Real-Estate-July-2020 (6 Files Merged)

REAL ESTATE
For updated information, please visit www.ibef.org July 2020

Table of Contents
Executive Summary……………….….….….3
Advantage India…………………..….… 4
Market Overview and Trends ………..…….6
Strategies Adopted ………….……....…….14
Growth Drivers ..……………….…...............16
Opportunities ..….……….........………….…23
Key Industry Organizations ..…….…….….27
Useful Information ..…….......…………..….29

EXECUTIVE SUMMARY
India’s Real Estate Market (US$ billion)

 Real estate sector in India is expected to reach US$ 1 trillion by
2030. By 2025, it will contribute 13 per cent to the country’s GDP.
1500
 Rapid urbanisation bodes well for the sector. The number of Indians living
1000 1,0
in urban areas is expected to reach 525 million by 2025. More than 70 per
00
cent of India’s GDP will be come from urban areas by 2020. 65
120 500 0
 Construction is the fourth largest sector in terms of FDI inflow. FDI in the
0
sector (includes construction development and construction activities) Urban Population in India1 (million)
20172025F2030F
stood at US$ 42.50 billion from April 2000 to March 2020.
 Government of India’s Housing for All initiative is expected to bring US$ 600 525.45
460.24 470.72
1.3 trillion investment in the housing sector by 2025. 400
4 4
 India's Global Real Estate Transparency Index ranking improved by a 2 6
200 9 1
notch to 34 in 2019 on the back of regulatory reforms, better market
data and green initiatives according to property consultant JLL. 0 2015 2018 2019 2020F 2025F
Cumulative FDI inflow1 between April 2000-March 2020(US$
billion)
30.00
20.00 25.66
10.00 16.85
0.00
Construction Activities Construction Development
Notes: E – estimated; P – Projected, F- Forecasted

Source: KPMG, World Bank, Census 2011, Credai-JLL report, 1United Nations World Urbanization Prospects 2018, CBRE
3 Real Estate For updated information, please visit www.ibef.org

Real Estate
ADVANTAGE INDIA
ADVANTAGE INDIA
 Demand for residential properties has surged due to increased  Growing requirement of space from sectors
urbanisation and rising household income. India is among the such as education, healthcare, e-commerce
top 10 price appreciating housing markets internationally.
and logistics.
 About 10 million people migrate to cities every
 Growing demand of energy efficient and
year.
environment friendly architecture.
 Growing economy driving demand for
commercial and retail space.
ADVANTAGE
INDIA
 Driven by increasing transparency and  The Government has allowed FDI of up to
returns, there’s a surge in private 100 per cent for townships and settlements
investment in the sector. development projects.
 Real estate attracted around Rs 43,780  Under the Housing for All scheme, 60
crore (US$ 6.26 billion) worth of million houses are to be built, which include
investment in 2019. 40 million in rural areas and 20 million in
urban area by 2022.
 Real Estate (Regulation and Development)
Act (RERA) 2016 will make the sector more
transparent.
 GST rate is brought down to 5 per cent.
Source: KPMG, Report on Real Estate Sector in India – Corporate Catalyst India Pvt Ltd, USGBC, JLL India, Cushman & Wakefield, Knight Frank Active Capital, EY

Real Estate
MARKET OVERVIEW
AND TRENDS
SEGMENTS IN THE INDIAN REAL ESTATE SECTOR
Residential segment contributes ~80 per cent of the real estate sector. Housing launches across top eight Indian cities increased 23 pe
Residential space
Few players with presence across India.

Commercial space Most of the activity is in the leasing segment.
FDI in multi-brand retail to boost demand.

Retail segment in Indian attracted private equity (PE) investment of around US$ 1 billion in 2019.
Real estate Retail space Retail would add up more 39 million square feet of space by 2022.
sector
Hotel room supply in the country increased 5.4 per cent y-o-y in FY19, totalling to 133,359 rooms at the end of FY19.
The sector is likely to attract an annual investment between US$ 0.5-0.6 billion during 2018-2022, with total investment reachin
Hospitality space
On February 29, 2020, India formally approved 417 SEZs, of which 238 were already in operation. Majority of the special economic zone
In March 2020, the Government approved proposals from TCS and DLF to set up SEZs for IT sector in Haryana and Uttar Pradesh.
SEZs
Notes: SEZ - Special Economic Zone. IT - Information Technology, BPM - Information Technology Enabled Services
Source: KPMG Cushman and Wakefield, CRISIL, JLL India, ANAROCK Property Consultants, Colliers Research, CBRE

INDIAN REAL ESTATE IS A LARGE, GROWING MARKET…
 Real estate sector in India is expected to reach US$ US$ 1 trillion in Market size of real estate in India (US$ billion)
market size by 2030, up from US$ 120 billion in 2017. India’s real estate
market is estimated to grow at a CAGR of 19.5 per cent during 2017-
2028. 1200
 Increasing share of real estate in the GDP would be supported by 1000

increasing industrial activity, improving income level and urbanisation. 800
 The Government launched 10 key policies for the real estate sector: 650
• Real Estate Regulatory Act (RERA) 180

200 120
• Benami Transactions Act 0
• Boost to affordable housing construction 2017 2020 2025 2030F
• Interest subsidy to home buyers

NHB India Housing Price Index*
• Change in arbitration norms
• Service tax exemption
• Dividend Distribution Tax (DDT) exemption 112 110
108
• Goods and Services Tax (GST)
110.46
• Demonetisation 106
108.86
• PR for foreign investors 104
105.62
105.54
102
104.08
100
Sep'18Dec'18Mar'19Jun'19Sept'19
Notes: CAGR - Compounded Annual Growth Rate; F – Forecast, Information is as per latest data available, *average of indices of all cities, P – Projected
Source: KPMG, Report on Real Estate Sector in India – Corporate Catalyst India Pvt Ltd, CBRE, National Housing Bank

DEMAND FOR RESIDENTIAL SPACE EXPECTED TO GROW SHARPLY
 A localised and fragmented market presents Cumulative Housing Demand-Supply in Top 8 Cities (‘000 units)
opportunity for consolidation with only few large pan- 2016-20
India players like DLF.
Scenario  More foreign players might enter the market as FDI
norms have eased.
 Furthermore, norms on land acquisitions is expected
to be relaxed. 717
HIG
351
 Rapid urbanisation.
 Growth in population.
Key drivers
 Easy availability of finance. 1,457
 Repatriation of NRIs and HNIs. MIG Demand
 Rise in disposable income. Supply
647
 Housing sales reached 2.61 lakh units in 2019

across seven major cities.
1,982
Notable  NCR (National Capital Region) is expected to
generate maximum demand in MIG and HIG LIG
trends
category followed by Bengaluru. 25
 Developers are now focussing on affordable and
mid-range categories to meet the huge demand.
0 500 1000 1500 2000 2500
Notes: LIG – Low Income Group, MIG - Middle Income Group, HIG - High Income Group
Source : Cushman and Wakefield, Anarock Property Consultants

Few large developers with a pan-India presence
dominate the market.
Operating model has shifted from sales to lease and maintenance.
By 2023, commercial space is expected to reach at 50 msfa mainly driven by sectors - IT-BPO, pharma, engineering and manufacturing.
Rapid growth in service sectors: IT/BPM, BFSI and

Telecom.
Rising demand from MNCs.
Demand for office space in tier II cities.
33.20 33.00
29
28
City-Wise Commercial Space Demand (million square feet) 2019
METROS DRIVING DEMAND FOR COMMERCIAL SPACE

 In 2019, the demand for office sector with 35
commercial leasing activity reached 69.4 mn sq ft. 30 3
25
Notable  Business activity is shifting from CBDs to SBDs and 2 2
20
tier I to tier II cities. 5 6
trends 15
1 8 10 1
 Co-working space across top seven cities reached 1 4
6 5 5
12 msf by end of 2019. Demand for Commercial Space in Top 8 cities3(million square
0
feet)
Bengaluru
NCR
Chennai
Pune
Ahemdabad
Mumbai
Kolkata
Hyderabad
Scenario 34
33
32
31
Notes: MNC - Multinational Corporation, BFSI - Banking, Financial and Insurance Services, CBD - Central Business District, SBD
30 - Special Business District, NCR - National Capital
Region, msf- million square feet
29
Source: Cushman and Wakefield
28
27
10 Real Estate For26updated information, please visit www.ibef.org
25
Key drivers 2016201720182019
OFFICE MARKET OVERVIEW
 Office market has been driven mostly by growth in BPM/IT, BFSI, Net Office Space Leasing in 2019 (million square feet)
consulting and manufacturing industries. Moreover, many new
companies are planning a foray into Indian market due to huge
18
potential and relaxed FDI norms.
 Grade-A office space absorption is expected to cross 700 msf by 16

2022, with Delhi-NCR contributing the most to this demand.
15.3
 During 2019, the office leasing space reached 60.6 msf across eight 14
major cities, registering a growth of 27 per cent y-o-y.
12 12.8
 In 2019, Bengaluru saw the highest volume of office space leased at
15.3 msf, followed by Hyderabad at 12.8 msf. 10
9.7
8 8.6
5.2
Ahmedabad
1.351.5
Hyderabad
Bengaluru
0.8
Chennai
Mumbai
Kolkata
Pune
NCR
Notes: BPM - Information Technology Enabled Service. msf – million square feet
Source: Knight frank JLL India, Livemint, Colliers International, CBRE, JLL

RETAIL SPACE LIKELY TO SEE STRONG GROWTH
Number of Malls in India

 Currently, retail accounts for a small portion of the
Indian real estate market.
Scenario  Organised retailers are few and the organised retail 300
space is mostly developed by residential/office
space developers.
253
 Booming consumerism in India. 246
232
 Organised retail sector is growing 25-30 per cent
219
annually. 200 212
203
188
 India’s population below 30 years of age and
having exposure to global retail is expected to drive
150
demand for organised retail.
100
 Around 32 new malls with area of 13.5 msf were

expected to start operations in 2019,
Notable 50
 Mumbai, NCR, Bengaluru and Kolkata witnessed
trends highest growth in retail real estate during 2019.
 Retail sector attracted US$ 1 billion in 2019.
0
2012201320142015201620172018
Source: : Cushman and Wakefield, CBRE, JLL India, Real estate intelligence service (JLL), Anarock

HOSPITALITY MARKET TO WITNESS LARGE INCREMENTAL CAPACITY
Branded Hotel Rooms Inventory in Major Indian Cities (‘000)

 NCR and Mumbai are by far the biggest hospitality
markets in India, followed by Bengaluru, Hyderabad
Scenario and Chennai. 12.7
Bengaluru
17.1
 Besides hotels, the hospitality market comprises of
New Delhi 14.7
service apartments and convention centres.
16.0
13.7
Mumbai 15.9
Chennai 9.2
 A robust domestic tourism industry. 10.1
Goa 6.7
 The increasingly global nature of Indian businesses is 8.5
Key drivers boosting business travel.
Hyderabad 6.8
 Tax incentives for hotels and higher Floor Space 7.7
5.9
Index (FSI). Gurugram 7.4
Pune 6.3
7.1
5.4
Jaipur 6.3
Kolkata 3.9
5.2
 Service apartments appear particularly attractive 3.4
within the hospitality space. Ahmedabad
4.3
Notable
 Government initiatives to promote tourism in tier II Agra 2.3
trends 2.6
and tier III cities is generating significant demand for 1.5
hotels in such cities, especially budget hotels. Noida 2.0
- 5.0 10.0 15.0 20.0
FY23
FY18
Notes: RevPar - Revenue per available room

Source: : Cushman and Wakefield, Hotelivate

Real Estate
STRATEGIES
ADOPTED
STRATEGIES ADOPTED
 Having a diverse portfolio of residential, commercial and township developments.

