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Business Investing Estate

EXECUTIVE SUMMARY

This research work is related to customers and investors research study, titled “CUSTOMERS OR INVESTORS PERSPECTIVE ABOUT INVESTING IN REAL ESTATE” in high tech cities like Greater Noida, Ghaziabad, Noida and New Delhi.

The research addresses the factors influencing the customers and investors decision to allocate resources to real estate. The survey includes a sample of major customers and investors via a questionnaire. They answered question about their target real estate allocation, their plans to increase or decrease their allocation, the major reasons for investing in real estate, and their view point on major factors which are to be considered by a company before starting a company.

The major empirical findings are:

• Customers/Investors have a short history of real estate investment but are currently increasing their allocation to the real estate, more so than Equities, Debt, and Commodities.

• Legal and regularity risk, Hard to determine the best opportunities and Risk of poor professional advice are given as the risk involved for real estate investing.

• Despite of developers investing their large part of funds on Entertainment centers like Shopping Malls, Multiplexes etc. large part of customers prefer to invest in Residential Projects such as Plots , Group Housing, and Townships.

• Residential Property is gaining as an attractive mode of investment of middle class people leading to growing demand.

• With the shifting of more and more companies and offices to the suburbs, growth in suburban residential real estate market has also been witnessed. Lavish townships with good quality construction replete with luxurious amenities and facilities are now coming up. Survey reveals the factors or specifications needed by the customers where they are investing their funds and also the lack of facility in their previous or current residence.

• Despite the billions of money spent on brand advertising, customer's rate - strength as a weak influence at best on their purchase decisions.

• The most important factors influencing the real estate allocation decision are statistical estimates of risk and return, advice from external consultants and long term historical performance.

During the course of this research work I was provided with an opportunity to interact with the number of people to receive their responses for questionnaire gave a glimpse of the behaviors of people and how a researcher should proceed to elicit the responses comfortably. The experience gathered during this research study will help me to understand the real estate sector and customers perception about investing in real estate.

CHAPTER 2

RESEARCH METHODOLOGY

Research methodology:

2.1 Primary Objectives:

1. Study the profit margins of Real Estate developers in different projects.

2. Study of competitors.

(DLF, ANSALS, UNITECH, PARSVNATH, and OMAXE)

• Project details

• Market share

• Present and future developments plans.

3. Study the customer/investor perception about investing in Real Estate in NCR.

• Interest in investing in real estate.

• Reasons for investing in real estate. (Short term, Long term, End use, Recurring Returns)

• Risk factor in real estate and Return.

• Project they like to invest their funds. (Office Spaces, Plots, Shopping Malls, Multiplexes, Group housing)

• In which assets class they find themselves most comfortable. (Real Estates, Equities, Debt and Commodities)

• Their need for specifications and factors they find appropriate where they are investing their funds.

• Lack of facility in previous or current residence.

4. What are the risk and return factors in investing in real estate.

5. Why they invest in real estate and for what reason.

2.2 Hypothesis:

(1) H₀: The customers have interest in investing in real estate.

H₁: The customers do not interest in investing in real estate.

(2) H₀: The developers are successful in solving the problems and providing necessary specifications to customers.

H₁: The developers are unsuccessful in solving the problems and do not provide necessary specifications to customers.

2.3 Research Design:

The study is to conduct on the part of business expansion plan of Dreamland promoters and Consultants Pvt. Ltd. to expand their business and solve customer's issues. On this part, Market Survey is conducted to know the customer/investor perception about investing in real estate.

In this research focus is on current customers views about real estate as an asset class.

The approach is direct. The survey is going to be done through a large sample of major customers/investors via questionnaire in NCR.

2.4 Sample Design:

The sample size for the above study was a total of 200 from the whole NCR. The respondents of a sample are selected using non-probability procedures. The target respondents were HNI's (High Network Individuals), upper segment of middle class, high level executive workforce of corporations.

2.5 Scope of the study:

Among the study key findings are:

• Customers have a short history of real estate investment but are currently increasing their allocation to the real estate, more so than equities, debt and commodities.

• Legal and regulatory risk, hard to determine the best opportunities and risk of poor professional advice are given as the main reason for real estate investing.

• Despite of developers investing their large part of funds on entertainment centers like shopping malls, multiplexes etc. large part of customers prefer to invest in residential projects such as plots and group housing.

• Residential property is gaining as an attractive mode of investment of middle class people leading to growing demand.

• The most important factors influencing the real estate asset allocation decision are statistical estimates of risk and return, advice from external consultants and long term historical performance.

• Despite of billion of money spent on brand advertising, customer's rate brand-strength as a weak influence at best on their purchase decisions.

• With the shifting of more and more companies and offices to the suburbs, growth in the suburban residential real estate market has been witnessed. Lavish townships with good quality construction replete with luxurious amenities and facilities are now coming up. Survey reveals the factors or specification needed by the customers where they are investing their funds and also the lack of facility in their previous or current residence.

