INDIAN REAL ESTATE - Indian Real Estate.pdf · Deeppp Indian Real Estate Relationshi ps Diversified...
Transcript of INDIAN REAL ESTATE - Indian Real Estate.pdf · Deeppp Indian Real Estate Relationshi ps Diversified...
Confidential and for private circulation only
INDIAN REAL ESTATE
AN ATTRACTIVE ALTERNATIVE INVESTMENT
IBCL EventLuxembourg1st December 2009
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Confidential and for private circulation only
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
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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
Confidential and for private circulation only
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
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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
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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
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Real estate sector to see a FDI capital infusion of $8 bn by end of 2009
Confidential and for private circulation only
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
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Confidential and for private circulation only
INVESTMENT OPPORTUNITY & STRATEGY
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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
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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
MIXED-USE COMMERCIAL
EMERGING REAL ESTATE
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
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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)
MIXED-USE COMMERCIAL
EMERGING REAL ESTATE
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
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Apply intense asset management to create value
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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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Confidential and for private circulation only
PLUS CAPITAL – An Overview
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Confidential and for private circulation only
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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Confidential and for private circulation only
Rising India Realty Fund
Fund OverviewIndia focused real estate fund which will invest in urban real estate development projects across residential and commercial
assets
PLUS CAPITAL PROFILE
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
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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
PLUS CAPITAL PROFILE
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
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p y p y p yFDI Complaint Real
Estate Projects
Confidential and for private circulation only
Questions ?Questions ?
Vivek BansalF d & M i Di tFounder & Managing DirectorPLUS CapitalPhone: +91-9810587878Email: [email protected]
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Confidential and for private circulation only
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
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a definitive Prospectus and all related agreements and documents.