 Companies have projects in various strategic geographic locations in order to diversify risks .
Diversified portfolio
 Focus on the growth of lease business.
 Housing finance companies and private equity (PE) companies have started focusing on affordable housing.
Backward  An architectural, structural and interior studio and a metal and glazing factory.
integration  Interiors, wood working factory, and concrete block making plant.
 In September 2019, DLF sold over nine acres of land in New Gurugram to American Express for about Rs 300
crore (US$ 42.92 million).
Merger &  Raymond sold its 20 acres Thane land to Xander-backed VRSA for Rs 700 crore (US$ 98 million).
Acquisition (M&A)  In January 2020, RMZ Corp entered into a strategic and equal partnership with Mitsui Fudosan (Asia) Pte Ltd to
expand its business footprint.
 Iconic RK Studios property, located in suburban Chembur, was acquired by Godrej Properties.
 Joint venture (JV) with land owners instead of amassing land banks. For example – Oberoi Realty, a Mumbai based
realty firm, adopted this strategy while entering the NCR region.
Risk management
 On July 23, 2020, Sunteck Realty entered a joint development agreement with landowners to construct a housing
in land sourcing
project in the Mumbai Metropolitan Region (MMR), having a revenue potential of Rs 5,000 crore (US$ 709.32
million) over the next five-seven years.
 Outsourced support functions.

 Focus on delivery capability.
Superior execution  Development of world class infrastructure.
 Rationalising costs.
Source: Livemint, Economic Times

Real Estate
GROWTH DRIVERS
Growth in tourism Urbanisation
Epidemologica
l changes
Growth drivers
Growing economy
Easier financing Policy support

17 Real Estate
REAL ESTATE BEING DRIVEN BY POLICIES AND GROWING ECONOMY
For updated information, please visit www.ibef.org
MIC GROWTH ALONG WITH GROWING URBANISATION IS BOOSTING REAL ESTATE D
Growth in Household Incomes in Indian Cities (2019) Population breakdown of India (million)
1000
12% 900
800 900 909
1 880 893
700
0 9 9 10% 600
% % % 8 8 8 8 500
8% % % % % 400
300 543
6% 200 461 483
100 429
4% 0
Hyderabad
Delhi NCR
Bengaluru
Chennai
Mumbai
Kolkata
2%
Pune
0% 201520182020E2025F
UrbanRural
 The Indian economy has experienced robust growth in the past decade and is expected to be one of the fastest growing economies in the
coming years.
 India’s urban population is expected to reach 525 million by 2025, up from an estimated 461 million in 2018.
 Rising income and employment opportunities have led to more urbanisation and more affordability for real estate in cities.
Notes: E – Estimate, F – Forecast

Source: IMF World Economic Outlook Database, JLL, *United Nations World Urbanization Prospects 2018

RISING TOURIST NUMBERS BOOSTING THE HOSPITALITY SECTOR
Foreign Tourists Arrivals in India (million) India’s Foreign Exchange Earnings From Tourism (US$ billion)
12.0
CAGR 7.1% 35.0 CAGR 10.01%
10.9
10.6
30.0
10.2
10.0
30.0
25.0
27.01
27.7
8.0
8.8
20.0
22.9
15.0
6.0 10.0
5.0
4.0 0.0
2.0
2016
2019
2017
2018
2017
2019
2016
2018
0.0
 During 2019, foreign tourist arrivals (FTAs) in India stood at 10.9 million, achieving a growth rate of 3.20 per cent y-o-y.
 The Government of India has set a target of 20 million FTAs by 2020 and double its foreign exchange earnings.
 India’s tourism and hospitality industry is anticipated to touch US$ 418.9 billion by 2022.
 During 2019, India earned US$ 30.0 billion in foreign exchange from tourism, recording a y-o-y growth of 4.80 per cent. Foreign exchange
earnings (FEEs) from tourism in India grew at a CAGR of 8.96 per cent during 2007-19.
 The growing inflow from tourists is expected to provide a fillip to the hospitality sector.
 Medical tourism sector in India is gaining momentum with a target of attracting 8 million medical tourists into the country by 2020.
Notes: CAGR is up to 2019, CY – Calendar Year

Source: Ministry of Tourism

Ease in housing
finance
 In order to boost affordable real estate, housing loans up to Rs 3.5 million (US$ 54,306) in metro cities were
included in priority sector lending by the RBI in June 2019. Loans under priority sector lending are relatively
cheaper.
 Housing loans account for more than half of retail loans.
Housing for
economically
weaker section
 In Union Budget 2019-20, the Government extended benefits under Section 80-IBA of the Income Tax Act till March
31, 2020 to promote affordable housing in India.
 In February 2018, National Urban Housing Fund (NUHF) was approved with an outlay of Rs 60,000 crore (US$
9.27 billion).
 On July 09, 2020, Union Cabinet approved the development of Affordable Rental Housing Complexes (AHRCs) for
urban migrants and poor as a sub-scheme under Pradhan Mantri Awas Yojana – Urban (PMAY–U).
FDI
 The Government has allowed 100 per cent FDI for townships and settlements development projects.
GOVERNMENT POLICIES
 Provision for reduction AREforHELPING
in minimum capitalisation THE
FDI investment from REAL
US$ 10 million to ESTATE
US$ 5 million to SECTOR
boost PROSPER
urbanisation.
 In January 2018, the Government allowed 100 per cent FDI in single-brand retail trading and construction
development without Government approvals.
REITs
 Real Estate Investment Trusts (REITs) in non-residential segment will open channels for both commercial and
infrastructure sector. In March 2019, Embassy Office Parks, India’s first REIT, went public.
 First REIT raised Rs 4,750 crore (US$ 679.64 million) and was launched in early 2019 by global investment firm,
Blackstone, and realty firm, Embassy group.
Land Acquisition Bill
 In December 2014, the Government passed an ordinance amending the Land Acquisition Bill.
 This ordinance is intended to speed up the process for industrial corridors, social infra, rural infra, housing for the
poor and defence capabilities.
Source: Government of India, News Sources

4,981
4,467
5,147
3,178
Distribution
PE/VC Investments of Institutional
in Indian Real EstateInvestment in India (2014-19)
(US$ million)
2%
3%
5,500 8% Office
Residential Entity Level Retail Mixed-use Others
10%
4,500 40%
3,500
2,500
37%
1,500
500
2016201720182019
 RBI proposed to allow banks to invest in real estate investment trusts and infrastructure investment trusts, attracting more institutional investors to
such assets. Indian Banks, which are allowed to invest about 20 per cent of their net-owned funds in equity-linked mutual funds, venture capital
(VC) funds and stocks, could invest in these trusts within this limit.
 Between 2009-19, Indian real estate sector attracted institutional investment worth US$ 30 billion and received US$ 5.15 billion in 2019.
 Investment from private equity (PE) players and VC funds reached US$ 4.47 billion in 2018 and US$ 1.47 billion in Q12019 in the sector. Real
estate attracted around US$ 14 billion from foreign PE players between 2015 and Q32019.
 Institutional investment into Indian real estate sector stood at US$ 712 million during Q4FY20.
PE INVESTMENTS ON THE RISE
Note: PE – Private Equity, VC – Venture Capital
Source: EY, JLL India

SEZs EMERGING AS AN EXTENSION OF REAL ESTATE BUSINESS
SEZ exports from India (US$ billion) City-Wise Distribution of SEZs in 2019
120 100
80 8%
Bengaluru
60 13% 30% Hyderabad NCR
Chennai Pune
40 Mumbai
100.3
20 15%
85.5
4
78.07
71.38
0 16%
15%
FY16FY17FY18FY19
 100 per cent FDI permitted for developing townships within SEZs with residential areas, markets, playgrounds, clubs, recreation centres, etc.
 Export from SEZs reached Rs 7.01 lakh crore (US$ 100.30 billion) in FY19 and grew by about 14.5 per cent to Rs 3.82 lakh crore (US$ 54.66
billion) in April-September 2019.
 In March 2020, proposals from TCS and DLF to set up SEZs for IT sector in Haryana and Uttar Pradesh was approved by the Government.
 Industry players, including realtors and property analysts, are rooting for the creation of "Special Residential Zones" (SRZs) along the lines of
SEZs.
Source: Ministry of Commerce and Industry, SEZ website

Real Estate
OPPORTUNITIES
Education
NCR
 is expected to have the highest incremental demand from the education sector during the period of 2015-20.
 The rising young population of India is expected to drive this space.
Healthcare
 The healthcare market is expected to reach US$ 372 billion by 2022.

 India requires additional 1.1 million beds.
 India needs to add 2 million hospital beds to meet the global average of 2.6 for every 1,000 people.
Senior citizen
housing
 Emergence of nuclear families and growing urbanisation have given rise to several townships that are developed to
take care of the elderly.
 A number of senior citizen housing projects have been planned. The segment is expected to grow significantly in
the future.
 The segment in India can reach US$ 7.7 billion in market size by 2030 according to a study by the Ministry of
Commerce and Industry.
NICHE SECTORS EXPECTED TO PROVIDE GROWTH OPPORTUNITIES
Service apartments
 Growth in the number of tourists has resulted in demand for service apartments.
 This demand is likely to grow and presents opportunity for the unorganised sector.
Hotels
 FTAs in India is expected to reach 15.3 million by 2025, which is expected to lead to an increase in demand for
hotels.
Notes: NCR – National Capital Region

Source: Cushman and Wakefield, Fitch Ratings, Report on Healthcare, Telemedicine and Medical Tourism In India – ASA and Associates LLP, Ministry of Tourism

Ahmedabad
 Upcoming office space likely to boost hospitality segment.
Bengaluru
 Corporate clients expected to provide steady growth to room demand.
Chennai
 Emerging as promising commercial destination with Chennai-Bengaluru Industrial Corridor – likely to witness strong
demand.
Hyderabad
 Room demand is expected to be driven by commercial and office space projects in the city.
Kolkata
 Projects like Light Rail Transport System, Monorail, Eco-Park, and Airport expansion are likely to boost travel,
which will result in increase in demand for the hotel industry.
Mumbai
TOP CITIES TO CONTRIBUTE TO GROWTH
 Improved infrastructure, new airport terminal and upcoming airport in Navi Mumbai is expected to drive hotel
industry’s growth.
NCR
 Higher floor space index and inclusion of hotel projects in infra lending lists provide a positive outlook for the hotel
market in NCR.
Pune
 IT parks are attracting global players and increasing traffic. New business units are likely to increase business
conferences and events, which in turn will boost the demand for hotels.
Source: Cushman and Wakefield

Real Estate
KEY INDUSTRY
ORGANISATIONS
The Confederation of Real Estate Developers’ Associations of India (CREDAI
National Secretariat, 703, Ansal Bhawan,

16, Kasturba Gandhi Marg, New Delhi – 110 001
Tel: (011) 43126262/43126200
Fax: 91 11 43126211
E-mail: Website:
Builders' Association of India (BAI)

G-1/G-20, Commerce Centre, J. Dadajee Road, Tardeo, Mumbai – 400034
Tel: 91 22 23514134, 23514802, 23520507
Fax: 91 22 23521328
E-mail: Website:
INDUSTRY ORGANISATIONS
27 Real Estate
For updated information, please visit www.ibef.org
Real Estate
USEFUL
INFORMATION
GLOSSARY
 BFSI: Banking, Financial Services and Insurance
 CAGR: Compound Annual Growth Rate
 CBD: Central Business District
 FDI: Foreign Direct Investment
 FSI: Floor Space Index
 HNI: High Net-worth Individual
 GOI: Government of India
 INR: Indian Rupee
 IT/BPM: Information Technology/Information Technology enabled Services
 MNC: Multinational Corporation
 NRI: Non Resident Indian
 SBD: Special Business District
 SEZ: Special Economic Zone
 US$ : US Dollar
 Wherever applicable, numbers have been rounded off to the nearest whole number
29 Real Estate
For updated
information, please
visit www.ibef.org
Exchange Rates (Fiscal Year) Exchange Rates (Calendar Year)
Year INR INR Equivalent of one US$
2004–05 44.95
2005–06 44.28
2006–07 45.29
2007–08 40.24
2008–09 45.91
2009–10 47.42
2010–11 45.58
2011–12 47.95
2012–13 54.45
2013–14 60.50
2014-15 61.15
2015-16 65.46
2016-17 67.09
2017-18 64.45
2018-19 69.89
2019-20 70.49
Year INR Equivalent of one US$
2005 44.11
2006EXCHANGE RATES
45.33
2007 41.29
2008 43.42
2009 48.35
2010 45.74
2011 46.67
2012 53.49
2013 58.63
2014 61.03
2015 64.15
2016 67.21
2017 65.12
2018 68.36
2019 69.89
Source: Reserve Bank of India, Average for the year