2.6 Limitations:

• Our respondents locate real estate much more than any other asset class such as equities, debt and commodities. But they mention that the cost associated in investing in real estate is much more than these classes.

• The potential relevance of uncertainty is immediate evidenced from many of the questionnaire results. In many questions, we observe significant differences in the “Don't know” response.

• In one of our question in questionnaire we ask the factors you find appropriate for risk in real estate. i.e. asset volatility, lack of reliable valuation data, legal and regularity risk, risk of poor professional advice, hard to determine best opportunities.

May be some of the factors are hard to determine and uncontrollable and unavoided.

• The key fact is the ability to service the debt. The general thumb rule for debt serving is to restrict all EMI payments to 45 percent of the investor's disposable income. This figure could vary according to the age of the person and his financial commitments. 25 years old unmarried person with no commitment can commit even to the extent of 75 percent of his disposable income to servicing a home loan EMI. But a 40 years old person with a wife and a child may struggle to service an EMI of 55 percent of his disposable income. The quantum of loan and structuring the EMIs has to carefully plan before hand to fall in debt trap.

• In reality asset allocation is far more sophisticated process. It varies from person to person and depends on person's financial plan, background, disposable income, age, and investor's preferences.

CHAPTER 3

CRITICAL REVIEW OF LITERATURE

Critical Review of Literature

A just released customer/investor research study, titled Customers/investors perception about investing in real estate throws a light on institutional investors and customers face a complex set of choices with respect to the composition and management of investment portfolios.

In this research we collected information about the real estate allocation choices, beliefs and view points of customers/investors.

Our investigation of the asset allocation gives interesting results.

• Our respondents locate real estate much more than any other asset class such as equities, debt and commodities. But they mention that the cost associated in investing in real estate is much more than these classes.

• The potential relevance of uncertainty is immediate evidenced from many of the questionnaire results. In many questions, we observe significant differences in the “Don't know” response.

• In one of our question in questionnaire we ask the factors you find appropriate for risk in real estate. i.e. asset volatility, lack of reliable valuation data, legal and regularity risk, risk of poor professional advice, hard to determine best opportunities.

May be some of the factors are hard to determine and uncontrollable and unavoided.

• The key fact is the ability to service the debt. The general thumb rule for debt serving is to restrict all EMI payments to 45 percent of the investor's disposable income. This figure could vary according to the age of the person and his financial commitments.

• In reality asset allocation is far more sophisticated process. It varies from person to person and depends on person's financial plan, background, disposable income, age, and investor's preferences.

• Consider middle-aged person from a middle class background seeking a stable life long job. He cannot be expected to invest in equities and property. His preference would be bank FDs. On the other hand, a market savvy young couple in the corporate sector with high surplus would prefer to invest in property. The age factor should be properly defined before targeting.

Comparison of role of risk and uncertainty with US Market

• Diversification and inflation hedging are given as the main reasons for investing in real estate in US market.

• The expected risk & return of real estate is perceived as midway between US stocks and bonds.

CHAPTER 4

REAL ESTATE INVESTMENT

4.1 Industry profile

India, like many other parts of the world is zooming away greatly in the face of a real estate boom. In India, there is a real estate boom in any direction you wish to see. Whether it is Bangalore, Pune, Calcutta or Chennai or Hyderabad or even Mumbai or Delhi - the story is same.

As a result, a boom in one sector translates into a boom in another sector with invertors rushing to park their money in a safe place. Low interest rates over the last few years made bank loans easier.

India has displaced US as the second-most favored destination for FDI in the world. The positive outlook of Indian government is the key factor behind the sudden rise of the Indian Real Estate sector.

Why Invest In Indian Real Estate? Due to growing real estate market, property in India has become a dream for every potential investor looking forward to dig profits. All are seeing into the Indian property market for a wide variety of reasons:

• It's ever growing economy which is on a continuous rise with 8.1 percent increase witnessed in the last financial year. The boom in economy increases purchasing power of its people and creates demand for real estate sector.

• India is going to produce an estimated 2 million new graduates from various Indian universities during this year, creating demand for 100 million square feet of office and industrial space.

• Presence of a large number of Fortune 500 and other reputed companies will attract more companies to initiate their operational bases in India thus creating more demand for corporate space.

• Real estate investments in India yield huge dividends. 70 percent of foreign investors in India are making profits and another 12 percent are breaking even.

• Apart from IT, ITES and Business Process Outsourcing (BPO) India has shown its expertise in sectors like auto-components, chemicals, apparels, pharmaceuticals and jewellery, where it can match the best in the world. These positive attributes of India is definitely going to attract more foreign investors in the near future.

