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    Real estate Real estate Document Transcript

    • Real Estate INTRODUCTION India Real Estate market has been seeing multi level rise in the past few years. If industry sources are to be believed, this upward graph has no sign of coming down or even lying flat for few more years to come. The facts that major real estate companies in India are going public, proves the potential of the Indian property market. Starting from infrastructure development to residential complex, commercial real estate to retail space development India property market is booming with all kinds of activities. Thanks to the Government approval of 100% FDI in India real estate development and steady capital market, some all time big investments are being made in the real estate sector. Buyers from all across the world are showing interest and Indian property now features at the top of the list of the international real estate investors. In this context, RealEstateOnline.in provides a common platform for Indian property owners, potential buyers & property dealers in India. We have comprehensive listings of residential & commercial property in all the major as well as the second tier cities in India, including real estate in Bangalore, Mumbai, Delhi, Agra, Hyderabad, Gurgaon, Chennai, Pune, Kolkata, Noida and so on. MBA 1ST SEMESTER 1
    • Mission To be known as the leading Group in the real estate arena - known for providing quality, futuristic and environment-friendly residential and commercial solutions on time. To be known as the leading Group in the real estate arena - known for providing quality, futuristic and environment-friendly residential and commercial solutions on time. To be known as the leading Group in the real estate arena - known for providing quality, futuristic and environment-friendly residential and commercial solutions on time. Our Vision To provide true value-for-money residential and commercial realty solutions to our clients. And in the process build a relationship of mutual trust with not only our clients but with all our associates... to make sure that all of us grow together bigger and stronger Real estate or immovable property is a legal term (in some jurisdictions) that encompasses land along with anything permanently affixed to the land, such as buildings. Real estate (immovable property) is often considered synonymous with real property (also sometimes called realty), in contrast with personal property (also sometimes called chattel or personality). However, for technical purposes, some people prefer to distinguish real estate, referring to the land and fixtures themselves, from real property, referring to ownership rights over real estate. The terms real estate and real property are used primarily in common law, while civil law jurisdictios refer instead to immovable property. In law, the word real means relating to a thing (from Latin res/rei, thing), as distinguished from a person. Thus the law broadly distinguishes between "real" property (land and anything affixed to it) and "personal" property (everything else, e.g., clothing, furniture, money). The conceptual difference was between immovable property, which would transfer title along with the land, and movable property, which a person would retain title to. MBA 1ST SEMESTER 2
    • Business sector With the development of private property ownership, real estate has become a major area of business. Purchasing real estate requires a significant investment, and each parcel of land has unique characteristics, so the real estate industry has evolved into several distinct fields. Specialists are often called on to valuate real estate and facilitate transactions. Some kinds of real estate businesses include: • Appraisal: Professional valuation services • Brokerages: 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 sales side of the property business • Real Estate Investing: Managing the investment of real estate • Relocation services: Relocating people or business to a different country Within each field, a business may specialize in a particular type of real estate, such as residential, commercial, or industrial property. In addition, almost all construction business effectively has a connection to real estate. "Internet Real Estate" is a term coined by the internet investment community relating to the parallel that exists between high quality internet domain names and real-world, prime real estate. Many internet companies actually use the address of properties as domain names. Levels According to The Economist, "developed economies'" assets at the end of 2002 was • Residential property: $48 trillion • Commercial property: $14 trillion • Equities: $20 trillion • Government bonds: $20 trillion • Corporate bonds: $13 trillion MBA 1ST SEMESTER 3
    • • Total: $115 trillion That makes real estate assets 54% and financial assets 46% of total stocks, bonds, and real estate assets. Assets not counted here are bank deposits, insurance "reserve" assets, and human assets; also it is not clear if all debt and equity investments are counted in the categories equities and bonds. For U.S. asset levels see FRB: Z.1 Release-- Flow of Funds Accounts of the United States. Mortgages in real estate In recent years, many economists have recognized that the lack of effective real estate laws can be a significant barrier to investment in many developing countries. In most societies, rich or poor, a significant fraction of the total wealth is in the form of land and buildings. In most advanced economies, the main source of capital used by individuals and small companies to purchase and improve land and buildings is mortgage loans (or other instruments). These are loans for which the real property itself constitutes collateral. Banks are willing to make such loans at favorable rates in large part because, if the borrower does not make payments, the lender can foreclose by filing a court action which allows them take back the property and sell it to get their money back. For investors, profitability can be enhanced by using an off plan or pre- construction strategy to purchase at a lower price which is often the case in the pre-construction phase of development. But in many developing countries there is no effective means by which a lender could foreclose, so the mortgage loan industry, as such, either does not exist at all or is only available to members of privileged social classes. Real estate economics Real estate economics is the application of economic techniques to real estate markets. It tries to describe, explain, and predict patterns of real estate prices, building production, and real estate consumption. The closely related fields of housing economics is narrower in scope, concentrating on residential real estate markets as does the research of real estate trends focus on the business and structural changes impacting the industry. Both draw on partial equilibrium analysis (supply and demand), urban economics, spatial economics, extensive research, surveys and finance. MBA 1ST SEMESTER 4