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Real Estate
Market size Of Real Estate in Cumulative Housing Demand-

India (US$ bn) Supply in Top 8 Cities (‘000 units)
2016-20
Market 1,000
HIG
717
Size 351 Demand

1,457 Supply
120 MIG
647
1,982
LIG
25
2017 2030
Note: LIG – Low Income Group, MIG – Medium Income Group, HIG – High Income Group
Net Office Space Leasing in 2019 (million square feet)
Sector 15.30
Composition 12.80
9.70
8.60
5.20
1.50 0.80
1.35
Bengaluru Hyderabad Mumbai NCR Chennai Ahmedabad Kolkata Pune
Demand for Commercial Space

In Top 8 cities (mn sq ft)
PE/VC Investments in Indian
Real Estate (US$ million)
Key 33.20 33.00 4,981

4,467
5,147
Trends
3,178
28.00 28.70
2016 2017 2018 2019 2016 2017 2018 2019

Government
Initiatives Real Estate Goods and Services Benami Transactions
Regulatory Tax Act
Act
Infrastructure
Growth in Infrastructure Related Activities during FY20 (per cent)
Growth 15.00
-3.60 -1.60
0.26 0.82
Electricity National Highway Rail Freight Railway Cargo at
Generation Construction Earning Earnings Major Ports
Index of Eight Core Infrastructure Industries
158.51156.90
153.93147.70
147.00
145.74
133.47134.10
131.90131.20
129.40
129.10
109.83107.00
Sector Composition
84.46 89.80
65.09 69.00
Coal Crude Oil Natural Refinery Fertilisers Steel Cement Electricity Overall
Gas Products
FY19 FY20
Highway
Construction in India (Km)
Installed Electricity Generation Capacity

(GW)
10,855.00
370.34
370.11
356.10
9,828.00
344.00
326.84
Key
8,231.00
280.33
Trends
6,061.00
4,622.00
FY16 FY17 FY18 FY19 FY20** FY16 FY17 FY18 FY19 FY20 FY21*
Note:*- April 2020, **- till September 2019
Government Ujwal Discoms

Initiatives Assurance Yojana PMAY - Urban
(UDAY) Housing For All Smart City Project
Engineering & Construction
Infrastructure in India
A vast land of construction opportunity
pwc 1
Contributors Jonathan Hook, Michael Cracknell, Vasant Gujararthi, Ravi Bhamidipati,
Amrit Pandurangi, Girish Mistry, Hemal Zobalia, Vishwas Udgirkar, Mukesh Rajani,
Graham Dredge, Jimit Devani and Raj Julleekeea.
Principal author Elizabeth Montgomery
Graphic design Hamilton-Brown
PricewaterhouseCoopers
Contents
Welcome 3
Introduction 5
Foreign Direct Investment (FDI) and the regulatory environment 6
Opportunities 7
Roads and highways
Rail
Ports and airports
Power
Public private partnerships
The tax environment for E&C companies investing in India 11

Structural considerations for developers
International tax considerations
Higher depreciation – what lies ahead?
Indirect tax issues
Challenges for local players and foreign companies looking to enter the market 14
Building a sustainable future in India 16
Concluding thoughts 17
Further reading 18
PricewaterhouseCoopers expertise in the E&C industry in India 20
Infrastructure in India: A vast land of construction opportunity 1

“Expanding investment in infrastructure can play
an important counter cyclical role. Projects and
programmes [are] to be reviewed in the area
of infrastructure development, including pure
public private partnerships, to ensure that their
implementation is expedited and does not suffer
from [the] fund crunch.”
Mr. Manmohan Singh, Indian Prime Minister,
(quoted in newspaper reports, October, 2008)
2 PricewaterhouseCoopers
Welcome
In this paper, we examine the opportunities created, how onshore versus offshore Reasons to invest in India:
for the engineering and construction (E&C) services and supplies are managed in a
industry in India, one of the fastest growing • One of the world’s fastest growing
particular contract, and indirect tax economies – and growth expected to
economies in the world. We also focus on implications can all have a major impact
the structuring opportunities and some of continue at 7-7.5% despite the global
on the bottom line. Further, foreign players downturn
the challenges overseas participants are are likely to need to identify promising
likely to encounter. • Few restrictions on foreign direct
local companies, then make a case for a
investment (FDI) for infrastructure
India’s economy is big and getting bigger. profitable partnership, in order to achieve
projects
PricewaterhouseCoopers estimates a win-win situation in India. Still, there is a
that India will become the world’s third strong rationale for many E&C companies • Tax holidays for developers of most
largest economy by 2050. Liberalisation to invest in India sooner, rather than later. types of infrastructure projects, some
Not only are there substantial of which are of limited duration
of government regulations and a
deliberate strategy on the part of the opportunities now, but establishing • Opening up of the infrastructure sector
Indian Government to promote relationships and a presence in the market through PPPs
infrastructure spells opportunity for E&C can help to ensure continuing project
companies. potential over the medium- and long-term. Projected spending from FY07-FY12
Nearly all of the infrastructure sectors Looking ahead, we believe that it is in selected infrastructure segments:
present excellent opportunities, with roads imperative that infrastructure development • Electricity: US$167 billion
and highways, ports and airports, railways occurs in a sustainable manner, in India • Railways: US$65 billion
and power standing out as particular and around the globe, if the impact of
• Road and highways: US$92 billion
bright spots, with staggering sums of climate change is to be slowed to broadly
investment planned. Public private acceptable levels. The Indian Government • Ports: US$22 billion
partnerships (PPPs) are gaining in must maintain a commitment to ensuring • Airports: US$8 billion
importance, and are benefiting from that rapid growth does not happen at an
government support – targeted PPP untenably high environmental cost, and
participation is US$150 billion. Companies infrastructure projects will play a key role
experienced in structuring these types of in ensuring the success of ‘green growth’.
deals should be able to use their expertise Those E&C companies taking a holistic
to good effect in the Indian marketplace. approach to building a sustainable
infrastructure will have a strong
Operating in India requires a thorough
competitive advantage.
understanding of the local market.
Companies need to do their homework in
order to understand a host of tax and
regulatory issues before bidding on
projects or setting up operations. Whether November 2008
or not a permanent establishment is
Jonathan Hook
Global Engineering IndiaRavi Bhamidipati

Engineering &
& Construction Construction leader
leader
“The link between infrastructure and economic
development is not a once and for all affair.
It is a continuous process; and progress in
development has to be preceded, accompanied,
and followed by progress in infrastructure, if we
are to fulfill our declared objectives of generating
a self-accelerating process of economic
development.”
Dr. V. K. R. V. Rao [noted Indian economist, early 1980s]
Introduction
The Indian economy is booming, with realistic, even given the global credit Private sector participation is integral
rates of Gross Domestic Product crunch, and assured observers that to these plans. PPPs have been
(GDP) growth exceeding 8% every the country’s Government will take identified as the most suitable mode for
year since 2003/04. This ongoing action if necessary to support the implementation of projects – and
growth businesses and indeed, are rapidly becoming the funding
is due to rapidly developing services the financial markets. Mr. Singh has also norm. Their share of the total planned
and manufacturing sectors, increasing singled out infrastructure investment as infrastructure improvements is projected
consumer demand (largely driven by particularly vital. to be around 30% (US$150 billion). Power
increased spending by India’s middle and road projects top the list, and other
class) and government commitments to Indeed, even with a somewhat slower
transportation sectors such as railways,
rejuvenate the agricultural sector and rate of growth, the Indian economy is still
ports, and airports are also targeted for
improve the economic conditions of expanding significantly, and substantial
investment in infrastructure continues major investments.
India’s rural population. Construction
is the second largest economic activity to be required in order to sustain India’s Companies looking to capitalise on the
in India after agriculture, and has been economic progress. The country’s situation need to plan their strategy
growing rapidly. The production of capacity to absorb and benefit from new for entering the market carefully.
industrial machinery has also been on the technology and industries depends on the Understanding the local market,
rise – and the increasing flow of goods has availability, quality and efficiency of more including selecting complementary local
spurred increases in rail, road and port basic forms of infrastructure including partners, is vital. Tax optimisation is a
traffic, necessitating further infrastructure energy, water and land transportation. In key cost
improvements. some areas, roads, rail lines, ports and component – while substantial tax benefits
airports are already operating at capacity, are provided for infrastructure projects,
In the fiscal year ending March 2008, so expansion is a necessary prerequisite developers need to be savvy about
India’s GDP grew by more than 9%. to further economic growth. structuring their contracts. Good tax
This robust rate of expansion was planning can have a potentially decisive
initially forecast to continue in the 2008- The Indian Government recognises this
imperative. As per the Eleventh Five Year impact, especially in bidding situations,
2009 fiscal year. In summer 2008, and help to avoid unnecessary litigation
however, the combined impact of Plan, more than US$500 billion worth of
investment is planned to flow into India’s later.
slowing Indian consumption, a higher
domestic cost infrastructure by 2012. Construction
of capital and reduced capital access projects account for a substantial portion
of the proposed investments, making
from international capital markets raised
the E&C sector one of the biggest
concerns by some analysts that the rate
beneficiaries of the infrastructure boom
of growth might be slowing. In October
in India. The regulatory environment is
2008, India’s Prime Minister, Mr.
relaxing to encourage further foreign direct
Manmohan Singh, affirmed the
investment (FDI).
Government’s view that a rate of growth
of 7-7.5% remains
Foreign Direct Investment (FDI) and the regulatory
environment
Major infrastructure development requires Figure 1: FDI routes

