REAL ESTATE

The Indian real estate industry is one of the largest sectors after agriculture and primary
sector in our country. These sectors contribute about 6.5 % to 7 % and it is one of major
source of job for unorganized sector of Indian labour market .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
accommodations. The construction industry ranks third among the 14 major sectors in terms
of direct, indirect and induced effects in all sectors of the economy.
Economic Characteristics of Real Estate:
Land also has some distinct economic characteristics that influence its value as an
investment:

 Scarcity: While land isn't considered rare, the total supply is fixed.
 Improvements: Any additions or changes to the land or a building that affects the
property's value is called an improvement. Improvements of a private nature (such as
homes and fences) are referred to as improvements on  the land. Improvements of a
public nature (e.g., sidewalks and sewer systems) are called improvements to the
land.
 Permanence of investment: Once land is improved, the total capital and labor used
to build the improvement represent a sizable fixed investment. Even though a building
can be razed, improvements like drainage, electricity, water, and sewer systems tend
to be permanent because they can't be removed (or replaced) economically.
 Location or area preference. Location refers to people's choices and tastes regarding
a given area, based on factors like convenience, reputation, and history. Location is
one of the most important economic characteristics of land (thus the saying, "location,
location, location!").

Types of Real Estate

There are five main types of real estate:

1. Residential real estate: Any property used for residential purposes. Examples

include single-family homes, condos, cooperatives, duplexes, townhouses, and
multifamily residences with fewer than five individual units.
2. Commercial real estate: Any property used exclusively for business purposes, such
as apartment complexes, gas stations, grocery stores, hospitals, hotels, offices, parking
facilities, restaurants, shopping centers, stores, and theaters.
3. Industrial real estate: Any property used for manufacturing, production, distribution,
storage, and research and development. Examples include factories, power plants, and
warehouses.
4. Land: Includes undeveloped property, vacant land, and agricultural land (farms,
orchards, ranches, and timberland).
5. Special purpose: Property used by the public, such as cemeteries, government
buildings, libraries, parks, places of worship, and schools.

 The real estate sector is one of the most globally recognized sectors. Real estate sector
comprises four sub sectors - housing, retail, hospitality, and commercial.
  The Real estate sector is the second largest employee after the agriculture and primary
sector. After agriculture. Real estate and construction together is the second largest
employment provider in the country, next only to agriculture, according to the
Economic Survey 2017-18, tabled in Parliament.
 The global stock of institutional-grade real estate will expand by more than 55% from
US$29.0 trillion in 2012, to US$45.3 trillion in 2020,

 The Indian sector provide jobs to people over 40 million people in 2013, and as per
projections, it is slated to employ over 52 million workforce by 2017 and 67 million
workforce by 2022.

 Real Estate stock in India is expected to reach 3.7 million square feet in 2019, with
addition of 200 million square feet during the year.
 Rapid urbanisation bodes well for the sector. The number of Indians living in urban
areas is expected to reach 543 million by 2025. More than 70 per cent of India’s GDP
will be contributed by the urban areas by 2020.

Issues and challenges in real estate sector:

Delay in Projects: The major problem consumer facing is delay of projects which may
happen due to various reasons like court intervention in land issues, finance, approval etc.
Approvals and Procedural difficulties: There are almost 50 approvals or more need to be
taken for starting a real estate project. This is one of the major causes of delays and high
amount of corruption in real estate sector. Consequently corruption and delay cause
inconvenience to customers only
Speculation in Land and Real Estate Prices: The prices of land and real estate in India has
increased exponentially in last decade and causes overpricing of commercial or residential
property. Further real estate agents buy or sell property frequently with their own investments
and cause of surging prices in property.
• Sources of Finance: Finance is the key for development of any industry. Due to poor image
of Real Estate sector, banks are becoming reluctant to provide loans and making regulation
tougher to avoid the bad loans. Alternate sources of finance are very costly and ultimately
impact total cost of the project.
• Further government intervention of building minimum 20% affordable housing putting
extra burden on developers and ultimately on the rest 80%.
• Real estate is the most famous sector for soaking the black money without any ambit.

