Real Estate

Industry introduction

What is this industry Real estate is "property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature; an interest vested in this (also) an item of real property; (more generally) buildings or housing in general. Also: the business of real estate; the profession of buying, selling, or renting land, buildings or housing Major categories in India Co-operative Housing Societies (CHS) Condominiums Builder flats Chawls Villas Lanes Houses Tianjin Kothis Havelis Independent Floors Lal Dora – Where people carry out commercial and residential activities both. The size is measured in Gaz (square yards), Quila, Marla, Beegha, and acre. Basic Introduction to the industry

Overview of Industry Market size of real estate in India The market size of real estate in India is expected to increase at a CAGR of 11.2 per cent during FY2008 - 2020.

Cont… Advantage India Robust demand Growing demand 2013 Growing demand Attractive opportunities Growing requirements of space from sectors such as education and healthcare Growth in tourism providing opportunities in the hospitality sector 2020E Demand for residential properties has surged due to increased urbanisation and rising household income About 10 million people migrate to cities every year 35 per cent of the population is in young age bracket (15-35 years) Growing economy driving demand for commercial and retail Market size: USD121 billion Market size: USD853 billion space Advantage India Increasing investments Policy support Allocation of USD1.3 billion for rural housing and USD0.7 billion for NHB to increase the flow of cheaper credit for affordable housing for urban poor as per Budget 2014-15 The government has allowed FDI of up to 100 per cent in development projects for townships and settlements FDI in construction development of USD23.4 billion between April 2000 and April 2014 During April 2012–January 2013, the real estate sector accounted for 8.8 per cent of total FDI inflows into India

Different Segments Real estate sector Residential space Fragmented market with few large players Residential segment contributes ~80 per cent of the real estate sector For FY12, estimated housing shortage for urban area was 18.8 million houses, indicating a tremendous growth opportunity Residential space Few players with presence across India Of a total supply of 445 million sq ft of office space planned in 10 major cities, around 167 million sq ft would come up during 2013 -15 with the demand being 66 million sq ft during the same period Commercial space FDI in multi- brand retail to boost demand Fragmented market with few national players Of a total planned supply of 67 million sq ft across major cities, around 38 million sq ft would come up during 2013 -15 Real estate sector Retail space A competitive market with many players; received investments by private equity funds worth USD11 million in 2013 As of 31 December 2012, the country had 1,376 approved hotels with 76,567 rooms Hospitality space The government has formally approved 576^ SEZs, of which 173 are in operation Majority of the SEZs are in the IT/ ITeS sector SEZs

Growth Drivers Growth drivers Growth in tourism Urbanisation Epidemological changes Growth drivers Growing economy Easier financing Policy support

Importance of the sector Real estate and construction sector has continued to contribute significantly to the country’s GDP; Average contribution over 2011-16 estimated to be 17.5% On an average, real estate contributes 8% while construction contributes 9.5% Both real estate (19.5% CAGR) & construction (CAGR 18.3%) have witnessed tremendous growth since 2001 Contribution of Real estate and Construction to India’s GDP (USD Bn) 17.5% 17.5%

Legal Formalities / Act /Govt. Regulations

Govt. Initiatives and Policy There has been a drastic curtailment in restrictive policies such as the Urban Land Ceiling and Regulation Act. Reforms in the Integrated Township Policy. Liberalization of FDI rules and the emergence of real estate funds. Range of Government benefits & incentives including residential tax breaks and the Special Economic Zones.

Housing for economically weaker sections Govt. Policy / Subsidy Additional deduction of up to USD1,841 on interests payable on home loans of up to USD46,032 announced in the Union Budget 2013–14 To liberalise scheme of interest subversion of 1 per cent on home loan by including loans of up to USD31,250 for houses that cost up to USD52,080 Ease in housing finances Housing for economically weaker sections Allocation of USD1.3 billion for Rural Housing Fund in Budget 2014-15 Allocation of another USD0.7 billion for National Housing Bank (NHB) to increase the flow of cheaper credit for affordable housing for urban poor in Budget 2014-15 The government has allowed FDI of up to 100 per cent in development projects for townships and settlements FDI of up to 100 per cent is allowed in the hotel and tourism sector through the automatic route FDI SEBI released draft guidelines for investments by Real Estate Investment Trusts (REITs) in non-residential segment. Upon implementation, this would widen the real estate market and boost funds entering the organised real estate sector. Widening the scope of real estate market In December 2014, the government passed an ordinance amending the land acquisition bill This ordinance would help speeding up the process for industrial corridors, social infra, rural infra, housing for the poor and defence capabilities Land Acquisition Bill

Construction of buildings Service Installations Various Laws and Act… Numerous Central and State level laws, rules and regulations govern the construction activity… Land title Planning & Land Construction of buildings Indian Registration Act , 1908 Various State legislations Land Revenue Acts by all State Governments Town and Country Planning Acts by all State Governments Master Plans/ Development Plans National Building Code 2005 Local Building Bye-Laws NOC from Central Govt. NOC from State Govt. Service Installations Environnent Impact Assesment (EIA) Notification S.O. 1533 (2006) Ancient Monuments and Archaeological Sites and Remains Act, 1958 Works of Defense Act 1903 (WDA) Environment (Protection) Act, 1986 Forest Conservation Act, 1980 Water (Prevention & control of pollution) Act, 1974 and Air (Prevention & control of Pollution) Act, 1981 Water connection Sewerage connection Gas connection Telecom connection Power / Electricity connection

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Legal Formalities The Real Estate (Regulation And Development) Bill, 2013 Highlights of the Bill The Bill regulates transactions between buyers and promoters of residential real estate projects. It establishes state level regulatory authorities called Real Estate Regulatory Authorities (RERAs). Residential real estate projects, with some exceptions, need to be registered with RERAs. Promoters cannot book or offer these projects for sale without registering them. Real estate agents dealing in these projects also need to register with RERAs. On registration, the promoter must upload details of the project on the website of the RERA. These include the site and layout plan, and schedule for completion of the real estate project. 70% of the amount collected from buyers for a project must be maintained in a separate bank account and must only be used for construction of that project. The state government can alter this amount to less than 70%. The Bill establishes state level tribunals called Real Estate Appellate Tribunals. Decisions of RERAs can be appealed in these tribunals. Real Estate Bill