REAL ESTATE INDUSTRY
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REAL ESTATE INDUSTRY

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Real estate is "property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature; an interest vested in this; ...

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

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REAL ESTATE INDUSTRY REAL ESTATE INDUSTRY Presentation Transcript

  • REAL ESTATE By: Farook A Azam (BE, PGDIM, MBA, IDIP, PM) Infrastructure consultant & Visiting Faculty @ VTU for MBA ( Infra – Mgmt.)
  • What it means? Real estate is "property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature; an interest vested in this; (also) an item of real property; (more generally) buildings or housing in general. Also: the business of real estate; the profession of buying, selling, or renting land, buildings or housing. VTU/INFRASTRUCTURE MANAGEMENT/MBA/4TH SEM 2
  • Global Scenario • Real estate as "real property" in the U.K. In British usage, "real property", often shortened to just "property", generally refers to land and fixtures, while the term "real estate" is used mostly in the context of probate law, and means all interests in land held by a deceased person at death, excluding interests in money arising under a trust for sale of or charged on land • Real estate in Mexico and Central America – Real estate business in Mexico, Canada, Guam, and Central America operates differently from the United States. – Some similarities include legal formalities (with professionals such as real estate agents generally employed to assist the buyer); taxes need to be paid (but typically less than those in U.S.); legal paperwork will ensure title; and a neutral party such as a title company will handle documentation and money to make the smooth exchange between the parties. Increasingly, U.S. title companies are doing work for U.S. buyers in Mexico and Central America. VTU/INFRASTRUCTURE MANAGEMENT/MBA/4TH SEM 3
  • Global Scenario…. • Prices are often much lower than prices in countries such as the U.S., but in many locations, such as Mexico City, prices of houses and lots are as expensive as houses and lots in countries such as the U.S. U.S. banks have begun to give home loans for properties in Mexico, but, so far, not for other Latin American countries. • In Mexico, foreigners cannot buy land or homes within 50 km (31 mi) of the coast or 100 km (62 mi) from a border unless they hold title in a Mexican Corporation or a Fideicomiso (a Mexican trust).[3][4] In Honduras, however, foreigners may buy beach front property directly in their name. There are different rules regarding certain types of property: ejidal land — communally held farm property — can be sold only after a lengthy entitlement process, but that does not prevent them from being offered for sale. • Real estate agents in Costa Rica currently do not need a license to operate, but the transfer of property requires a lawyer. CCCBR (Camara Costarricense de Corredores de Bienes Raices) is the only official body that represents the Real Estate industry to the government. The Costa Rica MLS is the official MLS of the Costa Rica Chamber of Real Estate Brokers Board. The Chamber institutes the rules, regulations and ethical guide for officially licensed brokers in Costa Rica. • In Mexico, real estate agents do not need a license to operate, but the transfer of property requires a notary public. VTU/INFRASTRUCTURE MANAGEMENT/MBA/4TH SEM 4
  • Real estate in Thailand • In Thailand it is possible for a foreigner to own a condominium freehold provided ownership does not exceed 49% of the total building; it is not easily possible for a foreigner to own land but normal practice is that property can be purchased then Land acquired under a 30 year lease option; Until recently it was considered by most legal advisors that the ownership of land by a foreigner through a Thai Limited Company was acceptable, although the Law clearly states that foreigners cannot own land in Thailand. The Government has now made clear that such ownership may be illegal. The legitimacy of such ownership depends on the status of the Thai Shareholders who must be shown to be active and financially participating shareholders. VTU/INFRASTRUCTURE MANAGEMENT/MBA/4TH SEM 5
