1. AN INDUSTRY
ANALYSIS OF THE
REAL ESTATE
SECTOR
By:
Arunav Nayak (11DM059)
Sanjeev Kumar (11DM017)
Sudeshna Sahu (11DM039)
Sulekha Routray (11DM104)

2. APPROACH
 Analysis of the Real Estate Cycle and the
parameters affecting it
 Current Scenario of Real Estate in India
 Analysis of the segments of the Real Estate
Industry (i.e Residential, Commercial, Retail and
Hospitality)
 Key Players in the Indian Real Estate
 Sector Market Performance in NSE
 Global Trends
 Application of Porter’s 5 Forces Model

3. REAL ESTATE CYCLE
 Real estate cycles are described as cyclic
movements of price in the real estate market
which, over a period of time, causes fluctuations
in the residential and commercial property
market.
 The real estate cycles involves periodic shifts of
rapid growth of output (recovery and
prosperity),alternating with relative stagnation
or decline (contraction or recession) over time.

4. PHASES OF REAL ESTATE CYCLE
 Recession
 Recovery
 Expansion
 Contraction

6. INDICATORS OF REAL ESTATE
CYCLE
 Population growth
 Employment rate
 Gross Domestic Product
 Household Disposable Income
 Stock Market Values
 Demand Supply Scenario
 Average house price movement
 Price to income ratio
 Net Rental Yield
 Interest Rate
 Demand Supply Scenario

7. CURRENT SCENARIO OF REAL
ESTATE IN INDIA
 Biggest Prospect for Real Estate – IT/ITeS
 Economic Downturns in US & European markets
has hampered the profit margins of such
companies and consequently IT companies have
begun cutting costs on real estate expenditure
 GDP Share of the real estate sector along with
business services was 10.6% in 2010-11
 Demand for real estate is expected to grow at a
compounded annual growth rate of 19%
 Institutional credit for housing investment is
growing at a CAGR of 18-20% per annum

8.  According to World Bank’s Doing Business 2012
report, India is one of the top countries in
housing & workspace needs, but ranks 181 in
terms of construction permission processes
 Current size of the Indian Real Estate market is
$65-70 billion out of which the residential
segment occupies 90-95% of the market,
commercial segment occupies 4-5% and organized
retail with 1% of the market

9. GROWTH DRIVERS OF INDIAN
REAL ESTATE
 Rapid urbanization
 Significant rise in consumerism
 Policy and Regulatory reforms (100% FDI
relaxation)
 Surge in Industrial and Business Activities
 Increasing demand for newer avenues for
entertainment, leisure and shopping

10. MARKET SIZE OF INDIAN REAL
ESTATE
US $ Billion
70
60
50
40
US $ Billion
30
20
10
0
2008 2009 2010 2011
Source: CCI Report on Real Estate in India Aug 2012

11. SEGMENTS OF REAL ESTATE
SECTOR IN INDIA
 Residential
 Commercial
 Retail
 Hospitality

12. RESIDENTIAL REAL ESTATE
Phases of growth:
 Phase I (2001-2005): Initial growth phase with off
take and prices picking up
 Phase II (2006-2008): High growth phase with
high demand and prices more than double
 Phase III (2009-2010): Substantial slowdown in
demand due to dented affordability and economic
environment
 Phase IV (2011-2014): Consolidation phase, with
demand, supply and prices gradually moving up
in line with improvement in economic
environment

13.  This segment is highly influenced by economic
cycles. Owing to global meltdown, the residential
real estate market in India too witnessed an
astounding fall in demand and capital
values, between first half of 2008 and first half of
2009. Average residential capital values declined
by 18-20 per cent in March 2009 from the peaks
witnessed during the first half of 2008.
 Recently there has been a pickup in demand due
improvements in economy

14. COMMERCIAL REAL ESTATE
 The commercial real estate has been driven
largely by the growth in service
sectors, especially IT/ITeS and with this began
movement from CBD’s (Central Business
Districts) towards city suburbs.
 Tax sops on the profits of IT-ITeS companies also
led to massive development of IT Parks and SEZs
(Special Economic Zones)
 Demand for office space is directly linked to
addition in number of employees, which in turn is
dependent on economic growth. When economy
slows down, companies hold their expansion
plans leading to lower demand for office space.

