Real estate sector overview

REAL ESTATE SECTOR OVERVIEW

The real estate sector in India assumed greater prominence with the liberalization of the economy

The Indian real estate sector has traditionally been dominated by a number of small regional players with relatively low levels of expertise and/or financial resources.

it has traditionally tapped high net-worth individuals and other informal sources of financing, which has led to low levels of transparency.

8/7/2013 1 M. Chandra Sekhar Reddy, Executive

Assistant, CREDAI AP

Real Estate Sector Overview

This scenario underwent a change. As of today, the real estate industry’s dynamics reflect

consumers’ expectations of higher quality with India’s increasing integration with the global economy.

Residential real estate industry has witnessed stupendous growth in the past few years owing to the following reasons: Continuous growth in population Migration towards urban areas Ample job opportunities in service sectors Growing income levels Rise in nuclear families Easy availability of finance

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M. Chandra Sekhar Reddy, Executive Assistant, CREDAI AP

• The huge gap in Demand and Supply of houses leading to a steep rise in residential capital values especially in urban areas.

• Broadly, residential real estate industry can be divided into four growth phases, as can be seen in the chart below







• According to CRISIL Research, housing shortage in India is estimated at 78.7 million units at the end of Phase II. The overall housing shortage in India is likely to decline to 75.5 million units by the end of Phase IV




• Urban Areas

Housing shortage in urban areas is estimated at 19.3 million units at the end of 2008, up from 15.1 million units at the start of 2005. Housing shortage in urban areas is likely to touch a walloping 21.7 million units by the end of 2014.

• Rural Areas

Rural housing shortage is expected to decline to 53.8 million units by 2013- 14 from 59.4 million units at the end of 2008. A reduction in housing shortage due to migration and conversion of kutcha houses into pucca houses.




• Despite strong fundamentals backing the residential real estate, it is highly influenced by economic cycles.

• Between 2008- 09 the real estate market in India too witnessed an astounding fall in demand and capital values

• However, the sector experienced a pickup in demand during the second half of 2009 across major cities mainly attributed to improvement in economy

• Demand for houses mounted as the global economy improved bringing back financial confidence to the home buyers along with low interest rates. End-users, who had put their purchasing plans on hold due to the fall in affordability levels and job-related uncertainties, started booking houses.


Recent Industry Trends



• In 2010- 11 total revenue was US$ 66.8 billion. By 2020, the sector is expected to earn a revenue of US$ 180 billion.

• the demand is expected to grow at a compound annual growth rate (CAGR) of 19 per cent between 2010 and 2014.

• India Ranked 20th in the list with investment volume of US $3.4 billion on 2012.

• In a couple of years this sector will attract US $ 4-5 billion from FDIs

• From April 2000- Feb 2012 Construction development sector has attracted FDI worth US $ 22,007.67 millions

• India needs to invest US$ 1.2 trillion over the next 20 years to modernize its infrastructure


Market Size/ Growth Prospects



• FDI up to 100 per cent is allowed under the automatic route in townships, housing, built-up infrastructure and construction development projects

• Also planning to introduce a single-window system for clearance of all real estate projects across the country. Which bring down the average approval time from the current 196 days to 45-60 days

• Under the JNNURM programmes the Government has sanctioned projects worth Rs 41,723 crores (US$ 7.51 billion) for building of 1,569,000 houses/dwelling units for economically weaker/lower income group

Government

Real Estate Sector Overview 8/7/2013 9 M. Chandra Sekhar Reddy, Executive


• Some of the initiatives taken in the union budget 2013-14 include:

• For homes and flats with a carpet area of 2,000 square feet or more or of a value of Rs 1 crore (US$ 180,213) or more, which are high-end constructions, where the component of services is greater, rate of abatement reduced from 75 to 70 percent

• Rs 6,000 crore (US$ 1.08 billion) were given to Rural Housing Fund

• National Housing Bank plans to set up Urban Housing Fund. Rs 2,000 crore (US$ 360.47 million) will be provided to the fund in the current financial year




• The real estate industry in India is yet in a promising stage.

• It the second largest employer after agriculture and expected growth rate would be 30 per cent over the next decade.

• The real estate market could start to perform better as the easing of FDI norms will begin to show results during the second half of the year

• the Finance Ministry's motivation through softening of interest rates and lending more to the real estate sector will have a positive impact on both developers and consumers.


Road Ahead



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Thank You

8/7/2013 M. Chandra Sekhar Reddy, Executive


Real estate sector overview

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