ASIA PACIFIC INSTITUTE OF

MANAGEMENT STUDIES
NEW DELHI

BUSINESS IN REAL
ESTATE

SUBMITTED TO: Dr. ARUN DRAVIUM

SUBMITTED BY: GROUP (A08)

RAHUL KUMAR (A25)
VARUN TYAGI (A43)
VISHAL SHARMA (A53)
 CERTIFICATE

This is to certify that the project

BUSINESS IN REAL ESTATE is
submitted by group A08 is partial
fulfillment by the 2nd trimester
course from “ASIA PACIFIC
INSTITUTE OF MANAGEMENT
STUDIES” an original mark has
done under the guidance of Dr.
ARUN DRAVIUM. This project has
not been submitted anywhere in
any form.
 Real Estate in India
With property boom spreading in all directions, real estate in India is touching
new heights. However, the growth also depends on the policies adopted by the
government to facilitate investments mainly in the economic and industrial sector.
The new stand adopted by Indian government regarding foreign direct investment
(FDI) policies has encouraged an increasing number of countries to invest in
Indian Properties.

India has displaced US as the second-most favored destination for FDI in the
world. As the investment scenario in India changes, India which has attracted
more than three times foreign investment at US$ 7.96 billion during the first half
of 2005-06 fiscal, as against US$ 2.38 billion during the corresponding period of
2004-05, making India amongst the "dominant host countries" for FDI in Asia and
the Pacific (APAC).

The positive outlook of Indian government is the key factor behind the sudden
rise of the Indian Real Estate sector - the second largest employer after
agriculture in India. This budding sector is today witnessing development in all
area such as - residential, retail and commercial in metros of India such as
Mumbai, Delhi & NCR, Kolkata and Chennai. Easier access to bank loans and
higher earnings are some of the pivotal reasons behind the sudden jump in
Indian real estate.

Why Invest In Indian Real Estate?

Flying high on the wings of booming real estate, property in India has become a
dream for every potential investor looking forward to dig profits. All are eyeing
Indian property market for a wide variety of reasons:

• It’s ever growing economy which is on a continuous rise with 8.1 percent
increase witnessed in the last financial year. The boom in economy
increases purchasing power of its people and creates demand for real
estate sector.
 • India is going to produce an estimated 2 million new graduates from
various Indian universities during this year, creating demand for 100
million square feet of office and industrial space.

• Presence of a large number of Fortune 500 and other reputed companies

will attract more companies to initiate their operational bases in India thus
creating more demand for corporate space.

• Real estate investments in India yield huge dividends. 70 percent of

foreign investors in India are making profits and another 12 percent are
breaking even.

• Apart from IT, ITES and Business Process Outsourcing (BPO) India has
shown its expertise in sectors like auto-components, chemicals, apparels,
pharmaceuticals and jewellery where it can match the best in the world.
These positive attributes of India is definitely going to attract more foreign
investors in the near future.

The relaxed FDI rules implemented by India last year has invited more foreign
investors and real estate in India is seemingly the most lucrative ground at
present. The revised investor friendly policies allowed foreigners to own property,
and dropped the minimum size for housing estates built with foreign capital to 25
acres (10 hectares) from 100 acres (40 hectares). With this sudden change in
investment policies, the overseas firms can now put up commercial buildings as
long as the projects surpass 50,000 square meters (538,200 square feet) of floor
space.

Indian real estate sector is on boom and this is the right time to invest in property
in India to reap the highest rewards.

Indian economy
India is the fourth largest country in terms of purchasing power parity.
GDP growth accelerated by 8-9%.
Investment of US$ 16 billion required in the next five year in infrastructure.
Real estate sector is registering an annual growth rate of 30%. Investment of
US $16 billion is expected in real estate sector for the next five to six year.
Credit to the housing sector has continued to be strong and benefited to be
low interest rate and incentive.
1.1% of GDP constitute FDI in real estate sector.
Returns in India range between 12-16% compare to 3-5% in advance foreign
countries.
It has forecast that Indian real estate sector will grow to US $90 by 2015.

