E&C Doing Business Around the World Engineering and Construction Conference June 20-22, 2018

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1 E&C Doing Business Around the World 2018 Engineering and Construction Conference June 20-22, 2018

2 E&C: Doing business around the world Helen Cadman Director Deloitte Tax UK Richard Ho Partner Deloitte & Touche Hong Kong Robert Claiborne Principal Dialog Design - Canada Hemal Mehta Partner Deloitte Tax India 2018 Engineering and Construction Conference June 20 22, 2018

4 UK Construction Market Key Facts 139bn value of all works in 2017 Second largest sector, contributing 6.1% of UK GDP in 2017 Dominated by a number of large firms Trade Deficit in construction materials and components of 9bn imports more than double exports 35% of London construction workers of migrant workers Increasing job numbers, one of the fastest growing sectors in the UK by employment numbers Skills shortage; driving wages up Sector with the largest gender pay gap at 30% versus national gap of 18% Variances between London, Regional Major Cities and Other Cities London strong commercial project demand Regional Major Cities strong residential and logistics demand Other cities generally struggle due to lack of domestic and international investment Copyright 2018 Deloitte Development LLC. All rights reserved Engineering and Construction Conference June 20-22,

5 UK Construction Output Growth Q1 2018, fell by 3.4%, 6 th consecutive 3 month decline in output after peaking in late 2016 Largest quarterly fall in output since 2012: Carillion collapse Poor weather conditions Infrastructure completions All sectors declined except private industrial Slight bounce back in April 2018 with growth of 0.8%, driven by housebuilding The CPA predicts growth of 2.3% by 2019 driven by infrastructure projects Sector 2018 Growth Forecasts (CPA Construction Industry Forecasts ) Infrastructure 11.1% Housing 2.0% Commercial -3.3% Industrial -3.1% Education 1.5% Copyright 2018 Deloitte Development LLC. All rights reserved Engineering and Construction Conference June 20-22,

YYC International Facilities Project Copyright 2018 Deloitte Development LLC.

Page title Page subtitle Sears Crosstown - Memphis Title Bold: this is dummy text it is not here to be read it is here to show how this document will look.

9 Page title Page subtitle Sears Crosstown - Memphis Title Bold: this is dummy text it is not here to be read it is here to show how this document will look. Title Bold: this is dummy text it is not here to be read it is here to show how this document will look. Title Bold: this is dummy text it is not here to be read it is here to show how this document will look. Copyright 2018 Deloitte Development LLC. All rights reserved Engineering and Construction Conference June 20-22,

Granville Island - Vancouver Copyright 2018 Deloitte Development LLC.

Mackimmie Complex University of Calgary Copyright 2018 Deloitte Development LLC.

Calgary Cancer Centre Copyright 2018 Deloitte Development LLC.

Telus Sky - Calgary Copyright 2018 Deloitte Development LLC.

Glenbow Museum Copyright 2018 Deloitte Development LLC.

19 The India story so far Economy Snapshot: GDP likely to move up. GDP growth budgeted at 7.2% FY19 Current account deficit to remain under control at 2% of GDP in FY19 Monetary policy in neutral mode. RBI likely to remain steady on rate for 1HFY Foreign fund flows have improved. FDI inflows of USD ~ 43.5 billion in FY17, added USD ~ 36 bn as of 3QFY18 Fiscal consolidation paused. New roadmap deficit budgeted at 3.3% of GDP in FY19 Inflation pressures to remain CPI at 4.46% in Apr 18, likely to hover around 5% in the near team INR expected to weaken through the year. At 67.68, likely to move towards 69 per USD Initiatives undertaken by the Government of India Jan Dhan Yojana Aadhar Make in India Smart cities Mission Ayushman Bharat Goods and Service tax Insolvency and Bankruptcy Code Real Estate (Regulation and Development) Act Affordable Housing Scheme Exports likely to build strength in the coming period. Exports rose 5.2% in Apr 18 Copyright 2018 Deloitte Development LLC. All rights reserved Engineering and Construction Conference June 20-22,

Indian Engineering Sector Has witnessed a remarkable growth over the last few years driven by increased investments in infrastructure and industrial production strategic importance to India s economy

