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The Roaring Real Estate Industry of India

Real Estate has always been viewed as “THE” industry with a priceless worth of potential tagged to it. Yes, be it for developers, buyers or sellers. It’s usually a win-win deal. That’s real estate, where people make conscientious decisions fully aware of the positive future returns.

The Indian real estate sector suffered in the past due to lack of reformation procedures ranging from antiquated laws, low property taxes, tight mortgage finances, lack of quality standards, etc. Most of the real estate was in the hands of big land owners who used to develop low quality constructions to suit the budged of Indian middle class. The housing finance was also not as easy as it is now days. Buying a property used to be a life time achievement for the middle class. The laws were very strict for the private developers and it used to take a long time in obtaining all kinds of necessary approvals to kick off a project. The residential units were built by Urban Development Authorities of different states, however they used to be too less to meet the demand.

With the Indian consumer becoming wise and more aware, they want to make judicious use of their money. More like extracting the worth of their money. This stems from the attitudinal change in wanting a better lifestyle, better environment, etc. As income levels have risen among the middle class, the interest rates of the banks on home loans have fallen considerably. As Indian banks are more than eager to provide easy home loans. This gives the developers the impetus to strive towards building better residential complexes, apartments and even commercial establishments.

Experts believe that the Indian real estate shows positive signs of emerging as one the fastest growing industries. In five years from now, it is estimated that the Indian real estate will grow from US$ 12 billion to US$ 45-50 billion.

This fast track growth is just not limited to the big cities; it is soon spanning the smaller cities as well. There is a burgeoning demand for commercial establishments at par with international standards. Ranging from retail malls to entertainment complexes, the commercial real estate is booming and according to a Merrill Lynch report, the number of malls in the country is expected to rise from 40 to around 250 by 2010. The focus of Builders and developers is now being shifted towards Tier II and Tier III towns. The property markets of cities like Jaipur, Ludhiana, Pune, Nagpur, Hyderabad, Sonepat, Panipat and Karnal are the new destinations of renowned developers.

International investments are on the rise as well, which plays a significant role in boosting the country’s overall economy, which is growing faster than 8% a year according to the Government’s statistics. Indian property market is luring a number of foreign funds who are looking at investment opportunities in India.

According to Michael Smith, head of Asian real estate investment banking at Goldman Sachs, “India is the most exciting real estate market in Asia; it’s one of the last major countries in Asia with an improving market.”

Future seems bright as foreign investors like J.P. Morgan, Britain’s Knight Frank plan to invest $4 billion as real estate funds, catapulting the Indian real estate into a never before experienced realm. Seventy percent of foreign investors are yielding good profits and twelve percent are breaking even.

Burgeoning population, more nuclear families, reverse brain drain, more foreign and domestic investments, increase in merging with world economy and a series of other factors have risen the potential of all Indian investment categories. This fuels the demand for office, residential and retail space. Further, the wage packets have become thicker than ever before and the average age of owning a property has come down to 35 years.

India is currently facing a housing shortage of 20 million dwelling units. According to researchers, the rapid growth in population and increasing income levels will spur the demand to up to 10 million new housing units per year by 2030.

The ‘India Special’ publication reveals interesting statistics; stating that office space demand will continue to be on the rise. According to their report, “India is the prime destination for IT services outsourcing. In the coming five years, at least 55 million square metres of extra office space must be completed in the premium office segment alone”.

With the Government of India opening its routes to foreign investors and allowed 100 per cent foreign direct investment (FDI), India is seeing a never before seen boom in real estate. Big foreign investors have already invested and are planning to invest further because they foresee India’s potential in the real estate market. Merrill Lynch has predicted that “the Indian realty sector will grow from $12 billion in 2005 to $90 billion by 2015″.

More and more NRIs decide to invest in Indian real estate primarily due to overall growth prospects. In 2005, the inflow of NRIs was 90,000 crores ($21 billion).This buying and selling, creates and regulates the real estate market.

However, what really needs to be taken into consideration is the zoning between commercial and residential areas. This calls for a marked planning and strategizing before implementing the ideas lest it should create a bottleneck.

The future sees the Indian real estate prices to be only going up and up. If one is waiting to see the prices going down, it’s going to be a really long wait. People only see this as a lucrative investment where returns are more than any other mode of investment.

It’s like striking the iron while it’s still hot and we can tell you, the real estate iron is steaming hot and shall remain for a while. Researchers predict a boom; however it does not come risk-free as there is still lack of complete transparency, with various other factors too coming into play.