a substantial influx of investment capital.
The policies of the Indian Government Approval Route Automatic Route
seek to encourage investments in – Permission required – Freely permissible (100%)
domestic infrastructure from both local
and foreign private capital. The country
is already a hot destination for foreign
investors. As per the World Investment
Report of the UNCTAD, India was rated • Existing Airports – beyond 74% • Greenfield airports
the second most attractive location (after • Atomic Minerals • Construction & maintenance of infrastructure
China) for global FDI in 2007. • In case of joint venture or technology
like ports, harbors, roads and highways
Currently, India has FDI of about US$21 collaboration agreement in the same field • Power generation, transmission and
distribution and power trading (atomic
billion per year, well below the targeted
energy not permitted)
US$30 billion. In order to increase
FDI inflows, particularly with a view to • Mass rapid transport systems
catalysing investment and enhancing • Townships, housing, built-up infrastructure
infrastructure, the Indian Government has and construction-development projects
introduced significant policy reforms. For
example, it now permits 100% FDI under
the automatic route for a broad range of
sectors (see Figure 1) – only certain post- to promote the construction sector, the the development of certain sectors in India
investment intimation is required. For Indian Government has relaxed some may be hampered due to lack of adequate
FDI in a few sectors, a prior approval is of the exchange control restrictions and co-ordinated planning. Projects
required, which takes around 6-8 weeks. and is now allowing foreign nationals/ which are approved may face difficulties
As part of policy reforms, the Indian citizens to acquire immovable property in if related projects are substantially
Government is constantly simplifying the India, subject to certain conditions and delayed. One example is Bangalore’s new
approval route process, including setting procedures. international airport, one of the largest
up several agencies to expedite PPP projects to date. The project is facing
Hurdles to investment remain. Although
FDI approval. Further liberalisation is growing pains related to insufficient road
India has a well-developed legal
expected as the Government continues to and rail connections to the new facility,
system, the current legal and regulatory
emphasise infrastructure investment. in part due to delays of expected high-
environment sometimes acts as an
speed rail and highway projects under the
In August 2008, a press report stated that obstacle to the necessary injections
auspices of other government bodies.
Morgan Stanley was looking to invest of foreign private capital into India’s
up to a quarter of its US$4 billion global infrastructure. Major infrastructure
infrastructure fund in emerging markets, projects are governed by the concession
notably India and China – and that in India, agreements signed between public
Morgan Stanley would face competition authorities and private entities. Tariff
from Australia’s Macquarie Group, JP determination and the setting of
Morgan, Goldman Sachs and Deutsche performance standards vary somewhat by
Bank, all looking to channel foreign sector. In the roads and highways sector,
investors’ money into Indian infrastructure. the ministry generally sets tolls – while in
While some of this planned investment major ports projects, and many of those
may be reduced or delayed given the in electricity generation, an independent
current environment in the credit markets, regulator will decide relevant tariffs. In
India is still likely to garner substantial the airport sector, a new independent
FDI, particularly if its economy is able to regulator is planned for 2009 and is likely
maintain a fairly strong rate of growth in to play a major role in determining tariffs in
the face of a global recession. concession agreements for the segment.
In some instances, ministry or regulator
From an exchange control perspective, control over potential proceeds can act as
India is moving towards full current a disincentive to the private infrastructure
account convertibility. Most revenue developer.
transactions are freely permitted,
except certain transactions like royalty, As is the case in many countries, there
is no single regulator which formulates
consultancy fees, etc., which are
the policy for all infrastructure projects.
subject to certain limits. Capital account
There is also no standardisation in the
transactions need prior approval, except
concession agreements across the
where specifically permitted. In order
different infrastructure sectors. As a result,
Opportunities
What segments present the best road infrastructure. Plans announced by are likely to reach the US$700 million-
opportunities for E&C companies? The the Government to increase investments US$800 million range. About 53 projects
Planning Commission of India has planned in road infrastructure would increase funds with aggregate length of 3000km and an
extensive expansion in the roads and from around US$15 billion per year to over estimated cost of around US$8 billion
highways, ports, civil aviation and airports, US$23 billion in 2011-12 (see Figure 2). are already at the pre-qualification stage.
and power infrastructure segments – all of The quantum of funds invested as part
which provide substantial opportunities for The procurement process favours players
of these programmes will significantly with good experience and sound financial
E&C companies. exceed that invested in recent history.
strength.
Such programmes would be funded via
Roads and highways a mix of public and private initiatives (see The opportunities do not stop there. More
Table 1). than 10 states are also actively planning
India’s roads are already congested, The Indian Government, via the National the development of their highways. While
and getting more so. Annual growth is Highway Development Program (NHDP), the average size of these projects is
projected at over 12% for passenger is planning more than 200 projects in smaller than the NHDP projects, most will
traffic and over 15% for cargo traffic. The NHDP Phase III and V to be bid out, still be substantial, in the US$100 million-
Indian Government estimates around representing around 13,000km of roads. US$125 million range. All told, more than
US$90 billion plus investment is required The average project size is expected to 4,500km of state highways are likely to be
over FY07-FY12 to improve the country’s US$150 awarded by the end of 2010.
million-US$200 million. Larger projects
Figure 2: Projected Investment in the Road & Highways Sector in the Eleventh Plan
23,387
Investment (US$ million)
25,000 19,971
17,273
20,000 15,976
15,104
15,000
10,000
5,000
2007-08 2008-09 2009-10 2010-11 2011-12
National Highways State Roads Rural Total

North East Roads
Roads
Table 1: Road Infrastructure Detailed Projections (US$ million)
State Roads (Highways, Major Ru

National Highways District Roads, Other ral North Total
Roads) Ro East
NHDP1 NHD Non-
Year Public P NHDP Total Public Private Total
Privat (Public)
2007-08 3,173 3,70 463 7,33 4,347 1,333 5,680 1,875 212 15,104
2 8
2008-09 3,305 3,96 486 7,757 4,528 1,428 5,956 2,025 238 15,976
6
2009-10 3,464 4,49 510 8,469 4,745 1,618 6,364 2,150 291 17,273
5
2010-11 3,834 5,68 536 10,05 5,253 2,047 7,299 2,300 317 19,971
5 5
2011-12 4,707 6,47 563 11,74 6,488 2,345 8,834 2,463 344 23,387
8 7
Total 18,483 24,32 2,557 45,36 25,361 8,771 34,132 10,813 1,401 91,711
6 5
1 NHDP – National Highway Development Programme

Rail at many ports is currently inadequate, Cochin and Bangalore supplementing the
even where ports have already been efforts of the Airports Authority of India.
The Indian Government has also modernised. An estimated investment of
recognised existing infrastructure gaps The Government has proposed the
around US$22 billion is targeted for port
and capacity constraints in the rail system, establishment of an Airport Economic
projects in the five year period from FY07-
and as a consequence plans large scale Regulatory Authority (AERA) to promote
FY12. The National Maritime
investment over the five years from efficiency, competitive pricing and
Development Programme includes 276
FY07-FY12. Projected investments total a customer-focused service. State
projects, with
US$65 billion, of which 40% is expected governments are also getting involved
a required investment of about US$15
to be contributed by the private sector. and looking to facilitate the development
billion over the next ten years, with
One major PPP programme is already in of new airports. The total investment
private investment targeted at around
its initial phases. The Dedicated Freight on new airports has been proposed at
US$8 billion. In addition to improving
Corridor project is designed to alleviate about US$10 billion by 2012. Greenfield
road and rail connections, projects
congestion on the rail routes between airport projects are planned in resort
related to port development (construction
Delhi and Mumbai and Delhi and Kolkota destinations and emerging metros
of jetties, berths, container terminals,
by building long-distance, cargo-only such as Goa, Pune, Navi Mumbai,
deepening of
rail lines, at an estimated cost of US$6 Greater Noida and Kannur. Further, 35
channels to improve draft, etc.), will
billion-7 billion. non-metro airports are proposed for
provide major opportunities for E&C
development. Prequalification of bidders
Other proposed initiatives include the companies.
for development of Amritsar and Udaipur
development of manufacturing plants Recent deregulation of the sector now
airport has already been completed,
for rolling stock with long-term permits 100% FDI, and an independent
and bids for 10 non-metro airports are
committed procurement for several tariff regulatory authority has been set up
scheduled to be invited shortly.
years, and the setting up of logistics to facilitate projects at major ports.
parks. City metro systems are also in As the density of airports increases in
Air traffic has increased rapidly in recent
the pipeline. The first corridor of the various regions, increased competition is
years, although this slowed in 2007. While
Mumbai Metro Project has already been likely to bring new issues into focus, such
a number of Indian airlines have faced
awarded to Reliance Infrastructure and as corporate performance management.
challenging market conditions in 2008,
the Government has asked the final Airports will look to diversify their revenue
and the rate of growth is likely to be
shortlisted companies sources through the development of
significantly less than initially projected,
to submit detailed financial bids for the city-side infrastructure. Airlines will also
Indians are still flying in much greater
second phase of the Mumbai Metro. be looking for new technology solutions
numbers. Estimates made in 2007 by the
to maximize revenues and reduce costs.
Indian Railways is also looking for Indian Government’s Committee on
MRO (Maintenance, Repair & Overhaul)
private partners to help modernise Infrastructure suggest that passenger
facilities could therefore also present new
railway stations to world-class levels, traffic will grow at a CAGR
business opportunities.
and for projects focused on increasing of over 15% in the next 5 years. Indian
connectivity with ports. manufacturers are also looking to the skies The need for improved aviation
– the same source anticipates that infrastructure extends beyond the
cargo traffic will grow at over 20% p.a. construction of new airports – existing
Ports and airports over the next five years. metro airports also require significant
modernization and upgrading. EPC
Increasing connectivity with inland Even if these estimates prove somewhat
contractors are expected to be sought
transport networks is just one of many optimistic, the growth already achieved
for Chennai and Kolkata airports in the
challenges currently facing India’s ports, has put tremendous pressure on airport
immediate future.
which have seen massive swells in the infrastructure. The Indian Government has
amount of goods transported. Traffic is projected that an investment of around
estimated to reach 877 million tonnes US$8 billion in the five year period from Power
by 2011-12, and containerised cargo is FY07-12 will be needed to help cope
expected to grow at 15.5% (CAGR) over with additional demand, and private Increased manufacturing activities
the next 7 years. India’s existing ports sector participation is expected to play a and a growing population are also
infrastructure is not sufficient to handle key role. The private sector has already causing a surge in power usage. India
the increased loads – cargo unloading stepped up to the challenge of airport
infrastructure development in several
cases, with private participation in recent
years at Delhi, Mumbai, Hyderabad,
has the fifth largest electricity grid in
the world with 135 GW capacity, and
the world’s third largest transmission
and distribution (T&D) network. Large
investments are needed to meet growing
demand and provide universal access.
The policy and regulatory framework
is pro-investment – shifting away from
‘negotiated and guaranteed’ to ‘open and
market competition’. Given the increased
competition, diversity, and number of
opportunities, project and collaboration
risk must be more carefully assessed and
managed.
An investment of US$167 billion is
projected for electricity projects in the five
year period from FY07-FY12. The massive
number and scope of potential projects
has attracted a number of new investors,
lenders and operators. All new awards
are through open, competitive bidding.
A rush is on to develop new assets,
harness natural resources, and attract
global finance – but an industry focus and
strategy is necessary to properly tap into
this opportunity.
E&C companies may want to consider
involvement in the construction of power
stations, and T&D networks, particularly
if sustainable building and generation
technologies can be leveraged. The Indian
Government is also looking to encourage
the generation of wind and solar power
by providing generation-based incentives
to those companies who do not claim
accelerated depreciation, so E&C
companies with experience in building
these types of alternative energy projects
may find excellent opportunities.
Public private partnerships

Funding India’s wide-ranging, US$500
billion programme of infrastructure
expansion over a five-year period is
likely to be beyond the means of total
government funding, so policies have
been designed to facilitate private
investment to the maximum level possible.

