India Now! More Than Ever

INDIA, the worlds largest democracy celebrates over 65 years of democracy, independent impartial judiciary and stable governance. Characterized by a mature political economy largely untouched by world events, with development as its core agenda, India is the 2nd fastest growing economy, and the rising hope of a world in recession. 20 YEARS. 7 GOVERNMENTS.6 PRIME MINISTERS. 1 AGENDA.

India : global competitive position Indias GDP estimated to grow at a higher rate of 6.7% in 2013-14, on revival in consumption, in comparison to 5.5% estimated for fiscal 2012-13.

Some indicators of market robustness:

7thlargestretailmarketintheworld. 4thintheworldinpurchasingpowerparity(PPP). Indianluxuryrealestatemarketgrowingby20%eachyear. 153,000millionaires:ranked12th. Highestgrowthrateinmillionairepopulation:20.8%. Increasingurbanpopulation:projectedtohave68citieswithpopulationover1mn. Risingmiddleclasspopulation(keydemanddriver):200-300mn. Plannedinvestmentinconstructionandinfrastructureovernext5years:$500bn. Indianretailexpectedtoreach$637bnby2015.

* Source: National Council for Applied Economic Researchs (NCAER), Capgemini and Merrill Lynch

Infrastructure :Investmentininfrastructureexpectedoverthenext5yearsisprojectedataround$1trillion.

Destination attracting highest number of unlisted, closed-end funds thatfocus on a single country.

Most preferred choice among emerging markets.

*Source : McKinsey Global Institute Report

Retail : The Indian retail industry has experiencedgrowthof10.6%between2010and2012andisexpectedtoincreaseto$750-850bnby2015.

Retail business in India is estimated at around$550bn,withorganizedretailestimatedat$28bnat5-7%penetration.

Penetration of organized retail is estimated at about 14% with a 12% rate of growth per annum.

*Source: Knight Frank

A. FDI in specialty stores: Multi-brand organized retail in specialty stores such as Consumer Electronics, Furniture and Furnishing, Footwearetc.areexpectedtoexpandandmatureinthenextfewyears.

B. Dominance of unorganized retail: Flexiblecreditoptionsand convenient shopping

locations will help traditional retail to continue its dominance.

C. Growth in small cities and towns: Stiff competition and saturation of urban marketsisexpectedtodrivedomestic retail players to tap the potential of small cities.

* Source : Deloitte

Future trends :

Drivers of growth and development

Luxury : TheluxurymarketinIndiaispeggedtogrowat25%in2013till2015andlikelytotouch$15bnfromthecurrentlevelof$8bn.

ThenumberofUltraHighNetworthHouseholds,withaminimumnetworthof$5mnisexpectedtotripleto286,000innext5yearswitha5-foldincreaseintheirnetworthtoINR235trillion.

HNIswilldoubleby2015toover400,000withacollectivewealthof$2645bn.

Almost40%oftheinvestmentsmadebyHNIsinIndiaareinrealestate.ForDelhi-NCR,thisfigureismore than 50%.

* Source: Jones Lang LaSalle (JLL)

Real Estate : Residential construction constitutes 17% of total construction in India. In 2010, the construction industryinIndiawasestimatedtobeworth$129bn,accountingfor7.8%ofGDP.

Indias prime property market was inexorablydrivenbydemographicchange, with the number of wealthy households forecast to increase to 11 mn by 2013, compared to 3 mn in 2003

The residential construction marketisexpectedtogrowbyaCAGR of 10% to 2015, supported by single-familyhousing(10%CAGR).

Indian Residential Construction Market segmentation Forecast by Category in USD mn

2010 2011 2012f 2013f 2014f 2015f

Residential construction (Total)

21,352 23,197 25,249 27,723 30,624 33,757

Single-FamilyHousing 10,826 11,752 12,805 14,071 15,547 17,151

NewMulti-FamilyHousing 6,794 7,401 8,080 8,894 9,8512 10,885

Residential Building Redevelopment

3,732 4,045 4,364 4,757 5,225 5,720

Key Players : Domestic

DLF, Unitech, Tata Projects, Lodha, Sobha Developers, Shapoorji Pallonji, India Bulls Real Estate,HIRCO,RahejaDevelopers.

Global Majors :Dubai-based DAMAC Properties to invest up to 2.9bninIndia.

MerrillLynch&Coacquire49%equityinsevenmid-income housing projects of Indias largest real estate developer DLF in Chennai, Bangalore, Kochi and Indore for 243 mn.

UAE-based real estate company Rakeen and Chennai-basedmineralfirmTrimexGroup form joint venture, Rakindo Developers, whichwillinvestover3bnoverthenext5years.

DLFformsjointventurewithLimitlessHolding,apartofDubaiWorld,todevelopa9bntownshipproject in Karnataka.

