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personal interviews and secondary sources like internet.A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI 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. books and magazines. The study also looks into the role of the government by way of different policies that effect the investment decision of the investor. The study is based on the data collected both through primary sources such as questionnaires. journals. Page | 5 . The sample size taken for the study was of 75 respondents who were interviewed personally and on telephonic interview.


Page | 7 . In the commercial property segment. tenants. The activities of the real estate sector includes the housing and construction sectors. real estate agents. Combined with smaller household sizes. 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. In the residential sector. The housing sector has been growing at an average of 34% annually. developers. Real estate is a 12$ billion (revenue) industry in India. residential and non-residential buildings. One can also earn rental income from the real estate properties . buyers etc. There has been a rapid growth in the industry in the past few years.Profits can be earned from real estate as a result of appreciation of real estate property prices. a growing middle class is enjoying rising income levels. It is one of the fastest growing sectors in India. The main players in the real estate market are the landlords. builders. sale.A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI INTRODUCTION REAL ESTATE Real estate means an immovable property. Real estate can be divided into 3 main categories:    Commercial Residential Agricultural/Vacant Land Real estate involves the purchase. either commercial or residential which may consist of a building or a structure. strong growth in the services sector Specially the IT and BPO industry have led to greater demand for commercial space. this demographic change has boosted demand for more modern housing. and development of land. This is known as capital gains from real estate.

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.g. Resorts. brokerage services. property management. and financial institutions are floating real estate funds. banks are giving loans to builders. 5 % of the country‟s GDP is contributed by the housing sector. economic services (e. can be seen from the fact that it is the second largest employer next only to agriculture.A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI The importance of real estate sector. such as construction (housing construction. and infrastructure projects such as dams. architecture and design. Indian property market is immensely promising and most sought after for the purpose of investment. hotels. as well as construction of commercial offices. retail and industrial buildings. 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. It consists of a collection of industrial and services sectors of the economy. real estate finance services (mortgage banking. Private equity players are considering big investments.g. Developments in the real estate sector are being influenced by the developments in the Retail. In 2005. contributing 6% to GDP. schools) and information technology (IT)-enabled services (like call centers) Page | 8 . 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.. hospitality and entertainment (e. real estate investment). as a major player of nation‟s growth. the sector generated around 31 million jobs (of which only 1 million were generated by the organized sector). hospitals. cinema theatres) industries. roads and bridges). real estate operations.

growth is likely to continue.A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI etc.5 million employment opportunities per annum are expected to be generated.2% of GDP in FY07 to 2. adequate infrastructure is the most basic requirement. thus stepping up the demand for real estate. looking forward to make a mark. 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. Future Prospects on Real Estate Industry The real estate market in India is yet in an emerging stage and the scope is simply unlimited. economic growth is likely to continue. However. and 2.0% GDP growth during the Eleventh Plan period. 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. Bharti etc. and expects to more than double public investments from 1. the public sector has remained a big investor in this sector. today India is the second. In fact. the government is developing a program for infrastructure investment through both public and private sectors. given the acute shortage of infrastructure in India compared to the requisite level required to achieve the next growth target. In order to overcome the current constraint of insufficient modern infrastructure.shows the demand for construction is expected to grow by at least 8-9%. it has become a necessity for India to modernize and expand its infrastructure not only to Page | 9 . The Government of India proposes to achieve 9. The organized retail market in India is also accelerating with players like Wal-Mart. and with it. As a result. the demand for infrastructure to maintain and accelerate the performance. Favorable government policies for globalization and liberalization have put India on the fast track. The Government‟s ambitious projects lined up for the Eleventh Plan period . It does not resemble a bubble that will burst. With greater quantum of domestic and international capital flowing into various sectors of the economy. and is the centre of attraction globally. fastest-growing economy in the world. Also with the growing quantum of domestic and international capital inflow.8% by FY12. To achieve growth of this scale. An unhindered growth for the next twenty years is almost sure.