  • In Philippines……. • In the Philippines, real estate is an area for growth. Aside from the development of high rise buildings in the Greater Manila area, nearby provinces are now seeing much land development with its continuous expansion for horizontal development projects in the nearby provinces such as Laguna, Cavite, Rizal, Bulacan, Pampanga and Batangas. • The major expansion in vertical real estate development outside Metro Manila are in Tagay south of the metropolis, Cebu and Iloilo in the Visayas, Cagayan de Oro and Davao in Mindanao, where medium-to-high rise buildings are beginning to appear. • Foreigners are generally not allowed to hold more than a 40% interest in any land, although there is an exemption for pensioners who deposit more than US$50,000 in a specified account. Philippine rules distinguish between a house and the land it sits on. VTU/INFRASTRUCTURE MANAGEMENT/MBA/4TH SEM 6
  • Real Estate Industry in India • Real estate in India continues to be a favoured destination globally for investors, developers and non-resident Indians (NRIs), driven largely by investor-friendly government policies and increasing globalisation. The second largest employment generation sector after agriculture, real estate contributes about 6.3 per cent to India’s gross domestic product (GDP). The foreign direct investment (FDI) in the sector is expected to touch US$ 25 billion in the next 10 years from its current US$ 4 billion. • The sector’s progress is driven by factors such as rapid urbanisation, a growing trend towards nuclear families, positive demographics, rural–urban migration, ever-developing infrastructure, higher income levels and housing demand. The real estate sector, with its growing investment opportunities, is expected to post annual revenues of US$ 180 billion by 2020. VTU/INFRASTRUCTURE MANAGEMENT/MBA/4TH SEM 7
  • Market Dynamics in INDIA • The real estate sector in India is witnessing rapid growth in the residential, commercial and industrial segments. Real estate development, once restricted to bigger cities, have shown marked progress in smaller cities and towns owing to availability of banks loans, higher earnings and improved standard of living. • The real estate sector of India is projected to post annual revenues of US$ 180 billion by 2020 against US$ 66.8 billion in 2010–11, a compound annual growth rate (CAGR) of 11.6 per cent. The demand is expected to grow at a CAGR of 19 per cent in the period 2010–2014, with Tier I metropolitan cities expected to account for about 40 per cent of this growth. As of now, Mumbai, Delhi-National Capital Region (NCR) and Bengaluru cater for 46 per cent of total office space demand in India. This demand is expected to be rise sharply in Tier II cities such as Kolkata and Chennai in the period 2010–14. • Today, Delhi-NCR accounts for about 30 per cent of the total mall supply in India. About 53 per cent of demand for total mall space is projected to come from the country’s top seven cities, namely Delhi-NCR, Bengaluru, Mumbai, Kolkata, Pune, Hyderabad, and Chennai, in the period 2010–2014. VTU/INFRASTRUCTURE MANAGEMENT/MBA/4TH SEM 8
  • Investment Opportunities • The Indian retail realty sector is projected to grow at around 15 per cent year-on-year over the next 3–5 years as against a 12–13 per cent nominal growth of India’s GDP estimated by the International Monetary Fund (IMF). If the sector does indeed manage the aforementioned growth, it will touch Rs 34 trillion (US$ 544.73 billion) by 2016. • India’s office space stock is estimated to rise by 40 per cent to 642.2 million sq ft by 2017, according to a report by real estate consultancy Knight Frank India. The current Indian market offers some of the most competitive rates in the Asia-Pacific region, according to a report by property services firm DTZ. The report also states that Indian cities will have some of the fastest rental growths in the region over the period 2013–17, but will remain among the most competitive. • The share of luxury retail space in India will be 1.4 per cent by 2015, according to a report by real estate services firm Cushman & Wakefield. NCR and Mumbai, areas that have embraced the mall culture, are the two most favoured destinations for luxury retailers. • The construction development sector, including townships, housing and built-up infrastructure garnered total FDI worth US$ 22,671.95 million in the period April 2000–August 2013. Construction (infrastructure) activities during the period received FDI worth US$ 2,280.95 million, according to the Department of Industrial Policy and Promotion (DIPP). VTU/INFRASTRUCTURE MANAGEMENT/MBA/4TH SEM 9
