A PROJECT REPORT ON

“STUDY ON REAL ESTATE IN INDIA”

BACHELOR OF MANAGEMENT

STUDIES

SEMESTER – VI

UNIVERSITY OF MUMBAI
SUBMITTED TO

“JES COLLEGE OF COMMERCE SCIENCE & IT”

UNDER THE GUIDANCE OF

PROF.

SUBMITTED BY
Miss. SANSKRITI RAMSAMUJH SINGH

BATCH: 2022-2023

ROLL NO. 20
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 CERTIFICATE

This is to certify that Miss. has worked and duly completed

his Project Work for the Degree of Bachelor of
Management Studies and her project is
entitled, “STUDY OF REAL ESTATE IN INDIA” under
my guidance and that no part of it has been submitted for
any Degree or any University.

It is her own work and fact reported by her personal

finding and investigation

Principal Internal Examiner External

Examiner (Dr. Prashant Shelar)

Date:
Place: Mumbai

2
 DECLARATION

I undersigned Miss. Sanskriti Ramsamujh Singh, student of

Bachelor of Management Studies, hereby declare that the work
embodied in this project work titled “Study of Real Estate in India”
Forms my own contribution to the research work carried out under the
guidance of Prof. is a result of my own research work
and has not been previously submitted to any other University for any
other Degree/Diploma to this or any other university.

Whenever reference has been made to previous work of

other it has been clearly indicated as such and included in
bibliography.

I, hereby further declare that all information of this

document has been obtained and presented in accordance with
academic rules and ethical conduct

SIGNATURE
(MISS. SANSKRITI RAMSAMUJH SINGH)

DATE:
PLACE: MUMBAI

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 ACKNOWLEDGEMENT
To list who all have helped me is difficult because they are so
Numerous and the depth is so enormous.

I would like to acknowledge the following as being idealistic channels

and fresh dimension in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving

me chance to do the project.

I would like to thank my project Guide for providing

the necessary facilities require for completion of thisproject
and for his moral support and guidance which made theproject
successful.

Lastly, I would like to thank each and every person who directly
helped me in the completion of the project especially my Parents and
Peers who supported me through my project

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 TABLE OF CONTENT

SR NO. PARTICULAR
1 INTRODUCTION
1 INTRODUCTION
2 TYPES OF REAL ESTATE
3 REAL ESTATE MARKET IN INDIA
4 REAL ESTATE AS INVESTMENT
5 REAL ESTATE AND STOCK
6 RECENT DEVELOPMENTS IN REAL ESTATE
2 HISTORY OF REAL ESTATE IN INDIA
HISTORY
EVOLUTION OF REAL ESTATE
SECTOR POST INDEPENDENCE
3 REVIEW OF LITERATURE
1 INVESTMENT SATISFACTION
2 MACRO ECONOMIC VARIABLE AFFECTING
REAL ESTATE MARKET RETURN
3 MARKET FACTOR AFFECTING REAL ESTATE MARKET
4 RESEARCH METHODOLOGY
5 DATA ANALYSIS AND RESULT
6 CONCLUSION
7 SUGGESTION
8 BIBLIOGRAPHY
9 QUESTION

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 ABSTRACT
The present research aimed to study the real estate market in India
brimming with enormous growth yet lacking academic presence. The
study proceeded with some research questions - whether direct real
estate investment is sufficient to be defined as an asset class; its role
in asset portfolio along with the equities; macroeconomic factors
affecting it; best suited time series model for Indian real estate market
return series; behavioral factors influencing it; and how these
behavioral factors influence it?
The study has tried to contribute to the limited research by
investigating the
behavioral biases influencing the real estate market investment
decisions of non- professional retail investors. It contributes to the
lacking academe on housing market dynamics in emerging countries
like India. The study attempted to collect data on as many explanatory
variables as possible to control the omitted variable bias and has used
general-to-specific modelling to simplify the initially high-
dimensional model. To check the sensitivity of the results due to the
feedback loop effect, the study used two sequences of ordering for the
shocks. The study extends the prevailing knowledge base about the
relationship between behavioral biases, investment satisfaction and
reinvestment intention.

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 CHAPTER 1

INTRODUCTION

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INTRODUCTION
The term “Real estate” is first recorded in the 1660s and holds the
oldest English sense of the word. It is derived from the Latin is the
meaning of existing, actual or genuine and estate refers to the Land.
Real estate refers to the property consisting of houses or Land.

Real estate is property consisting of land and the buildings on it,

along with its natural resources such as crops, minerals or water;
immovable property of this nature; an interest vested in this (also) an
item of real property, (more generally) buildings or housing in
general. Real estate is different from personal property, which is not
permanently attached to the land, such as vehicles, boats, jewelry,
furniture, tools and the rolling stock of a farm. Residential real estate
may contain either a single family or multifamily structure that is
available for occupation or for non-business purposes. Residences
can be classified by and how they are connected to neighboring
residences and land. Different types of housing tenure can be used
for the same physical type. For example, connected residences might
be owned by a single entity and leased out, or owned separately with
an agreement covering the relationship between units and common
areas and concerns.

The Government of India passed the Real Estate Regulation Authority

(RERA) Act in March 2016 to ensure efficient and transparent
business transactions in the real estate sector. The RERA act protects
the interests of the builders, homebuyers, real estate brokers, and
stakeholders of the real estate industry.

A real estate brokerage is a firm that employs a team of real estate

agents (realtors) who help facilitate a transaction between the buyers
and sellers of property. Their job is to represent either party and help
them achieve a purchase or sale with the best possible terms.

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The term ‘real estate’ is defined as land, including the air above it and
the ground below it, and any buildings or structures on it. It is also
referred to as realty. It covers residential housing, commercial offices,
trading spaces such as theatres, hotels and restaurants, retail outlets,
industrial buildings such as factories and government buildings. Real
estate involves the purchase, sale, and development of land,
residential and non-residential buildings. The main players in
the real estate market are the landlords, developers, builders, real
estate agents, tenants, buyers etc. The activities of the real estate
sector encompass the housing and construction sectors also.

The real estate sector in India has assumed growing importance with
the liberalization of the economy. The consequent increase in
business opportunities and migration of the labor force has, in turn,
increased the demand for commercial and housing space, especially
rental housing. Developments in the real estate sector are being
influenced by the developments in the retail, hospitality and
entertainment (e.g., hotels, resorts, cinema theatres) industries,
economic services (e.g., hospitals, schools) and information
technology (IT)-enabled services (like call centers)
etc. and vice versa.

The real estate sector is a major employment driver, being the second
largest employer next only to agriculture. This is because of the chain
of backward and forward linkages that the sector has with the other
sectors of the economy, especially with the housing and construction
sector. About 250 ancillary industries such as cement, steel, brick,
timber, building materials etc. are dependent on the real estate
industry.

CURRENT SCENARIO

It is difficult to estimate the exact contribution of the real estate sector

to gross domestic product (GDP) as it appears in a disaggregated and

9
dispersed form in the National Accounts Statistics. Residential
housing and real estate services (activities of all types of dealers such
as operators, developers and agents connected with real estate) is
covered under the category ‘real estate, owner- ship of dwellings,
business and legal services. The gross value added in the ownership
of dwellings is equivalent to gross rental of the residential dwellings
less cost of repairs and maintenance. Gross rental is estimated as a
product of average gross rental per dwelling and the number of census
dwellings and includes imputed rent of owner-occupied
houses.

The rentals of the industrial/trading establishments are deductible

expenses from the profits of these establishments but appear as profits
of the business or company renting out the premises. Similarly,
implicit rents on self-owned real estate is accrued as profits from
business and is difficult to separate from non-real estate profits. The
addition to the stock of real assets with these businesses appears in the
business accounts as capital addition. In the national accounts it
would appear under the head ‘gross fixed capital formation –
construction’. Value of construction output is the additions made to
the stock of real estate assets in the public, private and household
sectors. The contribution of ‘construction’ to GDP is the estimate
of value added derived from the corresponding estimates of this value
of construction output.

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2] TYPES OF REAL ESTATE

Four Major Types Of Real Estate Properties In India

 1) Residential Real Estate.
 2) Commercial Real Estate.
 3) Industrial Real Estate.
 4) Investing in Land.

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1) RESIDENTIAL REAL ESTATE

The residential real estate market in the U.S. is just plain huge.
According to the world property journal, the combined value of the
housing market hit $33.6 trillion this year, larger than the annual
GDPs of the U.S. and China combined.

When you look at the different options for investing in residential real
estate, it’s also easy to understand why the value of the U.S. housing
market has grown by more than 50% over the last 10 years:
 Single-family houses
 Condominiums
 Cooperatives (Co-op)
 Townhomes
 Duplex
 Triplex
 Fourplex
 Mobile homes

Residential real estate consists of housing for individuals, families, or

groups of people. This is the most common type of estate and is the
asset class. ... Within residential, there are single-family homes,
apartments, condominiums, townhouses, and other types of living
arrangements.

Real estate is the land plus any buildings and resources on that land.
Real estate may be used for commercial purposes, like operating a
store or an office, or for industrial purposes, like operating a mine or a
factory. The most common type of real estate, however, is residential
real estate, which is used for housing.

Residential areas encompass a large variety of potential dwellings,

from houses to houseboats, and from neighborhoods types ranging
from the poorest slum to the wealthiest suburban subdivision. Many
of these are not specifically real estate, which is a legal definition
describing a state of ownership: residential real estate emerges when
land sanctioned for residential use is purchased by someone, which
becomes real property.

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Residential real estate is often the most important financial investment
a person owns, and the value of real property on the estate is subject
to shifts in the real estate market. Some people purchase real estate in
the hope of making money, either by selling it at a profit or leasing it
to others and charging them rent. But most people simply live on their
property.

First-time buyers of residential real estate frequently finance their

purchase with a mortgage, a loan issued by a bank for the sole
purpose of buying a home. The more the home is paid off, the more
equity it gains.

In some areas, it’s possible for real property to be used commercially,

especially if the business operates on an appointment-only schedule,
has very few employees, and generates little to no automobile traffic.
Do you own residential real estate? See how long it’ll take you to pay
off your mortgage with Bankrate’s mortgage calculators.

Residential real estate market on the rebound, headed for

consolidation

IN MUMBAI, the largest residential real estate market in India, 8,576

houses were sold in October, the highest for that month in a decade.
November, it seems, is going to be as good—1,441 properties were
registered in the first week of the month, according to the real estate
consultancy Knight Frank India.
The past six years had been rough for the residential real estate sector.
Demonetization, disruptions caused by the Real Estate Regulation and
Development Act and the goods and services tax and a liquidity crisis
had driven down demand for houses. The pandemic was the final
blow. Inventories piled up and developers hit the brakes on new
launches.

The hard times, however, seem to be over now, with buyers returning
to the market. As the prices are steady, it continues to be an excellent
market for buyers. The biggest draw, however, is the all-time low

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interest rates. During the pandemic, central banks around the world
slashed interest rates and pumped money into the system. The
Reserve Bank of India cut the repo rate (the benchmark rate at which
it lends to banks) to just 4 per cent. Banks, in turn, slashed their rates.
Some banks offer home loans at 6.40 per cent interest now.