Government Policies The government has taken various initiatives to improve the real estate sector. have been of great support for the sector. and higher private investments. The Government of India in March 2005 amended existing norms to allow 100 per cent FDI in the construction business. Golden quadrilateral project and the Delhi Mumbai Industrial corridor. 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. would prove beneficial in meeting the infrastructure needs of various segments of the economy. Until now. It has made the policies for FDI in real estate very liberal. only Non Resident Indians (NRIs) and Persons of Indian Origin (PIOs) were permitted to invest in the housing and the real estate sectors. Moreover. Golden Quadrilateral project.A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI sustain. Page | 10 . the government‟s initiatives such as the ultra mega power projects. apart from the public-private partnership. but to benefit from the existing growth spree. 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. Moreover. The Government is also initiating various projects like the ultra mega power project. The positive outlook of Indian government is the key factor behind the sudden rise of the Indian Real Estate sector. increased investment outlay in the Eleventh plan. It has also encouraged several large financial firms and private equity funds to launch exclusive funds targeting the Indian real estate sector. This liberalization act cleared the path for foreign investment to meet the demand into development of the commercial and residential real estate sectors.

and less restrictive guidelines for foreign direct investment in real estate in India since February 2005 have seen significant improvements in the real estate investment environment in India for both local and international players. Deregulation of the capital markets and international investment in India is also likely to have a significant impact on future FDI levels and the growth of real estate funds for real estate investment in India. To understand the significance of the sector and its implications there have been various research on real estate industry both in India and abroad. 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 diversification benefits for the real estate markets (office. and international real estate investors seek global investment opportunities. with most markets improving their performance in more recent years. They have also concluded that deregulation of the Indian capital markets since 2004. This has taken on increased importance as India significantly expands its economic growth to potentially be the world‟s third largest economy by 2020. particularly concerning technology parks.A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI CHAPTER 2: REVIEW OF LITERATURE The real estate sector has become a major contributor of an economy‟s growth. access to Grade A office space. 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. although there was some loss of portfolio diversification benefits for office and residential real estate with stocks. They also studied that offshoring in the cities like Delhi and Mumbai has created huge demand for better infrastructure. Page | 11 . particularly in the emerging Asian real estate markets. 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. The expected development of REITs in India in the next few years will also expand the real estate investment opportunities available in India. This area of offshoring has significant real estate investment issues.

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

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

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. REITs is the future of the Indian real estate market. 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. ASSOCHAM‟s (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. REITs also serve as an effective vehicle for broader participation by investors in the market. the flow of capital into the sector will be carried out through REITs. Desai & Rane (2006) estimate development plans of real estate companies to rise to 20million. To sustain these growth levels. a regulatory system that is too often not business friendly etc. FDI statistics suggest that India's performance has been significantly understated but India still falls behind for several reasons such as high tariff structure. without demand and latent capital adequacy.it was suggested that REITs listed under Page | 14 . 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. Nonetheless. the share of foreign investments will be within the range of US$ 2528 billion by 2010. However. Indian real estate sector is on boom and this is the right time to invest in property in India to reap the highest rewards. The paper by Henley (2004) compares the performance of India and China in attracting foreign direct investment (FDI). And that it is one of the vehicles that have single taxation and it also offer low volatility and ease of liquidity. poor physical infrastructure. 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.30million square feet annually. India has displaced USA as the second-most favored destination for FDI in the world.A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI With strong growth in demand expected across segments of real estate over the next few years.

investments that nowadays can be executed by simply buying shares of stock listed by real estate investment companies. · REITs should be granted a status of investment scheme formed under NBFC Rules as a result of which it would be tax exempted. pension funds should be allowed to invest in REITs. the listed real estate market developed into a sector with almost 400 listed firms worldwide. In the first half of this inaugural address. Changes in Voluntary Pension Rules suggested that Under Voluntary Pension Rules.A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI NBFC should be allowed to invest in real estate development and acquisition. Though the above recommendations were made however. Exposure limits needed redefinition with respect to a REIT. On the one hand. the boom of these real estate stocks is discussed. Three relevant lessons Page | 15 . 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. tenancy laws are strengthened. it was concluded that the markets will not function smoothly unless the rental yields improve. In less than three decades. 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. REITs should be allowed to borrow. paghri system is abolished. and the time consumed in legal proceedings is reduced. real estate markets offer investors a wide spectrum of profitable investments opportunities. 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. official and unofficial pricing issue is settled. representing a sum aggregate market capitalization of around one trillion dollars by the end of 2007.