15.  Due to the Subprime crisis and the ongoing
Eurozone crisis, the demand for commercial
space has come down drastically. Subdued
demand and rentals has impacted the execution
adversely in addition to cancellation of many
projects.
 Sustained decline in this segment past 2008 has
been the result of postponement of expansion
plans by corporate.

16. ORGANIZED RETAIL REAL
ESTATE
 The retail industry in India is in slowdown
despite attaining peaks of CAGR at 28% in the
2005-08 period. The industry is expected to
increase at a CAGR of 14% in the short term and
19% over the next 5 years.
 Organised retail penetration has grown to about
5.6% in 2009-10, which is further expected to
increase to about 7.3% by 2012-13.
 Key driving factors for growth of this sector
includes lavish lifestyles, high disposable incomes
and a propensity to spend.

17. 2007-08 2009-2010 2012-2013
Total Retail Rs.15.5 trillion Rs.19.7 trillion Rs.27.9 trillion
Organized Rs.0.9 trillion Rs.1.1 trillion Rs.2.0 trillion
Retail
Organized 5.5% 5.6% 7.3%
Retail
Penetration
Source: CRISIL, India Real Estate Overview

18. HOSPITALITY SECTOR REAL
ESTATE
 Rising incomes, higher weekend trips and
increased access to travel-related information
over the Internet have propelled growth in
hospitality.
 From 2003-04 to 2010-11,the market size of the
hotel sector has more than doubled from Rs 77.13
billion in 2003-04 to more than Rs 200 billion in
2008-09, registering an impressive CAGR of more
than 15%
 In 2008-09, the market size decreased by around
4 per cent due to decline in revenues. The hotel
industry faced a fall in room demand due to the
global financial crisis and the 26/11 terror
attacks in Mumbai.

19.  Demand is expected to increase at a CAGR of 15
per cent while room availability is expected to
record a CAGR of 9 per cent across premium
segments. Business destinations are poised to see
higher growth in room inventory compared to
leisure destinations.

20. KEY PLAYERS IN THE INDIAN
REAL ESTATE
 DLF Ltd
1. Presence across 30 cities in India
2. Residential, townships, commercial
complexes, IT parks, hotels etc pan its project
coverage
3. It is the only real estate company to be listed in
BSE Sensex, NSE Nifty, MSCI India Index and
MSCI Emerging Markets Asia Index

21.  UNITECH
1. First developer to be certified ISO 9001
2. Offers diversified projects across
residential, commercial and IT
parks, retail, hotels etc.
3. First real estate company to be listed in NSE
Nifty
4. Has ventured into infrastructure business as
UNITECH Infra

22.  Ansal API
1. Market leader in the NCR region
2. Project spectrum includes integrated townships,
group housing, shopping complexes and malls,
hotels, IT parks and SEZ segments, and
Infrastructure and Utility services
3. Land reserves of about 9335 acres

23. SECTOR MARKET
PERFORMANCE (NSE)
 The market trend in NSE for last 7, 15, 30 and 90
days can be obtained
 In this presentation, there will be focus on top
gainers and losers over a period from 14th
September 2012 to 28th September 2012

24. TOP GAINERS
Company Start Price End Price Difference % Change
HOUSING 72.7 97.4 24.7 33.98
DEV
VASCON 38.75 49.6 10.85 28
ENG
PENLAND 37.2 47.15 9.95 26.75
LTD
BRIGADE 48.5 59.05 10.55 21.75
INDBUL 49 57.65 8.65 17.65
REAL
Source: myiris.com, Sector Overview, Market Performance

25. TOP LOSERS
Company Start Price End Price Difference % Change
DB 72.45 71.3 -1.15 -1.59
REALTY
SUNTECK 319.8 317.95 -1.85 -0.58
REAL
DS 67.85 67.65 -0.2 -0.29
KULKARNI
TCI 132.85 132.5 -0.35 -0.26
DEVELP
Source: myiris.com, Sector Overview, Market Performance

26. GLOBAL TRENDS
As per a report published by Scotiabank dated
September 14, 2012:
 Among the international property markets
tracked, the number of countries reporting
declining average real prices on a year-over-year
basis outnumbered those reporting price
increases by more than two to one.
 Weak consumer confidence, high unemployment
and tight credit conditions continue to weigh
heavily on housing demand and pricing.