“A healthy environment fostered by low home loan interest rates is set

to continue as the RBI has kept key policy rates unchanged for the
eighth consecutive time in early October,” said Shishir Baijal,
chairman and managing director of Knight Frank India.

Home sales in the July-September quarter in India’s eight largest

cities surged 92 per cent year-on-year to 64,010 units. This was 104
per cent of the quarterly average in 2019, indicating that sales are now
above the pre-pandemic levels. “The residential market has been
witnessing pent up demand. The market will further be buoyant on
festive tailwinds, supplemented by conducive market dynamics like
low interest rate and deal sweeteners from developers,” said Niranjan
Hiranandani, managing director of Hiranandani Group.

The momentum can be seen across all major markets. Mumbai saw
sales more than double year-on-year to 15,942 units in the September
quarter, according to Knight Frank India. In Hyderabad, sales jumped
more than three-fold to 5,987 units. In Bengaluru, sales surged 131
per cent from a year ago to 11,337 units. Sales rose 94 per cent in
Pune, 75 per cent in Kolkata and 48 per cent in the National Capital
Region. In Kolkata, 6,861 units were sold in the third quarter, 244 per
cent more than the 2019 quarter average.

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2). COMMERCIAL REAL ESTATE.

Commercial real estate (CRE) is property that is used exclusively for

business-related purposes or to provide a workspace rather than as a
living space, which would instead constitute residential real estate.
Most often, commercial real estate is leased to tenants to conduct
income-generating activities. This broad category of real estate can
include everything from a single storefront to a huge shopping center.

Commercial real estate includes several categories, such as retailers of

all kinds—office space, hotels and resorts, strip malls, restaurants, and
healthcare facilities.

The Basics of Commercial Real Estate

Commercial real estate and residential real estate comprise the two
primary categories of real estate property. Residential properties
include structures reserved for human habitation and not for
commercial or industrial use. As its name implies, commercial real
estate is used in commerce, and multi-unit rental properties that serve
as residences for tenants are classified as commercial activity for the
landlord.

Investing in Commercial Real Estate

Investing in commercial real estate can be lucrative and serve as a

hedge against the volatility of the stock market. Investors can make

15
money through property appreciation when they sell, but most returns
come from tenant rents.

Advantages of Commercial Real Estate

One of the biggest advantages of commercial real estate is attractive
leasing rates. In areas where the amount of new construction is either
limited by land or law, commercial real estate can have impressive
returns and considerable monthly cash flows. Industrial buildings
generally rent at a lower rate, though they also have lower overhead
costs compared to an office tower.

Commercial real estate also benefits from comparably longer lease

contracts with tenants than residential real estate. This long lease
length gives the commercial real estate holder a considerable amount
of cash flow stability, as long as long-term tenants occupy the
building.

In addition to offering a stable, rich source of income, commercial

real estate offers the potential for capital appreciation, as long as the
property is well-maintained and kept up to date. And, like all forms of
real estate, it is a distinct asset class that can provide an effective
diversification option to a balanced portfolio.

Disadvantages of Commercial Real Estate

Rules and regulations are the primary deterrents for most people
wanting to invest in commercial real estate directly. The taxes,
mechanics of purchasing, and maintenance responsibilities for
commercial properties are buried in layers of legalese. These
requirements shift according to state, county, industry, size, zoning,
and many other designations. Most investors in commercial real estate
either have specialized knowledge or a payroll of people who do.

Another hurdle is the increased risk brought with tenant turnover,

especially relevant in an economy where unexpected retail closures
leave properties vacant with little advance notice.

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With residences, the facilities requirements of one tenant usually
mirror those of previous or future tenants. However, with a
commercial property, each tenant may have very different needs that
require costly refurbishing. The building owner then has to adapt the
space to accommodate each tenant's specialized trade. A commercial
property with a low vacancy but high tenant turnover may still lose
money due to the cost of renovations for incoming tenants.

For those looking to invest directly, buying a commercial property is

a much more costly proposition than a residential property. Moreover,
while real estate, in general, is among the more illiquid of asset
classes, transactions for commercial buildings tend to move especially
slowly.

Commercial Real Estate Outlook and Forecasts

The U.S. commercial property market took a big hit during the 2008-
2009 recession, but it has experienced consistent annual gains since
2010. These gains have helped recover the recession-era losses.

As reported by Forbes, the retail sector, in particular, has proved a

pain point in the broader commercial property market, as widespread
store closures intensified in 2017 and continued into 2018. For
example, popular mall REIT Westfield Corporation saw their stock
price shed about 30% between mid-2016 and late 2017 before
reversing some losses through January 2018. Unibail-Rodamco SE
acquired Westfield for $15.8 billion, creating Unibail-Rodamco-
Westfield (URW).3

Most research maintains that the property market remains healthy

overall. J.P. Morgan, in its "2019 Commercial Real Estate Outlook,"
largely echoed this view, commenting that 2019 was the tenth year of
increases in commercial property rents and valuations.4

Note that the global COVID19 pandemic beginning in 2020 did not
really cause real estate values to drop substantially. Except for an
initial drop at the beginning of the pandemic, property values have
remained steady or even have risen, much like the stock market,
which recovered from its dramatic drop in Q2 2020 with an equally

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dramatic rally that has run through much of 2021.5 This is a key
difference between the economic fallout occurring in 2020 and what
happened a decade earlier. What is not known is if the required
remote work environment that began in 2020 for most Americans will
have any long-term impact on corporate office needs.

Pros

 Hedge against stock market

 High-yielding source of income
 Stable cash flows from long-term tenants
 Capital appreciation potential

Cons

 More capital required to directly invest

 Greater regulation
 Higher renovation costs
 Illiquid asset

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3) INDUSTRIAL REAL ESTATE

Industrial real estate refers to properties used to develop, manufacture,

or produce goods and products, as well as logistics real estate that
supports the movement and storage of products and goods. These
buildings aren't as glamorous as other types of real estate such as
glimmering skyscrapers, well-manicured multifamily communities, or
crowd-drawing shopping centers. However, industrial real estate is
vital because these properties are the workhorses of the industrial
economy.
PROS AND CONS OF INDUSTRIAL REAL ESTATE

Significant demand: Some speculate the U.S. may need more than 1
billion square feet of additional warehouse space by 2025 to support
fast-growing e-commerce demand. This outlook suggests more
expansion/development opportunities for investors.

Longer rental terms: Industrial leases are usually three to 10 years but
can be up to 25 years, whereas residential leases are a year, and self-
storage properties are month by month. As a result, these properties
tend to generate stable income for years.

Lower maintenance: Industrial properties don't require as much upkeep

as other property types. Most leases are triple net, meaning maintenance
is the tenant's responsibility. Meanwhile, overall longer lease terms
imply that an industrial building owner won't need to renovate the
properties as often since there's lower tenant turnover.
INDUSTRIAL REAL ESTATE AS AN INVESTMENT

While industrial properties aren't as glamorous as other types of real

estate, they're vital to the economy. This means tenants usually sign
long-term leases that supply investors with stable cash flow. Add in
the sector's growth potential, and real estate investors won't want to
overlook this essential property type.

Industrial real estate means that you deal with businesses rather than
regular people. This implies longer leases, as business are not as
likely to change their location as often. It's not rare to see that
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industrial real estate investors rent out their property to the same
business for decades at a time

How did an asset class go from the ugly duckling of the investment
world to the darling in such a short period of time? By now, almost all
consumers are intimately familiar with online shopping. Online
shopping or e-commerce has been the driver for the rapid acceleration
of warehouse demand across the nation, resulting in an ultra-
competitive environment for potential investors of these properties.
Let's take a closer look at the data to see why investors are so bullish
on this sought-after asset class and evaluate where some opportunities
lie going forward.

According to CBRE at the end of 2019, U.S. e-commerce sales

accounted for 15% of the overall retail sales. For every $1 billion in
additional e-commerce sales, the industrial market would need to
deliver 1.25 million square feet of warehouse space to meet this
demand. By 2030, e-commerce sales were projected to account for
43% of overall retail sales by 2030.

Fast forward to today, and those stats have been accelerated by

Covid-19 as most consumers were forced to buy consumer goods and
groceries online, many of whom were adopting shopping online for
the first time. According to a recent report by JLL, retail e-commerce
sales are expected to reach $709.78 billion this up from $601 billion
in 2019. By 2025, some experts believe that e-commerce sales will hit
$1.5 trillion, which would create demand of nearly 1 billion square
feet from e-commerce users over the next five years. It is important to
note that e-commerce users only account for approximately a quarter
of the overall industrial market, so the demand from all industrial
users will be an even higher number.

E-commerce specific warehouse space requires up to three times the

square footage than that of traditional brick-and-mortar retail stores as
retailers offer more variety of products online versus in stores, both in
the number of SKUs and the physical size of the product. E-
commerce has much higher sale returns, and these returns account for
a significant amount of the supply chain spend for companies.

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Distribution facilities handling returns may need up to 20% more
space than a traditional facility. These reverse logistics operators
often prefer the less expensive second generation space, also referred
to as Class B, as many of the Class A building attributes such as
higher ceiling height, excess parking and wider column spacing are
not as necessary for product that will be stacked on the floor and
moved out quickly.

Other industry sectors, such as automotive, tires, third-party logistics

and manufacturing will consider second generation space, because of
the increased demand and higher rental costs from e-commerce
occupiers' preference in leasing Class A space. The "rising tide lifts
all boats" theory rings true as the demand will have a trickle-down
effect to Class B space. Functional and well-located, Class B
warehouse space will offer investors an excellent opportunity to
achieve higher yields than Class A warehouse. As more tenants look
to be as close to dense population centers as possible, we will likely
see more infill, vacant big-box retail be converted to last-mile
distribution space. Class A bulk distribution will continue to be the
most sought after from institutional buyers, and though it has the
lowest returns, it will be likely to continue to have the most consistent
appreciation.

Conversely, Class C warehouse space and smaller, multitenant

industrial that is typically occupied by smaller, local-credit companies
is more likely to be negatively affected in the downturn. A recent
Goldman Sachs report found that 84% of Payroll Protection Program
recipients will exhaust funding by the first week of August, and only
16% are confident that they can make payroll without more assistance
from the government. Only 37% believe they can survive another
shutdown. While it's too early to tell how well the smaller companies
perform, it's fair to say that many will struggle or not survive, making
this type of investment more volatile.

During the peak of Covid-19, many companies utilizing a "just-in-

time" distribution strategy to keep only the minimum amount of
product needed onshore ran into severe shortages of product
inventory. To alleviate these issues in the future, many companies

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will look at producing and holding a larger inventory. A 5% increase
in business inventories in the U.S. could drive additional demand for
500 to 700 million square feet of warehouse space.