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

To identify the main areas of investment in Real estate. 3. Also one more reason why this area was taken into consideration was that. 3. which is representative of South Mumbai. This scope of study was taken due to logistical problems and also Mumbai is a miniature of Maharashtra. Null Hypothesis: The disposable income is the main factor that drives the investment decision in real estate.A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI CHAPTER 3 RESEARCH METHODOLOGY 3. Null Hypothesis: Government Policies play a major role in Real estate investment Alternate Hypothesis : Government Policies does not effect the investment in real estate. the area under research was heterogeneous in nature where all class people could be easily contacted.2 Objective of Study     To identify the factors affecting the value of real estate.The pain area of the researcher‟s topic.1 Research Problem It is the pain area for which the researcher needs to find or suggest some solutions. a study on tool to identify an investors perception while buying a real estate property in south Mumbai. Thus the results of Mumbai can be used for further studies with respect to Maharashtra and India.4 Hypothesis 1. 3. Alternate Hypothesis : The disposable income is not the main factor for decision in real estate investment 2. Page | 17 .3 Scope of Study The researcher has made an attempt to collect data. To identify the current trends in real estate. To identify the factors effecting decision of investing in real estate.


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

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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.

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Top Players of Real Estate Industry


DLF: DLF‟s 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 O‟Rourke (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,
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76 crore. it is India‟s largest slum rehabilitation company. commercial premium office spaces and retail projects like world-class shopping malls. with significant operations in the Mumbai Metropolitan Region. Unitech‟s Chairman has declared the investment of $ 720 million by his company in the coming four years to develop 28 hotels along with Marriott International. NCR and Chennai. more than 90% of IBREL‟s portfolio by value is in the three major markets of Mumbai.17 crore. Bank of India. With operations spanning every aspect of the real estate business. HDIL is a public listed real estate company in India with shares traded on the BSE & NSE Stock Exchanges. 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.Its chief activities include construction. New Delhi. o HDIL: Ranked as India‟s fastest growing real estate company by Construction World NICMAR in October 2007 & with a current market cap of Rs. Being a focused regional player. electrical broadcast and information technology. Mumbai. expansion of real-estate.867. etc. The market capitalisation of the company is Rs.6. o India Bulls Real Estate: One of India‟s largest listed developers developing residential and commercial real estate.40 crore.000 crores. Indira Gandhi International Airport. the company has created magnum opus of construction and has been a consistent executer of challenging projects. Established in 2000. hotels. & was given the Mumbai International Page | 21 . the current market cap being Rs. Housing Development & Infrastructure Limited has established itself as one of India‟s premier real estate development companies.16. consultancy in associated sectors.A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI Mumbai.545. 18.8. o Unitech: Recently Ramesh Chandra. from residential apartment complexes to towers & townships.567. Mumbai. Hotel Taj Intercontinental.

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

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

Even PG hostels and working Women‟s hostels are considered safe and can be availed of on an individual or sharing basis mean big business. Buying good space in high quality development and leasing it to a good brand is a wise investment decision. Usually. shops and showrooms are an integral part of the commercial rentals in India. For those considering regular rental returns rather than capital appreciation. commercial lease agreements specify a 15% escalation in the real estate rental in every three years which is a good enough yield. This is a fund set up and managed to invest in stocks. 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. REIT are such ways of investing Page | 24 .A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI paying guest or PG accommodation in India is a convenient arrangement. 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. 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. It will facilitate low risk and less worry on maintenance. Commercial rentals including corporate office space. mall space has the distinction to be an excellent option. 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. It gives returns higher than that received with office space and much higher than the rental returns from residential space. mall space. Or they might invest in a Real Estate Investment Trust. BPO spaces. bonds and mortgage instruments in the real estate area.

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. The price is really high due to increase in trade. due to such reasons this has become a huge business these days. Be it a small investor who invest in a commercial property like a small shop or big investors who invest in malls. paying guest and earn handsome rent every month. Sellers many times accept a mortgage from a buyer. Commercial properties are in demand and so investors find it as a lucrative investment option. technology parks etc. A person can invest in a property and purchase it and then can lend it on rent to tenants. Page | 25 . They sell the note to an investor at a discount and the investor then gets payments from the buyer. Every investor can invest in these properties based on this level of investment. sometimes even faster than the overall market. and after payments have been made for a while. they want to convert to cash. Over time. There is scope for all types of investors. Certain areas of the country have experienced significant appreciation in home values over the last ten years.As it gives an ease of earning regular income. Appreciation of the Market Value of Properties This is the most widely known way of profiting in real estate. the value of the property appreciates. A property is purchased and held. Investment in commercial properties In today‟s time commercial property are very expensive. Rental Income from residential Property This type of income is at a rise these days .A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI Mortgage Instruments Discounted notes are another investment strategy.