4.2 Company profile

In a Short span of time, ‘Dreamland Promoters & Consultants' has established its reputation as the rising star of Indian star of Indian real estate industry. The extraordinary achievements of the company are unparalleled and have quickly translated into truth and faith of its customers and associates. Dreamland Promoters and Consultants Pvt. Ltd., is an upcoming name in the field of housing development.

Promoted by the young and visionary, Mr. Pawan Bhadana, Dreamland, an ISO 9001:2000 company is bound together with energies of youth and wisdom of experience. A thorough real estate professional with an experience spanning over 10 years, Mr. Bhadana himself is a man of ideologies. Under his dynamic leadership, Dreamland has achieved milestones that were hitherto. However, foe him success has come not just in the form of business volumes, but as love and appreciation of all concerned.

Dreamland understands that a home is not just by brick and mortar. Behind the construction of every home, lie the dreams and aspirations of a family. To match their expectations and to really make their dreams come true, lot of care and a lot of commitment has to go right from designing it the finishing part. And to supplement such wonderful home, a pleasant environment also needs to be created. This is the reason that the company has associated with itself the best architect, planners and construction professionals.

Vision:

To play an important part in the process of housing development in our nation by creating a reputed organization of globally appreciated standards based on integrity, values and trust.

To contribute to the case of society by initiating and supporting educational, cultural and health development activities particularly for underprivileged children

Mission:

To develop & deliver quality housing and to work towards achieving excellence in our field

Apart from its present sphere of business, Dreamland has mega plans to diversity and excels in other fields, including: Media, IT, Education, Hospitality.

To carry out its corporate social responsibilities, the establishment of ‘Dreamland Foundation' is on the cards. To start with, the foundation will cater to the education needs of underprivileged children.

MD's Message

Mr. Pawan Bhadana

M.D., Dreamland Promoters & Consultants Pvt. Ltd.

“We aim to create real value for our customers by adopting quality standards that match the best in the world. Encouraged by the trust of our valued clients as well as our partners, we strive to establish benchmark in real estate development and turn many dreams into reality.”

FUTURE PROSPECTS:

Dreamland Group has embossed its name on the ground of Indian real estate sector. Headed by the visionary, Mr. Pawan Bhadana, CMD and driven by a dedicated team of real estate professionals, Dreamland Group is committed to create exceptional projects that offer real value to its customers.

Up surging with widely recognized and appreciated projects, the group already has to its credit the grand success of Golf View City at Hapur (approved by the H.D.P.A.) and The Willows-Lifestyle Apartments at Ghaziabad (approved by G.D.A.) that are currently under development.

With its upcoming residential project, Dynasty Apartments, Dreamland is all set to promote and develop ‘Bhiwadi', the latest destination for real estate development. Here, the group proposes to develop a residential project consisting of apartments and plots. Dreamlands, Dynasty Apartments will incorporate latest international technologies in construction and interiors. Special attention is being given for the aged and handicapped and special facilities are being provisioned to make them feel comfortable.

Taking its commitment further, Dreamland has also proposed ambitious projects at Noida (Residential Apartments), Greater Noida (Residential Apartments) & Faridabad (Commercial) among others.

4.3 SWOT Analysis

STRENGTHS

• R & D with Dreamland have developed excellent R & D and building and developing capabilities, which has build a strong customer base and establish market leadership through the high quality of its units.

• The increasing demand for the real estates presents a great opportunity for The Dreamland Promoters and Consultants Pvt. Ltd. to increase its market share.

WEAKNESS

• Dreamland has low presence in commercial projects. Currently, it has no units of commercial projects.

• Dreamland is mainly focused on residential projects.

• Not looking towards the scope of western UP where demand of residential projects is increasing.

• It has few Projects now, thereby less coverage in the market.

OPPORTUNITIES

• There is a scope of business as there is a demand for real estates.

• The big IPO (initial public offering) is a big opportunity of the company.

• The concept of wedding mall.

- The theme based malls are the way to the future.

THREATS

• Dreamland has the biggest threat from the global and large players in the real estate like DLF, UNITECH & OMAXE.

CHAPTER 5

STUDY OF COMPETITORS

THE COMPETITORS

• DLF

• UNITECH

• OMAXE.

• ANSALS

• ELDECO

• EROS

• PARSVNATH DEVELOPERS

DLF

DLF presently has its land bank in 31 different cities, through with a small presence (less than 100 acres) in 20 of these. In addition to 574 mn Sq. ft. land bank, DLF has 23 super luxury hotel sites, a golf course and clubs.

Too large dependence on Gurgaon:

The total land bank of 10,225 acres is highly skewed in favors of Gurgaon and to some extent Kolkata too. DLF has approximately 72 percent of its total land bank in Gurgaon (46 percent) and in Kolkata (23 percent) together.