27.  Housing markets remain weakest in Europe,
where sharp fiscal austerity, rising
unemployment and financial sector strains are
deepening recessionary conditions.
 In European countries that are financially sound,
there were some tentative signs of improvement.
 The U.S. housing market is showing increasing
signs of recovery.

28.  U.S. homeowner affordability, rising rental costs
and strengthening household formation are
contributing to the pickup in sales. Lower
inventory levels and a falling share of distressed
property sales also have contributed to the
stabilization in prices, though significant
differences in local market conditions persist.
 An increasing number of cities in China are
seeing renewed home price appreciation. This is
being supported by an easing in monetary
conditions .

30. APPLICATION OF PORTER’S 5
FORCES MODEL TO INDIAN
REAL ESTATE
 The analysis of 5 Forces model has been done to
determine whether the Indian Real Estate sector
will remain profitable in the years to come
 It is important to consider the impact of the
Eurozone Crisis as well as the Subprime Crisis

31. THREAT OF NEW ENTRANTS
 There will be decrease in profitability due to
increase in the number of entrants.
 As a result of the economic downturn around the
globe, it has been difficult for the new entrants to
get a hold because of cost reduction in expansion
plans by corporates in real estate, little scope in
commercial construction, and strong rivalry
between existing firms.
 Result: Relatively weak threat of new entrants

32. BARGAINING POWER OF
BUYERS
 Powerful customers are able to exert pressure to
drive down prices, or increase the required
quality for the same price, and therefore reduce
profits in an industry.
 Customers significantly influence the business
operations in real estate.
 Customers do possess a threat of integrating
backwards.
 Consequently, the bargaining power of the
buyers is strong.

33. BARGAINING POWER OF
SUPPLIERS
 An important category of suppliers is the bank.
They have the power to decide whether to fund a
venture or not and at what rate.
 Banks have now become highly conservative
especially after the economic downturn.
 Are significantly affected by the monetary
regulations like the Repo rate & CRR formulated
by the Central Bank of the country. This is in
turn affects the real estate sector.
 Consequently the bargaining power of suppliers
is very strong

34. THREAT OF SUBSTITUTE
PRODUCTS AND SERVICES
 In real estate business, substitute might be some
type of totally new retail space, some new
location for office space or rehabilitation instead
of new construction.
 The threat of substitute in real estate business
and its impact on profitability of the industry is
quite ambiguous and difficult to establish given
the economic downturns and the recovery mode
of the real estate business cycle.

35. RIVALRY AMONG EXISTING
COMPETITORS
 Rivalry is strong due to the large no. of real
estate firms operating in India (65 in total) and
the difficulty to differentiate
 The services offered by real estate companies
cannot be differentiated because these firms don’t
offer a product, other than the facilities they
lease and this itself is very difficult to quantify.
 In the current economic crisis, there is minimal
profitability and only companies with large cash
reserves are likely to survive.

36. ANALYSIS
 Considering all the 5 forces, it can be said that
the real estate industry is not very profitable at
this stage as it was before the subprime crisis of
US in 2008
 But considering the fact that the real estate cycle
is in the recovery stage right now and given that
the demand for real estate is growing at a CAGR
of 19%, it can be said that there are still bright
prospects ahead in a country like India.

37. REFERENCES
 (August 2012). Real Estate Sector in India. New
Delhi: Competition Corporation of India (CCI)
http://www.cci.in/pdf/surveys_reports/real-estate-
sector-india.pdf
 Warren, A. (September 14,2012). Global Real
Estate Trends. Toronto: Scotia Bank
http://www.gbm.scotiabank.com/English/bns_eco
n/retrends.pdf
 Porter, M. E. (June 2002). Competitive Strategy
and Real Estate Development. Harvard Business
School , 9.
http://www.isc.hbs.edu/Porter_Strategy_Real_Est
ate1.pdf

38.  Dr.V.Chandrasekhar, G. S. (2011). Indicators of
Real Estate Cycle - Implication for India.
ICREI, ISB , 20.

39. THANK YOU