Current Scenario of Real Estate in India

Current Scenario of the Real Estate Market in India Commercial real estate sector is in huge
boom in India. In the last fifteen years, post liberalization of the economy, Indian real estate
business surely has taken a complete upturn and is expected to keep growing from the
current USD 14 billion to USD 102 billion in the coming10 years. This growth can be due to
favorable demographics, increasing of purchasing power, existence of customer friendly and
easy to deal with banks & housing finance companies, the professionalism in real estate and
commending reforms initiated by the government to attracts global investors as well.
The property market in India has traditionally been unorganized and disintegrated. However,
the recent past has seen a unification of positions in the market as developers are stretching
their capacities to the maximum in order for meeting the growing market demand, which in
turn has encouraged and enlarged the projects with sourced financing. The IPOs by large and
big real estate developers like Sobha, Raheja and DLF have led to systematic organization of
the market in the Tier I cities, but the Tier II and Tier III cities still demonstrate the traits of
an unorganized and sloppy market. While the Indian real estate market still lacks the
transparency and liquidity compared to other much more mature real estate markets, this
increases requirements of multi-national occupiers, as well as theingress of international
property consultancies has led to the introduction of greater availability of market
information, both in published and private form pushing the sector to an organized market
form. Driving Forces Stated below are the actual reasons that have led to the boom of real
estate in the country.
1. Booming economy; accelerated GDP to 8% p.a.
2. India’s emergence as an attractive offshoring destination for investment opportunities
and availability of pool of both highly skilled technicians and engineers ;
Development of large captive units of major players of the market including GE,
Prudential, HSBC, Bank of America, Standard Chartered and American Express,etc.
3. Increase in disposable income and growing middle class, rising the demand for
quality residential real estate and real estate as an investment option as well.
4. Arrival of professional players equipped with expertise in real estate development;
5. Relaxation of legal rulings and various processes by the governing bodies which lead
to encouraging investments in real estate
6. Improvement and enhancement in infrastructure facilities.
Development
According to the data published by Department for Promotion of Industry and Internal Trade
Policy (DPIIT), construction and real estate is the fourth largest sector in terms of FDI
inflow. FDI in the sector (includes construction development and construction activities)
stood at US$ 42.50 billion from April 2000 to March 2020.
Some of the major and significant investments and developments in this sector are as follows:
 In March 2020, the Government approved proposals from TCS and DLF to set up
SEZs for IT sector in Haryana and Uttar Pradesh.
 Blackstone crossed US$ 12 billion investment milestone in India.
 Puravankara Ltd, a realty firm, plans to invest around Rs 850 crore (US$ 121.6
million) over the next four years to develop three ultra-luxury residential projects in
Bengaluru, Chennai and Mumbai.
 First REIT, which raised Rs 4,750 crore (US$ 679.64 million), was launched in the
early 2019 by global investment firm Blackstone and realty firm Embassy group.
 In January 2020, RMZ Corp entered into a strategic and equal partnership with Mitsui
Fudosan (Asia) Pte Ltd to expand its business footprint.
 Housing sales reached 2.61 lakh units in 2019 across seven major cities.
  In September 2018, Embassy Office Parks published that it would raise around Rs 52
billion (US$ 775.66 million) through India’s first Real Estate Investment Trust
(REIT) listing.

CURRENT SCENARIO OF REAL ESTATE GLOBALLY

 The Covid-19 pandemic and associated shutdowns of economic activity are an

enormous negative growth shock, causing unprecedentedly deep recessions almost
everywhere. But the contraction phase of the crisis has also been short-lived, and the
Aberdeen Standard Investments Research Team (ASIRI) forecasts incorporate a slow
but steady recovery from the second half of 2020 as restrictions are slowly lifted.
 • However, the long-term consequences of the crisis are set to be profound. They
include a permanent loss of output, labour market scarring, lower equilibrium real
interest rates, and an altered balance between monetary and fiscal policy.
 • Expected global real estate returns to be adversely affected over the latter half of the
year as a result of the delayed effects of the current crisis. The impact is likely to
continue to be uneven and contrary with some sectors more badly affected than
others. Consumer-facing sectors such as retail and hotels continue to be most affected
and we expect the largest declines in prices to be in these sectors. On the other hand,
sectors with resilient income, such as industrials, residential and some alternative and
long-income sectors, continue to hold up well. Pricing in these sectors is likely to
remain largely unscathed.
 • The fundamentals underpinning real estate were well-supported prior to the crisis,
with limited future supply and a low level of vacancies in most markets. Furthermore,
there remains an extreme large amount of dry powder on the side lines. This is
targeting the positive characteristics of real estate - diversification, an elevated income
return and reasonable long-term returns. We continue to expect these factors to attract
long-term investors. There may also be opportunities for well-capitalised investors to
pick up alluringly priced assets further on into the correction.
 People still prefer sectors of the market that continue to benefit from long-term
structural trends – ageing demographics, changes in technology, a focus on
sustainability and changes in the way we are shopping and living. Sectors that
continue to benefit from these trends include industrial, residential, and selective
assets that are categorised as alternatives. These sectors remain more resilient than the
parts of the market that are vulnerable to the secular changes. In our view, retail
remains particularly exposed to the changes, with the current crisis accentuating
structural transformation in the sector. We are still risk averse and continue to pursue
‘sustainable’ income in our target markets. We maintain a forensic approach to
seeking value in our favoured markets.