In the current time they are one of the major contributors in the upliftment of the real estate sector. Big developers purchase vacant land at discounted prices in auctions and then construct huge apartments. There are various ways in which a person can earn from vacant land by converting it into different alternatives.and then sell these flats individually and earn large profits. few keep it as it is and sell it off when the prices increase. cities . They prefer India as it is a developing Nation. These companies require better infrastructure to match up with their work and so came up the concept of Technology Park. these factors when added to the relaxation of policy brings about more funds from outside India. This has not only benefited the real estate industry but other interlinked industries as well effecting the India‟s overall economic growth. that too a one with one of the largest economies. We can see that as these companies are increasing their presence so is the value of real estate .A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI Vacant Land People purchase vacant land. villas. Major reasons for success of Real estate sector Expansion and Development of the IT sector Liberalization and Globalization has opened various avenues for investment. 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 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. This has made investment in Indian real estate more lucrative. There are large number of BPO‟s and KPO‟s that have set their base in India. Since the policies are being liberalized and restrictions are being removed India is becoming a favored destination for investment purpose for the foreign investors. Number of MNC‟s 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. Some others build up amazement parks and earn from it. Thereby increasing not just the worth of the real estate sector but also contributing in the Page | 26 .

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

Builder Flats Then came a time when Builder made Flats became a range among people. So penthouses were built which are really huge apartments. People preferred them as they were well furnished homes as compared to the previous Janta Flats. Co-operative Societies This was a corporation wherein the corporation owned two or more residential building. Apartments had large number of flats in the building. MIG and HIG Janta Flats made by the government. 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. This trend stayed for quite a long time and even today in few areas we can see LIG. These flats were build keeping in mind the owners choice and preferences unlike those of Janta flats. Page | 28 . Builders use to purchase vacant land or some existing old house deconstruct the old building and reconstruct new flats with latest designs.A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI and High Income Group Houses were 3bhk houses. they look like cottage type. 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. Penthouses These are huge houses which cater to the needs of the upper class people. Apartments They were like Builder flats but had better facilities as compared to them. Even today builder Flats are being constructed majorly trying to develop the under developed regions. Villas They are individual houses build in a locality.

hospitals. This is the latest trend in the real estate sector. water. Page | 29 . Green Houses This is another new concept which is doing great business.A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI Cities Big Builders are not just providing houses to live in but they are building up small cities within few acres of land. 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. The Cities are build in such a way that it consist of residential flats. clubs all around the residential flats to bring the life‟s of people at ease.Customers are willing to pay more than the normal market price if they are getting environment friendly alternatives . whereas some people avoid purchasing when the prices rise as they wait for the prices to fall and purchase at lower prices.As people have become more conscious about going green. and other resources. Reducing waste. 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. Solar panels are used and all possible steps are taken to save our natural resources like Efficiently using energy. about saving our resources so as to benefit from the in the future . 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. schools. Every buyer has his own capacity to purchase a property at different prices. multiplex. The prices of property may rise due to different factors. malls. pollution and environmental degradation. Protecting occupant health and improving employee productivity.

The Banks rate fluctuate based on different policies that the government makes. Economies Condition The situation prevailing in a country is another important factor. stamp duties and various other things like FDI involvement etc. 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. Government Policies Government policies are one of the major factors that affect the decision of the investors. 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. 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. If the country is going through a bad phase the investor would not invest at that time. Page | 30 . Location preference is different for each investor as per his requirements and personal choice. Government policies relate to taxation policy.A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI Bank Rate Bank rate is another important factor that determines the decision of the investor. He would assess it based on the amount that he is expecting to earn from his investment. A stable economy is always a favored destination among the investors.