    • Overview of real estate markets The main participants in real estate markets are: • Owner/User - These people are both owners and tenants. They purchase houses or commercial property as an investment and also to live in or utilize as a business. • Owner - These people are pure investors. They do not consume the real estate that they purchase. Typically they rent out or lease the property to someone else. • Renter - These people are pure consumers. • Developers - These people prepare raw land for building which results in new product for the market. • Renovators - These people supply refurbished buildings to the market. • Facilitators - This includes banks, real estate brokers, lawyers, and others that facilitate the purchase and sale of real estate. The owner/user, owner, and renter comprise the demand side of the market, while the developers and renovators comprise the supply side. In order to apply simple supply and demand analysis to real estate markets a number of modifications need to be made to standard microeconomic assumptions and procedures. In particular, the unique characteristics of the real estate market must be accommodated. These characteristics include: • Durability - Real estate is durable. A building can last for decades or even centuries, and the land underneath it is practically indestructible. Because of this, real estate markets are modeled as a stock/flow market. About 98% of supply consists of the stock of existing houses, while about 2% consists of the flow of new development. The stock of real estate supply in any period is determined by the existing stock in the previous period, the rate of deterioration of the existing stock, the rate of renovation of the existing stock, and the flow of new development in the current period. The effect of real estate market adjustments tend to be mitigated by the relatively large stock of existing buildings. • Heterogeneous - Every piece of real estate is unique, in terms of its location, in terms of the building, and in terms of its financing. This makes pricing difficult, increases search costs, creates information MBA 1ST SEMESTER 5
    • asymmetry and greatly restricts substitutability. To get around this problem, economists (beginning with Muth (1960)) define supply in terms of service units, that is, any physical unit can be deconstructed into the services that it provides. Olsen (1969) describes these units of housing services as an unobservable theoretical construct. Housing stock depreciates making it qualitatively different from a new building. The market equilibrating process operates across multiple quality levels. Further, the real estate market is typically divided into residential, commercial, and industrial segments. It can also be further divided into subcategories like recreational, income generating, area, historical/protected, etc. • High Transaction costs - Buying and/or moving into a home costs much more than most types of transactions. These costs include search costs, real estate fees, moving costs, legal fees, land transfer taxes, and deed registration fees. Transaction costs for the seller typically range between 1.5 - 6% of the purchase price. In some countries in Continental Europe, transaction costs for both buyer and seller can range between 15 - 20%. • Long time delays - The market adjustment process is subject to time delays due to the length of time it takes to finance, design, and construct new supply, and also due to the relatively slow rate of change of demand. Because of these lags there is a great potential for disequilibrium in the short run. Adjustment mechanisms tend to be slow, relative to more fluid markets. • Both an investment good and a consumption good - Real estate can be purchased with the expectation of attaining a return (an investment good), or with the intention of using it (a consumption good), or both. These functions can be separated (with market participants concentrating on one or the other function) or can be combined (in the case of the person that lives in a house that they own). This dual nature of the good means that it is not uncommon for people to over- invest in real estate, that is, to invest more money in an asset than it is worth on the open market. • Immobility - Real estate is locationally immobile (save for mobile homes, but the land underneath them is still immobile). Consumers come to the good rather than the good going to the consumer. Because of this, there can be no physical market-place. This spatial fixity means that market adjustment must occur by people moving to dwelling units, rather than the movement of the goods. For example, if tastes change and more people demand suburban houses, people must MBA 1ST SEMESTER 6
    • find housing in the suburbs, because it is impossible to bring their existing house and lot to the suburb (even a mobile home owner, who could move the house, must still find a new lot). Spatial fixity combined with the close proximity of housing units in urban areas suggests the potential for externalities inherent in a given location. Demand for housing The main determinants of the demand for housing are demographic. However other factors like income, price of housing, cost and availability of credit, consumer preferences, investor preferences, price of substitutes and price of compliments all play a role. The core demographic variables are population size and population growth: the more people in the economy, the greater the demand for housing. But this is an oversimplification. It is necessary to consider family size, the age composition of the family, the number of first and second children, net migration (immigration minus emigration), non-family household formation, and the number of double family households, death rates, divorce rates, and marriages. In housing economics, the elemental unit of analysis is not the individual as it is in standard partial equilibrium models. Rather, it is households that demand housing services: typically one household per house. The size and demographic composition of households is variable and not entirely exogenous. It is endogenous to the housing market in the sense that as the price of housing services increase, household size will tend also to increase. Income is also an important determinant. Empirical measures of the income elasticity of demand in North America range from 0.5 to 0.9 (De Leeuw, F. 1971). If permanent income elasticity is measured, the results are a little higher (Kain and Quigley 1975) because transitory income varies from year- to-year and across individuals so positive transitory income will tend to cancel out negative transitory income. Many housing economists use permanent income rather than annual income because of the high cost of purchasing real estate. For many people, real estate will be the most costly item they will ever buy. The price of housing is also an important factor. The price elasticity of the demand for housing services in North America is estimated as negative 0.7 MBA 1ST SEMESTER 7
    • by Polinsky and Ellwood (1979), and as negative 0.9 by Maisel, Burnham, and Austin (1971). An individual household’s housing demand can be modeled with standard utility/choice theory. A utility function, such as U=U(X1, X2, X3, X4...Xn), can be constructed in which the households utility is a function of various goods and services (Xs). This will be subject to a budget constraint such as P1X1+P2X2+...PnXn=Y, where Y is the households available income and the Ps are the prices for the various goods and services. The equality indicates that the money spent on all the goods and services must be equal to the available income. Because this is unrealistic, the model must be adjusted to allow for borrowing and/or saving. A measure of wealth, lifetime income, or permanent income is required. The model must also be adjusted to account for the heterogeneousness of real estate. This can be done by deconstructing the utility function. If housing services (X4) is separated into the components that comprise it (Z1, Z2, Z3, Z4,...Zn), then the utility function can be rewritten as U=U(X1, X2, X3, (Z1, Z2, Z3, Z4,...Zn)...Xn) By varying the price of housing services (X4) and solving for points of optimal utility, that household's demand schedule for housing services can be constructed. Market demand is calculated by summing all individual household demands. Supply of housing Housing supply is produced using land, labour, and various inputs such as electricity and building materials. The quantity of new supply is determined by the cost of these inputs, the price of the existing stock of houses, and the technology of production. For a typical single family dwelling in suburban North America, approximate percentage costs can be broken down as: acquisition costs 10%, site improvement costs 11%, labour costs 26%, materials costs 31%, finance costs 3%, administrative costs 15%, and marketing costs 4%. Multi-unit residential dwellings typically break down as: acquisition costs 7%, site improvement costs 8%, labour costs 27%, materials costs 33%, finance costs 4%, administrative costs 17%, and marketing costs 5%. Public subdivision requirements can increase development cost by up to 3% depending on the jurisdiction. Differences in building codes account for about a 2% variation in development costs. However these subdivision and building code costs typically increase the market value of the buildings by at least the amount of their cost outlays. A production function such as Q=f(L,N,M) can be constructed in which Q is MBA 1ST SEMESTER 8