The Global Commercial Real Estate industry grew over much of the five years to 2020 after a
moderate start. Investor confidence took a hit in 2015, which continued in 2016 as well
largely due to global political uncertainty plus the low oil prices. This negatively affected
investment in the estate industry and revenue declined 0.6% in 2016. Global investment has
since rebounded strongly amid strong global economic growth, which pitched the industry
revenue to recover. However, the outbreak of COVID-19 (coronavirus) is expected to
severely constrict demand as economic uncertainty skyrockets. As a result, industry revenue
is expected to fall at an annualized rate of 3.8% to $3.2 trillion over the five years to 2020, as
revenue is expected to fall 25.8% in 2020 alone.

STRUCTURE AND PERFORMANCE OF THE REAL ESTATE INDUSTRY

GLOBALLY

STRUCTURE OF REAL ESTATE

The structure of real estate industry includes construction of commercial houses, residential
housing, and business spaces, such as hotels, restaurants and industrial buildings, namely
factories and government buildings. Real estate also involves activities such as the purchase,
sale, and development of land. Thusthe real estate activities encompass both construction and
housingsectors.

 
Global Real estate industry consists of:

1. Residential
Those properties used for residential purposes. Examples - condos, cooperatives,
duplexes, townhouses, and multifamily residences with fewer than five individual
units.

2. Commercial
The commercial property, also called commercial real estate, investment or income
property, is a real estate intended to generate a profit, either from capital gain or rental
income

3. Industrial
Industrial real estate is a property for manufacturing, production, research and
development, storage and distribution purposes.
Industrial properties can generally be broken down into three sizes:Small, large and
enormous.Small industrial sites include single or double-storey buildings zoned for
industrial use. Large industrial sites include warehouses and factories for storing and
production purposes.

4. Land
This includes vacant land, working farms, and ranches. The subcategories
within vacant land include undeveloped, early development or reuse, subdivision and
site assembly.

By Business
  Sales
 Rental

By Region

 North America
o U.S.
o Canada
 Europe
o Germany
o UK
o Russia
o Rest of Europe
 Asia-Pacific
o China
o India
o Japan
o Rest of Asia-Pacific

Key Players IN REAL ESTATE INDUSTRY

American tower corporation
Simon property group
China Vanke
EQUINIX
Oberoi realty ltd
NBCC India ltd
PERFORMANCE OF REAL ESTATE INDUSTRY IN INDIA

INDIA’S real estate industry is expected to reach 1trillion US$ by 2030.It will contribute
13% to the country GDP by the year 2025.Surfacing of nuclear families, rising household
incomes and rapid urbanisation are likely to remain the key drivers for growth in all sphere of
real estate. More than 70% of India’s GDP will be contributed by the urban areas. India’s
Global India's Global Real Estate Transparency Index ranking improved by a notch to 34 in
2019. The Indian retail segment attracted around 1Billion$ of investment in 2019 in the form
of private equity.

Also, the working or office space has been increased mostly by growth in ITeS/IT, BFSI,
consulting and manufacturing sectors. During 2019, the office leasing space reached 60.6 msf
across eight major cities, registering a growth of 27 per cent every year.Warehousing space is
expected to reach 247 msf in 2020 and also the investment of Rs 50,000 crore (US$ 7.76
billion) is expected during 2018-20. Grade-A office space absorption is expected to cross 700
msf by 2022 with Delhi-NCR and Bangalore contributing the most to this demand.

Total amount of US $ 1.3 trillion investment is expected by Government of India’s Housing

for All initiative in the housing sector by 2025. As of December 2019, under Pradhan Mantri
Awas Yojana (Urban) [PMAY (U)], 1.20 crore jobs were created and 1.12 crore houses were
sanctioned in urban areas. The scheme is expected to push affordable housing and
construction in the country to reach to as many poor people as possible and also give a boost
to the real estate sector in India.

REFERENCES
1. WIKIPEDIA
2. YOUTUBE VIDEOS
3. https://www.ibef.org/industry/real-estate-india.aspx

PERFORMANCE OF REAL ESTATE INDUSTRY ON GLOBAL LEVEL

By the year 2025, it is expected that the global real estate will generate a revenue of USD
4,263.7 billion. According to a new report by Grand View Research, Inc. the following
factors will help in increasing the investment in global real estate industry: rapid
urbanization, increase in house hold income, emergence of nuclear families and increasing
demand for housing real estate space. Another major factor that helped in enhancing
income levels and in the global real estate market is rapid economic development in the
developing regions and countries like India, China and many African countries.

