“Real Estate Business and Economic Development.

Submitted by:

Piyush Bharti,

B.A. L.L.B (Hons.)

Roll:1947, Semseter: 4th

Submitted to:

Dr. Shivani Mohan

Assistant Professor.

This Final draft is submitted in the partial fulfillment in Economic

for the completion of BA L.L.B course.

February, 2020.

Chanakya National Law University, Patna.

Real Estate Business and Economic Development
Contents
DECLARATION BY CANDIDATE ........................................................................................................ iii
ACKNOWLEDGEMENT .........................................................................Error! Bookmark not defined.
1. Introduction ..................................................................................................................................... 1
1.1 Market Size ....................................................................................................................................... 1
1.2 Objective of the study: ..................................................................................................................... 2
1.3 Hypothesis ......................................................................................................................................... 2
1.4 Research methodology: ..................................................................................................................... 2
1.5 Limitation of the study: ..................................................................................................................... 3
2: Various Government Policies and Various Agencies Reports: ........................................................... 3
3: Problem Faced In Real Estate And It’s Solution : .............................................................................. 6
3.1 Disinvestment: .................................................................................................................................. 6
4: Housing Loan Interest rate subsidy. .................................................................................................... 8
4.1: Middle-Income Earners: .................................................................................................................. 8
4.2 Eligibility: ........................................................................................................................................ 9
4.3: Modus Operandi:............................................................................................................................ 10
4.4 Adjustment Of Subsidy: .................................................................................................................. 11
5: Economical Concepts and Development In Real Estate: .................................................................. 12
5.1: Demand For Housing ..................................................................................................................... 12
5.3: Adjustment Mechanism: ................................................................................................................ 14
5.3.1 Adjustment with Depriciation: ..................................................................................................... 14
5.3.2: Increase in demand: .................................................................................................................... 15
5.3.3: Increase In Cost:......................................................................................................................... 15
6. Conclusion and Suggestion: ............................................................................................................. 16
Bibliography: ........................................................................................................................................ 20

ii
Real Estate Business and Economic Development

DECLARATION BY CANDIDATE

I, hereby, declare that the work reported in the B.A. L.L.B (Hons.) Project Report titled “Real
Estate Business and Economic Development ” submitted at CHANAKYA NATIONAL LAW
UNIVERSITY, PATNA is an authentic record of my work carried out under the supervision of
Dr. Shivani Mohan. I have not submitted this work elsewhere for any other degree or
diploma. I am fully responsible for the contents of my Project Report.

(Signature of the Candidate)

Piyush Bharti (1947)

B.A. L.L.B., 2nd year

SEMESTER -2nd

CNLU, Patna

Dated :

iii
Real Estate Business and Economic Development

Acknowledgement:

I would like to show my gratitude towards my guide Dr. Shivani Mohan, Assistant Professor of
Economics , under whose guidance, I structured my project.

I owe the present accomplishment of my project to our CNLU librarians, who helped me
immensely with materials throughout the project and without whom I couldn’t have completed
it in the present way.

I would also like to extend my gratitude to my friends and all those unseen hands that helped me
out at every stage of my project.

THANK YOU,

Piyush Bharti

SEMESTER -2nd
CNLU, PATNA

iv
Real Estate Business and Economic Development

1. Introduction

The real estate sector is one of the most recognized sectors in the world. The real estate sector is
made up of four sub-sectors: housing, retail, hospitality and business. The growth of this sector
is well complemented by the growth of the enterprise environment and office space, as well as
urban and semi-urban shelters. The construction industry is the third of the 14 major sectors in
terms of direct, indirect and internal impacts of the construction industry.
The sector is also expected to absorb more non-resident Indian investment (NRI) in the short
and long term. Bengaluru is expected to be the preferred destination for real estate investment
for national institutions, followed by Ahmedabad, Pune, Chennai, Goa, Delhi and Dehradun.

Figure 1Indian Real Estate Industry 1

1.1 Market Size

The real estate market is expected to reach 65,000 rupees crore (USD 9.30 billion) by 2040
compared to 12,000 crore rupees (USD 1.72 billion) in 2019. The real estate sector in India is
expected to reach size USD 1 trillion market by 2030.2 Compared to USD 120 billion in 2017, it
will account for 13% of the country's GDP by 2025. Retail, hotel and commercial real estate are
also growing significantly, providing the infrastructure needed to meet India's growing needs .

