INDIAN REAL ESTATE - Indian Real Estate.pdf · Deeppp Indian Real Estate Relationshi ps Diversified team of real estate specialists with strong roots in Indian real estate operations

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INDIAN REAL ESTATE

AN ATTRACTIVE ALTERNATIVE INVESTMENT

IBCL EventLuxembourg1st December 2009

1


Fundamentals Backed Growth Prospects

Sustained economic and per capita income growthAsia’s 3rd largest economy, GDP projected to grow to USD 1 trillion by 2012

4th largest economy globally in terms of purchasing power parity

MARKET PROSPECTS

GDP composition shift towards services and manufacturing with services sector accounting for over 50%

Supported by strong demographicsUrban centers expected to grow at 30% annually with growth in urban population to 600 million by 2030

CURRENT SCENARIO

KEY ENABLERS

Working population between age groups 24 – 44 years adding 91 mn people by 2013

35 cities have a population greater that 1 million

R id ti l Commercial RetailResidential

13.5 14.6

21.823.4

19.4 19.6

25.3

100

150

200

250

1015

20

25

30Commercial

200300

400500

600Retail

200

300

400

500

2030

405060

(mn sq. ft)

70-130

125-260

350 400

(USD bn) (USD bn)

0

50

1961 1971 1981 1991 2001 2005 2011E0

5

10

No. of Households Usable Housing StockShort fall

0100

200

FY05-10 FY05-15IT / BPO Non IT

0

100

FY05 FY06 FY07 FY08E FY09E FY10E010

Retail Sales (LHS) Organized Retail (RHS)

350-400180-220

Source: HDFC Source: SSKI Research Source: ENAM Research, Images 2006

2

5x increase in office space over the next 3-5 years

Over ~ 200 mn sq. ft. for organized retail by 2010

Current housing shortage seen at ~ 19.2 mn housing units


Emerging Urban Sprawl

Expanding MarketsBooming real estate demand is moving from the big metros to emerging mid-size cities: companies are increasingly setting up their business in the periphery, so is the workforce.

MARKET PROSPECTS

Growth indicators for such cities include:Industrial and economic growth – job creation, population migrationIncrease in per capita and disposable incomes – changing lifestyles and increased consumerismInfrastructure spending and planned allocations by state governments – upgrading overall quality of life

CURRENT SCENARIO

KEY ENABLERS

p g p y g pg g q y

350

400

DelhiChandigarhJallandhar

Average annual household disposable Income, 2001INR 000’

350

400

DelhiChandigarhJallandhar

Average annual household disposable Income, 2001INR 000’

Goa

200

250

300

Delhi

Mumbai

Chennai

Hyderabad

PuneCoimbatore

Amritsar

Faridabad

Ludhiana

Chandigarh

Goa

200

250

300

Delhi

Mumbai

Chennai

Hyderabad

PuneCoimbatore

Amritsar

Faridabad

Ludhiana

Chandigarh

100

150

200

Kolkotta

Chennai

BangaloreAhmedabad

LucknowKanpur

Surat

Nagpur

Total disposable income100

150

200

Kolkotta

Chennai

BangaloreAhmedabad

LucknowKanpur

Surat

Nagpur

Total disposable income

3

0

50

0 2 4 6 8 10 12 14 16 18 20

JaipurTotal disposable incomeBillion, Indian rupees

Tier 1 Tier 2 Tier 3 Niche Cities

Source: The Great Indian Middle Class, NCAER, McKinsey Global InstitutePopulation, millions

0

50

0 2 4 6 8 10 12 14 16 18 20

JaipurTotal disposable incomeBillion, Indian rupees

Tier 1 Tier 2 Tier 3 Niche Cities

Source: The Great Indian Middle Class, NCAER, McKinsey Global InstitutePopulation, millions


The Urban Middle Class: fueling the market

Increasing affluent segment ~ 300 millionCurrent middle income consumer base in India is bigger than the population of United States

