REAL ESTATE INDUSTRY

REAL ESTATE
By: Farook A Azam (BE, PGDIM, MBA, IDIP, PM)
Infrastructure consultant & Visiting Faculty @ VTU for MBA ( Infra
– Mgmt.)

What it means?
Real estate is "property consisting of land
and the buildings on it, along with its natural
resources such as crops, minerals, or
water; immovable property of this nature; an
interest vested in this; (also) an item of real
property; (more generally) buildings or
housing in general. Also: the business of
real estate; the profession of buying, selling,
or renting land, buildings or housing.
VTU/INFRASTRUCTURE MANAGEMENT/MBA/4TH SEM 2

Global Scenario
• Real estate as "real property" in the U.K. In British usage, "real property",
often shortened to just "property", generally refers to land and fixtures, while
the term "real estate" is used mostly in the context of probate law, and
means all interests in land held by a deceased person at death, excluding
interests in money arising under a trust for sale of or charged on land
• Real estate in Mexico and Central America
– Real estate business in Mexico, Canada, Guam, and Central America operates
differently from the United States.
– Some similarities include legal formalities (with professionals such as real estate
agents generally employed to assist the buyer); taxes need to be paid (but
typically less than those in U.S.); legal paperwork will ensure title; and a neutral
party such as a title company will handle documentation and money to make the
smooth exchange between the parties. Increasingly, U.S. title companies are
doing work for U.S. buyers in Mexico and Central America.

Global Scenario….
• Prices are often much lower than prices in countries such as the U.S., but in many
locations, such as Mexico City, prices of houses and lots are as expensive as houses
and lots in countries such as the U.S. U.S. banks have begun to give home loans for
properties in Mexico, but, so far, not for other Latin American countries.
• In Mexico, foreigners cannot buy land or homes within 50 km (31 mi) of the coast or
100 km (62 mi) from a border unless they hold title in a Mexican Corporation or a
Fideicomiso (a Mexican trust).[3][4] In Honduras, however, foreigners may buy beach
front property directly in their name. There are different rules regarding certain types of
property: ejidal land — communally held farm property — can be sold only after a
lengthy entitlement process, but that does not prevent them from being offered for sale.
• Real estate agents in Costa Rica currently do not need a license to operate, but the
transfer of property requires a lawyer. CCCBR (Camara Costarricense de Corredores
de Bienes Raices) is the only official body that represents the Real Estate industry to
the government. The Costa Rica MLS is the official MLS of the Costa Rica Chamber of
Real Estate Brokers Board. The Chamber institutes the rules, regulations and ethical
guide for officially licensed brokers in Costa Rica.
• In Mexico, real estate agents do not need a license to operate, but the transfer of
property requires a notary public.

Real estate in Thailand
• In Thailand it is possible for a foreigner to own a condominium
freehold provided ownership does not exceed 49% of the total
building; it is not easily possible for a foreigner to own land but
normal practice is that property can be purchased then Land
acquired under a 30 year lease option; Until recently it was
considered by most legal advisors that the ownership of land by a
foreigner through a Thai Limited Company was acceptable, although
the Law clearly states that foreigners cannot own land in Thailand.
The Government has now made clear that such ownership may be
illegal. The legitimacy of such ownership depends on the status of
the Thai Shareholders who must be shown to be active and
financially participating shareholders.

In Philippines…….
• In the Philippines, real estate is an area for growth. Aside from
the development of high rise buildings in the Greater Manila
area, nearby provinces are now seeing much land
development with its continuous expansion for horizontal
development projects in the nearby provinces such as
Laguna, Cavite, Rizal, Bulacan, Pampanga and Batangas.
• The major expansion in vertical real estate development
outside Metro Manila are in Tagay south of the metropolis,
Cebu and Iloilo in the Visayas, Cagayan de Oro and Davao in
Mindanao, where medium-to-high rise buildings are beginning
to appear.
• Foreigners are generally not allowed to hold more than a 40%
interest in any land, although there is an exemption for
pensioners who deposit more than US$50,000 in a specified
account. Philippine rules distinguish between a house and the
land it sits on.

Real Estate Industry in India
• Real estate in India continues to be a favoured destination globally
for investors, developers and non-resident Indians (NRIs), driven
largely by investor-friendly government policies and increasing
globalisation. The second largest employment generation sector
after agriculture, real estate contributes about 6.3 per cent to India’s
gross domestic product (GDP). The foreign direct investment (FDI)
in the sector is expected to touch US$ 25 billion in the next 10 years
from its current US$ 4 billion.
• The sector’s progress is driven by factors such as rapid
urbanisation, a growing trend towards nuclear families, positive
demographics, rural–urban migration, ever-developing
infrastructure, higher income levels and housing demand. The real
estate sector, with its growing investment opportunities, is expected
to post annual revenues of US$ 180 billion by 2020.