1
Indian Real Estate Industry; Inida Brand Factory Organisation; https://www.ibef.org/industry/real-estate-
india.aspx; accessed on 19th Feb 2020 at 15:00.
2
Ibid.

1
Real Estate Business and Economic Development

Indian real estate has increased 19.5% CAGR from 2017 to 2028.3
Sectors such as IT and IT, retail, consulting and e-commerce recently had a high demand for
office space. By the end of 2018, office space in India is expected to exceed 600 million square
feet, while the leasable area in the eight largest cities is expected to exceed 100 million square
feet in 2018-20. Office take-up in major Indian cities increased 26% year-over-year to 36.4
million square feet between January and September 2018. Collaborative space in the seven
largest cities increased sharply in 2018 (through September), reaching 3.44 million square feet,
compared to 1.11 million square feet in the same period in 2017. Completion of new office
space is expected to increase by 15%, exceeding 43.6 million square feet in 2019.4

1.2 Objective of the study:

1. The researcher wants to enlist the various government policies on Real Estate
Business
2. The researcher wants to find the challenges faced by government in Real Estate
Business
3. The researcher wants to know economic development in Real Estate Business .

1.3 Hypothesis
I) Researcher Hypotheses that Real Estate Business is the one of the most
recognized and primary sector for economic development and
government after 2014 make it as a primarily tool for development.
II) Researcher Hypotheses that subsidy in housing loan brings positive
development in real estate business.
III) Researcher Hypotheses that Real estate is a form of assets with limited
liquidity compared to other investments.

1.4 Research methodology:

The researcher will do doctrinal type of research in which he will go through the
primary as well secondary sources. The researcher through this methodology will be
able to get an adjust picture of the problem in question. The doctrinal method helps in
doing a comparative study of the topic. This methodology helps in going through not

3
Ibid.

4
Ibid.
2
Real Estate Business and Economic Development

only the work of one eminent person but of many other too. This helps in getting the
bird’s eye view of the subject.

1.5 Limitation of the study:

Since the researcher is a student of law, he has access to a limited area. The researcher
having read the commentary on the government policies could understand the
problem clearly but it would have been clearer if he would have read commentary of
more writers. The researcher has limited time for the project. The historical need and
background is also necessary for having a bird’s eye view of the particular topic and it
gets developed only by effective and extended reading over a long period of time. But
the required materials are not available in our library. The researcher has a restricted
access to the reports of the government commission and government websites where
the reasons of their work I not available. But still researcher with his hard work will
manage to take out the best possible work.

2: Various Government Policies and Various Agencies Reports:

Fitch Solutions said that it expects the nation's homelessness and homelessness to grow by 6.6%, in fact,
next year, driven by support. bringing in funding and a continued focus on providing affordable housing
in major cities.5

His statement was:

"Short-term expansion of India's building sector will be driven by a mixture of fiscal

support and government policies supporting the housing market, as well as
heightened activity within the logistics, retail and industrial buildings sectors, Long-
term growth, on the other hand, will mainly be driven by country's massive
population, which requires continued investments into residential building
constructionsector, "6

Due to the high debt-to-equity ratio by non-bank banks, regular bank problems are
increasing in 2019, making access to less money for both developers and builders.

5
‘Fiscal support, government policies to drive realty sector up by 6.6% in 2020: Fitch’ ;
https://realty.economictimes.indiatimes.com/news/industry/fiscal-support-government-policies-to-drive-realty-
sector-up-by-6-6-in-2020-fitch/73030027 ; Accessed on 19th/Feb/2020.
6
Ibid.
3
Real Estate Business and Economic Development

In response, the government "approved a Rs 10,000 crore package in November 2019

aimed to aid stalled housing projects, with an additional Rs 15,000 crore to be
contributed by state-run financial institutions.7

With the funds available more easily, it is expected that some of the blocked housing
projects will resume construction, and this will be within its forecasts for the growth
of India's construction sector in the short term.

Introduced in 2015, Pradhan Mantri Awas Yojana aims to provide affordable housing
to all the poor in the city by 2022, targeting over 4,000 cities chosen by the
government.8

To provide financial support to homebuyers, various complementary schemes, such as

the credit subsidy system, have been introduced, along with Pradhan Mantri Awas
Yojana.

