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International Research Journal of Finance and Economics

ISSN 1450-2887 Issue 24 (2009)


© EuroJournals Publishing, Inc. 2009
http://www.eurojournals.com/finance.htm

Prospects & Problems of Real Estate in India

Vandna Singh
Head-MBA Department
Seth Jai Prakash Mukand Lal Institute of Engeenring &Technology (JMIT)
Radaur, Yamunanagar

Komal
Lecturer, Institute of Technology & Management (ITM), Gurgaon
E-mail: komal29m@rediffmail.com

Abstract

The present paper entitled “Prospects & Problems of Real Estate in India” is an
attempt to reveal the issues concerned with real estate investment sector in India. This
paper is concerned with the investment on real estate in India and the trends in the
concerned industry. The paper has been divided into three sections. Section one deals with
the fundamental factors affecting the real value like demand, supply, property, restrictions
to use and site characteristics. Section two and three explains the causes and the constraints
to the present real estate boom respectively in India. The paper also presents the
suggestions and future prospects of real estate in the country.

Keywords: Real estate, property, prices, market, investment, income etc.

Objectives
The paper aims to examine the present scenario of real estate in India. In this broader framework, an
attempt has been made to achieve the following specific objectives:-
1. To study the fundamental factors affecting the real estate value.
2. To examine the present factors of real estate boom.
3. To present the future constraints of real estate investment in India.

Sample Size
Out of the total companies working in India in the field of real estate 50 major players have been
selected for the purpose of the study.

Research Methodology
The present study is of analytical and exploratory nature. Accordingly the use is made of secondary as
well as primary data. The secondary data is collected mainly through various newspapers, magazines,
Internet and RBI review. To supplement the secondary data, some primary data has also been used
which is collected through interviews and personal visits to the various companies to know the present
situation of the market.
International Research Journal of Finance and Economics - Issue 24 (2009) 243

The present study is dependent more on secondary data. Primary data is not used due to the
reliability of the data. The factors in the present paper are the Macro Economic factors for which the
secondary data is more suitable and reliable. The collected in the aforesaid manner have been tabulated
in condensed form to draw the meaningful results. To analyze the data tables, percentage and graphs
were used.

Independent Variables
Prices, features of flat, material used and advertising.

Dependent Variables
Customer awareness, presences and their perception about property.

Introdection
Real estate or immovable property is a legal term (in some jurisdictions) that encompasses land along
with anything permanently affixed to the land, such as buildings. Real estate is often considered
synonymous with real property (also sometimes called reality), in contrast with personal property (also
called personality). However, in technical terms, real estate refers to the land and fixtures themselves
and real property are used primarily in over real estate. The term real estate and real property are used
primarily in common law, while civil law jurisdiction refers instead to immovable property. In law, the
word real means relating to a thing as distinguished from a person. Thus the law broadly distinguishes
between real property (land and anything affixed to it) and personal property (everything else e.g.
clothing, furniture, money).
Real Estate Business Includes: With the development of private property ownership, real estate has
become a major area of business. Purchasing real estate requires a significant investment and each
parcel of land has unique characteristics, so real estate industry has evolved into several distinct fields.
Some kind of real estate businesses include-
• Appraisal – Professional valuation services
• Brokerage – Assisting buyers and sellers in transactions
• Development – Improving land for use by adding or replacing buildings
• Property Management – Managing a property for its owner(s)
• Real Estate Marketing – Managing the sale side of the property business
• Relocation Services – Relocating people or business to difficult country
Types of Ownership Interests: Real property (immovable property) can refer to the real estate
itself or to various types of ownership interests in real estate, including:
• Freehold: Provides the owner the right to use the real estate for any lawful purpose and sell
when and to whom the owner wishes.
• Life estate: An interest in real estate which is granted to a life tenant until that person dies. The
interest terminates upon the death of the life tenant.
• Estate for years: Similar to life estate but term are a specified number of years.
• Leasehold: The right to posses and use real estate pursuant to the terms of a use.
• Reversion: The right to posses the free interest in real estate after the expiration of a life estate,
estate for years or leasehold.
• Concurrent or co-tenancy: The ownership of an interest in real property by more than one
party. Rights of any single party may be limited in various ways depending on the jurisdiction
and type of concurrency.
Participants of Real Estate Market: The main participants in the real estate markets are-
244 International Research Journal of Finance and Economics - Issue 24 (2009)