Land cost and current debt levels

DLF has a total debt of Rs. 94.5bn and an outstanding amount of Rs. 55.4bn towards land Rs. 94.5bn and cost. Of the total debt of Rs. 94.5bn, 75 percent is on a floating rate basis which is a risk in a rising outstanding land interest rate environment. DLF had capitalized Rs. 1.1bn out of the total interest charge of cost is Rs. 2.8bn for FY06 and estimated the interest charge for FY10 would be Rs. 5.4bn, on a conservative basis, as interest rates have gone up by roughly 150 percent in the last nine months.

A quick snapshot on area developed, under construction and planned

A total of 10,255 acres translates into 574mn. Sq. ft. of saleable area, the total 574mn sq. ft. involves the development of plots of 46mn sq. ft., residential apartments of 377mn sq. ft. DLF is of the opinion that its present land bank is sufficient for the next 10-11 years. Out of 574mn sq. ft., DLF has a total of 46mn sq. ft. under development as of 30 November 2006, between FY07-09 with 9m sq ft under residential; 26m sq ft under commercial and 11m sq ft under retail development.

Snapshot of DLF past and future developments plans

UNITECH

The Rs. 1600crores Unitech Group is one of the Major Township Planning and real estate development companies in India and has a diverse business portfolio of heavy construction, leisure and entertainment projects, hospitality business and residential property developments.

Unitech Builder plans to use the Noida land to make 4000 top-of-the-line apartments priced at Rs. 2 crores (Rs. 20 million) each. The investment required to build this dream residential project: Rs. 3000 crores (Rs. 30 billion). Besides inking this mega deal, Unitech has been on a land-buying spread across the country - from Gurgaon to Kolkata, Kochi, Hyderabad and Chennai - to establish a pan-Indian presence. In the last few months, the Group has created a land of over 8,000 acres.

PARSVNATH

Parsvnath developers announced that they would invest Rs. 1600 crores over the next three years to construct a metro station cum shopping mall near the Commonwealth Games Village in the National Capital. The metro station cum shopping mall is spread over 7.3 acres and about 3.65lakh sq. ft. of retail space would be developed. This will be the 12^th mall which the Parsvnath will develop at metro stations, owned by Delhi Metro Railway Station Corporation, a building operator transfer basis.

Parsvnath projects cover saleable area of 134 million sq. ft, including owned land development rights; this does not include land owned in SEZ business. Ongoing projects are spread over 17 states and 46 cities.

Projects under Development

OMAXE

It started in 1987 as a vision, to realize the dreams of millions across the length and breath of our country, is today an ISO 9001:2000. At OMAXE we believe that our spectacular performance, extra-ordinary growth and spotless track record over the past 19 years are proof of the infinite possibilities that lie within us. It is the belief that puts OMAXE in the forefront of this multi-billion industry as a pioneer with an unshakeable reputation for delivering what is unconceivable for others. It also beckons us to continue realizing the dreams of million into reality.

OMAXE, one of the India's fastest growing Real Estate developers, has registered its presence across the country with a healthy mix of projects that range from well planned office spaces to international standards townships, group housing, state of the art malls, commercial complexes, multiplexes, theme malls, resorts, hotels, service apartments etc. The company has also diversified into IT parks, bio-technology parks, SEZs etc.

Today, OMAXE enjoy a reputation of being one of the India's premier Real Estate Developers with an indelible focus on customer satisfaction. This feat has been achieved through the adoption of quality system standards that integrate technological and design innovations with a strong technical base to provide state of the art real estate options.

At OMAXE, the human mind and spirit continue to be our most precious resource and a critical ingredient in the spectacular success of our endeavors. Today OMAXE boasts of over 800 qualified men and women who are successfully turning their dreams, and dreams of million into reality.

Having registered phenomenal start based on the successful acquisition and implementation of a large number of highly challenging and hugely varied projects, all in a short span of under two decades, OMAXE today enjoys the reputation of being North India's fastest growing Real Estate Developer.

CHAPTER 6

DATA

7.1 Data Collection

As a preliminary for the business development of the company it was essential to find the customer/investor perception about investing in real estate.

For collecting the information a questionnaire was designed focusing on the main cities in NCR like Greater Noida, Noida, New Delhi and Ghaziabad where the company is operating its projects.

The respondents in our sample size are professionals from major public and private institutions which include managers, consultants, proprietors, business class etc. Approximately 200 questionnaires were filled and ultimately collected 169 with positive response that they have their interest in investing their funds in real estate.

Table 1 summarizes the total sample size which reflects that majority of respondents have their interest in real estate.

Table: 1 Sample size and Respondents:

7.2 Primary Data

The whole of the study is primary data based oriented through a questionnaire. The contents of the questionnaire are:

• Interest in investing in real estate.

• Reasons for investing in real estate. (Short term, Long term, End use, Recurring Returns)

• Risk factor in real estate and Return.

