The document provides information about setting up a mortgage broker business in Canada. It discusses the Canadian economy and real estate sector. It outlines government incentives for first-time home buyers and discusses supply and demand factors and competitors in the industry. The document also includes a business proposal for a mortgage broker firm called Terrestrial Developers, with objectives to serve the Vancouver market and become profitable within 12 months. It performs a SWOT analysis noting opportunities like higher residential construction boosting housing prices and commissions.

1. BIRLA INSTITUTE OF MANAGEMENT TECHNOLOGY
PGDM BATCH (2019-21)
GLOBAL BUSINESS ENVIRONMENT
SETTING UP MORTGAGE BROKER BUSINESS IN CANADA
Submitted to:
Dr.JagdishShettigar
Dr.Monika Jain
Submitted by:
PriyalVijaywargia
19DM146
Group 10
1

2. ACKNOWLEDGEMENT
“I hereby take the opportunity to express my profound sense of gratitude and
reverence to all those who have helped and encouraged me towards the
successful completion of the project.”
“Firstly, I would like to express my thanks to Birla Institute of Management
Technology for giving me such a wonderful opportunity to widen the horizons of
my knowledge.”
“I would also like to thank my project guide Dr.JagdishShettigar&Dr.Monika Jain
for their immense guidance.”
PriyalVijaywargia
19DM146
Group 10
2

3. TABLE OF CONTENTS
S.No. Particulars Page No.
1 Canadian Economy 04
2 Real Estate Sector in Canada 04
3 Policy Approach 06
4 Government Incentive 07
5 Supply and Demand 08
6 Competitors 10
7 Business Proposal 11
8 SWOT Analysis 12
9 References 12
3

4.  Canadian Economy
The economy of Canada is a highly developed market economy.It is the 10th largest GDP by
nominal and 16th largest GDP by PPP in the world. As with other developed nations, the
country's economy is dominated by the service industry. Canada has the fourth highest total
estimated value of natural resources, third largest proven petroleum reserves and is the
fourth largest exporter of petroleum. It is also the fourth largest exporter of natural gas.
Canada is considered an "energy superpower".
The reliance on natural resources has several effects on the Canadian economy and
Canadian society. While manufacturing and service industries are easy to standardize,
natural resources vary greatly by region. At the same time the vast majority of these
resources are exported, integrating Canada closely into the international economy.
The United States is by far Canada's largest trading partner. In 2009, 73% of Canada's
exports went to the United States, and 63% of Canada's imports were from the United
States. The U.S remains Canada's largest foreign investor and the most popular destination
for Canadian foreign investments.
 Real Estate Sector in Canada
According to various surveys and interviews of industry players this year, it was found that
there is a sense of unease among many in the Canadian real estate market. The causes of
the unease include changing customer expectations, preferences and behaviours; the need
to embrace proptech and adapt to broader trends like co-working and the sharing
economy; policy challenges and geopolitical uncertainty; and emerging business challenges
caused by labour shortages, skills gaps and cybersecurity vulnerabilities.
Many of these business challenges aren’t new, but the pace of change is picking up. While
the industry is clearly responding to these disruptions, the scale of the changes puts many
organizations’ survival at stake. It’s time for a new approach that puts customer
experiences and expectations at the heart of everything companies do.
The common theme in office, retail and residential is that it is no longer about space. It's
about the services offered.
While the Vancouver and Toronto real estate markets continue to lead Canadian cities in
terms of investment and development prospects, every region has its own opportunities
and challenges.
4

5. From the various classes of commercial real estate to the housing market, the impacts of
changing customer habits and expectations are reverberating across the property types.
 Industrial real estate
 Purpose-built rental housing
 Office
 Retail
 Single-family residential
 Condominiums
Causes of unease
 Changing customer expectations, preferences, and behaviour
As sharing-economy concepts like co-working and co-living signal a new flexibility in
how people look at real estate, companies are having to adapt their developments
and spaces to respond by offering the top-quality amenities and services that
customers have come to expect.
 Technological pressures
Along with these changing customer trends comes the expectation of technology-
enabled spaces. Integrating property technology (proptech) solutions is a major
priority for industry players as they look for ways to better serve customer needs and
drive efficiencies. More generally, technology is having both positive and negative
impacts on business operations and physical space. The rise of e-commerce is
leading to decreased demand for traditional retail space but is boosting the
prospects for industrial properties and facilities that address last-mile delivery needs,
while the growth of the technology sector is a major factor in the strong absorption
of new office developments.
 Policy challenges and uncertainty
From government interventions aimed at addressing housing affordability to
geopolitical events, interviewees and survey respondents are seeing the impacts on
their businesses and are watching out for developments that could further disrupt
the industry.
 Rising business threats
Labour shortages, skills gaps, and cybersecurity vulnerabilities are just some of the
challenges requiring the industry to build new capabilities.
5

6.  Policy approach for Real Estate sector in Canada
Policy on Management of Real Property
This policy took effect on November 1, 2006. The policy ensures the sustainable and
financially responsible management of real property, throughout its life cycle, to support
the cost-effective and efficient delivery of government programs.
 Objective
The objective of this policy is to ensure real property is managed in a sustainable and
financially responsible manner, throughout its life cycle, to support the cost-effective
and efficient delivery of government programs.
 Expected Results
The expected results of this policy and its associated directive and standards are:
o effective and efficient management that enables program outcomes and serves
broader government objectives;
o financially responsible management that maximizes the long-term economic
advantage to the Crown and provides best value to the Canadiantaxpayer;
o barrier-free access and use of federal real property and services that ensures
inclusiveness and non-discrimination;
o cultural and environmental stewardship that contributes to the preservation and
protection of their heritage and the environment; and
o fair, open and transparent transactions that ensure equitable treatment.
 Consequences
Based on the assessment of departmental management performance, the Secretary of
the Treasury Board will make appropriate recommendations to the deputy head of a
department and to Treasury Board. Recommendations to Treasury Board ministers
could include such measures as an increase in transactional approval limits to
acknowledge improved performance or capacity, or conversely, a decrease in
authorities or a withholding of proceeds of sale or transfer in the event of performance
falling short of the requirements of this policy and its associated policy instruments.
6

7.  Government Incentive pertaining to Real Estate industry
First-Time Home Buyer Incentive
 Eligibility Criteria
o Your qualifying household income is less than $120,000. Qualifying income
includes money you earn from investments and rental income, not just your
job(s).
o You have at least the minimum down payment. The minimum down payment is
5% of the first $500,000 of the home’s purchase price, and 10% for any amount
above that. However, the total amount you put down (including the FTHBI
amount) must be less than 20% of the home’s purchase price. This maximum
down-payment rule also assures that the FTHBI applies only to CHMC mortgage-
default-insured mortgages.
o You are borrowing less than four times your qualifying income. Since the
maximum qualifying income is $120,000, the most any eligible buyer can borrow
(and still be able to apply for the Incentive) is $480,000 — including the
mortgage, mortgage insurance and the FTHBI amount. Lower earners who want
to apply for the Incentive are limited to borrowing even less, which would be
challenging considering that the average price of a home in Canada in June 2019
was $505,463, according to Canadian Real Estate Associationdata.
 Objective
The objective of this policy is to ensure real property is managed in a sustainable and
financially responsible manner, throughout its life cycle, to support the cost-effective
and efficient delivery of government programs.
 Expected Results
The expected results of this policy and its associated directive and standards are:
o effective and efficient management that enables program outcomes and serves
broader government objectives;
o financially responsible management that maximizes the long-term economic
advantage to the Crown and provides best value to the Canadiantaxpayer;
o barrier-free access and use of federal real property and services that ensures
inclusiveness and non-discrimination;
o cultural and environmental stewardship that contributes to the preservation and
protection of our heritage and the environment; and
o fair, open and transparent transactions that ensure equitable treatment.
7

8.  Supply and demand in Canadian Market
Factors that Influence Demand
In real estate, demand is how many people want to buy homes. A variety of factors
influence this.
 Interest Rates
Interest rates play a key role in housing demand. If all things are equal, then the lower
the interest rates, the higher the demand for real estate. Low interest rates mean that
the cost of borrowing is lower and homebuyers can afford to borrow more by way of a
mortgage and, consequently, can spend more on a home. The reverse also holds true;
high interest rates mean that the cost of borrowing is higher and homebuyers can
afford to borrow less in a mortgage and, therefore, can spend less on a home.
 The Economy
The overall economy and job market also play key roles in the demand for real
estate. When the economy is good, the demand for real estate tends to be higher.
However, when the economy is struggling, demand for real estate tends to be lower.
It’s the same for the job market. When the job market is good, demand for real estate
tends to rise; but, when the job market is poor, the demand for real estate goes down.
 Affordability
Affordability is the third factor to consider. This simply means how affordable real estate
is in your desired city or town in comparison to your pay-check. When home prices are
high relative to income, demand tends to be less, whereas when home prices are low
relative to income, demand tends to be higher.
The affordability of renting also plays into the demand for real estate. If renting is a lot
cheaper than owning a home, people may choose to rent instead of own.
 Immigration
Immigration also plays into the demand for real estate. The more immigrants there are
in a particular city, the higher the demand for real estate. In order to become a
Canadian citizen and a permanent resident, an immigrant needs to earn a certain
number of “points.” That means that they have a bright future and are likely to earn a
decent income, which helps them buy into the real estate market and boosts the
demand for real estate.
Likewise, foreign buyers also affect the demand for real estate. These foreigners are
looking for a safe place to park their money outside of their home countries.Although
8

9. they may not plan to reside in Canada, buying a property here means there’s a higher
demand for real estate and decreases the supply, as well. While a foreign buyers’ tax
has been introduced in some areas, foreigners with deep pockets may not mind paying
it – so it may not affect demand that much after all.
 Mortgage Qualifications
In recent years, the government has been tightening mortgage qualification rules. While
you used to be able to get a mortgage with a 40-year amortization, you can’t do so
anymore. Now, the maximum amortization available for someone putting down less
than 20% is 25 years, while the maximum amortization is 30 years for someone putting
down more than 20%. If you earn a decent income and you’re buying in an affordable
real estate market, that may not be a problem. But, if you’re buying in a city like
Toronto or Vancouver – where home prices are higher – it may disqualify you from a
mortgage on the property you had hoped to buy.
The mortgage stress test has also had an effect on housing demand. If you’re buying a
home, you must qualify at the greater of your mortgage rate plus 2% and the Bank of
Canada’s five-year benchmark rate (currently at 5.19%). This has essentially reduced the
purchasing power of homebuyers by about 20% compared to before the stress test
went into effect.
Factors that Influence Supply
Let’s turn to the less-discussed side of the equation: the supply of real estate.
 Active Listings
Active listings play a key role in the supply of real estate. More active listings mean
there’s a greater supply of homes for homebuyers to choose from. However, when
active listings are tight, there are fewer homes to choose from; one neighbourhood
might have only one or two homes for sale. Fewer active listings and stronger demand
for real estate mean that homes are more likely to sell for more.
 New Homes
There are two main types of homes: existing homes and new homes. New homes are
newly constructed homes. When there’s a mismatch between housing demand and
supply, new homes can help fill the gap. However, there have to be enough new homes
built to keep up with demand. When a lack of serviceable land and government red
tape gets in the way, the new homes being built simply may not be enough to keep up
with demand, thus leading to higher home prices.
9

10.  Permits
In new home construction, permits influence the supply of housing. If there’s a lot of
government interference and it takes a long time to bring new homes to market, there
tends to be a lower supply of homes, which means that home prices tend to be higher.
However, if the government streamlines the process for obtaining a permit, then there
tends to be a greater supply of homes and, consequently, prices tend to be lower.
 Land Use
Land also plays a big role. Land use determines whether you can build residential or
commercial properties there. It also stipulates density, the height of the buildings and
the types of properties – such as houses, townhouses or condos.If there’s a mismatch
between the land use and the demand for new homes, it can lead to a shortage of
homes and an increase in home prices. A lack of land can also lead to higher home
prices.
 Competitors in industry
List of the Top Canada Real Estate Services
 ReMax Ultimate Realty Inc.
 CAPREIT Apartments
 Wealthsimple
 Onni Group
 Dream
 MaxWell Realty Canada
 Macdonald Realty
 Westbank Corp.
 Amacon
 Pinnacle International
 Canada Lands Company
 Harvey Kalles Real Estate
 Lending Loop
10

11.  Business proposal
1. Objectives
Terrestrial Developers comprehensive mortgage broker services. Terrestrial Developerswill
focus on providing personal and specialized services to meet each client's specific needs.
The primary objectives of our firm are:
 Become profitable serving the real estate investment opportunities becoming
available in the rapidly growing Vancouver section of the city.
 Develop a solid, corporate identity in our specified target market area.
 Become one of the top brokerage firms in the area by our third year of operation, or
before.
 Realize a positive return on investment within the first 12 months.
2. Mission
Terrestrial Developersoffers high-quality mortgage brokerage services to residential and
business customers. Our aim is to provide our customers with fair mortgage rates at
reasonable prices, while keeping our clients informed and educated throughout the
process. We will become friends and mentors to our customers as well as quality service
providers. Terrestrial Developers ultimately provides excellent value to its customers and
fair reward to its owners and employees.
3. Market Analysis Summary
Due to the strengthening of the area's economy and lower interest rates, more home
buyers today are looking to purchase homes. These changes in attitudes of home buyers
are a tremendous boost to real estate firms. Residential construction is booming. We are
poised to take advantage of these changes, and expect to become a recognized name and
profitable entity in the city's real estate market. We chose to locate our office in the area of
most revenue potential and where we have close connection to dominant real estate firms.
Our targeted market area, the Vancouver area, shows stability and growth.
4. Market Segmentation
The home buyers that Terrestrial Developerswill be serving can be divided into two groups:
 First-time homeowners: A bulk of the new construction in the Old Town section of
the city is directed towards first-time homeowners.
 Residential refinancing: Whether it is for purchasing, construction, re-modelling,
debt consolidation, investment properties or refinancing, we have programs
available to service those with good and bad credit.
11

12. 5. Key to Success
 Tap into a variety of information sources, including data-driven insights, to truly understand
what your customerswant.
 Embrace customer personalization to take our growth to new levels. Also, think about our
supply chain. Which parts do we want to own and serve directly, and which can we assign to
someone else to undertake on our behalf.
 Try to minimize the number of layers between our company and the end consumer so that
we do not lose control of an important asset.
 In addition, explore the ways that joint ventures and partnerships can help us explore new
market opportunities.
 SWOTAnalysis
The industry is exposed to the following threats and opportunities:
 The value of residential construction is an indicator of the level of investment in, and values of,
new and existing residential structures. Higher investment in residential construction boosts
housing prices and indicates greater sales activity. This increases commissions for brokers and
agents, benefiting industry revenue. However, the value of residential construction is expected
to decline in 2019, posing a potential threat to theindustry.
 Population growth bolsters demand for housing, which pushes up housing prices and associated
industry commissions and brokerage fees. Consequently, population growth generally leads to
higher industry revenue and profit. The population of Canada is expected to grow in 2019,
representing a potential opportunity for the industry.
 References
https://clutch.co/ca/real-estate
https://www.realtor.ca/en
https://www.point2homes.com/news/canada-real-estate/factors-demand-supply-real-
estate.html
https://www.bplans.com/mortgage_broker_business_plan/appendix_fc.php
https://www.pwc.com/ca/en/industries/real-estate/emerging-trends-in-real-estate-
2020/markets-to-watch.html
12

13. 13