The reshoring of industrial manufacturing and distribution has been

underway for the last decade but will likely accelerate due to Covid-
19. The pandemic has magnified the importance of mitigating risks to
global supply chains. A recent Thomasnet.com survey of
approximately 1,000 US-based manufacturers found that 64% are
likely to bring production back to North America. A gradual increase
in production requires an increase in manufacturing and distribution
facilities for not only manufacturers but also their suppliers. China has
too large of a market share for American companies to pull out
completely but look for companies to diversify into other Asian
markets as well as Mexico, which could boost demand in Texas
border towns.

Warehouse space demand used to be strongly correlated with

consumer spending, so it was very much tied to the state of the
economy. Presently, market demand is also correlated to how a
consumer spends — online shopping — and this provides the
industrial market a healthier, more stable, resilient source of demand.
Investors are betting this demand will provide stability, rent growth
and appreciation into the future.

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4) INVESTMENT IN LAND

Owning land gives you financial security and peace of mind. Experts
recommend raw land investing and buying land for future
development, such as housing or building. No maintenance is
required, and you can sell your land at a higher price in the future

It's often been recommended that people should buy land due to its
scarcity. With this in mind, investors need to understand the
practicality of owning land and of running a land-based business
venture. They also need to be aware of the specific types of land-
related investment options available through investment products such
as exchange-traded funds(ETFs) and exchange traded notes (ETNs)

Types of Land Investments

Independently wealthy people can purchase land for personal use,

recreation, and yes, investment. Unfortunately, most people do not
fall into this category. This begs the question: Are land-ownership
opportunities and business ventures capable of generating an
acceptable return on investment for small investors , while still
affording them the joys and attributes associated with land
ownership? To answer this question, you need to be able to evaluate
10 general categories of potential land investments:

 Buying raw land can be a risky investment because it may not

generate any income and may not generate a capital gain when
the property is sold.
 Common types of land investments include residential and
commercial development land; cropland and livestock-raising
land; vineyards and orchards; mineral production land; and
recreational land.
 Potential investors in land need to be aware of the specific types
of land-related investment options available through investment
products such as exchange-traded funds (ETFs) and exchange-
traded notes (ETNs).
 For most small investors, real estate investment trust (REIT)
ETFs are a solid, cost-effective choice because they do not

23
 require direct management, are broadly diversified, and can be
purchased or sold on a real-time basis.
 Various ETFs and ETNs cover most land-based investment
categories, including timber, minerals, and farming.

BENEFITS OF INVESTING IN LAND

While not all land holds equal value, in general, there are a number of
advantages to buying raw land.

Good return on investment

Like residential or commercial investing, land can produce passive

income or large profits depending on how the land is purchased and
sold. I have several colleagues who specialize in buying land and
have done extremely well for themselves over the years. It's possible
to make high-double-digit returns if you buy the right piece of land at
the right price, and there are ways to earn residual passive income
with vacant land.

Things to know before investing in land

As I mentioned before, not all raw land is considered equal.
Environmental factors play a huge role in the value of the property as
a whole. When you evaluate a piece of land, you want to make sure
the property can be developed or used for its intended purpose. If the
parcel of land is considered swampland or near a cliff, it may be
difficult or impossible to develop as desired

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And always conduct thorough due diligence on:

 the property’s zoning

 demand for that type of raw land in that area
 the land's current value or potential future value
 annual property taxes
 public access to the property or if ingress and egress rights are
needed through a neighboring piece of land
 utilities -- if the parcel has infrastructure such as water,
electricity, or septic or sewer, or it will need to be added
 potential restrictions for the area based on local zoning laws

25
3] REAL ESTATE MARKET IN INDIA

Introduction
Real estate sector is one of the most globally recognized sectors. It
comprises of four sub sectors - housing, retail, hospitality, and
commercial. The growth of this sector is well complemented by the
growth in the corporate environment and the demand for office space
as well as urban and semi-urban accommodations. The construction
industry ranks third among the 14 major sectors in terms of direct,
indirect and induced effects in all sectors of the economy.

In India, the real estate sector is the second-highest employment

generator, after the agriculture sector. It is also expected that this
sector will incur more non-resident Indian (NRI) investment, both in
the short term and the long term. Bengaluru is expected to be the most
favored property investment destination for NRIs, followed by
Ahmedabad, Pune, Chennai, Goa, Delhi and Dehradun.

Market Size
By 2040, real estate market will grow to Rs. 65,000 crore (US$ 9.30
billion) from Rs. 12,000 crore (US$ 1.72 billion) in 2019. Real
estate sector in India is expected to reach US$ 1 trillion in market size

26
by 2030, up from US$ 200 billion in 2021 and contribute 13% to the
country’s GDP by 2025. Retail, hospitality, and commercial real
estate are also growing significantly, providing the much-needed
infrastructure for India's growing needs.

As per ICRA estimates, Indian firms are expected to raise >Rs. 3.5
trillion (US$ 48 billion) through infrastructure and real estate
investment trusts in 2022, as compared with raised funds worth US$
29 billion to date.
The office market in top eight cities recorded transactions of 22.2
MSF from July 2020 to December 2020, whereas new completions
were recorded at 17.2 MSF in the same period. In terms of share of
sectoral occupiers, Information Technology (IT/ITES) sector
dominated with a41% share in second half of 2020, followed by BSFI
and Manufacturing sectors with 16% each, while Other Services and
Co- working sectors recorded 17% and 10%, respectively.

According to Savills India, real estate demand for data centers is

expected to increase by 15-18 million sq. ft. by 2025.

In 2020, the manufacturing sector accounted for 24% of office space

leasing at 5.7 million square feet. SMEs and electronic component
manufacturers leased the most between Pune, Chennai and Delhi
NCR, followed by auto sector leasing in Chennai, Ahmedabad and
Pune. The 3PL, e-commerce and retail segments accounted for 34%,
26% and 9% of office space leases, respectively. Of the total PE
investments in real estate in Q4 FY21, the office segment attracted
71% share, followed by retail at 15% and residential and warehousing
with 7% each.

According to JLL India, in the third quarter of 2021, India's net office
absorption reached 5.85 million sq. ft., up 8% YoY in key cities.
Three cities—Delhi-NCR, Mumbai and Pune—accounted for ~62%
of the total volumes recorded in the quarter.
Between July 2021 and September 2021, a total of 55,907 new
housing units were sold in the eight micro markets in India (59% YoY
growth).

27
In the third quarter of 2021 (between July 2021 and September 2021),
new housing supply stood at ~65,211 units, increased by 228% YoY
across the top eight cities compared with ~19,865 units launched in
the third quarter of 2020.

In 2021-22, the commercial space is expected to record increasing

investments. For instance, in October 2021, Chintels Group
announced to invest Rs. 400 crore (US$ 53.47 million) to build a new
commercial project in Gurugram, covering a 9.28 lakh square feet
area.

According to the Economic Times Housing Finance Summit, about 3

houses are built per 1,000 people per year compared with the required
construction rate of five houses per 1,000 population. The current
shortage of housing in urban areas is estimated to be ~10 million
units. An additional 25 million units of affordable housing are
required by 2030 to meet the growth in the country’s urban
population.

Investments/Developments
Indian real estate sector has witnessed high growth in the recent times
with rise in demand for office as well as residential spaces. According
to Colliers India, a property consultant, institutional investments in
the Indian real estate sector are expected to increase by 4% to reach
Rs. 36,500 crore (US$ 5 billion) in 2021, driven by rising interest of
investors towards capturing attractive valuations amid the pandemic.
According to a recent report by Colliers India, private equity
investments in Indian real estate reached US$ 2.9 billion in the first
half of 2021, which was a >2x increase from the first half in 2020.

Exports from SEZs reached Rs. 7.96 lakh crore (US$ 113.0 billion) in
FY20 and grew ~13.6% from Rs. 7.1 lakh crore (US$ 100.3 billion) in
FY19.

In July 2021, the Securities and Exchange Board of India lowered the
minimum application value for Real Estate Investment Trusts from
Rs. 50,000 (US$ 685.28) to Rs. 10,000-15,000 (US$ 137.06 - US$

28
205.59) to make the market more accessible to small and retail
investors.

According to the data released by Department for Promotion of

Industry and Internal Trade Policy (DPIIT), construction is the third-
largest sector in terms of FDI inflow. Construction is the third-largest
sector in terms of FDI inflow. FDI in the sector (including
construction development & activities) stood at US$ 51.5 billion
between April 2000 and June 2021.

Some of the major investments and developments in this sector are as

follows:

 Between January 2021 and September 2021, private equity

investment inflows into the real estate sector in India stood at
US$ 3.3 billion.
 Home sales volume across seven major cities in India surged
113% YoY to reach ~62,800 units in the third quarter 2021,
from 29,520 units in the same period last year, signifying
healthy recovery post the strict lockdown imposed in the second
quarter due to the spread of COVID-19 in the country.
 In the third quarter of 2021, the Institutional real estate
investment in India increased by 7% YoY. Investment registered
in the first nine months of 2021 stood at US$ 2,977 million, as
against US$ 1,534 million in the same period last year.
 In November 2021, Ascendas India bought Aurum Ventures’
16-storey commercial tower in Navi Mumbai for Rs. 353 crore
(US$ 47 million), making it the largest deal of a standalone
commercial tower by a global institutional investor during the
past few years.
 REA India-owned online real estate company Housing.com tied
up with online legal assistance start-ups Legal Kart, Lawrato,
Vidhikarya and Vakil in 2021 to offer legal advice and
assistance to homebuyers.
 Top three cities—Mumbai (~39%), NCR-Delhi (~19%) and
Bengaluru (~19%)—attracted ~77% of the total investments
recorded in the third quarter of 2021.

29
 India's flexible space stock is likely to expand by 10-15% YoY,
from the current 36 million sq. ft., in the next three years,
according to a report by CBRE.
 To establish an investment platform for the Indian retail-led
mixed-use assets, in June 2021, GIC announced to acquire a
minority stake in Phoenix Mills’ portfolio (worth US$ 733
million).
 In May 2021, Blackstone Real Estate acquired Embassy
Industrial Parks for Rs. 5,250 crore (US$ 716.49 million) to
expand its presence in the country.
 To expand into the Indian real estate market, SRAM & MRAM
Group collaborated with Area CAS Developers and
Infrastructure Private Limited (Area Group), and Gupta Builders
and Promoters Private Limited (GBP Group) of India. It plans to
invest US$ 100 million in the real estate sector.
 According to Anarock, housing sales in seven cities increased
by 29% and new launches by 51% in Q4 FY21 over Q4 FY20.
 Private market investor, Blackstone, which has significantly
invested in the Indian real estate sector (worth Rs. 3.8 lakh crore
(US$ 50 billion), is seeking to invest an additional Rs. 1.7 lakh
crore (US$ 22 billion) by 2030.
 In 2021, working remotely is being adopted at a fast pace and
demand for affordable houses with ticket size below Rs. 40-50
lakh is expected to rise in Tier 2 and 3 cities, leading to an
increase in prices in those geographies.
 In April 2021, HDFC Capital Advisors (HDFC Capital)
partnered with Cerberus Capital Management (Cerberus) to
create a platform that will focus on high-yield opportunities in
the residential real estate sector in India. The platform seeks to
purchase inventory and provide last-mile funding for under
construction residential projects across the country.
 In March 2021, Godrej Properties announced it would launch 10
new real estate projects in Q4.
 In March 2021, Godrej Properties increased its equity stake in
Godrej Realty from 51% to 100% by acquiring equity shares
from HDFC Venture Trustee Company.