Although PMAY (U) is expected to stimulate growth in the residential construction

sector, we believe that the government is unlikely to reach its target within the set
timeframe, due to the continuous growth of urban population in India, which creates
higher demand. Affordable housing, as well as delays in land acquisition and
construction.
He also said that the related construction PMAY (U) is expected to continue beyond
2022, contributing to the growth of the residential building sector in the short and
medium term".

On a separate note, there is a considerable amount of inventory of unsold homes,

especially mid-range and high-end luxury units in urban areas, which will limit the
growth potential of the high-quality residential construction sector.

The real estate sector in India is expected to reach US $ 1 trillion in 2030. In 2025, it
will contribute 13% of the country's GDP. Real estate stocks in India are expected to
reach 3.7 million square feet in 2019, with the addition of 200 million square feet
during the year. The emergence of nuclear families, rapid urbanization and the
increase in family income are likely to remain the main growth drivers in all spheres
of the real estate sector, including residential, commercial and retail. The country's

7
"The 5 Pros and 3 Cons of Real Estate Investing".; Murdock Edgar, Christy; Accessed on 15 January 2020; At 17:15;
8
Ibid.
4
Real Estate Business and Economic Development

rapid urbanization is driving growth in the real estate sector. Over 70% of India's
GDP will be contributed by urban areas by 2020. The Indian real estate sector has
increased 19.5% compared to the CAGR from 2017 to 2028.9

Real estate attracted about 43.780 billion rupees (US $ 6.26 billion) in investments in
2019. The Indian property retail segment attracted private equity investments of
around US $ 1 billion in 2019. Real estate attracted about US $ 14 billion in foreign
private equity (PE) between 2015 and the third quarter of 2019. The first REIT raised
R $ 4,750 million (US $ 679.64 million) and was launched in early 2019 by the global
investment company Blackstone and the Embassy group, real estate company.

The office space was driven mainly by growth in ITeS / IT, BFSI, consulting and
manufacturing. Gross office occupation in major Indian cities increased by 18.7
million square feet between April and June 2019. In the first nine months of 2019,
demand from the office sector with commercial leasing activity reached 47 mn sq ft.
Storage space is expected to reach 247 million square feet in 2020 and to see
investments of Rs 50,000 crore ($ 7.76 billion) during 2018-20. The absorption of
category A office space is expected to exceed 700 million square feet by 2022, with
Delhi-NCR contributing more to this demand. Home sales are expected to increase
4% from the end of 2018, reaching 2.58 lakh units in the seven major cities.

Set in real estate in India for US $ 1 trillion by 2030. By 2025, contributing 13% to
PIB do país. Esperas is looking at real estate in India at 3.7 miles from the 2019 quad
bike, with the addition of 200 miles from the quadruple lasting to another. O n the
surgiment of the nuclear family, the urban urbanization and the familiar cost, we see
the principles of crescimento em todas as experiences of real estate, including
residential, commercial and commodity. A rápida urbanização do país is an impulsion
and crescimento no place for real estate. But 70% of the PIB of India will be
contributing to the urban area by 2020. Our real estate portfolio is 19.5% relative to
CAGR of 2017 and 2028.10

We are currently investing in 43,780 vehicles of rupiahs (US $ 6.26 vehicles) in

investments in 2019. An segment of the goods is sold in real estate investing in
private US $ 1 vehicles in 2019. We are in US operations US $ 14 vehicles with
private equity estranged (PE) for 2015 and thereafter trimester of 2019. O primeiro

9
Ibid.
10
Indian Real Estate Industry Analysis; https://www.ibef.org/industry/indian-real-estate-industry-analysis-
presentation; Accessed on 20th/Feb/2020, at 17:00.
5
Real Estate Business and Economic Development

REIT captures R $ 4,750 miles (US $ 679.64 miles) and is not available until 2019 as
the investment in global Blackstone and Pelo grupo Embaixada, empresa
imobiliária.11