• Project they like to invest their funds. (Office Spaces, Plots, Shopping Malls, Multiplexes, Group housing)

• In which assets class they find themselves most comfortable. (Real Estates, Equities, Debt and Commodities)

• Their need for specifications and factors they find appropriate where they are investing their funds.

• Lack of facility in previous or current residence.

The questionnaire is attached in annexure.

CHAPTER 7

FINDINGS AND ANALYSIS

Findings and Analysis

The company, Dreamland Promoters and Consultants Pvt. Ltd. has presently 3 projects out of which 2 have been already cleared and one is yet to be executed. The developers expect 30-40% returns/profit margins, although it varies from projects to projects due to various reasons like time, cost of purchase, etc.

7.1

Question 1 among the questionnaire reflects the real estate investment policy specifically. We asked our respondents do you have interest in investing your funds in real estate.

The answer to the question 1 indicate that a surprising number of respondents, nearly 169 out of 200 have their interest in investing their funds in real estate.

Exhibit 1: Question 1

Do you have interest in investing in Real Estate!

Interpretation:

Certain increase in property prices in the last four years, high income, cheaper loan rates, no longer adverse to debt and ready to discount future earnings today could be the main reasons for development of interest in real estate of customers.

7.2

Reasons for the customers/investors for investing in real estate, may it be Short term returns, Long term returns, End use or recurring returns. Different respondents from different cities show different perceptions. End use and long term investment are the two reasons among four who votes majority of respondents.

Exhibit 2: Question 2

Reasons for investing in Real Estate!

Interpretation:

Since real estate has beaten all forms of investment in last four years and sought to be emerging as a key element in customers/investors portfolio and by paying an EMI instead of paying taxes and rent they develop a compulsory saving habit and create a valuable asset for a long period of time could be a possible reason for this above result.

7.3

The question mentioned states about the top risk factors associated with the real estate investing. Asset volatility, lack of reliable valuation data, legal and regularity risk, risk of poor professional advice, hard to determine the best opportunities are the various risks associated with real estate and mentioned in questionnaire.

Exhibit 3: Question 3

Top risk factors in Real Estate!

Interpretation:

Risk of poor profession advice, legal and regularity risk, hard determining the best opportunities are the top three factors. Change in government policies, change in trend and fashion cold be the main reason for above.

7.4

Various big players had registered its presence across the country with a healthy mix of projects. The question revolves around the same perception about customers/investors view in which project they would like to invest. - Office Spaces, Shopping Malls, Plots, multiplexes & Group Housing are few of the projects.

Exhibit 4: Question 4

Project in which customers/investors like to invest!

Interpretation:

There's been an evident shift in perception and mindset in the Indian middle class over the last five to ten years, thanks to the impact of liberalization and opening up of the Indian economy, a rise in average income across households, and a palpable desire to own things ‘now'. The most crucial aspect of this ‘shift' in the consumer's mindset is perhaps explained by the fact that the young (or Next Generation) are more in charge of their lives and eager and impatient to assume the world. It's a generation that is independent, self-reliant and nuclear in nature. And it is this eagerness that is succeeding that has fuelled a drive to own what one desires the most: a home, a car and a healthy lifestyle. Other drivers have been incentives from the government to buy homes, improved quality of buildings and property services and a bouquet of financial options. Tax concessions, property price dips and lower interest rates have also helped.

7.5

The question ask “on a 5-point scale,….how does the long term expected return for the real estate component and your portfolio compare with the long term expected return for the following asset class in your portfolio”?

In which of the following asset classes are you most comfortable in investing your funds.

The research report that most respondents believe real estate has an expected return a little above that for equities and debt. They expect commodities too significantly and somewhat less.

What factors might explain this apparent contradict?

• First, allocation might not be based on modern portfolios theory.

• Second additional factors affecting risk and return estimates-such as higher relative cost of real estate.

• Consistent with this notion is the real estate has done well relative to stocks and bonds recently, a number of customers reported investing in real estate only recently.

7.6 & 7.7

The question asks about the factors or specifications to be included by developer where the customers/investors are investing their funds.

The factors listed below are most demanding among all:

• Affordable price range.

• Availability of loan at low interest rates.

• Easy payment plan.

• Clear title of property.

• Resale value.

• Connectivity to schools, hospitals, entertainment centers.

• Peaceful locality

• Pollution free environment.

• Quality construction and maintenance.

• Safety and Security, Water Availability, Power Back-Up, Car Parking, Recreational Facility, Club Membership etc.

• ROI (Return on Investment)

Thus, we found that respondents are interested in investing in real estate and at the same time developers are successful in satisfying the real estate investors. Each developer has an average of 30-40% profit margins, although it varies from projects to projects because of factors like cost of purchase, time, etc.

