SUMMER TRAINING REPORT SUBMITTED TOWARDS THE PARTIAL FULFILLMENT OF POST GRADUATE DEGREE IN INTERNATIONAL BUSINESS
Investors Perception in Real Estate SUBMITTED BY: Ritika Honey Lal__ MBA-IB (2010-2012) Roll No. : A1802010213
INDUSTRY GUIDE
FACULTY GUIDE
Mr. Satender Chauhan
Prof, (Dr.) Ajit Mittal
_Manager_
AMITY INTERNATIONAL BUSINESS SCHOOL, NOIDA AMITY UNIVERSITY ± UTTAR PRADESH 1
CERTIFICATE OF ORIGIN
This is to certify that Ms.Ritika Honey Lal, a student of Post Graduate Degree in International Business and Finance , Amity International Business School, Noida has worked in the Finance department, under the able guidance and and supervision of Mr.Satender Chauhan, Manager, Good Living Consultants Pvt Ltd.. The period for which she was on training was for 8 weeks, starting from 9th May 2011 to 9th July 2011. This Summer Internship report has the requisite standard for the partial fulfillment the Post Graduate Degree in International Business. To the best of our knowledge no part of this report has been reproduced from any other report and the contents are based on original research.
Prof.(Dr.) Ajit Mittal
Ritika Honey Lal
(Faculty Guide)
(Student)
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ACKNOWLEDGEMENT
I express my sincere gratitude to my industry guide Mr.Satender Chauhan, Manager, Good Living Consultants Pvt Ltd., for his able guidance, continuous support and cooperation throughout my project, without which the present work would not have been possible.
I would also like to thank the entire team of Good Living Consultant Pvt Ltd., for the constant support and help in the successful success ful completion of my project.
Also, I am thankful to my faculty guide Prof. Prof. (Dr.) Ajit Ajit Mittal of my institute, institute, for his continued guidance and invaluable encouragement.
Signature Ritika Honey Lal
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TABLE OF CONTENTS
(Research Based)
1. Executive Summary
6
2. Introduction
7
3. Research Methodology
Objective
Hypothesis
Research Design
Sample Size
Limitations
12
4. Literature Review
15
5. Company Profile
22
6. Industry Profile
27
y
Major Players of industry
Factors that determine the Value of Real estate 30
Areas of investment in real estate
33
Reason for the success of real estate
36
Trends in real estate industry
38
Factors effecting decision of investment
40
7. Data Collection
Primary
Secondary
28
42
8. Finding and Analysis
44
9. Conclusion
53
10. Recommendations
55
11. Bibliography
56
12. Questionnaire
57
13. Case Study
59
4
Executive Summary
The Indian economy is the second largest growing economy of the world and the Real estate sector is one of the major contributors co ntributors in the growth of the Indian economy. econo my. I have undertaken this study to analyze the perception of the investor in the real r eal estate sector and also to identify the various reason contributing to the gro wth of the sector. The study is based on the data collected both through primary sources such as questionnaires, personal interviews and secondary sources like internet, journals, boo ks and magazines. The sample size taken for the study was of o f 75 respondents who were interviewed personally and on telephonic interview. The study also looks into the role of the government by way of o f different policies that effect the investment decision of the investor.
A case study was made on Good Living Consultants Pvt Ltd. The case study is based on the investment made by the company co mpany in Rajasthan. It overs the problems pro blems faced by the company and the future prospect of that project.
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INTRODUCTION
6
REAL ESTATE Real estate means an immovable property, either commercial or residential which may consist of a building or a structure. Real estate can be divided into 3 main categories: y
Commercial
y
Residential
y
Agricultural/Vacant Land
Real estate involves the purchase, sale, and development of land, residential and nonresidential buildings. buildings.
The main players in the real estate market are the landlords,
developers, builders, builders, real estate estate agents, tenants, buyers etc. The activities activities of the real estate sector includes the housing and co nstruction sectors.
Real estate is a 12$ billion (revenue) industry in India. There has been a rapid growth in the industry in the past few years. It is one of the fastest growing sectors in India. The housing sector has been growing at an average of 34% annually. In the residential sector, a growing middle class is enjoying rising income levels. Combined with smaller household sizes, this demographic change has boosted demand for more modern housing. Real estate is not just about housing these days it has become a beneficial investment option as real estate can be pledged as collateral to secure a loan. One can also earn rental income from the real estate properties .Profits can be earned from real estate as a result of appreciation of real estate property prices. This is known as capital gains from real estate. In the commercial property segment, strong growth in the services sector Specially the IT and BPO industry have led to greater demand for commercial space.
The importance of real estate sector, as a major player of nation¶s growth, can be seen from the fact that it is the second largest employer next only to agriculture. 5 % of the country¶s GDP is contributed by the housing sector. In the next three or four or five years this contribution to the GDP is expected to rise to 6% The real estate industry has significant linkages with several other sectors of the economy. It consists of a collection of industrial and and services sectors of the economy,
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such as construction (housing construction, as well as construction of commercial offices, retail and industrial buildings, and infrastructure projects such as dams, roads and bridges), brokerage services, real estate finance services (mortgage banking, real estate investment), real estate operations, property management, architecture and design.
The relaxed FDI rules implemented by India in the recent years have invited more foreign investors and real estate sector in India is seemingly the most lucrative ground at present. Private equity players are considering big investments, banks are giving loans to builders, and financial institutions are floating real estate funds. Indian property market is immensely promising and most sought after for the purpose of o f investment.
Growth Potential
India is currently the second fastest-growing economy in the World. The Indian construction industry has been playing a vital role in overall economic development of the country, contributing 6% to GDP. In 2005, the sector generated around 31 million jobs (of which only 1 million were generated by the organized sector).
Developments in the real estate sector are being influenced by the developments deve lopments in the Retail, hospitality and entertainment (e.g., hotels, Resorts, cinema theatres) industries, economic services (e.g., hospitals, schools) and information technology (IT)-enabled services (like call centers) etc. Also with the growing quantum of domestic and international capital inflow, economic growth is likely to continue, and with it, the demand for infrastructure to maintain and accelerate the performance. As a result, the public sector has remained a big investor in this sector, given the acute shortage of infrastructure in India compared to the requisite level required to achieve the next growth target. The Government of India proposes to achieve 9.0% GDP growth during the Eleventh Plan period. To achieve growth of this scale, adequate infrastructure is the most basic requirement. In order to overcome the current constraint of insufficient modern infrastructure, the government is developing a program for infrastructure investment
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through both public and private sectors, and expects to more than double public investments from 1.2% of GDP in FY07 to 2.8% by FY12. It is also partnering with private companies on initiatives such as the ultra mega power projects and Golden Quadrilateral project and Delhi Mumbai industrial Corridor.
Future Prospects on Real Estate Industry
The real estate market in India is yet in an emerging stage and the scope is simply unlimited. It does not resemble a bubble that will burst. An unhindered growth for the next twenty years is almost sure. This is because the outsourcing business in India is growing at a rapid speed and this entails a huge demand for commercial buildings and urban housing besides improvement in infrastructure. The organized retail market in India is also accelerating with players like Wal-Mart, Bharti etc. looking forward to make a mark, thus stepping up the t he demand for real estate. The Government¶s ambitious ambitious projects lined up for for the Eleventh Plan period ,shows the demand for construction is expected to grow by at least 8-9%, and 2.5 million employment opportunities per annum are expected to be generated. Favorable government policies for for globalization and liberalization liberalization have put India on the fast track. In fact, today India is the second, fastest-growing economy in the world, and is the centre of attraction globally. With greater quantum of domestic and international capital flowing into various sectors of the economy, growth is likely to continue. However, it has become a necessity for India to modernize and expand its infrastructure not only to sustain, but to benefit from the existing growth spree. Moreover, the government¶s initiatives such as the ultra mega power projects, Golden Quadrilateral project, have been of great support for the sector. Moreover, increased investment outlay in the Eleventh plan, and higher private investments, apart from the public-private partnership, would prove beneficial in meeting the infrastructure needs of various segments of o f the economy.