It is important for the impulsion principal to apply for ITeS / IT, BFSI, consultancy
and fabrication. A total of 20,000 miles of the quarters of April and June of 2019, as
well as 2019, a year of dedication to the lease of the lease of the lease of commercial
lease at 47 million sq. Ft. see the armazenamento atingir 247 miles in the 2020
quarters and investing Rs 50,000 miles (US $ 7.76 car) over 2018-20. An absorption
of the escritories of categories A excursion 700 miles of squares at 2022, with the
Delhi-NCR contributing but for this demand. Coming as vendor of casas devel 4% a
part do final de 2018, ating 2.58 lakh unidades nas sete principais cidades.12

3: Problem Faced In Real Estate And It’s Solution :

High entry and ongoing costs : While buying shares of stock requires a minimal cash
outlay, real estate investing requires large sums of money: a down payment, closing
costs, money to repair and update the property, property taxes, insurance, mortgage
payments, property maintenance.

Illiquidity of property : Selling a property usually takes time, there is no way to sell
off one part of a property and convert it to cash. The transaction costs are higher than
selling stock shares.

Tenant problems : Periods of rental vacancy while looking for a tenant, renting to a
tenant who doesn't pay or leaves the property in poor condition. Unique risks.
Changing interest rates, unexpected repairs, increased liability for accidents that may
occur on the property, getting overleveraged.

3.1 Disinvestment:
Some people and companies focus their investment strategy on purchasing properties
that are at a certain stage of foreclosure. A property is considered foreclosed when the
homeowner has not paid his mortgage loan. Formal foreclosure processes vary by
state and may be judicial or non-judicial, which affects the length of time the property
13
is in the pre-closing phase. Once formal foreclosure procedures are in progress,

11
Ibid.
12
Ibid.
13
Levinrad, Lex (2010-12-17). "Investing in Foreclosures For Beginners". Distressed Real Estate Institute.
6
Real Estate Business and Economic Development

these properties can be purchased at a public sale, often called an auction or a sheriff's
sale. If the property is not sold at a public auction, the property will be returned to the
creditor. The properties in this phase are called Real Estate Owned, or REO.14

Buying, rehabilitation, renting, refinancing (BRRR) is a real estate investment

strategy used by real estate investors with experience in real estate reform or
rehabilitation, but who want to invest in real estate to get a steady cash flow. Some
investors add an extra R, which means repeat, as a way to create a property
portfolio.15

A real estate investor buys a reduced investment property because it requires cosmetic
repairs and / or updating. The investor updates the property, including structural
repairs necessary to bring the house into line with the current code. Usually includes
cosmetic enhancements such as new paints, floors, tiles, countertops and kitchen
appliances. The investor finds a tenant and becomes the owner receiving the rent,
usually every month. The property is then refinanced, usually for full amortization of
a 30-year loan.

14
Portman, Janet (2008-02-07). "Foreclosure causes heartache for renters". Inman News. Accessed on 20th/Feb/2020; At 17:00.
15
"Housing Slowdown Unnerves the Fix-and-Flip Crowd". WSJ. Accessed on 20th /Feb/2020; At 17:10..
7
Real Estate Business and Economic Development

4: Housing Loan Interest rate subsidy.

According to the PMAY (U) scheme by Pradhan Mantri Awas Yojana (Urban), here
are some important things to consider about the PMAY scheme, even if you are
organizing the prepayment amount, decide the location, builder and lender for home
loans. The Credit Related Grants Scheme (CLSS) for the Middle Income Group
(MIG), called CLSS for MIG I and MIG II, which was initially approved for
implementation in 2017, has been extended until March 31, 2020.16

4.1: Middle-Income Earners:

The new MIG category, recently introduced, will also consist of two boards. Medium income
group (MIG) - I will be made up of families with annual incomes ranging from Rs. 6,00,001 to
Rs. 12,00,000.17

And, the Middle Income Group (MIG) - II will include families with annual income between
Rs.12, 00,001 and Rs.18, 00,000. Therefore, effectively, anyone earning between Rs 6 lakh and
Rs 18 lakh per year can benefit from the benefits of subsidized loans, provided other conditions
are met.18

16
All about PMAY: How does it work, eligibility and subsidy
;https://economictimes.indiatimes.com/wealth/borrow/you-can-still-get-benefit-under-pmay-even-if-your-parents-
own-a-home/articleshow/58003642.cms?from=mdr; Accessed on 20th/Feb/2020; At 17:29.
17
Ibid.
18
"Your Complete Guide to Property Investment"; Yardney, Michael ; Published on 12 January 2020.
8
Real Estate Business and Economic Development

