Real Estate 2001 MARKS

A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI
UNIVERSITY OF MUMBAI PROJECT ON: A STUDY ON PRICING OF REAL ESTATE IN MUMBAI WITH SPECIAL REFERENCE TO INVESTORS PERCEPTION IN REAL ESTATE
NAME AND ADDRESS OF COLLEGE: LALA LAJPAT RAI COLLEGE OF COMMERCE AND ECONOMICS MAHALAXMI (WEST), MUMBAI- 400034
SUBMITTED BY: PARTH DHARIA SYBMS-C SEMESTER-IV
PROJECT GUIDE: Dr. VINAY PANDIT
YEAR OF SUBMISSION: 2013-14
Page | 1
CERTIFICATE:
THIS IS TO CERTIFY THAT THE PROJECT ENTITLED A STUDY ON PRICING OF REAL ESTATE IN MUMBAI WITH SPECIAL REFERENCE TO INVESTORS PERCEPTION IN REAL ESTATE COMPLETED BY PARTH DHARIA ROLL
NO.121301175 IS AN AUTHENTIC WORK CARRIED OUT BY HIM AT LALA LAJPAT RAI COLLEGE OF COMMERCE AND ECONOMICS UNDER MY GUIDANCE.
THE INFORMATION SUBMITTED IS TRUE AND ORIGINAL TO THE BEST OF MY KNOWLEDGE.
EXTERNAL EXAMINER
PROJECT GUIDE
INTERNAL EXAMINER
PRINCIPAL
Page | 2
DECLARATION
I PARTH DHARIA THE STUDENT OF LAJPAT RAI COLLEGE OF COMMERCE AND ECONOMIC, SY.BMS C HEREBY DECLARE THAT I HAVE COMPLETED THIS PROJECT ON A STUDY ON PRICING OF REAL ESTATE IN MUMBAI WITH SPECIAL REFERENCE TO INVESTORS PERCEPTION IN REAL ESTATE IN THE ACADEMIC YEAR 2013-2014 UNDER THE GUIDENCE OF DR.VINAY PANDIT. THE INFORMATION SUBMITTED IS TRUE AND ORIGINAL TO THE BEST OF MY KNOWLEDGE.
DATE:
SIGNATURE OF STUDENT
Page | 3
ACKNOWLEDGEMENT
WITH GREAT PLEASURE I THANK DR.VINAY PANDIT A PROFESSOR OF LALA LAJPAT RAI COLLEGE OF COMMERCE AND ECONOMICS FOR BEING AN INSPIRATION IN THE COMPLETION OF THIS PROJECT. I ALSO THANK HIM FOR PROVIDING ME GUIDANCE AND NUMEROUS SUGGESTIONS THROUGHOUT THE ENTIRE DURATION OF THE PROJECT. I AM THANKFUL FOR HIS INVALUABLE HELP WITHOUT WHICH THIS PROJECT WOULD NOT HAVE MATERIALISED. I EXPRESS DEEP GRATITUTDE TO MY ENTIRE COLLEGE, FRIENDS AND FAMILY MEMBERS WHOSE EFFORTS AND CREATIVITY HELPED ME IN GIVING THE FINAL STRUCTURE TO THE PROJECT WORK. NEVERTHELESS I WOULD LIKE TO THANK THE COLLEGE LIBRARIAN FOR PROVIDING ALL THE SUPPORT IN COMPLETING MY PROJECT. I AM ALSO THANKFUL TO ALL THOSE SEEN AND UNSEEN HANDS WHICH HAVE BEEN OF HELP IN THE COMPLETION OF THIS PROJECT WORK.
-PARTH DHARIA
Page | 4
EXECUTIVE SUMMARY
The Indian economy is the second largest growing economy of the world and the Real estate sector is one of the major contributors in the growth of the Indian economy. I have undertaken this study to analyze the perception of the investor in the real estate sector and also to identify the various reason contributing to the growth of the sector. The study is based on the data collected both through primary sources such as questionnaires, personal interviews and secondary sources like internet, journals, books and magazines. The sample size taken for the study was of 75 respondents who were interviewed personally and on telephonic interview. The study also looks into the role of the government by way of different policies that effect the investment decision of the investor.
Page | 5
INDEX
Sr No. 1 2 Topic CHAPTER 1 -INTRODUCTION CHAPTER 2-REVIEW OF LITERATURE CHAPTER 3-RESEARCH METHODOLOGY -RESEARCH PROBLEM -SCOPE OF STUDY -HYPOTHESIS -DATA COLLECTION -RESEARCH INSTRUMENT -RESEARCH DESIGN -SAMPLING PLAN -TESTING OF HYPOTHESIS 3 -LIMITATION OF RESEARCH CHAPTER 4- TOP PLAYERS OF REAL ESTATE 4 INDUSTRY CHAPTER 5- PRICING STARTEGIES ADOPTED BY 5 INVESTOR CHAPTER 6- DATA COLLECTION AND 5 6 7 8 9 INTERPRETATIONS CHAPTER 7- CONCLUSION CHAPTER 8 -RECOMMENDATION CHAPTER 9 -BIBLOGRAPHY ANNEXURE 54 62 64 65 66 32 20 17 Page No. 7 11
Page | 6
INTRODUCTION
REAL ESTATE Real estate means an immovable property, either commercial or residential which may consist of a building or a structure. Real estate can be divided into 3 main categories: Commercial Residential Agricultural/Vacant Land
Real estate involves the purchase, sale, and development of land, residential and non-residential buildings. The main players in the real estate market are the landlords, developers, builders, real estate agents, tenants, buyers etc. The activities of the real estate sector includes the housing and construction sectors.
Real estate is a 12$ billion (revenue) industry in India. There has been a rapid growth in the industry in the past few years. It is one of the fastest growing sectors in India. The housing sector has been growing at an average of 34% annually. In the residential sector, a growing middle class is enjoying rising income levels. Combined with smaller household sizes, this demographic change has boosted demand for more modern housing. Real estate is not just about housing these days it has become a beneficial investment option as real estate can be pledged as collateral to secure a loan. One can also earn rental income from the real estate properties .Profits can be earned from real estate as a result of appreciation of real estate property prices. This is known as capital gains from real estate. In the commercial property segment, strong growth in the services sector Specially the IT and BPO industry have led to greater demand for commercial space.
Page | 7

The importance of real estate sector, as a major player of nations growth, can be seen from the fact that it is the second largest employer next only to agriculture. 5 % of the countrys GDP is contributed by the housing sector. In the next three or four or five years this contribution to the GDP is expected to rise to 6% The real estate industry has significant linkages with several other sectors of the economy. It consists of a collection of industrial and services sectors of the economy, such as construction (housing construction, as well as construction of commercial offices, retail and industrial buildings, and infrastructure projects such as dams, roads and bridges), brokerage services, real estate finance services (mortgage banking, real estate investment), real estate operations, property management, architecture and design.
The relaxed FDI rules implemented by India in the recent years have invited more foreign investors and real estate sector in India is seemingly the most lucrative ground at present. Private equity players are considering big investments, banks are giving loans to builders, and financial institutions are floating real estate funds. Indian property market is immensely promising and most sought after for the purpose of investment.
Growth Potential
India is currently the second fastest-growing economy in the World. The Indian construction industry has been playing a vital role in overall economic development of the country, contributing 6% to GDP. In 2005, the sector generated around 31 million jobs (of which only 1 million were generated by the organized sector).
Developments in the real estate sector are being influenced by the developments in the Retail, hospitality and entertainment (e.g., hotels, Resorts, cinema theatres) industries, economic services (e.g., hospitals, schools) and information technology (IT)-enabled services (like call centers)
Page | 8

etc. Also with the growing quantum of domestic and international capital inflow, economic growth is likely to continue, and with it, the demand for infrastructure to maintain and accelerate the performance. As a result, the public sector has remained a big investor in this sector, given the acute shortage of infrastructure in India compared to the requisite level required to achieve the next growth target. The Government of India proposes to achieve 9.0% GDP growth during the Eleventh Plan period. To achieve growth of this scale, adequate infrastructure is the most basic requirement. In order to overcome the current constraint of insufficient modern infrastructure, the government is developing a program for infrastructure investment through both public and private sectors, and expects to more than double public investments from 1.2% of GDP in FY07 to 2.8% by FY12. It is also partnering with private companies on initiatives such as the ultra mega power projects and Golden Quadrilateral project and Delhi Mumbai industrial Corridor.
Future Prospects on Real Estate Industry The real estate market in India is yet in an emerging stage and the scope is simply unlimited. It does not resemble a bubble that will burst. An unhindered growth for the next twenty years is almost sure. This is because the outsourcing business in India is growing at a rapid speed and this entails a huge demand for commercial buildings and urban housing besides improvement in infrastructure. The organized retail market in India is also accelerating with players like Wal-Mart, Bharti etc. looking forward to make a mark, thus stepping up the demand for real estate. The Governments ambitious projects lined up for the Eleventh Plan period ,shows the demand for construction is expected to grow by at least 8-9%, and 2.5 million employment opportunities per annum are expected to be generated. Favorable government policies for globalization and
liberalization have put India on the fast track. In fact, today India is the second, fastest-growing economy in the world, and is the centre of attraction globally. With greater quantum of domestic and international capital flowing into various sectors of the economy, growth is likely to continue. However, it has become a necessity for India to modernize and expand its infrastructure not only to
Page | 9

