INDIA ISRAEL OPPORTUNITIES

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• INDIA- ISRAEL OPPORTUNITIES
• REAL ESTATE SECTOR IN INDIA

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Indian Economy

• India is the fourth largest economy in terms of
  Purchasing Power Parity.
• GDP growth accelerated from 7.5 in 2004-05 to
  8.4 in 2005-06.
• GDP growth estimated at 9.2 in 2006-07.

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Growth in Real Estate

• Investment of US320 billion required in next
  five years in infrastructure.
• Real Estate sector is registering an annual
  growth rate of 30. Investment of US 16 billion
  expected over the next five to six years in Real
  Estate.
• Credit to the housing sector has continued to be
  strong and benefited from low interest rates and
  incentives.

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Growth in Real Estate (Contd.)

• 1.1 of the GDP constitutes FDI in real estate
  sector.
• Returns in India range between 12-15 compared to
  3-4 in the advanced countries.
• Merrill Lynch forecasts that the Indian real
  estate sector will grow from US 12 billion in
  2005 to US 90 billion by 2015.

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Growth Drivers in Real Estate

• The robust growth in IT sector has pumped up the
  growth in real estate sector. An estimated 70 of
  the new construction is for the IT sector.
• Retail sector is growing at a fast pace. India
  has been ranked as 5th in the list of 30 emerging
  retail markets and 20 growth rate is predicted
  for the organized retail segment by 2010.
• Spiralling demand for hotel rooms has brought
  boom in hotel industry. The demand supply
  mismatch will remain over 50 beyond 2009,
  generating substantial business for real estate.

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Integrated Townships

• Central Government permitted setting up
  integrated townships at the following places-
• Gurgaon (Haryana)
• Hyderabad (Andhra Pradesh) (two projects)
• Mohali (Punjab)
• Chennai (Tamil Nadu)
• Bangalore (Karnataka)
• Kolkata (West Bengal)

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Retail and Shopping Malls

• Spurt in extremely large retail spaces.
• Shopping malls with over 1 million sq ft of space
  have become the order of the day.
• About 20 of these are now at various stages of
  construction across the country.
• In the National Capital Region (NCR), Unitech's
  Great India Place has a million square feet (sq
  ft) of retail space.
• In Mumbai, at least 8 malls with over 1 million
  sq ft. each.
• In Bangalore, at least 3 malls with similar
  dimensions are under development.
• Ludhiana will soon have a 1.6-million sq ft mall
  by Today Homes.

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FDI in Real Estate

• 100 FDI is allowed under automatic route in
  townships, housing, built-up infrastructure and
  construction-development project (including but
  not restricted to housing, commercial premises,
  hotels, resorts, hospitals, educational
  institutions, recreational facilities and
  regional level infrastructure), subject to
  certain conditions.
• FDI up to 51 is allowed through FIPB route in
  single brand retail shops.

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Guidelines for FDI in Real Estate

• Minimum area to be developed under each project
  would be as under
• In case of development of serviced housing plots,
  a minimum land area of 10 hectares
• In case of construction-development projects, a
  minimum built-up area of 50,000 sq.mts
• In case of a combination project, any one of the
  above two conditions would suffice

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Guidelines for FDI in Real Estate

• The investment would further be subject to the
  following conditions
• Minimum capitalization of US 10 million for
  wholly owned subsidiaries and US 5 million for
  joint ventures with Indian partners. The funds
  would have to be brought in within six months of
  commencement of business of the Company.
• Original investment cannot be repatriated before
  a period of three years from completion of
  minimum capitalization. However, the investor may
  be permitted to exit earlier with prior approval
  of the Government through the FIPB.

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Guidelines for FDI in Real Estate

• At least 50 of the project must be developed
  within a period of 5 years from the date of
  obtaining all statutory clearances. The investor
  would not be permitted to sell undeveloped plots.
  
• Undeveloped Plots, here will mean where roads,
  water supply, street lighting, drainage,
  sewerage, and other conveniences, as applicable
  under prescribed regulations, have not been made
  available. It will be necessary that the investor
  provides this infrastructure and obtains the
  completion certificate from the concerned local
  body/service agency before he would be allowed to
  dispose of serviced housing plots.