If the Indian Government’s targeted
level of private sector involvement and
investment are met (approximately 30%), are also increasing their interest. Until
the quantum of funding required would recently, only a very limited number of
be around US$150 billion – dwarfing large domestic players were fully
the investment achieved over the past conversant with PPP models and had the
decade by comparison. Achieving this capability to deliver on them. However,
level of investment is ambitious. Several local developers and contractors are
frameworks and plans are already in catching up fast
place, however, that may facilitate and domestic capacity has increased
reaching these goals. substantially in recent months.
The PPP/PFI market in India is still at a E&C companies looking to participate
relatively early stage. However, over the in this burgeoning segment do face
past decade or so, there has been an certain hurdles. The typical PPP project
increasing trend at the central as well as design and preparation process is still
state government level to use PPPs for largely technically-oriented, with limited
meeting critical infrastructure gaps. The appreciation of the overall financial and
results have been quite encouraging. commercial risk issues involved. Often
Establishing a PPP is now considered information distortions in the market
to be the default option for major have led to large variations in the bids/
infrastructure projects in sectors such as offers received during the procurement
roads, railways, airports, ports and other process. Further, the procurement
transport segments. First preference will process is often highly prescriptive, rather
be given to the PPP model, and only in than participative. The emphasis is on
cases where projects are expected to fail conforming to public sector requirements,
to attract private sector interest will more which may not offer value for money
traditional models be considered. and does not encourage innovative
solutions, rather than evolving the project
Most infrastructure sectors have an overall
configuration to be delivered over the
long-term plan and programme that long-term in a partnership approach.
provides guidance on the projects that
are likely to come up for development. And while the public sector is dictating
Key policy frameworks for procurement the terms, it is quite often not willing to
of projects through PPPs have also shoulder concomitant risk. The current
been drafted. For example, the NHDP concession structure is highly asset
discussed earlier in this paper details a oriented, rather than focusing on service
long-term plan for the roads and highways delivery. Private sector participants are
segment, with seven defined phases often required to assume considerable
and largely clearly identified projects risk, including demand risk, and the
(along with project costs) and an agreed apportionment of risk is in some cases
timeframe. The roads and highways quite inefficient.
segment also has a generally successful
Financing for PPP/PFI projects can also be
PPP model concession framework. The
a key constraint, as long-term fi and
NHDP is mandated to a dedicated agency
instruments have been in scarce supply.
that also has clearly earmarked source
PPP projects have so far been largely
of funding coming in to support the
fi domestically using plain vanilla
programme. Almost all the other sectors
debt with relatively low gearing.
have similar plans.
Commercial banks are the major source of
Over the last 3-4 years, there has been debt with generally short tenor (being
a push towards expanding the scope about 50% of concession period). At the
of PPPs for the provision of urban current time,
infrastructure through establishment of it is diffi to predict how the fi
another government programme for urban situation will evolve over the short-
renewal across the country. This is likely term.
to further increase the scope, scale and Certainly, access to credit has become far
number of PPPs in the country. more restrictive on a global basis, however
if India’s growth continues to outperform
Not surprisingly, international interest in
most other economies, it could emerge as
Indian PPPs has soared in 2008, with
a preferred destination for investment.
over 50 international players showing
interest in a variety of types of projects in India has become an attractive PPP
the first three quarters of the year. Local market and its attractiveness is likely
players increase in the future. Contractors
able to negotiate and partner with the
relevant ministries should find excellent
opportunities, particularly companies with
a longer-term view.
The tax environment for E&C companies investing
in India
E&C companies looking to invest in India Table 2: Types of taxes which may be applicable for E&C companies operating in India
need to consider a variety of tax issues.
Overall tax rates can be relatively high,
Nature of tax Governing Authority Rate of Tax (in %)
so careful tax planning is vital. Some
of the relevant taxes applicable to E&C Income Tax Central Government 33.99
companies are listed in Table 2.
Fringe Benefit Tax Central Government 33.99
Transfer pricing regulations were
introduced in India in 2001. Although Custom Duty Central Government Up to 31.70
transfer pricing regulations are a relatively Excise Duty Central Government Up to 14.42
recent phenomenon, the authorities have
taken an aggressive stance. There is no Service Tax1 Central Government 12.36
advance pricing arrangement (APA) yet
in India, so the implications of transfer Sales Tax/Value Added Tax (‘VAT’)1 State Government 4.00 to 12.50
pricing remain somewhat uncertain. 1
India is planning to implement a unified goods and service tax (GST) in 2010 at a rate still to be determined.
The Government’s strong focus on
promoting infrastructure development
also extends to tax policy, with a number
of policy measures and incentives now in
place for the construction of infrastructure Table 3: Overview of tax holiday terms for various infrastructure segments
facilities, including a numbers of tax
holidays, although Minimum Alternate
Tax (MAT) of 11.33% may be payable on
Sector Applicability Time-frame Eligibility
book profits during this period. Relevant Power • ‘Undertaking’ which • 10 consecutive years • All the above
tax holidays, their applicability, and the generates power out of 15 years should commence
eligibility of each infrastructure sector are • ‘Undertaking’ which (+complete) before
detailed in Table 3. transmits or distributes March 31, 2010
power
• ‘Undertaking’ which
Structural considerations for carries out substantial
developers renovation and
modernisation+
Dividends paid by an Indian company
Ports & • Indian companies • 10 consecutive years • ‘New’
are subject to a Dividend Distribution Airports developing and/or out of 15 years infrastructure
Tax (‘DDT’) of around 17%. operating & maintaining facility
ports and airports • Agreement with
In February 2008, the Finance Minister
announced some relief whereby a • Applicable also to government/ statutory
Inland waterway, Inland body
dividend paid to a parent company by its port, Navigational
subsidiary would not be liable to DDT, channel in the sea
subject to prescribed conditions. Earlier,
Railways • Indian companies • 10 consecutive years
corporates had a lean structure with one
developing and/or out of 20 years • ‘New’
company having many divisions catering operating & maintaining infrastructure
to different businesses. rail system facility
Following the recent change in DDT, many • Agreement with
corporates may be considering government/ statutory
Roads & • Indian companies • 10 consecutive years body
restructuring their corporate structure so Highways developing and/or out of 20 years
that different business streams have operating & maintaining • ‘New’
separate Indian operating companies with roads and highways infrastructure
• ‘Roads’ – includes toll facility
one common Indian parent. While such
types of structuring may help the parent roads, bridges • Agreement with
• ‘Highways’ – includes government/ statutory
company
housing or other body
to unlock shareholder value and should not
integral activities
impose any additional levy of DDT, it
should be noted that introducing a new Water • Includes water • 10 consecutive years
corporate layer at the Indian level will supply project, water out of 20 years
treatment system,
bring the shares in the Indian operating
irrigation project, • ‘New’
company within the Indian capital gains tax sanitation and infrastructure
net. sewerage system or facility
solid waste • Agreement with
Additionally, even if DDT is not due on
management system government/statutory
dividend payments, there would be an up
body
to 10% cash trap in the Indian operating
companies, as in accordance with Indian establishment position, where if the contract would include both onshore and
regulatory provisions, only 90% of a Indian tax authorities successfully offshore activities (see Figure 3). Taxability
company’s distributable reserves may be argue that there is an Indian permanent of payments received by foreign
paid as dividends. establishment of the foreign operations companies under EPC contracts has
Therefore, a construction company in India, then there maybe significant become a matter of great debate and
working on multiple projects in India adverse tax implications. It is therefore litigation. Onshore
should consider all relevant factors important to carefully manage the supplies and services are normally taxable
bespoke to their requirements before operations carried out at the Indian level. in India. Offshore supply of goods and
structuring their operations. In practical terms in the E&C industry, services under a composite contract are
activities generally take a long duration something of a grey area. The Indian
to complete, and hence PE clauses revenue authorities often attempt to bring
International tax considerations (especially fixed base and service PE) the entire EPC contract, including the
come into play in this industry more often. offshore supplies and services, within the
Effective tax structuring into India is vital Table 4 details common types of PEs and range of taxes in India. The tax authorities
as this impacts on how attractive a
their considerations. may cite a business connection in India,
project is to target investors and has a
direct influence on the net internal rate of and also note the presumed indivisibility of
return. It is therefore particularly Cash and profits repatriation EPC contracts.
important that international investment Profit repatriation – There are various Nonetheless, some recent landmark
opportunities options on repatriating profits from the judicial rulings with regard to EPC
are structured appropriately to take into structure, such as dividend distributions, contracts in India suggest that tax
consideration tax, accounting, regulatory share sale, capital reductions, etc, all with outcomes for each of the components
and legal aspects. We have outlined differing tax impacts. of the contract must be determined
below some of the key areas to consider.
independently. These rulings have brought
Engineering, procurement and about a general principle that profit from
Entry and exit strategy construction (EPC) contracts – offshore supplies would not be taxable in
Holding company location – Appropriate onshore versus offshore India, subject to the following conditions:
planning in respect of a holding company In the E&C industry, the execution of • Principal to principal transaction
jurisdiction is necessary to minimise projects is undertaken substantially by • Title (i.e. risk and ownership) in the
Indian withholding tax and Indian capital way of an engineering, procurement and offshore supplies passed to the buyer
gains on the sale of shares in Indian construction (EPC) contract. A typical on high seas (outside India)
companies. EPC contract will have the following • Sale consideration is received outside
Financing – In order to introduce debt into scope of work in a single project: India
India, there are various issues that need • Supply of equipment (offshore and • Sale is at arm’s length
to be considered such as the Indian onshore)
External Commercial Borrowings rules, • Installation/commissioning Although the above rulings suggest that
withholding tax issues on distributions out offshore supply and services may not to
• Services (offshore and onshore)
of India and the availability of a tax be taxed in India, the taxability depends
deduction for the distribution at the Indian • Software/technology transfer (offshore on the specifics of each case. Further, the
level. and onshore) revenue authorities have not accepted
Under a typical EPC contract, a non- the above rulings and the matter is
Holding the investment resident contractor performs a multitude pending before the higher judicial
of activities. The scope of work under an authority. E&C companies should take
Permanent Establishments – One of care to structure contracts in a tax
EPC
the risks with managing investments in efficient manner, taking
India is managing the Indian permanent into account the particulars of each project.
Higher depreciation – what Figure 3: Elements of a Typical EPC Contract
lies ahead?
EPC Contract
In order to make infrastructure projects
more attractive for companies and
investors, the Indian Government is
re-examining the existing depreciation
policy for such entities. The infrastructure
sector may be eligible for a higher rate Engineering Supply Erection,
& Design of Installation &
of depreciation in book value for BOOT
Equipm Commissioning
(build, own, operate, transfer) projects.
The Government is still examining this
proposal and also evaluating whether
depreciation
Offshore servicesOnshore services Offsh Onsh Onshore
could be a policy for amortisation of the ore ore
Sup Sup
entire expenditure for such companies.
Private players are needed to invest in
infrastructure projects on the BOOT
basis, and in the future, infrastructure
companies may benefit from the creation
of a sinking fund by such companies for
the concession period. Such a fund would
depend on the life of the project and the
concession period could vary widely,
depending on the contractual conditions of
the specific project. Table 4: Types of Permanent Establishments, when they occur, and issues to consider
Indirect tax issues