CHAPTER 8

RECOMMENDATIONS

Recommendations:

• In reality asset allocation is far more sophisticated process. It varies from person to person and depends on person's financial plan, family background, disposal income, age, and investor's preferences. So before targeting the customers the company should consider the factor.

• Consider middle- aged person from a middle class background seeking a stable life long job. He cannot be expected to invest in equities and property. His preference would be bank FDs. On the other hand, a market savvy young couple in the corporate sector with high cash surplus would prefer to invest in property. The age factor should be properly defined before targeting.

• Company should state to its customers that since real estate has beaten all forms of investment in last 4 years and sought to be emerging as a key element in customer's portfolio and by paying an EMI instead of paying taxes and rent, they develop a compulsory saving habit and create a valuable asset for a long period of time.

• Tremendous demand for residential property such as group housing, residential plots, and townships rather than commercial property. The company should focus on developing the residential property more rather than commercial property.

• There should be an option for discount for customers from registered dealers of the company.

• Customers should be approached and asked them to see sample flat without forcing them to buy the flat. The conveniences should be born by the company.

CHAPTER 9

BIBLIOGRAPHY & REFERENCES

BIBLIOGRAPHY:

• http://www.dreamlandindia.com

• http://www.ssrn.com

• http://www.unitechgroup.com

• http://www.omaxe.com

• http://www.dlf.in

• http://www.parsvnath.com

CHAPTER 10

ANNEXURE

Questionnaire

What are the customer's and investors perceptions about investing in Real Estate!

Introduction

Thank you for taking the time to complete the survey. Your feedback is integral to our academic research how customers think about investing in real estate. Specifically we want to uncover why the real estate is such a limited part of most of the customers and organization portfolios.

Your answer will remain strictly confidential and will be used for research purpose only. The survey should take about 5-7 minutes to complete. Thank you once again for your time.

NAME: AGE:

ADDRESS: OCCUPATION:

1. Do you have interest in investing your funds in Real Estate?

[ ] Yes [ ] No

If yes, please answer the following questions.

2. Have you ever invested your funds in Real Estate?

[ ] Yes [ ] No

3. Reasons for investing in Real Estate?

[ ] Short Term Return [ ] Long Term Return

[ ] End Use [ ] Recurring Return

[ ] we do not invest in Real Estate

4. Top risk factors in real estate and return?

[ ] Asset volatility [ ] Lack of reliable valuation data

[ ] Legal and Regularity risk [ ] Risk of poor Profession advice

[ ] Hard to determine the best opportunities [ ] any other

5. Various big players had registered its presence across the country with a healthy mix of projects. In which project you would like to invest your funds.

[ ] Office Spaces [ ] Shopping Malls

[ ] Plots [ ] Multiplexes

[ ] Group Housing [ ] Any Other, Please specify_________

6. For which of the following assets classes are you most comfortable in investing your funds.

Least Comfortable Most Comfortable

1 2 3 4 5

Don't Know _ _ _ _ _

Real Estate _ _ _ _ _

Equities _ _ _ _ _

Commodities _ _ _ _ _

Debt Markets _ _ _ _ _

7. Almost every builder providers the following specifications in his project like:

• Affordable Price Range, Availability of loan at low interest rates, Easy Payment Plan.

• Connectivity to Public Transport, Work Place.

• Proximity to Schools, Hospitals, Entertainment Centers.

• Clear title of property, Resale value.

• Peaceful locality, Pollution free environment.

• Quality Construction, Maintenance, Safety & Security, Water Availability, Power Back-Up, Car parking facility, Recreational facility, Club Membership etc.

• Return on Investment (ROI)

Any other factor or specification you find appropriate or useful in the area you are investing, please specify______________________________________________

8. Brand Name is something that immediately comes into your mind. Please rate the developers according to brand image.

_ DLF _ UNITECH _ OMAXE _ ANSALS _ ELDECO

_ DREAMLAND _ EROS _ PARSVNATH

9. Please specify lack of facility in your previous or current residence.

______________________________________________________________________________________________________________________________________________________

CHAPTER 11

CASE STUDY

CASE STUDY

Investing in Real Estate

INTRODUCTION

Investing in real estate presents both unique problems and opportunities. Real estate is a non-liquid, localized investment vehicle. It is immobile, are of limited supply, indestructible, and physically real.

It is difficult to own buildings because they require maintenance, tenants, regular updating, and are subject to fire and location advantages/disadvantages.

Real Estate Investing has created more millionaires than any other investment vehicle in this country. Investing in real estate is one of the safest and smartest investments that you can make. Real estate appreciates at a rate far greater than the rate of the inflation, builds equity, provides a steady return on investment, provides cash flow, and can offer substantial tax benefits.

Real estate is almost completely dependent on local conditions. One should invest in real estate only if he or she knows the local situation well-including the local economy, market conditions, political environment, building controls etc. All of these factors can be critical to the success or failure of an investment.