India’s Growth Story-Strong Fundamentals

Macro - Economic Indicators
• Avg. GDP growth of 6% in last decade; Currently 8%
• Domestic savings – 24% of GDP
• Foreign Exchange Reserves – US $ 140 bn
• Inflation around 4.1% in FY2006
• Population growth rate – down to 1.6%
• Literacy – 65% (Census 2001)
Foreign Investments
_ FDI inflows $ 7.5bn in FY 2006 (40% y-o-y growth)
_ FII inflow $30 billion in last 3 years (2004 to 2006)
Foreign trade
• Exports - $ 101 bn in FY2006 (25% y-o-y growth)
• Imports - $ 140 bn in FY2006 (32% y-o-y growth)

Growth driver in real estate sector

The robust growth in IT sector has pumped growth in real estate sector. An
estimate of the 70% new construction is for the IT sector.
Retail sector has grown at very fast pace. India has been ranked as 5th in the
list of 30 fast emerging country in retail market and 20% growth is predicted
for organized retail segmented by 2010.
Spiraling demand of hotel room has brought boom in hotel industry. The
demand supply mismatch will remain over 50% beyond 2009, generating
substantial business for real estate.
(1). Housing shortage in India

(2). Reducing family size

(3). Rising middle class income

(4).Improve affordability
Noida Real Estate
Greater Noida is a known planned township situated in proximity to the India's
Capital city, Delhi. As such, the area falls within the NCR region and is adjacent
to Noida, the first industrial township in Asia. It is a township developed on the
outskirts of NOIDA, is mainly to cater to the phenomenal influx of population into
this region in the last few years.

If Noida boasts of a vigorous growth as far as real estate is concerned, Greater

Noida indeed tops the chart in real estate development. Much development has
taken place here during past years, making Greater Noida an attractive
destination for prospective investors. Greater Noida has shed its old area tag and
is on the verge of emerging as a fast developing infrastructure support system.

Property market in Greater Noida is flourishing at a tremendous pace. Whether

talk about residential property or commercial, both are raising sky high and that
too with rocket speed. The demand for property is outstripping supply thereby
resulting in an increase in rental and property prices.

What adds on to real estate value of Greater Noida is its proximity to Noida and
also its pollution-free environment. Indeed, the authorities do not permit polluting
industries to set their establishments here. There are laboratories for measuring
ambient air quality. With a multitude of construction projects budding in this twin
city of Noida, its infrastructure is metamorphosing from better to excellent.

A lot of quality constructions are expected to be coming up in the residential

market of Greater Noida. Adding to the living standard are improved
infrastructural facilities like wide roads, proper underground cabling and excellent
drainage system. A number of shopping avenues featuring world class brands
and outstanding services also make Greater Noida an attractive destination for
investors.

One of the major reasons why people are mulling over investing their money in
Greater Noida is the escalating prices in Noida. The rate of property in Greater
Noida range between Rs 2,400-2,800 per sq ft m as compared to Noida whereas
the rate of built up property is no less than Rs. 3.500 per sq ft. Likewise, land
rates in Greater Noida hang between Rs 16,000 - 22,000 per sq m whereas it is
between Rs 35,000 - 65,000 per sq m in Noida.

Noida is also establishing itself as an attractive value proposition for commercial

properties. One of the most significant sector gaining high market value in the
commercial phase of into view, is the IT and ITES sector. It is believed to be the
key driver for the office market which accounted for a major portion of the over all
office absorption.

Alpha, Beta, Gamma, and Delta enjoy reputation of being well-settled sectors in
Noida. Here the going rates for land range between Rs 16,000 - Rs 18,000.
Following in ranking are P3 and Swarna Nagri, where the property prices are
slightly high. Top real estate developers like Unitech, Eldeco, Ansals, Omaxe,
Parsavnath, Assotech have established their presence in Greater Noida.