20 Indian Engineering Sector Has witnessed a remarkable growth over the last few years driven by increased investments in infrastructure and industrial production strategic importance to India s economy Engineering Export Promotion Council (EEPC) - apex body in charge of promotion of engineering goods, products and services from India Permanent member of the Washington Accord (WA) exclusive group of 17 countries an elite international agreement on engineering studies and mobility of engineers Copyright 2018 Deloitte Development LLC. All rights reserved Engineering and Construction Conference June 20-22,

21 Market Size, FDI Growth & Government initiatives M I L L I O N S FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 The engineering sector in India enjoys a comparative advantage in terms of manufacturing costs, technology and innovation coupled with favourable regulatory policies Infrastructure, construction and capital goods companies announced orders worth Rs 55,814 crore (US$ million) during October 1 December 6, In the third quarter of , this number stood at Rs 27,324 crore (US$ million). The growth was backed by BHEL s receipt of Rs 20,400 crore (US$ million) worth of power projects in Telangana and Larsen & Toubro s receipt of a Rs 8,650 crore (US$ million) order for the Mumbai trans-harbor link The Government s increasing focus on attracting foreign investors in manufacturing and infrastructure likely to boost FDI in the engineering sector During FY per cent rise in cumulative FDI flows into the Indian engineering industry In the Union Budget , the government allocated US$ billion for the infrastructure sector Spending on engineering services is projected to increase to US$ 1.1 trillion by 2020 India s capital good sector is expected to triple in size to Rs 7.5 trillion (US$ 116 billion) and add 21 million jobs by 2025 * Source Copyright 2018 Deloitte Development LLC. All rights reserved Engineering and Construction Conference June 20-22,

----- Global infrastructure market spending ------ Specific industry knowledge The construction market is projected to grow in the coming year for several reasons: ---------------------------------

22 ----- Global infrastructure market spending Specific industry knowledge The construction market is projected to grow in the coming year for several reasons: Factors driving the boom in infrastructure spending Expected I&CP spending up to 2030 (1) Urban development and growing population Aging infrastructure Global energy requirements New technologies BRIC insatiable demand Years of underinvestment Infrastructure will facilitate the migration from rural to urban life in developing economies Aging infrastructure in developed economies is in need of replacement, upgrade or repair Infrastructure will accommodate growing energy demand and alternative energies Infrastructure is required to compete in an increasing globalized marketplace Developing and rapidly growing countries will require infrastructure development Infrastructure will be used as a catalyst for economic growth as capital markets recover Assets constructed as a result of the boom Energy and utilities Transportation Major events infrastructure Telecommunications Other Oil and gas Electricity Alternative energy Water Toll roads, tunnels, bridges Railways, mass transit Car parks Ports Airports Infrastructure relates to: Olympic Games Pan Am Games Other World Cup World Expo Other major events Wireless networks Cable systems Health care facilities Education facilities Prisons (1) Estimate based on World Bank projections * More than 70% of infrastructure investment up to 2030 in developing countries Copyright 2018 Deloitte Development LLC. All rights reserved Engineering and Construction Conference June 20-22,

23 EPC Players turning into real estate developers Evolution of the Indian construction industry from item rate packages to lump-sum contracts and then to EPC contracts over the years A visible shift from owner-managed projects to projects where the risk of time and cost overruns has been transferred to the contractor, along with the responsibility of designing, procurement of material and construction Initially, only few contractors in India had the required technological and financial capabilities to take overall responsibilities of the complete project therefore large projects were divided into small EPC packages Gradually, EPC contractors developed technical expertise and became financially competent. Eventually, some of the players acquired a strategic stake in the equity of the project Over the years, Indian EPC players have developed their in house design, engineering and construction capabilities to bid and execute large and complex EPC projects Many of these players have expanded into real estate construction and development Larsen & Toubro Ltd. Shapoorji Pallonji & Co. Ltd. Samsung Engineering Consolidated Construction Consortium Limited Ahluwalia Contracts (India) Ltd. expressed their commitment as well as provided confidence to owners and investors Copyright 2018 Deloitte Development LLC. All rights reserved Engineering and Construction Conference June 20-22,

