Real Estate VI Sem

7/31/2019 Real Estate VI Sem

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Chapter No. 1

Introduction to Real Estate

Business

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Real Estate

The most basic definition real estate is "an interest in land". Broadening

that definition somewhat, the word "interest" can mean either an ownershipinterest (also known as a fee-simple interest) or a leasehold interest. In an

ownership interest, the investor is entitled to the full rights of ownership of

the land (for example, to legally use and transfer the title of the

land/property), and must also assume the risks and responsibilities of a

landowner (for example, any losses as a result of natural disasters and the

obligation to pay property taxes). On the other side of the relationship, a

leasehold interest only exists when a landowner agrees to pass some of his

rights on to a tenant in exchange for a payment of rent. If you rent anapartment, you have a leasehold interest in real estate. If you own a home,

you have an ownership interest in that home. Some jurisdictions recognize

other interests beyond these two, such as a life estate, but those interests

are less common in the investment arena.

Supply of urban land is largely controlled by State-owned developmentbodies like the Delhi Development Authority (DDA) and Housing Boardsleaving very limited developed space free, which is controlled by a few

major players in each city.

Directorate of Estates is an attached office of the Ministry of UrbanDevelopment, Government of India. It is responsible for the administrationand management of the office buildings for the various organizations of theGovernment of India as well as residential accommodation for theGovernment employees in the metropolitan cities of Delhi, Mumbai,Kolkata, Chennai and five other cities namely Shimla, Chandigarh,Ghaziabad, Faridabad and Nagpur. The Central Government Estates in theremaining cities and towns are managed by the Central Public WorksDepartment (CPWD).

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CREDAI (Confederation of Real Estate Developer's Associations ofIndia) is the apex body of the organized real estate developers/buildersacross India. 20 State/city level associations, namely, Andhra Pradesh,Chhattisgarh, Delhi-NCR, Goa, Gujarat, Jharkhand, Himachal Pradesh,Karnataka, Kerala, Madhya Pradesh, Maharashtra, Odessa, Punjab,Rajasthan, Tamilnadu, Uttar Pradesh and West Bengal spread over across18 States of India are members of CREDAI with over 3,500 individualmembers developers encompassing over 60% of the organized privatestate/cities in the country.

Real Estate Laws in India

Investing in real estate in India require compliance with various laws which runinto dozens, some of them more than 100 years old and some very new. Inaddition to federal laws of India, there are many state laws governing realestate transactions and investment. The federal laws governing real estateinclude:

Indian Contract Act, 1872

Transfer of Property Act, 1882 Registration Act, 1908

Special Relief Act, 1963

Urban Land (Ceiling And Regulation) Act (ULCRA), 1976

Land Acquisition Act, 1894

The Indian Evidence Act, 1872

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While each State has its own set of laws, which govern planneddevelopment, the two laws that exist in every State are the stamp duty andrent laws.

The sector has assumed growing importance with liberalisation of theIndian economy. Developments in the sector are being influenced by thedevelopments in the retail, hospitality, entertainment industries, economicservices and information technology (IT)-enabled services, etc. and viceversa.

Foreign Direct Investment (FDI) in real estate is being permitted sinceJanuary 2002. Previously, only NRIs and PIOs were allowed to invest in thehousing and the real estate sectors. Foreign investors other than NRIswere allowed to invest only in development of integrated townships and

settlements either through a wholly-owned subsidiary or through a jointventure company along with a local partner.

India fully opened up the sector to FDI in 2005. However, norms issuedlater made a minimum capitalization of $10 million for wholly-ownedsubsidiaries and $5 million for joint ventures mandatory. Besides, minimumarea requirement were also imposed by the Government. At present,foreign institutional investment (FII) is not permitted in the real estatesector.

India's real estate sector is witnessing an unprecented high. Enablingregulatory changes, high industrial growth, easier financing options andsteady growth in equity markets have resulted in an upturn in the realestate investment activity. This, coupled with the Government's relaxationof FDI policies have made the real estate an attractive investment option.

With the development of private propertyownership, real estate hasbecome a major area ofbusiness, commonly referred to as commercial

real estate. Purchasing real estate requires a significant investment, andeach parcel of land has unique characteristics, so the real estate industryhas evolved into several distinct fields. Specialists are often called on tovaluate real estate and facilitate transactions. Some kinds of real estatebusinesses include:

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Appraisal: Professional valuation services

Brokerages: A mediator who charges a fee to facilitate a real estate

transaction between the two parties.

Development: Improving land for use by adding or replacing buildings

Net leasing

Property management: Managing a property for its owner(s)

Real estate marketing: Managing the sales side of the propertybusiness

Real estate investing: Managing the investment of real estate

Relocation services: Relocating people or business to a differentcountry

Corporate Real Estate: Managing the real estate held by acorporation to support its core businessunlike managing the realestate held by an investor to generate income

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Within each field, a business may specialize in a particular type of realestate, such as residential, commercial, or industrial property. In addition,almost all construction business effectively has a connection to real estate.

Professional university-level education in real estate is primarily focused atthe graduate level. Focus in towards the commercial real estate sector,primarily real estate development or investment rather than residential realestate sales conducted by a REALTOR.

Real Estate Financing

There are different ways of real estate financing: governmental and

commercial sources and institutions. A home buyer or builder can obtain

financial aid from savings and loan associations, commercial banks,

savings banks, mortgage bankers and brokers, life insurance companies,

credit unions, federal agencies, individual investors, and builders.

Savings and loan associations

The most important purpose of these institutions is to make mortgage loans

on residential property. These organizations, which also are known

as savings associations, building and loan associations, cooperative

banks (in New England), and homestead associations (in Louisiana), are

the primary source of financial assistance to a large segment of American

homeowners. As home-financing institutions, they give primary attention to

single-family residences and are equipped to make loans in this area.

Commercial banks

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Due to changes in banking laws and policies, commercial banks are

increasingly active in home financing. In acquiring mortgages on real

estate, these institutions follow two main practices:

First, some of the banks maintain active and well-organized departmentswhose primary function is to compete actively for real estate loans. In areas

lacking specialized real estate financial institutions, these banks become

the source for residential and farm mortgage loans.

Second, the banks acquire mortgages by simply purchasing them from

mortgage bankers or dealers.

In addition, dealer service companies, which were originally used to obtain

car loans for permanent lenders such as commercial banks, wanted to

broaden their activity beyond their local area. In recent years, however,

such companies have concentrated on acquiring mobile home loans in

volume for both commercial banks and savings and loan associations.

Service companies obtain these loans from retail dealers, usually on a

nonrecourse basis. Almost all bank/service company agreements contain a

credit insurance policy that protects the lender if the consumer defaults.

Savings banks

These depository financial institutions are federally chartered, primarily

accept consumer deposits, and make home mortgage loans.

Mortgage bankers and brokers

Mortgage bankers are companies or individuals, who originate mortgage

loans, sell them to other investors, service the monthly payments, and may

act as agents to dispense funds for taxes and insurance.

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Mortgage brokers present the consumer home buyer with the best loan

from a variety of loan sources. Their income comes from the lender making

the loan, just like with any other bank. Because they can tap a variety of

lenders, they can shop on behalf of the borrower and achieve the best

available terms. Despite legislation enacted that could favor the majorbanks, mortgage bankers and brokers keep the market competitive so the

largest lenders must continue to compete on price and service. According

to Don Burnette of Bright green Home loans in Port Orange, Florida, "The

mortgage banker and broker conduit is vital to maintain competitive

balance in the mortgage industry. Without it, the largest lenders would be

able to unduly influence rates and pricing, potentially hurting the consumer.

