Convoyage December 2012

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From the Editor's Desk

It

gives us an immense pleasure to introduce you to the new version of Convoyage. Keeping with

the tradition of JBIMS, the magazine is now in hands of an excited new bunch of first year management students. The goal of this magazine is to inform the readers about what's hot and happening in the consulting world, engage them in engrossing case studies and contribute to their consulting knowledge base.

The last month marked a great success of Conflux, the November 2012 edition. It was an intra college case study challenge. We are delighted by the overwhelming participation from both junior and senior batches. We look forward to organizing such events in future as well. As you might have noticed, the consulting club now has a page in Facebook. Through this page we are planning to provide news from the consulting business, case studies and notification of other events happening in the club. We also plan to connect to JBIMS Alumni and people from other B-Schools through this forum.

We are also pleased to introduce a video section in the new magazine. Here we would be featuring interviews with eminent consultants and other dynamic contents. It's nice to be a part of the budding new consulting club in JBIMS. Strategizing the modus operandi and engagement programs gives us a taste of true consulting experience on its own. We invite all of you to be a part of the consulting club - the newest kid of the block. We would be looking forward to your contribution to the magazine and the activities of the consulting club. Wish you all a merry x-mass and a happy new year!

Jyotirmoy Mukherjee, MMS1

Cover

Sector Watch: Real Estate

Story

b y Jyotirmoy Mukherjee

Real estate sector laid golden bricks in Indian economic growth story for a long time. Rapidly increasing population, industrialization and organized retail – all have contributed towards a tremendous interest and growth towards the real estate business. We are living in a relatively young country with high purchasing power parity. This has made India a lucrative destination for property investors. Although, this sector too has witnessed a major traction after 2008 due to the global economic crisis. However, recent policy changes like introduction of FDI and housing bill are resulting in steady pickup in the growth momentum.

L et's look at the major growth drivers –

The real estate industry can be divided into four major segments –

R esidential
Favourable demographic trends like rising income levels, smaller family size and rapid urbanisation has contributed towards increased demand in residential housing. This is paired with consumer credit availability. As per RBI data, the outstanding gross bank credit for personal housing loans is growing at a CAGR of 20% from 2005.

Decreasing
Household Size
6.5
6

6.2
5.95
5.7

5.5

5.8
5.6
5.4

Increasing Income
100%

5.6
5.4 5.5

80%

1981
Urban

1991
Rural

2006
Total

3%
19%

41%

43%
35%

22%

2005

2015F

2025F

0%
1995

5

1%
40%

54%

50%

1%
2%
18%

10%
32%
36%

500000

Urban Population % of Total
Population
40%
17%

18%

20%

23%

26%

1951

1961

1971

1981

1991

30%
20%

29%

31%

34%

2001

2011

2021F

10%
0%

However, this sector has witnessed a major backlash after 2008 global economic crisis. Developers and buyers are both reeling under the pressure of the adverse economic conditions.

Captial Value Index for 10 Major
Cities
200
150
100
50
0
2005 2006 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012
H1 H2
H1 H2
H1 H2
H1 H2
H1

Indexed to 2005
The increasing interest rates have contributed to further distress. The average capital value has remained flat between 2011 H1 and 2012 H1 due to an increased number of transactions are being declined by the buyers. For this segment the supply of 2.0 bn sq. ft. is expected to come by 2014. Whereas,...
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