate, primarily housing sector.

c. Interest component and some amount of principal component out of loan installments are

deductible from taxable income. 30 percent of rental income is also exempt from tax.

d. Housing loans are no longer expensive, as interest rates have stabilized in the country.

e. Rationalization of tax structure has resulted in tax compliance. These tax collections are being

deployed on infrastructure projects like roads, railways, airports, power units, etc., which is good

for real estate.

f. Government policies are designed to lure foreign investments, and encourage local

investments. This augurs well for economy and real estate.

g. Inflation is brought under control. Today, the country expects inflation to remain within 5

to 6 percent for a foreseeable future. This makes the country a good place to live in after

retirement.

h. Political stability within the country and amicable foreign relations create environment

conducive for businesses and living.

i. Population of the country has not yet reached a stable level, which means, the demand for

real estate will continue unabated for another 2 to 3 generations.

j. The prices of real estate in India have not reached the levels that are prevailing in other

developed countries.

k. Recent statistics reveal that housing sector makes up 80 percent of the real estate market. And

still there is a gap of almost 41 billion sft in demand and supply. The sector is expected is growing

at the rate of 30 percent per annum.

What has caused the current boom in the Indian Real Estate Industry?

The growth in the Indian real estate sector has been due to a number qf reasons; however the root cause

has been the consistently strong growth in India's GDP over the last few years, which resulted in an

income levels rise across the board.

Accompanying rising income levels is the pent-up demand for quality residential properties. The Indian

real estate market today continues to be triggered by this demand for all kinds of property to be used as a

primary residence. This is quite different from what happens in many other countries, where the motor

of the real estate market is often the collective desire to own a second home or to 'trade up' to a better

one

Rising disposable income has resulted in a corresponding increase in consumption. The growth of

consumerism in India has created a demand for new retail, hospitality and entertainment venues and this

has contributed to the recent boom in the Indian construction and real estate sector.

The driver of much of this economic growth has been the technology sector. In India, thb industry

accounts for the absorption of almost 80% of the commercial office space and, as it continues to grow,

demand for office space can only

Urbanization has also resulted in the slow decay of the Indian joint family system where younger

educated members working in well paying jobs within the Business Process Outsourcing and call-center

industries seek to move into their own smaller units and create nuclear families. This has resulted in an

increase in demand for housing as well.

The government has also adopted favorable policies towards home ownership. Additionally a boom in

retail banking has encouraged a vast array of banks to provide housing loans with small down payments.

In 2001 the Indian government

lowered interest rates to 7.5% and this made bank finance accessible to a large pool of people, which in

turn fueled their demand for real estate. In recent times the government has allowed interest rates to

creep upwards but they are still lower than the 15% to 20% that older Indians were used to paying. The

large Indian middle class comprising of more than 300 million people can now afford to take a bank

loan and buy a residential property.

Not only has the Indian government and intermediaries made funds easily available to the citizenry,

since 2005 it has relaxed the rules for Foreign Direct Investment in real estate. This has brought global

investment banks such as Merrill Lynch rushing to invest in Indian real estate. Merrill lynch has

forecasted that the Indian realty sector will grow to $90 billion in 2015. In line with this forecast,

Morgan Stanley has invested $68 million in Mantri Developers a medium sized construction firm based

in Bangalore while Merrill Lynch invested $50 million in a regional developer called Panchsheel

developers. In addition, several global private equity firms have also started investing into the Indian

real estate sector through real estate funds.

The aggregate impact of increased domestic demand and foreign capital investment in Indian realty in \

recent times has indeed resulted in a boom in the Indian real estate industry that was practically

unimaginable some years ago. This increased demand, and India's sustained economic growth are two

very good omens for those Indians who can afford to invest i~ real estate now, and also for foreign

property speculators who have the foresight to add some prime Indian property to their portfolio.

Discouraging Aspects of the FDI Policy in Real Estate

The current FDI norms have receive only lukewarm response from foreign investors. In the past eleven

months, the FDI in Real Estate Investment is not encouraging. Only one project has been approved.

Why so? Here is a glance at the key issues.

1. Minimum Area of Development

The guidelines say that the minimum area to be developed by a company will have to be 100 acres. For

a foreign player, finding 100 acres of land around Indian cities will not be too easy. Most local

developers have already cornered this market, so the present market

conditions are not very attractive to the foreign developers. It will be less restrictive, if this minimum

area is reduced from 100 acres to 25 acres.

2. Restriction on Development

Plus the FDI policy does not allow developers to have a free say on the type of development.

Restrictions include areas to be reserved and handed over free for various uses. Plus there are

reservations for no-profit-no-loss (NPNL) categories and economically weaker section (EWS) housing.