sustain, but to benefit from the existing growth spree. Moreover, the governments initiatives such as the ultra mega power projects, Golden Quadrilateral project, have been of great support for the sector. Moreover, increased investment outlay in the Eleventh plan, and higher private investments, apart from the public-private partnership, would prove beneficial in meeting the infrastructure needs of various segments of the economy.
Government Policies The government has taken various initiatives to improve the real estate sector. It has made the policies for FDI in real estate very liberal. The new stand adopted by Indian government regarding foreign direct investment (FDI) policies has encouraged an increasing number of countries to invest in Indian Properties. The positive outlook of Indian government is the key factor behind the sudden rise of the Indian Real Estate sector. The Government of India in March 2005 amended existing norms to allow 100 per cent FDI in the construction business. This liberalization act cleared the path for foreign investment to meet the demand into development of the commercial and residential real estate sectors. It has also encouraged several large financial firms and private equity funds to launch exclusive funds targeting the Indian real estate sector.
Until now, only Non Resident Indians (NRIs) and Persons of Indian Origin (PIOs) were permitted to invest in the housing and the real estate sectors. Foreign investors other than NRIs were allowed to invest only in development of integrated townships and settlements either through a wholly owned subsidiary or through a joint venture company in India along with a local partner. The minimum land area for development by foreign investors is lowered from the earlier floor of 100 acres to 25 acres which has further made the real estate sector lucrative in the eyes of the foreign investors.
The Government is also initiating various projects like the ultra mega power project, Golden quadrilateral project and the Delhi Mumbai Industrial corridor.
Page | 10
CHAPTER 2: REVIEW OF LITERATURE The real estate sector has become a major contributor of an economys growth. To understand the significance of the sector and its implications there have been various research on real estate industry both in India and abroad. The research are being conducted to gain more knowledge about the various factors contributing to the growth of the industry and also to analyze the factors which effect the decision of investment in the sector. I have tried to study few such research papers to get a better idea about the current scenario of the real estate sector.
Graeme Newell and Rajeev Kamineni in their research paper assessed the risk-adjusted performance and portfolio diversication benets for the real estate markets (office, retail and residential) of New Delhi and Mumbai. The real estate markets were found to under-perform the stock market in India over 1998 2005, with most markets improving their performance in more recent years, although there was some loss of portfolio diversication benefits for office and residential real estate with stocks. Deregulation of the capital markets and international investment in India is also likely to have a signicant impact on future FDI levels and the growth of real estate funds for real estate investment in India. They also studied that offshoring in the cities like Delhi and Mumbai has created huge demand for better infrastructure. This area of offshoring has signicant real estate investment issues; particularly concerning technology parks, access to Grade A office space. They have also concluded that deregulation of the Indian capital markets since 2004, and less restrictive guidelines for foreign direct investment in real estate in India since February 2005 have seen signicant improvements in the real estate investment environment in India for both local and international players. This has taken on increased importance as India signicantly expands its economic growth to potentially be the worlds third largest economy by 2020, and international real estate investors seek global investment opportunities; particularly in the emerging Asian real estate markets. The expected development of REITs in India in the next few years will also expand the real estate investment opportunities available in India.
Page | 11

Vandna Singh and Komal (2009) in their research paper found that as the GDP increases the real estate prices also increases because there is a high degree of Positive correlation between the real estate prices and GDP. The Real estate prices also increases with increase in the per capita income as there is high degree of positive correlation between these two. The FDI into the country affects the real estate FDI and real estate having a positive correlation leads to the boom in this sector. Increase in FDI from 2006 to march 2007 is 10%. Earlier it was 16% and now in 2008 it is 25%. The interest rate also affects the real estate prices because it affects the lending and borrowing by the investors. In residential segment, availability of easy home finance and rising purchasing power has driven the growth. Builders are launching high-end, life style residential products to cater to the growing bunch of high net worth individuals.
They suggested that due to high prices the lower income group is not able to purchase the land, so govt. should take measures to protect the lower income group. The investors should analyze the type of land in which they are going to invest and the potential Returns from it. Due to lot of investment avenues in real estate in India, fraud cases are also increasing day by day like in Delhi deconstruction of buildings. Thus careful measures and laws should be enacted to deal with these types of situations.
Natalija stated that Advantage India: Real estate is one of the fastest growing sectors in India. Market analysis pegs returns from realty in India at an average of 14% annually with a tremendous upsurge in commercial real estate on account of the Indian BPO boom. Lease rentals have been picking up steadily and there is a gaping demand for quality infrastructure. A significant demand is also likely to be generated as the outsourcing boom moves into the manufacturing sector. Further, the housing sector has been growing at an average of 34% annually, while the hospitality industry witnessed a growth of 10-15% last year.
Jim Berry stated that the highest and best use analysis is another component of property investment analysis, especially in the case of vacant land or deteriorated property that needs to be redeveloped.
Page | 12

Highest and best use is defined as the most profitable use at which a site can be developed. Thus, highest and best use analysis is usually carried out for land sites that are acquired for development purposes. A sites highest and best use will depend on a number of factors including site physical characteristics, its location, make up and purchasing power of the population in its area of influence, competitive projects in its area of influence, market conditions and prospects at the time of analysis, and other factors. If the land site is zoned in an urban use, the highest and best use analysis will focus on the feasibility and profitability of developing the alternative allowable uses.
Future of Real estate in Indian Economy Analyzing the current scenario there has been various researches forecasting the future of the real estate industry. According to them the Real Estate potential in India is vast. The market is expected to grow at 33% through 2005-2010 to US 50 billion as per Negandhis (2007) estimates. Tremendous potential demand along with an improving regulatory landscape, robust economic growth and gradually improving 27 corporate governance standards of developers makes the real estate market in India over the next five years highly sustainable. This strong potential demand is expected to result in an exponential growth in development plans of real estate companies. According to Negandhi (2007), development is expected to reach 16 billion square feet across all segments of the real estate market by 2010 The plan ahead seems sustainable; however it would be unwise to forget the experience of the 1985-93 boom/bust in real estate that has left industry players nervous about when it might happen again. A paper by Kaiser (1997) examines the possible causes and the periodicity of such major real estate cycles. The evidence suggests that both periods of negative returns, (early 1930s and early 1990s) were caused by excessive levels of new construction which caused an inflation spike in the general level of prices, suggesting a 50- 60 year real estate bust cycle. The paper safely concludes that India is not likely to witness another bust period for real estate in the next four decades. The conclusions of Kaiser can be witnessed with the bullishness underlying in the development proposed by the cumulative strength of the Indian developers. Historically, Indian real estate companies have undertaken development of 1million- 3million square feet of real estate annually.
Page | 13

With strong growth in demand expected across segments of real estate over the next few years, Desai & Rane (2006) estimate development plans of real estate companies to rise to 20million- 30million square feet annually. To sustain these growth levels, the flow of capital into the sector will be carried out through REITs. REITs is the future of the Indian real estate market. It is expected to lend the much needed liquidity to developers and allow them to take out their capital value off ompleted projects for deployment in newer projects. REITs also serve as an effective vehicle for broader participation by investors in the market.
However, without demand and latent capital adequacy, none of these plans will materialize effectively for the players in this segment and a good chunk of their demand and capital is expected in the form of Foreign Direct Investments. The paper by Henley (2004) compares the performance of India and China in attracting foreign direct investment (FDI). FDI statistics suggest that India's performance has been significantly understated but India still falls behind for several reasons such as high tariff structure, poor physical infrastructure, a regulatory system that is too often not business friendly etc. Nonetheless, India has displaced USA as the second-most favored destination for FDI in the world. ASSOCHAMs (The Associated Chambers of Commerce and Industry of India) study on Future of Real Estate Investment in India forecasts that of estimated US$ 60 billion future market size of real estate business in India, the share of foreign investments will be within the range of US$ 2528 billion by 2010. The overseas investments will also be finding larger space in Indian SEZs and increasing number of shopping malls that will naturally fatten their share in real estate market. Indian real estate sector is on boom and this is the right time to invest in property in India to reap the highest rewards.
In the research paper on Real estate investment trust by KASB securities limited in Dec 2005 it came to light that since REIT allows indirect investment in real estate for small investors who otherwise could have not had this opportunity. And that it is one of the vehicles that have single taxation and it also offer low volatility and ease of liquidity.it was suggested that REITs listed under
Page | 14

