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Outlook on Real Estate and Housing Finance. CAFRAL Round Table Conference October 7, 2011. Contents. Economic Growth and Income. Aspirations of the Indian Consumer. Housing Industry and Home Finance Outlook. Driving Real Estate Growth: Way Forward. Contents. Economic Growth and Income.

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slide1

Outlook on Real Estate and Housing Finance

CAFRAL Round Table Conference

October 7, 2011

contents
Contents

Economic Growth and Income

Aspirations of the Indian Consumer

Housing Industry and Home Finance Outlook

Driving Real Estate Growth: Way Forward

contents1
Contents

Economic Growth and Income

Aspirations of the Indian Consumer

Housing Industry and Home Finance Outlook

Driving Real Estate Growth: Way Forward

gdp and income growth
GDP and Income Growth

` trillion

Share of Construction in GDP at 8.1% in 2011

73.1

61.3

52.8

45.8

Per capita income increased by 51% over the last 4 years

Savings rate at 36% of GDP

10-11

09-10

07-08

08-09

Economic growth has favourably impacted savings and income levels

GDP at current market prices (factor cost)

Source: RBI

breakup of savings age of gdp
Breakup of Savings (%age of GDP)

National Savings 36.0%

Household25.1%

Corporate10.9%

Financial Assets12.6%

Private sector8.7%

Physical Assets12.5%

Public sector2.2%

Physical assets are a major investment avenue for Indian households

Physical assets imply houses, jewellery, etc.

Financial assets include Bank deposits, stock, etc

Source: RBI - As %age of GDP current prices (2009-10)

5

breakup of household savings
Breakup of Household Savings

Savings in Physical Assets (%age of GDP)

Physical savings continue to show robust growth

12.5%

11.5%

10.1%

Savings in deposits and insurance have increased 3 fold in 2 decades

99-00

09-10

89-90

Real-estate has consistently been a significant savings avenue

Physical assets imply houses, jewellery, etc.

Financial assets include Bank deposits, stock, etc

Source: RBI - As %age of GDP current prices (2009-10)

contents2
Contents

Economic Growth and Income

Aspirations of the Indian Consumer

Housing Industry and Home Finance Outlook

Driving Real Estate Growth: Way Forward

aspirations of the indian consumer
Aspirations of the Indian Consumer

Affordability and accessibility

Civic infrastructure and connectivity

Consumer protection and Transparency

Assurance of build quality and delivery standards

Title clarity and legal protection

8

8

contents3
Contents

Economic Growth and Income

Aspirations of the Indian Consumer

Housing Industry and Home Finance Outlook

Driving Real Estate Growth: Way Forward

supply and absorption
Supply and Absorption

Supply (H1 2011)

Absorption (H1 2011)

Mumbai Metro Region

45,096

53,859

NCR

59,271

56,829

Bangalore

21,942

19,158

Chennai

24,342

11,964

Hyderabad

10,854

15,183

Kolkata

7,461

4,917

Pune

15,645

15,666

Demand-supply balance is micro-market specific

Source: JP Morgan & Prop-Equity estimates

10

price index movement
Price Index Movement

NCR

Bangalore

131

122

108

108

96

100

100

93

16%

(7%)

12%

22%

(4%)

12%

2008

2009

2010

2011

2008

2009

2010

2011

Pune

Mumbai

171

122

130

103

100

98

100

98

32%

32%

(2%)

5%

(2%)

19%

2008

2009

2010

2011

2008

2009

2010

2011

Prices have increased substantially in 2011

All estimates as on March 31

11

price index movement1
Price Index Movement

Chennai

Hyderabad

134

110

99

100

100

93

97

101

22%

4%

11%

5%

(1%)

(7%)

2008

2009

2010

2011

2008

2009

2010

2011

Kolkata

157

109

98

100

44%

10%

(2%)

2008

2009

2010

2011

Property prices in Hyderabad have been relatively flat

All estimates as on March 31

12

home finance disbursements
Home Finance Disbursements

In ` tn

Annualized Growth Rate

28%

20%

13%

15%

3.00

1.96

2.00

1.73

1.44

3.40

1.13

1.00

Annual Disbursements

11-12

15-16

10-11

08-09

09-10

Disbursements expected to maintain a CAGR of 15%

Source : CRISIL

contents4
Contents

Economic Growth and Income

Aspirations of the Indian Consumer

Housing Industry and Home Finance Outlook

Driving Real Estate Growth: Way Forward

potential drivers of real estate growth
Potential Drivers of Real Estate Growth

Accelerating growth in urban centers

Push from increased infrastructure investments

Policy and administrative support

Increase in Credit Flow

potential drivers of real estate growth1
Potential Drivers of Real Estate Growth

Accelerating growth in urban centers

Rising consumer incomes will provide significant push to housing demand

Policy and administrative support

Bringing FSI1 norms to global standards can create substantial floor space

Greater affordability will be a crucial factor

1 FSI: Floor Space Index

16

potential drivers of real estate growth2
Potential Drivers of Real Estate Growth

Push from increased infrastructure investments

Bringing urban infrastructure under priority sector to increase capital availability

Increase in Credit Flow

Effective urban planning based on a long term development roadmap for each city

Increased investments in transport, healthcare and education

17

potential drivers of real estate growth3
Potential Drivers of Real Estate Growth

Property Registry will provide substantial risk mitigation

Push from increased infrastructure investments

Credit Bureau penetration is facilitating enhanced credit flow

Title Insurance and Mortgage Insurance will significantly reduce risks

Increase in Credit Flow

18

potential drivers of real estate growth4
Potential Drivers of Real Estate Growth

Real Estate Regulation Act: Encumbrance clearance and delivery protection to consumer

Accelerating growth in urban centers

Adoption of independent project rating standards & quality assurances by developers

Increased supply through rental housing projects

Land Acquisition Bill can enhance clarity and transparency

Policy and administrative support

19

summary
Summary

Income growth will continue to drive real estate growth and housing demand

Imperative to focus on urban planning and increasing infrastructure investments

Unlocking supply through FSI liberalization, rental housing schemes, etc is necessary to increase affordability

Need for strengthening consumer protection through a mix of policy, legislative and industry level initiatives

20

20