There are two types of properties that can be invested in are: residential and commercial.

• Commercial properties, as their name suggests, are properties that are sold or leased to businesses. These can include retail areas, warehouse spaces, industrial properties, restaurants, and much more.

• Residential properties are homes, duplexes, condos, townhouses, and rental properties rented or sold to individuals and families.

The Investors can invest in both types of properties but it requires different skills, networking procedures, and even marketing are required for each.

It may be simpler to focus on one type of buyer or renter and one type of property. Residential real estate investing makes a great deal of sense. There are many advantages for the beginner investor, and even seasoned investor, interested in residential real estate investing.

One major advantage is that there is already an extensive financing industry in place for residential properties. There are also government programs and special programs in place to help those with little money to buy their first home.

Residential real estate investing can also be very attractive because there's always a target market interested in this type of property. When the economy takes a downturn, businesses will continue to carry on because families and individuals will still need places to live. They will still be renting, and even buying properties. The fact that there are government initiatives and many types of mortgage programs ensures that home buyers continue buying even when the economy is in a slump. This can make residential real estate investing slightly less risky for real estate investors.

Thus, there is always a market for residential projects, something that cannot always be said for commercial property investing. Another major advantage of residential real estate investing is that it takes less money to get started. While commercial properties tend to be more expensive, residential homes can be purchased with very little capital. Distressed properties and foreclosed properties, in particular, can often be purchased for less than their actual market value. This makes residential real estate investing relatively simple. An investor can simply purchase a property that is being sold for less than its value. He or she can use traditional mortgages or business loans in order to make the purchase.

After renovating or even just cleaning up, the investor can resell the property for considerably more and thereby make a profit. It is really that simple and thus, residential properties have great investment opportunity.

Real Estate Investors Benefits

They actually carry less risk.

The truth is that everyone needs real estate sooner or later. Businesses need retail space in order to house their shops or store their supplies, and families need homes in which to live.

The earning potential for real estate investors are sky-high.

Because real estate investors are selling very high tag items -- homes sell for anywhere from tens of thousands to millions of dollars -- the profit margins can be terrific.

They can be deeply satisfying.

A real estate investor helps families find an ideal home, helps people with good credit find a property that they thought they could not afford, and helps businesses establish a base of operations. At the same time, the real estate investor enjoys complete freedom. He or she does not have to report to a boss, spend hours in a cubicle, or even spend hours at home.

"This sort of freedom - combined with the truly awesome earnings potential of being an investor - makes real estate investing a wonderful part time business opportunity."

If you want to earn a real living while enjoying greater freedom, consider all your options. Once you do, you may find that becoming a real estate investor makes the most sense. This is the opportunity that allows you to survive in better way in the economy and allows you to enjoy a truly rewarding career and truly terrific profits.

Why invest in real estate? Does it provide as much as could be expected from other types of investments, such as the stock market or mutual funds? If so, is the return high enough to be worth the extra risk involved and the fact that the money may be tied up for an extended period of time? What are the local market conditions, and how are they likely to change over the course of two, five or ten years? It is certainly easier, and in many ways safer, to rely instead on other types of investments.

There is one primary reason for investing in real estate - in a word, profit! These three types of Return on Investment (ROI) can add up to a significant total return - one that justifies the greater risk and involvement.

Three types of return on investment (ROI) are found with real estate.

1. Cash Flow before Tax

2. Return on Taxes

3. Appreciation

Important Factors in Decision to Invest in Real Estate

1. Location

2. Price - higher and better use, will market allow for better cash inflow

3. Demand - what is the competition among buyers?

4. Existing leases - are they good or bad

5. Existing operating expenses

6. Competition - what are new properties coming on market, will they improve our property and make it more valuable

7. Condition - look for cosmetic problem not structural

8. Replacement cost

9. Terms of financing

10. Economic cycle - is the timing good or is there a down-swing

11. Motives of seller - why are they selling (ask them)

KEY ISSUES OF THE CASE

• Why invest in real estate.

• What factors are to be taken into consideration before investing in real estate?

• It is completely dependent on local conditions of the economy.

• The primary reason for investing in real estate is in a word - “profit”

• There are two types of real estate properties i.e. Residential and Commercial. It is difficult to own property.

• Three types of ROI are found in real estate.

• Doing a real estate business is really profitable.

• Real Estate Developers act as a guide and play an important role in the real estate market.

ANALYSIS AND RESULTS OF THE CASE

Dreamland Promoters and Consultants Pvt. Ltd., a real estate developer, presently dealing in residential properties enjoy a number of advantages over other companies. Residential projects have a large market and even when the economy is downturn, people need place to live. As a result, they are less risky and have a high tag earning potentials as compared to commercial projects. It also requires less capital for investment than commercial projects and if you want to resell, you can easily get customers in a short span of time and make a profit.