Top 15 tips for investing in Real Estate

The real estate market in India is hot and booming. The property prices are sky rocketing and ever increasing. Indian property market has never seen such a boom in real estate and escalation in prices. The increase in prices or appreciation is from twenty percent to one hundred percent per annum. The prices are going out of reach every day and owning a house is becoming more and more costly. It is a bit difficult to speculate about realty prices, whether they will come down or keep increasing. However, if you have decided to buy a house of your dreams or you want to put your savings into real estate to ride the high flying prices, here are some tips to help you to strike a good deal.

1. Always go for the approved properties
Sometimes you may be lured by cheap unauthorized properties, which might give you a good return also, but they would never give you peace of mind and the prices will fluctuate on the government announcements and change in government policies. Secondly there is a huge risk involved with them and you have chances of complete erosion of your investment. So always go for the approved properties, they will give you good returns in the long run.

2. Save on stamp duty
Different states have different stamp laws, prescribing different rates of stamp duty on registration of property. Generally stamp duty for females is less than that on males. For example stamp duty in Delhi is 8 percent for males and 6 percent for females. And if you want to own property in joint names of a male and female then the average rate would apply and in the above case it would come out to 7 percent. So you have an option to buy property in the name of your wife, mother or sister, thereby saving some amount on stamp duty.

3. Always visit the actual site before buying
Do not buy property on papers only. Visit the site before purchasing. There are some developers who sell plots and flats by showing brochures, maps and approved plans in some distant locations, guaranteeing the returns to be more than 20 percent or so. Recently there has been increase in the appetite of investors for investment in tier II towns adjoining metropolitan cities like Delhi, Mumbai, Hyderabad and Chennai. It becomes very difficult for a person residing in New Delhi to visit a site in Panipat or Karnal, therefore he tends to rely on the reputation of the developer and invests in the property by just going through the brochures. However it is always recommended that you should actually visit and see the property you are going to buy, because reality is always different from dreams.

4. Explore all means viz. property dealers, media, websites, etc.
When you go to buy some thing the prices are very high and when you want to sell something the prices are very low. This happens to all of us, because the brokers and property dealers tend to show huge demand to the buyers and huge supply to the sellers because the difference is their profit. Some dealers are big enough to keep a stock of properties. When you are out to buy some property try and explore all means like newspapers, websites, etc. In newspaper advertisements you can directly talk to the other party and have a realistic estimate of price and if you search through some good real estate websites you would get an idea of a fair price of the area you are targeting. Now with this estimate of prices from all other sources you can go to a property dealer and you would be in a better position to bargain a good deal.

5. Try to make use of bank loans for financing
It is always prudent and easy to go for bank loans for buying a property. Here your investment would be only up to 20 percent as margin money and rest will be invested by the bank and if the bank interest is 12 percent and the property appreciates at the rate of 20 percent per annum you get a return of 20 percent on your own investment and also a return of 8 percent on the amount financed.

6. Always buy real estate with a long term view as transaction costs are high
You pay about 8 percent to the Government as stamp duty and about 2 percent to the broker as commission. Further there are some other costs involved in documentation, legal charges, attorney’s fees, stamp papers, etc. In all you end up paying more than 10 percent as transaction cost to buy a property in a city like Delhi. The transaction cost is much higher than other options of investment; therefore the investment horizon should be from medium term to long term.

7. Check the fair rental value of the property before buying
If you are buying a ready to move in property and the goal is pure investment, then the property, during the period of investment, would be let out. It would always be prudent to check the fair rental value of the property. The rent would cover a part of your installment and will reduce your burden. In some areas the value of property is very high but the rental value is very low, whereas in some areas the value is low and the rental value is high. If a property is of Rs. 50 lacs and its rental value is Rs. 8000 and another property is of Rs. 30 lacs and its rental value is Rs. 10000 you should go for the latter.

8. Look for the reputation and track record of the developer
If you are going for a property developed by a private builder, check his credentials, reputation and response to his earlier schemes.

9. Compare the returns with other options of investment
Well, your decision of investing in real estate should not base only on the fact that the real estate market is booming and every one is investing in real estate. Compare all options of investment and the estimated returns from them. Go for real estate only if it comes out to be the best option. There are people who are good at stock markets or commodities, mutual funds can also be another good option. Closely look at the risks and returns of all the options and then decide.

10. Check the legal status of the property before buying
Never buy a property before checking its legal status. Verify the title deeds and other papers relating to the property carefully. You may also consult a lawyer in case you suspect the legality of the title deeds or any other papers.

11. The property should not have any unauthorized construction
You should also check that there is no unauthorized construction in the property and the building has been built up with approved construction plan.