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Government Policies
The government has taken various initiatives to improve the real estate sector. It has made the policies for FDI in real estate very liberal. The new stand adopted by Indian government regarding foreign direct investment (FDI) policies has encouraged an increasing number of countries to invest in Indian Properties. The positive outlook of Indian government is the key factor behind the sudden rise of the Indian Real Estate sector. The Government of India in March 2005 amended existing norms to allow 100 per cent FDI in the construction business. This liberalization act cleared the path for foreign investment to meet the demand into development of the commercial and residential real estate sectors. It has also encouraged several large financial firms and private equity funds to launch exclusive e xclusive funds targeting the Indian real estate sector.
Until now, only Non Resident Indians (NRIs) and Persons of Indian Origin (PIOs) were permitted to invest in the housing and the real estate sectors. Foreign investors other than NRIs were allowed to invest only in development of integrated townships and settlements either through a wholly owned subsidiary or through a joint venture company in India along with a local partner. The minimum land area for development by foreign investors is lowered from the earlier floor of 100 acres to 25 acres which has further made the real estate sector lucrative in the eyes of the foreign investors.
The Government is also initiating various projects like the ultra mega power project, Golden quadrilateral project and the t he Delhi Mumbai Industrial corridor. .
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RESEARCH METHODOLOGY
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Research Methodology
Objective y
To identify the factors affecting the value of o f real estate.
y
To identify the main areas of o f investment in Real estate.
y
To identify the current trends in real estate. estat e.
y
To identify the factors effecting decision of investing in real estate.
Hypothesis
1. Null Hypothesis: The disposable income is the main factor that drives the
investment decision in real estate. Alternate Hypothesis : The disposable income is not the main factor for
investment decision in real estate
2. Null Hypothesis: Government Policies play a major role in Real estate
investment Alternate Hypothesis : Government Policies does not effect the investment in
real estate.
Research Design
The data collected is Primary data and Secondary data which is quantitative data, which was further analyzed in order to draw conclusions and suggestions.
Sample Sample
75 respondents were interviewed to conclude the result. The interview was taken face to face and telephonically.
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Limitations
Small sample size
The sample size was only 75 respondents which a very small size to base a research and give conclusion about the whole sector.These respondents are not sufficient enough to base our conclusion for the group of investors.
Time bound research
The research was conducted in a short span of time.The responses of the respondents may be affected by some particular situation prevailing at that particular time. If the time duration would have been long it would have gien the general idea or perception of the investors.
Might get biased response
As discussed earlier that the sample size was small also considering that the interview were conducted in a short span of time, there is high probability that the respondents might have given biased responses. respo nses.
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LITERATURE REVIEW
14
Literature Review
The real estate sector has become a major contributor of an economy¶s growth. To understand the significance of the sector and its implications there have been various research on real estate industry both in India and abroad. The research are being conducted to gain more knowledge about the various factors contributing to the growth of the industry and also to analyze the factors which effect the decision of investment in the sector. I have tried to study few such research papers to get a better idea about the current scenario of the real estate sector.
Graeme Newell and Rajeev Kamineni in their research paper assessed the risk-adjusted
performance and portfolio diversi¿cation bene¿ts for the real estate markets (office, retail and residential) of New Delhi and Mumbai. The real estate markets were found to under perform the stock market in India over 1998± 2005, with most markets improving their performance in more recent years, although there was some loss of portfolio diversi¿cation benefits for office and residential real estate with stocks. Deregulation of the capital markets and international investment in India is also likely to have a signi¿cant impact on future FDI levels and the growth of real estate funds for real estate investment in India. They also studied that offshoring in the cities like Delhi and Mumbai has created huge demand for better infrastructure. This area of offshoring has signi¿cant real estate investment issues; particularly concerning technology parks, access to Grade A office space. They have also concluded that deregulation of the Indian capital markets since 2004, and less restrictive guidelines for foreign direct investment in real estate in India since February 2005 have seen signi¿cant improvements in the real estate investment environment in India for both local and international players. This has taken on increased importance as India signi¿cantly expands its economic growth to potentially be the world¶s third largest economy by 2020, and international real estate investors seek global investment opportunities; particularly in the emerging Asian real estate markets. The
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expected development of REITs in India in the next few years will also expand the real estate investment opportunities available in India.
Vandna Singh and Komal (2009) in their research paper found that as the GDP
increases the real estate prices also increases because there is a high degree of Positive correlation between the real estate prices and GDP. The Real estate prices also increases with increase in the per capita income as there is high degree of positive correlation between these two. The FDI into the country affects the real estate FDI and real estate having a positive correlation leads to the boom in this sector. Increase in FDI from 2006 to march 2007 is 10%. Earlier E arlier it was 16% and now in 2008 it is 25%. The interest rate also affects the real estate prices because it affects the lending and borrowing by the investors. In residential segment, availability of easy home finance and rising purchasing power has driven the growth. Builders are launching high-end, life style residential products to cater to the growing bunch bunc h of high net worth individuals.
They suggested that due to high prices the lower income group is not able to purchase the land, so govt. should take measures to protect the lower income group. The investors should analyze the type of land in which they are going to invest and the potential Returns from it. Due to lot of investment avenues in real estate in India, fraud cases are also increasing day by day like in Delhi deconstruction of buildings. Thus careful measures and laws should be enacted to deal with these types of situations.
Natalija stated that Advantage India: Real estate is one of the fastest growing sectors in
India. Market analysis pegs returns from realty in India at an average of 14% annually with a tremendous upsurge in commercial co mmercial real estate on account of o f the Indian BPO boom. Lease rentals have been picking up steadily and there is a gaping demand for quality infrastructure. A significant demand is also likely to be generated as the outsourcing boom moves into the manufacturing sector. Further, the housing sector has been growing at an average of 34% annually, while the t he hospitality hospitality industry witnessed a growth of 10-15% last year.
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Jim
Berry stated that the highest and best use analysis is another component of property
investment analysis, especially in the case of vacant land or deteriorated property that needs to be redeveloped. Highest and best use is defined as the most profitable profitable use at which a site can be developed. Thus, highest and best use analysis is usually carried out for land sites that are acquired for development purposes. A site¶s highest and best use will depend on a number of factors including site physical characteristics, its location, make up and purchasing power po wer of the population in its area of o f influence, influence, competitive co mpetitive projects in its area of influence, market conditions and prospects at the time of analysis, and other factors. If the land site is zoned in an urban use, the highest and best use analysis will focus on the feasibility and profitability of developing t he alternative allowable uses.
