Finance in Real Estate

Manish Nagori

Contents

Manish Nagori

•Overview of the market

•FDI

•Government Relief

•Next-gen Financing Options

•Benefits of REITs and REMFs

Manish Nagori

Real Estate Market• Real estate is one of the fastest growing sectors in the Indian economy• Contributes about 5% to India's GDP• The country's economic growth is driving the demand for real estate• Demand for residential space is expected to grow at a CAGR of 19%

between 2010 and 2014

Source: IBEF March 2014 Real Estate report

Manish Nagori

FDI- Foreign Direct Investment• Real estate sector is the fourth largest sector in terms of FDI in the

country• From April 2012-January 2013, the sector accounted for 8.8 per cent of

total FDI inflows into India• FDI in the sector is estimated to grow to US$ 25 billion in the next 10 years

Source: IBEF March 2014 Real Estate report

Manish Nagori

Government ReliefHousing for economically weaker sections:• Allocation of USD1.1 billion for Rural Housing Fund and USD0.37 billion for

Urban Housing Fund in FY14 budget

FDI :• The govt. has allowed FDI of up to 100 % in development projects for

townships and settlements • FDI of up to 100 % is allowed in the hotel and tourism sector through the

automatic route

Ease in housing finances:• Deduction of up to USD 1,841 on interests payable on home loans of up to

USD 46,032 announced in the Union Budget 2013–14

Source: IBEF March 2014 Real Estate report

Manish Nagori

Next-Gen Financing OptionsReal Estate Mutual Funds (REMF)• Functions like any other mutual fund• REMF invests directly in property or indirectly in the equity of real estate

companies instead of investing in stock or bonds

Real Estate Investment Trust (REIT)• A security that sells like a stock on the major exchanges and invests in real

estate directly, either through properties or mortgages• REITs receive special tax considerations and offer investors high yields• Highly liquid method of investing in real estate

Manish Nagori

Benefits of REITs and REMFs• Capital availability for real estate and infrastructure projects• Entry to small investors due to high liquidity and small investor size• Diversification benefits in portfolios• Dividend income and long term capital appreciation• Attractive to institutional investors due to transparency and professional

management

Manish Nagori

Thank You