Adding more to its investment features are better connectivity like plans to build
an international airport and connecting by Metro Railway. Undoubtedly, Greater
Noida is riding on growth wave and promises to set new benchmarks.

Real Estate Greater Noida - Buy, Sell, Rent Properties, Commercial, Residential
Land, Plots, Apartments, Flats, Office and Retail space from reputed
builders/developers by our qualified real estate agents with extensive experience
in Greater Noida properties.

FDI in Real Estate

Till recently, FDI in real estate was restricted to development of industrial parks,
hotels, integrated townships and SEZ’s.

On March 3, 2005, Government of India replaced the integrated township policy

to permit FDI up to 100% in townships, housing, built-up infrastructure &
construction - development projects, under automatic route (Press Note 2 (2005
series))

FDI is now permitted in:

 townships
 housing
 commercial premises
 hotels
 resorts
 hospitals
 industrial park
  resorts
 hospitals
 educational institute
 SEZ’s etc.

FDI in Real Estate – Aspects to be considered

Q. Minimum built up area in case of construction-development projects

super built up area or covered (carpet) area?

A. May be governed by local regulations which is typically based by Floor

Space Index (FSI)/ Floor Area Ratio (FAR)

Q. Requirement of minimum land area of 25 acres for serviced housing plots.

Whether applicable to ‘constructed housing’?

A. Requirement of minimum land area of 25 acres is only for projects where

land developed with provision of common facilities & infrastructure for
subsequent sale as plots for independent housing ie serviced housing plots. By
implication, for ‘constructed housing’, criteria of minimum built up area of 50,000
sq meters should apply

Q. Minimum capitalization requirement of US$ 5 million - Capitalization

requirement for JV company or minimum capital contribution by foreign investor?

A. Refers to capital to be brought in by the foreign investor in the JV

Company
Tax environment – Developers
Industrial parks
 10 year tax holiday (in a block of 15 years) on profits derived
from developing, developing & operating, maintaining &
operating industrial parks in India, developed before March 31,
2006
 Tax holiday available subject to obtaining Government approval
under Industrial Park Scheme, 2002 & subsequent notification
by Central Board of Direct Taxes

Special Economic Zones

 10 year tax holiday (in a block of 15 years) on profits derived
from developing SEZ’s in India, notified on or after April 1, 2005
(as per SEZ Bill 2005)
 Tax holiday available subject to obtaining Letter of Permission
from Board of Approvals in the Ministry of Commerce and
notification by Central Government

Housing projects
 Income tax holiday available to housing projects approved by
local authority before March 31, 2007
  Construction of project to be completed within 4 years from end
of financial year in which approval is obtained
 Residential unit should have maximum built up area of 1,000/
1,500 sq ft (based on city of location)
 Project should be on a plot of land which has minimum area of
1 acre
 Built up area of shops & other commercial establishments
included in housing project not to exceed 5% of aggregate built
up area of housing project or 2,000 sq ft, whichever is less

Section 10(23G)
 Income from dividends, interest and long term capital gains by
companies/ trusts from investments in shares/ long term finance
(more than 5 years), of specified infrastructure development
companies (eg engaged in industrial parks, hotels, housing
projects, etc) is tax exempt
 However, MAT may apply on such income of investors
computed @ 8.42% of book profits
 In order to claim above exemption, the project company should
be notified by CBDT

Section 115O
 Domestic companies declaring dividend liable to pay dividend
distribution tax (‘DDT’) @ 14.025%
 DDT is in addition to regular corporate tax payable by
companies @ 33.66%

How to get a House/Plot?

 a. Eligibility for applying in U.P Housing &Development Board.
b. Procedure for applying in U.P Housing &Development Board.
c. Rules for registration in U.P Housing &Development Board.
d. Allotment in U.P Housing &Development Board.