24 Overview of real estate in India (1/3) Market overview of the real estate sector Industry Overview Market size (India) (US$ billion) GDP: Real Estate sector contributes about 6.30% to India s GDP and account for more than 9.0% of country s employment. Expected to grow to 13% of India s GDP by Market Size: Current market size of real estate in India is US$ 93.8 Bn and expected to increase at a CAGR of 11.4% to US$180 billion by Residential sector dominates the real estate sector with a market share of more than 90% while commercial, retail, hospitality & warehousing/ logistics sector accounts for the rest of the market share. Urbanisation: Demand for residential properties has surged due to increased urbanization - 38% of population (534 Mn people) to occupy Indian cities by Currently 33% population (409 Mn people) living in India cities. Housing: Housing shortage of Mn units across India of which 30% (18.5 Mn units) is in Urban India. Employment: Indian RE sector has a total employment of ~ 7.6 million people. It is expected to grow to 17.2 Mn people employed by FY2009 FY2010 FY2011 FY2014 FY2020E Growing urbanisation Population breakdown of India (million) Urban 1, , FY1999 FY2001 FY2011 FY2015E FY2030F At USD 350 Billion, India has the 5th largest inventory of Institutional Grade Commercial Real Estate in the Asia-Pacific region. Improving business sentiments and a recovery in the domestic market have led to higher demand for office space in the last two years. Currently, organized retail account for only 9% of total retail in India Source: Deloitte Consulting, IBEF Key growth drivers (India) Economic growth Key growth cities: NCR, Mumbai, Bangalore, Chennai, Pune & Hyderabad Rising income level Urbanization Demographic advantage Growth in tourism Increasing FDI Copyright 2018 Deloitte Development LLC. All rights reserved Engineering and Construction Conference June 20-22,

25 Overview of real estate in India (2/3) Market Segments Segment Trends Key drivers Comments Residential Demand projections across top 8 cities ( 000 units) FY2013 FY2014 FY2015 FY2016 FY2017 Rapid urbanisation Growth in population Rise in the number of nuclear families Easy availability of finance Repatriation of NRIs and HNIs Rise in disposable income Housing shortage of Mn units across India of which 30% (18.5 Mn units) is in Urban India Developers now focusing on affordable and mid-range categories to meet this huge demand Commercial Residential 22 Space 23 Demand projections across top 8 cities (mn sft) Rapid growth in services sectors: IT/ITeS, BFSI and Telecom Rising demand from MNCs and ecommerce industry in India Demand for office space in Tier 2 cities Increasing employment rate Mumbai, NCR and Bengaluru account for 60% of total office space demand in India by 2017 Bengaluru is likely to experience highest demand over followed by Mumbai and NCR FY2013 FY2014 FY2015 FY2016 FY2017 Retail Demand projections across top 7 cities (mn sft) FY2010 FY2011 FY2012 FY2013 FY2014 Booming consumerism in India Organised retail sector growing 25-30% annually Entry of MNC retailers India s population below 30 years of age having exposure to global retail are expected to drive demand for organised retail About 53% of demand for total mall space in India expected to come from top seven cities NCR accounts for about 30% of the total mall supply Hospitality Commerc ial Office space Trend analysis (stock -no of rooms) ( 000) FY2013 FY2014 FY2015 FY2016 FY2017 Robust domestic tourism industry Increasing global nature of Indian businesses boosting business travel Tax incentives for hotels Expansion of physical infrastructure during the 12 th Five Year Plan NCR and Mumbai are the biggest hospitality markets in India, followed by Bengaluru, Hyderabad and Chennai Government initiatives to promote tourism in Tier 2 cities is generating significant demand for hotels Copyright 2018 Deloitte Development LLC. All rights reserved Engineering and Construction Conference June 20-22,

