Introduction
The real estate sector is one of the most universally renowned sectors,
with being second largest employer after agriculture, in India and is slated to grow at 30
per cent over the next decade. The real estate sector consists of four sub sectors -
housing, retail, hospitality, and commercial. Currently, growth of this sector is well
supplemented by the growth of the corporate environment, rising with the demand for office
space as well as urban and semi-urban accommodations. In fact, the construction industry
ranks third among the 14 major sectors in terms of direct, indirect and induced effects
from all sectors of the economy.
Market Size
The Indian real estate market is expected to touch US$ 180 billion by
2020,with housing sector alone contributes 5-6 per cent to the countrys Gross Domestic
Product (GDP).In the period FY2008-2020, the market size of this sector is predicted to
increase at a Compound Annual Growth Rate (CAGR) of 11.2 per cent. Retail, hospitality and
commercial real estate are also on the rise, providing the much-needed infrastructural
boost for Indias emerging requirements.
It is expected that this sector will invite further non-resident Indian
(NRI) investments in both short term and long term goals. Bengaluru is expected to be the
most favoured property investment destination for NRIs, followed by Ahmedabad, Pune,
Chennai, Goa, Delhi and Dehradun
Sectors such as IT and ITeS, retail, consulting and e-commerce have
noted higher demand for office space in recent times- growth of market can be contributed,
here. The office space absorption in 2016 amongst the top eight cities amounted to 34
million square feet (msf) with Bengaluru recording the highest net absorption during the
year. Information Technology and Business Process Management sector had a uncontested lead
in the total leasing table with 52 per cent of total space uptake in 2016. Stats state
that Mumbai is the best city in India for commercial real estate investment, with returns
of 12-19 per cent likely in the coming five years, followed by Bengaluru and
Delhi-National Capital Region (NCR).
Investments
The Indian real estate sector has observed a high growth in current
times, with the rise in demand for office as well as residential spaces. According to data
released by Department of Industrial Policy and Promotion (DIPP), the construction
development sector in India has received Foreign Direct Investment (FDI) equity inflows to
the sum of US$ 24.28 billion in the period April 2000-December 2016.Some of the major
investments in this sector are as follows:
Altico Capital, a non-banking finance company (NBFC), has co-partnered
with American private equity firm KKR & Co LP to invest a meaty sum of 435 crore (US$
65.25 million) in a 66-acre residential township, being developed by SARE Homes in
Gurgaon. They have also invested 200 crore (US$ 30 million) in Bengaluru-based real
estate developer Legacy Group, to fund the ongoing construction while refinancing the
developers existing loans.
Gurgaon-based property search aggregator Square Yards Consulting Pvt.
Ltd. has successfully raised US$ 12 million from the private equity arm of Reliance Group
for strengthening its team, while expanding its presence to more than 25 countries.
A combined venture between Dutch asset manager APG Asset Management and
real estate asset platform Virtuous Retail, has obtained a portfolio of three shopping
malls for US$ 300 million, and has further dedicated an additional US$ 150 million as
equity capital to expand the portfolio.
Macquarie Infrastructure and Real Assets (MIRA) and Tata Housing
Development Co. Ltd have ventured into a 70:30 partnership to invest 1,400 crore (US$ 210
million) and Rs.600 crore (US$ 90 million) respectively in premium high-end residential
property projects, starting with four major cities of Mumbai, NCR, Bengaluru and Pune.
Mr.NandanNilekani, co-founder of Infosys Limited, has invested around
US$ 25 million in a real estate NBFC unit of KKR India, one of the local arms of the
US-based private equity firm KKR & Co LP.
Indiabulls Housing Finance has effectively raised over Rs.1,300crore
(US$ 195 million) by selling masala bonds to foreign investors, set to be utilized for its
affordable housing segment.
Ivanhoe Cambridge, the real estate faction of Canadas second largest
pension fund manager Caisse de depot et placement du Quebec (CDPQ), sets to enter into a
Joint Venture (JV) agreement with Piramal Fund Management to set up a US$ 250 million
venture, providing equity capital to developers of residential projects in the country.
Apollo Asia RE Singapore Private Limited and realty firm
SalarpuriaSattva Group have entered into a JV to acquire 100 per cent stake in two real
estate projects at Bangalore and Vadodara from a consortium of offshore investors in a
deal worth 275 crores (US$ 41.25 million).
NestAway Technologies Pvt Ltd, a home rental company, has progressively
raised US$ 30 million in Series C round of funding from US-based Tiger Global, Russian
billionaire Yuri Milner, and IDG Ventures India, allotted to scale up operations and build
technology.
Real estate private equity fund of the Kotak group, Kotak Realty Fund,
has significantly raised US$ 250 million from institutional investors for equity
investments in realty projects across Indias top six property markets including Mumbai,
Delhi, Pune, Bengaluru, Hyderabad and Chennai over the next 24 to 36 months.
Quikr, an online classifieds platform, has obtained real estate portal
Commonfloor.com for US$ 200 million in a stock- cum-cash deal.