12. Look for the surrounding infrastructure
The value of the property depends on the surrounding infrastructure. Have a close look around the property. Whether the roads are sufficiently wide, whether there are sufficient parks, schools, markets and hospitals in the surrounding area. The distance from the nearest Bus stand, railway station and airport will also matter.

13. Do not ignore the recurring maintenance costs
Apart from the initial fixed cost, there would be several other recurring costs like common area maintenance, electricity charges, cable charges, maintenance of lifts, parks and security and parking charges. Have a prior estimate of all these costs as they would vary for different housing societies.

14. Don’t forget to see the parking space, for your own and your visitors’ vehicles
There should be ample parking space for the vehicles of the residents and their visitors.

15. Don’t forget to check the quality of construction
Last but not the least, do take care to ensure the quality of construction. This can be verified from the residents of the society and the people living in the surrounding areas with similar constructions.

Where to Invest - Real Estate or Stock Markets -  The Difficult Question?

Where should you invest - Stock Market or Realty
Who wants to keep his money in the bank any more when there are so many investment options to make your money grow exponentially? Well you have to put that minimum amount to those standard post office instruments, provident fund and insurance to save that 30 percent tax allowed by the taxman, and will you be interested in putting even a single penny more than that in those instruments? With its robust and booming economy India has become one of the favorite investment destinations in the world. Almost all sectors are witnessing strong growth, per capita income and spending is at all time high levels. Disposable income in cities is increasing and finding its way to spending and investing. A lot of investment is being pumped in stock markets and real estate. Both are high risk high return markets and have witnessed tremendous growth in the past five years.

The risk factor
The stock markets are definitely more risky than the real estate market and therefore have the potential to give you more returns than the real estate market. You won’t see many multi-baggers in the real estate, I mean to say that in bullish markets stocks are seen to be rising 3 to 4 times in a year where as the increase in property prices is more or less secular in a particular area. But at the same time the stocks can also reduce to half or one third of their value which is rarely seen in real estate. Further you can easily find stocks on upper or lower circuits of 20 percent which means that they can increase or decrease up to 20 percent in one single day and in real estate it takes months to increase or decrease 20 percent. Therefore, of the two we can safely conclude that the real estate investment is safer than the stock market investment.

The information and knowledge factor
As discussed above stock market is a high risk high return game, but if you play it professionally you stand to make a lot of money out of it. Unlike real estate markets stock market investments require a lot of information and in depth knowledge of the companies you are going to invest in. The stock prices are a mirror of the performance of the company which is reflected through quarterly results announced by the company and on the positive and negative news flows. Further these prices also depend on other factors like overall market trend, performance of the particular sector and industry, macro economic factors, global factors and announcements and policies of Government. Therefore, investment in stock markets will require beforehand knowledge of the company you are going to invest in and you will have to keep yourself informed on all other price sensitive factors.

Minimum investment
One good thing about stock markets is that you can make an investment of as low as Rs. 500 and more importantly you can plan your investments like you can put some money every month or you can invest in small tranches and you can have a portfolio of many stocks. In real estate I think a small investment would not make sense and even the smallest investment would not be less than Rs. 10 lacs considering the investment to be made in a metropolitan city.

Transaction costs
The transaction costs of buying a property would be much higher than buying a stock. On purchase of stocks you would be charged a brokerage of about 0.5 percent plus service tax and the security transaction tax (STT) is 0.125 percent. In all you pay about 0.75 percent of the value of security as transaction cost. Whereas in case of a property the agent’s commission would be about 2 percent and the stamp duty on registration of property would be about 8 percent plus some other documentation and incidental charges would take it beyond 10 percent. Since the transaction costs are high, you cannot buy and sell property as soon as you can buy and sell the stocks. Thus you can rotate the money in stock market more frequently than in real estate.

Power of finance
One good thing in real estate investment is that you can buy a property by investing only 10 percent of the total value and rest will be financed by the bank. The interest rate charged by the bank will be fixed and any appreciation over and above the interest rate will be your gain. The finance term can be as long as 20 to 25 years. In the stock markets also margin trading is allowed and further you can buy stock futures in the derivatives market by giving a 20 percent margin of the value of futures. However a position can be built only for a period of one month and can be rolled over every month till the position is settled with rollover costs involved but there is no interest charged. Again, as discussed above, the trading in derivatives market requires a lot of information and knowledge.

The stock exchange advantage
When you have invested in stock markets, you know the exact value of your portfolio on any given day because the prices of stocks are quoted on stock exchanges and you can exit the market any time you decide. Whereas in case of real estate investment you only have an estimate of the value of your property and it takes considerable time to sell the property when you decide to exit the market. Therefore your investments in the stock market are more liquid than in real estate.

