Intro to Investing in Real Estate Sector #Thread #Investing
A rather complex sector to understand the business models
cc @dmuthuk @Vivek_Investor
Segments in this sector:
- Residential Segment
- Commercial Segment
- Retail Segment
- SEZ Segment
- Hospitality Segment
1/n
A rather complex sector to understand the business models
cc @dmuthuk @Vivek_Investor
Segments in this sector:
- Residential Segment
- Commercial Segment
- Retail Segment
- SEZ Segment
- Hospitality Segment
1/n
Segment 1 - Residential Segment is highly fragmented and contributes to around 75% to the Real Estate Sector
- 20000+ residential builders in the India
- National, Regional & Local focus
Godrej - National
Shobha, Prestige - South
DLF - North
Oberoi, Hiranandani - West
2/n
- 20000+ residential builders in the India
- National, Regional & Local focus
Godrej - National
Shobha, Prestige - South
DLF - North
Oberoi, Hiranandani - West
2/n
Segment 2 - Commercial
- Very few players
- Reputation & branded names often considered for huge establishments
- B2B Business model
Namely DLF, Prestige, Oberoi, Nesco, RMZ (Not listed)
3/n
- Very few players
- Reputation & branded names often considered for huge establishments
- B2B Business model
Namely DLF, Prestige, Oberoi, Nesco, RMZ (Not listed)
3/n
Retail Segment
- Warehousing & Office spaces (beyond commercial)
- Warehousing attracted private equity (PE) investments of US$ 971 million in 2020
Important for growing retail needs
Key players in commercial are involved in retail as well
ibef.org/industry/real-…
4/n
- Warehousing & Office spaces (beyond commercial)
- Warehousing attracted private equity (PE) investments of US$ 971 million in 2020
Important for growing retail needs
Key players in commercial are involved in retail as well
ibef.org/industry/real-…
4/n
Hospitality Segment
Construction of Hotels. Accor is a big player and the business model in this sector is generally build & lease
India currently has more than 35,000 hotel rooms above five star
Caters to premium & ultra-premium segment and growing gradually.
5/n
Construction of Hotels. Accor is a big player and the business model in this sector is generally build & lease
India currently has more than 35,000 hotel rooms above five star
Caters to premium & ultra-premium segment and growing gradually.
5/n
SEZ Segment
- Special Economic Zones to promote growth with special tax rebates
- India formally approved 425 SEZs out of which 265 are already operational. Typically we see a lot of IT companies as a part of these SEZ businesses
6/n
- Special Economic Zones to promote growth with special tax rebates
- India formally approved 425 SEZs out of which 265 are already operational. Typically we see a lot of IT companies as a part of these SEZ businesses
6/n
Based on the sector, the business models vary and the risk-return ratio also vary by the model
Land bank model
Development model
Joint Venture
Contractors
Project types include New projects, Redevelopment, Govt Driven etc.
7/n
Land bank model
Development model
Joint Venture
Contractors
Project types include New projects, Redevelopment, Govt Driven etc.
7/n
Geography and Segment
National - Godrej
Regional - discussed above
Tier 2 - Ashiana, Eldeco
Luxury - Sothebay's
Mid-range - Purvankara
Affordable - Kotlepatil
To manage the customer perception, often the players create sub-brands
Ex: Puravankara
8/n
National - Godrej
Regional - discussed above
Tier 2 - Ashiana, Eldeco
Luxury - Sothebay's
Mid-range - Purvankara
Affordable - Kotlepatil
To manage the customer perception, often the players create sub-brands
Ex: Puravankara
8/n
How to read this sector? Some key metrics
Residential Real Estate Sector
- Inventory to Sales conversion cycle
- Area booked for construction
- Rental yield
- Realization - Value per square foot sold
- Advances & Collection
- New project roadmap
9/n
Residential Real Estate Sector
- Inventory to Sales conversion cycle
- Area booked for construction
- Rental yield
- Realization - Value per square foot sold
- Advances & Collection
- New project roadmap
9/n
Commercial Real Estate Sector
- Cost of construction to Rental Yield
- Inventory to Sales conversion cycle
- Inventory with-held (Early stage vs. late stage)
- Certifications RERA, LEED etc.
Debt is often seen in reality businesses due to huge upfront construction costs
10/n
- Cost of construction to Rental Yield
- Inventory to Sales conversion cycle
- Inventory with-held (Early stage vs. late stage)
- Certifications RERA, LEED etc.
Debt is often seen in reality businesses due to huge upfront construction costs
10/n
Reality OUTLOOK in India
India is a growing and its a good accelerator for infrastructure and reality growth.
11/n
India is a growing and its a good accelerator for infrastructure and reality growth.
11/n
Now where and how to invest??
Most of the experts say, Real-estate is a cyclical business. Indeed, its true and one needs to understand the cycles to invest in Real-estate.
12/n
Most of the experts say, Real-estate is a cyclical business. Indeed, its true and one needs to understand the cycles to invest in Real-estate.
12/n
India is currently at juncture of best affordable housing in 2.5 decades which will lead the growth forwards
13/n
13/n
Both residential and commercial real estate businesses are cyclic irrespective of builder class.
Indirect way to play this sector is through Ancillaries, Housing Finance Companies etc.
Even if the new demand in real estate goes down, the after-market keeps them stable
14/n
Indirect way to play this sector is through Ancillaries, Housing Finance Companies etc.
Even if the new demand in real estate goes down, the after-market keeps them stable
14/n
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