Goldman Sachs purchased shares worth 255 crore (US$ 38.25 million) in
Vatika Hotels Private Limited, a company owned by real estate and hospitality firm Vatika
Group.
Government Initiatives
The Government of India, along with the governments of the respective
states, has undertaken numerous initiatives to promote the development in the sector. The
Smart City Project, where there is a plan to build 100 smart cities, is a prime
opportunity for the real estate companies. Below are some of the other major Government
Initiatives:
The Ministry of Housing and Urban Poverty Alleviation has approved the
construction of 84,460 more affordable houses for urban poor in five states, namely West
Bengal, Jharkhand, Punjab, Kerala and Manipur under the Pradhan Mantri Awas Yojana (Urban)
scheme with an average investment of 3,073 crore (US$ 460 million).
The Securities and Exchange Board of India (Sebi) has planned easier
regulations for real estate investment trusts (REITs), such as elevating the cap of
investment of REITs assets in under-construction projects from 10 per cent to 20 per
cent, to attract the interest of developers, and also plans to relax the rules, to aid
foreign fund managers relocation to India. SEBI has allowed Foreign Portfolio Investors
(FPI) to invest in units of Real Estate Investment Trusts (REITs), infrastructure
investment trusts (InvITs), and category III alternative investment funds (AIFs),
permitting them to acquire corporate bonds under default. The Securities and Exchange
Board of India (SEBI) has also issued the consultation paper for public issue of Real
Estate Investment T rusts (REITs), which include provisions such as capping of allocation
to qualified institutional buyers (QIBs) at 75 per cent, among other topics. They have
also notified final rules that will govern real estate investment trusts (REITs) and
infrastructure investment trusts (InvITs). This move will supplement easier access to
funds for cash-strapped developers; while creating a new investment avenue for
institutions and high net worth individuals, and eventually ordinary investors.
The RajyaSabha or the upper house of the Parliament has conceded the
Real Estate (Regulation and Development) Bill, 2013, which sets to protect consumer
interest, certify competence in all property related transactions, while improve
responsibility of real estate developers, increase transparency and attract more
investments into the realty sector in India.
Indias Prime Minister MrNarendraModi permitted the launch of Housing
for All by 2022, under the Sardar Patel Urban Housing Mission. Close to 30 million houses
will be built in India by 2022, mostly for the economically weaker sections and low-income
groups, through public-private-partnership (PPP) and interest subsidy.
Way forward
Replying to a progressively well-informed consumer base and, keeping in
context the aspect of globalisation, Indian real estate developers have shifted gears,
successfully accepting fresh challenges. Real estate developers, to meet the growing need
for managing multiple projects across cities, are further investing in centralised
processes to source material and organise manpower and. The sector is also hiring
qualified professionals in areas like project management, architecture and engineering.
The mounting flow of FDI into Indian real estate has encouraged transparency to an
increased level. Developers, in order to attract funding, have revamped their accounting
and management systems to meet due diligence standards. These are sure-shot signs of
better time to come to the sector.
Company Overview
The land operations of the SRS Group are completed by SRS Real
Infrastructure Limited, a Bombay Stock Exchange recorded organization, and its 100%
auxiliary SRS Real Estate Limited. The organization is, as of now, affianced in the
improvement and development of over twelve undertakings in the private and business
classes. With a land bank of roughly 500 sections of land, the land operations are spread
crosswise over Faridabad, Greater Faridabad, Palwal, Rewari, Rohtak Panchkula in Haryana
and Karjat (Mumbai).
We have immediately earned a name for ourselves in the land business,
because of our scale, straightforward operations, convenient conveyances and a solid
comprehension of the necessities of the purchasers. What sets our organization in good
stride is its wide span of operations which incorporate Group Housing, Independent Floors,
Residencies, Farmhouses, Townships, Corporate Tower, IT Parks and Hotels. These numerous
tasks have fundamentally added to the companys quality and abilities, enabling it to
leverage new opportunities.
2016-17 has been an eventful year for us. We initiated the second phase
possession of approximately 100 flats and offered possession of 375 flats at our Palwal,
Sector- 5 project, ensuring a rush of customers to own a piece of our premium housing. Out
of 109 Villas, the company has offered 74 Villas for possession at the SRS Farm House in
Manjhawali, Ballabgarh. We have got 35 new bookings for plots at our Panchkula Golf Hill
Project. Our overseas project of construction, development and maintenance of the bus
depot at The Republic of Congo is in full swing.
The real estate market has been among the sectors worst hit by the
economic downturn which, coupled with high interest rates in the face of persistent
inflation and delays in securing mandatory government approvals, has kept wary homebuyers
away for the last couple of years. The sector witnessed substantial slowdown and part
recovery in demand because of the global economic downturn and various government
regulations such as demonetization, which led to a decline in affordability and tight
liquidity. The retreat of various real estate investors, accompanied by slowdown in the
capital markets, has resulted in oversupply and falling prices. Also, the advent of
demonetization has brought in a sobering effect to the market as well as SRS, with the
organizations bank account becoming NPA.