The real estate market involves buying, selling, and renting leasing of property, and
condominiums for commercial and personal household usage. A number of key players
have entered regional market due to the exponential growth in the commercial real estate
business in the last decade. Some other factors to boost the market over the forecast period
are government reforms, lower rentals and mortgage rates in the developing countries.

According to United Nations, approximately 50% of the population lives in urban areas
and this figure is set to reach up to 65% in the forecast period owing to the migration into
cities that turn into megacities with bustling urban amenities and lifestyle.

REFERENCES
1. GOOGLE
2. WIKIPEDIA
3. https://www.alliedmarketresearch.com/real-estate-market
Porter Five Forces Analysis
Porter Five Forces Analysis is a strategic management tool used to analyze industry, and
company to understand various forces that could affect the profitability. Real Estate Investors
Plc managers use Porter Five Forces to know how the basic five competitive forces exist in
the environment can influence profitability. Managers need to condust this analysis before
any decision in strategy formulation.
According to the five competitive forces theory, the competitions in an industry not only exist
in the known and visible competitors, but there exist five basic competitive forces, Threat of
new market entrants, Threat of substitute products, Bargaining power of buyers, Bargaining
power of suppliers, Competition within existing rivals.

PORTERS FIVE FORCES ANALYSIS in INDIA

Competitive Rivalry
 Large number of players operating in India
 Limits a seller’s ability to set the prices for goods and services
 An absence of competitive neutrality due to unequal provisioning of policy
concessions
Threat of New Entrants
 Uncertain investment timeline due to long gestation period
 High cost of land and land use restrictions act as a natural barrier
 Brand value of the incumbent player for the consumers
Substitute Products
 No specific substitutes available
 Substitutes are mainly government-provided housing, mostly limited to the
economically backward class
Bargaining Power of Suppliers
 Large real estate firms have good bargaining power against customers
 Unregulated and badly managed land banks make land acquisition difficult for realty
companies
Bargaining Power of Customers
  Due to a large variety of quality players, the customers have many options to choose
from •
 They are also becoming more discerning and demanding better quality

GLOBAL PORTERS FIVE FORCES ANALYSIS

Intensity of Industry Rivalry (Neutral to Favorable)
Competitive rivalry in the global areas accounts very low. When the time of selling the end
units to customers, the developers in industry try avoiding rivalry by
 Developing products in different markets/locations;
 Launching products at different time periods;
 Differentiating product types.
The key factor is that the residential property is sufficiently differentiable and not subject to
any sort of perishability or technological obsolescence such that developers have much more
flexibility with the timing of producing and selling their end product.
Threat of new entrants (Neutral to Unfavorable)
1. Legal Authorization
No special legal authority is needed to enter the industry.
2. Technology
The technological expertise in this industry is not particularly high. Designs, names
and concepts can all be copied.
3. Capital 
Capital could be considering a barrier mostly for large-scale, specialized projects. The
ability to obtain banking financing also limits small players from scaling up their
projects.
On account of the above points, there is weak/low threat of new entrants.

Threat of Substitutes (Favorable for End Use; Neutral for Investment)

There is no substitute in and for real estate sector from the point of view of real estate
construction and development. So the threat of substitutes for real estate sector is seemingly
nil.
If we take example of China, residential real estate is in high demand. As accommodation,
new private housing from any firm can be replaced by
1. Competitive product from another developer;
2. Existing private housing for sale or for rent:
3. Social housing either for sale or rent.
Competition from other developers can be avoided by product differentiation such as high
quality and management services
Bargaining Power of Suppliers (Favorable)
There are mainly four Key suppliers in the industry that are known as the land sellers
(government or other developers), construction contractors and building material & home
furnishing manufacturers and capital providers. Based on these a Typical cost of sale is made
up roughly 1/3 land, 1/3 construction and 1/3 financing costs.
There is a lower switching cost in changing suppliers for raw material. There is negligible
threat of forward integration by suppliers.

Bargaining Power of Buyers (Neutral)

The bargaining power of buyers was low earlier, but has shown an gradual increase and now
can be termed as moderate. The products are standardized. Switching costs are very high.
People look for developers with good track record and credit worth i.e. brand identity.