Page | 31 . If the government policies keep changing then people will be reluctant to invest in such an economy. equities of real estate companies. 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.A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI This is an important factor while deciding.

dividend or appreciation of the value of the instrument. 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.. machinery. 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. Assets like vehicles.A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI CHAPTER-5 PRICING STRATEGIES OF INVESTOR What is Investment. It is related to saving or deferring consumption.. Investment is putting money into something with expectation of profit. building. appliances Property such as home. An investment involves choice by an individual or an organization to invest its money or capital in following instrument. The above listed all the investment instruments possesses less or more chances of risk. In simple. 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 owner‟s control. Page | 32 .

A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI 5. Vacant land (A). Residential Property: Page | 33 . Residential Property (C). Commercial property (A).1 Classification of Properties : Real estate has been broadly categories into 3 classes as follow Types of Property (B).

including depreciation on the property and interest on your borrowings. or even fall. are tax deductible. \ House prices could remain static. People buy residential property for two important reasons: · For staying · As an investment ►►Advantages of Investing in Residential Property · Expenses. · · · You make money as the value of the property increases. Page | 34 . You could get "bad" tenants. ►►Risks of Investing in Residential Property · · · · · Interest rates could rise. Residential property offers a good investment avenue.A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI The residential type of property is by far the most popular with both new and experienced agents. You get rental income. You can leverage your investment. The property could be untenanted for a period of time. It could take up a lot of your personal time.

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

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

Real estate is basically defined as immovable property such as land and everything permanently attached to it like buildings.A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI the safest and smartest way of investing ones money. if any. 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. It is a branch of real estate investment which is gaining ground as major part of capital budgeting analysis. The job of developing the land lies with the developer. Land developed for commercial purposes and those developed for building residential complexes will have different prices and tax implications. 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 . Land situated close to developed areas will cost more as opposed to those in less developed areas. 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. Capital gains can easily be realized from land when land price increases. it will significantly appreciate its value. The most striking feature of land investment is that investment takes place in a tangible asset which the investors can readily put into use. and with proper care to include modern houses and the associated amenities.

A result of this attribute is that you have a certain degree of physical control over the investment . (3). You can't do that with a stock or bond. You can see it and touch it. Tenant complaints must be addressed. speak with your tenants. public stock markets are much more efficient information is efficiently dispersed among market participants. and show it off to your family and friends. you can try fixing it. It just means that information irregularity exists among participants in the market. expertise or resources. Requires Management: Because real estate is tangible. real! You can visit your investment. and those with material non-public information are not permitted to trade Page | 38 . it needs to be renovated. Tangible: Real estate is. And. In contrast. Inefficient Markets: An inefficient market is not necessarily a bad thing.2 CHARACTERISTICS OF REAL ESTATE INVESTMENT: Real estate properties have its own some important features. when the building starts to age. (2). it needs to be managed in a hands-on manner.A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI 5. Some of the characteristics that make real estate unique as compared to other investment alternatives are as follows: (1). allowing greater profits to be made by those with special information.if something is wrong with it. Landscaping must be handled. well.

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

Who is the developer? 2.3 CONSIDERATIONS WHILE MAKING INVESTMENT IN REAL ESTATE When it comes to making money. As a result. Basic amenities 6. Is the project a self development / partnership or joint venture? 3. Past business / trading history 4. But real estate is something which more people can be involved in. But these areas also offer a significant amount of risk. whether it be in the stock market or in business. no investment is entirely risk free. Lots of opportunities abound. The location of the proposed project 5. The growth prospects of the neighborhood development 7. most people do not engage in these speculative activities.A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI invest in has as large an impact on your eventual returns as your choice of property within the market. simply because everyone needs a home to live in. Industrial and business development in the locality Page | 40 . Real estate is considered to be one of the surest investments. However. 5. and so even here a certain amount of due diligence is required. Some important point you need to think about: 1.

Price comparison analys Page | 41 .A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI 8.

right from idea conceptualization to profit generation / hand-over. Managing realty projects right from identification to marketing is a lengthy process replete with many challenges. Future property price valuation 10. Build. ■ An integrated service model offering end-to. encompassing all functional & operational tasks.360° Realty Services to cater to the diverse needs of corporate & developers in project management & execution. The services are effectively streamlined enabling steady progression of the projects. Build-One offers you with a unified value-chain of core realty services with critical forward & backward integration of other value-added services. 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. What are the returns on your investment? Affordability is a key consideration when making any purchase.A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI 9.end .One offers you with a integrated service model meeting the entire realty business needs to help you successfully undertake your realty projects. Page | 42 . One should factor additional expenses such as electricity and property taxes to get a complete idea of how much can be afforded.

