THE NATURE, SCOPE AND

CHARACTERISTICS OF
REAL ESTATE
 Definition of Real Estate
• Real Estate is artificially delineated space
references to a fixed point on the surface of the
earth with a fourth dimension of time. It is built
to house an economic activity that is subject to
cultural preferences and restricted by the public
infrastructure.
• Real estate is the term defined as the land,
including the air above it, ground below it, any
buildings or structures on it, and any natural
resources in it.
 Concept
Space--Time Product
It generates income over time in exchange for the
use of space. Examples: apartments, football
tickets, wedding receptions
 CHARACTERISTICS OF THE REAL ESTATE

• Durability
• Heterogeneity.
• High transaction costs.
• Long time delays
• Both an investment good and a consumption
good.
• Immobility ( mobile homes/caravans )
 INVESTOR MOTIVATIONS
1. Pride in Ownership
2. Personal Control
3. Self-use and Occupancy
4. Estate Building
5. Security of Capital
6. High Operating Yield
7. Leverage
8. Tax Shelter
9. Capital Appreciation
10. Portfolio Diversification
 DRIVERS OF REAL ESTATE
• Booming economy??; GDP to 6-7 percent.
• Rise in disposable income and growing middle class.
• India’s emergence as an attractive off shoring destination and
availability of pool of highly skilled technicians and engineers ;
• Growing requirement of space for health care, educational
institutes, office space, commercial activity and logistics.
• Entry of professional players equipped with expertise in real
estate development;
• Relaxation of legal rulings and processes by the governing bodies
encouraging investments in real estate
• Improvement in infrastructure facilities
• 100 percent FDI in townships and settlement development. 30
billion dollars in FIIs in last 10 years.
• Policies/Initiatives like Smart City Projects, Land Acqn Act, RERA,
Housing for all.
 CONCERNS
• Rising Debt.
• Lack of funding. NBFCs collapsing.
• Delayed deliveries.
• Increasing inventory.
• Pessimism in the market.
• Demand supply gap.
The Real Estate Market Characteristics:
1. Highly Stratified, Local Markets
2. Heterogeneous Product
3. Private, not Public, Transactions
4. Unsophisticated Investors
5. Unorganized Market
 participants in real estate markets
• Owner/user: These people are both owners and tenants. They
purchase houses or commercial property as an investment and also
to live in or utilize as a business.
• Owner: These people are pure investors. They do not consume the
real estate that they purchase. Typically they rent out or lease the
property to someone else.
• Renter: These people are pure consumers.
• Developers: These people prepare raw land for building, which
results in new products for the market.
• Renovators: These people supply refurbished buildings to the
market.
• Facilitators: This group includes banks , real estate brokers and
lawyers, and others that facilitate the purchase and sale of real
estate.
 REAL ESTATE : ACTIVITIES :

• that of real estate agents that consists of

purchasing and reselling owned real estate ;
• - the letting and management of owned or
leased real estate ; -
• real estate activities for a third party that
include the activities of real estate agencies
and the activity of administering real estate.
 REAL ESTATE PROJECTIONS
• Real estate sector in India is expected to reach US$ 1 trillion by 2030. By 2025, it
will contribute 13 per cent of the country’s GDP.
• Real Estate stock in India is expected to reach 3.7 million square feet in 2019, with
addition of 200 million square feet during the year.
• More than 70 per cent of India’s GDP will be contributed by the urban areas by
2020.
• Private Equity and Venture Capital investments in the sector have reached US$ 4.47
billion in 2018 and US$ 249 million in Q1 2019. Between 2009-18 (up to October,
2018)
• Indian real estate sector attracted institutional investments worth US$ 30 billion.
• Gross office absorption in top Indian cities has increased 26 per cent year-on-year
to 36.4 million square feet between Jan-Sep 2018. Warehousing space is expected
to reach 247 million square feet in 2020 and see investments of Rs 50,000 crore
(US$ 7.76 billion) during 2018-20. Grade-A office space absorption is expected to
cross 700 million square feet by 2022, with Delhi-NCR contributing the most to this
demand.
https://www.ibef.org/industry/indian-real-estate-industry-analysis-presentation
 Characteristics of the Real Estate
Market in India
• Growing Market Demand
• Realization of large commercial projects
• IPOs by developers
• Gradual organization of the markets in the Tier I cities
• Greater availability of information
• Emergence of transparency and liquidity
• Entry of international real estate consultancies
• Governing legal framework relaxed
• Competitive pricing
 Real Estate Utilization
• Commercial Office
• Hospitality
• Retail Malls
• Multiplexes
• Residential
• Logistic infrastructure such as warehouses and
granaries.
• Co-living and co-working spaces
 REAL ESTATE PLAYERS
• Real Estate Investment Banking
• Real Estate Consultants
• Developers and Construction Companies
• FDIs/FIIs/FPI
• Financial Institutions – Real Estate Mutual
Funds
• Private Equity/Venture Capital Funds
 PARTICIPANTS
1. Builder/developer
2. Syndicator
3. Property Manager
4. Construction Lender
5. Permanent Lender
6. Managing Equity Investor
7. Passive Equity Investor
 Real Estate and Financing Trends in
India
• Securitization and CMBS ( Commercial
Mortgaged Backed Securities )
• Realty Funds/ Realty Mutual Funds in India
• Real Estate Investment Trust ( REITs ). Act
passed in Jan 17. Blackstone-Embassy Office
Park and Prestige Estates – successful IPOs in
REITs.
• Residex House Price Index
 INVESTMENT DISADVANTAGES AND
RISKS
1. Illiquid
2. Management
3. Depreciation of Value
4. Government Controls and regulations. GST?
5. Real Estate Cycles
6. Legal Complexity
 Risks involved in the Real Estate
Investment Market
• Liquidity risk
• Regulatory risks
• Property market transparency risk
• Macroeconomic risks
• Ownership and Land Title Issues
 FUTURE OF REAL ESTATE MARKETS:
PWC-REAL ESTATE-2020
• The global investable real estate universe will expand
substantially, leading to a huge expansion in
opportunity, especially in emerging economies.
• Fast-growing cities will present a wider range of risk
and return opportunities.
• Technology innovation and sustainability will be key
drivers for value.
• Collaborating with governments will become more
important
• Competition for prime assets will intensify further
• A broader range of risks will emerge. New risks :
Climate change risk, accelerating behavioural change
and political risk will be key