    • the quantity of houses produced, N is the amount of labour employed, L is the amount of land used, and M is the amount of other materials. This production function must, however, be adjusted to account for the refurbishing and augmentation of existing buildings. To do this a second production function is constructed that includes the stock of existing housing, and their ages, as determinants. The two functions are summed yielding the total production function. Alternatively an hedonic pricing model can be regressed. The long-run price elasticity of supply is quite high. George Fallis estimates it as 8.2 (Fallis, G. 1985), but in the short run supply tends to be very price inelastic. Supply price elasticity depends on the elasticity of substitution and supply restrictions. There is significant substitutability both between land and materials, and between labour and materials. In high-value locations, multi-story concrete buildings are typically built to reduce the amount of expensive land used. As labour costs increased since the 1950s, new materials and capital intensive techniques have been employed to reduce the amount of relatively expensive labour used. However supply restrictions can significantly affect substitutability. In particular the lack of supply of skilled labour (and labour union requirements), can constrain the substitution from capital to labour. Land availability can also constrain substitutability if the area of interest is delineated (that is, the larger the area, the more suppliers of land, and the more substitution that is possible). Land use controls such as zoning bylaws can also reduce land substitutability. The adjustment mechanism The basic adjustment mechanism is a stock/flow model to reflect the fact that about 98% the market is comprised of existing stock and about 2% consists of the flow of new buildings. MBA 1ST SEMESTER 9
    • In the diagram to the right, the stock of housing supply is presented in the left panel while the new flow is in the right panel. There are four steps in the basic adjustment mechanism. First, the initial equilibrium price (Ro) is determined by the intersection of the supply of existing housing stock (SH) and the demand for housing (D). This rent is then translated into value (Vo) via discounting cash flows. Value is calculated by dividing current period rents by the discount rate, that is, as a perpetuity. Then value is compared to construction costs (CC) in order to determine whether profitable opportunities exist for developers. The intersection of construction costs and the value of housing services determine the maximum level of new housing starts (HSo). Finally the amount of housing starts in the current period is added to the available stock of housing in the next period. In the next period, supply curve SH will shift to the right by amount HSo. Adjustment with depreciation The diagram to the left shows the effects of depreciation. If the supply of existing housing deteriorates due to wear, then the stock of housing supply depreciates. Because of this, the supply of housing (SHo) will shift to the left (to SH1) resulting in a new equilibrium price of R1. The increase of prices from Ro to R1 will shift the value function up (from Vo to V1). As a result, more houses can be produced profitably and housing starts will increase (from HSo to HS1). Then the supply of housing will shift back to its initial position (SH1 to SHo). MBA 1ST SEMESTER 10
    • Increase in demand The diagram on the right shows the effects of an increase in demand in the short run. If there is an increase in the demand for housing, such as the shift from Do to D1 there will be either a price or quantity adjustment, or both. For the price to stay the same, the supply of housing must increase. That is, supply SHo must increase by HS. Increase in costs The diagram on the left shows the effects of an increase in costs in the short- run. If construction costs increase (say from CCo to CC1), developers will find their business less profitable and will be more selective in their MBA 1ST SEMESTER 11
    • ventures. In addition some developers may leave the industry. The quantity of housing starts will decrease (HSo to HS1). This will eventually reduce the level of supply (from SHo to SH1) as the existing stock of housing depreciates. Prices will tend to rise (from Ro to R1). Real estate trends Real estate trends is a generic term used to describe any consistent pattern or change in the general direction of the real estate industry which, over the course of time, causes a statistically noticeable change. This can be a result of the economy, a change in mortgage rates, consumer speculations, or other fundamental and non-fundamental reasons. A real estate trend is the catalyst for the change, and it is usually a concept, a belief, a philosophy, or an event. Sometimes a real estate trend evolves to meet a specific need, while others evolve when new products or solutions are launched. For example, when more lenders began offering creative financing products, more borrowers were able to afford a mortgage (at least on paper). At other times, a trend from another industry spills over into the real estate industry and is adopted. Therefore, a trend must have substance and be based on fact. Over time, it will cause pattern of change. Monitoring changes and tracking trends is a not an exact science and can be very hard to predict. The residential real estate brokerage industry is approximately half way through a 10 -15 year industry transition. This major shift is creating a fundamental change in the way homes are being bought and sold and the role the real estate agents are playing therein. MBA 1ST SEMESTER 12
    • Real estate broker Real estate broker is a party who acts as an intermediary between sellers and buyers of real estate and attempts to find sellers who wish to sell and buyers who wish to buy. In the United States, the relationship was originally established by reference to the English common law of agency with the broker having a fiduciary relationship with his clients. Estate agent is the term used in the United Kingdom to describe a person or organization whose business is to market real estate on behalf of clients. In the US, real estate brokers and their salespersons (commonly called "real estate agents" or, in some states, "brokers") assist sellers in marketing their property and selling it for the highest possible price under the best terms. When acting as a Buyer's agent with a signed agreement (or, in many cases, verbal agreement, although a broker may not be legally entitled to his commission unless the agreement is in writing), they assist buyers by helping them purchase property for the lowest possible price under the best terms. Without a signed agreement, brokers may assist buyers in the acquisition of property but still represent the seller and the seller's interests. In most jurisdictions in the United States, a person is required to have a license in order to receive remuneration for services rendered as a real estate broker. Unlicensed activity is illegal, but buyers and sellers acting as principals in the sale or purchase of real estate are not required to be licensed. In some states, lawyers are allowed to handle real estate sales for compensation without being licensed as brokers or agents. The difference between salespersons and brokers In the past, when brokers (and their agents) only represented sellers, the term ‘’real estate salesperson’’ may have been more appropriate than it is today, given the different ways that brokers and their agents can help a buyer through the process rather than simply “sell’’ him or her a property. Legally however, the term 'salesperson' is still used in many states to describe a real estate agent. Real estate education: In order to become licensed, most states require that an applicant take a minimum number of classes before taking the state licensing exam. Such education is often provided by real estate brokerages as a means to finding new agents. MBA 1ST SEMESTER 13