Initial allotment
Whether real estate or Stock markets, initial allotment route is always safe. In real estate the allotment is generally made by the State level Urban Development Authorities at prices which are lower than the prevailing market prices, therefore these investments have a very low risk of depreciating. In stock markets also the initial public offerings are made under strict guidelines of SEBI and other governing bodies which control malpractices in the stock markets. Secondly the companies offering equities to public do it at reasonable prices to make the issue fully subscribed. The IPOs are generally listed at a premium and good IPOs can be said to be a safe investment.

Lastly, I would say that investment in stock markets require investment of your time as well. You need to spend time to track your portfolio and the news flows on your stocks. If you have time to invest and if you have an appetite for taking risk, you can go for investment in stock markets and if you just want to invest and forget for a long term, go for real estate investment.

Thinking of buying your first house?

Okay, so you have come to a point in life where you need to make the big decision. Buying yourself a house that you can call “Sweet Home“, ready to bid goodbye to the shrieking landlords and be ready to bask in the pride of ownership. Believe me, it can be the most daunting task to buy a house for first timers at least. In fact, it can be more daunting than finding your perfect groom!

With considerable amount of research and preparations, it is not really such a scary proposition after all. With a little extra effort of lapping up on information, doing your homework well, you could land yourself a magical deal! With a little help, and exercising prudence, generations would benefit from this one decision, as it usually happens that property plays an heirloom in most families.

Many factors come into play when deciding to buy a house. Here are few tips that would guide you in this process.

Are you mentally and financially prepared to make the purchase?
Being mentally prepared is still easy, because by now it has settled that you need to buy your own home as it has been reiterated to you for the umpteenth time that its time to do so. Having made that decision, one still needs to rethink and strategize a bit further. Delve a little and ask yourself these questions:

• Do you have any budget constraints?
• Do you have a steady and regular source of income?
• Do you have a job or business, good enough to sustain your expenses?
• Are you planning to live in that area for a few years to come?
• Most importantly, weigh your affordability. Do you have enough funds to make a down payment?

Although many mortgage programs are available, research reveals that your total payout on repayment of loan including interest and tax should not exceed 30-40 percent of your total monthly income. Larger the amount of the down payment, lesser the amount of your mortgage. So, weigh all your options before you dive in.

After much deliberation, one is able to make judicial use of one’s funds. Mental preparation is paramount. Rest assured, with the right guidance your home will prove to be a valuable asset.

Explore, Research and define your search
By now it has sunk in that you need to put aside a certain amount of funds towards purchasing your house. Next step is to find out what is available, what kind of neighborhood you want, what kind of housing are you looking for - condo, single unit apartment, a builder’s floor, a flat or a bungalow. Most importantly, a preliminary sweep of the immediate vicinity is vital. That would give you an idea of defining your search parameters in terms of safety, distances from work place or market place, basic amenities, etc. Survey your surroundings. Is there a park? If you have kids, how far is the school? Take all these factors into consideration.

Again planned research is the key. The most common tool is of course to surf the web to find the kind of abode you are planning to buy. This kind of preliminary search gives one an idea of the kind of vicinity, neighborhood, etc and in some cases with the help of web-based tools such as google maps even aerial views of the area you plan to live in. With all this information just a mouse click away, you would have figured out by now where and what are you looking for. That done, it would be a good idea to get in touch with an agent, preferably someone whom you know and most importantly, who listens to you and understands your needs.

By now you know that you are almost there and just a few steps away from owning your dream home!

Time to explore and narrow down your search
Given that your agent by now understands your needs and exact requirements, he should be showing you homes that fit your particular parameters. It’s time to narrow down your search in terms of the features of the house that suit you best. Features like a backyard, garage, basement, single or double bedroom etc. That done, make sure you don’t look at to many houses in a single day, chances are you would be confused and would not remember the specific details. Best would be to carry a camera (or a mobile with camera phone as is very common these days) and take pictures for future previews before making your decision. Or you could even carry a paper notebook for jotting down some key points regarding the specific properties.

Now you would want to zero down on a couple of houses that suits and fits your parameters.

Thorough home inspection and negotiation
Once you have finalised the house you are interested in buying (after much deliberation of course)., it is now time to do a thorough inspection of the entire house and immediate vicinity. This would help you uncover and detect major or minor defects, which need to be fixed. Discuss with the seller all the details and ask him or her to either lower the cost or pay for the repairs.

According to Reggie Marston, a home inspector “A home inspection should uncover defects that could become very costly to repair after (buyers) assume ownership,” he says. “It will also uncover safety issues, water infiltration issues, roof problems, structural issues, etc”.