Competition drives every organization in this industry to constantly improve

on their performance, and the consumer is the winner in this scenario."

Life insurance companies

Life insurance companies are another source of financial assistance. These

companies lend on real estate as one form of investment and adjust their

portfolios from time to time to reflect changing economic conditions.

Individuals seeking a loan from an insurance company can deal directly

with a local branch office or with a local real estate broker who acts as loancorrespondent for one or more insurance companies.

Credit unions

These cooperative financial institutions are organized by people who share

a common bond for example, employees of a company, a labor union, or

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a religious group. Some credit unions offer home loans in addition to other

financial services.

Federally supported agencies

Under certain conditions and fund limitations the Veterans

Administration makes direct loans to creditworthy veterans in housing credit

shortage areas designated by the VA's administrator. Such areas are

generally rural areas and small cities and towns not near the metropolitan

or commuting areas of large cities areas where GI loans from private

institutions are not available.

The federally supported agencies referred to here do not include the so-called second-layer lenders who enter the scene after the mortgage is

arranged between the lending institution and the individual home buyer.

Real Estate Investment Trust

Real Estate Investment Trusts (REITs), which began when the Real Estate

Investment Trust Act became effective January 1, 1961, are available.

REITs, like savings and loan associations, are committed to real estate

lending and can and do serve the national real estate market, although

some specialization has occurred in their activities.

In the U.S., REITs generally pay little or no federal income tax, but are

subject to a number of special requirements set forth in the Internal

Revenue Code, one of which is the requirement to annually distribute at

least 90% of their taxable income in the form ofdividends to shareholders.

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Chapter No. 2

Major players in the Real

Estate sector & their

performance

Organized Real Estate Industry in India is only a couple of decades old.Real Estate Industry in India took off with the global boom in the RealtySector which percolated down to India as well. Lack of clear land titles andlitigation has made this industry one of the most opaque and corrupt ones.Due to the massive price appreciation and huge valuations, Land

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Scamshave become quite common with Chief Ministers, Generals, TopBureaucrats all involved in the murky environment of Real Estate in India.The most recent scam related to bribing of top public banks officials inthe LIC Housing Finance Scandal has again put question mark on the

fundamentals of the industry. Valuing the industry and making a real estateinvestment remains one of the most difficult investing tasks in the IndianStock Market. Even Fund Managers are staying away from the Sector dueto lack of trust in the Financial Statement given by the industry. That saidmodern India presents a booming picture of tall buildings and huge officeareas & shopping malls.

A list of the chief players in Indian market is given below :

Sobha Developers Ltd

DLF Ltd

Unitech Ltd

Emaar MGF

Shapoorji Pallonji & Co

India Bulls Real Estate

HDIL

Sobha Developers Ltd

Headed by: PNC Menon, Chairman

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About: The Company was founded in 1995 by PNC Menon after hereturned home from the Middle East where he was acclaimed for qualityinteriors and construction since 1977. Today, this Rs10 billion pluscompany is one of the largest and only backward integrated company inthe construction arena. Its IPO in 2006 was oversubscribed by 126 timesthat created history, being the first event of its kind in Indian capitalmarkets.

Till date, Sobha has completed 47 residential projects, 13 commercialprojects and 166 contractual projects covering about 36 million sq ft area in18 cities across India (as of 31 March 2010). The company currently has 21ongoing residential projects aggregating to 8.5 million sq ft, while 4.24million sq ft of contractual projects are under various stages of construction.

Vision - Transform the way people perceive 'Quality'

Mission - No Short Cuts to Quality

Philosophy - Passion at Work

Sobha Developers Ltd: With an annual turnover of Rs 1,189 crore,

Sobha Developers Ltd was initiated by the now chairman PNC Menon in

the year 1995. On June 30, 2007, the company has 3,706 skilled

professionals working for it. At present it owns Rs 3,500-acre land in

eight Indian cities namely Coimbatore, Bangalore, Mysore, Chennai,

Thrissur, Kochi, Pune and Hosur. The companys clientele include some

of the top players in IT, hotel and construction sector such as Hewlett

Packard, Mico, Infosys, Ramaraju Developers, Dell, Timken, etc.

Capital Structure - Sobha Developers Ltd.

Period InstrumentAuthorizedCapital

IssuedCapital

- P A I D U P -

From To (Rs. cr) (Rs. cr) Shares Face Capital

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(nos) Value (Rs. Cr)

2010 2011 Equity Share150.0 98.1 98063868 10.0 98.1

2009 2010 Equity Share150.0 98.1 98063868 10.0 98.1

2008 2009 Equity Share150.0 72.9 72901733 10.0 72.92007 2008 Equity Share80.0 72.9 72901733 10.0 72.9

2006 2007 Equity Share80.0 72.9 72901733 10.0 72.9

2005 2006 Equity Share30.0 21.1 21104080 10.0 21.1

2004 2005 Equity Share22.0 21.1 21140480 10.0 21.1

2003 2004 Equity Share22.0 21.1 21140480 10.0 21.1

Shareholding pattern - Sobha Developers Ltd.

Holder's Name No of Shares% ShareHolding

Promoters 45000 0.05%

Foreign Promoter 59331350 60.50%

Foreign Institutions 31599481 32.22%

General Public 2605008 2.66%

Other Companies 1339875 1.37%

N Banks Mutual Funds 1261576 1.29%

Others 1069170 1.09%

Financial Institutions 589948 0.60%

Foreign NRI 199214 0.20%

Directors 21235 0.02%

Foreign Others 2000 0.00%

Foreign Ocb 11 0.00%

Profit & Loss - Sobha Developers Ltd.

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Mar'11 Mar'10 Mar'09 Mar'08 Mar'07

12Months

12Months

12Months

12Months

12Months

INCOME:

Sales Turnover 1,451.65 1,110.61 983.87 1,436.34 1,194.75

Excise Duty 3.24 3.39 9.13 13.84 8.28

NET SALES 1,448.41 1,107.22 974.74 1,422.51 1,186.46

Other Income 0.00 0.00 0.00 0.00 0.00

TOTAL INCOME 1,463.96 1,118.89 982.17 1,434.22 1,189.18

EXPENDITURE:

ManufacturingExpenses 729.98 517.60 599.92 1,032.80 694.85

Material Consumed 116.69 97.20 -173.89 -283.34 3.41

Personal Expenses 124.24 96.28 126.09 126.20 81.40

Selling Expenses 88.36 65.73 61.16 94.22 77.49

AdministrativeExpenses

90.74 82.86 91.60 98.98 73.14

ExpensesCapitalised

0.00 0.00 0.00 0.00 0.00

Provisions Made 0.00 0.00 0.00 0.00 0.00

TOTALEXPENDITURE

1,150.01 859.68 704.89 1,068.87 930.30

Operating Profit 298.40 247.54 269.85 353.64 256.16

EBITDA 313.94 259.21 277.28 365.36 258.87

Depreciation 27.77 32.31 36.03 35.04 24.39

Other Write-offs 0.00 0.00 0.00 0.00 0.00

EBIT 286.17 226.90 241.25 330.32 234.49

Interest 42.93 67.14 105.21 59.69 48.07

EBT 243.24 159.76 136.04 270.63 186.41

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Taxes 61.14 23.61 35.84 42.58 25.06

Profit and Loss forthe Year

182.10 136.15 100.19 228.05 161.35

Non Recurring Items 0.36 0.39 9.49 0.25 0.17

Other Non CashAdjustments

0.00 0.12 0.00 0.00 -0.0

Other Adjustments 0.00 0.00 0.00 0.00 0.00

REPORTED PAT 182.46 136.66 109.68 228.30 161.52

KEY ITEMS

Preference Dividend 0.00 0.00 0.00 0.00 0.46

Equity Dividend 29.42 24.52 7.29 47.40 40.10

Equity Dividend (%) 29.99 25.00 9.99 65.01 54.99

Shares in Issue(Lakhs)

980.64 980.64 729.02 729.02 729.02

EPS - Annualised(Rs)

18.61 13.94 15.04 31.32 22.16

Balancesheet - Sobha Developers Ltd.