NBFC should be allowed to invest in real estate development and acquisition. Exposure limits needed redefinition with respect to a REIT, REITs should be allowed to borrow. Regarding Modifications to Income Tax Ordinance it was suggested that Gains from sale proceeds of land and or building to a REIT should be tax free; REITs should be granted a status of investment scheme formed under NBFC Rules as a result of which it would be tax exempted. Changes in Voluntary Pension Rules suggested that Under Voluntary Pension Rules, pension funds should be allowed to invest in REITs. Various other recommendations included The Land Record System should be computerized Tenancy Laws should be strengthened and should be classified as criminal law for settlement of disputes efficiently for property formed under REIT structure Transaction costs should be reduced Buyers of property from REITs should not be asked source of income;
Though the above recommendations were made however, it was concluded that the markets will not function smoothly unless the rental yields improve, tenancy laws are strengthened, official and unofficial pricing issue is settled, paghri system is abolished, and the time consumed in legal proceedings is reduced.
The ups and down of Real Estate Markets Dirk Brounen in Dec 2008 said that the Real estate markets around the world have earned a complicated reputation. On the one hand, real estate markets offer investors a wide spectrum of profitable investments opportunities, investments that nowadays can be executed by simply buying shares of stock listed by real estate investment companies. In the first half of this inaugural address, the boom of these real estate stocks is discussed. In less than three decades, the listed real estate market developed into a sector with almost 400 listed firms worldwide, representing a sum aggregate market capitalization of around one trillion dollars by the end of 2007. Three relevant lessons
Page | 15

regarding these international real estate stocks are discussed in the first fifteen pages of this booklet, lessons offered by real estate research from the Rotterdam School of Management. On the other hand, real estate markets are notorious for attracting entrepreneurs with bad intentions, seeking for opportunities to circumvent the strong arm of the law. These activities have yielded many headlines in the daily press and have given real estate a gloomy reputation. The dynamics of foreclosure auction of homes is an example of a source of negative headlines, stressing that the suboptimal organization of these auctions prohibits distressed sellers from earning a fair price for their home. In the second part of this address, I focus on an empirical test of the matter. By analyzing over 700 auctioned homes the dynamics of the auction system is discussed objectively. This offers a fair view on the problems at hand and searches for way to improve the system in the near future.
Page | 16
CHAPTER 3 RESEARCH METHODOLOGY 3.1 Research Problem

It is the pain area for which the researcher needs to find or suggest some solutions.The pain area of the researchers topic, a study on tool to identify an investors perception while buying a real estate property in south Mumbai.
3.2 Objective of Study

To identify the factors affecting the value of real estate. To identify the main areas of investment in Real estate. To identify the current trends in real estate. To identify the factors effecting decision of investing in real estate.
3.3 Scope of Study

The researcher has made an attempt to collect data, which is representative of South Mumbai. This scope of study was taken due to logistical problems and also Mumbai is a miniature of Maharashtra. Thus the results of Mumbai can be used for further studies with respect to Maharashtra and India. Also one more reason why this area was taken into consideration was that, the area under research was heterogeneous in nature where all class people could be easily contacted.
3.4 Hypothesis
1. Null Hypothesis: The disposable income is the main factor that drives the investment decision in real estate. Alternate Hypothesis : The disposable income is not the main factor for decision in real estate investment
2. Null Hypothesis: Government Policies play a major role in Real estate investment Alternate Hypothesis : Government Policies does not effect the investment in real estate.
Page | 17
3.5 Data Collection

Primary Data: Primary Data are those data, which are collected for the first time (first hand information). A structured questionnaire was built in correlation with objective of research and hypothesis. Thus, data using structured questionnaire was collected from different consumers. Secondary Data: Magazines, Trade Journals, Internet, Reference Books, Etc. are used to collect secondary data.
3.6 Research Instrument

Questionnaire formed in a structured format and accordingly surveys were carried out. The surveys were filled by different age group people in southern & western Mumbai. The information provided by them is 100 percent genuine and given in utmost faith. The questionnaire includes both open ended and close open ended questions. Open ended questions were used to find out the reviews of the respondents so that proper recommendation can be made. Close ended questions were used so that appropriate statistics could be calculated.
3.7 Research Design

Research Design is an outline of research study which indicates that what researchers will do right from the initial stage till the final data analysis. Research Design constitutes decision regarding what, where, why, when and how concerning with respect to an enquiry. A Descriptive design was decided to implement as per the demand of this current research. Thus, the research design adopted by the researcher for the study was Descriptive to cover the various facts of the study. A study a study on tool to identify an investors perception while buying a real estate property in south Mumbai. The study is restricted to South Mumbai and the data used is primary data as well as
Page | 18

secondary data. The study will be done with the help of a questionnaire and the report will be prepared in the form of MS WORD and MS POWERPOINT.
3.8 Sampling Plan / Sampling Technique

A sampling design is a definite plan for obtaining a sample from a given population. It refers to the technique or the procedure the researcher would adopt to select units from the sample. It will also indicate the number of units to be included in the sample also known as sample size. The sampling technique adopted by the researcher was Simple Random Sampling.
3.9 Limitation of Research
Small sample size The sample size was only 50 respondents which a very small size to base a research and give conclusion about the whole sector.These respondents are not sufficient enough to base our conclusion for the group of investors.
Time bound research The research was conducted in a short span of time.The responses of the respondents may be affected by some particular situation prevailing at that particular time. If the time duration would have been long it would have gien the general idea or perception of the investors.
Might get biased response As discussed earlier that the sample size was small also considering that the interview were conducted in a short span of time, there is high probability that the respondents might have given biased responses.
Page | 19
CHAPTER -4
Top Players of Real Estate Industry
DLF: DLFs chief business is to develop housing, marketable and retail properties. Currently it has undertaken the development of 70 million sq ft of housing projects which it intends to finish in the next three years. DLF has joined hands with Delhi Development Authority to develop townships in Amritsar, Pune, Gurgaon, Mumbai, Chennai and Goa. DLF has been the construction company behind different malls in the major cities in India. The company is also developing 50-75 hotels along with Hilton Hotels and infrastructure and SEZ in India in collaboration with Laing ORourke (UK).The current market cap is around Rs.51,832.22 crore.
Tata Projects: Tata Projects registered an annual turnover of Rs 2,300 crore on July 1, 2007. With more than 1,500 professionals the company has emerged as one of the chief player in EPC projects. Over the last four years, it has attained a CAGR of 50 per cent which quadrupled its annual turnover of 2006-07. Tata Projects functions in concentrated divisions like broadcast and distribution, steel, power production, oil, gas and hydrocarbons and industrial infrastructure.
Omaxe : Omaxe has
successfully executed more than one hundred and twenty
industrial, institutional, commercial and residential projects for a number of prestigious Indian private, public sector and Multinational's clients such as Amity University, LG, Pepsi, Samsung, Wave Cinemas, National Brain Research Centre, P.G.I. M.E.R, Apollo Hospitals and Delhi High Court.
Shapoorji Pallonji & Co: The Company has more than 3,500 professionals working for it and is largely driven by its loyalty to consumer satisfaction. Some of the major projects undertaken by Shapoorji Pallonji & Co are World Trade Centre, Mumbai; TELCO industrial complex, Pune; Bhabha Atomic Research Centre, Kalpakkam; HSBC Bank,
Page | 20