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

commercial. For example. It mean whether put residential or row house or to put specific commercial project looking at the locations and demand for the market. office or mixed-use project. Market Feasibility takes into account the importance of the business in the selected area. etc. Property Identification: Property identification refers to the type of project which the builder has to plan. and to test alternative land uses for given packages. a buyer with enough money to satisfy both the mortgage and the current owner can get clear title. Developers often conduct feasibility studies to determine the best location within a jurisdiction. a property may be encumbered by a mortgage. Jurisdictions often require developers to complete feasibility studies before they will approve a permit application for retail. Could the project be built?. In a more limited sense. it is nevertheless within the power of the owner to convey clear title. and usually involves packages of real estate land. standard terms in a mortgage require the mortgage holder to release the mortgage if a certain amount of money is paid. However. 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. Property identification generally is driven by demand of type of property in the market. manufacturing.A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI area where he want to set up the project. Can the site support a building structure that is planned?. it is used to state that. 4. Page | 44 . 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. Therefore. 2. Feasibility Study: Feasibility Study typically involves testing geographic locations for a real estate development project. although the owner does not own clear title. 3. should be check out. This encumbrance means that no one has clear title to the property. industrial. housing.

it needs to be submitted the same at the concerned govt. If authority finds no objections. The budget of the real estate project should be optimal as per the plan and designs of the structure. 9. Real property can also be acquired by inheritance and by a court order. 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. then after they can arrive at decision for approval and sanction of project. authority (Municipal Corp. Budgeting needs to analyze the size of the projects. Project Mgt./Municipality) for further verifications and approval for the project. Budgeting: This point is also important to be considered by a builder. 8. property acquisition refers to a person or other entity acquiring title to real property by a deed. 6. Regulatory Approval: After the plans and design of the projects. A project management team also has to form for various aspects of the Page | 45 . builder can approach architects to develop plan and design as per the requirements of builder. Property Acquisition: Generally. A deed is the legal instrument used to transfer ownership in real estate./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 STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI 5. 7. Here.

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

real estate also has high transaction costs. provided if one takes it seriously and with full sagacity.4 ADVANTAGES AND DISADVANTAGES OF REAL ESTATE INVESTMENTS: ADVANTAGES: Investing in real estate is as advantageous and as attractive as investing in stock market. location. and the remaining amount can be taken on holding the property as security. If you don't have the idea as to how it works. Real estate investments are traditionally considered a stable and rich gainer. then let explain with the help of an example. the population density of an area. risk reduction and inflation-hedging capabilities. ► No Need for Huge Starting Capital. 5. less of misadventure is involved in a real estate property. good history of land appreciation.000..A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI •Some of the benefits of adding real estate to a portfolio include: diversification. mortgage interest rates stability. can be difficult to acquire and it is challenging to measure its relative performance. market behavior. ► Real Estate Investments are Less Risky: As compared to other investments. A real estate property can be procured for an initial amount as low as $8. The reasons for the real estate investments becoming less risky adventure primarily relate to various socio-economic factors. Here are the main benefits of investing in property market. •Buying real estate requires substantial due diligence to ensure that you're getting what you expect after you close.000 to $ 15. However. Page | 47 . This is what you call High Ratio Financing. less of inflation and many more. yield enhancement.

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

Supposing. In fact. investing in real estate gives you high ROIs after the taxes ► Net Positive and High Income is Generated. commodities and services. though the annual value of one self-occupied residential property is exempt from income-tax.5 lakh every year. having regard to the need for housing millions of citizens. ► Increased demand for properties. you lose terribly on the investments in your bank in the form of inflation and high taxes therein. repayment of the installment of housing loan is deductible to the extent of Rs 1 lakh per annum under section 18-C. In addition.A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI Inflation is the rise in the prices of the products. or putting it another way. Comparatively. ► High Return on Investments Real estate investment gives you potentially high Rate of investment before and after the taxes levied on your income. will now cost $ 100 as the result of inflation. The tax exemptions available in real estate property investment are more than available in any other investment. There are several beneficial provisions in the Income-tax Act. but in real estate. only those who pay taxes can take advantage of the appropriate incentives given under the law. Page | 49 . ► Tax Exemptions You get various tax exemptions on your principal and investment income property. In other investments. Of course. it is the decrease in your capacity to buy or hire the services. Interest payable on loans taken for purchase or construction of house is deductible to the extent of Rs 1. 1961 which promote investment in residential properties. real estate sector has minimum rate of inflation. a commodity was worth $10 a decade back. you don't actually have such hindrances.