Figure 2: PMAY (U) : Features and benefits19

4.2 Eligibility:
The scheme mainly aims to provide housing for everyone. Therefore, understandably, all those
who already own a home or any member of their family own a home are kept out of the benefits
of PMAY. The rule says: The beneficiary family must not own a house and the beneficiary
family must not have benefited from central assistance under any housing scheme of the
government of India". A beneficiary family will consist of a husband, wife, unmarried children
and / or unmarried daughters.
To avoid duplication, beneficiary's family members must provide their Aadhaar numbers when
applying for a loan.
But according to the guidelines: A earning adult member (regardless of marital status) can be
treated as a separate household, as long as he is not the owner of pucca (all-weather unit) on his
behalf in any part of Indian.
Therefore, even if the children (married or not) stay with their parents at their parents' house (or
rented, in the same or another city), they can choose PMAY, as long as they earn and do not
own another home.
In the case of a rented couple and even if their parents own the house, they will be treated as a
separate family. However, if they want to enjoy the benefits of PMAY, they will be entitled to a
home, purchased by the spouse or both together.

NPV Calculayion:20

19
Ibid.
20
Ibid.
9
Real Estate Business and Economic Development

Figure 3NPV calculation : MIG I under PMAY(U)

4.3: Modus Operandi:

Let's say someone from the MIG II category wants to buy a house that costs 60 lakh Rs. After a
mandatory minimum repayment of 20%, i.e. Rs 12 lakh, the balance of Rs 48 lakh can be
determined by a loan. But in PMAY up to Rs. 3 lakh a 3% subsidy would apply, which is why
the lender's mortgage interest rate will apply to the Rs. 36 lakh balance.21NPV calculation

NPV Calculator: 22

Figure 4NPV calculation : MIG II under PMAY(U)

21
Ibid.
22
Ibid.
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Real Estate Business and Economic Development

4.4 Adjustment Of Subsidy:

The value of the interest subsidy will not be the difference between the amount of interest (real
and reduced rate), but it will be the net present value (VAL) of the interest subsidy value. It
must be calculated with a discount rate of 9%. The loan amortization schedule will be necessary
to calculate the concession's NPV, as the interest portion of each equal monthly installment
(EMI) must be taken into account. Then use the Fx function in the Excel spreadsheet to achieve
NPV. Due to the amount of the grant, the loan amount decreases and therefore the interest
burden decreases.

Let us suppose that, in the case of a 12 lakh RN real estate loan, a 3% interest rate subsidy falls
on 2.30 rupees. Therefore, from the loan amount of 12 lakh Rs, the amount of 2.30 ls will be
deducted and the borrowers will be required to pay the EMI on the balance, ie 9.7 at the rate at
which the lender grants loans, which can be 8.75 or 9. percent or whatever, according to the
MCLR-based home loan rate, it's a bank.23
The interest rate subsidy will be transferred in advance to the beneficiaries' credit account,
which will reduce the effective housing loan (subtracting it from the principal loan amount) and
an equal monthly installment (EMI). The borrower will pay EMI at the document rates agreed
on for the remainder of the principal loan amount.24

23
Ibid.
24
"Pros and Cons of Real Estate Investing: A Comprehensive Overview" ; Lyons, Ruth Published on 20 December 2019.
11
Real Estate Business and Economic Development

5: Economical Concepts and Development In Real Estate:

5.1: Demand For Housing

The main determinants of housing demand are demographic. But other factors, such as income,
house prices, the cost and availability of credit, consumer preferences, investor preferences, the
price of substitutes and the price of supplements, all play a role.
The main demographic variables are population size and population growth: the more people in
the economy, the higher the demand for housing. But this is an oversimplification. It is
necessary to take into account the size of the family, the age composition of the family, the
number of first and second child, the net migration (immigration minus emigration), the
formation of the non-family household, the number of double households, the mortality rates,
the divorce rates and weddings. In the housing economy, the elementary unit of analysis is not
individual, as in standard partial equilibrium models. On the contrary, families are the ones who
require housing services: usually a family at home. The size and demographic composition of
households is variable and not entirely exogenous. It is endogenous in the real estate market in
the sense that, as the price of housing services increases, the size of families tends to increase.
Income is also an important determinant. Empirical measures of income elasticity of demand in
North America range from 0.5 to 0.9 (De Leeuw, 1971). If the elasticity of permanent income is
measured, the results will be slightly higher (Kain and Quigley, 1975), because the transition
income varies from year to year and for individuals, so that the positive transition income will
tend to replace the negative transition income. Many home economists use permanent income
instead of annual income due to the high costs of buying real estate. For many people, real
estate will be the most expensive items they will ever buy.