Mumbai; Hotel Taj Intercontinental, Mumbai; Bank of India, Mumbai; Indira Gandhi International Airport, New Delhi, etc. the company has created magnum opus of construction and has been a consistent executer of challenging projects.
Unitech: Recently Ramesh Chandra, Unitechs Chairman has declared the investment of $ 720 million by his company in the coming four years to develop 28 hotels along with Marriott International. The market capitalisation of the company is Rs.16,867.40 crore.Its chief activities include construction, expansion of real-estate, consultancy in associated sectors, hotels, electrical broadcast and information technology.
India Bulls Real Estate: One of Indias largest listed developers developing residential and commercial real estate. Being a focused regional player, more than 90% of IBRELs portfolio by value is in the three major markets of Mumbai, NCR and Chennai. Established in 2000, the company has grown into one of the leading Indian business houses with its companies being listed on Indian and overseas financial markets having a combined net worth in excess of Rs. 18,000 crores. the current market cap being Rs.6,545.17 crore.
HDIL: Ranked as Indias fastest growing real estate company by Construction World NICMAR in October 2007 & with a current market cap of Rs.8,567.76 crore, Housing Development & Infrastructure Limited has established itself as one of Indias premier real estate development companies, with significant operations in the Mumbai Metropolitan Region. HDIL is a public listed real estate company in India with shares traded on the BSE & NSE Stock Exchanges. With operations spanning every aspect of the real estate business, from residential apartment complexes to towers & townships, commercial premium office spaces and retail projects like world-class shopping malls. it is Indias largest slum rehabilitation company, & was given the Mumbai International
Page | 21

Airport Slum Rehabilitation project in October 2007,one of the largest urban rehabilitation projects in India. .
o
Emaarr-MGF: One of the worlds leading real estate developers company in India and Development of properties in the residential flats, Commercial Properties, premium apartments etc. The Commonwealth Games Village builder is still trying to get listed on NSE. Currently not listed.
Factors determining the value of real estate Demand Demand refers to peoples willingness and ability to buy or rent a given property. In part demand stems from a market areas base. In most real estate markets, the source of buying power comes from jobs. Property values follow an upward path when employment is increasing. The real estate market in India has seen remarkable changes in the past few years. The rapid expansions of information technology, especially BPOs, spurt in the middle class income and 8% growth in GDP are the potential key factors for the growth. India is the 4th largest economy in the world, and has the 2nd highest GDP among the Developing countries based on purchasing power parity. IT and IT enable services sector in India is still in its growing stage due to increasing demand for business processing units in India and is estimated to grow by 107% to $583 million in revenue. This could lead to a space requirement of 2025 million sq. ft. per annum, according to a Merrill Lynch report. Taking this factor into consideration, the Total value of real estate created by the IT and ITES sector in the next three years will be Rs.132000.
Supply Analysis Supply analysis means sizing up the competition. Nobody wants to pay more for a property than the price they can pay for competing property. An integral part of value analysis requires identifying
Page | 22

sources of potential competition and then inventorying them by price and features. An analysis of supply should not limit potential competitors to geographically and physically similar properties. In some markets, for example, low priced single family houses might compete with condominium units, manufactured homes and even with rental apartments. The Property In real estate the property itself is also a key ingredient. The price that people will pay is governed by their needs and the relative prices of the properties available to meet those needs. To try to develop a propertys competitive edge, an investor should consider five things: 1. Restrictions on use 2. Location 3. Site characteristics 4. Improvements 5. Property management
Rental Trends in India Recent trends of rental properties in India are conspicuous by the immense potential that is being realized today. Rental values in cities like Delhi and outskirts are witnessing an increase of 20-25%. Real estate agents are devoting themselves to negotiations for rented homes than ever. Though the interest rates on home loans, continued tax exemptions on such prompts people to buy property, those with the ability to buy a flat among the middle-class are thinking twice. In residential segment, the capital value or cost of flats has almost doubled in cities like Gurgaon where prices went up to Rs. 45 lakh from Rs. 15 lakh a couple of years back. The demand for more capital appreciation in the wake of rising prices coupled with home loan rate hike has dampened the buying spirit. This has in ways propelled demand for rental property in India. Increased demand for independent houses or paying guests occurs mainly in the metros like Delhi, Gurgaon, and Mumbai etc. where the corporate sectors rent independent houses for their senior executives. A
Page | 23

paying guest or PG accommodation in India is a convenient arrangement. Even PG hostels and working Womens hostels are considered safe and can be availed of on an individual or sharing basis mean big business. The real estate rental trends in commercial sector are momentous as the key tendency among the investors is to rent a commercial space instead of buying. It will facilitate low risk and less worry on maintenance. Commercial rentals including corporate office space, BPO spaces, mall space, shops and showrooms are an integral part of the commercial rentals in India. Buying good space in high quality development and leasing it to a good brand is a wise investment decision. Usually, commercial lease agreements specify a 15% escalation in the real estate rental in every three years which is a good enough yield. For those considering regular rental returns rather than capital appreciation, mall space has the distinction to be an excellent option. It gives returns higher than that received with office space and much higher than the rental returns from residential space. Major Areas of Investment in Real estate Real estate Stocks and REIT
The passive investor would likely want to place investment funds into the stock market in the form of equities of major national homebuilders. Or they might invest in a Real Estate Investment Trust. This is a fund set up and managed to invest in stocks, bonds and mortgage instruments in the real estate area. People find it a convenient and safe mode of investment as small investors who do not have large funds to invest directly in real estate property are able to benefit from the schemes as large number of small investors come together and pool in their funds and invest them through people who have specialized skills of investment. This option not just give small investors the benefit of enjoying the income of real estate sector but also provide them with less risk as the risk gets distributes among large number of investors and the amount is managed by fund managers. REIT are such ways of investing
Page | 24

Mortgage Instruments
Discounted notes are another investment strategy. Sellers many times accept a mortgage from a buyer, and after payments have been made for a while, they want to convert to cash. They sell the note to an investor at a discount and the investor then gets payments from the buyer. Appreciation of the Market Value of Properties
This is the most widely known way of profiting in real estate. A property is purchased and held. Over time, the value of the property appreciates, sometimes even faster than the overall market. Certain areas of the country have experienced significant appreciation in home values over the last ten years. Rental Income from residential Property
This type of income is at a rise these days .As it gives an ease of earning regular income. A person can invest in a property and purchase it and then can lend it on rent to tenants, paying guest and earn handsome rent every month. It is becoming a trend in the metropolitan cities as more and more people are coming to metropolitan cities in search for work and when these people come to different cities to make a career and settle down they live on rented accommodations, due to such reasons this has become a huge business these days. Investment in commercial properties In todays time commercial property are very expensive. The price is really high due to increase in trade. Commercial properties are in demand and so investors find it as a lucrative investment option. Be it a small investor who invest in a commercial property like a small shop or big investors who invest in malls, technology parks etc. Every investor can invest in these properties based on this level of investment. There is scope for all types of investors.
Page | 25
Vacant Land People purchase vacant land, few keep it as it is and sell it off when the prices increase. Big developers purchase vacant land at discounted prices in auctions and then construct huge apartments, villas, cities .and then sell these flats individually and earn large profits. Some others build up amazement parks and earn from it. There are various ways in which a person can earn from vacant land by converting it into different alternatives. Major reasons for success of Real estate sector Expansion and Development of the IT sector Liberalization and Globalization has opened various avenues for investment. Number of MNCs have set up their base in India and have given way to the growth in the real-estate sector especially in the commercial property sector. This has also provided better employment opportunities to the people of India and thus helping in the overall growth of the Indian economy and subsequently in the growth of the real estate. There are large number of BPOs and KPOs that have set their base in India. These companies require better infrastructure to match up with their work and so came up the concept of Technology Park. This has not only benefited the real estate industry but other interlinked industries as well effecting the Indias overall economic growth. We can see that as these companies are increasing their presence so is the value of real estate .In the current time they are one of the major contributors in the upliftment of the real estate sector. Liberalized FDI Policy The decision of the Indian Government to liberalize the FDI policy has bought a relief to the foreign investors who can now invest up to 100 % in construction and housing development. This has made investment in Indian real estate more lucrative. Since the policies are being liberalized and restrictions are being removed India is becoming a favored destination for investment purpose for the foreign investors. They prefer India as it is a developing Nation, that too a one with one of the largest economies, these factors when added to the relaxation of policy brings about more funds from outside India. Thereby increasing not just the worth of the real estate sector but also contributing in the
Page | 26

growth of the economy. Some of the worlds famous builders are taking keen interest in investing in the Indian real-estate market. Investment of foreign builders promises better prospects in the Indian real estate industry in terms of regulatory policy, efficient management, and the use of more advanced technology. This ensures that the Indian real estate has a brighter future. . The minimum land area for development by foreign investors is lowered from the earlier floor of 100 acres to 25 acres which has further made the real estate sector lucrative in the eyes of the foreign investors.
Convenience in obtaining Bank Loan. There are number of banks in India. Due to the presence of large number of both nationalized and private banks competition has also increased. Competition is not just between the Private Banks but even amongst the nationalized banks. To compete each other these banks try and facilitate the customer to get the best of products and services. In the recent years banks have been offering hassle free loans to the customer which has increased the capacity of the investor to purchase real estate. So, buying a property is not difficult even for those belonging to middle-class. Thus, it has enabled the overall growth of the Indian real estate. Growth of the Indian economy The Indian economy is one of the fastest growing economies in the World. This has a direct effect on the real estate sector as it is one of the largest sectors in the Indian economy. Some of the major areas which have been greatly affected by the growth in Indian economy are Delhi NCR, Mumbai, Hyderabad, Chennai, Bangalore, Pune and Kolkata. This growth is observed in all forms of property such as commercial, residential and industrial. Trends in Real Estate Janta Flats Until few years people use to live in Flats which were distinguished as LIG, MIG and HIG. The Low income Group Housed which was 1 bhk house, Middle income group flats use to have 2 bhk house
Page | 27