This way, you save yourself time and unnecessary expenses. Try to negotiate further with the seller, to get full worth of your money. After all, it’s not every month one goes house shopping.

Time to close the deal on the house
Having completed all the major work, it’s time to close the deal and finally move in. Phew! By now you know it was all well worth the efforts. Now comes the documentation of the deal which should be reviewed by an attorney. The closing paperwork should be thoroughly reviewed by your attorney to make sure that it is in your best interests.

Having labored so hard, it is time indeed to relish and enjoy your new sweet home.

Selling your house? How to get a good price?

So you know its time to bid goodbye to your house and to make it available for sale. Now, you know at the time you did buy your house, it was with this conviction that its going to  prove as a valuable asset in the future by bringing you amazing return profits, either by rentals or by selling. In most cases, residential properties get appreciated over a period of time, and that is the time to hit the iron while it is still hot. Everyone wants to close the deal on their property with a maximum profit possible, however do not rush. With the right kind of presentation, research, and patience you will be on the right track towards a productive transaction. So, let’s just analyze what needs to be done to procure the best deal possible while your house is set to steaming hot in the real estate market.

Research is the key. Get your house appraised by a professional
First off, get the internet search engines working for you. Try to determine the value of your house, by finding out what price did other houses like yours in your area, sold for? There are many property listing websites which would give you an estimate of similar houses like yours and the prices and quotes that people are offering. This would give you an idea of attaching a sensible price tag to your property.

Try to also assess the features in your house that would outweigh the others and give you an advantage in procuring a better deal. For example, the basic amenities, location, neighborhood and most importantly the condition of your property. Try to weigh the bonuses, before you draw out a comparative analysis.

Better still, get talking to a few people be it friends or family, internet message boards or blogs or even your neighborhood. The idea is to get a good handle on the real estate market to ascertain the true value of your house. After all, its not every month that one gets to close a deal on property for a profit.

Having done your own homework and bit of research, its now time to get your house appraised by a professional. This is your next step. Ask your real estate agent to provide you with a detailed “comparative-value analysis” on your home. This analysis would provide you with information like the sale price estimate on houses similar to yours that have been sold only recently. Next step would be to get a fair appraisal on your property by your agent: At what price should you be listing your house and how would they help you sell it?

Time to spruce up your house and put its best face forward!
Let’s face it, looks do matter especially when you want to place a heavy tag on it to extract your property’s full worth, and the first impression is the last. Get rid of junk. Anything that you think has not been of any use to you for over a year, its time to dispose it. Do not exhibit too many personal possessions, empty out your closets, drawers, attics etc. Preferably, just the furniture should be present so it gives the buyer an idea of the kind of space and arrangements that he could make. Try to make the room appear more spacious as well as retaining the purpose of each room.

Most importantly, clean up to a sparkle! This step is vital. Clean corner to corner, even places that you had not thought of cleaning before. Certain buyers scrutinize every fine detail. Alternatively, you could hire a cleaning service to get the best job done. The walls, floors, light fixtures, ceiling fan blades, carpets, windows, faucets - everything needs to be cleaned and polished to a sparkle. Make sure you get rid of cobwebs in the basement and attics as well. This would impart a good impression that you have maintained your house well.

Usually a fresh coat of paint works like magic, and lends a brand new appeal to your house. Try to uncover and detect where repairs need to be made. Check every minute detail. The door knobs and handles as also the floor or counter tiles. Do any of the walls have a gaping hole? Are there any dripping faucets or jammed cabinets/drawers? Get everything fixed to the minutest detail possible. You are working on upping the oomph factor of your house; it will all be well worth it at the end of the deal.

Create Curb Appeal
Ask yourself how your house looks from the outside? The exteriors impart the first impression. Usually it is repainting the outside wall that works wonders. Check the landscaping outside your house. Try to plant a few flowers or place a few fancy pots. Do not let it look barren. Better still, mow the lawn. Make sure your door bell functions properly and if you have a front gate, it should not be creaky or look bedraggled. Most importantly, your house number should be clearly visible, if not get it painted anew.

Well, you are almost there. Now, best option is to get a real estate agent to help you sell your property. Avoid doing it all by yourself. Why? Research reveals that a good real estate agent could get you a price which may be up to 15 percent higher than in case of your doing it on your own. But at the same time you should not rely completely on your real estate agent. Try giving an advertisement in a leading daily and on the internet sites to get options. Weigh all options and more options you have more is your bargaining power.

With the right guidance and exercising prudence you are sure to close the deal at a fine profit. Till then, happy selling!