Particulars Mar'11 Mar'10 Mar'09 Mar'08 Mar'07

Liabilities12Months

12 Months12 Months12 Months12 Months

Share Capital 98.06 98.06 72.90 72.90 72.90

Reserves & Surplus 1,758.56 1,610.40 1,016.59 915.44 742.64Net Worth 1,856.62 1,708.47 1,089.49 988.34 815.54Secured Loans 1,202.62 1,446.58 1,878.34 1,438.09 545.23Unsecured Loans 8.35 7.45 33.84 324.96 38.45TOTALLIABILITIES

3,067.59 3,162.50 3,001.67 2,751.39 1,399.22

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AssetsGross Block 314.77 294.21 293.02 271.13 233.37(-) Acc.Depreciation

177.49 151.30 119.80 84.18 49.48

Net Block 137.28 142.91 173.22 186.95 183.89Capital Work inProgress.

66.80 63.20 51.56 1,652.05 902.83

Investments. 51.61 42.94 36.16 29.40 52.77Inventories 972.64 1,017.39 1,049.19 787.86 377.80Sundry Debtors 391.39 416.58 355.32 545.16 157.74Cash And Bank 27.54 80.04 21.05 12.59 68.36Loans And

Advances2,159.04 2,014.48 1,898.70 104.43 289.88

Total CurrentAssets 3,550.60 3,528.48 3,324.27 1,450.04 893.77Current Liabilities 645.53 561.32 555.56 477.12 531.00Provisions 93.17 53.71 27.98 89.91 103.04Total CurrentLiabilities

738.70 615.03 583.54 567.04 634.04

NET CURRENTASSETS

2,811.90 2,913.46 2,740.72 883.00 259.74

Misc. Expenses 0.00 0.00 0.00 0.00 0.00TOTAL ASSETS

(A+B+C+D+E) 3,067.59 3,162.50 3,001.67 2,751.39 1,399.22

DLF

DLFHeaded by: Dr Kushal Pal Singh, Chairman

About: With a track record of 64 years, DLF is Indias largest real estatecompany in terms of revenues, earnings, market capitalization and

developable area. It currently has pan India presence across 30 cities withapproximately 238 million sq ft of completed development and 413 millionsq ft of planned projects, of which 56 million sq ft of projects are underconstruction during FY10.

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Project Spectrum : Residential, townships, commercial complexes, ITParks, hotels, multiplexes, etc.

Quick fact :Only listed real estate Company included in the BSE Sensex,NSE Nifty, MSCI India Index and MSCI Emerging Markets Asia Index.

Latest : Will take its luxury mall DLF Emporio (already operational in NewDelhi) to other big cities such as Hyderabad and Chennai.

DLFs chief business is to develop housing, marketable and retailproperties. Currently it has undertaken the development of 70 million sqft of housing projects which it intends to finish in the next three years.DLF has joined hands with Delhi Development Authority to developtownships in Amritsar, Pune, Gurgaon, Mumbai, Chennai and Goa. DLFhas been the construction company behind different malls in the majorcities in India. The company is also developing 50-75 hotels along withHilton Hotels and infrastructure and SEZ in India in collaboration withLaing ORourke (UK).The current market cap is around Rs.51,832.22crore.

Capital Structure - DLF Ltd.

Period InstrumentAuthorizedCapital

IssuedCapital

- P A I D U P -

From To (Rs. cr) (Rs. cr)Shares(nos)

FaceValue

Capital(Rs. Cr)


2008 2009 Equity Share499.5 341.0 1704832680 2.0 341.0

2007 2008 Equity Share499.5 341.0 1704832680 2.0 341.0

2006 2007 Equity Share499.5 305.9 1529421080 2.0 305.9

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2005 2006 Equity Share39.5 37.9 37767997 10.0 37.8

2004 2005 Equity Share4.5 3.6 3508007 10.0 3.5

2003 2004 Equity Share4.5 3.6 3508007 10.0 3.5


1999 2001 Equity Share4.5 3.6 3508007 10.0 3.5

1997 1999 Equity Share4.5 3.6 3508007 10.0 3.5

Shareholding pattern - DLF Ltd.

Holder's Name No of Shares% Share Holding

Promoters 1334803120 78.60%

Foreign Institutions 270569137 15.93%General Public 63121125 3.72%


Others 5566356 0.33%


Foreign NRI 2168272 0.13%

NBanks Mutual Funds 947004 0.06%

Foreign Industries 126600 0.01%


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Profit & Loss - DLF Ltd.

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12 Months 12 Months 12 Months 12 Months 12 Months

INCOME:

Sales Turnover 2,916.08 2,307.08 2,827.90 5,496.96 1,101.66

Excise Duty 0.00 0.00 0.00 0.00 0.00

NET SALES 2,916.08 2,307.08 2,827.90 5,496.96 1,101.66

Other Income 0.00 0.00 0.00 0.00 0.00

TOTAL INCOME 4,046.14 3,203.84 3,834.62 6,057.70 1,429.32

EXPENDITURE:

Manufacturing Expenses 848.68 889.25 778.34 2,141.29 237.75

Material Consumed 0.00 0.00 0.00 6.06 8.72



Administrative Expenses 143.99 225.45 156.39 128.16 88.51

Expenses Capitalised 0.00 0.00 0.00 0.00 0.00

Provisions Made 0.00 0.00 0.00 0.00 0.00

TOTAL EXPENDITURE 1,136.27 1,262.13 1,065.14 2,424.98 443.22

Operating Profit 1,779.81 1,044.95 1,762.76 3,071.98 658.44

EBITDA 2,909.87 1,941.72 2,769.48 3,632.72 986.11

Depreciation 129.77 126.05 114.08 25.68 9.44

Other Write-offs 50.40 41.47 37.86 41.79 0.00

EBIT 2,729.70 1,774.19 2,617.54 3,565.24 976.67

Interest 1,286.70 847.24 809.86 447.65 356.25

EBT 1,443.00 926.96 1,807.69 3,117.59 620.42

Taxes 309.05 175.71 261.00 543.52 214.56

Profit and Loss for the Year 1,133.95 751.24 1,546.68 2,574.07 405.86

Non Recurring Items 105.45 11.80 -2.15 0.16 -0.1

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Other Non Cash Adjustments 30.16 2.01 33.05 0.36 1.24

Other Adjustments 0.02 -0.0 -29.81 -0.1 -1.14

REPORTED PAT 1,269.58 765.06 1,547.77 2,574.40 405.77

KEY ITEMS


Equity Dividend 339.51 339.48 339.44 681.93 340.97

Equity Dividend (%) 100.00 100.00 100.00 200.00 111.46

Shares in Issue (Lakhs) 16,975.72 16,973.91 16,972.09 17,048.33 15,294.21

EPS - Annualised (Rs) 7.48 4.51 9.12 15.10 2.65

Balancesheet - DLF Ltd.