Type of PE Occurs when a foreign Issues to consider
The majority of the E&C services company:
rendered by a company in India are Fixed base PE Has a virtual presence in India, Implications should be known prior to
subject to either service tax, VAT, or either establishing a project office in India.
both, depending on whether the services by way of a branch office or any
rendered by other manner which depicts a virtual
presence in India.
E&C companies are in the nature of a
construction contract or service contract.
Agency PE Has a dependent agent in India Ensuring that an Indian company
Apart from the above, there are certain does not act as a dependent agent
for the foreign company.
other indirect tax issues which need to be Service PE Renders services in India through its Planning of international assignments
addressed appropriately, especially employees or personnel for a period to ensure that employees do not stay
relating to contract structuring. aggregating more than a specified in India for a period exceeding the
Companies need period in any twelve month period, specified period.
to ensure that indirect taxes are taken although this depends on the specific
terms of each tax treaty.
into account as they make decisions
around how to structure a particular
project.
Challenges for local players and foreign companies
looking to enter the market
“Foreign firms do Without doubt then, there is huge Domestic production of equipment and
not get their own opportunity in the Indian infrastructure
space in the short- and medium-terms
machinery is ramping up fast, but in the
short term, a foreign partner may be
infrastructure to at least. The policies of the Indian able to help fill in any gaps. There are
Government, which have been many factors that influence the role of
execute projects, such evolving very rapidly in recent years, the local players vis-à-vis foreign players
continue to encourage the private – for example, the criteria used for the
as skilled manpower, sector in taking on a larger and more selection of developers is an important
plants & equipments diverse role – from being an
infrastructure builder (under
influencer on what role the foreign
players will take.
and construction a publicly fi arrangement) to an Risk-sharing on a PPP project also needs
infrastructure developer (under PPP to be carefully considered. The revenues
materials etc. They structures which include private fi of most infrastructure projects in India will
These developments have led to a be denominated in the local currency.
usually try to employ large Foreign players will need to consider the
locally available number of infrastructure projects open up
as opportunities for the private sector.
currency and tax issues already
mentioned in some detail, particularly on
resources in order to Considering the liberal FDI guidelines,
a PPP project where
significant private investment is also sought.
cut costs.” these lucrative projects present both an
opportunity and a threat to local players. In International EPC contractors, including
Quote from a Government representative many cases, foreign players are believed Toyo Engineering, Jacobs H&G, Uhde,
to have greater technological expertise, Tecnimont and Aker Kvaerner, are already
deeper pockets and more extensive leading players in India. At the same time,
experience compared to domestic many Indian companies e.g. Larsen &
companies. These advantages could Toubro (L&T), Gammon, Bharat Heavy
mean overseas companies winning work Electrical Limited (‘BHEL’), Engineers India
at the expense of local players, or Ltd and Thermax have either scaled up
partnering with them. Domestic E&C their skill sets or extended their operations
companies to overseas projects.
may therefore look at foreign entrants in
India has a very well established
the market as tough competitors – or as
infrastructure developer market. Local
strong potential partners.
firms have evolved in recent times into
If most of the forecasted projects go fully-fledged national players (and in
ahead as planned, there should be more some cases international players). In
than enough work for everyone. Wharton certain sectors, such as highways, power
Business School’s 2007 analysis of India’s and
construction boom pointed out that the water, the local firms also have significantly
proposed US$50 billion infrastructure progressed on the technological front.
spend per year in India is nearly two and Some of the India-based companies
half times the current turnover of the entire such as L&T, Punj Lloyd, Reliance,
existing domestic construction industry GMR,
(US$15 billion and growing fast), and that Suzlon, Tata Power, etc. are very active in
many of the major E&C companies have the international markets and thus, can no
massive order backlogs. Wharton also more be deemed ‘local’ E&C companies.
flagged talent shortages as an issue in Indeed, they are global organisations
key skilled trades such as fitting, welding, based out of India. These and other large
masonry and plumbing – so drawing on firms clearly look at foreign players as
the talent pool of foreign partners may both partners and competitors. However,
help in supplementing and training local smaller and medium-sized infrastructure
tradesmen. India is also facing shortages construction companies and developers
of construction equipment and machinery. (such as KMC, Nagarjuna, IVRCL,
Gammon, etc.) are often happy to partner
with foreign players without necessarily
considering them as competitors. “Foreign companies offer an excellent
The recent guidelines issued by the opportunity for a comprehensive tie-up to win
Indian Government for the selection
of PPP developers have also led to a projects and share the spoils. An attendant
slightly distorted behaviour in the local
marketplace. The guidelines favour
benefit is the transfer of technology to us at the
larger players, even when the project
investments and execution can be easily
end of it all.”
carried out by mid-sized companies. Quote from an Indian E&C company
This has led to situations where many
of the small/medium-sized local players
are looking at partnering with the foreign
players primarily for the purpose of
getting qualified and winning the job,
rather than to actually bring in investment “Entry of foreign players needs to be viewed as
or expertise. It is expected that such
behaviour will soon change as the a positive development to add value and state-
guidelines become more reflective of
market dynamics and mid-sized Indian
of-the-art technology to our highway projects.
companies mature. These firms will bring with them greater expertise
Foreign players looking to enter into the
Indian marketplace and team with local
in areas of highway construction technology,
players need to evaluate carefully the project management, project implementation
cost competitiveness of their prospective
participation. India has witnessed and monitoring expertise as well as technology
huge interest from a number of foreign
infrastructure companies in the past, transfer. The resultant benefits include savings in
but not many have really been able to
offer a cost-competitive proposal. Since
cost, time and improved quality of works, to the
India has evolved its own model of cost benefit of all.”
competitive delivery in many sectors
(for example, in telecoms), local players Quote from a Government representative
have an incentive to work with foreign
companies only if the partnering offers
a competitive edge over other bidders.
There have been few such success stories
so far where the foreign player has offered
a particularly cost-competitive product “Let us tie up with foreign companies from
or service. In instances where we have
seen the successful entry of foreign countries where we intend to do business in.
players (such as in the port sector), foreign
companies have often been able to bring
While we can help them enter India, they could
technology or management advantages, help us in expanding our business outside India
or expanded reach into international
markets, to supplement the capabilities of in countries where they operate.”
local partners. Quote from an Indian E&C company

Building a sustainable future
in India
Whilst the need for greater infrastructure in key social and economic infrastructure In our view, it is imperative that debate on
investment is clear, equally important is are maximised. the issue of sustainability in infrastructure
the need to sustainably manage such provision is heightened and that the
Global climate change creates further
investments. The Indian Government’s challenge that it presents is effectively
success in infrastructure provision will be challenges. New infrastructure must not
met. Government and infrastructure
measured not by the quantum of funds only support social and economic goals, it
agencies will also need to retain sufficient
invested, but on how infrastructure must also do so within acceptable focus on issues of feasibility and
contributes to the achievement of India’s environmental parameters. In our analysis prioritisation when the primary focus shifts
economic, social and environmental The World in 2050: Implications of global to delivery.
objectives. Importantly, infrastructure growth for carbon emissions and climate
investment should be considered as a change policy2, we set out a number of E&C companies looking to bid on major
means to an end, not an end in itself. possible scenarios for climate change projects need to ensure that they are
based on projected growth rates. In only taking a holistic approach which
Challenges in infrastructure provision are one of the scenarios, ‘Green growth + incorporates sustainability issues into the
not unique to India. Uncertainty, scarcity Carbon capture and storage (CCS)’, were design of the project, both in the planning
of available funds for investment, and emissions held to levels that are broadly and the delivery stages. Those that do so
competing priorities present challenges to considered to be ‘acceptable’ by have a unique opportunity to make a
all governments in infrastructure planning climatologists. major difference in a growing economy
and delivery. Sustainability requires that while enhancing their own bottom line.
future generations are not compromised Given that India’s growth rate is likely to
by the investment decisions of current continue at high levels, it is important that
generations. Sustainably managing considerations of issues such as fuel mix,
infrastructure through the appropriate encouraging more fuel efficient modes of
pricing, funding and prioritisation transport such as rail, and the possible
frameworks is important to ensure the use of CCS technology, come fully into
benefits that accrue from the significant discussion and are implemented whenever
investment that India is currently making possible.
2
Available to download at www.pwc.com
Concluding thoughts
Although it may not always be easy to

navigate the plethora of views, opinions
and perceptions expressed by various
local stakeholders, a vast opportunity
exists
for foreign contracting companies looking
to invest in Indian infrastructure. Already,
a number of contractors from Europe,
Australia, China, Malaysia and Korea
have made their presence felt in India.
Further, many E&C companies,
particularly from Japan, Spain, France
and the UK are
also now aggressively looking out for
opportunities to enter India for business.
Overall, the opportunities to develop a
significant business in India are extremely
promising for E&C companies, if they
have carefully selected strong local
partners, structured contracts sensibly to
maximise tax benefits where appropriate,
and taken a long-term, sustainable
perspective. Foreign companies who do
not acknowledge the opportunity in good
time may miss out on a critical opportunity
to establish a long-term presence in one
of the world’s largest growth markets.
Further reading:
Other publications from PricewaterhouseCoopers relating to the E&C

industry are available to download free of charge at www.pwc.com/e&c
International Mobility in the Engineering & Construction Industry

In this paper, we take a close look at trends and best practice across the E&C industry
with regard to moving people to work abroad. We draw on interviews with 24 companies
in the sector from around the globe, covering areas such as international assignment
policy, compliance, reward, cost effectiveness and talent management.
PwC Annual Global CEO Survey – E&C summary

A summary document containing the highlights from our interviews with over 50 CEOs
and executives within the sample who were from E&C companies. We compare the
results of their responses with the global average across all industries – with some
interesting findings.
Global Economic Crime Survey – E&C industry supplement

Examines the views of over 300 E&C industry executives and compares and contrasts
their thoughts with those of their peers across all industries, as well as with E&C
executives’ views from our 2005 survey. The results suggest that E&C executives need
to take economic crime more seriously.
Building New Europe’s Infrastructure – Public Private Partnerships in Central

and Eastern Europe
Explores the current developments and future opportunities within the infrastructure
sector of the CEE region. In the paper, we outline the opportunities in infrastructure
projects in CEE, EU funding, challenges and key success factors on bidding and
delivering on projects in CEE – a region requiring significant infrastructure investment.
Building Knowledge
A quarterly series of short papers on highly topical issues for E&C companies, hitting
directly to the heart of the business issue addressed.
Additionally, further reading on investing and operating in India, including
the following, is available to download at www.pwc.com/in
Destination India
Gives potential foreign investors a bird’s eye view of the tax and regulatory framework in
India. A foreign investor looking at investment opportunities in India, needs to decide its
entry strategy and business model while bearing in mind the gamut of Indian laws and
regulations impacting such foreign investment. The publication attempts to provide an
introductory summary of the policies, laws and regulations in India and a guide to the
more important aspects of doing business in India
Buying into India

Highlights a number of opportunities and challenges for investment in India with a
particular focus on Industrial Products, setting out the significant variations from state to
state in terms of the labour market, quality of infrastructure, and governmental attitudes
to investment amongst other things.
India Spectrum
This quarterly newsletter encompasses a summary of recent important judicial and
legislative developments in the field of direct tax, indirect tax, transfer pricing, exchange
control regulations, and mergers & acquisitions.

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in the industry. The infrastructure team large Indian/international port
India E&C leader
works closely with our Real Estate, PPP developers, as well as advice to key
& Government practices. Our knowledge logistics player in strategic investments Ravi Bhamidipati
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ravi.bhamidipati@in.pwc.com
the building of close networks and the for ports. We are currently advising a
sharing of information and expertise. Our government ministry on the development +91 (22) 6669 1308
assignments in all regions of the sub- of an international container trans-
continent have included both private and shipment terminal.
Advisory
public sector clients.
PricewaterhouseCoopers experts were
We have played an integral part in also involved in the first rail BOT project Amrit Pandurangi
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vishwas.udgirkar@in.pwc.com
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preparation and finalization of the Model
As PPP projects are still relatively new Tax
Concession
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Agreement being used for NHAI Projects. Girish Mistry
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Other projects include: Review of Model
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Concession Agreement (MCA), BOT Toll
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agreement & BOT Annuity agreements,
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Tax is also a key cost component. It is
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Airport and advising the Airport Authority
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Design hb02851
INFRASTRUCTURE
A well-developed infrastructural set-up propels the overall development of a country. It also

facilitates a steady inflow of private and foreign investments, and thereby augments the
capital base available for the growth of key sectors in an economy, as well as its own
growth, in a sustained manner. A robust real estate sector, comprising sub-segments such as
housing, retail, hospitality and commercial projects, is fundamental to the growth of an
economy and helps several sectors develop significantly through the multiplier effect.
The infrastructure sector, which includes segments such as energy, transport, water and
sanitation, communication, and social and commercial infrastructure, is the focus area for
key policymakers, banks and corporate to formulate and implement regulations. This is
expected to ensure the time bound creation of world-class infrastructure in the country.
India’s real estate industry has witnessed a paradigm shift from traditional finance to an era
of structured finance, private equity and public offering.
Several reforms have already happened across various sub-sectors of infrastructure
including, roads, airports, ports, power and urban utilities and progress have been however
much remain to be achieved to sustain and enhance economic growth.
The Indian Chamber of Commerce (ICC) tries to galvanize the intellectual capital with
support of concerned Governments and industry to delineate objective driven action points
for Infrastructure development and their implementation.
The Department is headed by Paromita Bhowmick Chaki.
INFRASTRUCTURE (SECTOR BRIEF)
Infrastructure has been considered the sunshine sector in India, and has played a pivotal role
in helping the country emerge as one of the fastest growing economies in the world. The
sector is highly responsible for propelling India’s overall development and enjoys intense
focus from Government for initiating policies that would ensure time-bound creation of
world class infrastructure in the country. The real estate sector is closely related to
infrastructure and is fundamental to its growth.
The Public Private Partnership (PPP) model introduced by the Indian Government in the
sector has attracted domestic as well as foreign investment and stimulated the economy.
PPPs have been identified as the most suitable mode for the implementation of projects –
and indeed, are rapidly becoming the funding norm.
CURRENT SCENARIO
 The infrastructure sector has become the biggest focus area of the Government of India.
Under Union Budget 2019-20, US$ 63.20 billion was allocated to the sector.
 According to Department of Industrial Policy and Promotion (DIPP), Construction
Development sector and Infrastructure Activities sector received FDI inflows amounting
to US$ 24.90 billion and US$ 13.49 billion, respectively from April 2000 to September
2018.
 Real estate sector in India is expected to reach a market size of US$ US$ 1 trillion by 2030
from US$ 120 billion in 2017 and contribute 13 per cent of the country’s GDP by 2025.
FUTURE OUTLOOK
 Setting up of National Infrastructure and Investment Fund (NIIF) with initial investment
of INR200 billion to increase investment flow to infrastructure projects
 The Real Estate Investment Trust (REIT) platform will help in allowing all kinds of
investors to invest in the Indian real estate market and would create an opportunity
worth Rs 1.25 trillion (US$ 19.65 billion) in the Indian market over the years.
 Retail, hospitality and commercial real estate are also growing significantly, providing the
much-needed infrastructure for India's growing needs.
KEY INITIATIVE
 Massive push to the infrastructure sector by allocating US$ 92.22 billion for the sector
 Railways received the highest ever budgetary allocation of US$ 22.86 billion
 US$ 31.81 billion will be invested in the smart cities mission. All 100 cities have been
selected as of June 2018.
 The Government of India is working to ensure a good living habitat for the poor in the
country and has launched new flagship urban mission, the Pradhan Mantri Awas Yojana
(Urban).
State Wise Steel Demand in India
ISA Steel Conclave, New Delhi, October 26, 2018