The price of housing is also an important factor. The price elasticity of demand for housing
services in North America is estimated at 0.7 negative by Polinsky and Ellwood (1979) and at
0.9 negative by Maisel, Burnham and Austin (1971).25

5.2: Supply For Housing:

25
" Pros and Cons of Real Estate Investing" Murdock Edgar, Christy.; Published on 10tht/Mar/2019 .

12
Real Estate Business and Economic Development

Developers produce home deliveries using land, labor and various inputs, such as
electricity and building materials. The amount of the new offer is determined by the
cost of these inputs, by the price of the existing stock of houses and by the production
technology. For a typical suburban North American family home, the approximate cost
percentages can be assigned as follows: acquisition costs, 10%; site improvement costs,
11%; labor costs, 26%; material costs, 31%; financial costs, 3%; administrative costs,
15%; and marketing costs, 4%. Multi-unit residential homes are usually divided as
follows: acquisition costs, 7%; site improvement costs, 8%; labor costs, 27%; material
costs, 33%; financial costs, 3%; administrative costs, 17%; and marketing costs, 5%.
The requirements of the public subdivision can increase the development costs by up to
3%, depending on the jurisdiction. The differences in construction codes represent a
variation of about 2% in development costs. 26
However, these costs of subdivision and building code generally increase the market
value of buildings with at least the value of their expenses. A production function such
as Q = f (L, N, M) can be constructed where Q is the quantity of houses produced, N is
the amount of labor employed, L27 is the amount of land used and M is the quantity of
other materials. However, this production function must be adjusted to take into
account the renovation and expansion of existing buildings. For this, a second
production function is built that includes the stock of existing homes and their ages as
determining factors. The two functions are added together, producing the total
production function. Alternatively, a hedonic pricing model can be regressed.
The elasticity of supply in the long run is quite high. George Fallis (1985) estimates it
at 8.2, but in the short term, supply tends to be very inelastic in price. The price
elasticity of supply depends on the elasticity of substitution and supply constraints.
There is significant substitutability, both between land and materials, and between
labor and materials. In high-value locations, developers can often build multi-story
concrete buildings to reduce the amount of expensive land used. As labor costs have
increased since the 1950s, new capital-consuming materials and techniques have been
used to reduce the amount of labor used. However, supply restrictions can significantly
affect substitutability. In particular, the lack of qualified labor supply (and union
requirements) may restrict the substitution of capital for work. The availability of land
can restrict substitutability if the area of interest is delimited (that is, the area is larger,
more land suppliers and more possible substitution). Land use controls, such as zoning
26
Ibid.
27
Ibid.
13
Real Estate Business and Economic Development

regulations, can also reduce land substitutability.

5.3: Adjustment Mechanism:

The basic adjustment mechanism is a stock / flow model that reflects that about 98% of the
market is existing stock and about 2% is the flow of new buildings.
In the diagram below, the cash supply inventory is displayed in the left panel while the new
stream is in the right panel. There are four steps to the basic adjustment mechanism.
First, the initial equilibrium price (Ro) is determined by the intersection of the supply of
existing housing stock (SH) and the demand for housing (D). This rent is then converted into
value (Vo) by updating the cash flows. The amount is calculated by dividing the rent for the
current period at the discount rate, ie in perpetuity. Then, the value is compared to construction
costs (CC) to determine if there are profitable opportunities for developers. The intersection
between the costs of construction and the value of housing services determines the maximum
starting level of new homes (HSo). Finally, the number of houses started during the current
period is added to the available stock of houses from the following period. In the next period,
the SH supply curve will move to the right with the quantity of HSo.