Future of Real estate in Indian Economy
Analyzing the current scenario there has been various researches forecasting the future of the real estate industry. According to them the Real Estate potential in India is vast. The market is expected to grow at 33% through 2005-2010 to US 50 billion as per Negandhi¶s (2007) estimates. Tremendous potential demand along with an improving regulatory landscape, robust economic growth and gradually improving 27 corporate governance standards of developers makes the real estate market in India over the next five years highly sustainable. This strong potential demand is expected to result in an exponential growth in development plans of real estate companies. companies. According to Negandhi (2007), development is expected to reach 16 billion square feet across all segments of the real estate market by 2010 The plan ahead seems sustainable; however it would be unwise to forget the experience of the 1985-93 boom/bust in real estate that has left industry players nervous about when when it might might happen again. A paper by Kaiser (1997) examines examines the possible causes and the periodicity of such major real estate cycles. The evidence suggests that both periods of negative returns, (early 1930¶s and early 1990¶s) were caused by excessive levels of new construction which caused an inflation spike in the general level of prices, suggesting a 50- 60 year real estate bust cycle. The paper safely concludes that India is not likely to witness another bust period for real estate in the
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next four decades. The conclusions of Kaiser can be witnessed with the bullishness underlying in the development proposed by the cumulative strength of the Indian developers. Historically, Indian real estate companies have undertaken development of 1million- 3million square feet of real estate annually. With strong growth in demand expected across segments of real estate over the next few years, Desai & Rane (2006) estimate development plans of real estate companies to rise to 20million- 30million square feet annually. To sustain these growth levels, the flow of capital into the sector will be carried out through REITs. REITs is the future of the Indian real estate market. It is expected to lend the much needed liquidity to developers and allow them to take out their capital value off ompleted projects for deployment in newer projects. REITs also serve as an effective vehicle for broader participation by investors in the market.
However, without demand and latent capital adequacy, none of these plans will materialize effectively for the players in this segment and a good chunk of their demand and capital is expected in the form of Foreign Direct Investments. The paper by Henley (2004) compares the performance of India and China in attracting foreign direct investment (FDI). FDI statistics suggest that India's performance has been significantly understated but India still falls behind for several reasons such as high tariff structure, poor physical infrastructure, a regulatory system that is too often not business friendly etc. Nonetheless, India has displaced USA as the second-most favored destination for FDI in the world. ASSOCHAM¶s (The Associated Chambers of Commerce and Industry of India) study on Future of Real Estate Investment in India forecasts that of estimated US$ 60 billion future market size of real estate business in India, the share of foreign investments will be within the range of US$ 25-28 25- 28 billion by 2010. The overseas investments will also be finding larger space in Indian SEZs and increasing number of shopping malls that will naturally fatten their share in real estate market. Indian real estate sector is on boom and this is the right time to invest in property in India to reap the highest rewards.
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In the research paper on Real estate investment trust by KASB securities limited in Dec 2005 it came to light that since REIT allows indirect investment in real estate for
small investors who otherwise could have not had this opportunity. And that it is one of the vehicles that have single taxation and it also offer low volatility and ease of liquidity.it was suggested that REITs listed under NBFC should be allowed to invest in real estate development and acquisition. Exposure limits needed redefinition with respect to a REIT, REITs should be allowed to borrow. Regarding Modifications to Income Tax Ordinance it was suggested that · Gains from sale proceeds of land and or building to a REIT should be tax free; · REITs should be granted a status of investment scheme formed under NBFC Rules as a result of which it would be tax exempted. Changes in Voluntary Pension Rules suggested that Under Voluntary Pension Rules, pension funds should be allowed to invest in REITs. Various other recommendations included y
The Land Record System should be computerized
y
Tenancy Laws should be strengthened and should be classified as criminal law for settlement of disputes efficiently for property formed under REIT structure
y
Transaction costs should be reduced
y
Buyers of property from REITs should not be asked source of income; inco me;
Though the above above recommendations were made however, it it was concluded concluded that the markets will not function smoothly unless the rental yields improve, tenancy laws are strengthened, official and unofficial pricing issue is settled, paghri system system is abolished, and the time consumed in legal proceedings is reduced.
The ups and down of Real Estate Markets Dirk Brounen in Dec 2008 said that the Real estate markets around the world have
earned a complicated reputation. On the one hand, real estate markets offer investors a wide spectrum of profitable investments opportunities, investments that nowadays can be executed by simply buying shares of stock listed by real estate investment companies. In
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the first half of this inaugural address, the t he boom of these real estate stocks is discussed. In less than three decades, the listed real estate market developed into a sector with almost 400 listed firms worldwide, representing a sum aggregate market capitalization of around one trillion dollars by the end of 2007. Three relevant lessons regarding these international real estate stocks are discussed in the first fifteen pages of this booklet, lessons offered by real estate research from the Rotterdam School of Management. On the other hand, real estate markets are notorious for attracting entrepreneurs with bad intentions, seeking for opportunities to circumvent the strong arm of the law. These activities have yielded many headlines in the daily press and have given real estate a gloomy reputation. The dynamics of foreclosure auction of homes is an example of a source of negative headlines, stressing that the suboptimal organization of these auctions prohibits distressed sellers from earning a fair price for their home. In the second part of this address, I focus on an empirical test of the matter. By analyzing over 700 auctioned homes the dynamics of the auction system is discussed objectively. This offers a fair view on the problems at hand and searches for way to improve the system in the near future.
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COMPANY PROFILE
21
GOOD LIVING CONSULATNTS PVT LTD.
GOOD LIVING CONSULTANTS Pvt. Ltd Ltd is a real estate estate Building and consulting company formed in 1994.Its registered office is in south extension Part-II .It started business with few small contracts in different regions of Delhi & ncr .In the later years the company started working at larger scale and took up the work of building and development of Group Housing Projects.
Cosmos Group Housing CGHS was an initiative of Good Living Consultants Pvt Ltd. It was the was the very first residential project in dwarka. It gave Good Living the first movers advantage. The company benefited a lot from this project. It build 175 flats under this project. All 2bhk apartment with all modern fac ilities. ilities. The flats were completed and all a llotted otted was made to the members in the year 1999. 199 9. It was one of the most successful project undertaken by the company co mpany till date.
After the completion of Cosmos the company undertook another project in the same area i.e. dwarka by the name of Manglik CGHS. This project had 112 flats in the category cat egory of 2bhk and 3bhk. 3b hk. The project was completed in the year 2003.
Apart from the residential projects that Good Living was making in various regions of Delhi and NCR it was also investing in Commercial Properties. It bought a commercial complex in Rajnagar extension; Ghaziabad. Where the company constructed 20 shops including halls and office space. In the later years the company made another investment yet again in the Dwarka region where it build 238 flats including 2bhk, 3bhk,4bhk apartments in the name of Naval Technical Officers CGHS.
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With over a decade of experience in real estate construction & development, the company has built over 10 Housing projects. The Company is behind the development of numerous group housing projects in the dwarka. Apart from working in Delhi and Ncr the company has now taken up project in Rajasthan. It¶s currently working on a housing project in shahjahanpur in Alwar district Rajasthan. The project is build build under a land area of 3375 sq. m It has 54 Apartments with with a flat area of 1077 sq ft.
The company bought this land in an auction in 2005 which was conducted by RIICO. The land was sold by the government at subsidized rates. In the same auction Good Living bought a commercial property with a Plot size 4789sq. m. near to 1 acre. It is planning to build a Hotel.
SWOT of Good Living Consultants Pvt Ltd.
Strength
Dynamic leadership of the Chairman Mr. Shri Chand Chauhan.
Mr.Chauhan is the pillar of the organization, under his guidance the company has reached from a level of builder to a developer in the industry. It¶s his hard work and guidance which has brought the company to the position where it stand today. The company will go a long way with such a dedicated and passionate person.
