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Real Estate

Real Estate

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Published by: rahul_aryan30501 on Sep 19, 2009
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International Research Journal of Finance and EconomicsISSN 1450-2887 Issue 24 (2009)© EuroJournals Publishing, Inc. 2009http://www.eurojournals.com/finance.htm
Prospects & Problems of Real Estate in India
Vandna Singh
 Head-MBA Department Seth Jai Prakash Mukand Lal Institute of Engeenring &Technology (JMIT) Radaur, Yamunanagar 
Komal
 Lecturer, Institute of Technology & Management (ITM), Gurgaon
E-mail: komal29m@rediffmail.com
Abstract
The present paper entitled “Prospects & Problems of Real Estate in India” is anattempt to reveal the issues concerned with real estate investment sector in India. Thispaper is concerned with the investment on real estate in India and the trends in theconcerned industry. The paper has been divided into three sections. Section one deals withthe fundamental factors affecting the real value like demand, supply, property, restrictionsto use and site characteristics. Section two and three explains the causes and the constraintsto the present real estate boom respectively in India. The paper also presents thesuggestions and future prospects of real estate in the country.
Keywords:
Real estate, property, prices, market, investment, income etc.
Objectives
The paper aims to examine the present scenario of real estate in India. In this broader framework, anattempt has been made to achieve the following specific objectives:-1.
 
To study the fundamental factors affecting the real estate value.2.
 
To examine the present factors of real estate boom.3.
 
To present the future constraints of real estate investment in India.
Sample Size
Out of the total companies working in India in the field of real estate 50 major players have beenselected for the purpose of the study.
Research Methodology
The present study is of analytical and exploratory nature. Accordingly the use is made of secondary aswell as primary data. The secondary data is collected mainly through various newspapers, magazines,Internet and RBI review. To supplement the secondary data, some primary data has also been usedwhich is collected through interviews and personal visits to the various companies to know the presentsituation of the market.
 
 International Research Journal of Finance and Economics - Issue 24 (2009)
243The present study is dependent more on secondary data. Primary data is not used due to thereliability of the data. The factors in the present paper are the Macro Economic factors for which thesecondary data is more suitable and reliable. The collected in the aforesaid manner have been tabulatedin condensed form to draw the meaningful results. To analyze the data tables, percentage and graphswere used.
Independent Variables
Prices, features of flat, material used and advertising.
Dependent Variables
Customer awareness, presences and their perception about property.
Introdection
Real estate or immovable property is a legal term (in some jurisdictions) that encompasses land alongwith anything permanently affixed to the land, such as buildings. Real estate is often consideredsynonymous with real property (also sometimes called reality), in contrast with personal property (alsocalled personality). However, in technical terms, real estate refers to the land and fixtures themselvesand real property are used primarily in over real estate. The term real estate and real property are usedprimarily in common law, while civil law jurisdiction refers instead to immovable property. In law, theword real means relating to a thing as distinguished from a person. Thus the law broadly distinguishesbetween real property (land and anything affixed to it) and personal property (everything else e.g.clothing, furniture, money).
Real Estate Business Includes:
With the development of private property ownership, real estate hasbecome a major area of business. Purchasing real estate requires a significant investment and eachparcel of land has unique characteristics, so real estate industry has evolved into several distinct fields.Some kind of real estate businesses include-
 
Appraisal – Professional valuation services
 
Brokerage – Assisting buyers and sellers in transactions
 
Development – Improving land for use by adding or replacing buildings
 
Property Management – Managing a property for its owner(s)
 
Real Estate Marketing – Managing the sale side of the property business
 
Relocation Services – Relocating people or business to difficult countryTypes of Ownership Interests: Real property (immovable property) can refer to the real estateitself or to various types of ownership interests in real estate, including:
 
Freehold:
Provides the owner the right to use the real estate for any lawful purpose and sellwhen and to whom the owner wishes.
 
Life estate:
An interest in real estate which is granted to a life tenant until that person dies. Theinterest terminates upon the death of the life tenant.
 
Estate for years:
Similar to life estate but term are a specified number of years.
 
Leasehold:
The right to posses and use real estate pursuant to the terms of a use.
 
Reversion:
The right to posses the free interest in real estate after the expiration of a life estate,estate for years or leasehold.
 
Concurrent or co-tenancy:
The ownership of an interest in real property by more than oneparty. Rights of any single party may be limited in various ways depending on the jurisdictionand type of concurrency.
Participants of Real Estate Market:
The main participants in the real estate markets are-
 
244
 International Research Journal of Finance and Economics - Issue 24 (2009)
 
Owner/User:
These people are both owners and tenants. They purchase houses or commercialproperty as an investment and also to live in or utilize as a business.
Owner:
These people are pure investors. They do not consume but rent out or lease the property tosomeone else.
Renter:
These people are pure consumers.
Developers:
These people prepare raw land for building which results in new product or the market.
Renovators:
These people supply refurbished buildings to the market.
Facilitators:
This includes banks, real estate grocers, lawyers and others that facilitate the purchaseand sale of real estate.The owner/user, owner and renter comprise the demand side of the market, while thedevelopers and renovators constitute the supply side. In order to apply the simple demand and supplyanalysis to real estate markets a number of modifications need to be made to standard microeconomicassumptions and procedures.
Real estate can divided into three categories:
These are
 
Commercial
 
Residential
 
AgriculturalWe can invest into all the given areas and can make return by capital appreciation, rentalincome, agricultural produce, lease and commercial use.The following factors influence the price and cost of the real estate:1.
 
The physical characteristics of the property2.
 
The property rights3.
 
The time horizon of holding the property4.
 
Geographical area5.
 
The development rate
Features of Real Estate Markets:
In particular, the unique features of the real estate market must beaccommodated. These include:
 
Durability
 
Heterogeneous
 
High transaction costs
 
Long time delays
 
Both an investment good and consumption good
 
Immobility
PART-1: Fundamental factors determining the value of real estate
These factors includes
Demand
Demand refers to people’s willingness and ability to buy or rent a given property. In part demand stemsfrom a market area’s 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 Indiahas 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 factorsfor the growth.India is the 4
th
largest economy in the world, and has the 2
nd
highest GDP among thedeveloping countries based on purchasing power parity. IT and IT enable services sector in India is stillin its growing stage due to increasing demand for business processing units in India and is estimated togrow by 107% to $583 million in revenue. This could lead to a space requirement of 20-25 million sq.

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