5.3.1 Adjustment with Depriciation:

The diagram on the right shows the effects of the impairment. If the existing cash supply
deteriorates due to wear and tear, the cash supply inventory will be impaired. For this reason,

14
Real Estate Business and Economic Development

the supply of houses (SHo) will move to the left (for SH1), resulting in a new demand for
equilibrium R1 (since the number of houses has decreased, but the demand still exists).
Increasing demand from Ro to R1 will change the value function (from Vo to V1). As a result,
more houses can be produced for profit, and the start of housing will increase (from HSo to
HS1). Then the cash offer will return to its original position (SH1 to SHo).

5.3.2: Increase in demand:

The diagram on the right shows the effects of increasing demand in the short term. If the
demand for an apartment increases, for example the transition from To to D1, the price or
quantity will be adjusted or both. In order for the price to remain the same, the supply of
apartments must increase. This means that the SHo offer must increase with HS.

5.3.3: Increase In Cost:

The diagram on the right shows the effects of a short-term cost increase. If the construction
costs increase (say from CCo to CC1), the developers will find their activity less profitable and
be more selective in their projects. In addition, some developers may leave the industry. The
15
Real Estate Business and Economic Development

amount of housing starts to fall (HSo to HS1). This will ultimately reduce the level of supply
(from SHo to SH1) as the existing housing stock depreciates. Prices will tend to rise (from Ro to
R1).

6. Conclusion and Suggestion:

Historically, the household includes houses, buildings, agricultural backgrounds and forests
surrounding the gardens and areas of a very large property, such as a farmhouse or manor. It is a
modern term for a court, but it lacks abolished judicial power. It is a "housing estate" because
the profits from its products and rents are sufficient to keep the household in the center of the
center, previously known as the court. The "estate" can therefore refer to all other houses and
villages in the same property as the manor house, including more than one former manor house.
Examples of such large properties are Woburn Abbey in Bedfordshire, England and Blenheim
Palace in Oxfordshire, England, built to replace the former Woodstock residence.

The "estate", with its "impressive home" connotations, was a natural candidate for inflationary
use in the 20th century. The term real estate respectively refers to housing estates covering
several farms and is not well used to describe a single farm.

16
Real Estate Business and Economic Development

Real estate investments include the acquisition, possession, administration, rental and / or sale
of real estate for profit. Real estate improvement as part of a real estate investment strategy is
generally considered a real estate investment specialization called development. Real estate is a
form of assets with limited liquidity compared to other investments, it is also capital intensive
(although capital can be obtained through mortgage leverage) and is highly dependent on cash
flow. If an investor does not understand and manage these factors, the building becomes a risky
investment.
Real estate markets in most countries are not as organized or efficient as markets for other more
liquid investment instruments. Individual properties are unique to each other and cannot be
traded directly, which is a serious challenge for an investor who wants to evaluate investment
prices and opportunities. For this reason, the location of the properties in which it can be
invested may require considerable work, and the competition between investors for the purchase
of individual properties can be highly variable depending on the availability knowledge.
Information asymmetries are common in real estate markets. This increases the risk of the
transaction, but also gives investors plenty of opportunities to get real estate at bargain prices.
Real estate companies usually use a variety of valuation techniques to determine the value of a
property before buying it.