Liabilities 12 Months 12 Months 12 Months 12 Months 12 Months

Share Capital 339.51 339.48 339.44 340.96 305.88

Reserves & Surplus 13,470.98 12,490.53 12,035.39 10,928.19 346.92

Net Worth 13,810.49 12,830.01 12,374.82 11,269.15 652.80

Secured Loans 14,700.70 11,590.19 7,979.97 4,945.91 6,242.81

Unsecured Loans 358.85 1,047.67 1,635.00 3,440.49 526.48

TOTAL LIABILITIES 28,870.03 25,467.86 21,989.79 19,655.55 7,422.10

Assets

Gross Block 2,143.37 2,002.85 1,968.40 1,533.72 365.58

(-) Acc. Depreciation 400.27 273.84 152.87 59.34 37.01

Net Block 1,743.10 1,729.02 1,815.52 1,474.37 328.57

Capital Work in Progress. 2,199.25 1,718.51 1,657.73 1,781.79 665.03

Investments. 7,037.24 6,558.88 2,956.32 1,839.83 769.17

Inventories 8,389.41 6,533.69 6,627.43 5,928.13 4,281.07

Sundry Debtors 270.21 607.96 212.89 930.18 173.79

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Cash And Bank 176.27 171.43 761.20 994.82 179.49

Loans And Advances 15,415.91 11,631.40 11,117.09 10,492.80 4,807.90

Total Current Assets 24,251.81 18,944.48 18,718.62 18,345.94 9,442.25

Current Liabilities 5,394.09 2,047.37 1,699.75 2,531.21 3,059.67

Provisions 967.27 1,435.66 1,458.64 1,255.16 723.25

Total Current Liabilities 6,361.36 3,483.03 3,158.40 3,786.38 3,782.93

NET CURRENT ASSETS 17,890.45 15,461.45 15,560.22 14,559.56 5,659.32

Misc. Expenses 0.00 0.00 0.00 0.00 0.00

TOTAL ASSETS (A+B+C+D+E) 28,870.03 25,467.86 21,989.79 19,655.55 7,422.10

Unitech

Unitech: Recently Ramesh Chandra, Unitechs Chairman hasdeclared the investment of $ 720 million by his company in the comingfour years to develop 28 hotels along with Marriott International. Themarket capitalisation of the company is Rs.16,867.40 crore.Its chiefactivities include construction, expansion of real-estate, consultancy inassociated sectors, hotels, electrical broadcast and informationtechnology.

Headed by: Ramesh Chandra, Executive Chairman

About: Established in 1972, Unitech is today Indias leading realestate developer in India. It is the first developer to have beencertified ISO 9001:2000 in North India.

Project Spectrum: Unitech offers diversified projects acrossresidential, commercial/IT parks, retail, hotels, amusement parks andSEZs segments. Unitech was the first real estate company to be partof the National Stock Exchanges NIFTY 50 Index. The company hasover 600,000 shareholders. Unitech and Norway based TelenorGroup came together to build Uninor - a telecommunication servicescompany providing GSM services across India.

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Latest: Has ventured into the infrastructure business by launchingUnitech Infra.

Capital Structure - Unitech Ltd.

Period Instrument Authorized Capital Issued Capital - P A I D U P -

From To (Rs. cr) (Rs. cr) Shares (nos)FaceValue

Capital(Rs. Cr)

2010 2011 Equity Share 800.0 523.3 2616301047 2.0 523.3

2009 2010 Equity Share 800.0 487.8 2438801047 2.0 487.8

2008 2009 Equity Share 800.0 324.7 1623375000 2.0 324.7

2007 2008 Equity Share 500.0 324.7 1623375000 2.0 324.7

2006 2007 Equity Share 200.0 162.3 811687500 2.0 162.3

2005 2006 Equity Share 25.0 12.5 12487500 10.0 12.5

2004 2005 Equity Share 25.0 12.5 12487500 10.0 12.5

2003 2004 Equity Share 25.0 12.5 12487500 10.0 12.5

2002 2003 Equity Share 25.0 12.5 12487500 10.0 12.5

2001 2002 Equity Share 25.0 12.5 12487500 10.0 12.5

2000 2001 Equity Share 25.0 12.5 12487500 10.0 12.5

1997 1999 Equity Share 25.0 12.5 12487500 10.0 12.5

1996 1997 Equity Share 25.0 12.5 12487500 10.0 12.5

1995 1996 Equity Share 25.0 12.5 12487500 10.0 12.5

1994 1995 Equity Share 25.0 12.5 12487500 10.0 12.5

1993 1994 Equity Share 15.0 10.9 10887500 10.0 10.9

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1992 1993 Equity Share 15.0 10.8 10804676 10.0 10.8

1991 1992 Equity Share 15.0 7.2 7208600 10.0 7.2

1990 1991 Equity Share 10.0 7.2 7208600 10.0 7.2

1989 1990 Equity Share 10.0 7.2 7208600 10.0 7.2

1988 1989 Equity Share 10.0 6.0 5992500 10.0 6.0

Holder's Name No of Shares % Share Holding

Promoters 1267023868 48.43%

Foreign Institutions 824924490 31.53%

General Public 343082921 13.11%



Foreign NRI 11357497 0.43%

Foreign Promoter 3822000 0.15%

Others 2275357 0.09%

NBanks Mutual Funds 1546229 0.06%


Profit & Loss - Unitech Ltd.


12

Months

12

Months 12 Months 12 Months 12 Months

INCOME:

Sales Turnover 1,340.41 1,849.49 1,767.27 2,486.79 2,441.74

Excise Duty 0.00 0.00 0.00 0.00 0.00

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NET SALES 1,340.41 1,849.49 1,767.27 2,486.79 2,441.74

Other Income 0.00 0.00 0.00 0.00 0.00

TOTAL INCOME 1,715.91 2,196.57 2,421.80 2,615.18 2,507.40

EXPENDITURE:

Manufacturing Expenses 884.14 920.51 568.06 981.25 853.98

Material Consumed 3.92 58.45 23.87 45.57 78.97



Administrative Expenses 94.14 64.70 49.83 64.51 42.35

Expenses Capitalised 0.00 0.00 0.00 0.00 0.00

Provisions Made 0.00 0.00 0.00 0.00 0.00

TOTAL EXPENDITURE 1,103.31 1,151.22 764.62 1,201.68 1,054.04

Operating Profit 237.10 698.28 1,002.64 1,285.11 1,387.69

EBITDA 612.60 1,045.36 1,657.17 1,413.51 1,453.35

Depreciation 6.68 5.95 10.04 8.58 4.54

Other Write-offs 0.00 0.00 0.00 0.00 0.00

EBIT 605.92 1,039.41 1,647.14 1,404.93 1,448.82

Interest 329.21 346.70 722.12 393.38 193.71

EBT 276.71 692.71 925.01 1,011.55 1,255.11

Taxes 218.09 171.13 216.98 334.83 361.27

Profit and Loss for the Year 58.62 521.58 708.03 676.72 893.84

Non Recurring Items 451.46 22.72 31.63 353.96 89.72

Other Non Cash Adjustments -1.84 -18.83 0.00 -0.3 0.44

Other Adjustments 1.84 18.83 0.00 0.38 -0.4

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REPORTED PAT 510.08 544.30 739.66 1,030.68 983.56

