Real Estate Investment – A Wise Choice (Wm Forum)

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Why Real Estate Investments are still attractive in this envrionment.

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  • We are colonizers and We have lonched new Project near by AJMER ROAD NATIONAL HIGHWAY. Good Project for INVESTMENT view

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    http://needtodial.com/index.php?page=item&id=12&redirect=1

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  • Real Estate Investment – A Wise Choice (Wm Forum)

    1. 1. AHSAN ALI SME & WM Banking Head, Noor Islamic Bank Wealth Management Summit 2009
    2. 2. <ul><li>Fundamentals of real estate as an asset class </li></ul><ul><li>The global crises </li></ul><ul><li>Recovery time frame </li></ul><ul><li>Benefits </li></ul><ul><li>The Dubai Story </li></ul><ul><li>Conclusion </li></ul>
    3. 3. <ul><li>Residential (Apartments, villas, town houses, condos etc) </li></ul><ul><li>Commercial (Office building, retail space etc) </li></ul><ul><li>Industrial (Factories, warehouses etc) </li></ul><ul><li>Vacant Land </li></ul>
    4. 4. <ul><li>Established asset class </li></ul><ul><li>Returns characteristics </li></ul><ul><ul><li>Conservative returns – Like a Bond, coupon (rental) with capital (value) net of transaction cost </li></ul></ul><ul><ul><li>Moderate returns - Like a Bond, coupon (rental) with capital (value) net of transaction cost , plus capital gain equal to prevailing deposit rates/inflation </li></ul></ul><ul><ul><li>Aggressive returns - Like a Bond, coupon (rental) with capital (value) net of transaction cost plus capital gain exceeding prevailing deposit rates/inflation </li></ul></ul><ul><ul><li>Should be evaluated on a Price to Earning (Value to Rental) </li></ul></ul><ul><li>Price and rentals driven by realistic demand and supply mechanics </li></ul><ul><li>Impacted by government policies and regulatory framework </li></ul><ul><li>Prone to distortion from speculative influences (crowding effect, credit criteria) </li></ul><ul><li>Holding period min medium term (in excess of 5 years) </li></ul><ul><li>Illiquid in physical form (REIT’s are an exception) </li></ul><ul><li>Requires maintenance and upkeep </li></ul><ul><li>Unlike stocks and bonds has an ‘intrinsic’ and ‘affinity’ value </li></ul><ul><li>Information pools on real estate tend to be localized by neighbourhood (value search, information asymmetry) </li></ul>
    5. 7. Source: IPD, NCREIF Seven markets saw returns stabilize or tick down – was this the start of a trend? All property local currency total returns, % pa ©IPD Mar-08
    6. 10. Year Sold Year Purchased Returns: > 10% Returns: 0 - 10% Returns: Negative Bought ’83 – Sold ’86 = 11.60% Avg.
    7. 11. Copyright © 2008 Morningstar Research Inc. 25-Year Degree of Correlation 1 – DEX Universe Bond 2 – Median Canadian Equity Balanced 3 – Median Real Estate Equity 4 – MSCI EAFE C$ 5 – MSCI World C$ 6 – S&P 500 C$ - Bank of Canada 7 – S&P/TSX Composite 8 – Standard Life Real Estate High 0.70 To 1.00 Moderate 0.11 To 0.69    None -0.10 To 0.10   Moderate Negative -0.11 To –0.69   Highly Negative -0.70 To -1.00   1 2 3 4 5 6 7 8 1   0.46 n/a 0.11 0.14 0.14 0.19 -0.08 2 0.46   n/a 0.52 0.67 0.70 091 -0.07 3 n/a n/a   n/a n/a n/a n/a n/a 4 0.11 0.52 n/a   0.92 0.56 0.49 -0.04 5 0.14 0.67 n/a 0.92   0.83 0.64 -0.04 6 0.14 0.70 n/a 0.56 0.83   0.66 -0.02 7 0.19 0.91 n/a 0.49 0.64 0.66   -0.06 8 -0.08 -0.07 n/a -0.04 -0.04 -0.02 -0.06  
    8. 13. <ul><li>Buy with the approach of a ‘home owner’ </li></ul><ul><li>Use the yard stick of existing and projected rental yields </li></ul><ul><li>NEVER speculate unless you can hold the property for the investment horizon </li></ul><ul><li>Rely on localized research </li></ul><ul><li>REIT exposure adds liquidity at the cost of transparency </li></ul><ul><li>Work with a facilities manager </li></ul><ul><li>ALWAYS measure total return </li></ul><ul><li>Employ leverage at payback periods where the rentals cover the interest cost of mortgage, leaving the opportunity cost of principle </li></ul><ul><li>Off plan exists in your imagination </li></ul>
    9. 14. <ul><li>“ The Aftermath of financial crises”, Carmen M Reinhart and Kenneth S Rogoff. Prepared for Amercian Economic Association meeting in San Franscisco Jan 3 rd , 2009 </li></ul><ul><li>Asteco Dubai Q4 report </li></ul><ul><li>“ The impact of financial services melt down on the global economy and the private equity industry”, David Rubenstein, October 15, 2008 </li></ul><ul><li>HSBC Global Research Property Ladder (UAE), 21 st Jan, 2009 </li></ul><ul><li>“ The role of real estate in the family office portfolio”, MIT centre for real estate and Taurus Investment Holding LLC. Professor Tony Ciochetti, October 27, 2006 </li></ul><ul><li>“ Real Estate and its role in a pension portfolio”, Peter Cuthbert, Standard Life Investments Canada, April 2008 </li></ul>

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