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“An Analytical study on Real Estate Investment in India”

Bachelor of Commerce in Accounting and

Finance(2019-20)

Semester VI Submitted by Dhanraj Zaveri Roll number - 1718415

Lala Lajpatrai College

“An Analytic study on Real Estate in India” CERTIFICATE This is to certify that Dhanraj Zaveri of B.com –Accounting and finance(2019-

20. has successfully completed the project under the guidance of Professor Minum Saksena Principal Project Guide Internal Examiner External Examiner

A RESEARCH PROJECT ON

“AN ANALYTICAL STUDY OF REAL ESTATE IN INDIA”

SUBMITTED TO

UNIVERSITY OF MUMBAI FOR COMPLETION OF THE

DEGREE

OF BACHELORS OF ACCOUNTING AND FINANCE

UNDER THE FACULTY OF COMMERCE

SUBMITTED BY:

MR.DHANRAJ.M.ZAVERI

T.Y.B.A.F(SEMESTER VI)

ROLL NO: 1617415

ACADEMIC YEAR:2019-

UNDER THE GUIDANCE OF

DR.MINUM SAKSENA

LALA LAJPATRAI COLLEGE OF COMMERCE AND

ECONOMICS

TABLE OF CONTENTS

CHAPTER-1 INTRODUCTION

OVERVIEW

what the future may hold as India quickly becomes a global superpower. The study has been undertaken as the project work undertaking the growing importance in the Investment matters and its contribution to the aspects of economy. The study explains the importance of the real estate sector, its current trends and future prospects of investments, its characteristics, advantages and disadvantages. of investments. Also various methods of finding out the investment values, considerations while investing in real estate properties, government regulations, etc. Marco-economic Overview The Indian economy currently stands among the world's fourth largest growing economy in terms of purchasing power parity and holds the distinction of being a key contributor to Asia's balance of payment surplus. India's GDP is estimated to be the third largest in the world by

2020. India is also considered the second most attractive country in the world for Foreign Direct Investment (FDI). Forex Reserves (excluding gold and SDRs) stood at US$157.25 billion at the end of July 2006. India now holds the fifth largest stock of reserves among the emerging market economies and the sixth largest in the world.

The performance of the country has been consistent and steady over the past three years with an average annual growth rate of 8%. The growth trend is being led by positive movements across sectors in agriculture, manufacturing and services.

Manufacturing industries like textiles,automobiles,cement,steel,petrochemicals,infrastruct ure(civil aviation, roads, and ports), electronics, beverages and tobacco products have been the prime drivers in India’s Industrial growth.

REAL ESTATE SCENARIO IN INDIA

The size of the Indian real estate market is estimated at USD 12 billion and it is currently growing at rate of about 30% annually. Real estate lending by banks has increased by 3.78 times in the last two years, forming 18% of the total bank credit. Strong and improved economic growth, proactive policy initiatives like relaxation of FDI in construction and availability of finance (institutional and retail) has driven the demand for real estate across all sectors - Commercial, Residential, Retail and Hospitality. Also, there is an increased focus towards development of Special Economic Zones (SEZ) in India.

Indian Real Estate Industry Analysis

Latest update: December, 2019

The last few years have seen Indian market mature through regulatory reforms (rationalization of stamp duties, reform of urban land ceilings), improving products in terms of quality and technology, changing tenant profile (MNCs, and respect for tenancy laws), and improving management and maintenance models (enhanced product life-cycles and sustained project / real estate yields). Although the initial real estate boom was concentrated in places like Bangalore and the National Capital Region of Delhi (including Gurgaon), more recently the geographical spread has widened. There has been a significant shift in real estate market from metros to its suburbs and to tier II and tier III cities. Lease rentals and occupancies have been picking up steadily and there is an increasing demand for quality infrastructure across various segments of the real estate sector.