GulfFinanceHouse(GFH)toinvestover1bnin a green field site close to Navi Mumbai.

TheindustryisprojectedtogrowataCAGRof80%through2012-2014andaround9,000unitsofluxuryhousingcomplexesareslatedtobelaunchedoverthenext2-4years.

Thetotalvalueofluxuryhomes,launchedin182luxuryresidentialapartments,offeringatotalof25,570unitsacrossthetop7citiesofNCR-Delhi,Mumbai,Bangalore,Chennai,Hyderabad,PuneandKolkatain2008-2012wasaround$30bn.

Project watch :World One by Lodha Group in partnership with Armani Casa - worlds tallest residential tower with117floors.Apartmentcost:around$3mn;mansioncost:$15mn

Orbit Arya by Orbit Corporation - 27-storeyed residential tower on Nepean Sea Road, a prime location in Indias financial capital. Apartmentcost:around$18mn.

London-basedrealestateplayer,HomesteadhasannouncedanewluxuryresidentialprojectinGurgaon, in association with sports icon, Maria Sharapova.

Sunteck has tied-up with Disney Consumer ProductstolaunchDisneyInspiredHomes.

*Source: Jones Lang LaSalle

Luxury Housing

Affordable Housing : ATechnicalGrouponUrbanHousingShortagehasestimatedthatthetotalhousingshortageinthecountryis18.78mnunitsin2012.

ThedemandforaffordablehousingisexpectedtogrowataCAGRofaround13%between2011-2013(RNCOS)andwouldexceed2mnunitsacrosskeycitiesinIndiawith80%ofdemandexpectedtooriginatefromthe$6,700-10,000incomegroup.Affordablehousingisestimatedtoreachamarketsizeofover$67bnbyendof2012(KnightFrank).

Affordable housing will be a key factor in driving the sector and we have already started working on progressive solutions in this area for effective and customized implementation of such projectsKumarGera,Chairman,ConfederationofRealEstateDevelopersAssociationsofIndia(CREDAI).

Project watch :UnitechexpandingintotierIIcitiesMohaliandBhopal.Ansal launches projects in tier II cities Meerut, Jhansi, Indore, Jodhpur.25% of Unitech project launches in non-metros.

Upper mid market segment not lagging . . .RealtymajorAnsalProperties&InfrastructureLtd.planstoinvestabout$330.8mnoverthenext3yearsonexpansionofintegratedtownships.Supertechwillinvest$880.5mnon15realtyprojectsacrossNorthIndiainthenext2years.Thai real estate developer Pruksa Global has incorporated a wholly-owned subsidiary in India, PruksaIndiaHousing,withplanstoinvest$224mninIndiaandhasannounceda26-acrevillaandrow house project in Bengaluru.

Retail Real Estate : Major cities Mumbai, NCR-Delhi, Bangalore, Chennai,Pune,HyderabadandKolkatawillseetheadditionofcloseto9.5mnsq.ftofmall space in 2013. The absorption is forecast totouch6.8mnsq.ftand7.1mnsq.ftin2013 and 2014 respectively.

The demand for good quality mall space is fuelled by the growth in organized retail and the entry of international retailers into India supported by increasing disposable incomes, rising consumption and shopping convenience as drivers.

Mumbai, NCR-Delhi, Bangalore and Chennai togetherabsorbed81%ofthetotalretailspace in 2012 in comparison with 70% in 2011.

New entrants :Real estate major DLFs subsidiary DLF Brands will bring Chicago-based Claires Stores Inc to India and open 75 stores over 2011-16.

French retail chain, Carrefour has entered India with lease deals across 10 to 12 sites.

RPG-owned Spencers Retail plans to set up 15-20 new stores, all-India, in 2011-12.

SparHypermarkets,thefoodretailchainofDubai-based Landmark Group, has invested $51.31mninsettingup5hypermarkets.

* Source: 2012 Fitch Report

2013isexpectedtobringalarger-than-usualnumberofNRIinvestorsintothecommercialspacearena.NRIsarecurrentlyenthusedbyprevailingexchangeratebenefitsandthefactthatcommercialrealestatecapitalvaluesarestill15-25%undertheir2007-08peaklevels.Cities such as Mumbai, NCR-Delhi, Bangalore and Chennai saw 72.5% total commercial space absorption in 2012. All-Indiademandforofficespaceisexpectedtoreach180mnsq.ft.by2013in7majorcities:Mumbai,NCR,Pune,Bengaluru,Chennai,HyderabadandKolkata,cateringto75%oftotaldemand.

Project Watch :KanakiaSpaceshasjustcompleteda$85mn,1.2mnsq.ftprojectinAndheri,Mumbai,withthelargestsinglefloorplateof1,60,000sq.ftinthecountry(0.7kmlong;andmorethan3.5acres).