    • Today in many states, the real estate agent (acting as an agent of the broker with whom he/she is employed) is required to disclose to prospective buyers and sellers who represents whom. See below for a broker/agent’s relationship to sellers and their relationship to buyers. While some people may refer to any licensed real estate agent as a real estate broker, a licensed real estate agent is a professional who has obtained either a real estate salesperson's license or a real estate broker's license. In the United States, there are commonly two levels of real estate professionals licensed by the individual states, but not by the federal government: Real estate salesperson (or, in some states, Real estate broker) When a person first becomes licensed to become a real estate agent, he/she obtains a real estate salesperson's license (or some states use the alternative term, "broker") from the state in which he/she will practice. If you want to obtain a real estate license, the candidate must take specific coursework (of between 40 and 90 hours) and then pass a state exam on real estate law and practice. In order to work, salespersons must then be associated with (and act under the authority of) a real estate broker. Many states also have reciprocal agreements with other states, allowing a licensed individual from a qualified state to take the second state's exam without completing the course requirements, or, in some cases, take only a state law exam. Real estate broker (or, in some states, Qualifying Broker) After gaining some years of experience in real estate sales, a salesperson may decide to become licensed as a real estate broker (or Principal/Qualifying broker) in order to own, manage or operate his/her own brokerage. Commonly more course work and a broker's state exam on real estate law must be passed. Upon obtaining a broker's license, a real estate agent may continue to work for another broker in a similar capacity as before (often referred to as a broker associate or associate broker) or take charge of his/her own brokerage and hire other salespersons (or broker) licensees. Becoming a branch office manager may or may not require a broker's license. Some states such as New York allow licensed attorneys to MBA 1ST SEMESTER 14
    • become real estate brokers without taking any exam. In some states, such as Colorado, there are no "salespeople", as all licensees are Brokers. A REALTOR, pronounced “Real-tor”, is a real estate salesperson or broker who is a member of the National Association of Realtors (NAR). All Realtors are brokers/salespersons, but not all brokers/salespersons are Realtors. Agency relationships with clients versus Non-Agency relationships with customers • Agency relationship: Traditionally, the broker provides a conventional full-service, commission-based brokerage relationship under a signed listing agreement with a seller or "buyer representation" agreement with a buyer, thus creating under common law in most states an agency relationship with fiduciary obligations. The seller or buyer is then a client of the broker. Some states also have statutes which define and control the nature of the representation. Agency relationships in residential real estate transactions involve the legal representation by a real estate broker (on behalf of a real estate company) of the principal, whether that person or persons is a buyer or a seller. The broker (and his/her licensed real estate agents) then becomes the agent of the principal. • Non-agency relationship: where neither written agreement nor fiduciary relationship exists, a real estate broker (and his agents) works with a principal who is then known as the broker’s customer. When a buyer, who has not entered into a Buyer Agency agreement with the broker and buys a property, then that broker functions as the sub-agent of the seller’s broker. When a seller chooses to work with a transaction broker, there is no agency relationship created. Transaction brokers Some state Real Estate Commissions, notably Florida's after 1992 (and extended in 2003) and Colorado's after 1994 (with changes in 2003), created the option of having no agency nor fiduciary relationship between brokers and sellers or buyers. Having no more than a facilitator relationship, transaction brokers assists buyers, sellers, or both during the transaction MBA 1ST SEMESTER 15
    • without representing the interests of either party who may then be regarded as customers. As noted by the South Broward Board of Realtors, Inc. in a letter to State of Florida legislative committees : "The Transaction Broker crafts a transaction by bringing a willing buyer and a willing seller together and assists with the closing of details. The Transaction Broker is not a fiduciary of any party, but must abide by law as well as professional and ethical standards." (such as NAR Code of Ethics) The result was that in 2003, Florida created a system where the default brokerage relationship had "all licensees …operating as transaction brokers, unless a single agent or no brokerage relationship is established, in writing, with the customer” and the statute required written disclosure of the transaction brokerage relationship to the buyer or seller customer only through July 1, 2008. In both Florida and Colorado's case, dual agency and sub-agency (where both listing and selling agents represented the seller) no longer exist. Dual or limited Agency Dual agency occurs when the same brokerage represents both the seller and the buyer under written agreements. Individual state laws vary and interpret dual agency rather differently. Many states no longer allow dual agency. Instead, Transaction Brokerage (see above) provides the Buyer and Seller with a limited form of representation, but without any fiduciary obligations (see Florida law). Buyers and sellers are generally advised to consult a licensed real estate professional for a written definition of an individual state's laws of agency, and many states require written Disclosures to be signed by all parties outlining the duties and obligations. • If state law allows for the same agent to represent both the buyer and the seller in a single transaction, the brokerage/agent is typically considered to be a Dual Agent. Special laws/rules often apply to dual agents, especially in negotiating price. MBA 1ST SEMESTER 16