30
  In January 2021, SOBHA Limited’s wholly owned subsidiary,
Sabha Highrise Ventures Pvt. Ltd. acquired 100% share in
Anna Lakshmi Land Developers Pvt. Ltd.

Government Initiatives
Government of India along with the governments of respective States
has taken several initiatives to encourage development in the sector.
The Smart City Project, with a plan to build 100 smart cities, is a
prime opportunity for real estate companies. Below are some of the
other major Government initiatives:

 In October 2021, the RBI announced to keep benchmark interest

rate unchanged at 4%, giving a major boost to the real estate
sector in the country. The low home loan interest rates regime is
expected to drive the housing demand and increase sales by 35-
40% in the festive season in 2021.
 Under Union Budget 2021-22, tax deduction up to Rs. 1.5 lakh
(US$ 2069.89) on interest on housing loan, and tax holiday for
affordable housing projects have been extended until the end of
fiscal 2021-22.
 The Atmanirbhar Bharat 3.0 package announced by Finance
Minister Mrs. Nirmala Sitharaman in November 2020 included
income tax relief measures for real estate developers and
homebuyers for primary purchase/sale of residential units of
value (up to Rs. 2 crore (US$ 271,450.60) from November 12,
2020 to June 30, 2021).
 In order to revive around 1,600 stalled housing projects across
top cities in the country, the Union Cabinet has approved the
setting up of Rs. 25,000 crore (US$ 3.58 billion) alternative
investment fund (AIF).
 Government has created an Affordable Housing Fund (AHF) in
the National Housing Bank (NHB) with an initial corpus of Rs.
10,000 crore (US$ 1.43 billion) using priority sector lending
short fall of banks/financial institutions for micro financing of
the HFCs.

31
  As of January 31, 2021, India formally approved 425 SEZs, of
which 265 were already operational. Most special economic
zones (SEZs) are in the IT/ BPM sector.

Road Ahead
The Securities and Exchange Board of India (SEBI) has given its
approval for the Real Estate Investment Trust (REIT) platform, which
will allow all kind of investors to invest in the Indian real estate
market. It would create an opportunity worth Rs. 1.25 trillion (US$
19.65 billion) in the Indian market in the coming years. Responding to
an increasingly well-informed consumer base and bearing in mind the
aspect of globalization, Indian real estate developers have shifted
gears and accepted fresh challenges. The most marked change has
been the shift from family owned businesses to that of professionally
managed ones. Real estate developers, in meeting the growing need
for managing multiple projects across cities, are also investing in
centralized processes to source material and organize manpower and
hiring qualified professionals in areas like project management,
architecture and engineering.

The residential sector is expected to grow significantly, with the

central government aiming to build 20 million affordable houses in
urban areas across the country by 2022, under the ambitious Pradhan
Mantri Awas Yojana (PMAY) scheme of the Union Ministry of
Housing and Urban Affairs. Expected growth in the number of
housing units in urban areas will increase the demand for commercial
and retail office space.

The current shortage of housing in urban areas is estimated to be ~10

million units. An additional 25 million units of affordable housing are
required by 2030 to meet the growth in the country’s urban
population.

The growing flow of FDI in Indian real estate is encouraging

increased transparency. Developers, in order to attract funding, have
revamped their accounting and management systems to meet due
diligence standards. Indian real estate is expected to attract substantial

32
amount of FDI in the next two years with US$ 8 billion capital
infusion by FY22.

33
 4] REAL ESTATE AS AN INVESTMENT
As an investment
Just as with other types of investments, however, real estate investing
can be risky. You can limit your risks by doing your due diligence
and conducting a thorough real estate market and rental property
analysis.

In markets where land and building prices are rising, real estate is
often purchased as an investment, whether or not the owner intends to
use the property. Often investment properties are rented out, but
flipping involves quickly reselling a property, sometimes taking
advantage of arbitrage or quickly rising value, and sometimes after
repairs are made that substantially raise the value of the property.

Real estate consistently increases in value over time and outperforms

other investments. Plus, it isn't as vulnerable to short-term fluctuations
as the stock market. You get a tangible, usable asset, whether you're
renting out an apartment or commercial building for income or buying
a home

Luxury real estate is sometimes used as a way to store value,

especially by wealthy foreigners, without any particular attempt to
rent it out. Some luxury units in London and New York City have
been used as a way for corrupt foreign government officials and
businesspeople from countries without strong rule of law to launder
money or to protect it from seizure.

Real estate can be used for residential, commercial, or industrial

purposes, and includes any resources on the land such as water or
minerals. Real estate is often the most valuable investment a person
owns, and the value of real estate is a key indicator of an economy's
health.
Real estate was rated the best long-term investment – well ahead of
gold, stocks and mutual funds, savings accounts/CDs and bonds. And
it's the same in India – where the emotional satisfaction of owning
your own property is inherently very strong.

34
Real estate properties may generate revenue through a number of
means, including net operating income, tax shelter offsets, equity
build-up, and capital appreciation. Net operating income is the sum
ofall profits from rents and other sources of ordinary income
generatedby a property, minus the sum of ongoing expenses, such as
maintenance, utilities, fees, taxes, and other expenses. Rent is one of
the main sources of revenue in commercial real estate investment.
Tenants pay an agreed upon sum to landlords in exchange for the use
of real property, and may also pay a portion of upkeep or operating
expenses on the property.

Tax shelter offsets occur in one of three ways: depreciation (which

may sometimes be accelerated), tax credits, and carryover losses
which reduce tax liability charged against income from other sources
for a period of 27.5 years. Some tax shelter benefits can be
transferable, depending on the laws governing tax liability in the
jurisdiction where the property is located. These can be sold to others
for a cash return or other benefits.

Equity build-up is the increase in the investor's equity ratio as the

portion of debt service payments devoted to principal accrue over
time. Equity build-up counts as positive cash flow from the asset
where the debt service payment is made out of income from the
property, rather than from independent income sources.

Capital appreciation is the increase in the market value of the asset

over time, realized as a cash flow when the property is sold. Capital
appreciation can be very unpredictable unless it is part of a
development and improvement strategy. The purchase of a property
for which the majority of the projected cash flows are expected from
capital appreciation (prices going up) rather than other sources is
considered speculation rather than investment.

Some individuals and companies focus their investment strategy on

purchasing properties that are in some stage of foreclosure. A
property is considered in pre-foreclosure when the homeowner has
defaulted on their mortgage loan. Formal foreclosure processes vary
by state and may be judicial or non-judicial, which affects the length

35
of time the property is in the pre-foreclosure phase. Once the formal
foreclosure processes are underway, these properties can be purchased
at a public sale, usually called a foreclosure auction or sheriff's sale. If
the property does not sell at the public auction, then ownership of the
property is returned to the lender. Properties at this phase are called
Real Estate Owned, or REOs.

Once a property is sold at the foreclosure auction or as an REO, the

lender may keep the proceeds to satisfy their mortgage and any legal
costs that they incurred minus the costs of the sale and any
outstanding tax obligation

36
5] REAL ESTATE AND STOCK

Reasons to Invest in Real Estate vs. Stocks

Many investors have traditionally turned to the stock market as a

place to put their investing dollars. While stocks are a well-known
investment option, not everyone knows that buying real estate is also
considered an investment. Under the right circumstances, real estate
can be an alternative to stocks, offering lower risk, yielding better
returns, and providing greater diversification .

Whether it's planning for retirement, saving for a college fund, or

earning residual income, individuals need an investment strategy that
fits their budget and needs. Comparing an investment in real estate to
buying stocks is a good place to start.

 The decision to invest in real estate or stocks is a personal

choice that depends on your financial situation, risk tolerance,
goals, and investment style.
 Real estate and stocks have different risks and opportunities.
 Real estate is not as liquid as stocks and tends to require more
money and time. But it does provide a passive income stream
and the potential for substantial appreciation.
 Stocks are subject to market, economic, and inflationary risks,
but don't require a big cash injection, and they generally can be
easily bought and sold.

Overview: Real Estate vs. Stocks

Investing in real estate or stocks is a personal choice that depends on
your financial situation, risk tolerance, goals, and investment style. It's
safe to assume that more people invest in the stock market, perhaps
because it doesn't take as much time or money to buy stocks. If you're
buying real estate, you're going to have to save and put down a
substantial amount of money.

37
When you buy stocks, you buy a tiny piece of that company. In
general, you can make money two ways with stocks: value
appreciation as the company's stock increases and dividends.

Returns: Real Estate vs. Stocks

Investing in the stock market makes the most sense when paired with
benefits that boost your returns, such as company matching in a
401(k). But those perks are not always available and there is a limit to
how much you can benefit from them. Investing in the stock market
independently can be unpredictable and the return on investment
(ROI) is often lower than expected.

Comparing the returns of real estate and the stock market is an apples-
to-oranges comparison—the factors that affect prices, values, and
returns are very distinct. However, we can get a general idea by
comparing the total returns of the SPDR S&P 500 ETF (SPY) and the
Vanguard Real Estate ETF Total Return (VNQ) for the last 17 years:

Many investors have traditionally turned to the stock market as a

place to put their investing dollars. While stocks are a well-known
investment option, not everyone knows that buying real estate is also
considered an investment. Under the right circumstances, real estate
can be an alternative to stocks, offering lower risk, yielding better
returns, and providing greater diversification.

Whether it's planning for retirement, saving for a college fund, or

earning residual income, individuals need an investment strategy that
fits their budget and needs. Comparing an investment in real estate to
buying stocks is a good place to start.

 The decision to invest in real estate or stocks is a personal

choice that depends on your financial situation, risk tolerance,
goals, and investment style.
 Real estate and stocks have different risks and opportunities.

38
  Real estate is not as liquid as stocks and tends to require more
money and time. But it does provide a passive income stream
and the potential for substantial appreciation.
 Stocks are subject to market, economic, and inflationary risks,
but don't require a big cash injection, and they generally can be
easily bought and sold.

Overview: Real Estate vs. Stocks

Investing in real estate or stocks is a personal choice that depends on
your financial situation, risk tolerance, goals, and investment style. It's
safe to assume that more people invest in the stock market, perhaps
because it doesn't take as much time or money to buy stocks. If you're
buying real estate, you're going to have to save and put down a
substantial amount of money.

When you buy stocks, you buy a tiny piece of that company. In
general, you can make money two ways with stocks: value
appreciation as the company's stock increases and dividends.

When you buy real estate, you acquire physical land or property. Most
real estate investors make money by collecting rents (which can
provide a steady income stream) and through appreciation, as the
property's value goes up. Also, since real estate can be leveraged, it's
possible to expand your holdings even if you can't afford to pay cash
outright.

For many prospective investors, real estate is appealing because it is a

tangible asset that can be controlled, with the added benefit of
diversification. Real estate investors who buy property own
something concrete for which they can be accountable. Note that real
estate investment trusts (REITs) are a way to invest in real estate and
are bought and sold like stocks.