and High Income Group Houses were 3bhk houses. This trend stayed for quite a long time and even today in few areas we can see LIG, MIG and HIG Janta Flats made by the government. Builder Flats Then came a time when Builder made Flats became a range among people. People preferred them as they were well furnished homes as compared to the previous Janta Flats. Builders use to purchase vacant land or some existing old house deconstruct the old building and reconstruct new flats with latest designs. These flats were build keeping in mind the owners choice and preferences unlike those of Janta flats. Even today builder Flats are being constructed majorly trying to develop the under developed regions. Apartments They were like Builder flats but had better facilities as compared to them. Apartments had large number of flats in the building. Co-operative Societies This was a corporation wherein the corporation owned two or more residential building. Each member of the cooperative housing society was given a house each. The member needs to take the approval of the society before selling off the property to the third person.
Penthouses These are huge houses which cater to the needs of the upper class people. As space in metropolitans are reducing because of increase in number of migrants the space required for living and constructing individual houses has reduced drastically. So penthouses were built which are really huge apartments.
Villas They are individual houses build in a locality, they look like cottage type.
Page | 28
Cities
Big Builders are not just providing houses to live in but they are building up small cities within few acres of land. The Cities are build in such a way that it consist of residential flats, schools, hospitals, multiplex, malls, clubs all around the residential flats to bring the lifes of people at ease. This is the latest trend in the real estate sector. Every Big builder/ developer are building their own cities as it not just provides them with onetime payment but with regular income by way f various facilities being offered by them.
Green Houses This is another new concept which is doing great business.As people have become more conscious about going green, about saving our resources so as to benefit from the in the future ,Customers are willing to pay more than the normal market price if they are getting
environment friendly alternatives . Solar panels are used and all possible steps are taken to save our natural resources like Efficiently using energy, water, and other resources, Protecting occupant health and improving employee productivity, Reducing waste, pollution and environmental degradation.
Factors effecting decision of investing in Real Estate Price The prevailing price of the real estate is a major factor that influences the investment decision of the investor. Every buyer has his own capacity to purchase a property at different prices. The prices of property may rise due to different factors. Some people purchase property even when the prices are rising as they expect that the prices may rise even further and then may have to regret. whereas some people avoid purchasing when the prices rise as they wait for the prices to fall and purchase at lower prices.
Page | 29

Bank Rate Bank rate is another important factor that determines the decision of the investor. The investor would assess whether the investment that he is making is worth the interest that he would be paying to take a loan for purchasing the property. He would assess it based on the amount that he is expecting to earn from his investment. The Banks rate fluctuate based on different policies that the government makes.
Location The investor looks into the factors like the location of the property before investing any money in the property. It is not just a deciding factor as to whether he should purchase it or not but also helps in deciding how much is the investor willing to spend on the property based on the location of the property. If a person is getting a Property in some prime location he might not mind paying more than the market price but if the location is not as per his satisfaction he will bargain to get the prices reduced. Location preference is different for each investor as per his requirements and personal choice.
Economies Condition The situation prevailing in a country is another important factor. If the country is going through a bad phase the investor would not invest at that time. A stable economy is always a favored destination among the investors.
Government Policies Government policies are one of the major factors that affect the decision of the investors. Government policies relate to taxation policy, stamp duties and various other things like FDI involvement etc.
Page | 30

This is an important factor while deciding. If the government policies keep changing then people will be reluctant to invest in such an economy.
Disposable Income The disposable income of a person is a major factor that determines his investment decision. If a person has high disposable income he can invest in huge real estate properties whereas if the disposable income is less then the investor might not be able to invest in real estate directly and he may invest in REIT, equities of real estate companies.
Page | 31
CHAPTER-5 PRICING STRATEGIES OF INVESTOR
What is Investment...
In simple, Investment is putting money into something with expectation of profit. More specifically, investment is the commitment of money or capital to the purchasing of financial instruments or other physical assets so as to gain profitable returns in the form of interest, dividend or appreciation of the value of the instrument. It is related to saving or deferring consumption.
An investment involves choice by an individual or an organization to invest its money or capital in following instrument,
Assets like vehicles, machinery, appliances Property such as home, building, lands
Commodity Stock Bond market
Financial Derivatives like future & option
Foreign assets denominated in foreign currency
Investment comes with the risk of loss of the invested sum of money. The investment that has not been thoroughly analyzed can be highly risky with respect to the investment owner because the possibility of losing money is not within the owners control. The above listed all the investment instruments possesses less or more chances of risk.
Page | 32

5.1
Classification of Properties :
Real estate has been broadly categories into 3 classes as follow
Types of Property
(B). Commercial property
(A). Residential Property
(C). Vacant land
(A). Residential Property:
Page | 33
The residential type of property is by far the most popular with both new and experienced agents. Residential property offers a good investment avenue. People buy residential property for two important reasons:
For staying
As an investment
Advantages of Investing in Residential Property
Expenses, including depreciation on the property and interest on your borrowings, are tax deductible.
You make money as the value of the property increases. You can leverage your investment. You get rental income.
Risks of Investing in Residential Property
Interest rates could rise. The property could be untenanted for a period of time. You could get "bad" tenants. It could take up a lot of your personal time. \ House prices could remain static, or even fall.
Page | 34

Following are the types of residences: Single Family Residence
1. Row Houses/ Townships 2. Flats 3. Bungalows (B). Commercial Property:
1. Multi-Family Commercial Real Estate:
Commercial real estate property types include duplex homes, and other construction for habitation by multiple family groups. Condominiums are frequently called multi-family because of their construction as a group, but are normally listed and sold as single family residential units. Duplex homes are also frequently listed and sold as residential units to a buyer that lives in
one side and rents out the other.
Page | 35

2. Retail Space Real Estate Properties:
This category would include single buildings used as stores for clothing, electronics and other consumer products, as well as malls, strip centers and the like. Restaurant spaces are a specialty subset of the retail category, with some listings shown as restaurant/retail. Valuations can be based on size and land value, retail sales per square foot or other investment return calculations.
3. Office Buildings and Office Complexes
A single building designed for office use, or a group of offices in a single building or cluster of buildings would fall into this category. When offices are grouped in structures with single ownership, they are listed as commercial office rental property. The owner derives income from the rental payments of the office tenants. These can be valued based on the rental income return on investment, rather than methods using square footage and land value. Medical & Dental offices are a subset.
(C). Vacant Land
Land Investment has historically been the forte of large development companies, rich farmers or wealthy individuals. It can be a profitable business if proper development of land is undertaken. Land Investment is referred to as a long term investment and with land prices on the rise in many parts of the world, it is said to be
Page | 36

the safest and smartest way of investing ones money.
Capital gains can easily be realized from land when land price increases. The most striking feature of land investment is that investment takes place in a tangible asset which the investors can readily put into use. It is a branch of real estate investment which is gaining ground as major part of capital budgeting analysis. Real estate is basically defined as immovable property such as land and everything permanently attached to it like buildings. It is essentially at this juncture that land as an asset differs from real estate as it does not necessarily includes buildings and the attachments to the land. Land is perhaps the most basic asset that we want to invest in and may include vast open tracts with no significant estate on it. The job of developing the land lies with the developer, and with proper care to include modern houses and the associated amenities, it will significantly appreciate its value. Land situated close to developed areas will cost more as opposed to those in less developed areas. Land developed for commercial purposes and those developed for building residential complexes will have different prices and tax implications, if any.
Investing in land can be profitable as there is limited supply of land and the purchaser can really sell dear if he wants to
Page | 37
5.2 CHARACTERISTICS OF REAL ESTATE INVESTMENT:
Real estate properties have its own some important features. Some of the characteristics that make real estate unique as compared to other investment alternatives are as follows:
(1). Tangible:
Real estate is, well, real! You can visit your investment, speak with your tenants, and show it off to your family and friends. You can see it and touch it. A result of this attribute is that you have a certain degree of physical control over the investment - if something is wrong with it, you can try fixing it. You can't do that with a stock or bond.
(2). Requires Management:
Because real estate is tangible, it needs to be managed in a hands-on manner. Tenant complaints must be addressed. Landscaping must be handled. And, when the building starts to age, it needs to be renovated.
(3). Inefficient Markets:
An inefficient market is not necessarily a bad thing. It just means that information irregularity exists among participants in the market, allowing greater profits to be made by those with special information, expertise or resources. In contrast, public stock markets are much more efficient information is efficiently dispersed among market participants, and those with material non-public information are not permitted to trade
Page | 38