KEY ITEMS


Equity Dividend 26.16 48.78 20.44 40.58 40.58

Equity Dividend (%) 5.00 10.00 6.29 12.50 25.00

Shares in Issue (Lakhs) 26,163.01 24,388.01 16,233.75 16,233.75 8,116.88

EPS - Annualised (Rs) 1.95 2.23 4.56 6.35 12.12

Balance sheet - Unitech Ltd.Print


Share Capital 523.26 712.96 324.68 324.68 162.34

Reserves & Surplus 8,758.61 7,415.47 2,534.89 1,819.14 998.66

Net Worth 9,281.87 8,128.43 2,859.56 2,143.82 1,161.00

Secured Loans 3,566.83 3,907.54 5,931.02 5,506.45 2,839.67

Unsecured Loans 2,002.24 1,016.02 1,747.98 2,611.08 765.39

TOTAL LIABILITIES 14,850.93 13,051.99 10,538.56 10,261.35 4,766.06

Assets

Gross Block 154.27 151.09 148.63 132.05 99.87

(-) Acc. Depreciation 49.78 44.03 40.79 35.96 30.24

Net Block 104.49 107.07 107.84 96.08 69.63

Capital Work in Progress. 10,870.28 9,666.03 8,688.46 7,083.41 4,408.59

Investments. 2,054.02 1,654.15 1,954.94 1,397.99 518.93

Inventories 9.79 5.74 10.48 13.66 32.77

Sundry Debtors 1,679.67 1,007.74 793.00 739.74 97.55

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Cash And Bank 265.26 209.43 103.15 371.18 795.82

Loans And Advances 7,872.87 7,427.77 5,489.72 7,624.58 3,090.88

Total Current Assets 9,827.59 8,650.68 6,396.36 8,749.17 4,017.01

Current Liabilities 7,859.01 6,895.87 6,580.13 6,316.27 3,798.30

Provisions 146.44 130.07 28.91 749.03 449.80

Total Current Liabilities 8,005.45 7,025.94 6,609.04 7,065.30 4,248.10

NET CURRENT ASSETS 1,822.14 1,624.75 -212.67 1,683.87 -231.08

Misc. Expenses 0.00 0.00 0.00 0.00 0.00

TOTAL ASSETS (A+B+C+D+E) 14,850.93 13,051.99 10,538.56 10,261.35 4,766.06

Chapter No. 3

Trends in Real Estate

business

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Indian Real-estate industry has become one of the biggest investmentsectors over the past few years. Currently, it plays a major role in shaping

the countrys economy. This sector is witnessing a marked boon owing tochanging trends and developments. Some of the major factors responsiblefor the current upward movement of the Indian real estate graph are asfollows:

Steady expansion and development in the IT sector of India : InIndia there has been a constant expansion in the IT sector. VariousMNCs and corporate houses have come up that have given way to the

growth in the real-estate sector especially in the commercial propertysector. This has also provided better employment opportunities to thepeople of India and thus helping in the overall growth of the Indianeconomy and subsequently in the growth of the real estate.

Adoption of Foreign Direct Investment (FDI) policy: The growth inthe real estate sector of India largely depends on its government policies.Currently, the government of India has adopted Foreign Direct Investment(FDI) policy, which has allowed the coming in of the foreign investors inthe Indian real estate market. Some of the worlds famous builders aretaking keen interest in investing in the Indian real-estate market. Comingin of foreign builders promises better prospects in the Indian real estateindustry in terms of regulatory policy, efficient management, and the use

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of more advanced technology. This ensures that the Indian real estate hasa brighter future.

Easy access to bank loans: Today, various national andmultinational banks are present in India that has madethe home/property loans easily accessible. So, buying a property is notdifficult even for those belonging to middle-class. Thus, it has enabled theoverall growth of the Indian real estate.

Growth in Indian economy: Indian economy is one of the fastestgrowing economies of the world. It has a direct influence on the real-estate sector of India. Some of the major areas which have been greatlyaffected by the growth in Indian economy are Delhi NCR, Mumbai,Hyderabad, Chennai, Bangalore, Pune and Kolkata. This growth isobserved in all forms of property such as commercial, residential andindustrial.

Today, the investors from all the major sectors are getting attracted

towards the Indian the real-estate sector. This sector has become a centreof attention amongst all the corporate sectors of India. Owing to all therecent developments in the Indian real estate sector, it has moved fiveplaces upwards in world rankings.

The Indian economy has witnessed robust growth in the last few years and

is expected to be one of the fastest growing economies in the coming

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years. Demand for commercial property is being driven by India's economic

growth. Real estate in India contributes about 5 per cent to India's gross

domestic product (GDP). The total revenue generated in 2010-11 stood at

US$ 66.8 billion.

Demand is expected to grow at a compound annual growth rate (CAGR) of

19 per cent between 2010 and 2014Tier 1 metropolitan cities are

projected to account for about 40 per cent of this. Growing requirements of

space from sectors such as education, healthcare and tourism provide

opportunities in the real estate sector. FDI of more than US$ 9 billion was

infused in real estate in the last decade.

In 2010, over 11 per cent of total FDI in India was in the real estate sector.

There have been 110 deals in this sector during the period 2001 to the firsthalf of 2011.

Urban population has been increasing and is expected to cross 590 million

by 2030. Urbanization and growing household income are some of the

major factors that influence demand for residential real estate and growth in

the retail sector.

Investments

Real estate emerged as the popular sector for private equity funds whoinvested US$1,700 million in this sector during 2011. Private equity in real

estate projects will fetch considerable returns by next year-end or early

2013.

Some of the recent investments in this sector are mentioned below:

Sahara India has joined hands with the US-based Turner Construction

Company. The JV, Sahara Turner Construction, will build integrated

townships called Sahara City Homes and other Sahara India projects inIndia worth US$ 25 billion over the next 20 years

DLF acquired the additional 26 per cent stake in its joint venture company

DLF Hotels & Hospitality Ltd (DHHL)from Aro Participation Ltd and

Splendid Property Company Ltd, affiliates of Hilton International. At

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present, the company holds 74 per cent equity in DHHL

Pride Group of Hotels, which owns a chain of upscale mid-market and

business hotels is planning to set up a series of new properties and this will

involve an investment of Rs 1,000 crore (US$ 203.18 million) over the nextfew years. The company plans to have a mix of owned and managed

properties having 3,500 rooms by 2015-16

Government Initiatives

The foreign direct investment (FDI) up to 100 per cent is allowed with

Government's permission for developing townships and settlements

New home loan borrowers of up to Rs 1.5 million (US$ 30,477) will get Rs

14,865 (US$ 302) as interest subsidy from the Government, on thecondition that the cost of the house should not exceed Rs 2.5 million (US$

50,798)

Allowing 100 per cent FDI under the automatic route in development of

Special Economic Zones (SEZ), subject to the provisions of Special

Economic Zones Act 2005 and the SEZ Policy of the Department of

Commerce

In the Union Budget 2011-12, Mr Pranab Mukherjee, Union FinanceMinister presented various initiatives for the real estate sector, especially

focusing on affordable housing. Some of these initiatives are listed below:

Increasing the limit on housing loans eligible for a 1 per cent subsidy in

interest rates. Widening the scope for housing under "priority-sector

lending" for banks, making interest rates cheaper on them

Allocating substantial amount to the Urban Development Ministry for

spending on extension of Metro networks in Delhi, Bangalore and ChennaiEarmarking US$ 20.03 million for the urban infrastructure development

project. The Urban Development Ministry received US$ 1.5 billion, an

increase of US$ 68.53 million from the last fiscal 2010-11

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Road Ahead

Real estate plays an important role in the Indian economy. This sector

happens to be the second largest employer after agriculture and is

expected to grow at the rate of 30 per cent over the next decade. The sizeof the Indian real estate market is expected to touch US$ 180 billion by

2020.