Market Dynamics in INDIA
• The real estate sector in India is witnessing rapid growth in the residential,
commercial and industrial segments. Real estate development, once
restricted to bigger cities, have shown marked progress in smaller cities and
towns owing to availability of banks loans, higher earnings and improved
standard of living.
• The real estate sector of India is projected to post annual revenues of US$
180 billion by 2020 against US$ 66.8 billion in 2010–11, a compound annual
growth rate (CAGR) of 11.6 per cent. The demand is expected to grow at a
CAGR of 19 per cent in the period 2010–2014, with Tier I metropolitan cities
expected to account for about 40 per cent of this growth. As of now,
Mumbai, Delhi-National Capital Region (NCR) and Bengaluru cater for 46
per cent of total office space demand in India. This demand is expected to
be rise sharply in Tier II cities such as Kolkata and Chennai in the period
2010–14.
• Today, Delhi-NCR accounts for about 30 per cent of the total mall supply in
India. About 53 per cent of demand for total mall space is projected to come
from the country’s top seven cities, namely Delhi-NCR, Bengaluru, Mumbai,
Kolkata, Pune, Hyderabad, and Chennai, in the period 2010–2014.

Investment Opportunities
• The Indian retail realty sector is projected to grow at around 15 per cent year-on-year over the
next 3–5 years as against a 12–13 per cent nominal growth of India’s GDP estimated by the
International Monetary Fund (IMF). If the sector does indeed manage the aforementioned growth,
it will touch Rs 34 trillion (US$ 544.73 billion) by 2016.
• India’s office space stock is estimated to rise by 40 per cent to 642.2 million sq ft by 2017,
according to a report by real estate consultancy Knight Frank India. The current Indian market
offers some of the most competitive rates in the Asia-Pacific region, according to a report by
property services firm DTZ. The report also states that Indian cities will have some of the fastest
rental growths in the region over the period 2013–17, but will remain among the most competitive.
• The share of luxury retail space in India will be 1.4 per cent by 2015, according to a report by real
estate services firm Cushman & Wakefield. NCR and Mumbai, areas that have embraced the mall
culture, are the two most favoured destinations for luxury retailers.
• The construction development sector, including townships, housing and built-up infrastructure
garnered total FDI worth US$ 22,671.95 million in the period April 2000–August 2013.
Construction (infrastructure) activities during the period received FDI worth US$ 2,280.95 million,
according to the Department of Industrial Policy and Promotion (DIPP).

Major investments in the Indian
real estate sector
• Godrej Properties Ltd plans to invest Rs 9,000 crore (US$ 1.44 billion) in 15 new real
estate projects in India over the next 10 years.
• Unitech Ltd has signed a Rs 800 crore (US$ 128.17 million) deal to lease an 800,000
sq ft space at one of its IT Special Economic Zones (SEZ) in Gurgaon, to
multinational human resource firm, Aon Hewitt.
• NRI billionaire Mr Ravi Pillai plans to purchase stake worth about US$ 100 in a
special purpose vehicle floated by Pune-based realtor, Panchshil Realty. The
investment will go into the construction of Trump Towers and World Trade Centre in
Pune, Maharashtra.
• Infrastructure Leasing & Financial Services (IL&FS) Ltd has claimed a project worth
Rs 244.46 crore (US$ 39.17 million) from realty firm Emaar MGF for construction
work at the latter’s residential project at Gurgaon, Haryana.
• French luxury hotel chain Sofitel, which is managed by Accor Group, is targeting 10
properties in India, mainly in major luxury destinations, in the next few years.
• One of the world’s top manufacturers of elevators, US-based Otis, is setting its sights
on the Indian real estate market. The pace of construction in India makes the country
an attractive proposition for such an investment. The company will be working with
the Delhi and Hyderabad Metro projects. The former has placed an order for 222
escalators for its Phase III project, according to Otis.

Major categories in North America
and Europe
• Attached / multi-unit dwellings
• Apartment - An individual unit in a multi-unit building. The boundaries of the apartment are
generally defined by a perimeter of locked or lockable doors. Often seen in multi-story
apartment buildings.
• Multi-family house - Often seen in multi-story detached buildings, where each floor is a
separate apartment or unit.
• Terraced house (a.k.a. townhouse or row house) - A number of single or multi-unit buildings in
a continuous row with shared walls and no intervening space.
• Condominium - Building or complex, similar to apartments, owned by individuals. Common
grounds and common areas within the complex are owned and shared jointly. There are
townhouse or row house style condominiums as well.
• Cooperative (a.k.a. co-op) - A type of multiple ownership in which the residents of a multi-unit
housing complex own shares in the cooperative corporation that owns the property, giving
each resident the right to occupy a specific apartment or unit.
• Semi-detached dwellings (in UK, a 'semi' is by definition two units with a party wall).
• Duplex - Two units with one shared wall. (in UK, a duplex is an apartment on more than one
storey)
• Single-family detached home
• Portable dwellings
• Mobile homes - Potentially a full-time residence which can be (might not in practice be)
movable on wheels.
• Houseboats - A floating home
• Tents - Usually very temporary, with roof and walls consisting only of fabric-like material.