upon the information. In the real estate markets, information is king, and can allow an investor to see profit opportunities that might otherwise not have presented themselves.
(4). High Transaction costs:
Private market real estate has high purchase costs and sale costs. On purchases, there are real-estateagent related commissions, lawyers' fees, engineers' fees and many other costs that can raise the effective purchase price well beyond the price the seller will actually receive. On sales, a substantial brokerage fee is usually required for the property to be properly exposed to the market. Because of the high costs of trading real estate, longer holding periods are common and speculative trading is rarer than for stocks.
(5). Lower Liquidity:
With the exception of real estate securities, no public exchange exists for the trading of real estate. This makes real estate more difficult to sell because deals must be privately brokered. There can be a substantial lag between the time you decide to sell a property and when it actually is sold - usually a couple months at least.
(6). Underlying resident Quality:
When assessing an income-producing property, an important consideration is the quality of the underlying residence. This is important because when you purchase the property, you're buying two things: the physical real estate, and the income stream from the tenants. If the tenants are likely to default on their monthly obligation, the risk of the investment is greater.
(7). Variability among Regions:
While it sounds clich, location is one of the important aspects of real estate investments; a piece of real estate can perform very differently among countries, regions, cities and even within the same city. These regional differences need to be considered when making an investment, because your selection of which market to
Page | 39

invest in has as large an impact on your eventual returns as your choice of property within the market.
5.3 CONSIDERATIONS WHILE MAKING INVESTMENT IN REAL ESTATE
When it comes to making money, Real estate is considered to be one of the surest investments. Lots of opportunities abound, whether it be in the stock market or in business. But these areas also offer a significant amount of risk. As a result, most people do not engage in these speculative activities. But real estate is something which more people can be involved in, simply because everyone needs a home to live in. However, no investment is entirely risk free, and so even here a certain amount of due diligence is required.
Some important point you need to think about:
1. Who is the developer?
2. Is the project a self development / partnership or joint venture?
3. Past business / trading history
4. The location of the proposed project
5. Basic amenities
6. The growth prospects of the neighborhood development
7. Industrial and business development in the locality
Page | 40

8. Price comparison analys
Page | 41

9. Future property price valuation
10. What are the returns on your investment?
Affordability is a key consideration when making any purchase. One should factor additional expenses such as electricity and property taxes to get a complete idea of how much can be afforded.
An integrated service model offering end-to- end - 360 Realty Services to cater to the diverse needs of corporate & developers in project management & execution. Managing realty projects right from identification to marketing is a lengthy process replete with many challenges. You may be keen to execute realty projects for commercial / residential purposes but may not be equipped with the right skill-sets / know-how for the undertaking.
Build- One offers you with a integrated service model meeting the entire realty business needs to help you successfully undertake your realty projects. Build-One offers you with a unified value-chain of core realty services with critical forward & backward integration of other value-added services. The services are effectively streamlined enabling steady progression of the projects, right from idea conceptualization to profit generation / hand-over, encompassing all functional & operational tasks.
Page | 42

360* Degree Firms significant Functions pertaining to Construction Project.
Market
Feasibility
Property
Title
Identificatio Study Study n Check/Legal Work
Regulatory Approvals Budgeting
Planning & Designing
Property acquisition
Project Mgt. /
Marketing
Selling, Leasing &
Construction
Plans Hand over
1. Market study:
Market study refers to detailed analysis of market and locations in different regions within the specific area. One has to look the trend and path of the property market in the
Page | 43

area where he want to set up the project. A marketability study tries to create a market area demand model based on available demographic information and the application of common sense to develop a picture of the current and future market area trends that may effect demand.
2. Feasibility Study:
Feasibility Study typically involves testing geographic locations for a real estate development project, and usually involves packages of real estate land. Developers often conduct feasibility studies to determine the best location within a jurisdiction, and to test alternative land uses for given packages. Jurisdictions often require developers to complete feasibility studies before they will approve a permit application for retail, commercial, industrial, manufacturing, housing, office or mixed-use project. Market Feasibility takes into account the importance of the business in the selected area. Could the project be built?, Can the site support a building structure that is planned?, etc. should be check out.
3. Property Identification:
Property identification refers to the type of project which the builder has to plan. It mean whether put residential or row house or to put specific commercial project looking at the locations and demand for the market. Property identification generally is driven by demand of type of property in the market.
4. Title clear/Legal work:
Title clear is the phrase used to state that the owner of real property owns it free and clear of encumbrances. In a more limited sense, it is used to state that, although the owner does not own clear title, it is nevertheless within the power of the owner to convey clear title. For example, a property may be encumbered by a mortgage. This encumbrance means that no one has clear title to the property. However, standard terms in a mortgage require the mortgage holder to release the mortgage if a certain amount of money is paid. Therefore, a buyer with enough money to satisfy both the mortgage and the current owner can get clear title.
Page | 44
5. Property Acquisition:
Generally, property acquisition refers to a person or other entity acquiring title to real property by a deed. A deed is the legal instrument used to transfer ownership in real estate. Real property can also be acquired by inheritance and by a court order.
6. Planning & Designing of Project:
Planning and designing is carried out only after finishing the above legal works. It is concerned with the proper plans and the design of the project that the developer is going to construct. Here, builder can approach architects to develop plan and design as per the requirements of builder.
7. Budgeting:
This point is also important to be considered by a builder. The budget of the real estate project should be optimal as per the plan and designs of the structure. Budgeting needs to analyze the size of the projects.
8. Regulatory Approval:
After the plans and design of the projects, it needs to be submitted the same at the concerned govt. authority (Municipal Corp./Municipality) for further verifications and approval for the project. If authority finds no objections, then after they can arrive at decision for approval and sanction of project.
9. Project Mgt./Construction:
If government regulatory approvals and project get sanctioned by authority, then after builder can take step further to start initial work of construction. A project management team also has to form for various aspects of the
Page | 45

project of residential or commercial. At regular interval of time, govt. executives checks the work whether is going as per the criteria.
10.Marketing Plan:
While developer put the marketing plan for the project he has put. On the bases of demand for the housing and location. As a promotional efforts and marketing for the project Hoardings, newspaper ads. attractive schemes, agent/ broker approach has to be followed.
11.Selling, Leasing and Handover:
Builder may sell the entire project to other party, or he may sell the project on leasing bases. Another option he may adopt is he can hand over to the party who want to handle this project.
Below are some of the main points that were made along the way: Real estate investments fall into one of the four following categories: private equity, public equity, private debt and public debt. Your choice of which one to invest in depends on the type of exposure you are seeking for your portfolio. You can invest in either income-producing properties or non-income-producing properties. Any leased property is income producing, and vacant properties are non-income producing. You can still earn a capital return on a non-income producing property, just as you would on an investment in a home. Real estate can produce income (like a bond) and appreciate.
Real estate is tangible, so it requires ongoing management. On the other hand, you also have an increased ability to influence the performance of a single investment as compared to other asset classes.
Page | 46

Some of the benefits of adding real estate to a portfolio include: diversification, yield enhancement, risk reduction and inflation-hedging capabilities. However, real estate also has high transaction costs, can be difficult to acquire and it is challenging to measure its relative performance. Buying real estate requires substantial due diligence to ensure that you're getting what you expect after you close.
5.4 ADVANTAGES AND DISADVANTAGES OF REAL ESTATE INVESTMENTS:
ADVANTAGES:
Investing in real estate is as advantageous and as attractive as investing in stock market. Here are the main benefits of investing in property market.
Real Estate Investments are Less Risky: As compared to other investments, less of misadventure is involved in a real estate property.. Real estate investments are traditionally considered a stable and rich gainer, provided if one takes it seriously and with full sagacity. The reasons for the real estate investments becoming less risky adventure primarily relate to various socio-economic factors, location, market behavior, the population density of an area; mortgage interest rates stability; good history of land appreciation, less of inflation and many more. No Need for Huge Starting Capital.
A real estate property can be procured for an initial amount as low as $8,000 to $ 15,000, and the remaining amount can be taken on holding the property as security. This is what you call High Ratio Financing. If you don't have the idea as to how it works, then let explain with the help of an example.
Page | 47