The housing sector alone contributes to 5-6 per cent of the India's GDP.

Retail, hospitality and commercial real estate are also growing

considerably, providing the much-awaited infrastructure towards India's

growing needs.

According to a study by ICRA, the construction industry in India ranks 3rd

among the 14 major sectors in terms of direct, indirect and induced effects

in all sectors of the economy. A unit rise in construction spending

generates five times the income, having a multiplier effect across the

board. With backward and forward linkages to over 250 ancillary industries,

the positive effects of real estate growth spread far and wide. Therefore,

real estate acts as a catalyst for adding momentum to growth of the Indian.

New Delhi: The current global scenario might be one of gloom, with

markets in the US and in Europe on the brink of a double dip recession, but

interest in Indian real estate is still high among global investors, said Carlo

Barel di Sant' Albano, chairman of the board of global property advisory

firm Cushman & Wakefield. "If a private equity player with a good track

record comes up with a project in India, he will still find capital," he says. Of

course, the time taken to raise money has increased, as many international

investors are averse to investing at the moment. "But it is clear from all theinvestors we speak to that they are trying to figure out how to put money in

this part of the world, even today,"

Today Asia is a very critical part of any corporate or investors' strategic

plan. For Albano, India is at the centre of that strategy, alongside China

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because of its size and growth prospects. "If you look at the growth

prospects in other parts of the globe, given what is happening in the US

and in Europe, Asia is clearly an important driver for growth in the future,"

says Albano. Over the next few years, investor confidence in India is

expected to improve, as transparency and regulation improve. "This willpush more capital into real estate," he says. In India, foreign direct

investment in real estate already ranks fourth among other sectors, which

is a fairly high position considering the regulations that exist for FDI in real

estate. When one talks about investments, a comparison between India

and China is inevitable.

Albano points out that China is ahead in terms of investment in

infrastructure and India has some catching up to do in terms of

infrastructure. "This scale in different cities in China provides extra flexibility

and a bigger canvas for investors." India, on the other hand, is ahead in

terms of availability of human capital.

Gross Domestic Product : Housing, Real Estate Services andConstruction

(at 1993-94 prices) (Figures In Rs Crore)

Year 1993-

94

1994-

95

1995-

96

1996-

97

1997-98 1998-99 1999-00

Housing 43,507 44,706 45,958 47,252 48,585 49,968 51,391

Real EstateServices

317 333 351 370 390 413 437

Construction 40,593 42,830 45,496 46,452 51,195 54,342 58,728

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Total 84,417 87,869 91,805 94,074 1,00,170 1,04,723 1,10,556

Gross Domestic Product : Housing, Real Estate Services andConstruction

(at 1993-94 prices) (Share in Per Cent)

Year 1993-94

1994-95

1995-96

1996-97

1997-98

1998-99

1999-00

Housing 5.6 5.3 5.1 4.9 4.8 4.6 4.5

Real EstateServices

0.04 0.04 0.04 0.04 0.04 0.04 0.04

Construction 5.2 5.1 5.1 4.8 5.0 5.0 5.1

Total 10.8 10.5 10.2 9.7 9.9 9.7 9.6

Source : National Accounts Statistics 2001

Price Variations in Different cities

Price variations in Mumbai

MUMBAI MAR-04 MAR-05 MAR-06 MAR-07 MAR-08

CuffeParade

11500 18000 25000 35000 42000

Malabar Hill 15000 22000 28000 38000 46000

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Worli 8500 12000 18000 26000 32500

Bandra

(west)

8500 10000 13500 21500 26500

NaviMumbai

1 800 2300 2800 3500 5500

Price variations in Delhi/NCR

Delhi/NCRMAR-04 MAR-05 MAR-06 MAR-07 MAR-08

ShantiNiketan

1150015000 18000 22500 27000

Vasant Vihar 1100014500 17000 21000 26500

FriendsColony

60008000 10000 13500 18000

Gurgaon 2 0002500 3700 4850 6100

Nodia 2 000

2800 3700 4900 6850

Impact of Union Budget 2012 On The Mumbai Real EstateMarket

The Positiveso By allowing external commercial borrowings (ECBs) in the low-cost

housing segment, the supply of affordable housing projects willincrease in the outskirts of Mumbai in areas such as Karjat, Boisar,

Nalasopara, Virar, Dombivali etc. on the heels of increased liquidityfor budget home projects.

o The extension of 1% interest subvention scheme on housing loans upto Rs 15 lakh wherein the cost of the house does not exceed Rs 25

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lakh, for another year will also help sustain demand for affordablehousing in Mumbai.

o The increased allocation for highways and other infrastructure

projects will help boost development of Mumbais outskirts andincrease the supply of housing units there. This will result in pricestability and affordability over the long term. The investment-linkeddeduction of capital expenditure in affordable housing, proposed tobe raised to 150% from 100%, will also encourage more supply oflow-cost housing in the city.

o The reduction of the withholding tax on ECB interest from 20% to 5%will help Mumbais affordable housing segment by creating much-

needed liquidity for budget home developers. End users will havemore money available for home loans with the setting up of a creditguarantee trust fund to ensure better flow of institutional credit forhousing loans.

o The announcement of central assistance and Japanese participationin the Delhi-Mumbai Industrial Corridor project is a big plus. Areas onMumbais outskirts that lie along the corridor will see increased landvalues.

o By reinforcing the tax pass-through status for all types of VentureCapital Fund (VCFs), there will be renewed confidence levels of realestate private equity investors to invest in cities such as Mumbai(which has seen most of the PE investments post the GlobalFinancial crisis.)

The Negatives

o The overall cost of apartments in Mumbai is likely to go up becauseof the hike in service tax from 10% to 12%. This will render realestate in the city even less affordable bad news for those who werewaiting until the budget before buying homes.

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o The requirement of deduction of tax at source at the rate of 1% onpayment of consideration for purchase of an immovable property willimpact the cash flows of real estate developers.

o The lack of a decision on FDI in multi-brand retail will furtherdiscourage developers from constructing malls in the city. This willlead to increased rentals in existing malls which are performing well.It will also delay re-tenanting and re-positioning of existing failedmalls.

o The budget made no mention of re-introducing the 80 IB (10) taxbenefit scheme for smaller-sized units. This would have helped

developers reconfigure and offer smaller units, which is the need ofthe hour in Mumbai.

o Nor were any new tax exemption schemes for IT/ITES companiesmentioned. Such exemptions would have increased demand for thevacant IT parks all over Mumbai.

o The finance ministry ignored the urgent need for an increase in the

limit on tax deduction available on home loans interest from presentRs 1.5 lakhs.

o There was also no indication of the real estate sector being grantedindustry status, which would have brought down the borrowing costfor developers thereby reducing home prices in Indias mostexpensive city.