100

In dia: S ha re of Mid dle Class in P opulation

Share of Middle Class Population MARKET PROSPECTS

Represent a new consumer class represented by a change in income distribution

Exposure to global lifestyles expanding the demand for quality housing and infrastructureApparent shift from rented to owned houses - average age of 3 2

7 3

9 0

4060

80ar

e of

pop

ulat

ion

(%)

CURRENT SCENARIO

KEY ENABLERS

Apparent shift from rented to owned houses - average age of a homeowner is 32 years

Metropolitans serve as the melting pot2 3 5

8

17

3 2

020

Sha

19 50 19 80 1 98 5 19 90 20 00 2 00 6 20 15 20 25

2 9 20 Rich (Above 115 000)

Annual Household Income* (in USD)Demographic Transformation of India

2

9

48

221

9

17

74

285

20

33

120

404

Rich (Above 115,000)

High Income (57,000 – 115,000)

Consuming class (23,000 – 57,000)

Working class (10 200 23 000)llion

Pop

ulat

ion

4

4

221

726

285

710

404

613

2001-02 2005-06 2009-10(E)

Working class (10,200 – 23,000)

Needy (Below 10,200)

* In PPP terms

Mi


Key Enablers Falling In Place

Current trends in the Real Estate market

Increasing urbanisation driving need for quality housing

MARKET PROSPECTS

Lack of fresh supply in CBDs pushing development to suburban and peripheral locations

Economic liberalization evolving newer organized retail formats

Overflowing metropolitan markets creating attractive opportunities in adjoining mid-size markets

Recent government initiatives have enabled the market to secure more realistic and healthy valuations

CURRENT SCENARIO

KEY ENABLERS

Recent government initiatives have enabled the market to secure more realistic and healthy valuations

Demonstration of reforms commitment by the government

Formation of National & State Urban Planning divisions for implementing and monitoring of development guidelines

Planned USD 150 billion of infrastructure investments in 2009 – 15 is set to increase value of real estate investments

Opening sector to receive FDI

Relaxation of Foreign Direct Investment (FDI) norms in March 2005 with low entry thresholds

5

Real estate sector to see a FDI capital infusion of $8 bn by end of 2009


Current Market Scenario

Continued Growth amid Global Slowdown

“Unfolding long term opportunities for Private Equity Investors”

MARKET PROSPECTS

GDP Growth 6.7% in FY09 and expected to grow by 7% in FY 10

Driven by domestic consumption

Price stability witnessed in residential segment across geographies

Land prices correcting to realisticvaluations and thus offering goodinvestment entry platforms

M k t ti ‘h lth i ’

CURRENT SCENARIO

KEY ENABLERS

Strengthening capital markets and fund flows

Proactive & Stable Government

Market correction a ‘healthy sign’eliminating over heating

Developers willing to negotiate terms atattractive valuations

Infrastructure spending to improve overall economic growth

Comprehensive tax regime to promote consumption

Focus on banking and finance to ease liquidity, mortgage rate down

attractive valuations

Availability of good investmentopportunities as compared to last 12months

The long term opportunity in Indian realestate is intact with significant supply-demand gaps across asset segments

6


INVESTMENT OPPORTUNITY & STRATEGY

7


Integrated Residential Township Schemes

Investment Opportunity

Integrated township schemes are promoted by the government and are EMERGING

INTEGRATED TOWNSHIP

strategically located to provide synergies to regional industries (SEZs,

CBDs, etc)

Includes development of metropolitan housing options, support

MIXED-USE COMMERCIAL

EMERGING REAL ESTATE

community infrastructure with recreational facilities and business

infrastructure

Benefits in terms of waivers and / or subsidies for stamp duty, property

t d t i l t t ttax and power costs in select states

Strategygy

Thorough analysis of potential of site with market absorption trends

Master plan to be demographic oriented

Application of intensive project and property management techniques to

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Application of intensive project and property management techniques to

maintain high-quality product


Emerging Real Estate Schemes

Investment Opportunity

Emergence of niche real estate development / operating companies that

believe in offering international categories of real estate formats that areEMERGING

INTEGRATED TOWNSHIP

believe in offering international categories of real estate formats that are

currently not available in India.