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 but 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 product or the market.
Renovators: These people supply refurbished buildings to the market.
Facilitators: This includes banks, real estate grocers, lawyers and others that facilitate the purchase
and sale of real estate.
The owner/user, owner and renter comprise the demand side of the market, while the
developers and renovators constitute the supply side. In order to apply the simple demand and supply
analysis to real estate markets a number of modifications need to be made to standard microeconomic
assumptions and procedures.
Real estate can divided into three categories: These are
• Commercial
• Residential
• Agricultural
We can invest into all the given areas and can make return by capital appreciation, rental
income, agricultural produce, lease and commercial use.
The following factors influence the price and cost of the real estate:
1. The physical characteristics of the property
2. The property rights
3. The time horizon of holding the property
4. Geographical area
5. The development rate
Features of Real Estate Markets: In particular, the unique features of the real estate market must be
accommodated. These include:
• Durability
• Heterogeneous
• High transaction costs
• Long time delays
• Both an investment good and consumption good
• Immobility

PART-1: Fundamental factors determining the value of real estate


These factors includes

Demand
Demand refers to people’s willingness and ability to buy or rent a given property. In part demand stems
from a market area’s base. In most real estate markets, the source of buying power comes from jobs.
Property values follow an upward path when employment is increasing. The real estate market in India
has seen remarkable changes in the past few years. The rapid expansions of information technology,
especially BPOs, spurt in the middle class income and 8% growth in GDP are the potential key factors
for the growth.
India is the 4th largest economy in the world, and has the 2nd highest GDP among the
developing countries based on purchasing power parity. IT and IT enable services sector in India is still
in its growing stage due to increasing demand for business processing units in India and is estimated to
grow by 107% to $583 million in revenue. This could lead to a space requirement of 20-25 million sq.
International Research Journal of Finance and Economics - Issue 24 (2009) 245

ft. per annum, according to a Merrill Lynch report. Taking this factor into consideration, the Total
value of real estate created by the IT and ITES sector in the next three years will be Rs.132000.

Supply Analysis
Supply analysis means sizing up the competition. Nobody wants to pay more for a property than the
price they can pay for competing property. An integral part of value analysis requires identifying
sources of potential competition and then inventorying them by price and features. An analysis of
supply should not limit potential competitors to geographically and physically similar properties. In
some markets, for example, low priced single family houses might compete with condominium units,
manufactured homes and even with rental apartments.

The Property
In real estate the property itself is also a key ingredient. The price that people will pay is governed by
their needs and the relative prices of the properties available to meet those needs. To try to develop a
property’s competitive edge, an investor should consider five things:
1. Restrictions on use
2. Location
3. Site characteristics
4. Improvements
5. Property management

The Property Transfer Process


In efficient markets, information flows so quickly among buyers and sellers that it is virtually
impossible for an investor to outperform the average systematically. As soon as something good or bad
occurs, the prices of the affected company’s stock adjust to reflect its current potential for earnings or
losses. Real estate markets are no as efficient as stock markets.

Rental Trends in India


Recent trends of rental properties in India are conspicuous by the immense potential that is being
realized today. Rental values in cities like Delhi and outskirts are witnessing an increase of 20-25%.
Real estate agents are devoting themselves to negotiations for rented homes than ever. Though the
interest rates on home loans, continued tax exemptions on such prompts people to buy property, those
with the ability to buy a flat among the middle-class are thinking twice.
In residential segment, the capital value or cost of flats has almost doubled in cities like
Gurgaon where prices went up to Rs. 45 lakhs from Rs. 15 lakhs a couple of years back. The demand
for more capital appreciation in the wake of rising prices coupled with home loan rate hike has
dampened the buying spirit. This has in ways propelled demand for rental property in India. Increased
demand for independent houses or paying guests occurs mainly in the metros like Delhi, Gurgaon, and
Mumbai etc. where the corporate sectors rent independent houses for their senior executives. A paying
guest or PG accommodation in India is a convenient arrangement. Even PG hostels and working
women’s hostels, are considered safe and can be availed of on an individual or sharing basis mean big
business.
The real estate rental trends in commercial sector are momentous as the key tendency among
the investors is to rent a commercial space instead of buying. It will facilitate low risk and less worry
on maintenance. Commercial rentals including corporate office space, BPO spaces, mall space, shops
and showrooms are an integral part of the commercial rentals in India. Buying good space in high-
quality development and leasing it to a good brand is a wise investment decision. Usually, commercial
lease agreements specify a 15% escalation in the real estate rental in every three years which is a good
enough yield. For those considering regular rental returns rather than capital appreciation, mall space
246 International Research Journal of Finance and Economics - Issue 24 (2009)

has the distinction to be an excellent option. It gives returns higher than that received with office space
and much higher than the rental returns from residential space.

