A

PROJECT REPORT

ON

‘ANALYSIS OF REAL ESTATE INVESTMENT’AT

CUSTOMER FIRST (C1), NAVSARI.AS IN THE PARTIAL FULFILMENT FOR THE DEGREE

OFBACHELOR OF BUSINESS ADMINISTRATION

PREPARED BYMr. AJAY M. GONDALIYA (TYBBA)

ROLL No: 09

GUIDED BY:MS. HETAL D. TANDEL

(LECTURER, NLCCM, NAVSARI)

NARANLALACOLLEGE OF COMMERCE & MANAGEMENT

NAVSARI – 396450VEER NARMAD SOUTH GUJARAT UNIVERSITY, SURAT

YEAR- 2010-11

C E R T I F I C A T E 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 GDP2001-02 3.1 6.1 6.8 4.2 3.92004-05 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 6.72009-10 0.4 8.3 8.0 10.1 8.02010-11 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:

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.

product

investment

insurance

Real estate

Portfolio mgt.

services

Mutual fund

Fd & bond

Mf pms

Equity pmsReal estate pms

life general

.

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

(A). Residential Property

(B). Commercial

property

(C). Vacant land

(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.

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

Market Study

Feasibility Study

Property Identification

Title Check/Legal Work

Property acquisition

Planning & Designing

BudgetingRegulatory Approvals

Project Mgt. / Construction

Marketing Plans

Selling, Leasing & Hand over

360* Degree – Firm’s significant Functions pertaining to Construction Project.

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 AdventureReal 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 WayThe 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:

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.

Real EstateMicro

Macro

•Supplier,•Cost,•Competitor

•Marketing Intermediary

•Social,•Legal,•Political

•Global and•Demographic

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 FlowsYear 1 100,000 n/a 100,000Year 2 105,000 n/a 105,000Year 3 110,250 n/a 110,250Year 4 115,763 n/a 121,551Year 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.

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, re-

sorts, cinema theatres) industries, economic services (hospitals, schools) and informa-

tion technology (IT)-enabled services (like call centers) etc and vice versa. Realty mar-

ket 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 invest-

ment in India’s booming real estate sector. This proves that India real estate is improv-

ing in reality. Further more states that foreign investors have immense interest invest-

ing 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 con-

centrating 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.

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 pro-

vided home loans. According to CARG report, the total size of Home loan market in

India is Rs.150,000 caror as in year 2010.

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

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

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.

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 invest-

ment.

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

Infrastructure investments continue to be the most important growth driver for con-

struction companies.

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

fordability 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 con-

struction.

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

ments 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/