    • • In some states (notably Maryland), Dual Agency can be practiced in situations where the same brokerage (but not agent) represent both the buyer and the seller. If one agent from the brokerage has a home listed and another agent from that brokerage has a buyer-brokerage agreement with a buyer who wishes to buy the listed property, Dual Agency occurs by allowing each agent to be designated as “intra- company” agent. Only the broker himself is the Dual Agent. • Some states do allow a broker and one agent to represent both sides of the transaction as dual agents. In those situations, conflict of interest is more likely to occur. Types of services that a broker can provide Since each state's laws may differ from others, it is generally advised that prospective sellers or buyers consult a licensed real estate professional. Some Examples: • Comparative Market Analysis - an estimate of the home's value compared with others. This differs from an appraisal in that property currently for sale may be taken into consideration (competition for the subject property). • Exposure - Marketing the real property to prospective buyers. • Facilitating a Purchase - guiding a buyer through the process. • Facilitating a Sale - guiding a seller through the selling process. • FSBO document preparation - preparing necessary paperwork for "Sale By Owner" sellers. • Full Residential Appraisal - but only, in most states, if the broker is also licensed as an appraiser. • Home Selling Kits - guides to how to market and sell a property. • Hourly Consulting for a fee, based on the client's needs. • Leasing for a fee or percentage of the gross lease value. • Property Management. • Exchanging property. • Auctioning property. • Preparing contracts and leases. (Not in all states.) These services are also changing as a variety of real estate trends re-engineer the industry. MBA 1ST SEMESTER 17
    • General The sellers and buyers themselves are the principals in the sale, and real estate brokers (and the broker's agents) are their agents as defined in the law. However, although a real estate agent commonly fills out the real estate contract form, agents are typically not given power of attorney to sign the real estate contract or the deed; the principals sign these documents. The respective real estate agents may include their brokerages on the contract as the agents for each principal. The use of a real estate broker is not a requirement for the sale or conveyance of real estate or for obtaining a mortgage loan from a lender. However, once a broker is used, the settlement attorney (or party handling closing) will ensure that all parties involved be paid. Lenders typically have other requirements, though, for a loan. Services provided to both buyers and sellers In addition to the services to sellers and buyers described below, most real estate agents coordinate various aspects of the closing. Real estate brokers (and their agents) typically do not provide title service such as title search or title insurance, do not conduct surveys or formal appraisals of the property such as those required by lenders, and do not act as lawyers for the parties, although they may "coordinate" these activities with the appropriate specialists. Some real estate brokers may be associated with loan officers who may help to finance buyers to make their purchase. Regardless of whether a real estate agent assists sellers or buyers of real estate, negotiation and financing skills are important. MBA 1ST SEMESTER 18
    • The "listing" contract Several types of listing contracts exist between broker and seller. These may be defined as: • Exclusive Right to Sell In this type of Agreement", the broker is given the exclusive right to market the property and represents the seller exclusively. This is referred to as Seller Agency. However, the brokerage also offers to co-operate with other brokers and agrees to allow them to show the property to prospective buyers and offers a share of the total real estate commission. • Exclusive Agency An alternative form, "Exclusive Agency", allows only the broker the right to sell the property, and no offer of compensation is ever made to another broker. In that case, the property will never be entered into an MLS. Naturally, that limits the exposure of the property to only one agency. • Open Listing This is an Agreement whereby the property is available for sale by any real estate professional that can advertise, show, or negotiate the sale. Whoever first brings an acceptable offer would receive compensation. Real estate companies will typically require that a written agreement for an open listing be signed by the seller to ensure the payment of a commission if a sale should take place. Although there can be other ways of doing business, a real estate brokerage usually earns its commission after the real estate broker and a seller enter into a listing contract and fulfill agreed-upon terms specified within that contract. The seller's real estate is then listed for sale, frequently with property data entered into a Multiple Listing Service (MLS) in addition to any other ways of advertising or promoting the sale of the property. In most of North America, where brokers are members of a national association (such as NAR in the United States or the Canadian Real Estate Association), a listing agreement or contract between broker and seller must include the following: starting and ending dates of the agreement; the price at which the property will be offered for sale; the amount of compensation MBA 1ST SEMESTER 19
    • due to the broker and how much, if any, will be offered to a co-operating broker who may bring a buyer. Without an offer of compensation to a co- operating broker (co-op percentage or flat fee), the property may not be advertised in the MLS system. Brokerage commissions In consideration of the brokerage successfully finding a satisfactory buyer for the property, a broker anticipates receiving a commission for the services the brokerage has provided. Usually, the payment of a commission to the brokerage is contingent upon finding a satisfactory buyer for the real estate for sale, the successful negotiation of a purchase contract between a satisfactory buyer and seller, or the settlement of the transaction and the exchange of money between buyer and seller. In North America commissions on real estate transactions are negotiable and have been under pressure for numerous reasons the average commission has declined during the last decade from 6% to about 5%. Real estate commission is typically paid by the seller at the closing of the transaction as detailed in the listing agreement. A growing alternative commission structure is the fee-for-service, fixed-fee, a la carte or flat-fee structure. Real estate trends have caused the unbundling of real estate brokerage services and according to the 2007 Swanepoel Trends Report rising costs and cost-conscious consumers are now exploring new innovative business models such as a la carte, multi-level marketing, residual, auctioneering and other discount or online real estate models. RESPA Real estate brokers who work with lenders may not receive any compensation from the lender for referring a client to a specific lender. To do so would be a violation of a (US) federal law known as the Real Estate Settlement Procedures Act (RESPA). All compensation to a broker must be disclosed to all parties. MBA 1ST SEMESTER 20
    • Lockbox With the sellers’ permission, a lockbox is placed on homes that are occupied and, after arranging an appointment with the home owner, agents can show the home. When a property is vacant or where a seller may be living elsewhere, a lockbox will generally be placed on the front door. The listing broker helps arrange showings of the property by various real estate agents from all companies associated with the MLS. The lockbox contains the key to the door of the property and the box can only be opened by licensed real estate agents (often only with authorization from the listing brokerage), by using some sort of secret combination or code provided by the brokerage or the issuer of the lockbox. Lockboxes come in two varieties - mechanical and electronic. Mechanical lockboxes utilize a combination dial or special mechanical key and are readily purchased at local home improvement centers or over the internet. Mechanical lockboxes offer the most basic protection of the homeowner's key and therefore expose the most risk of unmonitored or potentially unauthorized access to the home during the sales process. The risk stems primarily from an agent forgetting to change the combination after each sale. The frequency of use of mechanical lockboxes by agents has steadily declined due to the availability of more secure electronic lockboxes. Electronic lockboxes increase the level of security because agents wishing to show a property must have a valid electronic key to open the box. The electronic key must be renewed or refreshed at regular intervals by the agent otherwise the key deactivates itself preventing access to the lockbox contents. Electronic keys can range from credit card sized smart cards to a separate electronic box. In addition to greater security, electronic lockboxes typically record all key access activity internally. This access log can be downloaded and reviewed by the listing agent to determine the date, time and person accessing the lockbox. Electronic lockboxes also offer a host of other features such as controlling allowed showing times, homeowner privacy modes, special showing restrictions etc. MBA 1ST SEMESTER 21