Good Living has large number of assets in the form of Residential properties
and commercial properties in Delhi and NCR. The company has bought various projects in and around Delhi and is working towards developing them. It has expanded its base from Delhi and NCR to Rajasthan. The company is taking tak ing various initiatives in the field.
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It has Goodwill in the industry
Good Living Consultant has Goodwill in the industry. Being an initiator of investment in dwarka region it has created its image in the industry among the competitors.
Weakness
Liquidity Problem
The company is facing liquidity problem as it has invested in Shahjahanpur where it is incurring losses currently as it has not been able to book any flats till date. This is creating liquidity problem in the company co mpany
Website
The company does not have a proper website in place. If it has a website it would be able to explore more opportunities. It will be able to show its presence even online.
Lack of good Policies
The company does not have good policies relating to marketing strategies. It should also have a research department in place. The company has incurred losses due to lack of research like one such major problem was faced while investing in Shahjahanpur.
Opportunities
DMIC
The biggest opportunity that the company has is for it shahjahanpur project. The area has come under the proposed area for development under Delhi Mumbai Industrial corridor. It can earn huge profits from this project and benefit in the long run.
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Expanding Base
The company has an opportunity as it can explore new areas where it has not yet reached out. The company is currently working in Delhi, Ncr and Rajasthan. It can reach out to other ot her states and increase its current base.
Diversification
The company can diversify its business. It can work in other areas like retail and expand its business. It can also a lso enter into its related fields.
Threats
Threat from the competitor
The company has threat from its competitors who have brand name in the industry. Good Living is not yet a brand and so it faces problems from the top shots of the industry.
Recession
The world faced lot of problems due to recession where the main problem was actually the real estate industry, though India did well at that time but still if recession could hit the country in such a bad way it could also affect Indian real estate industry.
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INDUSTRY PROFILE
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Top Players of Real estate industry
o
DLF: DLF¶s chief business is to develop housing, marketable and retail
properties. Currently it has undertaken the development of 70 million sq ft of housing projects which it intends to finish in the next three years. DLF has joined hands with Delhi Development Authority to develop townships in Amritsar, Pune, Gurgaon, Mumbai, Chennai and Goa. DLF has been the construction company behind different malls in the major cities in India. The company is also developing 50-75 hotels along with Hilton Hotels and infrastructure and SEZ in India in collaboration with Laing O¶Rourke (UK).The current market cap is around Rs.51,832.22 crore.
o
Tata Projects: Tata Projects registered an annual turnover of Rs 2,300 crore
on July 1, 2007. With more than 1,500 professionals the company has emerged as one of the chief player in EPC projects. Over the last four years, it has attained a CAGR of 50 per cent which quadrupled its annual turnover of 2006-07. Tata Projects functions in concentrated divisions like broadcast and distribution, steel, power production, oil, gas and hydrocarbons and industrial infrastructure.
o
Omaxe : Omaxe has successfully executed more than one hundred and
twenty industrial, institutional, commercial and residential projects for a number of prestigious Indian private, public sector and Multinational's clients such as Amity University, LG, Pepsi, Samsung, Wave Cinemas, National Brain Research Centre, P.G.I. M.E.R, Apollo Hospitals and Delhi High Court.
o
Shapoorji Pallonji & Co: The Company has more than 3,500 professionals
working for it and is largely driven by its loyalty to consumer satisfaction. Some of the major projects pro jects undertaken by Shapoorji Pallonji & Co are World
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Trade Centre, Mumbai; TELCO industrial complex, Pune; Bhabha Atomic Research
Centre,
Kalpakkam;
HSBC
Bank,
Mumbai;
Hotel
Taj
Intercontinental, Mumbai; Bank of India, Mumbai; Indira Gandhi International Airport, New Delhi, etc. the company has created magnum opus of construction and has been a consistent executer of challenging projects.
o
Unitech: Recently Ramesh Chandra, Unitech¶s Chairman has declared the
investment of $ 720 million by his company in the coming four years to develop 28 hotels along with Marriott International. The market capitalisation of the company is Rs.16,867.40 crore.Its chief activities include construction, expansion of real-estate, consultancy in associated sectors, hotels, electrical broadcast and information techno logy.
o
India Bulls Real Estate: One of India¶s largest listed developers developing
residential and commercial real estate. Being a focused regional player, more than 90% of IBREL¶s portfolio by value is in the three major markets of Mumbai, NCR and Chennai. Established in 2000, the company has grown into one of the leading Indian business houses with its companies being listed on Indian and overseas financial markets having a combined net worth in excess of Rs. 18,000 crores. the current market cap being Rs.6,545.17 crore.
o
HDIL: Ranked as India¶s fastest growing real estate company by
Construction World-NICMAR in October 2007 & with a current market cap of Rs.8,567.76 crore, Housing Development & Infrastructure Limited has established itself as one of India¶s premier real estate development companies, with significant operations in the Mumbai Metropolitan Region. HDIL is a public listed real estate company in India with shares traded on the
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BSE & NSE Stock Exchanges. With operations spanning every aspect of the real estate business, from residential apartment complexes to towers & townships, commercial premium office spaces and retail projects like worldclass shopping malls. it is India¶s largest slum rehabilitation company, & wa s given the Mumbai International Airport Slum Rehabilitation project in October 2007,one of o f the largest urban rehabilitation projects in India. . o
Emaarr-MGF: One of the world¶s leading real estate developers company
in India and Development of properties in the residential flats, Commercial Properties, premium apartments etc. The µCommonwealth Games Village builder¶ is still trying to get listed on NSE. Currently not not listed.
Factors determining the value of real estate
Demand
Demand refers to people¶s willingness and ability to buy or rent a given property. In part demand stems from a market area¶s base. In most real estate markets, the source of buying power comes from jobs. Property values follow an upward path when employment is increasing. The real estate market in India has seen remarkable changes in the past few years. The rapid expansions of information technology, especially BPOs, spurt in the middle class income and 8% growth in GDP are the potential key factors for the growth.
India is the 4th largest economy in the world, and has the 2nd highest GDP among the Developing countries based on purchasing power parity. IT and IT enable services sector in India is still in its growing stage due to increasing demand for business processing units in India and is estimated to grow by 107% to $583 million in revenue. This could
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lead to a space requirement of 20-25 million sq. ft. per annum, according to a Merrill Lynch report. Taking this factor into consideration, the Total value of real estate created by the IT and ITES sector in the next three years will be Rs.132000 .
Supply Analysis
Supply analysis means sizing up the competition. Nobody wants to pay more for a property than the price they can pay for competing property. An integral part of value analysis requires identifying sources of potential competition and then inventorying them by price and features. An analysis of supply should not limit potential competitors to geographically and physically similar properties. In some markets, for example, low priced single family houses might compete with condominium units, manufactured homes and even with rental renta l apartments.