Growing demand of niche community based residential developments

(Senior citizen communities, golf communities, second homes, etc)

E l ti f i d d l t t d d i b i tit ti l



Evolution of new mixed-use development trends driven by institutional

and retail consumers in new emerging markets across Tier 2, Tier 3

cities (lease only residential, industrial & logistics parks, serviced

apartments)

Strategy

Determine potential for site

Identif best portfolio mi of space and potential sers across officeIdentify best portfolio mix of space and potential users across office,

retail, hospitality and residential

Apply intensive asset management to create value

Apply intensive property management techniques to maintain a high

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quality product


Mixed-Use Commercial Schemes

Investment OpportunityMixed-use development schemes that promote a combination of

commercial, retail and hospitality sectors (Malls with commercial office EMERGING

INTEGRATED TOWNSHIP

p y (

space / budget hotels)

Invest in projects / shopping center development / operating companies

that are endowed with strong property level fundaments and are likely to

enjoy a valuation upside due to industry consolidation (Retail, Hospitality)



Invest in projects planned in upcoming CBD’s of emerging markets that

are categorized by high valuation projections and absorption trends

StrategyStrategyTarget build-to-suits and limited speculative developments to

accommodate a flexible end-use (large floor plates)

Focused approach towards creation of modern infrastructure, including

t l i ti d th tilit f iliti d f i dltelecommunications and other utility facilities and user friendly

environments

Apply sophisticated property management techniques to maintain a

premium product

A l i t t t t t l

10

Apply intense asset management to create value


The Real Estate Market Opportunity

Nature of ParticipationSector Dynamics +Real Estate sector permeating to smaller Enter the value chain at an inflection pointReal Estate sector permeating to smallertowns & cities of India

Growth centers characterized by low real estate costs,availability of land for development, untapped manpowerpool and rising quality of life

Enter the value chain at an inflection pointAfter the agglomeration of land and developmentpermissions to capture higher returns while mitigating riskand nurturing a long term relationship for additional longterm value creation and maximizing returnsp g q y

Structured Participation OpportunitiesReal Estate developers, corporate entities and new

ti t il i t h i th fi t

Participate in developments surroundingestablished real estate markets

Hi h d f t d l i k filgeneration retailers vying to cash in on the first moveradvantage in these emerging markets

Transformation of Real estate in India

Higher degree of transparency and lower risk profile

Price stability and access to market valuation benchmark

Typical recommended investment structureHigh urbanization trends and evolution of newer realestate formats backed by increased liquidity through theadvent of real estate funds and private equity fundstransforming the real estate landscape in India.

Value creation through the SPV structure and formationof new development companies.

Debt financing for initial construction, thereafter financingfrom advance sales

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PLUS CAPITAL – An Overview

12


About PLUS Capital

An Investment and Asset Management company focused on the Indian real estate sector

Specialists in deal sourcing, land acquisitions, project management, due diligence and transaction structuring in the global and Indian

real estate markets

Established Management expertise

PLUS CAPITAL PROFILE

RISING INDIA

Strong management experience in global operations, strategic leadership, investment management and asset management

Track record of real estate investment and asset management transactions across residential and commercial asset classes

Value engineering through in-house operational team with expertise across project planning, marketing, development and

INVESTMENT STRUCTURE

construction management

Deep Indian Real Estate Relationshipsp p

Diversified team of real estate specialists with strong roots in Indian real estate operations

Established relationships with developers of repute, governing authorities, professional agencies and technical consultants to

facilitate value addition across the lifecycle of the investment.

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Rising India Realty Fund

Fund OverviewIndia focused real estate fund which will invest in urban real estate development projects across residential and commercial

assets


RISING INDIA

Development execution will be conducted through joint development partnerships with reputed developers

Fund management team will control all project entry, exit and capitalization decisions complemented through secured “veto

rights” (as applicable) on all project execution and financial decisions

Investment focus on integrated residential township and mixed-use commercial developments

Location foc s is in mid si e cities and emerging destinations aro nd established metro h bs categori ed b highINVESTMENT STRUCTURE

Location focus is in mid-size cities and emerging destinations around established metro hubs categorized by high

urbanization and absorption trends.