Once an investment property has been located, and preliminary due diligence (investigation and
verification of the condition and status of the property) completed, the investor will have to
negotiate a sale price and sale terms with the seller, then execute a contract for sale. Most
investors employ real estate agents and real estate attorneys to assist with the acquisition
process, as it can be quite complex and improperly executed transactions can be very costly.
During the acquisition of a property, an investor will typically make a formal offer to buy
including payment of "earnest money" to the seller at the start of negotiation to reserve the
investor's rights to complete the transaction if price and terms can be satisfactorily negotiated.
This earnest money may or may not be refundable, and is considered to be a signal of the
seriousness of the investor's intent to purchase. The terms of the offer will also usually include a
number of contingencies which allow the investor time to complete due diligence, inspect the
property and obtain financing among other requirements prior to final purchase. Within the
contingency period, the investor usually has the right to rescind the offer with no penalty and
obtain a refund of earnest money deposits. Once contingencies have expired, rescinding the
offer will usually require forfeiture of the earnest money deposits and may involve other
penalties as well.
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Real estate assets are typically very expensive in comparison to other widely available
investment instruments (such as stocks or bonds). Only rarely will real estate investors pay the
entire amount of the purchase price of a property in cash. Usually, a large portion of the
purchase price will be financed using some sort of financial instrument or debt, such as
a mortgage loan collateralized by the property itself. The amount of the purchase price financed
by debt is referred to as leverage. The amount financed by the investor's own capital, through
cash or other asset transfers, is referred to as equity. The ratio of leverage to total appraised
value (often referred to as "LTV", or loan to value for a conventional mortgage) is one
mathematical measure of the risk an investor is taking by using leverage to finance the purchase
of a property. Investors usually seek to decrease their equity requirements and increase their
leverage, so that their return on investment (ROI) is maximized. Lenders and other financial
institutions usually have minimum equity requirements for real estate investments they are
being asked to finance, typically on the order of 20% of appraised value. Investors seeking low
equity requirements may explore alternate financing arrangements as part of the purchase of a
property (for instance, seller financing, seller subordination, private equity sources, etc.)
If the property requires substantial repair, traditional lenders like banks will often not lend on a
property and the investor may be required to borrow from a private lender utilizing a short
term bridge loan like a Hard money loan from a Hard money lender. Hard money loans are
usually short term loans where the lender charges a much higher interest rate because of the
higher risk nature of the loan. Hard money loans are typically at a much lower Loan-to-value
ratio than conventional mortgages.
Some real estate investment organizations, such as real estate investment trusts (REITs) and
some pension funds and Hedge funds, have large enough capital reserves and investment
strategies to allow 100% equity in the properties that they purchase. This minimizes the risk
which comes from leverage, but also limits potential ROI.
By leveraging the purchase of an investment property, the required periodic payments to service
the debt create an ongoing (and sometimes large) negative cash flow beginning from the time of
purchase. This is sometimes referred to as the carry cost or "carry" of the investment. To be
successful, real estate investors must manage their cash flows to create enough
positive income from the property to at least offset the carry costs.
With the signing of the JOBS Act in April 2012 by President Obama there has been an easing
on investment solicitations. A newer method of raising equity in smaller amounts is through real
estate crowdfunding which can pool accredited and/or non-accredited investors together in a
special purpose vehicle for all or part of the equity capital needed for the

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acquisition. Fundrise was the first company to crowdfund a real estate investment in the United
States.

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Bibliography:

Government Reports, Government Websites , Online Journals , Magazines , Books &

Online websites and other authorities:

" Pros and Cons of Real Estate Investing" Murdock Edgar, Christy.; Published on
10tht/Mar/2019 . ....................................................................................................................... 12
"Housing Slowdown Unnerves the Fix-and-Flip Crowd". WSJ. Accessed on 20th /Feb/2020; At
17:10.. ......................................................................................................................................... 7
"Pros and Cons of Real Estate Investing: A Comprehensive Overview" ; Lyons, Ruth Published
on 20 December 2019 .............................................................................................................. 11
"The 5 Pros and 3 Cons of Real Estate Investing".; Murdock Edgar, Christy; Accessed on 15
January 2020; At 17:15; ............................................................................................................. 4
"Your Complete Guide to Property Investment"; Yardney, Michael ; Published on 12 January
2020. ........................................................................................................................................... 8
All about PMAY: How does it work, eligibility and subsidy ........................................................ 8
Fiscal support, government policies to drive realty sector up by 6.6% in 2020: Fitch’ ;
https://realty.economictimes.indiatimes.com/news/industry/fiscal-support-government-
policies-to-drive-realty-sector-up-by-6-6-in-2020-fitch/73030027 ; Accessed on
19th/Feb/2020............................................................................................................................. 3
Indian Real Estate Industry Analysis; https://www.ibef.org/industry/indian-real-estate-industry-
analysis-presentation; Accessed on 20th/Feb/2020, at 17:00...................................................... 5
Indian Real Estate Industry; Inida Brand Factory Organisation;
https://www.ibef.org/industry/real-estate-india.aspx; accessed on 19th Feb 2020 at 15:00. ...... 1
Levinrad, Lex (2010-12-17). "Investing in Foreclosures For Beginners". Distressed Real Estate
Institute ....................................................................................................................................... 6
Portman, Janet (2008-02-07). "Foreclosure causes heartache for renters". Inman News.
Accessed on 20th/Feb/2020; At 17:00. ....................................................................................... 7

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