These restrictions must be relaxed for all developers, both local and foreign.

3. Minimum Capitalization

Plus the minimum capitalization norm is USD 10 million for a wholly owned subsidiary and USD 5

million for joint ventures with Indian partners. This may not be much of an issue. The biggest hurdle is

that the housing/township sector does not qualify for the infrastructure sector (Section 80IA) benefits

under the Income Tax (IT) Act and unlike other infrastructure projects, it does not get a tax holiday.

4. Other Issues

Other issues like high tax rates, weak exchange status, restrictive clauses and high levels of corruption,

red tape and bureaucracy make India a less attractive destination for FDls in real estate. Foreign

investors are also worried that essential infrastructure like electricity, water and roads, which are the

government's responsibility, may not come through on schedule. India's real

Estate markets are far less structured and developed compared to the western countries. Hence, some

major changes like repealing the ULCRA and rationalizing the stamp duties during registration are

required to be implemented fast. These changes will most likely be in the form of easier financing for

development and encouragement of institutional investment in commercial real estate development.

Figure IV shows the low levels of labour productivity in India with respect to other nations.

Emerging Issues

In light of the above analysis, the following issues emerge:

Can FDI in real estate bring about price competitiveness? One of the goals of bringing in foreign

players is the possibility of improving competition. For the end consumer, what is needed is a

competitive price. The consumer is always looking for value in the product at the price paid. The recent

recession has more than amply revealed that luxury housing has few takers in India. The NRI market is

more or less saturated. High quality and high specification products which would obviously cost more

would have limited takers.

Can FDI in real estate improve product quality? There is a doubt in the minds of many industry players

about quality improvement. Today, the indian real estate industry is quite competent to provide the best

of quality and specifications. Good imported building accessories interms of plumbing, hardware, timber

products, etc. are all available in India. What further quality improvement that is likely to come in is a

question to be seen. As a matter of fact, many foreign building product manufacturers are already in the

pipeline to make their entry into the country.

Is FDI in real estate the only way to bring in big money into the industry? One of the popular arguments

forwarded in favour of FDI in real estate is the large amount of money that would flow into the country.

While this may be true to some extent, it is not entirely desirable. Foreign money does not come cheap.

There is a cost of capital involved, and the huge returns expected. Instead, if mobilisation of resources is

the issue, the same could be done by foreign institutional investors ( FIls) investing in financial

institutions which could in turn float instruments such as REMFs for local developers. In fact, REMFs

could be entirely local without any foreign capital involved since the Indian investor is today itching to

invest, and real estate is a secure return option. Therefore, once REMFs catch on in India, local

developers may not see sense in tying up with foreign companies. 100 percent FDI would mean foreign

companies with little local expertise and perhaps difficult to survive.

Can FDI in real estate provide cheaper housing for the common man consumer? The ultimate test of

FDI would be the price bottom line. Can FDI further bottom out the real estate sector in the country?

The answer seems to be a clear no for various reasons already mentioned above. At best, FDI would be

able to provide for the elite and upper classes alone.

SWOT Analysis of FDI in Real Estate in India

STRENGTHS WEAKNESSESS

- Infusing large capital - Inadequate backup by local authorities

- Better product design and quality - Difficulties in procuring local sanctions

- Technologically innovative products - High pricing and limited demand

- Greater professionalism in the industry - Difficulties in the exit route

OPPORTUNITIES THREATS

- Mass investments in the economy - Financial risks

- REITS / MFs - Market risks

- Competitive market creation - Displacement of existing players

- Improved business environment - High susceptibility to Litigation

FDI holds a great opportunity, if properly structured. It is an opportunity for mass investments into the

country. It is also an opportunity to hasten the process of real estate mutual funds ( REMFs ) which have

been on the anvil for quite some time now in India. All these hold in them a promise of greater

competitiveness in the market and an improved business sentiment and overall environment.

Threats perceived are from quite a few quarters, but largely unfounded, again provided the proper back

up is created. The companies would be taking a major risk in making such large investments.

Appropriate structuring is therefore needed in terms of proper feasibility, demand assessments, product

off take options packaging, risk sharing mechanisms, risk reducing methods and anchor buyers/tenants.

Local players perceive a threat in terms of being replaced. This should be seen as an opportunity instead

since the weak players would automatically fade out and only financially and professionally sound

players would stay. Yet another threat is the susceptibility to litigation. This is one threat which is real.

Laws are not so easy to change in India. Litigation could rise from several quarters. Particularly when

one has to assemble huge parcels of land, land ceiling laws, agricultural to non-agricultural conversions,

land use changes, greenbelt restrictions, environment controls, tree cutting laws, coastal zone

regulations, regional plan/master plan prescriptions, byelaws, property transfers, apartment laws, stamp

duty at multiple levels, consumer protection laws, etc.