NCC Urban Infrastructure Limited, has over 10 projects with a total built-up area of 2.5 mn sq.ft. in Bangalore,Chennai,HyderabadandKochi.

ManjeeraConstructionsLtd.,Hyderabadplanstodevelop$134mn,1.8mnsq.ftmixeduseproject,ontheKukatpally-HitecCitycorridor.

* Source: 2012 Fitch Report

Commercial Real Estate :

Tourism : India, after China, is considered one of the most lucrative hotel markets in the world and has the 2nd largest construction pipeline in Asia. India has an estimated 170,000 hotel rooms of which around60,000arebranded.Evenwiththeexpectedadditionofanother60,000hotelrooms(acrosssegments)overthenext3-5years,theindustryisexpectedtofallshortofmeetingthelongtermdemandsofaneconomygrowingat7-9%p.a.

Key drivers : Growing affluence and the increasing role India isexpectedtoplayintheglobaleconomyarelikelytodriveboth leisure and business travel in the coming years.

TheIndianHospitalityindustry,estimatedat$17bn,contributes2.2%ofIndiasGDP.Thesectorisexpectedtogrowto$36bnbytheendof2018.Ofthetoptwentyglobalbrands(intermsofnumberofhotels),around18brandsarealreadypresentinIndia.

In2009,HotelconstructioninIndiaaccountedfor23%oftotalAsiaPacificconstructionprojects.

Project watch:Theworldslargesthotelgroupbynumberofrooms,IHG,willlaunch19HolidayInnExpresshotelsin India by 2016.

Starwood operates under brands such as Le Meridien & Sheraton and intends to set up 100 hotels by 2015.

Accor,aglobalhotelchainwhoispushingitsmid-marketbrands,planstoopen81hotelsby2015.

One of the largest conglomerates in India, Tata Group, is planning to open over 40 budget hotels before 2012.

Hospitality :

Indiaisranked8thintermsofconsumptionintheworld.Theorganizedfurnitureindustryisestimatedataround$8billionandisexpectedtogrowataCAGRofabout25-30%annually.ThemodularfurnituremarketinIndia,estimatedatabout$160mn,isdominatedbybiggerplayerslikeGodrejandBPErgo.Themarketsizeoftheinternationalrangeofpremiumfurnitureisestimatedtobeworthabout$20mn, and is serviced by foreign players. The current imports are mainly from Italy, Germany, Spain, China, Korea, Malaysia, Indonesia, Philippines and Japan.

The furniture market in India is mainly concentrated in A, B and C class cities.

Itisestimatedthatthetop784urbancentrescontribute41%tothetotalconsumerfurnituremarket.

A and B type cities together contribute 33% of the total market.

There are about 5000 firms in the domestic organized sector, and nearly 10500 importers of furniture.

IndiaimportsaroundUS$150mnworthoffurniture,growingrapidlyandcateringtourban,affluent households.

Furniture

Office FurnitureThe Indian office furniture production is estimated at around$1.6bn,with40%beingoperativedesking.Otherproductsincludeseating,executivefurniture,cabinetsand office storage, filing systems, wall-to-wall units, furnitureforcommunicationareas.Itisexpectedtogrowattherateof10-15%overthenext3-4yearsdrivenby demand from modern work spaces, IT-ITeS, retail, healthcare and government infrastructure spending.

The premium furniture market, dominated by internationalsuppliersHermanMiller,SteelcaseandHaworth,areaggressivelytryingtofindaspaceinthissegment through domestic tie-ups.

International tie-ups :Wipro hires international designers Eric Chan and Tim Wallace to launch Startline range of products.

RockworthSystemsFurniture(India)Pvt.Ltd.,ajointventure between Dubai-based Al Reyami Group and Thailand-based Rockworth Public Company Limited, set up its first manufacturing facility in India at Sri City SEZ, a multi-product special economic zone.

Major Players : Furniture retailing giants : Pantaloon, Shoppers Stop, Trent, RPG, Vishal Retail, Reliance and Tata group.

Industry watch :Godrej & Boyce Manufacturing Co Ltd,BPErgo,Featherlite,Haworth,Style Spa, Renaissance, Millenium Lifestyles, Durian, Kian, Tangent, Furniture Concepts, Furniturewala, Zuari, N R Jasani & Company and PSL Modular Furniture.

An overview of the interiors sectors

FurnishingsTheIndianhomefurnishingsmarketisestimatedat$3.5bnandisexpectedtoreach$5.6bnby2015.Theluxuryfurnishings market comprises 3% of the market and is growingat25-30%perannum.Highdemandfromminimetros and tier-II cities.

Whos buying? India has seen a shift in consumer profile for luxuryfurnitureandfurnishings.Earlier,themainclientelewere the usual suspects: industrialists, Bollywood celebrities orluxuryhotels.Butnow,CEOsofMNCsandbanks,realestate barons and well-heeled socialites are the new consumersofluxury.