There are a number of considerations for investors when choosing

between investing in stocks or buying real estate as an investment.

39
Risks: Real Estate vs. Stocks
The housing bubble and banking crisis of 2008 brought a decline in
value for investors in the real estate and the stock markets—and the
COVID-19 crisis is doing it all over again, albeit for different reasons.
Still, it's important to remember that stocks and real estate have very
different risks overall.

Real Estate

Here are some things to consider when it comes to real estate and the
risks associated with it. The most important risk that people miss is
that real estate requires a lot of research. It's not something you can go
into casually and expect immediate results and returns. Real estate is
not an asset that's easily liquidated, and it can't be cashed in quickly.
This means you can't cash it in when you're in a bind.

For home flippers or those who own rental properties, there are risks
that come with handling repairs or managing rentals. Some of the
main issues you'll come across are the costs, not to mention the time
and headache of having to deal with tenants. And you may not be able
to put them off if there's an emergency.

As an investor, you may want and need to consider hiring a contractor

to handle repairs and renovations of your flip, or a property manager
to oversee the upkeep of your rental. This may cut into your bottom
line, but it does reduce your time spent overseeing your investment.

Stocks

The stock market is subject to several different kinds of risk: market,

economic, and inflationary risks. First, stock values can be extremely
volatile with their prices subject to fluctuations in the market.
Volatility can be caused by geopolitical and company-specific events.
Say, for instance, a company has operations in another country, this
foreign division is subject to the laws and rules of that nation.

But if that country's economy has problems, or any political troubles

arise, that company's stock may suffer. Stocks are also subject to the

40
economic cycle as well as monetary policy, regulations, tax revisions,
or even changes in the interest rates set by a country's central bank.

Other risks may stem from the investor themselves. Investors who
choose not to diversify their holdings are also exposing themselves to
greater risk.

Consider this: dividend-paying stocks can generate reliable income,

but it would take a considerable investment in a high-yielding
dividend stock to generate enough income to sustain retirement
without selling additional securities. Relying solely on high-yield
dividends means an investor may miss out on opportunities for higher
growth investments.

Pros and Cons: Stocks

For most investors, it does not take a huge cash infusion to get started
in the stock market, making it an appealing option. Unlike real estate,
stocks are liquid and are generally easily bought and sold, so you can
rely on them in case of emergencies. With so many stocks and ETFs
to choose from, it can be easy to build a well-diversified portfolio.

But as noted above, stocks tend to be more volatile, leading to a more

risky investment, especially if you panic sell . Selling your stocks may
result in a capital gains tax, making your tax burden much
heavier.2 And unless you have a lot of money in the market, your
holdings may not be able to grow much.

Pros

 Highly liquid
 Easy to diversify
 Low transaction fees
 Easy to add to tax-advantaged retirement accounts

Cons

 More volatile than real estate

 Selling stocks can trigger big taxes

41
  Some stocks move sideways for years
 Potential for emotion-driven investing

Additional Factors to Consider

Buying a property requires more initial capital than investing in
stocks, mutual funds, or even REITs. However, when purchasing
property, investors have more leverage over their money, enabling
them to buy a more valuable investment vehicle.

Putting $25,000 into securities buys $25,000 in value—assuming

you're not using margin . Conversely, the same investment in real
estate could buy $125,000 or so in property with a mortgage and tax-
deductible interest.1

Cash garnered from rent is expected to cover the mortgage, insurance,

property taxes, and repairs. But a well-managed property also
generates income for the owners. Additional real estate investment
benefits include depreciation and other tax write-offs.3

Real estate that generates monthly rental income can increase with
inflation even in a rent-controlled area, which offers an additional
advantage. Another consideration is taxes after selling the investment.
Selling stocks typically results in capital gains taxes. Real estate
capital gains can be deferred if another property is purchased after the
sale, called a 1031 exchange in the tax code.4

Internal Revenue Service. “Like-Kind Exchange - Real Estate Tax

Tips.” Accessed Jan. 6, 2021.

Real estate and stocks both present risks and rewards. Investing in the
stock market gets a lot of attention as a retirement investment vehicle,
particularly for people who contribute regularly to a tax-advantaged
account, such as a 401(k) or individual retirement account (IRA).
However, diversification is important, especially when saving for the
long term.

42
Investors should opt for a variety of asset classes or sectors to reduce
their risk. Investing in real estate is an ideal way to diversify your
investment portfolio, reduce risks, and maximize returns. Keep in
mind that many investors put money into both the stock market and
real estate. And if you like the idea of investing in real estate but don't
want to own and manage properties, a REIT might be worth a second
look.

43
 6] RECENT DEVELPOMENT IN REAL ESTATE
The lack of transparency and inefficiency in the real estate sector has
created a demand for the proper vigilance mechanism. To address this
concern, the Government of India brought a change in the legislation
as well as implementation of specialized regulator through the
enactment of the Real Estate (Regulation and Development) Act,
2016 ("Act") on May 1, 2016 which has come into full force from
May 1, 2017. The Act provides that appropriate state government
shall establish Real Estate Regulatory Authority to regulate and
promote the state's / Union Territory's real estate sector. RERA rules
have so far been notified by 18 states and Union Territories.

The Act focuses primarily on promoting the timely completion of

projects and maintaining the consistency by regulating the sale in real
estate sector. It further provides for establishing an adjudicating
mechanism for speedy dispute redressal through Real Estate
Appellate Tribunal ("REAT") to hear appeals from the decisions and
orders from the Real Estate Regulatory Authority ("RERA"). With
effect from May 1, 2016, the Act brought into force 69 of the 92
sections of the Act and now, with all the 92 Sections of the Act
coming into force with effect from May 1, 2017, the builders /
promoters will have to ensure that all the ongoing projects as well as
new projects registered with the RERA are given completion
certificates by the end of July.

The Act has established RERA, REAT and the Central Advisory
Council ("CAC") ford is charging its functions under the act and has
vested with the powers to regulate its own procedure. The CAC will
represent the interests of real estate industry, consumers, real estate
agents, construction laborer’s, academic and research bodies in the
real estate sector and will carry out the functions for advising the
recommending the Central Government in matters related to
implementation of the Act, protection of consumer interest, foster the
growth and development of the real estate sector and as any other
matter as may be assigned to it by the Central Government. The Act

44
has further entrusted RERA and REAT with the regulatory and
adjudicatory authorities with members specializing in the related field
by increasing the scope for greater certainty to the matters under the
Act. The RERA will facilitate the growth and promotion of
transparent, efficient and competitive real estate sector through the
protection of the allotees' interest, promoter and real estate agent,
creation of single window system for ensuring time bound approvals
and clearances of the projects and the measures to encourage
investment in the real estate sector including measures to increase
financial assistance to affordable housing segment.

Some of the key provisions of the Act are:

a. Mandatory registration of real estate projects by the Promoters

with RERA. However, no registration of the real estate projects
will be required inter alia where the area of land does not exceed
500 (five hundred) square meters or the number of apartments
does not exceed 8 (eight) inclusive of all phases.
b. Mandatory registration of real estate agents.
c. Provides functions and duties of promoters along with rights and
duties of allottees.
Depositing70%of the amounts realized from the real estate
projects from the allottees from time to time to be deposited in a
separate bank account in a scheduled bank to cover the cost of
construction and the land cost, which will be used only for that
purpose. However, the withdrawal from the account can be
made in the proportion to the percentage of completion of the
project.
d. In case any structural defector any other defect in workmanship,
quality or provision of services or any other obligations of the
promoter as per the agreement for sale relating to such
development is brought to the notice of the promoter within a
period of 5 years by the allottee from the date of handing over
possession, the promoter will rectify such defects without
further charge, within thirty (30) days, and in the event of
promoter's failure to rectify such defects within such time, the
aggrieved allottees shall be entitled to receive appropriate
compensation in the manner as provided under this Act.

45
 e. Both developers and buyers to pay the same penal interest of
SBI's Marginal Cost of Lending Rate plus 2% in case of delays.
f. The proposed project is required to be developed and completed
by the Promoter as per the approved sanctioned plans, layout
plans and specifications. Any alterations or additions in the
sanctioned plans, layout plans and specifications after the
initiation of the project would require 2/3rd of the allottees.

The allottees' interest has been protected under the Act such as
allottees can get the requisite information regarding approved
sanctioned plans, specifications etc., claim refunds (along with
interest) of the amount paid to the promoter in the event promoter
fails to complete or is unable to give possession of an apartment, plot
or building: (a) in accordance with the terms of the agreement for sale
or, as the case maybe, duly completed by the date specified therein; or
(b) due to discontinuance of his business as a developer on account of
suspension or revocation of the registration under this Act or for any
other reason, get compensation if allot tee (within five years of getting
possession) brings to the notice of promoters any structural defect or
any other defect in workmanship, quality or provision of services or
any other obligations of the promoter, allot tees may also file a
complaint with the RERA (or the adjudicating officer) for any
violation or contravention of the provisions of the Act. Further, any
person aggrieved by the decision or order of the RERA may file an
appeal before the Appellate Tribunal of the relevant jurisdiction.

As regards builders / promoters, there is a mixed reaction in the real

estate industry with the Act coming into full force. The recent
development has brought the builders / promoters into action for
making requisite financial arrangement to comply with the provisions
of the Act. The builders / promoters are now restructuring their real
estate projects to meet the requirements of the Act more effectively
and proposing to treat each building as a different phase for
registration process.

The mid-sized builders / promoters are also proposing to realign their

business, which may include seeking financial assistance to meet the
70% deposit criteria. It is also interesting to note that some of the

46
builders / promoters are now in a hurry to handover the possession to
the allot tees for avoiding penalty under the Act, which shows that the
provisions of the Act will play an effective role in ensuring that the
possession is handed over to allot tees in a timely manner.

We are hopeful that this recent development will bring a much-

awaited change and constructive progress in the real estate industry. A
new transparent, regulated and disciplined real estate market may
emerge. This may also encourage the builders / promoter store align
and revamp their business models to attract global capital flows in the
Indian real estate market.

EMERGING TREND IN REAL ESTATE

As we march towards 2022 with a pandemic-riddled economy, the

industry is set to enable recovery with a new phase of growth,
innovation, technology, and investment trends. Real estate is a multi-
faceted industry, with many dimensions to it. While some of its
sectors grew during the pandemic, some are recovering from the
challenges it faced. The pandemic accelerated the demand on the
industrial front, particularly for warehouses, data centers, and
distribution centers. This trend opened new pathways for the sector to
grow in the coming years.

47
2021 The year that was Adapting the digitization wave – The sector
also witnessed a digitization wave on a large scale. With the changing
paradigm, real estate players were required to evolve and adapt to the
new normal. From online site visits to online payment, developers are
using innovative technological tools and practices across various
stages of business operations. Virtual walkthroughs have been a
game-changer for the industry during the pandemic and will continue
to be so.