  • Major investments in the Indian real estate sector • Godrej Properties Ltd plans to invest Rs 9,000 crore (US$ 1.44 billion) in 15 new real estate projects in India over the next 10 years. • Unitech Ltd has signed a Rs 800 crore (US$ 128.17 million) deal to lease an 800,000 sq ft space at one of its IT Special Economic Zones (SEZ) in Gurgaon, to multinational human resource firm, Aon Hewitt. • NRI billionaire Mr Ravi Pillai plans to purchase stake worth about US$ 100 in a special purpose vehicle floated by Pune-based realtor, Panchshil Realty. The investment will go into the construction of Trump Towers and World Trade Centre in Pune, Maharashtra. • Infrastructure Leasing & Financial Services (IL&FS) Ltd has claimed a project worth Rs 244.46 crore (US$ 39.17 million) from realty firm Emaar MGF for construction work at the latter’s residential project at Gurgaon, Haryana. • French luxury hotel chain Sofitel, which is managed by Accor Group, is targeting 10 properties in India, mainly in major luxury destinations, in the next few years. • One of the world’s top manufacturers of elevators, US-based Otis, is setting its sights on the Indian real estate market. The pace of construction in India makes the country an attractive proposition for such an investment. The company will be working with the Delhi and Hyderabad Metro projects. The former has placed an order for 222 escalators for its Phase III project, according to Otis. VTU/INFRASTRUCTURE MANAGEMENT/MBA/4TH SEM 10
  • Major categories in North America and Europe • Attached / multi-unit dwellings • Apartment - An individual unit in a multi-unit building. The boundaries of the apartment are generally defined by a perimeter of locked or lockable doors. Often seen in multi-story apartment buildings. • Multi-family house - Often seen in multi-story detached buildings, where each floor is a separate apartment or unit. • Terraced house (a.k.a. townhouse or row house) - A number of single or multi-unit buildings in a continuous row with shared walls and no intervening space. • Condominium - Building or complex, similar to apartments, owned by individuals. Common grounds and common areas within the complex are owned and shared jointly. There are townhouse or row house style condominiums as well. • Cooperative (a.k.a. co-op) - A type of multiple ownership in which the residents of a multi-unit housing complex own shares in the cooperative corporation that owns the property, giving each resident the right to occupy a specific apartment or unit. • Semi-detached dwellings (in UK, a 'semi' is by definition two units with a party wall). • Duplex - Two units with one shared wall. (in UK, a duplex is an apartment on more than one storey) • Single-family detached home • Portable dwellings • Mobile homes - Potentially a full-time residence which can be (might not in practice be) movable on wheels. • Houseboats - A floating home • Tents - Usually very temporary, with roof and walls consisting only of fabric-like material. VTU/INFRASTRUCTURE MANAGEMENT/MBA/4TH SEM 11
  • US and Europe type of development • The size of an apartment or house can be described in square feet or meters. In the United States, this includes the area of "living space", excluding the garage and other non-living spaces. The "square meters" figure of a house in Europe may report the total area of the walls enclosing the home, thus including any attached garage and non-living spaces, which makes it important to inquire what kind of surface definition has been used. • It can be described more roughly by the number of rooms. A studio apartment has a single bedroom with no living room (possibly a separate kitchen). A one-bedroom apartment has a living or dining room separate from the bedroom. Two bedroom, three bedroom, and larger units are common. (A bedroom is defined as a room with a closet for clothes storage.) VTU/INFRASTRUCTURE MANAGEMENT/MBA/4TH SEM 12
  • Major categories in INDIA Major categories in India and the Asian Subcontinent • Co-operative Housing Societies (CHS) • Condominiums • Builder flats • Chawls • Villas • Kothis • Havelis • Independent Floors • Lal Dora - Where people carry out commercial and residential activities both. • The size is measured in Gaz (square yards), Quila, Marla, Beegha, and acre. VTU/INFRASTRUCTURE MANAGEMENT/MBA/4TH SEM 13
  • Real Estate Principles Real Estate Principles: A Value Approach demonstrates how value is central to virtually all real estate decision-making, including whether and how to lease, buy, or mortgage a property acquisition; whether to renovate, refinance, demolish or expand a property; and when and how to divest (sell, trade, or abandon) a property. VTU/INFRASTRUCTURE MANAGEMENT/MBA/4TH SEM 14
  • Real Estate Trends A real estate trend is any consistent pattern or change in the general direction of the real estate industry which, over the course of time, causes a statistically noticeable change. This phenomenon can be a result of the economy, a change in mortgage rates, consumer speculations, or other fundamental and non-fundamental reasons.  Property values declining instead of rising  Buyer agency growth  Lower commission rates  Marketing trends  US government involvement  See also  References  External links VTU/INFRASTRUCTURE MANAGEMENT/MBA/4TH SEM 15