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Venture Capital Funds (VCFs)

• In 2004, SEBI allowed venture funds to invest in
  local real estate.
• So far over 30 foreign funds have applied to
  start operations in India.
• VCFs invest in new properties with a lock-in
  period averaging seven years. VCFs and Foreign
  Capital Venture Investors would be exempted from
  lock-in requirements if shares were held by them
  for at least one year at the time of filing of
  the draft prospectus with SEBI.
• 7-8 billion is estimated to flow into real
  estate in next 18-30 months.

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Real Estate Mutual Funds (REMFs)

• SEBI has recently approved the scheme of REMFs/
• This scheme has an objective to invest directly
  or indirectly in real estate property.
• The units of REMFs will be compulsorily listed in
  stock exchanges and Net Asset Value (NAV) of the
  scheme will be declared daily/

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REMFs (Contd.)

• REMFs can invest directly in real estate
  properties within India, mortgage (housing lease)
  backed securities, equity shares, bonds,
  debentures of listed and unlisted companies,
  which deal in properties and also undertake
  property development and in other securities.

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Special Economic Zones (SEZs)

• SEZ is a specifically delineated duty free
  enclave and is deemed to be foreign territory for
  the purposes of trade operations and
  duties/tariffs. To augment infrastructure
  facilities for export production it has been
  decided to permit the setting up of SEZs in the
  public, private, joint sector or by the State
  Governments.
• SEZ Act 2005 has now come into effect. SEZ Rules
  2006 were also issued in February. The above Act
  and Rules enable India to leverage SEZs, like
  many East-Asian economies, to push investments
  and growth to a higher level.
• Details at www.sezindia.nic.in

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SEZs (Contd.)

• So far 63 SEZs are functional.
• 237 SEZs have been approved.
• Total investment in SEZs is expected to be over
  US 8.8 billion in the next five years.

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SEZs (Contd.)

• Incentives and Facilities available to SEZ
  Developers
• Exemption from customs/excise duties for
  development of SEZs for authorized operations
  approved by the Board of Approval.
• Income Tax exemption on export income for a block
  of 10 years in 15 years under Section 80-IAB of
  the IT Act.
• Exemption from minimum alternate tax under
  Section 115 JB of the Income Tax Act.
• Exemption from dividend distribution tax under
  Section 115O of the Income Tax Act. Exemption
  from Central Sales Tax (CST).
• Exemption from Service Tax (Section 7, 26 and
  Second Schedule of the SEZ Act).

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Key trends in real estate boom

• According to Census 2001 there is a shortage of
  24.7 million housing units across the country.
• Indian middle class which is numbered around 92
  million in 2005-06 will cross 153 million mark by
  2009-10 (Source NCAER)
• Number of malls in Mumbai, Bangalore, New Delhi,
  Hyderabad and Pune was expected to grow to about
  250 by 2010 as against 40 now. (Source Merrill
  Lynch)
• Specialized malls are coming up across the
  country. DLF Universal is developing the worlds
  biggest mall in Gurgaon.

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Major Players

• Real Estate Developers
• Indian companies DLF Universal, Parsvnath,
  Unitech, Omaxe etc.
• Foreign Companies Ascendas, Emmar Group, Salim
  Group, CESMA International Pvt. Ltd., LJ Hooker,
  etc.
• REVFs/REMFs
• Indian companies IDFC, Kotak Mahindra, Dewan
  Housing Finance, HDFC, etc.
• Foreign companies Blackstone, Dawnay Day,
  Savvils, Macquarie Bank, etc.

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Major Players

• US-based global investment bank Goldman Sachs and
  Unitech from India are planning to set up a
  special purpose vehicle (SPV) with a corpus of
  US 208.7 million for investments in the real
  estate sector.
• DLF Ltd is forging a 5050 joint venture with a
  large international property developer for two
  integrated townships in India with an investment
  of US 10 billion.
• Credit Suisse, is planning a US 1 billion fund
  to invest in India's real estate sector.

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Major Players

• Citigroup is investing around 400 million of
  equity from a recently raised fund in India.
• Hilton Hotels Corporation (HHC) has announced a
  joint venture company with DLF Ltd to develop and
  own 75 hotels and serviced apartments over 7
  years.
• Dawnay Day International, the UK-based investment
  company, plans to invest US 1.5 billion in
  Indian real estate in the next two years.

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• Thank you