You have to wait and watch the market movements and other socio-economic and politico economic factors before selling your real estate property. Make a firm decision when you go for purchasing your first real estate property. you will be ruined. If you are swayed by emotions. You will learn more on about making you real estate investments more time efficient in later part of the chapters. It is a lethargic time consuming process that makes you feel almost laid back. These disadvantages can be easily taken off. and that is you simply cannot aspire hard cash immediately. 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. is just not easy man. there are certain levels of Disadvantages.A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI DISADVANTAGES Beside the large potential of return on Investments. you need to know one thing straight. ► Taking Wrong Decisions People going for the real estate investment property take decisions in haste. like a mall or your home. ► No readily available Liquidity: With your real estate investment. ► A Risk full decision can harm: Page | 50 . You need to plan and have those instincts to get going with your property. ► Eats away your time and energy: Real estate investment can get you real fatigue.

Remember. ► No Stringent Comparison Methodologies Real estate market is variable. but you will become a pauper. ► Guided and Drawn on Government Policies: Government policies and regulations play an indispensable role in deciding on the real estate investment. if tried in combination. as I said in my earlier statements. property prices. Real estate market is speculative. taxesetc. These policies and regulations include control the zone based bylaws. construction activities. but all these are workable. provided you keep other factors such as time and location. you will make losses. if you are not prepared before. Not just losses but. No two real estate properties can have exact. constant. Though. There always exists kind of variation and this need to be taken into account. you do have the existing rule of thumbs and set strategies. rent control procedures. The price of two real estate properties can vary a great deal. license dispensations and property transfers. Page | 51 .A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI Investing in a real estate property can be a risky and costly even.

or reserving a yearly rent. or to be developed by its holder only Page | 52 . assign. It details the formalities for registering an instrument. (c) non-testamentary instruments which acknowledge the receipt or payment of any consideration on account of instruments in (2) above. (b) other non-testamentary instruments which purport or operate to create. whether incorporated or not. any right. Instruments which it is mandatory to register include: (a) Instruments of gift of immovable property.A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI 5. (d)Leases of immovable property from year to year. assurances. A person is defined to include an individual. Urban Land (Ceiling and Regulation) Act (ULCRA). m). declare.000 square meters (sq. to or in immovable property.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. 1908 The purpose of this Act is the conservation of evidence. whether in present or in future. title. or for any term exceeding one year. a family. 1976 This legislation fixed a ceiling on the vacant urban land that a 'person' in urban agglomerations can acquire and hold. This ceiling limit ranges from 5002. Excess vacant land is either to be surrendered to the Competent Authority appointed under the Act for a small compensation. The Central laws governing real estate include: Registration Act. or an association or body of individuals. limit or extinguish. and publication of documents and prevention of fraud. whether vested or contingent. a company. title or interest. a firm.

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

e.A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI CHAPTER 6 DATA ANALYSIS & INTERPRETATIONS Findings and Analysis The findings and analysis are based on the survey done on prospective buyers. 1.27%. The survey was conducted through the use of questionnaire.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. The following are the findings and analysis of the survey. 42%. Followed by the people in the age group of 45 years and above. This shows the type of sample that we are analyzing Page | 54 .35 years 36. Age group of Investors Age Group of Investors 20 -25 years 26 . 23% in age group of 26 to 35 years and the least were people in the age group of 20 to 25 years.

Income Level Income Level 45 40 35 30 25 20 15 10 5 0 2 . followed by people with income above 10 lakh.33% and the remaining were in the category of 3.3.3.A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI 2.6 lakh 6.5 lakh 3.5 to respectively. 39% .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.5 . lakh and 2.5 lakh consisting of 22% and 6% Page | 55 .e.