The Property
In real estate the property itself is also a key ingredient. The price that people will pay is governed by their needs and the relative prices of the properties available to meet those needs. To try to develop a property¶s competitive edge, an investor should consider five things: 1. Restrictions on use 2. Location 3. Site characteristics 4. Improvements 5. Property management
Rental Trends in India
Recent trends of rental properties in India are conspicuous by the immense potential that is being realized today. Rental values in cities like Delhi and outskirts are witnessing an
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increase of 20-25%. Real estate agents are devoting themselves to negotiations for rented homes than ever. Though the interest rates on home loans, continued tax exemptions on such prompts people to buy property, those with the ability to buy a flat among the middle-class are thinking twice. In residential segment, the capital value or o r cost of flats has almost doubled in cities like Gurgaon where prices went up to Rs. 45 lakh from Rs. 15 lakh a couple of years back. The demand for more capital appreciation in the wake of rising prices coupled with home loan rate hike has dampened the buying spirit. This has in ways propelled demand for rental property in India. Increased demand for independent houses or paying guests occurs mainly in the metros like Delhi, Gurgaon, and Mumbai etc. where the corporate sectors rent independent houses for their senior executives. A paying guest or PG accommodation in India is a convenient co nvenient arrangement. Even PG hostels host els and working Women¶s hostels are considered safe and can be availed of on an individual or sharing basis mean big business. The real estate rental trends in commercial sector are momentous as the key tendency among the investors is to rent a commercial space instead of buying. It will facilitate low risk and less worry on maintenance. Commercial rentals including corporate office space, BPO spaces, mall 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 a good brand is a wise investment decision. Usually, commercial co mmercial lease agreements specify a 15% escalation in the real estate rental in every three years which is a good enough yield. For those considering regular rental returns rather than capital appreciation, mall space has the distinction to be an excellent option. It gives returns higher than that received with office space and much higher than the rental returns from residential space.
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Major Areas of Investment in Real estate
Real estate Stocks and REIT
The passive investor would likely want to place investment funds into the stock market in the form of equities of major national homebuilders. Or they might invest in a Real Estate Investment Trust. This is a fund set up and managed to invest in stocks, bonds and mortgage instruments in the real estate area. People find it a convenient and safe mode of investment as small investors who do not have large funds to invest directly in real estate property are able to benefit from the schemes as large number of small investors come together and pool in their funds and invest them through people who have specialized skills of investment. This option not just give small investors the benefit of enjoying the income of real estate sector but also provide them with less risk as the risk gets d istributes among large number of investors and the amount is managed by fund managers. REIT are such ways of investing
Mortgage Instruments
Discounted notes are another investment strategy. Sellers many times accept a mortgage from a buyer, and after payments have been made for a while, they want to convert to cash. They sell the note to an investor at a discount and the investor then gets payments from the buyer.
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Appreciation of the Market Value of Properties
This is the most widely known way of profiting in real estate. A property is purchased and held. Over time, the value of the property appreciates, sometimes even faster than the overall market. Certain areas of the country have experienced significant appreciation in home values over the last ten years.
Rental Income from residential Property
This type of income is at a rise these days .As it gives an ease of earning regular income. A person can invest in a property and purchase it and then can lend it on rent to tenants, paying guest and earn handsome rent every month. It is becoming a trend in the metropolitan cities as more and more people are coming to metropolitan cities in search for work and when these people come to different cities to make a career and settle down they live on rented accommodations, due to such reasons this has become a huge business these days.
Investment in commercial properties
In today¶s time commercial property are very expensive. The price is really high due to increase in trade. Commercial properties are in demand and so investors find it as a lucrative investment option. Be it a small investor who invest in a commercial property like a small shop or big investors who invest in malls, technology parks etc. Every investor can invest in these properties based on this level of investment. There is scope for all types of investors.
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Vacant Land
People purchase vacant land, few keep it as it is and sell it off when the prices increase. Big developers purchase vacant land at discounted prices in auctions and then construct huge apartments, villas, cities .and then sell these flats individually and earn large profits. Some others build up amazement parks and earn from it. There are various ways in which a person can earn from fro m vacant land by converting it into different alternatives.
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Major reasons for success of Real estate sector Expansion and Development of the IT sector
Liberalization and Globalization has opened various avenues for investment. Number of MNC¶s have set up their base in India and have given way to the growth in the real-estate sector especially in the commercial property sector. This has also provided better employment opportunities to the people of India and thus helping in the overall growth of the Indian economy and subsequently in the growth of the real estate. There are large number of BPO¶s and KPO¶s that have set their base in India. These companies require better infrastructure to match up with their work and so came up the concept of Technology Park. This has not only benefited the real estate industry but other interlinked industries as well effecting the India¶s overall economic growth. We can see that as these companies are increasing their presence so is the value of real estate .In the current time they are one of o f the major contributors in the upliftment of the real estate sector.
Liberalized FDI Policy
The decision of the Indian Government to liberalize the FDI policy has bought a relief to the foreign investors who can now invest up to 100 % in construction and housing development. This has made investment in Indian real estate more lucrative. Since the policies are being liberalized and restrictions are being removed India is becoming a favored destination for investment purpose for the foreign investors. They prefer India as it is a developing Nation, that too a one with one of the largest economies, these factors when added to the relaxation of policy brings about more funds from outside India. Thereby increasing not just the worth of the real estate sector but also contributing in the growth of the economy. Some of the world¶s famous famous builders are taking keen interest in investing in the Indian real-estate real-estate market. Investment of foreign builders¶ promises promises better
35
prospects in the Indian real estate industry in terms of regulatory policy, efficient management, and the use of more advanced technology. This ensures that the Indian real estate has a brighter future. . The minimum land area for development by foreign investors is lowered from the earlier floor of 100 acres to 25 acres which has further made the real estate sector lucrative in the eyes of the foreign investors. investo rs.
Convenience in obtaining Bank Loan.
There are number of banks in India. Due to the presence of large number of both nationalized and private banks competition has also increased. Competition is not just between the Private Banks but even amongst the nationalized banks. To compete each other these banks try and facilitate the customer to get the best of products and services. In the recent years banks have been offering hassle free loans to the customer which has increased the capacity of the investor to purchase real estate. So, buying a property is not difficult even for those belonging to middle-class. Thus, it has enabled the overall growth of the Indian real estate. Growth of the Indian economy
The Indian economy is one of the fastest growing economies in the World. This has a direct effect on the real estate sector as it is one of the largest sectors in the Indian economy. Some of the major major areas which have been greatly affected by the growth in Indian economy are Delhi NCR, Mumbai, Hyderabad, Chennai, Bangalore, Pune and Kolkata. This growth is observed in all forms of property such as commercial, residential and industrial.
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Trends in Real Estate Janta
Flats
Until few years people use to live in Flats which were distinguished as LIG, MIG and HIG. The Low income Group Housed which was 1 bhk house, Middle income group flats use to have 2 bhk house and High Income Group Houses were 3bhk houses. This trend stayed for quite a long time and even today in few areas we can see LIG, MIG and HIG Janta Flats made by the government. Builder Flats
Then came a time when Builder made Flats became a range among people. People preferred them as they were well furnished homes as compared to the previous Janta Flats. Builders use to purchase vacant land or some existing old house deconstruct the old building and reconstruct new flats with latest designs. These flats were build keeping in mind the owners choice and preferences unlike those of Janta flats. Even today builder Flats are being constructed majorly trying to develop the under developed regions. reg ions. Apartments
They were like Builder flats but had better facilities as compared to them. Apartments had large number of flats in the building. Co-operative Societies
This was a corporation wherein the corporation owned two or more residential building. Each member of the cooperative housing society was given a house each. The member needs to take the approval of the society before selling off the property to the third person.
Penthouses
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These are huge houses which cater to the needs of the upper class people. As space in metropolitans are reducing because of increase in number of migrants the space required for living and constructing individual houses has reduced drastically. So penthouses were built which are really huge apartments. apart ments.
Villas
They are individual houses build in a locality, they look like cottage type. t ype.
Cities
Big Builders are not just providing houses to live in but they are building up small cities within few acres of land. The Cities are build in such a way that it consist of residential flats, schools, hospitals, multiplex, malls, clubs all around the residential flats to bring the life¶s of people at ease. This is the latest trend in the real estate sector. Every Big builder/ developer are building their own cities as it not just provides them with onetime payment but with regular income by way f various facilities being offered by them.