Disclaimer
This document is protected by copyright. Distribution to third parties or
reproduction in any format is not permitted without written permission from
worldsteel. worldsteel operates under the strictest antitrust guidelines and this
document was prepared consistent with these guidelines.
2
Contents
▪ worldsteel’s India state wise steel demand study

▪ Aspects of state wise steel use in India
▪ Insights on state wise steel demand prospects
▪ Summary and conclusion
3
worldsteel’s India state wise steel demand study
Motivation of the study
▪ India is known as a country of potential, but there are different views about when India’s
steel demand will start to take off.
▪ India’s growth prospects can be better understood by looking at India by states as was
the case with worldsteel’s provincial approach to China.
▪ Such disaggregated approach enables identification of uniqueness of each state and

better insight on economic and steel demand potential.
▪ The Project Team looked into characteristics of states (“White book of Indian
states”) focusing on potential for growth of steel using sectors, notably construction
and manufacturing.
5
Project team
▪ The Project was conducted under Joint leadership of worldsteel and ISA since 2016 2H
▪ Key contributors
▪ External partners: Joint Plant Committee
6
Estimating state wise steel demand – worldsteel approach
▪ In the absence of steel use statistics by state, SWIP share was used to estimate state
wise steel use
GSDP Construction VA SWIP

× ASU, fs India × 0.62 +
.
× ASU, fs India × 0.38

GSDP Construction VA SWIP
7
Aspects of state wise steel use in India
White books of India States
▪ Project Team has produced a “white book” for each state which covers the following aspects:
• Macroeconomic performance and drivers.
• Key policy initiatives and business environment.
• Overview of key industries in the state.
• Identification of steel demand drivers and SWOT analysis.
▪ Through this exercise, it was possible to identify and compare growth potential of different
states and the team has produced an evaluation of steel demand growth potential for
each state.
Note. 7 North Eastern states were approached in a consolidated way, the rest of the 22 states were studied separately along with National
Capital Region of Delhi.
9
States show uneven and multispeed development
▪ Regional growth has been uneven among states.
• West Bengal experienced economic decline after 1960s.
• Tamil Nadu on the other hand has grown steadily and consistently.
• Gujarat has been outperforming while northeastern states lag behind.
▪ Rich states are located in western/southern and northern India.
GDP per capita, 2015-16 GDP growth, CAGR 15-16 / 11-12
Jammu & Jammu &
Kashmir Kashmir
Himachal Pradesh Himachal Pradesh
Punjab Uttarakhand Arunachal Punjab Uttarakhand
Haryana Haryana Arunachal
Rajasthan Uttar Sikkim Pradesh Uttar Sikkim Pradesh
Assam
laya Rajasthan AssamNagalan
Pradesh Bihar Nagaland Pradesh Bihar d Meghalaya
Megha Manipur Manipur
Gujarat Jhark- Jhark- WestTripura
Madhya WesTt Madhya
ripura
hand
Pradesh Chhattis- Mizoram Gujarat
Bengal Chhattis- Mizoram
Pradesh garh Bengal
hand
Maharashtra garh Odisha Maharashtra Odisha
Telang < 50 k INR Telang <4%
ana
ana
Goa Andhra 50-100 k INR Goa Andhra 4-6 %
KarnatakaPradesh Source:
Central aka Pradesh
Karnat
Tamil Statistics 100-140 k INR Tamil
Office,
KeralaNadu worldsteel Nadu Kerala
> 140 k INR
6-8 %
>8%
10
Crude steel production by states
▪ Steel production centres: raw materials (iron ore) driven (Odisha, Chhattisgarh, Jharkhand and
Karnataka) or port based and proximity to markets (Maharashtra and Gujarat).
Crude steel production, Jammu &

Mt India total: 89.8 Mt Kashmir
18 Himachal Pradesh
Punjab
16 Uttarakhand Arunachal
Haryana
Delhi Pradesh
14 Sikkim
Rajasthan Uttar AssamNagaland
12
Pradesh MeghalayaManipur
Bihar
10
Gujarat Madhya Jhark- West Mizoram
8 Pradesh hand Bengal Tripura
Chhattis-
6 Maharashtra garh Odisha
< 1 Mt
4
Telangan 1-4 Mt
2 a
Goa Andhra 4-10 Mt
0 Pradesh
Karnataka
> 10 Mt
Tamil
Kerala Nadu
Source: JPC, 2015-2016, million tonnes (Mt)

11
Steel use by states
▪ Maharashtra and Tamil Nadu are largest steel using states, both auto hubs.
Jammu &
Kashmir PunjabHimachal Pradesh
Uttarakhand Haryana
Apparent steel use,
Mt
India total: 76.4 Mt
Arunachal
14,000 Delhi Pradesh
Sikkim
12,000 Rajasthan Uttar AssamNagaland
Pradesh MeghalayaManipur
Bihar
10,000
Gujarat Madhya Jhark- West Mizoram Tripura
Pradesh hand Bengal
8,000
Chhattis- Odisha
garh
6,000 Maharashtra
< 1 Mt
Telangan
4,000 1-3 Mt
a
Andhra
2,000 Goa
3-10 Mt
Karnataka Pradesh
0,000 > 10 Mt
Tamil
Kerala Nadu
Source: worldsteel estimation, 2014-15, million tonnes (Mt)
12
Steel geography of India is unbalanced
▪ Steel producing states in the east have not seen development of own steel markets.
▪ Therefore intra-state trade in steel has been a common feature.
Steel use
Jammu Jammu Steel production
& &
Kashmir Kashmir
Himachal Pradesh Himachal Pradesh
Punjab Punjab
Uttarakhand Arunachal Uttarakhand Arunachal
Haryana Haryana
Pradesh Pradesh
Rajasthan Uttar Sikkim Assam Rajasthan Uttar Sikkim Assam
Pradesh N agaland
Nagaland Meghalay a
Bihar Meghala ya
Manipur Pradesh Bihar Manipur
Gujarat Madhya West
Pradesh
Jhark-
Bengal Tripura Gujarat MadhyaChhattis-Jhark-WestTripura
Mizoram
Chhattis- hand Mizoram Pradesh handBengal
garh Odisha
Maharashtra garh Odisha Maharashtra
< 1Mt
Telanga Telang
na 1-3 Mt ana
Goa Goa Andhra
Andhra
Karnata Pradesh 3-8 Mt Pradesh
ka Karnata ka
Tamil >8 Mt Tamil
Nadu Kerala
Kerala iron ore production Nadu
(major sites)
Source: worldsteel estimation, 2014-15 Source: Joint Plant Committee, 2015-16
13
Steel use across states is also uneven
▪ Among rich states, only a few states show high steel use per capita, e.g. Tamil Nadu, Maharashtra,
Gujarat, Goa.
▪ North-Eastern states feature low steel use per capita, e.g. Assam, Manipur, Nagaland
▪ Some states have high steel use per capita despite low per capita income, driven by infrastructure, e.g.
Uttarakhand.
kg
k INR
250 Apparent steel use per capita
300
ASU per capita, kg Jammu &
200 250
Kashmir
GDP per capita, k INR Himachal Pradesh
200 Punjab Uttarakhand
150 Haryana Arunachal
150 Uttar Sikkim Pradesh
100 Rajasthan AssamNagaland
Pradesh Bihar Meghalaya
100 Manipur
Gujarat Madhya West Tripura
Jhar k-
Pradesh d Mizoram
Bengal
Chhattis-han
50 Odisha
50 Maharashtra garh
Telang
India average: 60.3 kg
Uttarakhand
0 0 ana
Goa Andhra < 50 kg
Haryana Pradesh
Karnataka
Tamil 50-100 kg
aharashtra
Nadu
Kerala
Source: Central Statistics Office, worldsteel estimation, 2014-15 > 100 kg
14
Diverse patterns of steel use of Indian states
▪ Reflecting uneven and diverse economic growth patterns, different states shows
different tracks of S-curve.
S-curve, 2004-05 – 2014-
ASU/cap 15
300
Goa
250
Haryana
Kerala
200 Maharashtra
Orissa
150
Uttar Pradesh
100
50
0
0 50 100 150 200 250 300 GDP/cap
Source: worldsteel estimation, 2004-15
15
Insights on state wise steel demand prospects
Insight 1: Uneven growth will continue, but catching-up
is taking place in some states State GDP growth
CAGR 15-16 / 11-12 (India average: 6.7 %)
(1/2) Gujarat
Himachal Pradesh
9.5
7.6
Karnataka 7.5
Chhattisgarh 7.3
▪ Uneven economic performances of Indian states has Haryana 7.1
Uttarakhand 7.0
been driven by geography, natural resources and Maharashtra 6.6
socio-political environments. Madhya Pradesh 6.6
West Bengal 6.4
Andhra Pradesh 6.4
▪ Political leadership and consistent policy had important Jharkhand 6.3
North East states 6.1
influence on the economic performance of the Odisha 5.9
Tamil Nadu 5.7
advanced states (e.g. Gujarat). Rajasthan 5.6
Sikkim 5.6
Telangana 5.2
▪ Central government’s focus on improving ease of Jammu and Kashmir 5.1
doing business has prompted pro-business reforms in Uttar Pradesh 5.0
Punjab 4.7
various states. Kerala 4.6
Bihar 4.5
Goa 1.0
Source: Central Statistics Office, worldsteel 17

Insight 1: Uneven growth will continue, but catching-up is
taking place in some states (2/2)
Potential for growth,
economic development
▪ Strong growth momentum will continue in Gujarat, Haryana,
Maharashtra & Tamil Nadu. Jammu &
Kashmir
Himachal Pradesh
▪ Some middle income states shows high growth potential PunjabUttarakhand
Arunachal
Haryana
driven by renewed focus on economic development (Andhra Rajasthan
Uttar Pradesh
Sikkim Assam
Nagaland
Pradesh, Pradesh Bihar Meghalaya
Telangana).
Madhya Jhark- Manipur
Tripura
West
Gujarat Pradesh handBeng Mizoram
al
Chhattis-
▪ Eastern states (Chhattisgarh, Jharkhand, Odisha) are Odisha
Maharashtra garh Potential for growth:
expected to catch up thanks to mining and Telang
ana
manufacturing
development. Goa Andhra
low
Source: Project Team Analysis

▪ North eastern states are expected to stay on lower growth Karnataka Pradesh
Tamil
track limited by lack of reform and geography, but large Kerala
Nadu
infrastructure investment as announced by the government
can change overall investment environment in the long run.
medium low medium high high
18
Insight 2: Service sector will continue to be a growth driver
▪ Service sector has been the key growth driver for India, enabling employment generation with less capital
investment.
▪ Service sector will continue to be important due to:

• Stronger focus on generating employment for sustainable and equitable growth,
• Competitive advantage in the knowledge based service sectors
Share of services in GDP Potential for growth, services (knowledge based)