  • Property values declining instead of rising • MSN reports that home prices have dropped by a record amount and illustrates with a chart of historical real estate prices. Real estate property values have trended upward in the range of 2-5% almost every year since World War II, but since 2006 they have declined. From 2007 to 2008 prices declined as much as 39% per year -though the average decline appears to be lower. Buyer agency growth • At one time, all real estate brokers and agents, or Realtors, practiced "single agency," meaning they represented only the buyer or the seller. In the 1990s, the concept of buyer agency became popular, allowing a buyer to retain an agent who would represent the best interests of the buyer alone. The first national company to provide this service was The Buyer's Agent, Inc. A 2008 study by Consumer Reports indicates that prior to this development, a Realtor was presumed by state law to be working for the seller. The same study shows that buyers using buyer agents obtained a savings of $5000 in the price of the home as compared to prices paid by unrepresented buyers.[4] It remains true that an unrepresented real estate buyer can still call the sellers agent to arrange a showing of the property. In such cases, the buyer should be advised by Agency Disclosure Laws (a state law in every state in the U.S.) that any information obtained, as well as all conversations and negotiations undertaken, will be for the benefit of the seller. VTU/INFRASTRUCTURE MANAGEMENT/MBA/4TH SEM 16
  • Lower commission rates Historical rates are presented in a report by the Government Accountability Office, Congress's investigative arm. A 2005 study of real estate commission rates, reported that realtors tended to charge, "about 5 percent to 7 percent of a property's selling price...". More recently, CBS News, "60 Minutes" television news magazine reported in 2007 that competitive pressure resulting from a record number of licensed agents has driven down the average sales commission rates paid by sellers. The current average at that time was reported to be roughly five percent (with possible small adjustments to local markets VTU/INFRASTRUCTURE MANAGEMENT/MBA/4TH SEM 17
  • • Marketing trends The Internet has became major lead generation method real estate marketing, eclipsing local newspapers and all other sources as the consumers most preferred method to learn about homes for sale. "An overwhelming majority (87%) of recent home buyers in the US say they used the internet as an information resource during their home-buying process, and nearly one-third say they first learned about their newly purchased home from an online channel, according to a study by the National Association of Realtors (NAR). Majority of real estate companies use popular internet marketing methods like SEO, advertising and social media. Websites like Craigslist (United States), Daft.ie (Republic of Ireland) and Gumtree (UK) became in 21st century main sources for both buyers and sellers. Rapid changes in market environment forced some countries to introduce new laws regulating real property market in the web. Even with introduction of internet, traditional media and methods of generating leads were still an important part of Real Estate trade: Though the internet was the most popular source, buyers also cited information from real-estate agents (85%), yard signs (62%), open houses (48%) and print or newspaper ads (47%). Fewer buyers relied on home books or magazines, home builders, television, billboards and relocation companies. VTU/INFRASTRUCTURE MANAGEMENT/MBA/4TH SEM 18
  • • Government involvement he United States Department of Justice Antitrust Division announced the launch of a new website in October 2007 to "educate consumers and policymakers about the potential benefits that competition can bring to consumers of real estate brokerage services and the barriers that inhibit that competition."[citation needed] Among other findings, they report that certain new sales models can reduce consumer home sales costs "by thousands of dollars. For example, in states that allow open competition, some buyer's brokers rebate up to two-thirds of their commission to the customer, and some seller's brokers offer limited-service packages that let sellers list their homes on the local Multiple Listing Service (MLS) for as little as a few hundred dollars VTU/INFRASTRUCTURE MANAGEMENT/MBA/4TH SEM 19