Green Houses
This is another new concept which is doing great business.As people have become more conscious about going green, about saving our resources so as to benefit from the in the future ,Customers are willing to pay more than the normal market price price if they are getting environment friendly alternatives . Solar panels are used and all possible steps are taken to save our natural resources like Efficiently using energy, water, and other resources, Protecting occupant health and
improving
employee
productivity,
Reducing
waste,
pollution
and environmental degradation.
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Factors effecting decision of investing in Real Estate
Price
The prevailing price of the real estate is a major factor that influences the investment decision of the investor. Every buyer has his own capacity to purchase a property at different prices. The prices of property may rise due to different factors. Some people purchase property even when the prices are rising as they expect that the prices may rise even further and then may have to regret. whereas some people avoid purchasing when the prices rise as they the y wait for the prices to fall and purchase at lower prices.
Bank Rate
Bank rate is another important factor that determines the decision of the investor. The investor would assess whether the investment that he is making is worth the interest that he would be paying to take a loan for purchasing the property. He would assess it based on the amount that he is expecting to earn from his investment. The Banks rate fluctuate based on different policies po licies that the government makes.
Location
The investor looks into the factors like the location of the property before investing any money in the property. It is not just a deciding factor as to whether he should purchase it or not but also helps in deciding how much is the investor willing to spend on the property based on the location of the property. If a person is getting a Property in some prime location he might not mind paying more than the market price but if the location is not as per his satisfaction he will bargain to get the prices reduced. Location preference is different for each investor as per his requirements and personal choice.
Economies Condition
The situation prevailing in a country is another important factor. If the country is going through a bad phase the investor would not invest at that time. A stable economy is always a favored destination among the investors.
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Government Policies
Government policies are one of the major factors that affect the decision of the investors. Government policies relate to taxation policy, stamp duties and various other things like FDI involvement etc. This is an important factor while deciding. If the government policies keep changing then people will be reluctant re luctant to invest in such an economy. eco nomy.
Disposable Income
The disposable income of a person is a major factor that determines his investment decision. If a person has high disposable income he can invest in huge real estate properties whereas if the disposable income is less then the investor might not be able to invest in real estate directly and he may invest in REIT, equities of real estate companies.
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DATA COLLECTION
41
Data Collection
Primary Data
Questionnaire
Face to face interview
Telephonic Interview
Secondary Data
Internet
Journals
Books
Magazines
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FINDINGS AND ANALYSIS
43
Findings and Analysis
The findings and analysis are based on the survey done on prospective buyers. The survey was conducted through the use of questionnaire. The following are the findings and analysis of the survey.
1. Age group of Investors
Age Group of Investors 20 -25 years
26 - 35 3 5 years
36- 45 45 years
45 and above
8%
27%
23%
42%
The respondent of the survey were mostly in the age group of 3645 years i.e. 42%. Followed by the people in the age group of 45 years and above- 27%. 23% in age group of 26 to 35 years and the least were people in the age group of 20 to 25 years. This shows the type of sample that we are analyzing
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2. Income Level
Income Level 45 40 35 30 25 20 Series1
15 10 5 0 2 - 3. 3.5 lakh
3.5 - 6 lakh
6- 10 10 lakh
10 lakh and above
The above analysis shows that the people covered under the survey mostly included people from the income group of 6-10 lakhs i.e. 39% , followed by people with income above 10 lakh- 33% and the remaining were were in the category of 3.5 to lakh and and 2- 3.5 lakh consisting of 22% and 6% respectively.
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3. Preferred Investment Option
Preferred Real estate
Investment Option Equity
Mutual Funds
Gold
18% 36% 12%
34%
The above findings show that Real estate is a favored investment option among the respondent by 36% followed by equity, gold and mutual funds by 34%, 18 % and 12 % respectively. This infers the trust and the interest of the investors in Real estate sector. People are willing to invest in real estate be it a large investor or small all of them try to invest in real estate sector in the ways convenient to them.
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4. Preferred investment in real estate
Preferred
Residential
Real estate Investment Option
Commercial
25%
REIT
equity of re real es estate
38%
13% 24%
The above analysis shows that investors preferred investment option is residential property by 38% .The next best option being equity shares of real estate companies by 25% followed closely by commercial property with 24% and the least investment is in REIT with only 13 % respondents investing in it. This analysis clearly shows that residential property is the most favored investment option amongst the investors. The above analysis also shows that people are not investing in REIT¶s when asked the reason most the people were not even aware about it.
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5. Factors effecting real estate investment decisions
Factors P ri c e
Ec ¡
¡
effecting Investment Ba k Rate
L cati
mies C ¡
diti ¡
¡
G ver me t Policies ¡
¡
Disposable I come
22%
28%
18%
12% 17% 3%
The major factor that effects the investment decision is the Disposable Income of the investor .which constitutes 28% of the respondents. The prevailing price of the properties is another important factor it constitutes 22% of the respondents if the price is too high people avoid purchasing the property and vice versa. Price is the major determinant factor followed by Bank rate at 18 % as it is very important for people who are opting for loans from the banks ,as they need to assess whether the investment is worth paying the interest on the loan or not. Then comes location at 17% followed closely by Government policies holding 12% of the respondents.These policies are regarding taxes, subsidies, stamp duties , FDI and the like. Economies condition condition also effect around around 3% respondents.
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6. Perception about effect of recession
Perception
of Buyers
Cost De Decreased
Projects Delayed
Good Good time time to purch purchas ase e
No differ differen ence ce
20%
Stop
Purchasing
8% 31%
19% 22%
To see the effect of recession on the minds of people I asked them about what according to them was the effect of recession in the real estate sector in india.31% respondents said that the projects were delayed .22% said that people would have stopped purchasing as the recession was effected mainly due to real estate sector and that it has become a risky option to invest.20% people said that as recession did not affect the Indian economy at large so it does not affect their investment decision.19% felt that it was a good time to purchase real estate properties.8% people felt that the cost should have reduced .
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7. Preferred time duration of investment
Time 1- 3 ye years
3-5 years
23%
Duration 5-10 years
more than 10 years
15%
28% 34%
Around 34% people invested for a time period of 5-10 years , followed by 28% investing for a duration of 3-5 years.23% for long term i.e. for more than 10 years and 15% invested for a time duration of 1- 3 years. This analysis shows that people invest in real estate for long term which is around 5-10 years.
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8. Better Future of Real estate
Better Future of Real estate Yes
¢
o
Ne
£
tral
11% 20%
69%
69% respondent feels that the Indian real estate industry has a bright future and will increase in the coming days. Whereas 20 % of the respondents feel the other way round. 11% respondents were neutral about the issue and said that the situation will remain same without any change. Majority of the respondents are positive about the future of the real estate industry.
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Conclusion
As we are aware that India is one o ne of the fastest growing economy econo my in the world and the real estate sector of India is one of o f the major contributor to the growth of the economy. It is the second largest sector for employment o pportunities pportunities after agricul agr iculture ture sector . . 5 % of the country¶s GDP is contributed by the housing hous ing sector.
From the above study stud y we can infer that the main reason for the success of the Real estate sector is the Growth of the economy eco nomy as a whole. When the disposable income inco me of the investors increases they invest more in the real estate sector as they find it a lucrative investment opportunity. Real estate is a favored investment option due to various efforts that are being made by the government.
