Dissertation Writing Help on Real Estate Activities in India
Project Report on Real Estate Activities in India
REAL
ESTATE ACTIVITIES
- Real estate accounted for 4.4% of India’s GDP in 2010
and is the second-largest employer in the country after agriculture.
- The industry has seen an unprecedented boom in the last
few years of the review period. Total value of real estate transactions
hit INR3.4 trillion by 2010, after showing uninterrupted growth of an
average 13% per year since 2000.
- Firstly, this was fuelled by better living standards of
Indian households, as well as improved access to credit. Secondly, the
rapidly expanding commercial sector created a surge in demand for
office-buildings and dwellings. Thirdly, the liberalisation policies of
the government reduced the number permissions and licenses needed before
taking up construction projects.
- Easier access to bank loans and higher earnings were
some of the pivotal reasons behind the sudden jump in residential real
estate. The demand is particularly strong in Tier-II and Tier-III cities.
To meet this demand, Ansal Properties has started several residential
projects in Jodhpur, Ajmer, Jaipur, Panipat, Kundli and Agra. Omaxe has
also planned around 40 residential and integrated township projects in
Tier-II and Tier-III cities, the majority of them being in Uttar Pradesh,
Punjab, Madhya Pradesh, Rajasthan and Haryana.
- Property prices in India are touching new heights, with
strong variations in different cities. Prices range from INR4,200 per sq
ft in Hyderabad to INR42,000 in Mumbai. In most cities, real estate prices
jumped at least twice between 2004 and 2008, with some districts recording
triple or even stronger growth. The villages adjacent to the metro cities
also experienced sky-rocketing land prices. This induced farmers to sell
their land for good money.
- Individual clients generate the lion’s share of
industry revenue. As of end-2010, Indian households accounted for 93% of
all real estate transactions in the country in value terms.
Business-to-businesses contracts constituted less than 7% of total sales,
which is quite typical for developing countries, mostly because a large
share of commerce is still within the unorganised sector. On the contrary,
Western economies usually record significantly higher proportion of
industrial customers within the real estate client base. In the UK, for
example, business-to-business customers account for at least 30% of all
business value.
- However, the property rental trends in the commercial
sector are momentous, as the key tendency among the investors is to rent a
commercial space instead of buying. Commercial rentals including corporate
office space, BPO spaces, shopping centre space, shops and showrooms are
an integral part of the commercial rentals in India. Buying good space in
high quality development and leasing it to foreign investors is currently
considered a wise investment decision. Typically, commercial lease
agreements specify a 15% escalation in the real estate rental in every
three years.
- Opening the doors to foreign investments was another
step to make the industry flourish. The government has allowed FDI in real
estate since 2002. FDI was deemed necessary in the view of making the
sector more organised and increasing professionalism. Indeed, the
organised market in India is accelerating, with players like WalMart,
Bharti and Reliance stepping up the demand for real estate.
- Over the review period of 2000-2010, the revised investor-friendly
policies not only allowed foreigners to own property, but also dropped the
minimum size for housing estates built with foreign capital from 100 acres
to 25 acres. This, in turn, encouraged an increasing number of countries
to invest in Indian properties. India’s housing and real estate sector
attracted a cumulative foreign direct investment worth INR383 billion
(US$8.4 billion) from April 2000 to April 2010, wherein the sector
witnessed FDI amounting INR128 billion (US$ 2.8 billion) in the fiscal
year 2009-10.
- 2010-2016 are expected to be good years for real
estate, both in the residential and commercial spaces. Property companies
are planning a lot of new developments in the upcoming years. Shristi
Infrastructure Development Corporation, for example, is to invest INR20.3
billion (US$445 million) over the next three years in seven small cities
in West Bengal, Tripura and Rajasthan. The company plans to build
integrated townships, healthcare facilities, hospitality and sports
facilities, retail centres, logistics hubs and commercial and residential
complexes.
- Tata Housing is planning to launch 10 new residential
projects in both affordable and luxury segments in 2011, with an
investment of about INR12.3 billion (US$269 million). Vision India Real Estate
is to develop logistics parks in Bengaluru and Chennai, with an outlay of
INR5 billion (US$110 million). Realty major Ansal Properties &
Infrastructure plans to invest about INR15 billion (US$331 million) over
the first three years of the forecast period on expansion of its existing
integrated townships and to develop a group housing project in Haryana.
- Along with these new investment projects, further
developing country’s economy and improving living standards of Indian
households, total value of real estate transactions is expected to
increase by an average 15% per year in 2011-2016, to INR7.77 trillion by
the end of the forecast period.