Demand in Tier 2 & 3 cities and peripheral areas –Demand for

residential properties in Tier 2 and Tier 3 cities gained momentum in
the past few months. The desire for a better lifestyle, remote working
culture and reverse migration led to an increased demand for homes in
the peripheral areas. Furthermore, this created a chance for real estate
players to explore and offer great home experiences to this untapped
consumer demand and capture new markets.

Ready-to-move-in projects gaining popularity – Last year saw the

demand for ready-to-move-in units surge in almost all cities. It
became a preferred segment owing to the shift in buyer mentality, to
seek safety and avoid risks associated with under-construction
properties.
Government support to the industry – Considering the revival
potential of the real estate sector, the government offered progressive
policies to give a boost to the industry. In order to boost the economy,
the government took initiatives to reduce tax incentives, providing a
conducive environment to encourage home buyers. The low-interest
rates on home loans have invariably increased the affordability factor
for potential home buyers.

Outcome on Sales – According to an industry report, homebuyers

took advantage of incentives offered by developers and low interest
rates, leading to an increase in residential sales in seven cities across
the country. Post the second wave, sales in the fourth quarter of 2021
recovered to & 90% volumes recorded in 2020 across the top seven
cities.

48
Commercial real estate equation – Flexible workspaces are in high
demand because they not only perfectly match the “new normal,” but
also provide companies with a way to save costs, raise productivity,
improve work experience and provide employees with more
flexibility. In 2022, the co-working segment is expected to shape
demand trajectory for the industry.

Time ahead in 2022 -23

The real estate sector’s contribution to the country’s GDP is set to go

up to 10% by 2030, contributing about $1 trillion to the economy,
according to an industry report. Let us look at some of the key trends
in the real estate industry that we foresee in the coming years.

Fractional ownership in commercial –Online investment platforms are

pursuing investors by offering fractional ownership with high yield
returns. The concept has gained popularity and is poised to reduce the
financial burden on the sole investor of the property.

Flexibility in office space – Companies are fragmenting their offices

across Tier 1 and Tier 2 cities, offering flexibility to employees. The
pandemic re-shaped the office working models for not only
employees but also for employers. Leading companies moved their
offices to co-working locations and continue to do so to optimize
costs and achieve better employee engagement in current
circumstances.

Data centers- Due to digitalization in the aftermath of the pandemic,

the demand for data centers has multiplied. India’s transformation
into a ‘digital economy’ increased the demand for the sector. The
demand for data centers in India has increased due to rising demand
from fintech, e-commerce, media, education, and content companies.

Affordable segment to grow – In 2021, we witnessed the affordable

segment as a leading buyer preference. Over half of the housing
demand in leading markets was driven by the affordable segment.
From this, the coming year has offered developers a chance to focus
on optimizing cost, despite the increasing input prices, by deploying

49
technology and bringing innovation to their offerings for keeping the
segment afloat in 2022 and meeting consumer demands.

Last-mile delivery in Warehousing – The pandemic accelerated the

pace of the e-commerce industry to meet the consumers’ needs for
increased home shopping. Swift fulfilment and timely distribution of
orders became a priority of every online shopping experience. This
has led to last-mile delivery with city-specific local warehousing
touchpoints.

To sum up
The current industry trends indicate that the future of Indian real
estate not only looks bright but is set to do better in the coming years.
There are several dynamics that will continue to impact the multiple
touch points of the real estate industry, such as: prices, buyer
behavior, demographic shift, cost of raw materials in general. Hence,
affordable, self-sustaining properties with a consumer experience
centric approach will lead the way for the industry in the coming year.

5 emerging trends that may reshape real estate sector in 2020

The real estate industry has been one of the most prominent pillars of
the Indian economy. With a contribution of close to 6-8% to India’s
Gross Domestic Product (GDP), it stands second in terms of
employment generation. The sector has been at the cusp of
transformation with policy changes, fall-out of funding agencies and
their subsequent cautiousness towards residential projects, developers
experimenting with new sectors and offerings, etc. Given the way the
economy is moving forward and the sector’s performance over the
last 18 months, some trends are becoming prominent in the Indian
real estate industry and are being embraced with the spirit of
endurance.

50
Technological transformation

Technology has been playing a pivotal role in the growth of the real
estate sector in India and has led to gains not only for buyers but also
the sellers. Not just in terms of construction, but even in terms of
simplifying the property buying process. Access to information,
customer expectations, and client service are very different from what
they were even five years ago. Technology has increased the
construction quality standards and reduced the time taken to build the
infrastructure. What once took months and years to build, can now be
achieved in weeks, without taking a toll on the project cost and labor.
The concept of augmented and virtual reality is picking up pace
where buyers can experience the property without physically visiting
it. India could potentially become a hub for blockchain technology in
the real estate sector as it will bring the necessary confidence back in
the system.

Foreign interest
Foreign capital has been chasing investment-ready assets in core
office locations in major cities. The commercial real estate sector has
been a big draw for foreign investors in the past five years owing to
the steady demand and rising rentals. The first half of 2019 saw a
28% increase in private equity inflow compared to the same time last
year, thus signaling confidence in India’s grade A offices, retail
properties and the warehousing sector. Foreign investors have formed
investment partnerships by backing local developers. Through these
platforms, we will see further traction in both core as well as
development assets. The overwhelming response to the stock market
listing of Embassy Office Parks’ REIT (real estate investment trust)
this year has given confidence to investors for opportunities in REITs
which are expected to open up more funding avenues for the sector.

Focus on consumer demand

The slowdown in sales and tightening of liquidity have prompted
developers to realign their strategies. Affordability and trust being the
key words, large as well as small-sized developers have jumped into
the bandwagon of aligning with consumer demand. The average size
51
of units have decreased to help “fit into the budget”. Developers are
trying to focus on completion of the existing projects given that the
current demand is primarily from the end user. Builders are open to
mergers, consolidations, acquisitions, joint developments and joint
ventures with established and prestigious developers. Hyderabad has
seen numerous examples where strong local developers have joined
hands with national players to elevate the level of offering.

Market Consolidation to become more pronounced

While the overall home sales remain weak in the country, the top
developers have still managed to show sustained sales in major cities.
These developers are also striving to reduce their debt by hiving off
assets, while the smaller firms are struggling to survive. The number
of property firms tipped into insolvency has more than doubled since
last year. Though the government plans to set up a Rs 25,000-crore
fund for stalled residential projects, this fund is estimated to help
revive less than 10% constructions that are running behind schedule.
The slowdown will thus swallow many more of the smaller firms.

Growth of new segments

The real estate model in India has changed quite a bit in the last
couple of years. The year 2020 will see the industry grow in terms of
newer policies aimed at improving buyer sentiments and the sale of
affordable housing. The definition of ‘affordability’ is changing as
affordable projects have started including amenities that typically
luxury projects offered. The residential segment will also see more
traction from the buyers with increased demand for co-living and
affordable spaces. On the commercial front, co-working space, data
centers and warehousing space would continue to be in demand.

The real estate industry has evolved from being a brick and mortar
driven industry to a service-driven product offering. It is important to
customize the offering according to the changing dynamics of the
market. In the days ahead, one can expect a flurry of changes in the
way these offerings are structured across markets and segments.

52
 CHAPTER 2

HISTORY OF REAL ESTATE IN

INDIA

53
HISTORY
From following the Zamindari system to renting out office-spaces to
working professionals for modern and focused work output, the Real
estate market in India has come a long way. Being the largest
democracy and the second-largest populous nation, India has
experienced a major boom in the Real Estate sector post-
independence mainly after the 1990s. A lot has been observed and
said by the experts about the industry and a lot is going to be
remarked but, one thing that is sure about the industry is its ever-
growing market. After a major surge in the 1990s due to economic
globalization, many industry leaders and organizations developed
spaces into some of the metropolitan cities experiencing exponential
growth.

But, that’s not the history of this market. India was a freed nation in
1947 and a massive change took place post-independence in almost
all the sectors and markets of the nation. Let’s talk about the Real
Estate market for a while.

Post-Independence – 1980s
It all started after Lahore was drawn as a part of Pakistan due to the
Radcliffe line. One of the most prolific and diversified cities, Lahore
was the hub of gatherings and people, coming to the city for their
businesses during the struggle for independence. However, after the
inclusion of Lahore in Pakistan there was a void in Punjab for a major
city. And hence, the 1950s – 1960s is known as the period of new
capitals for states such as Punjab, Gujarat, and more. India was still a
poverty-ridden country in the late 1960s which didn’t lead the Real
Estate market towards major growth in the country.

Chandigarh was one of the early planned cities in the post-

independence period which was a major success during the 1970s. It
was influential for a fresh and increased township and cities across the
country as Chandigarh was not only a success for people living in the
region but also, across the globe.

54
1980-1990
Before the 1980s the country didn’t experience much action in the
real estate market. People were destabilized majorly due to the
exploitation from the hands of Britishers and later through the claws
of landlords. The need for independent stakeholders and investors
were felt in the market. To boost the residential industry in the
country the Central Government established the Housing & Urban
Development Company in 1970, City & Industrial Development
Corporation in 1971 as well as the National Housing Bank in 1988.

1990 – 2000
Economic liberalization was the major highlight of this period. It
happened in 1991 which opened up new avenues for the multinational
companies entering India and foreign investors as well as stakeholders
to invest in the Indian market. The country experienced a surge in
skyscrapers, commercial buildings, growth of urbanization, and
civilized lifestyle. The rate of demand increased due to the growing
population as well as more and more people shifting to the town-side
for better opportunities and lifestyle. Families dropped down from
‘Joint’ to ‘Nuclear.’ The rate of urbanization climbed from 23.34% in
1980 to 25.72% in 1991.

2000 – Today
Fast forward to the times when supply mechanics started playing an
important role in the sector. The concept of the nuclear family was on
the rise and hence the demand for residential spaces increased
parallelly. The Mall concept was introduced throughout the country
from the early 2000s through its first Mall known as the Spencer
Plaza in Chennai. IT companies were set up in various metropolitan,
Tier II, and Tier III cities after the advent of technology and the
Internet. After 2006, the Indian Government sanctioned the
modernization of its Brownfield Airports like Mumbai and Delhi
along with Greenfield airports like Bengaluru which led to a high
increase in the real estate development around the airports. The Real
Estate Investment Trusts (REITs) were also introduced in 2014 which
allowed investors with a limited budget to make safe investments.
55
May 1st, 2017 saw one of the biggest takes in the recent times of the
real estate sector- the government passed the Real Estate (Regulation
& Development) Act or RERA to boost the development of cities
which eventually made an advantage to the home buyers as well.

Today, the real estate industry has made a significant effect on the
market. It has the second-largest contribution to the Indian economy.
It is also second on the list of job creation and workforce in the Indian
market.