PESTEL & Environment Analysis

Developed by “Francis Aguilar” at Harvard, PESTLE Analysis is used to conduct an external

analysis of any Business environment in any industry. PESTLE is an important step in
devising the strategies to effectively maneuver the competition so that the firm is able to
maximize is sustainability and profitability.

It provides an organization with valuable insights of any challenge that may appear in future
or any opportunity it can grab. This helps the organization to prepare itself in well advance,
an understanding of this will help any investor or stake holder prevent risks such as economic
recession, change in laws or technology. PESTEL is a group f 6 factors that may not only
affect the organization but the whole industry, these factors are namely Political, Economic,
Social, Technological, Environmental and Legal.

Political Factors that Impact

Political factors of the country or countries you serve in impact the profitability, chances of
survival of the company are quite diverse. These risks may vary from sudden changes in
existing political regimes to civil unrest or a decisions taken by the government.

In cases of MNC’s, Political factors not only for the host country but for all countries that
contain business operations, or engage in trade with, will affect the whole organization. List
below are few examples of Political factors that should be considered:

 The level of political stability in a country.

 Corruption and integrity of politicians
 Protection of company’s intellectual property (IP)
 Existing trade barriers and Taxation policy

Economic Factors that Impact

All the factors that pertain the economy of a country are considered the Economic factors,
such as Inflation rate, Interest rate, GDP etc. these factors affect the demand and supply of
any product and thus define the buying power of people. The economic factors in the
PESTEL analysis are macroeconomic.
 Economic system-monopoly, an oligopoly, or perfect competition
 The rate of GDP growth in the country.
 The interest rates in the country affecting the borrow and investment decisions
 Efficiency in financial markets.
 The exchange rate of the country.
 Poverty, Unemployment and other such factors

Social Factors that Impact

Societies play an important role in working of an organization, Social factors directly reflects
the society they work in, encompassing the cultural values, beliefs, attitudes are other values
of the population as a customer. These are not only important as marketing but for operations.
An understanding of the customers, their lifestyle, level of education and beliefs in a society,
or segment of society, would help design both the products and marketing messages that
would lead to a venture becoming a success.

Technological Factors that Impact

Technology defines the way any organization will work and has a approach to define the
pricing of its products and services. It is thus important to be in right technology at right time
and understand when to upgrade or stabilize not only for [profits or being a market leader but
also to prevent obsolescence in the near future.

Environmental Factors that Impact

As the industries differ, the standard norms for protecting the environment differ. These
norms define what the company should aim for or how to not become target of pressure
groups that may convert into boycotts due to lack of environmental consciousness.

The environmental factors that may significantly impact include:

 The current weather conditions

 Transportation of both the resources and the finished product.
 Climate change would also render some products useless.
 Those companies that produce extremely large amounts of waste may be required by
law to manage their environmental habits.

Legal Factors that Impact

An organization has various legal faces due to the Government and institutional framework
including the political and other aspects of PESTEL. Often policies on their
own aren't enough to efficiently protect and its workers, making appear an undesirable
place of employment which will repel skilled, talented workers.

The legal factors that deserve consideration include the following:

 Intellectual property laws

 Data protection laws
 Discrimination laws.
 Health and safety

PESTEL & Environment Analysis of Real Estate Industry

Political

 Real Estate faces continues irregularities owing to trade-off

 Issues like environment protection, proper civic planning versus development
 Issue related to acquisition of land for development purposes
 Passing of the land acquisition bill, favoring farmers against private projects and
public-private partnership.
 Allowance of FDI

Economic

 Rapidly developing IT and retail sector

 Rising middle class and increasing per-capita and income levels
 Rapid urbanization resulting the current real estate boom.
 High cost of borrowing from domestic lenders has resulted in liquidity crunch for the
sector.
 Rising inflation levels
–

Social

 Farmers and other people who did not have a proper law to guard their properties
have been protected via Land acquisition bill.

 More funds allocated to National Rural Housing.

 Housing constructions for slum dwellers in metropolitan cities and also for other
classes of people like army widows etc.

Technological

 Real estate development is mainly focused in urban areas with a fast rate. To cater
the same modern technologies like cement mould assembly, usage of cement
blowing pumps for vertical passage of cement are being used.

Environmental

 The real estate boom came hand in hand with constructions that went against the
norms of the environment ministry

 The national green tribunal (NGT) on 5th August 2013 banned mining or removal of
sand from river beds without an environmental clearance.

Legal
 Every new construction needs to get registration and subsequent clearances from the
local bodies.

 The origin of the land and its past owners’ clearance

 Numerous categorization of the taxes on the basis of the size and place of property
and income levels of the person owning it.

 Passing of land acquisition bill to support the needs of the farmers during passing of
land from their hands