DEFINITIONS
- Category: K - Real estate & business services
- Division: 70 - Real estate activities
This division includes:
Letting own property:
- development of real estate projects
- buying and selling of self-owned real estate
- letting and operating of self-owned real estate
Real estate services on a fee:
- intermediation in buying, selling, renting and
appraising real estate – rent-collecting agencies – facility management,
janitorial activities such as managing/offering activities;
rent-collecting agencies
- facility management, janitorial activities such as
managing/offering activities: facility operation; cleaning and maintaining
the premises of a building; controlling the heating/ventilation/air
conditioning systems; making minor repairs
Exclusions: development and construction
work of a real estate project by a construction unit; operation of hotels,
rooming houses, camps, trailer camps and other non-residential or short-stay
lodging places; development on own account involving construction.
Attractiveness
Index: Explanation
The Industry Attractiveness Index
has two parts, evaluating:
- the industry’s performance in a stable economic
environment;
- the industry’s performance in a turbulent economic
environment and the industry’s resistance to economic downturn.
The first part of the index
represents the industry’s performance in a stable economic environment, based
on historic evidence in the period of 2004-2008. It covers several criteria of
the industry’s performance:
- Industry’s growth: the compound annual growth rate of
the industry’s turnover.
- Demand stability: coefficient of variation of
year-on-year growth indexes of demand. Coefficient of variation is a ratio
between the standard deviation and sample mean. It complements the measure
of average growth rates by giving the growth stability characteristic.
- Industry’s profitability: average EBITDA share of
turnover over five years of stable economic environment.
- Bargaining power over suppliers: the measure is
calculated as the industry’s average percentage share in its three major
suppliers’ sales. It shows the industry’s potential power to negotiate the
prices and other supply conditions of its major intermediate purchases.
- Bargaining power over buyers: the measure is calculated
as the industry’s average percentage share in its three major buyers’
costs. It evaluates the potential power of the industry to negotiate the
price of its production and set other sales conditions.
- Barriers of entry: a share of big companies in the
total number of companies within the industry (500 employees and more).
The share of big companies is a proxy for entry barriers and concentration
measure within the industry.
- Foreign competition: average annual import share in
total domestic demand, average of five years. It shows how strong local
companies are in comparison with foreign competitors.
- Global opportunities: export share of industry’s
turnover, the average of five years. It shows the external industry’s
possibilities to supply the foreign markets and implicitly demonstrates
the competitiveness of the industry’s products/services abroad.
The second part of the index
reflects the industry’s vulnerability in economic downturn. It is based on
several criteria:
- Industry’s growth: the compound annual growth rate of
the industry’s turnover during economic downturn (2008-2011).
- Dependence on capital purchases: ratio of
non-investment (B2B) purchases of industry’s products/services to
investment purchases of industry’s products/services. Usually, goods and
services that are treated as capital by companies are pro-cyclical, their
reaction to changes in economic conditions is more sensitive in comparison
with B2B purchases.
- Dependence on household consumption: the average ratio
of household consumption expenditure to business purchases of the product
is used to evaluate the sensitivity of the specific production category.
Usually B2B goods and services experience amplified fluctuations in their
demand compared to final consumption spending categories, which exhibit
lower levels of volatility and are less sensitive to economic downturn.
- Durability of the industry’s product: time between the
purchase and the complete wearing out of a product/service. The longer the
time the more durable the good is. Demand for durable or semi-durable
goods usually has greater sensitivity to economic slowdowns as time of
service can be prolonged for these goods.
- Industry’s resistance to changes in a country’s GDP:
measured as the elasticity coefficient of how sensitively the industry
reacts to changes in a country’s GDP.
- Industry’s dependency on other industries (forward
linkage): the variable, measured as the horizontal sum of all coefficients
of Leontief’s matrix inverse. It measures the cumulative output decrease
in the sector, if the final demand for the production of all sectors were
to decrease by one unit. In a period of economic downturn, it is a measure
representing the power of other industries to affect the industry of
interest.
- Industry’s ability to affect other industries in the
economy (backward linkage): measured as the vertical sum of the
coefficients of Leontief’s matrix inverse. It shows how much influence the
industry has on other industries and how strong these links are. It
measures the extent to which a unit change in the demand for the product
causes production increases in all the industries of the economy. Being
one of the key industries in the economy gives it additional strength and resistance
to economic shocks.
Each measure of the industry’s
performance is compared across all industries in the country and is then
attributed to a corresponding percentile judged on its performance (scale from
1 to 100). The better the value of criteria is the higher percentile the
industry reaches. The percentiles are then weighted by their relative
importance and the final score is calculated as the weighted average.
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