Drivers for Future Growth

1. Drivers for Future Growth Ramesh Nair March 23rd 2007

2. Emerging Metrics Traditional Metrics • Family & Local Play • Single Asset Type Play • Mono / Oligopolies per city • Decisions – based on “Gut” • Pre – sell formula • Finance – “Traditional” • No Secondary Market • Debt support limited • “Corporatisation” • Tier II / Multi City Growth • Portfolio Approach • Increasingly Multi player • Decisions – Research based • Increasing Pvt Equity interest • Finance – Structured • REITS / MF to emerge. The Real Estate Industry in India…

3. Industry Overview – The Growth Factors

4. FDI in retail • Clear SEZ policy • Integrated City planning • Township Development • Relax FDI norms • Change Legal System • More govt land for devpt • Computerisation of records • Create clusters • More PPP’s • Township Development • Invest in infrastructure • Improve Public Transportation • Faster approvals Initiatives required from the government *SOURCE - CRISIL

5. Less of these…

6. More of these…

7. More of these…

8. Global Megatrends • Demography is destiny • Globalisation • Urbanisation

9. Slums are natural, they are inevitable Slums are created artificially, needlessly Conventional Wisdom vs Visionary Alternative Space is scarce; so, only a minimal space should be allowed even for the rich Only when the rich get large spaces can the poor hope to get their due Rural-urban migration is inevitable Rural-urban migration is unnecessary Capital creates jobs Employers create jobs Rural poor will migrate to cities only Rural poor follow wherever employers go Employers like only CBDs Basically, employers seek connectivity only Cities alone can supply large connectivity Dedicated bus lanes linking a loop of villages can provide similar connectivity Business must be at the city centre and residences far off at the periphery Businesses can be distributed around the loop and located close to residences Space is scarce, hence expensive. So, poor can have slums only Space is in surplus; so, land prices can be made low enough for the poor to afford

10. Need for a Strategy • Past strategies wont carry you through the next decade. • Before developing an effective strategy ask: • What’s happening in the industry? • What’s my position in the industry? • Some companies do better that others irrespective of industry. • Competitive forces include existing competition, new entrants, bargaining power of suppliers, tenants and investors.

11. Current Issues • Current success based on a very favorable environment. • Entry barriers low, so a lot of new competition coming in. • Development for a fee is emerging. • Investors backward integrating to become developers. • Real estate advisors helping increase landlord returns. • Tenants, investors and suppliers becoming smarter and more sophisticated. • Most developers still doing deals without a strategy.

12. Future - Focus • Have a sustainable competitive advantage. • Cost or differentiation. • Cost: Finance, develop and deliver at a lower cost. • Differentiation: Unique skills that help in premium pricing. • Decide on scope – project, location and tenant. • Different industries vary in profitability and its hard to have a competitive advantage in everything.

13. THANK YOU