Investment ObjectiveTo provide stable & consistent capital appreciation with a target annual IRR of over 20%

Mitigate risk through portfolio diversification across asset classes and locations complemented by rigorous asset

management

Competitive AdvantageBenefit from Plus Capital’s strong risk-adjusted investment management and asset management experience in India

Secured preferred relationships with multiple developers of repute offering access to niche off-market deals

‘Strong Starting Position’ facilitated with a healthy pipeline of investment-ready deals

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In-house team of real estate experts to add value across all stages of the investment life cycle


Investment Structure

Tax-efficient structureA tax-efficient investment structure for Foreign Direct investments in the Indian Real Estate Market

International standards of corporate governance

Individual Investors Institutional Investors Feeder Funds

International standards of corporate governanceInternational standards of corporate governance and monitoring by the International Finance Commission, Mauritius


RISING INDIA

Luxembourg

Investment Management

INVESTMENT STRUCTURE

Luxembourg

Investment Management Company

RISING India Realty Fund

Mauritiusg

Agreement

Advisory Agreement

100%

100%100%

SPV 1 SPV 2 SPV n

Portfolio Company 1

IndiaPortfolio

Company 2Portfolio

Company n Indian Advisory Company

Transaction & Asset Management

JV JV JV

15

p y p y p yFDI Complaint Real

Estate Projects


Questions ?Questions ?

Vivek BansalF d & M i Di tFounder & Managing DirectorPLUS CapitalPhone: +91-9810587878Email: [email protected]

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Important Disclosures

This document was prepared at your specific request exclusively for your benefit and your internal use. Neither this document nor any of its contents maybe disclosed to, reproduced or used or relied upon by, any other person or used for any other purpose without the prior consent of PLUS Capital and itsaffiliated companies (“PLUS”).

The information contained herein, including any expression of opinion, and any information which accompanies this presentation or which is suppliedsubsequently, has been obtained from or is based upon sources believed to be reliable but has not been independently verified and is not guaranteed asto accuracy or completeness.

The simulations, if any, presented in this document result from the simulations of PLUS at a given moment, in function of the financial assumptions andk t t hi h PLUS h l t d d th bj t t k t i timarket parameters which PLUS has selected, and are thus subject to market variations.

PLUS is not responsible for ascertaining whether all risks associated with the transactions contemplated herein have been identified or disclosed, or forproviding advice to you as to whether you should enter into the transaction or on the documentation to be used for the transaction or on the merits ofpurchasing any investment or otherwise. You must make your own assessment of the transaction and the risks and benefits associated with it and of allthe matters referred to in the preceding sentence Neither PLUS nor any of its officers or employees makes any representation as to or assumes anythe matters referred to in the preceding sentence. Neither PLUS nor any of its officers or employees makes any representation as to, or assumes anyresponsibility or liability, for, the merits, suitability, expected or projected success, profitability, performance or benefit of any such transaction. PLUSrecommends that you enter into any transactions only after having considered, with the assistance of external advisors, without reliance upon PLUS, thespecific risks of any transaction, including but not limited to, the legal, tax, and funding implications so as to enable you to appraise and understand thefinancial and legal terms of such transaction and to enter into such transaction in reliance on your own judgment and that of your advisers and not on anyviews expressed by PLUS.

You must assess the validity, enforceability and compliance of this transaction for the purposes of including, wrapping or indexing it or its economic resultinto your own product, those of your affiliates or those of third parties.

The terms and conditions in this document are purely indicative and are subject to the final expression of the terms of a specific transaction as detailed in

17

a definitive Prospectus and all related agreements and documents.

Documents

INDIAN REAL ESTATE - Indian Real Estate.pdf · Deeppp Indian Real Estate Relationshi ps Diversified team of real estate specialists with strong roots in Indian real estate operations