    • Shared commissions with co-op brokers If any buyer's broker (or any of his/her agents) brings the buyer for the property, the buyer's broker would typically be compensated with a co-op commission coming from the total offered to the listing broker, often about half of the full commission from the seller. If an agent or salesperson working for the buyer's broker brings the buyer for the property, then the buyer's broker would commonly compensate his agent with a fraction of the co-op commission, again as determined in a separate agreement. A discount brokerage may offer a reduced commission in the event no other brokerage firm is involved and no co-op commission is paid out. If there is no co-commission to pay to another brokerage, the listing brokerage receives the full amount of the commission minus any other types of expenses. Potential points of contention for agents Real estate commissions are becoming a point of controversy. Home values in many areas have quadrupled over the past 20 years. This may be contributing to the increased number of licensed agents and growing competition between them. The number of real estate agents in areas tends to rise when home values do, and the productivity of existing agents goes down. The rewards have increased, but so have the demands of clients and business risks faced by agents. In North America, agents have had to become familiar with marketing through the internet as well as traditional print and other media. Additionally the law is complicated with issues such as defects in housing, grow houses and other issues of which the agent is the front line defense for his client. There is more liability than ever in advising buyers and sellers. Another controversy exists for the commissions to real estate agents. If a listing agent sells a property for any amount above the listed price, he in turn will make additional income. In theory, this will motivate him/her to get top dollar price for his client, the seller. However, if the agent representing the buyer attempts to obtain a lower sales price for his client, then he/she would make a lower commission. Thus, it could be considered to be in the agent's best interest to advise his client to purchase the property at a higher price. MBA 1ST SEMESTER 22
    • In practical terms, there is rarely a great enough difference between the listing (asking) price and the negotiated selling price to make a significant difference between the commissions generated on each side, and certainly hardly enough to justify an agent failing in his fiduciary duty to obtain the best terms for his/her client. Another potential conflict of interest exists when a listing agent in a very active real estate market has incentive to sell properties quickly at unnecessarily low prices in order to benefit from a high volume of sales. In any case, agents who create satisfied clients and develop subsequent referrals are likely to do far better in the long run. Real estate brokers and buyers Services provided to buyers: • Buyers as clients With the increase in the practice of buyer brokerage in the US, especially since the late 1990s in most states, agents (acting under their brokers) have been able to represent buyers in the transaction with a written "Buyer Agency Agreement" not unlike the "Listing Agreement" for sellers referred to above. In this case, buyers are clients of the brokerage. Some real estate brokerages choose only to represent buyers in an exclusive buyer's agency relationship and do not take "listings" from sellers. A real estate brokerage attempts to do the following for the buyers of real estate only when they represent the buyers with some form of written buyer- brokerage agreement: • Find real estate in accordance with the buyers’ needs, specifications, and cost. • Takes buyers to and shows them properties available for sale. • When deemed appropriate, prescreens buyers to ensure they are financially qualified to buy the properties shown (or uses a mortgage professional to do that task). • Negotiates price and terms on behalf of the buyers and prepares standard real estate purchase contract by filling in the blanks in the contract form. The buyer's agent acts as a fiduciary for the buyer. MBA 1ST SEMESTER 23
    • Due to the importance of the role of representing buyers' interests, many brokers who seek to play the role of client advocate are now seeking out the services of Certified Mortgage Planners, industry experts that work in concert with Certified Financial Planners to align consumers' home finance positions with their larger financial portfolio(s). • Buyers as customers In most states, until the 1990s, buyers who worked with an agent of a real estate broker in finding a house were customers of the brokerage, since the broker represented only sellers. Today, state laws differ. Buyers and/or sellers may be represented. Typically, a written "Buyer Brokerage" agreement is required for the buyer to have representation (regardless of which party is paying the commission), although by his/her actions, an agent can create representation. • Find real estate in accordance with the buyers’ needs, specifications, and affordability. • Take buyers to and shows them properties available for sale. • When deemed appropriate, prescreen buyers to ensure they are financially qualified to buy the properties shown (or uses a mortgage professional to do that task). • Assist the buyer in making an offer for the property. The impact of globalization on real estate brokers' activities Globalization has had an immediate and powerful impact on real estate markets, making them an international working place. The rapid growth of the Internet has made the international market accessible to millions of consumers. A look at recent changes in homeownership rates illustrates this. Minority homeownership jumped by 4.4 million during the 1990s, reaching 12.5 million in 2000, according to the Fannie Mae Foundation. Foreign direct investment in U.S. real estate has increased sharply from $38 billion in 1997 more than $50 billion in 2002 according to Census data. Most local real estate agents view the foreign market as a significant revenue potential and may have already worked with international clients in their local market, new immigrants or more sophisticated investors from different cultures and from other countries. For example, they are providing value- added services to an overseas relocation employee figure out which MBA 1ST SEMESTER 24