US and Europe type of
development
• The size of an apartment or house can be described in square
feet or meters. In the United States, this includes the area of
"living space", excluding the garage and other non-living
spaces. The "square meters" figure of a house in Europe may
report the total area of the walls enclosing the home, thus
including any attached garage and non-living spaces, which
makes it important to inquire what kind of surface definition
has been used.
• It can be described more roughly by the number of rooms. A
studio apartment has a single bedroom with no living room
(possibly a separate kitchen). A one-bedroom apartment has
a living or dining room separate from the bedroom. Two
bedroom, three bedroom, and larger units are common. (A
bedroom is defined as a room with a closet for clothes
storage.)

Major categories in INDIA
Major categories in India and the Asian Subcontinent
• Co-operative Housing Societies (CHS)
• Condominiums
• Builder flats
• Chawls
• Villas
• Kothis
• Havelis
• Independent Floors
• Lal Dora - Where people carry out commercial and residential
activities both.
• The size is measured in Gaz (square yards), Quila, Marla, Beegha,
and acre.

Real Estate Principles
Real Estate Principles: A Value Approach
demonstrates how value is central to
virtually all real estate decision-making,
including whether and how to lease, buy, or
mortgage a property acquisition; whether to
renovate, refinance, demolish or expand a
property; and when and how to divest (sell,
trade, or abandon) a property.

Real Estate Trends
A real estate trend is any consistent pattern or change in the general
direction of the real estate industry which, over the course of time,
causes a statistically noticeable change. This phenomenon can be a
result of the economy, a change in mortgage rates, consumer
speculations, or other fundamental and non-fundamental reasons.
 Property values declining instead of rising
 Buyer agency growth
 Lower commission rates
 Marketing trends
 US government involvement
 See also
 References
 External links

Property values declining instead of rising
• MSN reports that home prices have dropped by a record amount and illustrates with a
chart of historical real estate prices. Real estate property values have trended upward in
the range of 2-5% almost every year since World War II, but since 2006 they have
declined. From 2007 to 2008 prices declined as much as 39% per year -though the
average decline appears to be lower.
Buyer agency growth
• At one time, all real estate brokers and agents, or Realtors, practiced "single agency,"
meaning they represented only the buyer or the seller. In the 1990s, the concept of buyer
agency became popular, allowing a buyer to retain an agent who would represent the best
interests of the buyer alone. The first national company to provide this service was The
Buyer's Agent, Inc. A 2008 study by Consumer Reports indicates that prior to this
development, a Realtor was presumed by state law to be working for the seller. The same
study shows that buyers using buyer agents obtained a savings of $5000 in the price of the
home as compared to prices paid by unrepresented buyers.[4] It remains true that an
unrepresented real estate buyer can still call the sellers agent to arrange a showing of the
property. In such cases, the buyer should be advised by Agency Disclosure Laws (a state
law in every state in the U.S.) that any information obtained, as well as all conversations
and negotiations undertaken, will be for the benefit of the seller.

Lower commission rates
Historical rates are presented in a report by the
Government Accountability Office, Congress's investigative
arm. A 2005 study of real estate commission rates,
reported that realtors tended to charge, "about 5 percent to
7 percent of a property's selling price...". More recently,
CBS News, "60 Minutes" television news magazine
reported in 2007 that competitive pressure resulting from a
record number of licensed agents has driven down the
average sales commission rates paid by sellers. The
current average at that time was reported to be roughly five
percent (with possible small adjustments to local markets

• Marketing trends
The Internet has became major lead generation method real estate marketing,
eclipsing local newspapers and all other sources as the consumers most
preferred method to learn about homes for sale. "An overwhelming majority
(87%) of recent home buyers in the US say they used the internet as an
information resource during their home-buying process, and nearly one-third
say they first learned about their newly purchased home from an online
channel, according to a study by the National Association of Realtors (NAR).
Majority of real estate companies use popular internet marketing methods like
SEO, advertising and social media. Websites like Craigslist (United States),
Daft.ie (Republic of Ireland) and Gumtree (UK) became in 21st century main
sources for both buyers and sellers. Rapid changes in market environment
forced some countries to introduce new laws regulating real property market in
the web. Even with introduction of internet, traditional media and methods of
generating leads were still an important part of Real Estate trade:
Though the internet was the most popular source, buyers also cited information
from real-estate agents (85%), yard signs (62%), open houses (48%) and print
or newspaper ads (47%). Fewer buyers relied on home books or magazines,
home builders, television, billboards and relocation companies.

• Government involvement
he United States Department of Justice Antitrust Division
announced the launch of a new website in October 2007 to
"educate consumers and policymakers about the potential
benefits that competition can bring to consumers of real estate
brokerage services and the barriers that inhibit that
competition."[citation needed] Among other findings, they report
that certain new sales models can reduce consumer home sales
costs "by thousands of dollars. For example, in states that allow
open competition, some buyer's brokers rebate up to two-thirds
of their commission to the customer, and some seller's brokers
offer limited-service packages that let sellers list their homes on
the local Multiple Listing Service (MLS) for as little as a few
hundred dollars

REAL ESTATE INDUSTRY

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