Eligibility for applying in U.P Housing & Development

Board

1. There is no income limit for applying for home in U.P Housing &
Development Board.
2. Applicant must be 18 years old at the time of filing an
application.
3. Applicant or his/her family must not be owning any other plot or
house in the city where a house is allotted to him/her. Apart
from this the applicant or his/her family must not own more than
one plot or house in the entire state.
4. At the time of allotment or any time after the allotment, the
applicant or his/her family must not own the property more than
specified under Urban Land Ceiling and Regulation Act-1976
including the property allotted by the Housing Board also.
5. If the applicant or anyone in his/her family is registered earlier
as well under different scheme and in the mean time is allotted
the plot/house in that earlier scheme then that allotment or this
new registration will be cancelled.
6. Those people registered earlier with the Housing Board under
any category and have not been allotted the plot/house can
register themselves for the new scheme by paying the balance
registration amount. The interest earned on earlier deposited
registration amount will be settled in the last installment to be
paid.

Procedure for applying in U.P Housing & Development

Board

1. Application form along with challan (4 copies) attached in the

application booklet should be duly filled. This should be
 submitted along with the registration amount in cash or bank
draft payable to U.P Housing & Development Board in the
respective city's approved bank before the last date mentioned
in the form. In case of bank draft it should be noted that it
should be encashed in the same city only where the application
form is submitted. The 4th copy of the challan will be returned
back by the bank which should be kept safe.
2. If the application letter is deposited by post then it should be
noted that the letter alongwith the bank draft and the challan
duly filled should reach before the last date to Indian Overseas
Bank, 3-Vidhaan Sabha Marg, Lucknow - 226001 by registered
post only. The bank will send the 4th copy of the challan back to
the applicant by post which should be kept in safety.
3. Registration amount should be deposited either in cash or in
terms of bank draft in the respective bank. Incomplete and late
submitted forms will not be entertained.

Rules for Registration in U.P Housing & Development

Board

1. Registration cannot be done for more than one or joint names.

Joint registration is valid in the case of husband-wife only. In
special cases registration can be transferred in the name of
husband/wife or close blood relations as per the rules of the
Housing Board. Application of the person other than the
registered person will not be entertained.
2. Registration is done in the name of applicants personally not in
the name of certain society etc.
3. Board is not bound to allot the houses/plots to every registration
holders. Those who are not allotted the land/house by the Board
are not entitled to claim the dues/amount spent.
4. If no. of registrations are higher than the available plots/land
then old registration holders will be preferred over the new ones.
In general category allotment is done through lottery system.
5. No interest will be paid on the amount deposited for registration
with the Board. If any person cancels his/her registration and
wants the amount back then the amount is returned back by
deduction of 20% and that too without any interest. at the time
of cancellation 4th copy of challan received from the bank at the
time of registration has to be deposited.
6. If Board cancels the registration then the registration amount is
returned without deduction of penalty. If the amount is returned
after 1 year then the simple interest at rate of 6% is paid.
Allotment in U.P Housing & Development Board

1. Normally every registration holders will be allotted a plot/house.

2. Allotment of houses/plots will be based on lottery system.
Normally the allotted property will not be changed/transferred.
In certain circumstances, the Housing Commissioner can change
the allotment by charging 5% amount of total expenditure.
Property is allotted on "As It Is and Where It Is" basis. The
dispute on quality of property will not be entertained after the
acquisition of the property. If anybody doesn’t acquire the
property after it is allotted to him due to certain reasons and the
Housing Commissioner accepts his/her application then the
deposited registration amount is returned back cutting the
penalty of 20%.
3. Under normal circumstances the allotment of the property is
done within 3 years from the date of registration. If due to
unavoidable reasons the construction of the houses is delayed
then the Board will not be responsible and no interest will be
given on the amount paid.
4. Allot tee cannot sell or transfer the property allotted to him/her
without prior permission from the Housing Board.
5. The land of the allotted houses will be on leasehold. The lease
would be of 90 years and will be renewed thereafter every 30
years. The annual rent for lease would be 0.25% of the present
land rate. Housing Board can increase it as well.
6. The decision of the Housing Commissioner in case of any dispute
in registration or allotment will be the last and final. The Housing
Commissioner has the right to change the prerequisites
described as per his/her will.