CONCLUSIONS

Being a new to the market ‘The Dreamland Promoters and Consultants Pvt. Ltd.' has a good start, as is has tried to engage itself towards residential projects which have a competitive advantages over the commercial projects.

Since, Real Estate Market is on a boom, it's a great opportunities for real estate developers to develop its market share and increase its profit margins.

QUESTIONS

Question: There are several properties to choose from in your area. How do you select the right one? You need an effective way to evaluate and compare investment financials! Explain.

Question: Why invest in real estate? Is the return worth enough taking the extra risk? If yes, for what period? What is your outlook for the real estate market?

Question: How are you reading the macro situation of the economy at present, as a Real Estate Investor? What is your advice for all those new entrants eyeing the real estate space/market?

Question: Since ‘The Dreamland Promoters and Consultants Pvt. Ltd.' has a small coverage but a good start, how should it go on increasing its market share both volume and value wise in this competitive real estate market.

REFERENCES:

• www.realestateweblog.org/maximize-investment-real-estate-software.php

• www.reit.com

• www.indianground.com/real_estate_india.aspx

• www.economywatch.com/investment/real-estate-investment.html

• www.real-estate-investment-information.com

• www.vccircle.com/2008/07/07/forget-short-medium-term-problems-real-estate-is-best-play-out-here

• www.greatrealestateinvestinginfo.com

• www.real-estate-investing information.net/articles/tips_to_successful_real_estate_investing.php

CHAPTER 12

SYNOPSIS

SYNOPSIS:

CUSTOMER/INVESTORS PERCEPTION ABOUT INVESTING IN REAL ESTATE

STUDENT NAME: AMIT KESARWANI

INDUSTRY GUIDE: Mr. M.L.YADAV

Manager Marketing

&

Mr. ANIL DWIVEDI

Senior Manager Marketing

Dreamland Promoters And

Consultants Pvt. Ltd., Noida

FACULTY GUIDE: Dr. AJIT MITTAL

PURPOSE:

• To understand about Real Estate Industries, and customers perception about investing in Real Estate.

• To know what factors and reasons customers take before investing in Real Estate.

• To draw an understanding about the Profit Margins in Real Estate Business.

• To understand whether developers are successful in solving the problem and providing the necessary specifications to customers.

OBJECTIVE:

• What are the Risk factors as well as other factors in Real Estate Investment and its Return?

• To study the different Profit Margins of different Real Estate Developers in different projects.

• To find the customer perception about investing in Real Estate business in NCR.

• Why they invest in Real Estate and not in OTHERS like: Equities, debt, Commodities

• Reasons for investing in Real Estate. (i.e. For Short Term, Long Term, End Use, Recurring Returns)

Findings:

• Customers have a short history of real estate investment but are currently increasing their allocation to the real estate, more so than equities, debt and commodities.

• Legal and regulatory risk, hard to determine the best opportunities and risk of poor professional advice are given as the main reason for real estate investing.

• Despite of developers investing their large part of funds on entertainment centers like shopping malls, multiplexes etc. large part of customers prefer to invest in residential projects such as plots and group housing.

• Residential property is gaining as an attractive mode of investment of middle class people leading to growing demand.

• The most important factors influencing the real estate asset allocation decision are statistical estimates of risk and return, advice from external consultants and long term historical performance.

• Despite of billion of money spent on brand advertising, customer's rate brand-strength as a weak influence at best on their purchase decisions.

• With the shifting of more and more companies and offices to the suburbs, growth in the suburban residential real estate market has been witnessed. Lavish townships with good quality construction replete with luxurious amenities and facilities are now coming up. Survey reveals the factors or specification needed by the customers where they are investing their funds and also the lack of facility in their previous or current residence.

Recommendations:

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• In reality asset allocation is far more sophisticated process. It varies from person to person and depends on person's financial plan, family background, disposal income, age, and investor's preferences. So before targeting the customers the company should consider the factor.

• Consider middle- aged person from a middle class background seeking a stable life long job. He cannot be expected to invest in equities and property. His preference would be bank FDs. On the other hand, a market savvy young couple in the corporate sector with high cash surplus would prefer to invest in property. The age factor should be properly defined before targeting.

• Company should state to its customers that since real estate has beaten all forms of investment in last 4 years and sought to be emerging as a key element in customer's portfolio and by paying an EMI instead of paying taxes and rent, they develop a compulsory saving habit and create a valuable asset for a long period of time.

• Tremendous demand for residential property such as group housing, residential plots, and townships rather than commercial property. The company should focus on developing the residential property more rather than commercial property.

• There should be an option for discount for customers from registered dealers of the company.

• Customers should be approached and asked them to see sample flat without forcing them to buy the flat. The conveniences should be born by the company.

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