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Chapter No. 4

Impact of Dubai crisis onReal Estate business

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Following the passage of the long-awaited foreign property ownership lawin March 2006, a deluge of foreign money boosted Dubais ambitions.Europeans, including Russians, accounted for 20% of the buyers of allproperty categories. GCC, Arab nationals and UAE nationals make up28%, Asians 40%, and Iranians 12%, according to figures from GlobalRealty Partners . The overall foreign ownership index of property keptby Colliers International soared 116% from Q1 2007 to Q3 2008.From 2002 to 2008, Dubais property prices almost quadrupled, and large-scale developments turned Dubai into one of the fastest growing cities in

the world. Some of the biggest projects include Jumeirah Garden City(estimated cost: US$95 billion), Dubailand (US$64 billion), The Lagoons(US$25 billion), Palm Jumeirah (US$14 billion), and The World (US$14billion).

Then the global credit crunch hit. Amlak and Tamweel, the UAEs twolargest home finance companies, stopped offering new loans. The twomortgage lenders accounted for more than 50% of all mortgages in thecountry.Foreign investors suddenly disappeared at the end of 2008, as theglobal financial crisis hit the emirates. This caused transaction volumes to

plummet. The overall foreign ownership index was 50% down by Q4 2010,from its peak in Q3 2008. Almost half of all the construction projects in theUAE, worth around AED1.1 trillion (US$582 billion), have been either puton hold or cancelled, in response to falling demand and deterioratingmarket conditions. The table lists some of the megaprojects being delayedor cancelled:

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Universal City Dubailand Dubailand 2.2 billion On hold

Emerald

Gateway

Along Coast Road,

between Abu Dhabi

downtown and AbuDhabi International

Airport

Abu Dhabi

Municipality 1.9 billion On hold

Aqua Dunya Dubailand Dubailand 1.8 billion On hold

Dolphin CityIsland near Abu

Dhabi

Emirates

German Group1.7 billion On hold

Nad El ShebaRace course

5-km southeast ofDubai

Meydan LLC 1.3 billion Cancelled

Al FalahOutskirts of Abu

DhabiAldar Properties

0.72

billionOn hold

Falcon City

of WondersDubailand ETA Star

0.68

billionCancelled

DubaiExhibition City

Within the Jebel AliAirport City

n/a 0.45billion

Cancelled

However, with the economy already returning to growth, construction onsome halted projects is expected to resume by end-2011.

In an effort to help the market, the government has announced overAED165.25 billion (US$45 billion) worth of future projects, which includesinvestment in transport infrastructure. This is expected to create more jobsand increase demand for real properties.

New benchmark rate introduced

Mortgage interest rates in Dubai have, in the past, followed key US Fedrates, because of the peg to the US dollar. The dirham (AED) is pegged to

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the US dollar at AED3.67 = US$1. In 2008, when the Fed successively cutkey rates, the UAEs central bank was forced to track US monetary policy,causing inflation to hit a record high of 12.9%.

The Central Bank of the UAE set its first benchmark interest rate (overnightrepurchase rate) at 4.75% in September 2007. The new repo rate gives thecountry slightly more flexibility in responding to changes in the US Fedfunds rate.

In January 2009, UAEs benchmark rate was reduced to 1%, from 1.5% inDecember 2008, to mitigate the impact of the global meltdown.

Mortgage lending stops

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The UAEs mortgage market has expanded rapidly in recent years. Totalreal estate mortgage loans grew from 4.1% of GDP in 2001, to 15.2% ofGDP in 2008. In September 2008, total outstanding mortgage loans rose bya spectacular 97% to AED115.7 (US$31.5) billion from December 2007.

Then the global credit crunch hit. Banks and other mortgage lendersimposed tighter lending criteria; they increased interest rates, and reducedLTV ratios.

Amlak and Tamweel, the UAEs two largest home finance companies, havestopped offering new loans. The two mortgage lenders accounted for morethan 50% of all mortgages in the country.

Government to the rescue!

In September 2008, the UAE government made AED120 (US$32.7) billionavailable to shore up bank liquidity. In February 2009, Abu Dhabiannounced an additional AED16 (US$4.36) billion cash injection into theemirates five banks.

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"The first and most important agenda priority for the UAE is to fix theliquidity problem so that the banks can start lending again," notes aStandard Chartered Bank report. Government measures were insufficient,

it added, saying at least AED100 (US$27) billion more is needed to kick-start lending.

The government is also widely expected to help the real estate market.Now theres a role for the government to stimulate the (real estate) sectoras it did with the banking sector. It must stimulate the constructioneconomy, said Fatima Obaid Al-Jaber, CEO of Al Jaber Group.

Rent caps and the new rental index

In 2006, the peak of the property boom, the government introduced a rentcap of 15%, to control rent increases. Then in 2007, the rent cap wastighted to 7%. In 2008, the rent cap was again reduced to 5% in an effort tocurb inflationary pressures.

In January 2009, Dubais Real Estate Regulating Agency (RERA) unveileda new rental index to replace rent caps. Following this a new rental law wasreleased, establishing the rental index as a benchmark for rent increases.

In the Greens, the rental index places the annual rent of 2BR apartments

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between AED168,000 (US$45,777) and AED180,000 (US$49,046), and 3-

BR apartments at a range of AED200,000 (US$54,496) to AED260,000

(US$70,845). In the Arabian Ranches,rents for 4-BR villas vary between

AED320,000 (US$87,193) and AED350,000 (US$95,368).

In Jumeira Lake Towers, 3-BR apartments cost between AED240,000(US$65,395) to AED350,000 (US$95,368). In Marina, 3-BR apartmentsvary from AED220,000 (US$59,946) to AED300,000 (US$81,744).In Mankool, 3-BR flats rent for AED150,000 (US$40,872) to AED200,000(US$54,496) annually.

Rents and yields falling

Even the rental market is cooling. Homeowners unable to sell propertiesare renting units out, causing the supply of rental houses to rise sharply.

Rents for residential properties dropped 25% in 2008 from the previousyear, according to some estimates. Dubais most prestigious locations, likeDowntown Burj Dubai and Palm Jumeirah, were the worst hit, with rentsplunging as much as 33%.

Prices and rents in Dubai have both declined very significantly since ourlast survey in September 2009 and even then, they had fallensignificantly from 2008, according to research conducted by the GlobalProperty Guide. Prices for apartments typically range from aroundUS$3,700 to US$4,200, except on the very largest apartments, which are

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somewhat less highly priced. This compares with a range of US$6,650 toUS$7,300 at the peak of the boom.Overall, gross rental yields in Dubai are moderate at around 5.6% to 6.5%.

Yields for smaller-sized apartments have moved up, but not those for

larger-sized apartments

New index shows Abu Dhabi price falls

According to a new property index launched recently by the real estate

agents Cluttons, prices in Abu Dhabi were down by around 12% in the lastquarter of 2010 from the previous quarter.

The new index shows comprehensive price data for both villas andapartment sales over the past year. The index is based on prices andtransactions in ten leading residential areas in Abu Dhabi. Propertiesincluded were categorized into high-end (e.g. Raha Beach), medium (e.g.

Al Reef), and low end (e.g. Mohammed Bin Zayed City) according tospecification.

An important feature of the Index is that it only considers valuations andsales achieved, and excludes new launches, that are typically pricedhigher. This helps it reflect the real story and act as a true barometer of thestate of the market, said Harry Goodson Wickes of Cluttons.