Government Policies are another major reason for the increase of investment in the real estate sector. One of the most recent and effective effective policy change of government which which has bought an increase in the investment of real estate sector is the liberalized policy of the government in relation to FDI in the real estate sector. As the go vernment has allowed 100% FDI in the construction sector there are large numbers of foreign investors who are investing in the Indian real estate industry. The governments rule where it has reduced the minimum land area for development by foreign investors from the earlier floor of 100 acres to 25 acres which has further made the real estate sector lucrative in the eyes of the foreign investors.
Foreign investors play a major role in the development of the real estate sector, whether directly or indirectly. indirectly. Direct FDI is an example, the other way is by the increase in the number of MNC¶s , there is requirement of better infrastructure facilities so when the demand increases it benefits the industry.
The rental trend has also increased many folds in the recent years. People not just invest in real estate for property appreciation but they also invest to earn regular income by way 52
of rent from the properties. Rental trend is on a rise people rent commercial and residential properties. Paying Guest, hostels hostels are also very common these days due to large demand.
Real estate investment trust (REIT) is a good option available for small investors , who can pool in their funds and invest in the real estate sector and also benefit from the skilled knowledge of the fund managers who analyze the various pros and cons and then make the investment decision for the investors in different funds of real estate market. After speaking to the investors¶ one of the conclusion that I came across was that though REIT is a very good option for investing in the real estate sector but most of the people are not able to utilize it as they are not aware about it. Government should take up steps to bring awareness amongst the people about REIT.
Bank Loans are another important factor effecting the investors¶ investment decision. The govt should build such policies which make obtaining a loan for investment in real estate a hassle free process; also to increase the investment in real estate the government should keep the Bank rate low as it is one of the major drivers of investment in real estate sector. The investor always assess whether the investment that he is making is worth the interest that he will be paying to obtain a loan for such an investment.
The final conclusion that I can give from the above study is that there is great scope of the real estate sector. It will grow in the near future and will be one of the major reason for the growth for the Indian economy. eco nomy.
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Recommendations
The government should liberalize its policies regarding investment in real estate. As we have seen in the above study that because of the governments initiative of liberalizing the FDI policy relating to investment in Real estate sector there has been huge investments being made by the foreign investors. So the government should take such steps.
The government should create awareness amongst the general public about REIT as most of the people are not investing in it due to lack lack of awareness .It is a good investment option but people are not benefiting from it as they are not aware about it.
The government should lower the interest rate as it is one of the major factors that determine the investment decision of the investor. If the govt want to increase the investment in the real estate sector then it will have to reduce the bank rates so that it increases the money in the hands of people and they invest in real estate.
Investors have high hopes from the real estate industry, even though they are aware about the delays in the projects due to recession, Still they are positive about the future prospect of o f the real estate industry.
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Bibliography
www.makaan.com
www.magicbricks.com
www.ansalspropertiesltd.com
www.eros-group.com
www.eldecogroup.com
www.omaxe.com
www.parsvnath.com
www.ashianahousing.com
www.gurgaonproperties.net
www.realestatencr.com
www.gurgaonrealestate.com
www.estatedeveloper.com
www.bank bazaar.com
www. noradarealestate.com
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QUESSIONNAIRE 1. Name : 2. Age : 3. Gender : 4. Income Level :
2 lakh ± 3.5 lakh
3.5 to 6 lakh
6 to 10 lakh
10 lakh and above
5. What is your preferred investment option :
Real estate
Equity
Mutual Funds
Gold
6. Which option do you prefer while investing in Real estate :
Residential Property
Commercial Property
Real estate investment trust
Equity of real estate companies co mpanies
7. Which is the most important factor that effect your real estate investment decision
Price
Bank Rate
Location
Economies Condition
Govt Policies
8. What is your perception about the effect of recession in the real estate market in India:
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Cost Decreased
Projects Delayed
Stop Purchasing
Good time to purchase
No Difference Difference
9. What is your preferred time duration of Investment :
9
1-3 years
3-5 years
5-10 years
More than 10 years
Do you think India¶s real estate estat e market will Improve in future :
Yes
No
Neutral
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CASE STUDY
58
CASE STUDY
I have made this case study stud y on the investment decision of Good Goo d Living Consultant Pvt Ltd. Shahjahanpur Project in the Alwar district of Rajasthan.
In the year 2005 RIICO (Rajasthan State Industrial and Investment Corp) auctioned plots in Shahjahanpur, near Neemrana, Nee mrana, Alwar district Rajasthan. Good Living Consultants saw that the area was under development and being close to Neemrana which was then being developed as a favored tourist spot decided to invest in the area. There were many reasons for Good Living to invest in the area.
Some of them are as foll fo llows: ows: Development of the area
The government was taking tak ing various initiatives to develop the area. Good Goo d Living found it beneficial to invest at such a growing gro wing stage so that it would be able to reap profits in the long run. They thought of o f purchasing the land at subsidized rates that were being offered by the Govt as they knew that in the near future after the development process is completed the company would wou ld earn huge profits from this investment.
Location
Being close to Neemrana fort which was becoming a favored tourist spot the company co mpany thought that it would be a good option as the location will only improve in the future when the development process is completed. As it was a tourist Spot in the nearby area of Delhi and NCR and the value of the property would only increase. Moreover the location being on national Highway 8 was always a favored location for investment purpose.
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Subsidized Rate
The government was auctioning plots p lots in the area at a subsidized rate. This was a wonderful opportunity for the company to invest at this stage as the value of the property would increase with the passage of time. The opportunity was such that one could not resist investing in such an area .
First Movers Advantage
First mover¶s advantage is the advantage that t hat is gained by a co mpany by initiating and being the first one to occupy occup y the market in a particular segment. Good Living Consultants is a growing co mpany; It is not always easy for a growing company to face competition co mpetition from the top shots of the industry. In the shahjahanpur region Good Living saw the option o ption of gaining the first movers advantage as no other developer had yet set its base. Good Living wanted to gain the first movers advantage from the Project and so they t hey invested in the project. It was a great opportunity for Good Living to create its Name in the industry by taking this first movers advantage and no company at a growing stage would lose this opportunity. Good Living could also not resist such a lucrative investment option. They had earlier benefited from such a situation when they invested in dwarka region reg ion of Delhi.
Considering all the factors that were in favor of investment in shahjahanpur, Alwar district, Rajasthan Good Living consultant bought a piece of Land from RIICO in the auction for the purpose of making Residential Flats in the area. Land area 3375 sq.m Flat area 1077 sq ft.
Good Living Consultants decided to make residential flats, 2bhk apartment¶s .They saw that there were not many flats in the area rather there was no such society in the nearby are which had apartment style of Living. Good Living thought of gaining this advantage
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and started the construction work expecting to close the booking in the initial phase of construction.
Shahjahanpur Project
The proposed project had 54 Flats .All in the category of 2 Bhk. The company thought that it would bring a revolution revo lution in the area as no such apartments were available in the locality. The company aimed at making the project very successful by giving the best of facilities
The features of the Project were:
Structure:
Superior RCC frame earth quake resistant.
Wall and Ceiling Finish :
POP in Ceiling in Drawing Rooms with w ith dry distemper Finish
Flooring :
Drawing room and bed room roo m with designer vitrified tiles, and balcony and toilets to ilets with antiskid tiles. Master Bedroom with wooden flooring.
Doors and Windows :
Flush doors in all rooms, superior wooden frame for door and windows with wardrobe in bedrooms.
Kitchen :
Granite top with stainless steel sink and modular kitchen wo odwork.