Honing Investment Skills
A real estate investment, especially when you buy a condo for yourself, will be a pleasurable learning experience. It gives you the opportunity to learn and when you went ahead with your first real estate property. Not a time taking Adventure
Real estate investment will not take out all your energies, until you are prepared and foresighted to take the adventure in full swing. You can save hell lot of time, if you are vigilant enough to know the techniques of making a judicious investment in the right time and when there are good market conditions prevailing at that point of time. Leverage is the Right Way
The concept of leverage in real estate is not a new one. It implies investing a part of your money and borrowing the rest from other sources, like banks, investment companies, finance companies, or other people's money (OPM). There have been many instances where people have become rich by practically applying OPM Leverage Principal. Moreover, in case the lender is interested in selling the property, the net proceeds resulting from the sale of the property should comfortably cover the mortgage amount. Real Estate Appreciation
An appreciation is an average increase in the property value over original capital investment, taking place over a period. There are some neglected real estate properties that have an appreciation below the average mark, whereas, some of the properties located in maintained geographical areas, showing high demand, have an above average appreciation. In such centrally located and high demand areas, the average appreciation can reach up to 25% in a year. Low Inflation
Page | 48

Inflation is the rise in the prices of the products, commodities and services, or putting it another way, it is the decrease in your capacity to buy or hire the services. Supposing, a commodity was worth $10 a decade back, will now cost $ 100 as the result of inflation. Comparatively, real estate sector has minimum rate of inflation. Tax Exemptions You get various tax exemptions on your principal and investment income property. The tax exemptions available in real estate property investment are more than available in any other investment. In other investments, you lose terribly on the investments in your bank in the form of inflation and high taxes therein, but in real estate; you don't actually have such hindrances. There are several beneficial provisions in the Income-tax Act, 1961 which promote investment in residential properties, having regard to the need for housing millions of citizens. Of course, only those who pay taxes can take advantage of the appropriate incentives given under the law. Interest payable on loans taken for purchase or construction of house is deductible to the extent of Rs 1.5 lakh every year, though the annual value of one self-occupied residential property is exempt from income-tax. In addition, repayment of the installment of housing loan is deductible to the extent of Rs 1 lakh per annum under section 18-C. High Return on Investments
Real estate investment gives you potentially high Rate of investment before and after the taxes levied on your income. In fact, investing in real estate gives you high ROIs after the taxes Net Positive and High Income is Generated. Increased demand for properties.
Page | 49
DISADVANTAGES
Beside the large potential of return on Investments, there are certain levels of Disadvantages. These disadvantages can be easily taken off, if you have an insight about the limitations of real estate investment and what can be its short term as well as long-term repercussions. Taking Wrong Decisions
People going for the real estate investment property take decisions in haste. Make a firm decision when you go for purchasing your first real estate property, is just not easy man. If you are swayed by emotions, you will be ruined. No readily available Liquidity:
With your real estate investment, you need to know one thing straight, and that is you simply cannot aspire hard cash immediately. You have to wait and watch the market movements and other socio-economic and politico economic factors before selling your real estate property, like a mall or your home. Eats away your time and energy:
Real estate investment can get you real fatigue. It is a lethargic time consuming process that makes you feel almost laid back. You need to plan and have those instincts to get going with your property. You will learn more on about making you real estate investments more time efficient in later part of the chapters. A Risk full decision can harm:
Page | 50
Investing in a real estate property can be a risky and costly even, if you are not prepared before, you will make losses. Not just losses but, but you will become a pauper. Remember, as I said in my earlier statements, Real estate market is speculative. No Stringent Comparison Methodologies
Real estate market is variable. The price of two real estate properties can vary a great deal, provided you keep other factors such as time and location, constant. No two real estate properties can have exact. There always exists kind of variation and this need to be taken into account. Though, you do have the existing rule of thumbs and set strategies, but all these are workable, if tried in combination. Guided and Drawn on Government Policies:
Government policies and regulations play an indispensable role in deciding on the real estate investment. These policies and regulations include control the zone based bylaws, construction activities; property prices; rent control procedures; license dispensations and property transfers; taxesetc.
Page | 51

5.5 Government regulations in Real Estate sector: Much of the over 100 laws governing various aspects of real estate in India dates back to the 19th century and major amendments to existing laws are required to make them relevant to modern day requirements. The Central laws governing real estate include:
Registration Act, 1908
The purpose of this Act is the conservation of evidence, assurances, title, and publication of documents and prevention of fraud. It details the formalities for registering an instrument. Instruments which it is mandatory to register include:
(a) Instruments of gift of immovable property;
(b) other non-testamentary instruments which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, to or in immovable property;
(c) non-testamentary instruments which acknowledge the receipt or payment of any consideration on account of instruments in (2) above.
(d)Leases of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent.
Urban Land (Ceiling and Regulation) Act (ULCRA), 1976
This legislation fixed a ceiling on the vacant urban land that a 'person' in urban agglomerations can acquire and hold. A person is defined to include an individual, a family, a firm, a company, or an association or body of individuals, whether incorporated or not. This ceiling limit ranges from 5002,000 square meters (sq. m). Excess vacant land is either to be surrendered to the Competent Authority appointed under the Act for a small compensation, or to be developed by its holder only
Page | 52

for specified purposes. The Act provides for appropriate documents to show that the provisions of this Act are not attracted or should be produced to the Registering officer before registering instruments compulsorily registrable under the Registration Act.
The objective of acquiring the excess vacant land could not be achieved because of intrinsic deficiencies in the legislation itself.
Stamp Duty:
There is a direct link between Registration Act and Stamp Act. Stamp duty needs to be paid on all documents which are registered and the rate varies from state to state.
Rent Control Act:
Rent legislation in India has been in existence for a very long time. Rent control by the government initially came as a temporary measure to protect the exploitation of tenants by landlords after the Second World War. However these rent control acts became almost a permanent feature. Rent legislation provides payment of fair rent to landlords and protection of tenants against eviction. Besides, it effectively allows the tenant to alienate rented property.
Property Tax:
Property tax is a levy charged by the municipal authorities for the upkeep of basic civic services in the city. In India it is the owners of property who are liable for the payment of municipal taxes whereas in countries like the United Kingdom, the occupier is liable. Generally, the property tax is levied on the basis of reasonable rent at which the property might be let from year to year. The reasonable rent can be actual rent if it is found to be fair and reasonable. In the case of un-let properties, the rental value is to be estimated on the basis of letting rates in the locality.
Page | 53
CHAPTER 6 DATA ANALYSIS & INTERPRETATIONS

Findings and Analysis
The findings and analysis are based on the survey done on prospective buyers. The survey was conducted through the use of questionnaire. The following are the findings and analysis of the survey.
1.
Age group of Investors
Age Group of Investors

20 -25 years 26 - 35 years 36- 45 years 45 and above
27%
8% 23%
42%
The respondent of the survey were mostly in the age group of 36-45 years i.e. 42%. Followed by the people in the age group of 45 years and above- 27%. 23% in age group of 26 to 35 years and the least were people in the age group of 20 to 25 years. This shows the type of sample that we are analyzing
Page | 54
2.
Income Level
Income Level
45 40 35 30 25 20 15 10 5 0 2 - 3.5 lakh 3.5 - 6 lakh 6- 10 lakh 10 lakh and above Series1
The above analysis shows that the people covered under the survey mostly included people from the income group of 6-10 lakhs i.e. 39% , followed by people with income above 10 lakh- 33% and the remaining were in the category of 3.5 to respectively. lakh and 2- 3.5 lakh consisting of 22% and 6%
Page | 55
3.
Preferred Investment Option
Preferred Investment Option

Real estate Equity Mutual Funds Gold
18% 36% 12%
34%
The above findings show that Real estate is a favored investment option among the respondent by 36% followed by equity, gold and mutual funds by 34%, 18 % and 12 % respectively. This infers the trust and the interest of the investors in Real estate sector. People are willing to invest in real estate be it a large investor or small all of them try to invest in real estate sector in the ways convenient to them.
Page | 56
4.
Preferred investment in real estate
Preferred Real estate Investment Option

Residential Commercial REIT equity of real estate
25% 13% 24%
38%
The above analysis shows that investors preferred investment option is residential property by 38% .The next best option being equity shares of real estate companies by 25% followed closely by commercial property with 24% and the least investment is in REIT with only 13 % respondents investing in it. This analysis clearly shows that residential property is the most favored investment option amongst the investors. The above analysis also shows that people are not investing in REITs when asked the reason most the people were not even aware about it.
Page | 57
5.
Factors effecting real estate investment decisions
Factors effecting Investment