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UAEs mortgage market springs back to life!

Perhaps surprisingly, banks and other mortgage lenders in the UAE arereturning to the market and offering new mortgage products.Tamweel , oneof the largest Islamic mortgage lenders, is back in the market, havingstopped trading its mortgage shares in November 2008 due to the globalcredit crunch.More fixed-rate mortgage products have been introduced. In addition, feefree products, which allow borrowers to switch to a new lender at a lowercost, have been offered starting during the last quarter of 2010.

The UAEs mortgage market has expanded rapidly in recent years.Mortgage loans grew from 4.1% of GDP in 2001, to 14.7% of GDP in 2010.In December 2010, total outstanding mortgage loans rose by 15.2% to

AED163.2 billion (US$44.44 billion) from December 2009. Loan-to-value(LTV) ratios are also increasing again, with some lenders offering as muchas 80% LTVs on some projects. In the first quarter of 2011, mortgage loans

were offered with interest rates ranging from 5.8% to 6%.

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Rent control survives, alas

In 2006, the peak of the property boom, the government introduced a rentcap of 15%, to control rent increases. Then in 2007, the rent cap wastightened to 7%. In 2008, the rent cap was again reduced to 5% in an effortto curb inflationary pressures.

In January 2009, Dubais Real Estate Regulating Agency (RERA) unveileda new rental index to replace rent caps. Following this a new rental law was

released, establishing the rental index as a benchmark for rent increases.

Then in January 2011, RERA issued Decree No. 2, allowing adjustmentof the rental index tables every four months to keep the rental values up-to-date which will also help in capping the rental rates.Landlords and real estate leasing companies are required by RERA toregister rental contracts on the newly-established e-registration portalsystem, the Ejari System , or face penalties for non-compliance. This will

enable the authorities to track the movements of rental values in Dubai andto construct a full and accurate picture of the market. In addition, RERAintroduced a rental increase calculator to assist tenants and landlordscompute their rent cap figures.

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On the other hand, in Abu Dhabi, the 5% rent cap was kept unchanged in2011 from last year, according to theAbu Dhabi Executive Council . Inaddition, some amendments were issued to laws concerning the tenant-landlord relationship. These include:

A lease will now be automatically renewed at the end of thecontract period unless either party requests it terminated before then.

The notice period to vacate a property is two months before theend of the contract term for residential properties.

Rents still falling

Residential rental rates are still falling. Homeowners unable to sellproperties are renting units out, causing the supply of rental houses to rise

sharply. Based on the latest report released byAsteco , a propertymanagement company:

In Dubai, apartment rents dropped by about 3% in Q4 2010from the previous quarter, and 17% from the same period last year

In Abu Dhabi, apartment rents fell by 7% q-o-q in Q4 2010, and16% to 30% from a year earlier

Annual rents in Q4 in Dubai ranged from AED23,000 (US$6,263) toAED120,000 (US$32,679) for one-bedroom apartments, to fromAED70,000 (US$19,063) to AED190,000 (US$51,742) for large three-bedroom apartments, according to Asteco.

On the other hand, annual rents in Abu Dhabi in Q4 ranged fromAED35,000 (US$9,531) to AED130,000 (US$35,402) for one-bedroomapartments, to from AED70,000 (US$19,063) to AED260,000 (US$70,804)for three-bedroom apartments.

Rents in specific developments:

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GDP growth for UAE was 3.2% in 2010, after a 3.15% contraction in 2009.

Economic recovery is expected to continue in 2011 with GDP growth of3.3%, which is of course far below the 9.3% average annual GDP growthprevailing from 2003 to 2008. Higher oil production and prices are expected

to boost the economy in 2011. Abu Dhabis economy is expected to grow by 3.8% in 2011,according to theAbu Dhabi Chamber of Commerce and Industry . Dubais economy is expected to expand by up to 5% in 2011,according to the Dubai Chamber of Commerce and Industry .

Inflation is expected to rise to 4.5% in 2011, due to higher commodity

prices. Although higher than the level in 2009 and 2010 (at 0.9% and 1.6%,respectively), this inflation rate is benign compared to the average inflationrate of 9.7% from 2005 to 2008.

The UAEs property market, which suffered one of the biggest crashesduring the global crisis, is gaining momentum. House prices have fallen byaround 60% from their Q4 2008 peak, according to Jones Lang LaSalle,but positive economic growth, strong government support, and mortgagelenders returning to the market are helping property prices stabilize, though

local analysts are generally pessimistic about future price prospects.The residential property price index rose slightly by 0.8% in Q4 2010 fromthe previous quarter, down 6% on a year earlier, according to ColliersInternational Middle East .During Q4 2010:

House prices rose by 0.9% during the quarter to AED10,344(USD2,817) per sq. m. (6% down on the year).

Apartment prices were unchanged during the quarter at

AED11,344 (USD3,089) per sq. m. (5% down on the year). Villa prices rose 3.3% during the quarter to AED 9,666(USD2,632) per sq. m. (2% down on the year).

Townhouses fell 3.3% during the quarter to AED 7,546(USD2,055) per sq. m. (21% down on the year).

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The total number of property transactions increased by 5% in Q4 2010 fromthe previous quarter, according to Colliers. Of the total Q4 transactions,villas constituted about 45%, followed by apartments (37%) andtownhouses (18%).

During 2010 real estate transaction values in Dubai plunged 65%,according to Jones Lang La Salle . And while demand fell, oversupply kepton rising. In Q3 2010, less than 600 transactions were completed,significantly down from 1,200 during the same period in 2009.

The completion of 36,000 housing units in Dubai in 2010 hassqueezed prices down.

The anticipated completion of 25,500 units in 2011 is expectedworsen the glut of residential properties.

Chapter No. 5

Conclusion

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The Real Estate explosion in the Indian real estate is in large part due to

the by the burgeoning outsourcing and IT and BPO industries, which are

bringing large amounts of cash. The underlying reason for all these moves

is that the Indian real estate is tremendously attractive, because of basic

demographics and a supply shortage. Truly Indian real estate is having adream run for last five years. Though there is a sort of saturation in the Tier

1 cities but the good news for Indian real estate is that Tier II cities started

growing with the IT Sector and the industrial sector investing in such

places. Thus Indian real estate is poised for a boom, taking the rest of the

economy with it.

The main problems of Dubai real estate werent really about the credit

crunch or lack of availability of funds. The main reason why the things

turned out that way in Dubai were lack of proper laws and regulations to

control the different market forces. Capitalism even under its freest form is

regulated and checked by laws in every country to ensure everyones rights

have been guarded.

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The notion that Indian real estate is expensive is based more on the cost of

undeveloped land, which is becoming a scarce commodity, than finished

residential or office space, which is still available at reasonable prices in

most places, except maybe places like Marine Drive in Mumbai or

Connaught Place in Delhi. Indian Real Estate will remain bullish for theforeseeable future.

ANNEXURE

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BIBLIOGRAPHY

http://www.google.com

http://www.wikipedia.com

http://www.managementparadise.com

http://www.investopedia.com/.

http://www.moneycontrol.com/
http://www.google.com/http://www.wikipedia.com/http://www.managementparadise.com/http://www.investopedia.com/http://www.moneycontrol.com/http://www.google.com/http://www.wikipedia.com/http://www.managementparadise.com/http://www.investopedia.com/http://www.moneycontrol.com/

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