REMFs Having Problem Due To Unclear Tax Rule

At a time when the real estate sector is hard-pressed for funds, the real estate mutual funds (REMFs) are yet to take off, in

spite of being granted permission 3 months ago. This is due to unclear rules about their tax treatment.

REMFs, which were touted as key instrument enabling retail investors to take part in the booming realty sector, have been

delayed partly because the Securities & Exchange Board of India (Sebi) and the finance ministry are still trying to sort out the

tax ability of such scheme.

The Central Board of Direct Taxes (CBDT) has decided to provide it the same tax status as the equity oriented mutual funds,

as was requested by the Sebi. This means that the REMFs will be freed from dividend distribution tax and investors spared

from paying long-term capital gains while selling their shares.

Yet, as said by the Income Tax Act 1961, equity oriented mutual funds are those which have at least sixty five percent direct

investment in securities of the listed companies.

Interestingly, in Sebi’s rules, REMFs must invest a at least of thirty five percent of their funds straight into real estate assets

and the rest into mortgage-backed securities, debt and equity instruments floated by the realty companies, thereby making it

hard for them to be eligible as equity oriented mutual funds.

“As per the REMF structure laid out by Sebi, these funds would more often than not be akin to debt funds,” an expert said.

Unlike equity-linked funds, debt-funds magnetize both capital gains tax and dividend distribution tax. This creates problems as

investors are indirectly being denied the tax incentives given to equity oriented funds, the officials said.

“For a clearer understanding and in order to take in REMFs, the finance ministry will have to change the description of equity

oriented mutual funds in the IT Act,” A. Krishnan tax partner (real estate), Ernst & Young said.

Findings

India has enormous potential in all its property investment categories. Strong population growth, a large

pool of qualified workers, greater integration with the world economy and increasing domestic and

foreign investment are fuelling demand for office, retail and residential property. Although not discussed

in depth in this paper, this demand growth can also be applied to many special property classes, such as

hotels or second homes. Going forward, it will be a matter of exploiting this potential. For the real estate

industry, three aspects are most particularly important.

Second, India needs a stronger capital market base for property financing. The debate on the potential

introduction of REITs and real estate funds points in the right direction. The introduction of REITs in

2007 will give international investors in particular a familiar investment vehicle. Private investors could

also enter into indirect investment in real

First, further opening to foreign investment is desirable. Not only do international investors have the

means to finance new construction projects, but also possess the expertise in market analysis, facility

management and building construction. In the medium term these will act as catalysts to bring greater

transparency to the market.

Biblography :-

Colliers International India Research . Deutsche Bank Research

. Hiranandani construction Pvt. Ltd

. Urbanindia.nic.in

. Indiaground.com

. Mckinsey&co.report

. Economic Times

About Indore

Indore Development scheme 1991 has area of 214.10 Sq. Km. (12145 Hectar Land)

This is used as follows:

Develop Area 2005

1

2

3

4

5

6

Residential

Commercial

Industrial

Public & Semi Public

Entertainment

Transportation

Total

5060

648

1498

1417

1417

2105

12145 Hectar

4660

570

843

1096

290

1370

8829 Hectar

Main Objective of Indore Devlopment Scheme 2021

1. Utilization of City land for Developmentof City

2. Preservation of Historical & natural Places

3. Preservation of Historical Places of the Period of Devi Ahilya

Population Distribution

City

Area

Population

1961

Population

1971

Population

1981

Population

1991

Population

2001

Population

2011

Population

2021

Population

2025

Censes Censes Censes Censes Censes Estimated Estimated Estimated

Indore 394941 537000 829327 1091618 1506062 2208724 2785897 3016767

Dist

Indore

1364720 1777685 2465827

Madhya

Pradesh

38167647 48564515

Population: of Indore, Madhya Pradesh at 2001

Madhya Pradesh Indore Dist.

City Indore

Population 60385118 2465827 1506062

Male 31456873 1289352 791803

Female 28928245 1176475 714259

Density of Population 196 663 12614.73

Area (Sq. Km.) 308245 3898 137.17

Literacy 50.28% 63.96% 82.30%

Devloper of Indore

Indore Development Authority (IDA)

IDA has played an important role to Development of Indore by development 68 Scheme on an area 34.5

Sq. Km. which is including the amenity and facility areas.

M P Housing Board

Madhya Pradesh Housing Board has played an important role to develop of Indore City By developing

the 11500 House accommodating for 50750 persons in their scheme area.

It is governed by a Board of Directors consisting of a Chairman appointed by the Government, officials of concerned

departments/ agencies of the State and Central Governments, as also two MLAs and two other non-officials appointed

by the State Government.