56
 Evolution of Real Estate Sector Post Independence
India has a rich heritage in the field of construction but many of the
structures were destroyed by invaders specially after the loot and
destruction by the Britishers, Arab and Afghans. In the midst of this
the real estate sector suffered the most as many people became
homeless during the partition and recovery took a long period to
overcome from the wound. The 73 years of post-independence period,
the growth of real estate sector in India has been gradual. Cities have
expanded and with growth in population and industries the real estate
sector grew simultaneously. Cities expanded in planned manner; new
technologies adopted giving rise to fast growth of real estate sector.
The partition of India and Pakistan, Lahore became a part of Pakistan
which was one of the prolific cities of India creating a void for
Punjab, India. Hence, the period between the year 1950 and 1960 is
considered as the period for new capital cities such as Chandigarh,
Gandhinagar. Chandigarh was one of the first planned city developed
in post- independence India. Chandigarh, the dream city of India\'s
first Prime Minister, Jawahar Lal Nehru, was planned by the famous
French architect Le Corbusier. Picturesquely located at the foothills of
Shivalika, it is known as one of the best experiments in urban
planning and modern architecture in the twentieth century in India.

In the decade following it, The Maharashtra Regional and Town

Planning Act was passed in 1966. It was for the first time an Indian
state passed such a real estate law. It gave a major boost for the
governments of other states to design such laws. Considering housing
as the basic necessity, Government gave major impetus to real estate
housing sector, though remained in unorganized sector for a long
time. To boost the residential industry, the central government
established institutions like the Housing and Urban Development
Company in 1970, City & Industrial Development Corporation in
1971 and the National Housing Bank in 1988.

Liberalization of monetary policies in 1990 was the most significant

phase for reforms in real Estate sector. This allowed large number of
multinational companies to enter India. Their entry generated huge
demand for housing complexes and commercial spaces. This led an

57
increase demand for skyscrapers. All big cities like Mumbai, Delhi,
Kolkata, Chennai etc. large numbers of skyscrapers started coming up
with high technological input from architects across the globe.

1990 was perhaps the most critical time for India since the
independence. Large and growing fiscal imbalances coupled with
difficult monetary policies, created a serious looming economic crisis
in the nation. However, the then government managed to liberalize
the monetary policies. This opened up the avenue for the multi-
national companies to enter India, which ultimately led to an increase
in the skyscrapers. NRI’s investment and foreign capital in the early
1990’s led to immense growth in the real estate sector, with cities
experiencing exponential growth.

Real Estate sector got a further boost with influx of IT Companies in

cities such as Bangaluru and Hyderabad and subsequently IT Industry
spread to other parts of the country such as Kolkata were entire area
–sector 5 in Salt Lake was dedicated for IT Companies, Gurugram,
Noida, Vasi in Mumbai, Pune, Chennai and many more. The impact
of IT and ITES development in India had a major impact since the
time of Y2K bug, through which India left its imprint on the entire
world.
Funding for real Estate projects were made easier by allowing Foreign
Direct Investment in 2005 made it possible for the entry of foreign
developers. The mall concept in India was started by Spencer Plaza in
Chennai started in 2000 and followed by Ansal Plaza in Delhi.

Year 2006 saw the Indian government sanctioning modernization of

its Brownfield airport, such as Mumbai, New Delhi along with
Greenfield airports like Bengaluru via the public- private partnership
model. This led to high increase in the real estate development around
the airports.

Real Estate Investment trust (REIT) was introduced in 2014 to

support investors with limited budget. Real Estate Regulation Act
(RERA Act) came into force in 2017. This act has brought a
transformation and empowerment to the home buyers as well.

58
Government announced Pradhan Mantri Awas Yojna to provide basis
accommodation to every Indian by 2022. Through Union Budget
2019, the Government has announced additional deduction up to Rs.
1.5 lakhs for interest paid on loans borrowed up to 31st March, 2020
for purchase of house valued up to Rs. 45 lakhs. With rapid
urbanization, comes a greater need for the housing. So, the real estate
sector in India has very huge scope in future. The present situation
caused due to COVID-19 will have some adverse effect in the growth
of Real Estate Sector but recovery shall bring all progresses in line
with government plans.

59
 CHAPTER 3

REVIEW OF LITERATURE

60
 REVIEW OF LITERATURE

This chapter summarizes the available literature in this area of

research, mainly focusing on real estate and stock market
relationship; macroeconomic variables affecting this market;
behavioral research in this area etc. Further, the chapter discusses the
identified research-gaps and research questions. Then, this chapter
talks about the research objectives of the present research

Real Estate and Stock Market Numerous studies have explored the
association between the stock market prices and the real estate prices
but results have been varying possibly due to changes in sampling,
quality of the data, or economic setting (Chaudhry, Myer, & Webb,
1999; Liow & Yang, 2005; and Lin & Fuerst, 2014)
The presence of a relationship between stock prices and real estate
prices is either due to market integration or market segmentation.
Studies by Chang and Wei (2007), Quan and Titman (1999) and Lu,
Wilson and Okunev (1996), and Geltner (1990) provide an indication
for the segmentation of both the markets. Adcock, Hua, and Huang
(2016), Hoesli and Lizieri (2007) and Knight, Lizieri, and Satchell
(2005) provide an indication for the integration relation between both
the asset markets under study.

According to Baum (2009, p. 5), “The direct implication of property

being different is its diversification potential, and hence the
justification for holding it, within a multi-asset portfolio.” Direct real
estate investments provide substantial diversification benefits when
used in a portfolio along with the stocks (MacKinnon &Al Zaman,
2009). Very few studies, however, have examined the role of direct
real-estate markets in influencing alternative mainstream capital
Markets. Asian real estate markets show significant diversification
when compared with the European real estate markets (Bond, Karolyi,
& Sanders, 2003), so there are great chances for long-standing

61
diversification opportunities in numerous Asian countries’ real estate
market (Garvey, Santry, & Stevenson, 2001). The characteristic of the
real estate market in Emerging economies has not been systematically
researched (Ciarlone, 2015). There are very few studies with limited
scope in Indian Context e.g., Halbert and Rouanet (2014), and Newell
and Kamineni (2007) Introduction of the Commercial Real estate
asset in the form of REIT (Indirect real estate investment) in India is
an important step towards securitization of Indian real estate market
(Das & Thomas Jr, 2016). Pai and Geltner (2007) showed that indirect
real estate investment with less systematic risk tends to offer higher
returns. Endowment Model (Swenson, 2000) describes the immaturity
and non-transparency as the beneficial characteristics of an asset
class. According to Hoesli and Oikarinen (2012), the indirect real
estate offers liquidity and desired information transparency, and is
highly correlated to the stock market. In that case, it cannot act as a
diversifier in the portfolio mix. Therefore, it becomes important to
find out whether direct real estate investment is sufficient to be
demarcated as an asset class or does it need standardization in order
tobecome a preferable investment.

62
Investment Satisfaction

The word satisfaction is created from two Latin words satis (enough)
and facer (to do or make), (Oliver, 1980; 2014, p. 6) describes it as a
function of expectations and disconfirmation or “a filling or
fulfilment, perhaps up to a threshold of undesirable effects”. Financial
satisfaction refers to “satisfaction with one’s financial situation and
position” (Sahi, 2017). According to Shim et. al. (2006) “The
satisfaction level of real estate investors means the state of utility
maximization on the future cash income vis- à-vis present cash
expenditures.” “Financial satisfaction is the degree to which
individuals and families have financial adequacy and security” (Xiao,
Sorhaindo, & Garman, 2006; p. 109). Every individual has their own
selective reference point on
which his satisfaction depends, these reference points are based on
some internal standards set by them (Cummins & Nistico, 2002).
The present study considers satisfaction as the summary- state of the
psychological process resulting with overall investment experience,
(Oliver, 2014, p. 7)

SATISFACTION

With overall investment experience

SATISFACTION SATISFACTION
SATISFACTION
With event that With level of
occur during With final outcome satisfaction
investment received

Figure 2.1 component of satisfaction by Oliver

.
For the present study, measures for investment satisfaction have been
adopted from Shim et. al (2008). They are also in accordance with

63
three components of satisfaction (Figure 2.1) as described by (Oliver,
2014, p. 7).
Figure 2.1 Components of satisfaction by Oliver 2.1.7 Reinvestment
Intention
Reinvestment in the real estate market can be compared to the
repurchase intention concept which is usually used in marketing, here
intent to repurchase the product is replaced by intent to reinvest in the
financial product. Borrowing the definition for repurchase intention
from Fang et al. (2014), the study defines reinvestment intention as
the subjective probability that an individual will continue to invest in
the property market. Intention to reinvest can be of two forms: the
intention to again put (money) into real estate market; and the
intention to involve in positive word-of-mouth (referral) (Curtis,
Abratt, Rhoades, & Dion, 2011; Zeithaml, Berry, & Parasuraman,
1996). Reinvestment intention in real estate is driven by the
satisfaction gained by the investor which may be attaining the
financial and personal goal (Shim et al., 2008)

64
Macroeconomic Variables Affecting Real Estate Market Returns

According to Singh and Pattanaik (2010), financial prices like interest

rate, exchange rate, asset prices and financial quantities for e.g.,
money supply, bank credit act as the transmitting variables through
which monetary policies get percolated to the cor 21 objective of
monetary policy which are GDP, inflation, and output (Kohn, 2009).
Ciarlone (2015) in his paper, investigated the house price dynamics of
16 emerging economies including India. He classified financial prices
and financial quantities as fundamentals which derive housing
demand and described construction cost as the fundamental affecting
housing supply. Both these supply-demand factors influence growth
variables of any economy viz., GDP, inflation, and output. The
responsiveness of the supply fundamentals to the changes in demand
conditions plays important role in housing dynamics. Treasury (2003)
and Égert and Mihaljek (2007) talked about
how the changes in these housing demand, supply fundamentals are
used to model house price dynamics. There is evidence for other
predictors of house prices viz., income, wealth, employment and
wages (Ciarlone, 2015; Égert & Mihaljek, 2007; Treasury, 2003). For
the present study, variables participating directly in the monetary
transmission - pathway are considered. As far as macroprudential
policies targeting financial prices like interest rate or exchange rate
are concerned, there is a mix of positive as well as negative responses
in the area of housing research and it remains as an unsolved issue
(Lambertini, Mendicino, & Punzi, 2013). Singh and Pattanaik (2010)
talked about the pre-crisis notion that asset bubbles are hard to
identify so banks should avoid using interest rate to balance asset
prices. In the words of Strauss-Kahn (2011), “it is far from obvious
that such variables should enter the primary target of monetary
policy”. The pre-crisis interest rate strategy ‘Taylor (1993) rule’ of
keeping inflation under control by maintaining a low-interest rate and
stabilizing output around its potential; and everything else will take
care of itself was questioned by Hofmann and Bogdanova (2012); and
Borio (2011). Hofmann and Bogdanova (2012) supported their
argument with the rising impact of factors other than the dynamics of
interest rate, inflation, and 22 output on policy setting, they talked

65
about factors like the capital flow in the form of
credit and exchange rate. According to Cerutti, Dagher, and
Dell'Ariccia (2017), there is an obvious danger to the housing market
due to credit growth but it is more dangerous if the funding model is
based on securitization. Kuttner and Shim (2016) in their paper, in
which they have used panel data of 57 countries including India,
talked about different types of credits (supply side as well as demand
side) affecting the housing market, they do not find any robust
evidence of supply-side credit affecting the housing market. Mishkin
(2007) talked about how housing prices play a significant part in
monetary policy transmission by affecting the aggregate demand in
three different routes – directly affecting housing expenditure;
household wealth; and bank balance sheets

66
Market Factors Affecting Real Estate Market

Waweru and Mawangi (2014) describe the market factors which

affect real estate investment decisions. They have listed property price
changes, property market information, past trends of property market
related to concerned property, fundamentals of property, seasonal
price cycles, market mood/preferences and over/under-reaction to
price changes as the factors which influence property market
investment decisions. Hargitay, Hargitay and Yu (2003) argue that
prices are very important while making investment decisions.
“Property investment decision has to 30 rely on the gathering of up-
to-date market information from all available sources” (Hargitay et
al., 2003, p. 251). Past trends in property market serve as an important
determinant of investment related to property (Shiller, 2007).
“Decisions concerning the timing of the purchase and disposal of
investment assets require pertinent information about the state and
mood of the market” (Hargitay et al., 2003, p. 251).