Jammu & Kashmir Jammu & Kashmir
Himachal Pradesh
Punjab
Himachal Pradesh Arunachal
Uttarakhand Punjab HaryanaUttarakhand Arunachal
Haryana Pradesh
Uttar Sikkim Assam Rajasthan Pradesh
MeghalaNyaagaland Uttar SikkimAssam
Rajasthan Pradesh MeghalaNyaagaland
Bihar TripuraManipur Pradesh Bihar
Madhya Jhark- West Mizoram Manipur
Gujarat Jhark- Tripura
Pradesh
Chhattish- and Bengal Gujarat MadhyaChhattis-hand West Mizoram
garh Odisha Pradesh Bengal
Maharashtra garh
Telang MaharashtraTelan Odisha Potential for growth:
< 40 %
ana Andhra
gana low
Goa 40-50 % Andhra medium low
Goa
Karnata kaPradesh
Pradesh
Karnataka
KeralaTamil 50-60 % KeralaTamil
Nadu medium high
Nadu
high
60-70 %
Source: Central Statistics Office, 2015-16 Source: Project Team Analysis
19
Insight 3: Manufacturing is slowly gaining momentum (1/2)
▪ The share of manufacturing in India’s GDP stayed within 14-16% in the last 40
years, only recently rising to 18%.
▪ Some states have strong presence of manufacturing due to:
Share of manufacturing in GDP
• Unfavorable climate for agriculture (e.g. Gujarat,
Jammu &
Maharashtra and Tamil Nadu). Kashmir
Himachal Pradesh
• Mineral deposits leading to heavy industries base (e.g. Punjab
Uttarakhand Arunachal
Haryana Pradesh
Goa, Odisha, Chhattisgarh and Jharkhand). Rajasthan Uttar Sikkim Assam
Nagaland
Pradesh
Bihar Meghalaya
• Special tax benefits (e.g. Uttarakhand, Himachal Pradesh Gujarat Madhya
Jhark- West
Bengal Tripura
Manipur
and Sikkim). Pradesh Chhattis-

hand
Mizoram
Maharashtra garh Odisha
▪ “Make in India” provides vision for enhancing manufacturing Telanga < 10 %

activities across states, aiming to raise share of manufacturing Goa
na
Andhra 10-20 %
to 25% of Karnataka
Pradesh
20-40 %
GDP. Tamil
Kerala
Nadu > 40 %
Source: Central Statistics Office, 2015-16
20
Insight 3: Manufacturing is slowly gaining momentum (2/2)
▪ Some states will have stronger focus on manufacturing: Potential for growth,
manufacturing
• Maharashtra, Uttarakhand, Tamil Nadu, Gujarat, and
(steel intensive)
Haryana have made significant progress in implementing
Jammu &
business reforms and suitable infrastructure. Kashmir
Himachal Pradesh
Punjab Arunachal
• States like Andhra Pradesh, Madhya Pradesh and Haryana
Uttarakhand
Pradesh
Punjab have renewed thrust on manufacturing, especially Sikkim Assam
Rajasthan Uttar Meghala Nagaland
Pradesh
in auto and ancillary sector. Bihar
Jhark-
ya
Manipur
Tripura
Gujarat Madhya
▪ Within the manufacturing sector the focus is more on Pradesh
Chhattis-
garh
hand
West
Bengal
Mizoram
Odisha
relatively labour intensive ones like food processing and Maharashtra
Telanga
textiles. na
Potential for growth:
▪ Mechanical machinery and shipbuilding sectors are less Goa Andhra
Pradesh low
prominent across states with a few exceptions (e.g. Punjab Karnataka
medium low
and Gujarat). Kerala
Tamil
Nadu
medium high
high
21
Insight 4: India’s auto manufacturing hub will expand
Automotive industry in India
▪ India’s auto industry has shown a strong growth driven
by domestic demand and FDI inductive policies.
▪ India aims to be a global auto hub for small cars with

huge focus on exports.
▪ The existing automotive hubs in Haryana, Tamil

Nadu, Maharashtra will continue to strengthen.
• Haryana is the largest production hub and geared to
domestic market.
▪ New auto hubs are emerging in Andhra Pradesh, Gujarat

mainly driven by FDI.
▪ The sector is also poised for continued strong growth.
Source: SIAM, IBEF, public domain
22
Insight 5: Construction will be a common demand driver
▪ Growth in the construction sector will be a pan-India phenomenon driven both by infrastructure spending
and housing demand, especially affordable housing.
▪ Construction has gained significant share in Tamil Nadu, Uttar Pradesh, Chhattisgarh, etc.
▪ Majority of states are expected to have strong infrastructure development, especially along major corridors.
▪ In some states, like Jammu & Kashmir and Bihar, steel demand will be driven almost entirely by
infrastructure development.
Share of construction in GDP Potential for growth, infrastructure
Jammu & Jammu &
Kashmir Kashmir
Himachal Pradesh
Punjab Himachal Pradesh
Uttarakhand Arunachal Punjab Uttarakhand Arunachal
Haryana Haryana
Uttar Sikkim Pradesh
Nagaland Uttar Bihar Pradesh
SikkimAssam
Rajasthan Pradesh Assam Rajasthan Pradesh Nagaland
Bihar Meghalaya Meghalaya
Madhya
Jhark- West Manipur Manipur
Mizoram Madhya Jhark- West
Gujarat Pradesh hand
ra Tripu
Bengal Gujarat Ch hattis- Tripura Mizoram
Chhattis- Pradesh gar
handBengal
h
Maharashtra Odisha
garh
Maharashtra
Odisha
Telan <6% Telan
gana gana
low
Goa Andhra 6-8 % Goa Andhra medium low
Karnata Pradesh Karnataka Pradesh
ka
Tamil 8-10 % Tamil medium high
KeralaNadu Kerala Nadu
Source: Central Statistics Office
> 10 % Source: Project Team Analysis
high
23
Insight 6: Steel geography of India will remain unbalanced
▪ Gujarat, Maharashtra and Haryana are likely to experience strongest growth in steel demand.
Tamil Nadu also has good potential.
▪ The unbalanced steel geography will continue: capacity expansion have been mostly brownfield and
new steel production facilities most likely to be built around raw materials.
▪ With decreased transportation cost, intra-state trade steel trade will continue to prevail.
Potential for steel demand growth Increase in annual crude steel production
(from 2010/11 to 2015/16)
Jammu &
Kashmir Jammu &
Kashmir
Punjab Himachal Pradesh Himachal Pradesh Uttarakhand
Uttarakhand Arunachal Haryana
Punjab
Haryana Pradesh Arunachal
Rajasthan Sikkim Assam Pradesh
Uttar Nagaland Uttar Sikkim
Rajasthan
Pradesh Bihar Megha laya Pradesh AssamNagaland
Jhark- Manipur Bihar Meghalaya
Jhark- Manipur
Gujarat Madhya Chhattis-hand WestTripura Mizoram Gujarat Madhya West Tripura
Pradesh Bengal Chhattis-hand Mizoram
Pradesh Bengal
Maharashtra garh Odisha Potential for growth: Maharashtra garh
Odisha
Telang Telang
ana Andhra low ana Andhra
Goa medium low medium high Goa
KarnatakaPradesh Pradesh
Tamil KeralaNadu Karnataka
Source: Project Team Analysis Tamil
Kerala
Nadu
high Source: JPC
Increase of >1 Mt
Summary and conclusion
Steel demand potentia
Summary of state potential
Gujarat,
H Haryana,
Andhra Pradesh, Maharashtra
Chhattisgarh,
Jharkhand,
MH Karnataka, Odisha, Tamil Nadu
Telangana,
Uttar Pradesh,
Uttarakhand
Bihar, Jammu and Assam, Goa,
North East ex Kashmir, Kerala, Himachal Pradesh,
ML Assam Madhya Pradesh,
West Bengal
Punjab, Rajasthan
Sikkim
L
L ML MH H
Economic growth potential
26
Geography of economic vs steel demand potential
▪ Eastern states are expected to catch up in economic development.
▪ Infrastructure will be a pan-India steel demand driver, driven by various government initiatives.
▪ Strong manufacturing potential are shown in a limited number of states.
▪ Gujarat, Maharashtra, Haryana show strongest, balanced potential.
Potential for economic growth Potential for steel demand

Potential for steel demand
growth, infrastructure driven growth, manufacturing driven

low
medium low medium high

high
27
When will India’s demand take off?
Steel demand per capita, kg/ person India 2018 to 2030
350
China 2008
300
India
Inflection imminent
250 2005
200
Inflection later
150
100 1993 Status quo continued

2000
50 2014 2018
1990
2000
0
0 500 1.000 1.500 2.000 2.500 3.000 3.500 4.000
GDP per capita, USD/ person
Source: IHS Markit, worldsteel, Project Team Analysis

Thank you for your attention.
For further information contact:
Dr Nae Hee Han | Director, Economic Studies and Statistics

World Steel Association
han@worldsteel.org | T: +32 (0)2 702 8913 | worldsteel.org
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REAL ESTATE

For updated information, please visit www.ibef.org July 2020

Market Overview and Trends ………..…….6

Strategies Adopted ………….……....…….14

Growth Drivers ..……………….…...............16

Key Industry Organizations ..…….…….….27

Useful Information ..…….......…………..….29

India’s Real Estate Market (US$ billion)

Notes: E – estimated; P – Projected, F- Forecasted

3 Real Estate For updated information, please visit www.ibef.org

5 Real Estate For updated information, please visit www.ibef.org

Few players with presence across India.

FDI in multi-brand retail to boost demand.

7 Real Estate For updated information, please visit www.ibef.org

 Increasing share of real estate in the GDP would be supported by 1000

• Real Estate Regulatory Act (RERA) 180

• Boost to affordable housing construction 2017 2020 2025 2030F

• Interest subsidy to home buyers

8 Real Estate For updated information, please visit www.ibef.org

 Housing sales reached 2.61 lakh units in 2019

9 Real Estate For updated information, please visit www.ibef.org

Rapid growth in service sectors: IT/BPM, BFSI and

METROS DRIVING DEMAND FOR COMMERCIAL SPACE

 Grade-A office space absorption is expected to cross 700 msf by 16

11 Real Estate For updated information, please visit www.ibef.org

Number of Malls in India

 Around 32 new malls with area of 13.5 msf were

12 Real Estate For updated information, please visit www.ibef.org

Branded Hotel Rooms Inventory in Major Indian Cities (‘000)

Notes: RevPar - Revenue per available room

13 Real Estate For updated information, please visit www.ibef.org

 Having a diverse portfolio of residential, commercial and township developments.

 Outsourced support functions.

Source: Livemint, Economic Times

15 Real Estate For updated information, please visit www.ibef.org

Easier financing Policy support

Notes: E – Estimate, F – Forecast

18 Real Estate For updated information, please visit www.ibef.org

Notes: CAGR is up to 2019, CY – Calendar Year

19 Real Estate For updated information, please visit www.ibef.org

Land Acquisition Bill

Source: Government of India, News Sources

20 Real Estate For updated information, please visit www.ibef.org

21 Real Estate For updated information, please visit www.ibef.org

Source: Ministry of Commerce and Industry, SEZ website

22 Real Estate For updated information, please visit www.ibef.org

 The healthcare market is expected to reach US$ 372 billion by 2022.

Notes: NCR – National Capital Region

24 Real Estate For updated information, please visit www.ibef.org

 Upcoming office space likely to boost hospitality segment.

 Corporate clients expected to provide steady growth to room demand.

Source: Cushman and Wakefield

25 Real Estate For updated information, please visit www.ibef.org

National Secretariat, 703, Ansal Bhawan,

Builders' Association of India (BAI)

 BFSI: Banking, Financial Services and Insurance

 CAGR: Compound Annual Growth Rate

 CBD: Central Business District

 FDI: Foreign Direct Investment

 FSI: Floor Space Index

 HNI: High Net-worth Individual

 GOI: Government of India

 INR: Indian Rupee