26 Overview of real estate in India (3/3) Growth Drivers DEMAND PULL FACTORS Robust and sustained macro-economic growth Upsurge in industrial and business activities, especially new economy sectors Favourable demographic parameters Significant rise in consumerism. Rapid urbanization Availability of a range of financing options at affordable interest rates IMPACT Increasing occupier base Significant rise in demand for office/industrial space Demand for newer avenues for entertainment, leisure and shopping Creation of demand for new housing SUPPLY PUSH FACTORS Policy and regulatory reforms (100 per cent FDI relaxation) Positive outlook of global investors Simplification of urban development guidelines Infrastructure support and development initiatives by the government IMPACT Entry of a number of domestic and foreign players; increasing competition and consumer affordability Easy access to project financing options Increases developers risk appetite and allows large scale development Improved quality of real estate assets Development of new urban areas and effective utilisation of prime land parcels in large cities Source: Various sources Copyright 2018 Deloitte Development LLC. All rights reserved Engineering and Construction Conference June 20-22,

27 Key aspects for consideration Tax & Regulatory Choice of investment routes FDI / FVCI / FPI Investment objectives equity, debt or mezzanine Characterization of income Regulatory approvals Determination of investment platform Profit sharing arrangement Tax efficiency on profit repatriation Tax Residency (POEM) / Permanent Establishment (PE) Treaty Eligibility tax residency, substance etc Pricing guidelines Exit strategies indirect transfer, withholding of taxes etc Reporting requirements Copyright 2018 Deloitte Development LLC. All rights reserved Engineering and Construction Conference June 20-22,

28 Our team Summary of major experience Advised clients on structuring SEZ and have done 25 plus deals in real estate space. Recently closed one of the biggest deal in Pune (Maharashtra) assisting the buyer in acquisition of 450 acre of land parcel Advised to a prominent Mumbai based developer in setting up a REIT platform Advising domestic and overseas funds to set up India Dedicated Real Estate Funds to large PSU banks and PE players HEMAL MEHTA Partner - Head Financial Services M&A Tax DID: (91) Mobile: (91) Mail: hemalmehta@deloitte.com Hemal has over 19 years of experience in tax field and has been specializing in M&A, Private Equity and Real Estate space from over 12 years. Hemal heads the Financial Services Tax and Regulatory Practice of the Firm and focuses on growing the M&A, Private Equity and Infrastructure Tax Practice. Structuring Infra funds and real estate funds etc. Advised infra funds on their proposed deals at various stages i.e. Bid, deal and exit Internal restructuring of 28 Indian entities (engaged into real estate) of a foreign client to achieve the desired pattern of shareholding without any tax cost and minimum regulatory compliances Consolidation of businesses of two foreign banks branches in India from the perspective of minimising the tax cost Structured joint ventures of foreign investors / developers with the Indian developers / land owners from the foreign direct investment and tax perspective Structured Offshore Private Equity Funds which are India focused and also India based venture capital funds Assisted many developers in structuring their projects from RERA and tax perspective Advising Canadian Pension Fund on its proposed investment in infrastructure sector in India and a comparative jurisdiction analysis Advising one of the largest Private Equity Funds on its investment in an entity engaged in digital storage devices, Steel company in India, Hyderabad-based seed company, one of India s largest cash management company, concluded 2 large deals in IT sector Advising one of India s leading investment bank in relation to their joint venture with UK government arm for setting up of an infrastructure fund in India Copyright 2018 Deloitte Development LLC. All rights reserved Engineering and Construction Conference June 20-22,

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29 Questions? Submit General Session questions via the Q&A tab 1. In the app, select More from the menu tab 2. Click Q&A 3. Select the current session from the list 4. Enter your question and click the Ask Question button to submit Copyright 2018 Deloitte Development LLC. All rights reserved Engineering and Construction Conference June 20-22,

30 About Deloitte Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee ( DTTL ), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as Deloitte Global ) does not provide services to clients. In the United States, Deloitte refers to one or more of the US member firms of DTTL, their related entities that operate using the Deloitte name in the United States and their respective affiliates. Certain services may not be available to attest clients under the rules and regulations of public accounting. Please see to learn more about our global network of member firms. Copyright 2018 Deloitte Development LLC. All rights reserved. 36 USC

Real Estate NOVEMBER For updated information, please visit

Real Estate NOVEMBER For updated information, please visit Real Estate NOVEMBER 1 Contents Advantage India Market overview and trends Growth drivers Success stories: DLF, Godrej Properties Opportunities Useful information 2 Real Estate NOVEMBER Advantage India