67
 CHAPTER 4

RESEARCH METHODOLOGY

68
RESEARCH METHODOLOGY

This chapter discusses the research methods used for the present
research. It talks about the type of research, research design, sources
of data, tools of analysis and scope of the study. The pilot study used
in the study is also presented in this chapter. Further, a brief
discussion about the research approach used in the study for attaining
each objective has been discussed.
SOURCES OF DATA
The research involved both primary as well as secondary data. The
target population for the present study are people in India, who use
real estate for investment purpose. People who have invested in real
estate for the purpose of earning profit from it (i.e., buying a flat in an
apartment or building floors for the purpose of renting) served as 42
sampling unit for the survey. People with investment after 2008 were
eligible for inclusion in the survey”. Primary data has been collected
using multistage (3 stages) stratified sampling. The secondary data for
house price has been collected from housing price index (HPI) from Q
4 2008-09 to Q2 2017-2018. The secondary data for other variables
have been collected from different sources as explained further in
section 3.3.1 i.e., ‘secondary data’. Research objectives I to IV have
been analyzed using secondary data and secondary data analysis tools
while research objectives V and VI are analyzed using primary data.

69
 CHAPTER 5

DATA ANALYSIS AND RESULT

70
DATA COLLECTION

Market research require two kind of data that is Primary Data and
Secondary Data

Primary Data Sources: Primary Data is collected using a well –

structured questionnaire survey

Secondary Data Sources: Secondary Data is collected by someone

other than the user. Common sources of secondary data include
organizational records and qualitative methodologies or qualitative
research. The data for study has been collected through various
sources such as;
 Magazines
 Internet
 Articles

71
ANALYSIS OF PRIMARY DATA: QUESTINNARE FINDINGS

1] What is your age?

AGE NO. OF
GROUP PEOPLE
18 1
19 4
20 8
21 8
22 2
23 3
24 4
25 3
52 1
55 1

72
2] Do you own a property?

Yes No
31.25 % 68.75 %

73
3] Which type of property do you own?

Bungalow Rowhouse Apartment Mobile House Others None

2% 7% 11 % 3% 18 % 59 %

According to the survey maximum number of people chose the other

option, which indicates they either live in a chawl system of some other
kind of houses

74
4] Which form of information do you use while buying real estate
property?

Broker Family /Friends Real estate agent Other

8% 46 % 30 % 16 %

By looking at the result we can assume that most of the people took
advice regarding real estate from their family and friends instead of
agent.

75
5] Have you seen any home investment property that you are
interested in?

Yes No

49 % 51 %

76
6] Do you see real estate as an investment?

Yes No

84 % 16 %

Maximum people believe Real estate as an investment because Real

estate Investor make money through rental income, appreciation and
profit generated by business

77
7] If yes why?

Long Term Investment Short Term Investment

80 % 20 %

You can purchase real estate for a long-term investment, in which

you purchase the real estate with the intention of renting, or you can
make a real estate investment in the short term, in which you purchase
the property, fix it up, and sell it at a higher value.

78
8] How do you plan to buy the real estate property?

Loan from Loan from bank Don't wish to Self-Funded Others

families/friends financial institutes disclose
6% 34 % 18 % 31 % 11 %

According to the survey almost 50% people like to but estate by self-
funding. And rest with the help of loan from bank or the financial
institute

79
9] Where would you like property to be based?

City / Urban Suburban Rural

80 % 16 % 4%

Nowadays most of the people prefer to live in urban instead of rural,

as it is more develop

80
10] Which type of real estate do you prefer?

Residential Commercial Industrial Land

67 % 8% 9% 16 %

According to the survey maximum number of people prefer

residential estate instead of other. After residential people prefer for
investing in land. As it has benefits than other.

81
11] Where do you prefer to invest in?

Real Estate Stock Both Other

27 % 13 % 49 % 11 %

People are interested in investing in both real estate as well as stock.

Although there is maximum number of people interested in stock as
the investment amount is less than investment amount in real estate

82
12] Is real market growing in India?

Agree Disagree Neutral

73 % 6% 21 %

According to the survey there is growth in real estate market of

India.as the returns are profitable in real estate and has benefit of long
term.

83
13] Do you think real estate should be in your portfolio?

Yes No
85 % 15 %

Everyone’s portfolio must be strong. But maximum people agree to

add real estate investment in portfolio as it makes it stronger.

84
14] According to you, what are the disadvantages in investing real estate?

Required maintenance Requires time Subject to taxation Others

22 % 20 % 30 % 28 %

As it is a long-term investment it requires time. Unlike the other

investment, it requires less time.

85
15] What do you think is advantage for real estate investing?

Great return Long term security Steady cash flow Diversification

30 % 50 % 11 % 9%

As it is long term investment it also has long term security. And it is

even less risky than other.

86
16] Which risk do you think are involve in real estate investment?

Unpredictable Bad location Negative cash flow Lack of liquidity

nature
25 % 28 % 11 % 36 %

Maximum think people it is a risk to have a bad location. If the

location is not proper the benefits are less.

87
CHAPTER 6

CONCLUSION

88
CONCLUSION
Real estate has historically been more a stable investment than any
other investment
Unlike stocks which have continuous ups and downs
Real estate market assures you profit when you buy right

These approaches need to be done with care since they have both
advantages and disadvantages
The Indian real estate sector continues its steady progress with overall
sales activity going up significantly in the past six months and
drivingfactor behind entire process had been the Information
Technology (IT) sector which has been contributed considerably to
the demand side moreover the natural demand has also undergone a
complete transformation.
Real estate construction is largest energy consumer in India. There is
need to check the energy performance of these construction

89
CHAPTER 7

SUGGESTION

90
SUGGESTION
Compare the deals that you have, and try looking at both the pros and
cons of every deal. Check the market price, and do not believe
everything a real estate agent says. Do your own research, check if the
properties have any pending taxes or are disputed by any chance.

If you’re starting a real estate business, you know it’s important that
your new business makes money. After all, you have to have enough
cash in the bank to stay alive as a business, never mind making
enough to purchase that luxury vacation home in Jackson Hole,
Wyoming.

The question is, what are the most effective strategies to go about
making that money?

Below you will find a list of six strategies and tactics real estate
agents use to bring in additional revenue, or to maximize their current
revenue. From becoming a broker to flipping houses, we’re sure
there’s at least one you’ll find useful.

Few things to consider while investing in real estate.

Location
It is all about the location when it comes to investing in residential
real estate. Many factors come into play here, including access to
public transport, safety, proximity to one’s place of work or school,
coupled with other facilities such as hospitals, malls, movie theatres,
and many more. When buying in an upcoming district outside the
main city, other factors should also be considered, such as distance to
neighboring cities and infrastructure projects in the area. Investors
should also carry out a thorough check of the property to get a better
understanding of its potentials and liabilities.

Stage of development
The pandemic has made people realize the value of owning a house.
Further, the resultant work- from-home structure has encouraged
91
many to consider properties in remote locations. There has also been
an increase in buyer inclination towards under-construction projects
in these far-flung areas. The main reason behind this is that such
projects are comparatively more pocket-friendly, yield higher ROI,
and are compliant with fair trade practices under the RERA
regulations

Title and other property-related documents

An overall check of the documents is critical to establish the
ownership of the property and avoid any disputes in the future. It can
help one gauge the amount of legal work required to finalize the sale
deed. Buyers should be mindful of hidden charges and paperwork
requirements such as documents related to mortgage or ownership
transfer. These are sometimes added in the property documents and
sale agreements by sellers or brokers

Resale value
Resale value is a crucial factor to consider before investing in a
property. Ideally, property prices must appreciate significantly with
time to ensure healthy returns on the initial investment. However,
homebuyers usually ignore this while making their decision. They
often focus solely on a prime locality or the budget, which can be a
mistake in the long run. If one chooses the wrong house or location,
the future sale price may be less than the desired returns. In situations
like this, the main issues to consider are: Whether or not the property
will appreciate more than the market or what amount of the
investment’s potential upside is already present in the current
purchase price

92
 CHAPTER 8

BIBLIOGRAPHY.

93
BIBLIOGRAPHY

WEBSITES
 https://www.forbes.com/sites/forbesrealestatecouncil/2020/08/17/ind
ustrial-real-estate-is-the-investment-worlds-new-
darling/?sh=57c54d9d5e70

 www.mondaq.com/india/real-estate/645344/recent-development-in-
the-real-estate-sector

 https://timesofindia.indiatimes.com/blogs/voices/steps-to-make-the-
best-first-time-investment-in-real-estate/

MAGZINES

 Forbes (August 17 2020)

 The week (November 28 2021)

94
CHAPTER 9

QUESTION

95
QUESTIONS

1] Do you own a property?

a. Yes
b. No

2] Which type of property do you own?

a. Bungalow
b. Rowhouse
c. Apartment
d. Mobile homes
e. Others
f. None

3] Which form of information do you use while buying real

estate property?

a. Broker
b. Family/ Friend
c. Real estate agent
d. Other

4] Have you seen any home investment property that you are
interested in?

a. Yes
b. No
96
5] Do you see Real estate as an investment?
a. Yes
b. No

6] If yes why?

a. Long term investment

b. Short term investment

7] How do you plan to buy the real estate property?

a. Loan from families/ friends

b. Loan from bank financial institute
c. Don’t wish to disclose
d. Self-funded
e. Other

8] Where would you like property to be based?

a. City/Urban
b. Suburban
c. Rural

9] Which type of real estate do you prefer?

a. Residential
b. Commercial
c. Industrial
d. Land

97
10] Where do you prefer investing in?

a. Real estate
b. Stock
c. Both
d. Other

11] Is real estate market growing in India?

a. Agree
b. Disagree
c. Neutral

12] Do you think real estate should be in your portfolio?

a. Yes
b. No

13] According to you, what are the disadvantages in investing real

estate?

a. Require maintenance
b. Requires time
c. Subject to taxation
d. Other

14] What do you think is advantage of real estate investing?

a. Great return
b. Long term security
c. Steady cash flow
d. Diversification

98
15] What risk you think are involve in real estate investment?

a. Unpredictable nature
b. Bad location
c. Negative cash flow
d. Lack of liquidity

99
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