CeramicsIndia ranks in the top 3 in ceramic tile production in the world. The market share of India has risen from a little over 2.7% to 5.6%.

A major change in the ceramic tiles industry was the introduction of vitrified and porcelain tiles which accounted for 50% of the total tile sales by value. These new products and the conventional wall and floor tiles have together made the organized sector grow to a formidable 1150 mn industry.

Key Indian Brands : Roseby's,D'decorHome,Dicitex,Maishaa,AddressHome,Onset,Ishatvam,ZazaHome.

Key international players in India : Pottery Barn, Macy's, EthanAllen,ZaraHome,Bloomingdales,BrundeVian-Tiran,Versace, Corneliani, Fendi Casa.

The sector continues to grow at a healthy 10 - 12% per annum. The production in 2011-12stoodatapprox.494millionsqmtsof which the organized sector accounted for only 40% and has tremendous potential considering the per capita consumption of ceramic tiles in India.

* Source: ICCTAS

Bed Linen55%

Break up

10%Curtains

11%Upholstery

13%Bath

11%Others

Lighting IndustryThe Indian lighting industry is currently peggedat$1.9bnandisgrowingatabout17-18%perannum.TheLEDIndustryisexpectedtoreacharound$500mnby2015.

Major players in the industry are already offering very good value propositions in the market, making this segment dynamic. With a strong movement towards sustainable solutionsinlighting,LEDsareexpectedtobethenextchoiceinlightingforconsumers,anda McKinsey report has predicted that 70% of lighting will become LED based by 2020.

The key segments identified in this changeover will be hospitality, retail, outdoors & residential.

Kitchen and ApplianceThe total market of the modular kitchen industry inIndiaisvaluedatapprox.$5bn,ofwhich,theorganized sector accounts for merely about 7.5%.

The organized kitchen appliances industry is pegged at$0.3bn.Combinedmarketforkitchensandhomeappliances is estimated to grow at 25% per annum andexpectedtoreach` 70bnoverthenext5years.

The biggest consumers for these lifestyle products arehighnet-worthindividuals(HNIs)andyoungupper-middle-class couples with high disposable incomes.

* Source: Indian Kitchen Congress

The furniture and architectural hardware market is very roughly estimatedbyindustryexpertsat$4bn.Ofthis,40%isimportedand 60% is manufactured in the domestic market. The industry has grown at a CAGR of 20-25% inlast2yearsandisexpectedtocontinue at the same rate for the next10years. The market is largely in the unorganizedsector,with80%falling in this segment.

India has manufacturing hubs in tier 2 centers such as Rajkot and Aligarh which compete with Chinese products but the lack of new technology and machinery have slowed growth.

Furniture Hardware

PaintsThedomesticpaintindustryisexpectedtotouchthe$10bnmarkinthenext3yearsonthebackofrisingurbanizationand economic revival.

In2012,thepaintindustrystoodat$5.2bn,outofwhichthedecorativesegmentcontributednearly71%at$3.7bn,whiletheremaining$1.5bnwascontributedbytheindustrialsegment.In terms of volume, the industry stood at 3.11 mn tonnes, ofwhich the decorative segment accounted for nearly 77% .

According to IPA the 70:30 trend of decorative and industrial segments will continue in the future, on account of growingurbanization and increase in disposable income.

In the industrial segment, the auto sector will continue to pushdemand.Theindustryisalsoexpectinganincreaseinpriceinthe coming years, and has witnessed almost 30% increase in priceover the last three years.

* Source: Indian Paint Association

CUSTOMS TARIFFS2013 BUDGETCompriseBasicDuty+CountervailingDuty(CVD)+SpecialCVD

LIGHTINGLamps, Light Fittings, Search Lights, Spot Lights,HangingLamps,CompleteFittings

Basic Duty only 12%

TILES & SANITARY-WARE

Basic Duty + CVD + Spl CVD 26%

FURNITUREDecorative, Marine, Aircraft, Elastic Laminated, Laminated And All Other Ply

Basic Duty + CVD + Spl CVD 26%

IRON & STEEL INDUSTRY Non-Alloy SteelBasic Duty + CVD + Spl CVD 14%

FLOORINGParquet, Tongued, Grooved, Molded, Non-Coniferous Wood, Bamboo

Basic Duty + CVD + Spl CVD 26%

PAINTAcrylic, Vinyl, Dispersion, Emulsion, Distemper, Varnishes, Pigments, Dry paints

Basic Duty only 7.5%

TABLEWARE

Basic Duty + CVD + Spl CVD 26%

KITCHENWood And Other Kitchen Accessories

Basic Duty + CVD + Spl CVD 26%

* Source: www.cybex.in

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