    • inoculations his or her children will need as well as the steps needed to register a car in the United States. Real estate brokers want to keep central to the transaction, protect the best interests of their members and address the unique needs of each multicultural global client by acquiring specialized training and designations. (See below for more) Recently the Mexican association of real estate practitioners in Mexico, AMPI, and the NAR, National Association of Realtors in the US, signed a bilateral contract for international real estate business cooperation. Also at the local level, many other state and local associations are helping other countries achieve the same result. For instance, in New Mexico, a historically multicultural state, under the RANM, Realtor Association of New Mexico and the President’s Advisory Council, is looking into forming an ambassador association to help a foreign country into signing a bilateral agreement with the NAR. In New Mexico, there are 4500 licensed real estate professionals and only 14 or 15 CIPS designees, out of whom, only 6 speak a language other than English. Real estate brokers / agents and further education In addition to completing the educational requirements for a state real estate license, most states issue real estate licenses for limited time periods and require real estate professionals to complete a certain number of hours of further education on an annual or biannual basis in order to renew their licenses. Required course hours range from 10 to 20 per license period. Typically, some specific courses are required to be taken; these would include real estate law updates. NAR educational requirements and recognized designations As adherents to NAR's Code of Ethics, Realtors are required to update their acquaintance with the Code every 4 years by taking a course, available on- line or "live". However, Realtors, as members of NAR, also have the option of studying for additional certifications in a variety of specialties, several of which are backed by NAR with offerings of certification and update courses available nationwide. MBA 1ST SEMESTER 25
    • The most well known NAR sponsored designations are the following: • Accredited Buyer Representative (ABR). The Real Estate Buyers Agent Council has over 40,000 members and is the largest association of real estate professionals focusing on all aspects of buyer representation. Of the REBAC members, over 30,000 have completed REBAC’s two-day course and provided documentation of buyer agency experience. Linked to the ABR is the ABRM, Accredited Buyer Representative Manager (ABRM) for managers. • Accredited Land Consultant (ALC). ALC’s are the recognized experts in land brokerage transactions of all kinds of specialized land services including farms and ranches, raw land sales and development. • Certified Commercial Investment Member (CCIM). CCIMs are recognized experts in commercial real estate brokerage, leasing, valuation and investment analysis. There are more than 7,500 designees and an equal number of candidates principally in North America, but also in Asia and Europe. • Certified Property Manager (CPM). Geared to real estate property management specialists, designees handle all forms of management from residential to commercial to industrial. • Certified Real Estate Brokerage Manager (CRB). The designation is awarded to REALTORS® who have completed the Council's advanced educational and professional requirements. CRB designees consistently increase their level of industry knowledge, advance their earning and career potential, increase their firm’s profitability and benefit from active involvement in our network of real estate professionals. • Certified Residential Specialist (CRS). Designees, with 44,000 members - 4% of NAR members - who average 43 transactions per year and earn four times as much as the average Realtor, belong to the Council of Residential Specialists which is the largest affiliate of NAR. They are involved in over 27% of all transactions because the consumer prefers to work with a more knowledgeable and seasoned brokers or agents. Requirements for this designation include a total of at least 25 transactions (or specific $$ volume of sales) over a specific MBA 1ST SEMESTER 26
    • time period, significant experience, as well as complete rigorous educational requirements. • Certification for Internet Professionalism (e-PRO). An e-PRO is a Realtor who has undergone a new training program presented entirely online in order to be certified as Internet Professionals. NAR is the first major trade group to offer certification for online professionalism which involves all aspects of doing business on the internet. • Certified International Property Specialist (CIPS). Realtors with the CIPS designation have both hands-on experience in international real estate transactions, Whether traveling abroad to put transactions together, assisting foreign investors, helping local buyers invest abroad, or serving an immigrant niche in local markets. CIPS designees have also successfully completed an intensive program of study focusing on critical aspects of transnational transactions, including currency and exchange rate issues and cross-cultural relationships, regional market conditions, investment performance, tax issues and more. The CIPS network is comprised of 1,500 real estate professionals from 50 countries who deal in all types of real estate. • Counselor of Real Estate (CRE). A CRE designee is one of only 1,100 by-invitation-only members of an international group of professionals who provide seasoned, objective advice on real property and land-related matters. • Graduate of the Realtors’ Institute (GRI). The GRI designation is held by 19% of Realtors and courses are offered through state Realtor Associations with 90 hours of coursework on marketing and servicing listed properties to real estate law. In a 2003 survey, NAR has determined that GRIs earned over $33,200 more annually than non- designees. • Real Estate Professional Assistant (REPA). Designed for administrative assistants or employees of Realtors (who may or may not hold a real estate license), a two-day certificate course provides an intensive introduction to the real estate business and to the specific ways support staff can become valuable assets to their employers. MBA 1ST SEMESTER 27
    • Changing Industry The real estate brokerage industry is approximately half way through a 10 -15 year industry transition. This major shift is creating a fundamental change in the way homes are being bought and sold and the role the real estate agents are playing therein and many new real estate brokerage models are evolving. Compensation has traditionally been based on a percentage of the sales price, split between the buying and selling brokers, and then between the agent(s) and his/her real estate agency. While a split based on the percentage received by the broker is generally normal, in some brokerages agents may pay a monthly "desk fee" for office costs, monthly fee, etc. and then retain 100% of the commission received. The business and compensation structures are however changing as the real estate trends create various new real estate models and real estate related services such as Zillow, Red fin, Trulia, Point2, House values, Realestate.com and RealEstateStoreUSA.com. The Dangerous Disconnect Between Home Prices and Fundamentals Today's home prices can best be described as a recession in the making, but are most often referred to as a bubble. Prices have grown so much in the last decade that they are now completely disconnected from the fundamentals that have historically ruled the real estate market. Today's prices are not sustainable and the graphs and analysis below demonstrate why. MBA 1ST SEMESTER 28
    • The Disconnect Between Wages and Home Prices Price increases are nothing new, since home values tend to go up over time. What makes this housing bubble different (besides the fact that it is the largest bubble in U.S. history) is the dangerous disconnect between home prices and the basic fundamentals that typically rule the housing market. For example, increases in home prices typically keep pace with increases in wages. But this has not happened. National median home prices have increased by more than 45 percent in the last decade (when adjusted for inflation). Median wages per worker, on the other hand, have only increased by 10 percent in the same period. As a result, for almost the first time ever, individuals who are making the median household income cannot afford to buy a median priced home. In order to qualify buyers for loans, lenders loosened credit regulations and encouraged risky mortgage products like interest-only loans, negative amortization loans and ARM loans. This made it easier to get a mortgage, but admittedly much harder to keep it. MBA 1ST SEMESTER 29