Bathrooms :
CP fittings and one Indian and one EWC
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Electrical:
Modular switches with T.v and Telephone o utlets in the rooms
Staircase and common area :
With Kota stone and white marble or suitable suitable floor tiles on the t he passage.
Elevators in each block with power back up
Round the clock security and intercom
Fire fightning arrangements
500 Watt power back up in each Block
Good Living Planned to give the best of features in the Project Pro ject as these features were very new for the local people.
A Rude Shock
The construction work had begun in the site but the company got a rude shock when even after advertising about the project in the nearby area not even a single booking for the t he flat was done. The constructi co nstruction on work was in full force but unexpected things happened and people did not show any interest in the project.
The company was offering o ffering the Flats initially at a price of 19 lakh but after seeing no response it reduced the rice to around 16 lakh but all to no avail. The company then took too k an initiative an offered financing option opt ion to the investors but still all was to no avail. The company had to then slow down the construction work as there were no bookings and if the construction got completed co mpleted without any booking then apart from the loss that the company was incurring it will w ill also start incurring the wear and tear cost. The company ran into huge loss due to this project. The expected First Movers advantage turned out to be a disadvantage. It gave the company a rude shock.
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Analysis
The company then took an initiative and we visited the site to speak to the local residents of the locality. After conducting the survey in the area we got to know that the major reason for failure of the project was that the company saw all the benefits that it was gaining out of the project but forgot to do the most important work which was research in the area about the t he preference of the local people.
Resistant to change
From our finding we got to know that people in the nearby locality still prefer to live in plotted houses rather than flats. They are resistant to change. They T hey are not comfortable with the flats style of living.They do not prefer living in apartments.
Image of Builder Flats
Another important finding that we came ca me across was that people had a misconception that builder flats are not well constructed. People had this perception as they had not experienced such style of living and believed what they heard from people around them. They have a perception that builders do not use good quality products. They felt that they would e cheated. They did not have any trust on such apartments
Recommendation and Suggestion
After analyzing the scenario in the area we concluded that
The company should have conducted a thorough research in the area before investing such a huge amount.
They should have spoken to the residents so that would have made the company aware about the thinking of the people.
They should have also made people aware about the apartment style of living , so that those people could have related to them
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The company should have been in touch with the localities , they should have conducted some sessions were they went and meet the people so as to win the trust of peop people. le.
They should have taken the involvement of the people living around by hiring people from the nearby locali loca lities ties so that t hat people could have build bu ild their trust.
Real estate never a Loss
In the midst of all these problems came a ray of hope. The government has come up with a project called as the DELHI MUMBAI INDUSTRIAL CORRIDOR. The pro ject is passing through shahjahanpur area which is bringing in development at a rapid rap id speed. The government is investing huge amounts amou nts in the area to develop it. This will benefit Good Living Projects.
Delhi-Mumbai Industrial Corridor is a mega infra-structure project of USD 90 billion with the financial & technical aids from Japan, covering an overall length of 1483 KMs between the political capital and the t he business capital of India, i.e. Delhi and Mumbai. Mu mbai. Government of India has announced establishing e stablishing of the Multi-moda Multi-modall High Axle Load Dedicated Freight Corridor (DFC) between Delhi and Mumbai, co vering an overall length of 1483 km and a nd passing through the six States - U.P, NCR of Delhi, Haryana, Rajasthan, Gujarat and Maharashtra, with end terminals t erminals at Dadri in the National Capital Region of Delhi and Jawaharlal Nehru Port near Mumbai. Distribution of length of the corridor indicates that Rajasthan (39%) and Gujarat (38%) to gether constitute 77% of the total length of the alignment of o f freight corridor, followed followed by b y Haryana and Maharashtra 10% each and Uttar Utt ar Pradesh and National Capital Region of o f Delhi 1.5 % of total length each. This Dedicated Freight Corridor envisages a high-speed connectivity for High Axle Load Wagons (25 Tonne) of Double Stacked Container Trains supported by high power locomotives. The Delhi - Mumbai leg of the t he Golden Quadrilateral National Highway also runs almost parallel to the Freight Corridor. This corridor will be equipped w ith an array of infrastructure facilities such as power facilities, rail connectivity to ports en route etc. Approximately 180 million people, 14 percent of the population, popu lation, will be affected by the
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corridor¶s development.
This project incorporates Nine Mega Industrial zones of o f about 200-250 sq. km., high speed freight line, three ports, and six air po rts; a six-lane intersection-free expressway connecting the country¶s poli po litical tical and financial cap itals and a 4000 MW power plant. Several industrial estates and clusters, c lusters, industrial hubs, with top-of-the-line infrastructure would be developed along a long this corridor to attract more foreign investment. Funds for the projects would come from the Indian government, Japanese loans, and investment by Japanese firms and through Japan depository depo sitory receipts issued by the Indian companies.
This high-speed connectivity between Delhi and a nd Mumbai offers immense opportunities for development of an Industrial corridor along the alignment of the connecting infrastructure. A band of 150 km (Influence region) reg ion) has been chosen on both bo th sides of the Freight corridor to be developed as the t he Delhi-Mumbai Industrial Corridor. The vision for DMIC is to create strong economic base in this band with globally competitive environment and state-of-the-art infrastructure to activate local commerce, enhance foreign investments, real-estate investments and attain sustainable development. In addition to the influence region,
In Rajasthan, the alignment of DFC passes through t hrough Phulera-Ajmer-Marwar and over 58% area of the state falls falls within the influence area of DMIC. The state of Rajasthan has rich agricultural and mineral base. Key industrial sectors in the state include Cement, Building Stones, Gypsum, Gems & Jewels, Chemical, Food Foo d processing and Textiles. The emerging sectors include IT/ITES, Auto Component and Knowledge Hubs. Based on the strengths of specific regions across the state, five development nodes are identified in the influence area of DMIC. It includes two investment regions and three industrial areas. Preliminary discussions discussions with w ith the State Government agencies also indicate that adequate land is available for the envisaged developments.
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The proposed plan passes through the shahjahnapur area. This will directly benefit Good Livings Investment in the region. It falls falls under Node No.7: Khushkhera-Bhiwadi-
Neemrana Investment Region. The map of the Proposed Pro posed plan is as follows:
Advantages
Proximity to the Golden Quadrilateral, NH-8 and the Ded icated Freight Corridor would provide added value to t o the investors in the region.
State Government has already identified and designated des ignated the land for developing the region as Global G lobal City.
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As it is said that investing in real estate in never a loss, it can be short term loss but in the long run the investment always pays off. o ff. So it was proved in the case of God living consultants¶ shahjahanpur Project.
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Synopsis
GOOD
LIVING
CONSULTANTS PVT LTD.
³Investors Perception in Real estate´ Ritika Honey Lal Industry Guide: Mr.Satender Chauhan Faculty Guide: Prof.( Dr.) Ajit Mittal
Objective The project undertaken by me was based on perception of o f the investors in the real estate industry. I studied the various factors that effect the growth of the industry and also the t he factors that effect the decision of the investor to invest in various options that are available.The main finding was that the t he government plays major role in the growth of the real estate sector and also that disposable income is another important player that determines the investment decision.
I studied a sample of 75 people peo ple to infer the results of the research.During the study I used primary data in the form of questionnaire by way of personal
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interview and secondary data was collected from internet , journals and magazines.
Perception about the Industry Guide : y
y
My industry guide has been very helpful throughout the project. He has a very flexible approach toward work
.
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