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.A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI 3. 18 % and 12 % respectively. This infers the trust and the interest of the investors in Real estate sector. 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%. Page | 56 .

Page | 57 . 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 above analysis also shows that people are not investing in REIT‟s when asked the reason most the people were not even aware about it.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.A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI 4.

which constitutes 28% of the respondents. Page | 58 . 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 . Economies condition also effect around 3% respondents. 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 . stamp duties . Then comes location at 17% followed closely by Government policies holding 12% 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.as they need to assess whether the investment is worth paying the interest on the loan or not. FDI and the like. subsidies.A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI 5.These policies are regarding taxes.

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.31% respondents said that the projects were delayed .19% felt that it was a good time to purchase real estate properties. Page | 59 . 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.A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI 6.20% people said that as recession did not affect the Indian economy at large so it does not affect their investment decision.8% people felt that the cost should have reduced .

Page | 60 .3 years. This analysis shows that people invest in real estate for long term which is around 5-10 years. for more than 10 years and 15% invested for a time duration of 1. Preferred time duration of investment Time Duration 1.e.A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI 7.3 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.

Majority of the respondents are positive about the future of the real estate industry. 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. 11% respondents were neutral about the issue and said that the situation will remain same without any change. Page | 61 .A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI 8. Whereas 20 % of the respondents feel the other way round.

Government Policies are another major reason for the increase of investment in the real estate sector. When the disposable income of the investors increases they invest more in the real estate sector as they find it a lucrative investment opportunity. 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.A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI 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. Real estate is a favored investment option due to various efforts that are being made by the government. 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. 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. Page | 62 . 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. 5 % of the country‟s GDP is contributed by the housing sector. . It is the second largest sector for employment opportunities after agriculture sector.

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. Real estate investment trust (REIT) is a good option available for small investors . 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. Page | 63 . 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. 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 other way is by the increase in the number of MNC‟s . whether directly or indirectly. Bank Loans are another important factor effecting the investors‟ investment decision. Direct FDI is an example. Rental trend is on a rise people rent commercial and residential properties. Government should take up steps to bring awareness amongst the people about REIT. The govt should build such policies which make obtaining a loan for investment in real estate a hassle free process. Paying Guest. The rental trend has also increased many folds in the recent years. hostels are also very common these days due to large demand. It will grow in the near future and will be one of the major reason for the growth for the Indian economy. there is requirement of better infrastructure facilities so when the demand increases it benefits the industry. 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. The final conclusion that I can give from the above study is that there is great scope of the real estate sector.A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI Foreign investors play a major role in the development of the real estate sector.

 The government should lower the interest rate as it is one of the major factors that determine the investment decision of the investor. even though they are aware about the delays in the projects due to recession. Page | 64 .  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 . Still they are positive about the future prospect of the real estate industry.It is a good investment option but people are not benefiting from it as they are not aware about it.  Investors have high hopes from the real estate industry. 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.A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI 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.

ansalspropertiesltd.omaxe.estatedeveloper.realestatencr.com  www.com  www.ashianahousing.gurgaonproperties.com  www.makaan.eldecogroup.com  www.com  www.com  www. noradarealestate.eros-group.parsvnath.magicbricks.com  www.com  www.gurgaonrealestate.com  www.net  www.com  www.com  www.com Page | 65 .com  www.bank bazaar.A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI CHAPTER 9 BIBLIOGRAPHY  www.

What is your preferred investment option :     Real estate Equity Mutual Funds Gold 6.5 lakh 3. Income Level :     2 lakh – 3. Age : 3. Which option do you prefer while investing in Real estate :     Residential Property Commercial Property Real estate investment trust Equity of real estate companies 7. Name : 2.5 to 6 lakh 6 to 10 lakh 10 lakh and above 5. Which is the most important factor that effect your real estate investment decision   Price Bank Rate Page | 66 . Gender : 4.A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI ANNEXURE QUESSIONNAIRE 1.

What is your preferred time duration of Investment :     1-3 years 3-5 years 5-10 years More than 10 years 9 Do you think India‟s real estate market will Improve in future :    Yes No Neutral Page | 67 .A STUDY ON REAL ESTATE PRICING IN SOUTH MUMBAI    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.