Residential Real Estate The residential property market in India constitutes almost 75% of the real estate market in terms of value. Low

per capita housing stock, rising disposable income coupled with easy availability of finance from the housing finance companies and banks are driving demand in this sector. Also, Average age of housing loan borrowers have decreased to 30- 35 years from 40- 45 years a few years ago, indicating a younger buying threshold. The housing sector is currently growing at 30-35% per annum. A proportion of demand is also being driven from investors who view housing as an attractive investment option as compared to mutual funds and stocks. The demand for housing is geographically widespread with townships being built in both the metros and the tier II and III cities. In India, there is a housing shortage of 19.4 million units out of which 6.7 million are in urban areas alone. This translates into very high opportunities for investors in the residential sector. Retail Real Estate The Retail industry in India continues to be dominated by individual small format stores with floor space of less than 500 sq.ft. Total number of retail outlets is estimated to be around 12 -15 million, indicating a retail density of 12- outlets per 1,000 people, which is one of the highest in the world. The retail sector in India is currently estimated at USD 230 billion. The current size of the organized retail activity is USD 7 billion, which is a mere 3% of the total retail market. The retail sector is witnessing a growth of 5-7% per annum; however the organized retail is poised to grow at a rate of

against the total current supply of 96,000 rooms, five star category accounts for just a quarter of the supply. With the expected growth in demand for rooms at 18%, another 65,000 – 80,000 hotel rooms will be needed till 2010. This demand – supply gap is expected to result in high level of activity in construction of hotels. The established brands in this sector such as Asian Hotels, Indian Hotels, ITC, Le Meridian etc are in expansion mode with many new players such as Accor Group, Marriot, Choice, IHG Group keen to establish their footprint. Special Economic Zones The upcoming realty trend in India after multiplexes and mega housing projects are the Special Economic Zones (SEZ). Currently, 28 SEZs are operational in the country, including those converted from Export Processing Zones (EPZ) to SEZ. Approx. 189 proposals have already been granted approval since the SEZ Act, 2005 came into force. These include SEZs in various segments such as multi- product, Information Technology, Bio-technology, Gems and Jewellery, Textiles and technology intensive industries. Both developers and corporate have shown tremendous interest in developing SEZs in the country. Reliance Industries, for instance, is planning a 25,000 acre SEZ in Gurgaon and is also the main partner in twin SEZs coming up at Navi Mumbai and Maha Mumbai, with a combined size of 35, acres.

Eighty percent share of the real estate market is garnered by residential sector and the rest is comprised of offices, shopping malls, hotels and hospitals. Real estate companies are coming up with various residential and commercial projects to fulfill the demand for residential and office properties in Tier-II and Tier-III cities. An estimated shortage of 26.53 million houses during the Eleventh Five Year Plan (2007-12) provides a big investment opportunity. → in the year 2009-10 the total constructions sector size was Rs. 488,345 caror as per The Central Statistical Organization. Table: Growth Rate of Major Sectors in India: Year Agriculture Industry Construction Services GDP 2001-02 3.1 6.1 6.8 4.2 3. 2004-05 0.0^ 8.5^ 16.1^ 9.1^ 7. 2005-06 5.8^ 8.1^ 16.2^ 10.6^ 9. 2006-07 4.0^ 10.7^ 11.8^ 11.2^ 9. 2007-08 4.9 7.4 10.1 10.9 9. 2008-09 1.6 2.6 7.2 9.7 6. 2009-10 0.4 8.3 8.0 10.1 8. 2010-11 5.4 8.2 8.9 9.6 8. .

5.1 Classification of Properties:

6 Real estate has been broadly categories into 3 classes as follow

(A). Residential Property:

The residential type of property is by far the most popular with both new and experienced agents. Residential property offers a good investment avenue. People buy residential property for two important reasons:  For staying  As an investment

►►Advantages of Investing in Residential Property

Types of

Property

(A). Residential

Property

(B). Commercial

property

(C). Vacant land

 Expenses, including depreciation on the property and interest on your borrowings, are tax deductible.  You make money as the value of the property increases.  You can leverage your investment.  You get rental income.

►►Risks of Investing in Residential Property

 Interest rates could rise.  The property could be untenanted for a period of time.  You could get "bad" tenants.  It could take up a lot of your personal time.  House prices could remain static, or even fall.

The following are the type of Residential Property:

1. Single Family Residence

2. Row Houses/ Townships

3. Flats

4. Bungalows

(B). Commercial Property: