The real estate sector is one of the most globally recognized sectors.
It comprises of four sub-sectors - housing, retail, hospitality, and commercial. The
growth of this sector is well complemented by the growth in the corporate environment and
the demand for office space as well as urban and semi-urban accommodation. The
construction industry ranks third among the 14 major sectors in terms of direct, indirect
and induced effects in all sectors of the economy.
In India, the real estate sector is the second-highest employment
generator, after the agriculture sector. It is also expected that this sector will incur
more non-resident Indian (NRI) investment, both in the short term and the long term.
By 2040, real estate market will grow to Rs. 65,000 crore (US$ 9.30
billion) from Rs. 12,000 crore (US$ 1.72 billion) in 2019. Real estate sector in India is
expected to reach US$ 1 trillion in market size by 2030, up from US$ 200 billion in 2021
and contribute 13% to the country?s GDP by 2025. Retail, hospitality, and commercial
real estate are also growing significantly, providing the much-needed infrastructure for
Indias growing needs.
India?s real estate sector saw over 1,700 acres of land deals in
top eight cities in the first nine months of FY22. Foreign investments in the commercial
real estate sector were at US$ 10.3 billion from 2017-2021. As of February 2022,
Developers expect demand for office spaces in SEZs to shoot up after the replacement of
the existing SEZs act.
As per ICRA estimates, Indian firms are expected to raise >Rs. 3.5
trillion (US$ 48 billion) through infrastructure and real estate investment trusts in
2022, as compared with raised funds worth US$ 29 billion to date.
The office market in the top eight cities recorded transactions of 22.2
msf from July 2020 to December 2020, whereas new completions were recorded at 17.2 msf in
the same period. In terms of share of sectoral occupiers, Information Technology (IT/ITeS)
sector dominated with a 41% share in the second half of 2020, followed by BSFI and
Manufacturing sectors with 16% each, while Other Services and Co-working sectors recorded
17% and 10%, respectively.
Around 40 million square feet were delivered in India in 2021. It is
expected that the country will have a 40% market share in the next 2-3 years. India is
expected to deliver 46 million square feet in 2022.
According to Savills India, real estate demand for data centers is
expected to increase by 15-18 million sq. ft. by 2025. In 2022, office absorption in the
top seven cities stood at 38.25 million Sq. ft.
According to the Economic Times Housing Finance Summit, about three
houses are built per 1,000 people per year compared with the required construction rate of
five houses per 1,000 population. The current shortage of housing in urban areas is
estimated to be ~10 million units. An additional 25 million units of affordable housing
are required by 2030 to meet the growth in the country?s urban population.
INVESTMENTS/DEVELOPMENTS
Indian real estate sector has witnessed high growth in the recent times
with rise in demand for office as well as residential spaces. The Private Equity
Investments in India?s real estate sector, stood at US$ 3.4 billion in 2022.
In July 2021, the Securities and Exchange Board of India lowered the
minimum application value for Real Estate Investment Trusts from Rs. 50,000 (US$ 685.28)
to Rs. 10,000-15,000 (US$ 137.06 - US$ 205.59) to make the market more accessible to small
and retail investors.
FDI in the sector (including construction development & activities)
stood at US$ 55.5 billion from April 2000-December 2022.
Some of the major investments and developments in this sector are as
follows:
Between January-July 2022, private equity investment inflows into the
real estate sector in India stood at US$ 3.27 billion. Home sales across top eight cities
in India surged 68% YoY to reach ~308,940 units in 2022, signifying a healthy recovery in
the sector. Retail real estate segment attracted institutional investments of US$ 492
million in 2022. Private market investor, Blackstone, which has significantly invested in
the Indian real estate sector (worth Rs. 3.8 lakh crore (US$ 50 billion) is seeking to
invest an additional Rs. 1.7 lakh crore (US$ 22 billion) by 2030.
GOVERNMENT INITIATIVES
Government of India along with the governments of respective States has
taken several initiatives to encourage development in the sector. The Smart City Project,
with a plan to build 100 smart cities, is a prime opportunity for real estate companies.
Below are some of the other major Government initiatives:
In the Union Budget 2023-24, the Finance Ministry has announced a
commitment of Rs. 79,000 crore (US$ 9.64 billion) for PM Awas Yojana, which represents a
66% increase compared to the last year. In order to revive around 1,600 stalled housing
projects across top cities in the country, the Union Cabinet has approved the setting up
of Rs. 25,000 crore (US$ 3.58 billion) alternative investment fund (AIF). Government has
created an Affordable Housing Fund (AHF) in the National Housing Bank (NHB) with an
initial corpus of Rs. 10,000 crore (US$ 1.43 billion) using priority sector lending short
fall of banks/financial institutions for micro financing of the HFCs. As of December 31,
2022, India formally approved 425 SEZs, and as of January, 2023, 270 SEZs are operational.
Most special economic zones (SEZs) are in the IT/ BPM sector.
ROAD AHEAD
The Securities and Exchange Board of India (SEBI) has given its
approval for the Real Estate Investment Trust (REIT) platform, which will allow all kind
of investors to invest in the Indian real estate market. It would create an opportunity
worth Rs. 1.25 trillion (US$ 19.65 billion) in the Indian market in the coming years.
Responding to an increasingly well-informed consumer base and bearing in mind the aspect
of globalisation, Indian real estate developers have shifted gears and accepted fresh
challenges. The most marked change has been the shift from family-owned businesses to that
of professionally managed ones. Real estate developers, in meeting the growing need for
managing multiple projects across cities, are also investing in centralised processes to
source material and organise manpower and hiring qualified professionals in areas like
project management, architecture and engineering.
The residential sector is expected to grow significantly, with the
central government aiming to build 20 million affordable houses in urban areas across the
country by 2022, under the ambitious Pradhan Mantri Awas Yojana (PMAY) scheme of the Union
Ministry of Housing and Urban Affairs. Expected growth in the number of housing units in
urban areas will increase the demand for commercial and retail office space.
The current shortage of housing in urban areas is estimated to be ~10
million units. An additional 25 million units of affordable housing are required by 2030
to meet the growth in the country?s urban population.
The growing flow of FDI in Indian real estate is encouraging increased
transparency. Developers, in order to attract funding, have revamped their accounting and
management systems to meet due diligence standards. Indian real estate is expected to
attract a substantial amount of FDI in the next two years with US$ 8 billion capital
infusion.
BUSINESS OVERVIEW
Our Company focuses on residential projects and it has created strong
footing in the States of Maharashtra and Gujarat for executing residential projects by
developing projects featuring apt model of execution. Our Company develops projects on
affordable pricing, to our prospective customers, without compromising on quality
construction and this is ensured by experienced project execution team and insightful
architectures appointed independently. It intends to exploit the opportunities that are
available in the Real Estate Sector and our operations will cover all aspects of real
estate development, from the identification and acquisition of land, the planning,
execution and marketing of our projects, maintenance and management of our completed
developments etc. Company?s ongoing destination is at Hill Station at Dharampur,
Valsad known as Wilson Hills.
There is no material change in the key ratios.
COMPANY STRENGTHS
Your Company continues to capitalize on the market opportunities by
leveraging its key strengths.
These include:
1. Brand Reputation: Enjoys higher recall and influences the buying
decision of the customer. Strong customer connects further results in higher premium
realizations.
2. Execution: Possesses a successful track record of quality execution
of projects with contemporary architecture.
3. Significant leveraging opportunity: Follows conservative debt
practice coupled with enough cash balance which provides a significant leveraging
opportunity for further expansions.
4. Outsourcing: Operates an outsourcing model of appointing globally
renowned architects/contractors that allows scalability and emphasizes contemporary design
and quality construction – a key factor of success.
5. Transparency: Follows a strong culture of corporate governance and
ensures transparency and high levels of business ethics.
6. Highly skilled execution team: Employs experienced, capable and
highly skilled design and project management teams who oversee and execute all aspects of
project development.
CHALLENGES
While the management of your Company is confident of creating and
exploiting the opportunities, it also finds the following challenges: Availability of
accomplished and trained labour force; Concerns due to ongoing pandemic situation;
Increased cost of manpower; Rising cost of construction lead by increase in commodity
prices; Growth in auxiliary infrastructure facilities; and Over regulated environment.
COMPETITION:
Our Company faces competition from various domestic real estate
developers. Our competition varies depending on the size, nature and complexity of the
project and on the geographical region in which the project is to be executed. We believe
that our capability, experience and reputation for providing safe and timely quality
services allow us to compete effectively.
CAUTIONARY STATEMENT
This management discussion and analysis contain forward looking
statements that reflects your Company?s current views with respect to future events
and financial performance. The actual results may differ materially from those anticipated
in the forward looking statements as a result of many factors.
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