Price Economies Condition Bank Rate Government Policies Location Disposable Income
28%
22% 18% 17%
12%
3%
The major factor that effects the investment decision is the Disposable Income of the investor .which constitutes 28% of the respondents. The prevailing price of the properties is another important factor it constitutes 22% of the respondents if the price is too high people avoid purchasing the property and vice versa. Price is the major determinant factor followed by Bank rate at 18 % as it is very important for people who are opting for loans from the banks ,as they need to assess whether the investment is worth paying the interest on the loan or not. Then comes location at 17% followed closely by Government policies holding 12% of the respondents.These policies are regarding taxes, subsidies, stamp duties , FDI and the like. Economies condition also effect around 3% respondents.
Page | 58
6.
Perception about effect of recession
Perception of Buyers
Cost Decreased Good time to purchase Projects Delayed No difference Stop Purchasing
20% 19%
8% 31%
22%
To see the effect of recession on the minds of people I asked them about what according to them was the effect of recession in the real estate sector in india.31% respondents said that the projects were delayed .22% said that people would have stopped purchasing as the recession was effected mainly due to real estate sector and that it has become a risky option to invest.20% people said that as recession did not affect the Indian economy at large so it does not affect their investment decision.19% felt that it was a good time to purchase real estate properties.8% people felt that the cost should have reduced .
Page | 59
7.
Preferred time duration of investment
Time Duration
1- 3 years 3-5 years 5-10 years more than 10 years
23%
15%
28% 34%
Around 34% people invested for a time period of 5-10 years , followed by 28% investing for a duration of 3-5 years.23% for long term i.e. for more than 10 years and 15% invested for a time duration of 1- 3 years. This analysis shows that people invest in real estate for long term which is around 5-10 years.
Page | 60
8.
Better Future of Real estate
Better Future of Real estate

Yes No Neutral
11% 20%
69%
69% respondent feels that the Indian real estate industry has a bright future and will increase in the coming days. Whereas 20 % of the respondents feel the other way round. 11% respondents were neutral about the issue and said that the situation will remain same without any change. Majority of the respondents are positive about the future of the real estate industry.
Page | 61
CONCLUSION
As we are aware that India is one of the fastest growing economy in the world and the real estate sector of India is one of the major contributor to the growth of the economy. It is the second largest sector for employment opportunities after agriculture sector. . 5 % of the countrys GDP is contributed by the housing sector.
From the above study we can infer that the main reason for the success of the Real estate sector is the Growth of the economy as a whole. When the disposable income of the investors increases they invest more in the real estate sector as they find it a lucrative investment opportunity. Real estate is a favored investment option due to various efforts that are being made by the government.
Government Policies are another major reason for the increase of investment in the real estate sector. One of the most recent and effective policy change of government which has bought an increase in the investment of real estate sector is the liberalized policy of the government in relation to FDI in the real estate sector. As the government has allowed 100% FDI in the construction sector there are large numbers of foreign investors who are investing in the Indian real estate industry. The governments rule where it has reduced the minimum land area for development by foreign investors from the earlier floor of 100 acres to 25 acres which has further made the real estate sector lucrative in the eyes of the foreign investors.
Page | 62

Foreign investors play a major role in the development of the real estate sector, whether directly or indirectly. Direct FDI is an example, the other way is by the increase in the number of MNCs , there is requirement of better infrastructure facilities so when the demand increases it benefits the industry.
The rental trend has also increased many folds in the recent years. People not just invest in real estate for property appreciation but they also invest to earn regular income by way of rent from the properties. Rental trend is on a rise people rent commercial and residential properties. Paying Guest, hostels are also very common these days due to large demand.
Real estate investment trust (REIT) is a good option available for small investors , who can pool in their funds and invest in the real estate sector and also benefit from the skilled knowledge of the fund managers who analyze the various pros and cons and then make the investment decision for the investors in different funds of real estate market. After speaking to the investors one of the conclusion that I came across was that though REIT is a very good option for investing in the real estate sector but most of the people are not able to utilize it as they are not aware about it. Government should take up steps to bring awareness amongst the people about REIT.
Bank Loans are another important factor effecting the investors investment decision. The govt should build such policies which make obtaining a loan for investment in real estate a hassle free process; also to increase the investment in real estate the government should keep the Bank rate low as it is one of the major drivers of investment in real estate sector. The investor always assess whether the investment that he is making is worth the interest that he will be paying to obtain a loan for such an investment.
The final conclusion that I can give from the above study is that there is great scope of the real estate sector. It will grow in the near future and will be one of the major reason for the growth for the Indian economy.
Page | 63
CHAPTER 8 RECOMMENDATIONS
The government should liberalize its policies regarding investment in real estate. As we have
seen in the above study that because of the governments initiative of liberalizing the FDI policy relating to investment in Real estate sector there has been huge investments being made by the foreign investors. So the government should take such steps.
The government should create awareness amongst the general public about REIT as most of
the people are not investing in it due to lack of awareness .It is a good investment option but people are not benefiting from it as they are not aware about it.
The government should lower the interest rate as it is one of the major factors that determine
the investment decision of the investor. If the govt want to increase the investment in the real estate sector then it will have to reduce the bank rates so that it increases the money in the hands of people and they invest in real estate.
Investors have high hopes from the real estate industry, even though they are aware about
the delays in the projects due to recession, Still they are positive about the future prospect of the real estate industry.
Page | 64

CHAPTER 9 BIBLIOGRAPHY
www.makaan.com www.magicbricks.com www.ansalspropertiesltd.com www.eros-group.com www.eldecogroup.com www.omaxe.com www.parsvnath.com www.ashianahousing.com www.gurgaonproperties.net www.realestatencr.com www.gurgaonrealestate.com www.estatedeveloper.com www.bank bazaar.com www. noradarealestate.com
Page | 65
ANNEXURE QUESSIONNAIRE
1. Name : 2. Age : 3. Gender : 4. Income Level :

2 lakh 3.5 lakh 3.5 to 6 lakh 6 to 10 lakh 10 lakh and above
5. What is your preferred investment option :

Real estate Equity Mutual Funds Gold
6. Which option do you prefer while investing in Real estate :

Residential Property Commercial Property Real estate investment trust Equity of real estate companies
7. Which is the most important factor that effect your real estate investment decision

Price Bank Rate
Page | 66

Location Economies Condition Govt Policies
8. What is your perception about the effect of recession in the real estate market in India:

Cost Decreased Projects Delayed Stop Purchasing Good time to purchase No Difference
9. What is your preferred time duration of Investment :

1-3 years 3-5 years 5-10 years More than 10 years
Do you think Indias real estate market will Improve in future :

Yes No Neutral
Page | 67
Page | 68
Page | 69
Page | 70

Real Estate 2001 MARKS

Încărcat de

Informații document

Descriere originală:

Drepturi de autor

Formate disponibile

Partajați acest document

Partajați sau inserați document

Opțiuni de partajare

Vi se pare util acest document?

Este necorespunzător acest conținut?

Drepturi de autor:

Formate disponibile

Real Estate 2001 MARKS

Încărcat de

Drepturi de autor:

Formate disponibile

A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI

SUBMITTED BY: PARTH DHARIA SYBMS-C SEMESTER-IV

PROJECT GUIDE: Dr. VINAY PANDIT

YEAR OF SUBMISSION: 2013-14

A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI

THE INFORMATION SUBMITTED IS TRUE AND ORIGINAL TO THE BEST OF MY KNOWLEDGE.

A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI

A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI

A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI

A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI

A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI

A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI

A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI

A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI

A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI

A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI

A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI

A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI

A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI

A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI

A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI

CHAPTER 3 RESEARCH METHODOLOGY 3.1 Research Problem

3.2 Objective of Study

3.3 Scope of Study

A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI

3.5 Data Collection

3.6 Research Instrument

3.7 Research Design

A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI

3.8 Sampling Plan / Sampling Technique

3.9 Limitation of Research

A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI

Omaxe : Omaxe has

successfully executed more than one hundred and twenty

A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI

A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI

A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI

A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI

A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI

A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI

A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI

A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI

A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI

A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI

A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI

A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI

CHAPTER-5 PRICING STRATEGIES OF INVESTOR

Commodity Stock Bond market

Financial Derivatives like future & option

Foreign assets denominated in foreign currency

A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI

Real estate has been broadly categories into 3 classes as follow

(A). Residential Property

(C). Vacant land

(A). Residential Property:

A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI

Advantages of Investing in Residential Property

Risks of Investing in Residential Property

A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI

1. Row Houses/ Townships 2. Flats 3. Bungalows (B). Commercial Property:

1. Multi-Family Commercial Real Estate:

one side and rents out the other.

A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI