A

PROJECT REPORT

ON

‘ANALYSIS OF REAL ESTATE INVESTMENT’

AT

CUSTOMER FIRST (C1), NAVSARI.

AS IN THE PARTIAL FULFILMENT FOR THE DEGREE
OF
BACHELOR OF BUSINESS ADMINISTRATION
PREPARED BY
Mr. AJAY M. GONDALIYA (TYBBA)
ROLL No: 09

GUIDED BY:
MS. HETAL D. TANDEL
(LECTURER, NLCCM, NAVSARI)

NARANLALA
COLLEGE OF COMMERCE & MANAGEMENT
NAVSARI – 396450
VEER NARMAD SOUTH GUJARAT UNIVERSITY, SURAT
YEAR- 2010-11
CERTIFICATE OF COMPANY
 CERTIFICATE

This is to certify that the project report entitled, “Analysis of Real estate
Investment”, at Customer First financial Advisors Pvt. Ltd., Navsari, is submitted by
Mr. Ajay M. Gondaliya, TyBBA (Finance), Exam No. …………..
To the Naranlala College of Commerce And Management, Navsari in the partial
fulfillment of the requirement for the degree of Bachelor of Business Administration at
Veer Narmad South Gujarat University, Surat.

Dr. R. C. Gandhi Ms. Hetal D. Tandel

(Director, NLCCM, Navsari) (Lecturer, NLCCM, Navsari)
Project Guide
 DECLARATION

I, the undersigned, Mr. Ajay M. Gondaliya, declare that the project work
entitled “Analysis of Real Estate Investment”, is based on my work. This is an original
piece of work and references whenever taken have been duly acknowledged. No part
of the report has been copied and without reference.

I further declare that the information collected from the company has been
used only for academic purpose and has not been shared with anyone.

- Mr. Ajay M. Gondaliya

Navsari.
Date: - 31/3/2011
 ACKNOWLEDGEMENT

Knowledge as an important tool that play important role in our daily life, however
is necessary to apply it on the right way and gain experience. The project work has
placed an important part to explore the practical work, to learn in detail apart from the
theoretical studies. Hence, such type of project work is valuable for the management
students of these days. I perceived this work as an opportunity to gain knowledge and
experience apart from study.
I am highly gratified to Mr. Hardik Naik & Mr. Vishal Merchant who permit me
to do the project work at C1 and provided me with useful knowledge. I am also
thankful to other personnel of the company who gave me valuable guidelines during
the course of preparation of this project report.
I am thankful to Dr. R. C. Gandhi, Director of Naranlala College of Commerce &
Mgt., Navsari and Ms. Hetal D. Tandel, my project guider for providing me valuable
guidelines during the preparation of this project report.

---------------------------------
Ajay M Gondaliya
(TYBBA)
 SYNOPSIS

Name: Ajay M Gondaliya

Student (NLCCM, Navsari)
Project Title: ‘Analysis of Real Estate Investment’
The project Report on ‘Analysis of Real Estate Investment’ is prepared to witness the
growing prospects of investment in real estate. In last few years, the rate of return on
investment made in real estate properties has been increasing at increasing rate.
Looking to the demand for houses, land, retail spaces and other constructions, it is
estimated that the sector with achieve a huge investment in different regions of India.
In the matter of profitable investment portfolio, the investment in properties also is one
of the most appreciable modes of avenue.
To derive at a conclusion on the significance of real estate investment along with other
investment avenues, it needs substantial amount of information and data which in this
report have been gathered with help of area experts and resources. However, there is
difficulty as there is lack of specific methods of calculation of deriving investment
returns. The project being on the general study of the real estate sector, it doesn’t carry
descriptive research work. The Exploratory research design was followed considering
the topic of work. The entire report is bases on the following points:

•Introduction and Significance of the Sector, its characteristics, advantage-

disadvantages, considerations and administrative regulations.
•Methods of finding real estate values, trends and prospects of investment, overall
conclusions.
•Company profile.
 TABLE OF CONTENT
Chapters Particulars Pg NO

i Company certificate
ii Declaration
iii Acknowledgement
iv Synopsis

CHEP: 1 INTERODUCTION

1.1. About Study

1.2. Objectives of Study
CHEP: 2 RESEARCH METHODOLOGY

2.1. Research Design

2.2 Sources of data

CHEP: 3 INDUSTRY PROFILE

CHEP: 4 COMPANY PROFILE

4.1. History
4.2. What C1 offers…
CHEP: 5 THEORITICAL FRAMEWORK

5.1. Types of Property

5.2. Characteristics of Real estate investment
5.3. Considerations while investing in Properties.
5.4. Advantages and Disadvantages of Real Estate
Investment
5.5. Factors that affects the market
 5.6. Government’s regulations in the Real estate
sector
CHEP: 6 ANALYSIS

6.1. Finding real estate investment values.

6.2 Trends and Prospects in Real Estate Sector

6.3. Investment Climates (Factors driving the real estate
Investment)
CHEP: 7 Conclusion
 1.1 ABOUT STUDY:
The most basic definition real estate is a piece of land, including the air above
it and the ground below it, and any buildings or structures on it. Real Estate can
include business and/or residential properties, and are generally sold either by a realtor
or directly by the individual who owns the property (for sale by owner).
The Real Estate/property is considered to be the second largest employment
sector and the most emerging industry in India. The way people prefer to invest in
properties of different kinds and boom in construction activities all over the country is
the matter to be known. The trend in property market, kinds of investment in real
estate, hotspots for investment in various regions, Price fluctuations and growth rate of
industry, etc. are the contents to be studied. The study has been undertaken as the
project work undertaking the growing importance in the Investment matters and its
contribution to the aspects of economy. The study explains the importance of the real
estate sector, its current trends and future prospects of investments, its characteristics,
advantages and disadvantages of investments. Also various methods of finding out the
investment values, considerations while investing in real estate properties, government
regulations, etc.

1.2 Objectives of the Study

The Report has been prepared with certain goals. The Following are the Main objective
of study of the report.
 To analyze the investment in real estate.

 Comprehensive study of overview and Trends in Real Estate sector

Investment.
 To study the advantages of investment in properties, prospects of
investment.

Limitation Of the Study

If any work is to be carried out, it has its own some problems and
limitations. This project work is faced by the following major limitations:

1). For the preparation of this project report, it demand a quantum of time.
The limited time hassled in the completion of the project work.
2). The conclusions and finding derived here are as per my limited
understandings and knowledge.
3). There is lack of specific methods of calculation and proper statistical
tools.
4). The project report is largely based on the secondary data.
 Research can be defined as the search for knowledge, or systematic
investigation for the purpose of discovering, interpreting and concluding the subject.
The research work is carried out in order to find out solutions to the questions.

2.1 Research Design:

The research type undertaken in this project work is the Exploratory Research design.
It is a type of research conducted for deriving systematic solutions. It should draw
definitive conclusions. This research often relies on secondary research such as
reviewing available literature and data, or qualitative approaches such as informal
discussion.

2.2 Data Sources:

Preparing the project report comprises the process of collecting and analyses
data. The report is prepared on the base of two types of data, primary data and
secondary data.

Primary Data:
Primary data are those data that are collected by research. Such data are already
exists. I have collected such kind of data by asking questions and queries to the
managers, personnel and employees of the company. Such data are recorded in the
books.
Secondary Data:
The project report is largely comprises the secondary type of data collection.
Such type of data are already exists that are collected previously by others. The sources
of secondary data are newspaper, magazine, websites, books, etc.
 Real estate sector in India is witnessing tremendous boom. Real estate industry in
India is presently worth $12 billion and is growing at the rate of 30 per cent per annum.
The importance of real estate sector in India can be gauged from the fact that it is the
second largest employer next only to agriculture. The real estate industry has
significant linkages with several other sectors of the economy and over 250 associated
industries.
Indian real sector has seen an unprecedented boom in the last few years. This
was ignited and fueled by two main forces. First, the expanding industrial sector has
created a surge in demand for office-buildings and dwellings. The industrial sector
grew at the rate of 10.8 percent in 2006-07 out of which a growth of 11.8 percent was
seen by the manufacturing sector. Second, the liberalization policies of government
have decreased the need for permissions and licenses before taking up mega
construction projects. Opening the doors to foreign investments is a further step in this
direction. The government has allowed FDI in the real estate sector since 2002. FDI
was deemed necessary in the view of making the sector more organized and increasing
professionalism farmers. The villages adjacent to the metro cities have experienced
sky-rocketing land prices. This has induced farmers to sell their land for good money.

Eighty percent share of the real estate market is garnered by residential sector
and the rest is comprised of offices, shopping malls, hotels and hospitals.
Real estate companies are coming up with various residential and commercial projects
to fulfill the demand for residential and office properties in Tier-II and Tier-III cities.

An estimated shortage of 26.53 million houses during the Eleventh Five Year Plan
(2007-12) provides a big investment opportunity.
 → in the year 2009-10 the total constructions sector size was Rs. 488,345 caror as per
The Central Statistical Organization.

Table: Growth Rate of Major Sectors in India:

Year Agriculture Industry Construction Services GDP
2001-02 3.1 6.1 6.8 4.2 3.9
2004-05 0.0 8.5 16.1 9.1 7.5
2005-06 5.8 8.1 16.2 10.6 9.5
2006-07 4.0 10.7 11.8 11.2 9.7
2007-08 4.9 7.4 10.1 10.9 9.0
2008-09 1.6 2.6 7.2 9.7 6.7
2009-10 0.4 8.3 8.0 10.1 8.0
2010-11 5.4 8.2 8.9 9.6 8.6
.
Source: CSO
Customer First
Company Profile:

4.1 About C1:

C1- Customer First started by two young entrepreneurs who saw

opportunities to provide quality financial services to investors. Mr. Hardik Naik and
Mr. Vishal Merchant were carrying on two firms named, Money Matters in Navsari
and Safe Invest in Surat. They are having excellent knowledge, skills and talent having
the same objective of “making each and every investors wealthy”. Thus the financial
year 2008-2009, Money matters and Safe Investment both get merged and formed a
new brand named “CUSTOMER FIRST” (C1) in order to make their services more
appreciable and thus would be able to satisfy each and every customer with their joint
experience.

4.2 What C1 offers…

The company has range of financial services to cater the customer’s requirements. The
major services are:

 Complete Financial planning and Investment solution

 True client-focused, need-based investment advisory services.
 Top quality products for managing investment.
 Quality services & support to clients.
 C1 PRODUCTS:

product

investmen insuranc Real

estate
t e
Portfolio
Mutual Fd &
mgt. life general
services fund bond

Mf pms

Equity
pms
Real
estate
pms
C1 OFFICES:
Head office: Vishwakarma Arcade, Majura Gate, Surat-05.
Corporate office: Opp. Seth R. J. J. Highschool, Junathana,
Navsari-396445.
Branch Offices: Bardoli, Vyara, Vapi, Gandevi, Valsad, Billimora, chikhli,
Ankleshwar, Ahmedabad.
.
What is Investment...

In simple, Investment is putting money into something with expectation of

profit. More specifically, investment is the commitment of money or capital to the
purchasing of financial instruments or other physical assets so as to gain profitable
returns in the form of interest, dividend or appreciation of the value of the
instrument. It is related to saving or deferring consumption.
An investment involves choice by an individual or an organization to invest its
money or capital in following instrument,
 Assets like vehicles, machinery, appliances
 Property such as home, building, lands
 Commodity
 Stock market
 Bond
 Financial Derivatives like future & option
 Foreign assets denominated in foreign currency

Investment comes with the risk of loss of the invested sum of money. The
investment that has not been thoroughly analyzed can be highly risky with respect
to the investment owner because the possibility of losing money is not within the
owner’s control. The above listed all the investment instruments possesses less or
more chances of risk.
5.1 Classification of Properties:

Real estate has been broadly categories into 3 classes as follow

Types of
Property

(B).
(A). Residential (C). Vacant
Commercial
Property land
property

(A). Residential Property:

 The residential type of property is by far the most popular with both new and
experienced agents. Residential property offers a good investment avenue. People buy
residential property for two important reasons:

• For staying
• As an investment

►►Advantages of Investing in Residential Property

• Expenses, including depreciation on the property and interest on your

borrowings, are tax deductible.
• You make money as the value of the property increases.
• You can leverage your investment.
• You get rental income.

►►Risks of Investing in Residential Property

• Interest rates could rise.

• The property could be untenanted for a period of time.
• You could get "bad" tenants.
• It could take up a lot of your personal time.
• House prices could remain static, or even fall.

The following are the type of Residential Property:

 1. Single Family Residence
2. Row Houses/ Townships
3. Flats
4. Bungalows

(B). Commercial Property:

1. Multi-Family Commercial Real Estate:

Commercial real estate property types include duplex homes, and other construction
for habitation by multiple family groups. Condominiums are frequently called multi-
family because of their construction as a group, but are normally listed and sold as
single family residential units. Duplex homes are also frequently listed and sold as
residential units to a buyer that lives in one side and rents out the other.
2. Retail Space Real Estate Properties:

This category would include single buildings used as stores for clothing, electronics
and other consumer products, as well as malls, strip centers and the like. Restaurant
spaces are a specialty subset of the retail category, with some listings shown as
restaurant/retail. Valuations can be based on size and land value, retail sales per square
foot or other investment return calculations.

3. Office Buildings and Office Complexes

A single building designed for office use, or a group of offices in a single building or
cluster of buildings would fall into this category. When offices are grouped in
structures with single ownership, they are listed as commercial office rental property.
The owner derives income from the rental payments of the office tenants. These can be
valued based on the rental income return on investment, rather than methods using
square footage and land value. Medical & Dental offices are a subset.

(C). Vacant Land

Land Investment has historically been the forte of large development companies,
rich farmers or wealthy individuals. It can be a profitable business if proper
development of land is undertaken. Land Investment is referred to as a long term
investment and with land prices on the rise in many parts of the world, it is said to be
the safest and smartest way of investing ones money.

Capital gains can easily be realized from land when land price increases. The
most striking feature of land investment is that investment takes place in a tangible
asset which the investors can readily put into use. It is a branch of real estate
investment which is gaining ground as major part of capital budgeting analysis. Real
estate is basically defined as immovable property such as land and everything
permanently attached to it like buildings. It is essentially at this juncture that land as an
asset differs from real estate as it does not necessarily includes buildings and the
attachments to the land.
Land is perhaps the most basic asset that we want to invest in and may include vast
open tracts with no significant estate on it. The job of developing the land lies with the
developer, and with proper care to include modern houses and the associated
amenities, it will significantly appreciate its value. Land situated close to developed
areas will cost more as opposed to those in less developed areas. Land developed for
commercial purposes and those developed for building residential complexes will have
different prices and tax implications, if any.
Investing in land can be profitable as there is limited supply of land and the purchaser
can really sell dear if he wants to.
5.2 CHARACTERISTICS OF REAL ESTATE INVESTMENT:

Real estate properties have its own some important features. Some of the
characteristics that make real estate unique as compared to other investment
alternatives are as follows:

(1). Tangible:
Real estate is, well, real! You can visit your investment, speak with your tenants, and
show it off to your family and friends. You can see it and touch it. A result of this
attribute is that you have a certain degree of physical control over the investment - if
something is wrong with it, you can try fixing it. You can't do that with a stock or
bond.
(2). Requires Management:
Because real estate is tangible, it needs to be managed in a hands-on manner. Tenant
complaints must be addressed. Landscaping must be handled. And, when the building
starts to age, it needs to be renovated.
(3). Inefficient Markets:
An inefficient market is not necessarily a bad thing. It just means that information
irregularity exists among participants in the market, allowing greater profits to be made
by those with special information, expertise or resources. In contrast, public stock
markets are much more efficient - information is efficiently dispersed among market
participants, and those with material non-public information are not permitted to trade
upon the information. In the real estate markets, information is king, and can allow an
investor to see profit opportunities that might otherwise not have presented themselves.
(4). High Transaction costs:
Private market real estate has high purchase costs and sale costs. On purchases, there
are real-estate-agent related commissions, lawyers' fees, engineers' fees and many other
costs that can raise the effective purchase price well beyond the price the seller will
actually receive. On sales, a substantial brokerage fee is usually required for the
property to be properly exposed to the market. Because of the high costs of “trading”
real estate, longer holding periods are common and speculative trading is rarer than for
stocks.
(5). Lower Liquidity:
With the exception of real estate securities, no public exchange exists for the trading of
real estate. This makes real estate more difficult to sell because deals must be privately
brokered. There can be a substantial lag between the time you decide to sell a property
and when it actually is sold - usually a couple months at least.
(6). Underlying resident Quality:
When assessing an income-producing property, an important consideration is the
quality of the underlying residence. This is important because when you purchase the
property, you're buying two things: the physical real estate, and the income stream
from the tenants. If the tenants are likely to default on their monthly obligation, the risk
of the investment is greater.
(7). Variability among Regions:
While it sounds cliché, location is one of the important aspects of real estate
investments; a piece of real estate can perform very differently among countries,
regions, cities and even within the same city. These regional differences need to be
considered when making an investment, because your selection of which market to
invest in has as large an impact on your eventual returns as your choice of property
within the market.

5.3 CONSIDERATIONS WHILE MAKING INVESTMENT

IN REAL ESTATE

When it comes to making money, Real estate is considered to be one of the surest
investments. Lots of opportunities abound, whether it be in the stock market or in
business. But these areas also offer a significant amount of risk. As a result, most
people do not engage in these speculative activities. But real estate is something which
more people can be involved in, simply because everyone needs a home to live in.
However, no investment is entirely risk free, and so even here a certain amount of due
diligence is required.
Some important point you need to think about:
1. Who is the developer?
2. Is the project a self development / partnership or joint venture?
3. Past business / trading history
4. The location of the proposed project
5. Basic amenities
6. The growth prospects of the neighborhood development
7. Industrial and business development in the locality
8. Price comparison analysis
9. Future property price valuation
10. What are the returns on your investment?

Affordability is a key consideration when making any purchase. One should factor
additional expenses such as electricity and property taxes to get a complete idea of how
much can be afforded.

■ An integrated service model offering end-to-end - 360° Realty Services to cater to

the diverse needs of corporate & developers in project management & execution.
Managing realty projects right from identification to marketing is a lengthy process
replete with many challenges. You may be keen to execute realty projects for
commercial / residential purposes but may not be equipped with the right skill-sets /
know-how for the undertaking.
Build-One offers you with a integrated service model meeting the entire realty business
needs to help you successfully undertake your realty projects. Build-One offers you
with a unified value-chain of core realty services with critical forward & backward
integration of other value-added services. The services are effectively streamlined
enabling steady progression of the projects, right from idea conceptualization to profit
generation / hand-over, encompassing all functional & operational tasks.
360* Degree – Firm’s significant Functions pertaining to Construction Project.

Feasibility Property Title

Market Identificatio
Study Study Check/Legal
n Work

Regulatory Planning & Property

Approvals Budgeting acquisition
Designing

Project Mgt. / Selling,

Marketing
Leasing &
Construction Plans
Hand over

1. Market study:
Market study refers to detailed analysis of market and locations in
different regions within the specific area. One has to look the trend and path of the
property market in the area where he want to set up the project. A marketability study
tries to create a market area demand model based on available demographic information
and the application of common sense to develop a picture of the current and future
market area trends that may effect demand.
2. Feasibility Study:
Feasibility Study typically involves testing geographic locations for
a real estate development project, and usually involves packages of real estate land.
Developers often conduct feasibility studies to determine the best location within a
jurisdiction, and to test alternative land uses for given packages. Jurisdictions often
require developers to complete feasibility studies before they will approve a permit
application for retail, commercial, industrial, manufacturing, housing, office or
mixed-use project. Market Feasibility takes into account the importance of the
business in the selected area. Could the project be built?, Can the site support a
building structure that is planned?, etc. should be check out.
3. Property Identification:
Property identification refers to the type of project which the builder has to
plan. It mean whether put residential or row house or to put specific commercial project
looking at the locations and demand for the market. Property identification generally is
driven by demand of type of property in the market.

4. Title clear/Legal work:

Title clear is the phrase used to state that the owner of real property
owns it free and clear of encumbrances. In a more limited sense, it is used to state
that, although the owner does not own clear title, it is nevertheless within the power
of the owner to convey clear title. For example, a property may be encumbered by a
mortgage. This encumbrance means that no one has clear title to the property.
However, standard terms in a mortgage require the mortgage holder to release the
mortgage if a certain amount of money is paid. Therefore, a buyer with enough
money to satisfy both the mortgage and the current owner can get clear title.

5. Property Acquisition:
Generally, property acquisition refers to a person or other entity acquiring
title to real property by a deed. A deed is the legal instrument used to transfer
ownership in real estate. Real property can also be acquired by inheritance and by a
court order.

6. Planning & Designing of Project:

Planning and designing is carried out only after finishing the above legal
works. It is concerned with the proper plans and the design of the project that the
developer is going to construct. Here, builder can approach architects to develop
plan and design as per the requirements of builder.

7. Budgeting:
This point is also important to be considered by a builder. The budget of
the real estate project should be optimal as per the plan and designs of the structure.
Budgeting needs to analyze the size of the projects.

8. Regulatory Approval:
After the plans and design of the projects, it needs to be submitted the
same at the concerned govt. authority (Municipal Corp./Municipality) for further
verifications and approval for the project. If authority finds no objections, then after
they can arrive at decision for approval and sanction of project.

9. Project Mgt./Construction:
If government regulatory approvals and project get sanctioned by
authority, then after builder can take step further to start initial work of
construction. A project management team also has to form for various aspects of the
 project of residential or commercial. At regular interval of time, govt. executives
checks the work whether is going as per the criteria.

10.Marketing Plan:
While developer put the marketing plan for the project he has put. On the
bases of demand for the housing and location. As a promotional efforts and
marketing for the project Hoardings, newspaper ads. attractive schemes, agent/
broker approach has to be followed.

11.Selling, Leasing and Handover:

Builder may sell the entire project to other party, or he may sell the project
on leasing bases. Another option he may adopt is he can hand over to the party who
want to handle this project.

Below are some of the main points that were made along the way:
•Real estate investments fall into one of the four following categories: private equity,
public equity, private debt and public debt. Your choice of which one to invest in
depends on the type of exposure you are seeking for your portfolio.

•You can invest in either income-producing properties or non-income-producing

properties. Any leased property is income producing, and vacant properties are non-
income producing. You can still earn a capital return on a non-income producing
property, just as you would on an investment in a home. .
•Real estate can produce income (like a bond) and appreciate.

•Real estate is tangible, so it requires ongoing management. On the other hand, you
also have an increased ability to influence the performance of a single investment as
compared to other asset classes.

•Some of the benefits of adding real estate to a portfolio include: diversification, yield
enhancement, risk reduction and inflation-hedging capabilities. However, real estate
also has high transaction costs, can be difficult to acquire and it is challenging to
measure its relative performance.

•Buying real estate requires substantial due diligence to ensure that you're getting what
you expect after you close.

•The way to determine the value of your property (other than actually selling it) is to
have it appraised by an accredited appraiser.

5.4 ADVANTAGES AND DISADVANTAGES OF REAL

ESTATE INVESTMENTS:

ADVANTAGES:
Investing in real estate is as advantageous and as attractive as investing in stock
market. Here are the main benefits of investing in property market.
► Real Estate Investments are Less Risky:
As compared to other investments, less of misadventure is involved in a real estate
property.. Real estate investments are traditionally considered a stable and rich gainer,
provided if one takes it seriously and with full sagacity. The reasons for the real estate
investments becoming less risky adventure primarily relate to various socio-economic
factors, location, market behavior, the population density of an area; mortgage interest
rates stability; good history of land appreciation, less of inflation and many more.

► No Need for Huge Starting Capital.

A real estate property can be procured for an initial amount as low as $8,000 to $
15,000, and the remaining amount can be taken on holding the property as security.
This is what you call High Ratio Financing. If you don't have the idea as to how it
works, then let explain with the help of an example.

► Honing Investment Skills

A real estate investment, especially when you buy a condo for yourself, will be a
pleasurable learning experience. It gives you the opportunity to learn and when you
went ahead with your first real estate property.

► Not a time taking Adventure

Real estate investment will not take out all your energies, until you are prepared and
foresighted to take the adventure in full swing. You can save hell lot of time, if you are
vigilant enough to know the techniques of making a judicious investment in the right
time and when there are good market conditions prevailing at that point of time.

► Leverage is the Right Way

The concept of leverage in real estate is not a new one. It implies investing a part of
your money and borrowing the rest from other sources, like banks, investment
companies, finance companies, or other people's money (OPM). There have been many
instances where people have become rich by practically applying OPM Leverage
Principal. Moreover, in case the lender is interested in selling the property, the net
proceeds resulting from the sale of the property should comfortably cover the mortgage
amount.

►Real Estate Appreciation

An appreciation is an average increase in the property value over original capital
investment, taking place over a period. There are some neglected real estate properties
that have an appreciation below the average mark, whereas, some of the properties
located in maintained geographical areas, showing high demand, have an above
average appreciation. In such centrally located and high demand areas, the average
appreciation can reach up to 25% in a year.

► Low Inflation
Inflation is the rise in the prices of the products, commodities and services, or putting it
another way, it is the decrease in your capacity to buy or hire the services. Supposing, a
commodity was worth $10 a decade back, will now cost $ 100 as the result of inflation.
Comparatively, real estate sector has minimum rate of inflation.

► Tax Exemptions

You get various tax exemptions on your principal and investment income
property. The tax exemptions available in real estate property investment are more than
available in any other investment. In other investments, you lose terribly on the
investments in your bank in the form of inflation and high taxes therein, but in real
estate; you don't actually have such hindrances.
There are several beneficial provisions in the Income-tax Act, 1961 which
promote investment in residential properties, having regard to the need for housing
millions of citizens. Of course, only those who pay taxes can take advantage of the
appropriate incentives given under the law.
Interest payable on loans taken for purchase or construction of house is deductible to
the extent of Rs 1.5 lakh every year, though the annual value of one self-occupied
residential property is exempt from income-tax. In addition, repayment of the
installment of housing loan is deductible to the extent of Rs 1 lakh per annum under
section 18-C.
► High Return on Investments
Real estate investment gives you potentially high Rate of investment before and after
the taxes levied on your income. In fact, investing in real estate gives you high ROIs
after the taxes
► Net Positive and High Income is Generated.
► Increased demand for properties.

DISADVANTAGES

Beside the large potential of return on Investments, there are certain levels of
Disadvantages. These disadvantages can be easily taken off, if you have an insight
about the limitations of real estate investment and what can be its short term as well as
long-term repercussions.
► Taking Wrong Decisions

People going for the real estate investment property take decisions in haste. Make a
firm decision when you go for purchasing your first real estate property, is just not
easy man. If you are swayed by emotions, you will be ruined.

► No readily available Liquidity:

With your real estate investment, you need to know one thing straight, and
that is you simply cannot aspire hard cash immediately. You have to wait and watch
the market movements and other socio-economic and politico economic factors before
selling your real estate property, like a mall or your home.

► Eats away your time and energy:

Real estate investment can get you real fatigue. It is a lethargic time consuming process
that makes you feel almost laid back. You need to plan and have those instincts to get
going with your property. You will learn more on about making you real estate
investments more time efficient in later part of the chapters.

► A Risk full decision can harm:

Investing in a real estate property can be a risky and costly even, if you are not
prepared before, you will make losses. Not just losses but, but you will become a
pauper. Remember, as I said in my earlier statements, Real estate market is speculative.
► No Stringent Comparison Methodologies

Real estate market is variable. The price of two real estate properties can vary
a great deal, provided you keep other factors such as time and location, constant. No
two real estate properties can have exact. There always exists kind of variation and this
need to be taken into account. Though, you do have the existing rule of thumbs and set
strategies, but all these are workable, if tried in combination.

► Guided and Drawn on Government Policies:

Government policies and regulations play an indispensable role in deciding

on the real estate investment. These policies and regulations include control the zone
based bylaws, construction activities; property prices; rent control procedures; license
dispensations and property transfers; taxes etc.

5.5 The Factors that affects the Real Estate market:

 •Supplier, •Social,
•Cost, •Legal,
•Competitor •Political

Micr Macr
o Real Estate o

•Marketing •Global and

Intermediary •Demographic

Micro factors;

There are certain Micro factor that influences the property market
and its aspects. Suppliers, Cost of materials, firm’s competitors and also marketing
intermediary are the major elements that have effect on property business.

Macro Factors:
Factors like political, legal, social, global and demographic are the
Macro environment with generally influences reeal estate industry in large scale.
5.6 Government regulations in Real Estate sector:

Much of the over 100 laws governing various aspects of real estate in India dates
back to the 19th century and major amendments to existing laws are required to make
them relevant to modern day requirements. The Central laws governing real estate
include:

Registration Act, 1908

The purpose of this Act is the conservation of evidence, assurances, title, and
publication of documents and prevention of fraud. It details the formalities for
registering an instrument. Instruments which it is mandatory to register include:

(a) Instruments of gift of immovable property;

(b) other non-testamentary instruments which purport or operate to create, declare,

assign, limit or extinguish, whether in present or in future, any right, title or interest,
whether vested or contingent, to or in immovable property;

(c) non-testamentary instruments which acknowledge the receipt or payment of any

consideration on account of instruments in (2) above.

(d) Leases of immovable property from year to year, or for any term exceeding one
year, or reserving a yearly rent.

Urban Land (Ceiling and Regulation) Act

(ULCRA), 1976
This legislation fixed a ceiling on the vacant urban land that a 'person' in urban
agglomerations can acquire and hold. A person is defined to include an individual, a
family, a firm, a company, or an association or body of individuals, whether
incorporated or not. This ceiling limit ranges from 500-2,000 square meters (sq. m).
Excess vacant land is either to be surrendered to the Competent Authority appointed
under the Act for a small compensation, or to be developed by its holder only for
specified purposes. The Act provides for appropriate documents to show that the
provisions of this Act are not attracted or should be produced to the Registering officer
before registering instruments compulsorily registrable under the Registration Act.
The objective of acquiring the excess vacant land could not be achieved
because of intrinsic deficiencies in the legislation itself.
Stamp Duty:
There is a direct link between Registration Act and Stamp Act. Stamp duty needs
to be paid on all documents which are registered and the rate varies from state to state.

Rent Control Act:

Rent legislation in India has been in existence for a very long time. Rent
control by the government initially came as a temporary measure to protect the
exploitation of tenants by landlords after the Second World War. However these rent
control acts became almost a permanent feature. Rent legislation provides payment of
fair rent to landlords and protection of tenants against eviction. Besides, it effectively
allows the tenant to alienate rented property.

Property Tax:
Property tax is a levy charged by the municipal authorities for the upkeep of
basic civic services in the city. In India it is the owners of property who are liable for
the payment of municipal taxes whereas in countries like the United Kingdom, the
occupier is liable. Generally, the property tax is levied on the basis of reasonable rent
at which the property might be let from year to year. The reasonable rent can be actual
rent if it is found to be fair and reasonable. In the case of un-let proper-ties, the rental
value is to be estimated on the basis of letting rates in the locality.
6.1 FINDING REAL ESTATE VALUES:

It is the practice of knowing the market value of a property. As all properties differ
from each other in terms of location area, etc. so their value is different. Basic
amenities of the area and surrounding environment are the factors playing an integral
role in the valuation of the property. Real estate returns are generated in two ways.
First, the income return comes from tenants' rent payments. The income return is a
straightforward calculation because all you need to know is how much cash remains
after all property expenses have been paid. The second type of return is the capital
return, which is the increase or decrease in the value of the property due to changes in
market demand and/or inflation. The capital return is more difficult to calculate, and
requires the property to be valued or appraised.
If you want to determine the value of a real estate investment, the most accurate
method is to sell the property and see how much money you get for it.

Appraisal method:
Appraisers use a variety of methods to determine value, and for income-producing
properties the most common method is the capitalization rate approach. In its simplest
form, a capitalization rate equals the net income from a property divided by its
purchase price. To use the capitalization rate approach, an appraiser gathers
capitalization rates from actual sales of similar properties, and based on those sales and
capitalization rates forms a judgment on the appropriate capitalization rate for the
property being valued. The appraiser then applies that capitalization rate to the subject
property's income to estimate the value. For example, if the market-derived
capitalization rate for a property is 10%, and the net income for that subject property is
$100,000 in the year after you purchase the property, then the value of the property is
$1,000,000.
-- Operating Cash Sales price Total Cash Flows
Year 1 100,000 n/a 100,000
Year 2 105,000 n/a 105,000
Year 3 110,250 n/a 110,250
Year 4 115,763 n/a 121,551
Year 5 121,551 10,00,000 1,121,551

Hiring and Appraiser:

When choosing an appraiser to value your property, the most important
consideration is that they have the appropriate experience and background to appraise
your type of property. You don't want to hire a residential appraiser to value your
commercial building unless they also have experience valuing commercial buildings.
They also need to have experience appraising properties in your geographical area,
because different locations have different market attributes. If your appraisal will be
used by a third party, such as a mortgage lender, then you should be certain the lender
will accept reports from your chosen appraiser. Last, the amount of the appraiser's fees
should be a consideration.

Mortgage Financing:

The type and amount of mortgage financing is important to the performance of

the property for two reasons. First, if your property has a closed mortgage in place that
also happens to have poor terms (for example, a high interest rate or an undesirable
loan to value or amortization period), then it can affect the value of the property.
Therefore, it is important to consider the perception of the market when locking in your
financing if there is a chance you will sell the property during the mortgage term.

Assume, you purchased a property for Rs.1,000,000 one year ago

without any financing. You just completed an appraisal that says the property is worth
 Rs.1,200,000. So, your capital gain is Rs. 200,000, which results in a capital return of
20%.
Now, assume you bought the same property but financed your purchase
with a 50% loan to value, interest-only mortgage. After your purchase you therefore
have Rs.500,000 of your own cash invested and the bank has loaned you the other
Rs.500,000. One year later, you still owe the bank Rs.500,000 because you used an
interest-only mortgage. So when you get your Rs.1,200,000 appraisals and subtract
what you owe the bank, your equity in that property is worth Rs.700,000. Since you
have Rs.500,000 invested, your capital gain is Rs.200,000. Your capital return,
however, is 40% rather than the 20% you would have achieved if you didn't use
financing. This occurs because you still achieve a gain of Rs.200,000, but you get it
using only Rr.500,000 of your own money instead of Rs.1,000,000 of your own cash
(but keep in mind that you would need to pay out interest payments to the bank). This
is known as leverage, and it has a powerful impact on property returns.

6.2 Trends and prospects in Real Estate sector:

 India is recognized as a land for all season. Everybody is amazed by the beauty
and culture of India. Humanity, religious and races are nowhere better on this earth
than India. Each characteristic of nation represents itself on a huge, inflated scale,
praiseworthy when compared with other countries on the globe. People feel immense
pleasure owning a property or a piece of land here. It is one of the fastest growing
sectors in the country. This rapidly growing real estate market is getting matured day
by day as large and international people are taking part. The market has augmenting
investors and carries a real industry-responsive approach.
Even the property prices are augmenting fast, especially Chennai, Hyderabad ,
Delhi, Bangalore, Ahmedabad, Surat, Pune real estate are on the very high phase. The
market boom is spread across the country and hence more and more Indians are not
interested in investing for India real estate. The economy rate as well has managed to
grow faster than 8% each year because of increasing real estate market trend.

Last decadal Increas in growth Indian Real Estate

14% 11.10% 12.6%

12% 9.80%
10% 8%

8% 6.80%
% growth rate 5.90%
6%
4% 3%
2%
0%
2003- 2004- 2005- 2006- 2007- 2008- 2009-
04 05 06 07 08 09 10
Year
At present, the real estate and construction sectors are playing a crucial role in
the overall development of India’s core infrastructure. The real estate industry’s
growth is linked to developments in the retail, hospitality and entertainment(hotels,
resorts, cinema theatres) industries, economic services (hospitals, schools) and
information technology (IT)-enabled services (like call centers) etc and vice versa.
Realty market is just not trendy among Indians, but has also gained popularity among
foreigners. Morgan Stanly – one of the world’s best banks has of late invested about
$152 million Mumbai real estate. The presented report also stated that this is the only
biggest investment in India’s booming real estate sector. This proves that India real
estate is improving in reality. Further more states that foreign investors have immense
interest investing in real estate India. Due to the demand of residential and commercial
real estate among NRI’s has pushed the price of real estate beyond actual limit.

◙ Trend of Property Market: Decade ago…

The market was not in an initial stage at the time of 1991. The industry was more
focused in only two centre Bombay and Delhi. Those years didn’t find construction
activities on large scale as the industry is today. The residential as well as retail sector
was not as healthy as we experiencing today. There were hardly construction of retail
malls and complexes, also the concepts of integrated townships, high-rise complexes,
and row hoses schemes were not introduced at this stage. People were found generally
unaware of investment opportunities in real estate it was because of negligible return
on their investment. Also real estate index was not indicated at Stock exchange. The
Tier II and III cities were far away from the property concerns, very slow pace of
development were taking around such cities. Hence, the Real estate industry couldn’t
take place at these times. The price of property was quite low as compared to today’s
situation, it was because was the less number of dealings and transactions regarding
property.

It has been observed since the last few years that end-user buying in the sector has
increased from 35 percent to more than 60 percent. There are many obvious reasons for
this improvement. First, the advent of the IT sector has made job in the cities a highly
common phenomenon. This has induced office workers to migrate to cities.
The table below depicts the growth of different sectors that have contributed heavily to
the real estate growth in India.
Sector CAGR (Compound Annual Growth
Rate)
Organized Retail 49.53
IT and ITES 28
Overall Housing 30
Real Estate 33

◙ Trend of Property market: Recent year…

India is a growing economy and has witnessed a growth of 8.1% in the last financial
year. Therefore, the investors are eying on Indian property and willing to invest at this
right time to reap huge profits.

· Rising income levels of a growing middle class.

· The focus of Property market shifts to Tier II and Tier III cities, rather than only
concentrating on only Metro cities like Mumbai and Delhi. Smaller cities middle
class house holds increasing more rapidly than of metro cities. So there is a tremendous
boom in smaller cities.

· Growth in commercial office space requirement is led by the burgeoning outsourcing

and information technology (IT) industry and organized retail

· There is a great demand for office and industrial space of 100 million square feet to
accommodate an estimated 2 million new graduated passing out from various Indian
universities recently.

The following chart depicts the rate of property in the particular year, and indicates the
trend of market.
 Increase in Property Rate in tier cities

TIER III cities 8000

1200
2009-10
TIER II Cities 15000 1999-00
3500
(pe r Sq.Ft)
25000
TIER I Cities
10000

0 5000 10000 15000 20000 25000

However Property rate differs from location to location in the same city. These rate are
taken on average bases.

· There is a huge demand for corporate space of a large number of Fortune 500 and
other multinational companies who are willing to set up offices in India.

· Investment of $ 320 billion requires in next five years in infrastructure. Credit to be

housing sector has continued to be strong and benefited from low interest rates.

· India is witnessing growth in other sectors like auto ancillary, chemical, healthcare,
pharmaceutical, jewellery that lead to huge demand in this space as well.

Home loans and other incentives:

Presently the commercial banks and other finance landing institutions are also
started playing an important role in the development and growth of the Property
Market. Easy availability and governmental incentives have boost in the reality boom.
At present the market leader in the India mortgage market is the Housing Development
Finance Corporation (HDFC), the State Bank of India (SBI), ICICI and other banks
proving home loans to the customers. At present the total worth of the India Mortgage
Market is nearly US $ 18 billion. The present home loan rate is 8.5% p.a.
Till December 31 last year, the SBI was offering teaser loans where the interest rate
was 8% for the first year, 9% for the second and third years, and a floating rate
thereafter. As on that date, the total outstanding retail home loans stood at Rs82,376
crore for the bank.

The services offered by institutions

 New home loans
 Home equity loans
 Mortgage refinancing
 Real estate lending
Chart showing home loan amount disbursed to customers:

The three major financial institutions HDFC, ICICI and Corporation bank had
provided home loans. According to CARG report, the total size of Home loan market
in India is Rs.150,000 caror as in year 2010.
 Year Total Loan Disbursed (in Cr.)
1991-00 9812.03
2000-2001 12637.85
2001-2002 14744.85
2002-2003 33840.53
2005-2006 56,600

◙ Contribution of total investment in major two type of property in India

Chart Showing proportion of Investment in two types of Property.

20%
80
% Residential

Commercial

(source: CREDAI)

Of the total investments done in properties, about 20% investment was in Commercial
segment and about 80% of investment was in Residential segment.

→The residential housing development contributes to 80% of the real estate in India.

→ Remaining 20% is for commercial property development including offices, shopping

malls, hotels, hospitals, multiplexes, entertainment centers.
6.3 INVESTMENT CLIMATES:
(Factors influencing high investment in Gujarat)
Real Estate sector in Gujarat has shown a rapid growth in last decade, resulting in
realty boom. There are various factors which drives realty boom in the state are as:

• Highly industrialized state, with more than 38% GDP contributed by secondary
sector.

• Creating value for investors, ranked as the best state for investment approved by
financial institutions.

• Top contributor to Indian economy, around 22% of the Indian exports contributed
by Gujarat

• An economy on the boom and beating recession, more than 10% since 2004

• State with highest number of MoU realization

• Utility cost one of the least as compared to competing destinations

• Taxes at par with other business destinations

• Globally cost competitive labor force

DMIC
• Some Mega Projects proposed to com up at Gujarat, will boost the real estate
investments, and largely affect the market:
1) Special Investment Region (SIR, Dholera)
2) Delhi Mumbai Industrial Corridor (DMIC)
3) Special Economic Zones (SEZs)

The Ministry of housing in 2006 to assess the urban housing shortage has estimated
that at the end of the 10th Five Year Plan, the total housing shortage in the
country was 26.53 million.

HOUSING SHORTAGE IN INDIA

35
30 34

30.1
25 26.7 26
20
19.7
URBAN
15 RURAL
21.7
10 15.1 18.4 19.3 20.5
(in m illon)
5
0
2001 2005 2008 2010 2014
(Source : CRISIL Research)
Real Estate Sector in Gujarat. Trend in Property market

Gujarat is one o f the most growth oriented state in India. And Ahmedabad
and Surat are the most happening cities in the state. The transformation of these cities
into Metros” is fast and benefiting to all. The prices o f properties in Ahmedabad and
Surat are at new high. The cities were almost unknown just before few years now they
have become most popular. Both the cities are growing in terms o f finance and
developing even as career hubs. Simultaneously Number of new, national and
multinational Companies are ready to invest in these cities as they have seen a bright
future in business opportunities. There were times when people wanted to invest in
other cities than Ahmedabad and Surat. But the scenario has been improved. Now a
day’s people have started investing in these two cities as they look at them as places of
new growth.
Gujarat is one of the most growth oriented state in India. The prices
of properties in Ahmedabad and Surat are at new high. The cities were almost
unknown just before few years, now they have become most popular. Both the cities
are growing in terms of finance and developing even as career hubs. Simultaneously
Number of new businesses, national and multinational companies is ready to invest in
these cities as they have seen a bright future in business opportunities. There were
times when people wanted to invest in other cities than Ahmedabad and Surat. But the
scenario has been improved. Now a day's people have started investing in these two
cities as they look at them as places of new growth.
While Ahmedabad is the historical city of Gujarat with a rich heritage, Surat
is the clean and green city or the port city of Gujarat. Total population of larger
Ahmedabad is approximately 5.5million people. Surat too has the population about
4.9million. Surat is being the fastest growing city of India now textile and diamond
business have bright future. Other than these two industries, lot more industries are
growing up very fast in these cities. So there is no doubt that demand for housing will
increase by leaps and bounds. All working class people will need residence/apartments.
So investment in residential projects in these two cities will bring huge profit to
housing companies or the builders. Housing sector is the most preferred segment in
Surat and Ahmedabad. Well known builders and popular property developers who
were not interested in building small houses and apartments are now coming up with
all kinds of affordable and luxury homes to buyers from all class. Though industrial
sector of both the cities are quite well established, the expansion and business with a
new vision is going in full speed. As life has become fast and modern, the new
generation needs something novel. So for their recreation and entertainment new malls,
multiplexes and retail outlets are opening up daily across the cities.

Further people invested in gold and silver or in stock market. But as these markets
are as always uncertain smart people will prefer to invest in Real estate. So a common
trend among affluent Gujaratis is to invest in a property which will rise soon. In real
estate there is minimum risk of cost cutting and they are growing at rapid speed. So
many projects are up coming too that will attract higher middle class people to middle
class people. Investors from other affluent cities have also seen a great opportunity and
flocked in to these cities with their profits.

REAL ESTATE MARKET IN GUJARAT......

In the industrial map of India, Gujarat has a significant place as its citizens are
well known for their entrepreneurial talent. As part of the global real estate property
market boom, Gujarat too is gearing up for welcoming the change. By introducing
world-class real estate infrastructure to the Gujarat’s soil, many real estate companies
have made it an ideal place for living and organizing profitable businesses. Currently,
we witness a phenomenal rise in the demand for both residential and commercial
complexes all over the region. It seems the Gujarat investors are returning to real estate
business after an interval. Many of them are now eyeing fresh projects to put their
money in. The growing demand of real estate brokers tells it all. In the present day, as
the infrastructural development is at its peak, the real estate sector in Gujarat witness a
steady growth. Property developers in Gujarat offer high-end flats and bungalows to
locals as well as non-resident Indians. It is a known fact that the NRIs are one of the
major investors in Gujarat residential property and this makes the real estate
developers focus on luring them in foreign investment. Investing in real estate market
in Gujarat is the wisest option for the investors at this moment as the state witness a
huge growth in real estate development. Real estate in Gujarat is primarily divided as
residential properties and commercial properties. The real estate brokers in Gujarat
predominantly crack down on Ahmedabad real estate as it is one of the promising real
estate property markets in India. What’s more, it is a known fact that many major
industries are eyeing on real estate properties in Ahmedabad and Surat, it is wise to
invest on property at the right time. If you are looking for such opportunities, it is
always better to approach a real estate agent or a real estate broker as they are the ones
who know better about the localities and the prices of the properties. Try to find out
professional real estate agents that are into the real estate business for long time.
As a conclusion of real estate studies in India, we can see that as far as real estate is
concerned, the bar of investment has significantly raised. India has immense scope for
building infrastructure, in addition to increase investment returns by 25% which was
just 12 to 15% past decade. The commercial real estate yield in India is larger than any
other country, thus making it one of the most popular destinations for real estate
investment.

India is on the verge of witnessing a sustained growth in infrastructure buildup.

Infrastructure investments continue to be the most important growth driver for
construction companies.

Demand-supply gap for residential housing, favorable demographics, rising

affordability levels, availability of financing options as well as fiscal benefits available
on availing of home loan are the key drivers supporting the demand for residential
construction.

However, there are potential constraints for domestic as well as foreign

investments in India. Absence of a single regulator to monitor business practices
prevailing in Indian real estate market is perceived to be a risk factor by investors.
BIBLIOGRAPHY:

BOOKS:
• Investment Analysis & Portfolio Management- 2nd Edition Prashana Chandra .
Tata Mcgrill Publication , New Delhi.

WEB REFERENCICES:
• http://www.investopedia.com
• http://www.indianground.com
• http://www.economywatch.com
• http://www.realestateindia.com
• http://www.siracusaco.com/