Debt-laden developers in the countrys key property
markets—Mumbai, Bengaluru, Chennai and the National Capital Region (NCR centred on
Delhi)—have been struggling with slow sales, high unsold inventory, delayed
construction and stalled projects.
Opportunities for SRS have reflected this as we have witnessed failure
in terms of rise of revenue. This requires consolidation of the inebriated situation,
instead of any further expansion. We have therefore decided to indulge in market
stabilizing practices, forgoing the onus to expand. SRS may discontinue its trading
business completely and Future reorganization of business will consist of Real Estate
segment (primarily affordable housing) and infrastructure segment (domestic and overseas
projects). 2017-18 is looking up to be a stabilizing year ahead as we take proactive
measures in building an empire from scratch. With the inclusion of developments such as
RERA and affordable housing, SRS is set to power ahead in an era of profitable growth.
Real Estate (Regulation and Development) Act, RERA is a very
significant and crucial law that will impact the entire Real Estate sector in the country.
With RERA, transparency and accountability are being introduced in a sector that is widely
perceived as big yet unorganized. here will be more accountability and compliance from the
developers end as RERA renders brokers, agents and developers punishable if they do
not comply and abide by the regulations. This will bring faith back as investors would
promote the practice of transparency, calibrating the market.
The second reform to leave a lasting impact falls on the shoulders of
Goods and Services tax (GST). It is the most revolutionary tax-related reform to be seen
in India in several decades, having a reflective effect on Indias economic prospects and
future scenario of the market. In spite of the tax structure has being announced, there is
still a lot of speculation about which tax rate will be applicable to the real estate and
construction industry. Yet, this is set to have a positive impact on SRSs endeavors
as business will improve due to enhanced liquidity, leading to enriched profitability,
collection will garner a timely facade, sales will increase and our NPA of banks will be
standard.
As a move to revolutionize the real estate scenario, Prime Minister has
announced that 2 Crore affordable houses will be completed upto 2022 to provide home for
poor and middle class. The budget announcement on allowing 100 per cent deduction for
profits to housing projects building homes up to 30 sq.metres in the four metro cities and
60 sq.metres in other cities is likely to spur supply of affordable homes, demand for
which makes for almost 90 per cent of the demand for homes in India. Govt. classified the
Affordable housing projects, which is certain to improve the profitability of the Company
due to low income-tax on affordable projects, alongside being an easy way to get funds
from financial institutions or banks. SRS allies to that through plans to build affordable
housing for new owners to capitulate on.
SRS believes in progress, but not at the cost of Mother Nature. We have
always vouched for sustainable development, fit for not only us but our future generations
to thrive in. Hence, our construction procedures are environment friendly, following all
applicable norms. Our pro-environment construction procedures are what have always set us
apart and we intend to follow that path in the coming years ahead. Alongside that, all
compliances such as NGT are adhered to as we stay true to our commitments and vouch for
our integrity.
HUMAN RESOURCES
The Company considers its employees to be the most valuable asset and
is committed to provide a conducive work environment to enable each individual employee to
fully realize his or her potential. One of the cornerstones of the company culture is
teamwork and continuous learning. To promote this, the company focused on supporting
people to unlock their potentials and to enable them to work with a superior team spirit.
The Companys HR measures revolve around this philosophy. As on 31st
March, 2017, there were 44 employees on the payrolls of the Company.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The Company has proper and adequate system of internal controls to
ensure that all assets are safe guarded and protected against loss from unauthorized use
or disposition, and that transactions are authorized, recorded and reported correctly and
adequately.
The Internal control system provides for well documented policies,
guidelines, authorizations and approval procedures. The internal control is designed to
ensure that financial and other records are reliable for preparing financial information
and for maintaining accountability of assets. All financial and audit control systems are
also reviewed by the Audit Committee of the Board of Directors of the company.
Cautionary Statement
This Annual Report may contain forward looking statements, plans and
strategy of SRS, its future financial condition and growth prospects, future developments
in its industry and its competitive and regulatory environment, and statements which
contain words or phrases such as "propose", "transform",
"will", "expected to", "horizon of growth", "strong
growth prospectus", etc. or similar expressions or variations of such expressions.
These forward looking statements are based on expectations and projection, and may involve
a number of risks, uncertainties and other factors that could cause actual results,
opportunities and growth potential to differ materially from those suggested by such
statements. These risks and uncertainties include, but are not limited to risks with
respect to its real estate business, economic environment in India, changes in development
regulations, changes in tax law, changes in other applicable laws, litigation and labour
relations.
Some information in this report may contain forward-looking statements.
We have based these forward looking statements on our current beliefs, expectations and
intentions as to facts, actions and events that will or may occur in the future. Such
statements generally are identified by forward-looking words such as "believe",
"plan", "anticipate", "continue", "estimate",
"expect", "may", "will" or other similar words.
| On behalf of the Board |
| For SRS Real Infrastructure Ltd. |
| Place: Faridabad |
| Date: 12th July, 2017 |
| (Dr. Anil Jindal) |
(Rajesh
Singla) |
| Chairman |
Whole-Time
Director |
| DIN: 00005585 |
DIN:
00009745 |
+91-9892691696