    • In recent years, a large portion of the buyers bought out of their price range. In many cases, their loan qualification was based on a teaser rate and/or an interest-only mortgage payment. Now that the interest rate is due to reset on these loans, millions will not be able to afford their mortgage and will likely lose their homes to foreclosure. The Disconnect Between Rents and Home Prices Also disconcerting is the disconnect between rents and home prices. At one point, the only thing that stopped most people from buying versus renting was lack of a down payment. Sure, it cost a little more each month to buy - but not much. But thanks to the housing boom, everything has changed. Home price increases have far outpaced rent increases, rising 45 percent in the last ten years. In the same time period, rents, like wages, increased by only 10 percent. Nationally, it now costs 60 percent less to rent than it does to buy. But for some reason, this hasn't stopped people from buying. Between 1995 and present day, the homeownership rate has soared. In contrast, the number of people who rent has declined for the first time since WWII. Since we already know that rising wages and lower home prices were a factor, the increase in homeownership can be easily traced back to the lenders who loosened credit and mortgage lending restrictions. Thanks to these lenders, buyers who would have never stood a chance of getting a mortgage just a few years ago were now being approved for outrageous amounts of money. MBA 1ST SEMESTER 30
    • The Disconnect Between Home Prices and Home Sales Although the disconnect between home prices and home sales was not present during the housing boom, it most certainly is now. The public has either lost interest or simply can't afford to buy into the current housing market. Home sales have slowed nationally, and are down significantly in cities within California, Florida, Nevada, Michigan and Ohio. As a result, supply has now exceeded demand in most areas. It would take several months, and in some cases years, to sell all of the homes that are currently on the market. Yet, home prices are staying level for the most part - for now. If sales do not pick up soon, home prices will most definitely begin to fall. MBA 1ST SEMESTER 31
    • SHRI KRISHNA REALESTATE AGENCY A/3, LAXMI NARAYAN, SOCIETY ROAD NO 1, JOGESHWARY – (E), MUMBAI-400060. STATUS : 5PARTENERS ASSESS. YEAR : 2008-2009 GIR/PAN NO : JMAMS2695N/Wd COMPUTATION OF TOTAL INCOME BUSINESS INCOME NETPROFIT AS PER BUSINESS 84,970.00 OTHER SOURCES NIL GROSS TOTAL INCOME 84,970.00 TOTAL TAXABLE INCOME 84,970.00 TAXABLE INCOME ROUNDOFF u/s 288A 84,970.00 INCOME TAX PAYABLE NIL MBA 1ST SEMESTER 32
    • SHRI KRISHNA ESTATE AGENCY PROFIT AND LOSS ACOUNT for the year ended 31st March, 2008 Particulars Rs. Particulars Rs. To Shop Rent 1,20,000 By Telephone 72,000 To Telephone Expenses 15,000 By Commission Received 2,00,000 To Electricity 7,500 To Profession Tax 21,080 To Convinces 5,000 To Repair & Maintenance NIL To Stationary 5,000 To Depreciation 6,950 To Miscellaneous Expenditures 6,500 To Net Profit 84,970 2,72,00 0 2,72,000 MBA 1ST SEMESTER 33
    • SHRI KRISHNA ESTATE AGENCY BALANCESHEET As on 31st March, 2008 Liabilities Rs. Assets Rs. Capital 3,00,000 Fixed Assets : 44,500 Less: Depreciation 6,950 37,550 Add: Net Profit 84,970 Investment NIL Deposit: MTNL 50,000 Electricity 2,500 Shop 1,00,000 152500 Bank: Fixed Deposit 1,00,000 Current A/c 50,000 150000 Cash At Hand 44,920 3,84,97 0 3,84,970 MBA 1ST SEMESTER 34
    • SHRI KRISHNA REALESTATE AGENCY A/3, LAXMI NARAYAN, SOCIETY ROAD NO 1, JOGESHWARY – (E), MUMBAI-400060. STATUS : 5PARTENERS ASSESS. YEAR : 2009-2010 GIR/PAN NO : JMAMS2695N/Wd COMPUTATION OF TOTAL INCOME BUSINESS INCOME NETPROFIT AS PER BUSINESS 1, 29,300.00 OTHER SOURCES NIL GROSS TOTAL INCOME 1, 29,300.00 TOTAL TAXABLE INCOME 1, 29,300.00 TAXABLE INCOME ROUNDOFF u/s 288A 1, 29,300.00 INCOME TAX PAYABLE NIL MBA 1ST SEMESTER 35
    • Shri Krishna Estate Agency Profit & Loss Account For the year ended 31st March, 2009 Particulars Rs. Particulars Rs. Rent 1,20,000 By Telephone 75,600 Telephone 15,000 By Commission Received 2,50,000 Electricity 8,000 Conveyance 6,000 Repair & Maintanous 2,000 Stationary 5,000 Dep. 6,950 Mis.exp 8,000 Profession 26,350 Net profit 1,29,300 3,25,600 3,25,600 Shri Krishna Estate Agency MBA 1ST SEMESTER 36
    • BALANCESHEET As on 31st March, 2009 Liabilities Rs. Assets Rs. Bal. B/D 1,94,920 Fixed Assets : 37,550 Less: Depreciation 6,950 30,600 Add: Net Profit 1,29,300 Investment NIL Add:- Bank Int. 6,375 Deposit: MTNL 50,000 Electricity 2,500 Shop 1,00,000 1,52,500 Bank: Fixed Deposit 1,00,000 Current A/c 40,000 1,40,000 Cash At Hand 7,495 3,30,59 5 3,30,595 MBA 1ST SEMESTER 37
    • RATIO’s Proprietary Ratio- Proprietary Ratio is a test of the financial and credit strength of the business. It is related with shareholders funds and total assets. This ratio determines the long term or ultimate solvency of the business. It is also called “Net Worth to Total Assets Ratio” or “Equity Ratio” or “Assets Backing Ratio” or “Net Worth Ratio" Shareholders funds comprise of ordinary share capital, preference share capital and all items of reserves and surplus. Total assets include all tangible assets and only those intangible assets which have a definite realizable value. Proprietary Ratio = Proprietors Funds x 100 Total Assets Proprietors Fund = Equity Share Capital + Pref. Capital + Capital Reserve + Rev. Res. – Fictitious Assets Total Assets = All Fixed Assets + All Current Assets + Investments. OR PROPRIETARY RATIO = Proprietors’ Funds x 100 Total Funds Total Funds = Owned Funds + borrowed Funds Significance and Objectives Proprietary ratio shows the extent to which shareholders own the business and thus indicates the general financial strength of the business. The higher the proprietary ratio, the greater the long term stability of the company and consequently greater protection to creditors. However, a very high proprietary ratio may not necessarily be good MBA 1ST SEMESTER 38
    • because if funds of outsiders are not used for long term financing, a firm may not be able to take advantage of trading equity. 2008:- 3, 00,000 X 100 = 78.13% 3, 84,000 2009:- 3, 24,220 X 100 = 98.07% 3, 30,595 Our proprietary ratio indicates the higher growth of financial strength of our business which is greater for long term stability of the company & consequently greater protection to the creditors. MBA 1ST SEMESTER 39
    • Shri Krishna Ice Cream Parlor Profit & Loss Account For the year ended 31st March, 2008 Particulars Rs. Particulars Rs. Telephone 3,600 By Income 1,08,175 Maintainous 9,600 By Order Received 25,000 Electricity 72,000 Stationary 2,000 Marketing 4,000 Intrest Charges 29,975 Net profit 12,000 1,33,175 1,33,175 MBA 1ST SEMESTER 40
    • Shri Krishna Ice Cream Parlor BALANCESHEET As on 31st March, 2008 Liabilities Rs. Assets Rs. CAPITAL 7,00,000 Fixed Assets : L & B 9,60,000 Less: Dep. 48,000 Fan 1666 (-) dep. 166 9,12,000 1,50 0 Add: Net Profit 12,000 Investment NIL Bank Loan 3,00,000 (-):-Repayment 60,000 2,40,000 Deposit: MTNL 3,000 Electricity 2,500 Fridge 15,000 20,500 Cash At Hand 18,000 9,52,000 9,52,000 MBA 1ST SEMESTER 41
    • Shri Krishna Ice Cream Parlor Profit & Loss Account For the year ended 31st March, 2009 Particulars Rs. Particulars Rs. Telephone 3,600 By Income 1,03,425 Maintanous 9,600 By Order Received 32,000 Electricity 72,000 Stationary 2,000 Marketing 4,000 Interest Charges 29,975 Net profit 14,250 1,35,425 1,35,425 MBA 1ST SEMESTER 42
    • Shri Krishna Ice Cream Parlor BALANCESHEET As on 31st March, 2009 Liabilities Rs. Assets Rs. Capital Bal b/d 7,00,000 12,000 Fixed Assets : L & B 9,12,000 Less: Dep. 45,600 Fan 1500 (-) dep. 150 8,66,400 1,35 0 Add: Net Profit 14,250 Investment NIL Bank Loan 2,40,000 (-):-Repayment 60,000 1,80,000 Deposit: MTNL 3,000 Electricity 2,500 Fridge 15,000 20,500 Cash At Hand 18,000 9,06,250 9,06,250 MBA 1ST SEMESTER 43