PART-2: Causes for Present Real Estate Boom


Foreign Funds
The Government has allowed FDI in the real estate sector with certain caveats. Recently the Cabinet
Committee on Economic affairs has decided to permit 100% FDI in forms of housing, hotels, resorts,
commercial premises, educational institutions, recreational facilities, hospitals and city and regional
level infrastructure in order to attract higher investments. Earlier, restrictive norms were imposed on
foreign investments with their presence permitted only in the integrated townships. They invest in
urban infrastructure like hotels, shopping malls, large scale residential complexes in new townships,
InfoTech parks and special economic zones. Over a half a dozen domestic realty funds have been setup
so far with a corpus of over Rs. 3,500 crore.

Figure 1: FDI in Indian Real Estate

30%
26.5%
25%

20%
16.0%
15%
10.6%
10%
4.5%
5%

0%
2003-04 2004-05 2005-06 2006-07

Real Estate Exposure of Banks


Commercial banks exposure to the real estate sector almost doubled in the first 10 months of 2005-06
over the March 31, 2005 level. In real estate, banks advances for 2005 were Rs. 26,600 crore against
Rs. 17,355 crore the year before. The total outstanding loans to real estate rose by 84.4% as on January
20, 2006, according to RBI’s report on macroeconomic and economic developments in 2005-06
released. In the meantime, the housing finance industry started to expand rapidly, making home loans
easily available to everyone. The supply increased enormously and the demand remained steady, as
prices had gone beyond the realistic levels.
International Research Journal of Finance and Economics - Issue 24 (2009) 247
Figure 2: Loan Disbursement

Loans (Rs. in crore)


45000
39750
40000
35000
30000 26500
25000
20000
15000 12626
9821
10000 7500
4500 5700
5000
0
1996- 1997- 1998- 1999- 2000- 2001- 2002-
1997 1998 1999 2000 2001 2002 2003

Shortage of Land for Special Economic Zone


In the great rush to developing special economic zones a schism have emerged between the companies
that posses land for the projects and those that don’t. As many as 125 projects for over 2,13,023 acres
(86,208 hectares, which is more than half the area of the national capital) were considered at a meeting
to a massive 1,48,290 acres or 70% of the projected land size these SEZs. For instance Mahindra
Realty does not have the 2,500 acres land for it s proposed SEZ as yet. Out of the 23 multi product
SEZ projects for which the data is available, only three were in possession of a total of 30,250 acres of
land a month ago. Of this, Reliance Industries accounted for 25,000 acres. Another seven projects had
managed to get a portion of the 27,510 acres of the total land they sought. The remaining thirteen
projects did not have land totaling 1,35,000 acres available. Of this Adani Exports Limited did not
have the 75,000 acres if land available at that stage. The companies are not having the required land for
their projects making the prices of land very high.

Investment by IDFC
The Infrastructure Development Finance Company (IDFC) plans to invest Rs.1,000 crore every over
five years on township projects, InfoTech parks, hotels, retail and transport sectors.

Commercial Boom
According to an expert to a real estate consultancy, there are currently 18 malls in New Delhi,
Gurgaon, Nodia and Faridabad, with approximately built up space of 3 million sq. ft. While 66 new
mall projects have been announced, the crush in the meantime is on the existing space. Abhijit Das,
head, Ansalplaza Mall Management Company, confirms the rental increase. Shops on the first and
second floors of the mall, he says which were being leased at rates between Rs. 175 and Rs. 225 per sq.
ft. two months ago are now being out at a minimum of Rs. 250 per sq. ft.

10-Year Tax Holiday


The finance Ministry has announced a 10-year tax holiday for developers of Industrial parks set up
from April 1, 2006 to March 31, 2009. According to the Industrial Park Scheme 2008 notified by the
Central Board of Direct Taxed (CBDT), the industrial park developers will be eligible for 100% tax
deduction which is to be provided for 10 consecutive assessment years out of 15 years after the
commencement of operations of such units. The developers will be free to choose the 10 consecutive
years for the purpose of availing themselves of the tax holiday.
248 International Research Journal of Finance and Economics - Issue 24 (2009)

Price Variations in India


There are unbelievable variations in the prices of real estate sector in the past. Mainly there are two
causes for the same:

Per Capita Income


Figure 3: Per Capita Income

Income (in Rs.)


25000
23240
25000 21543
19592

20000

15000

10000

5000

0
2002-03 2003-04 2004-05 2005-06

As depicted by fig. 2 per capita income is increasing in India, which has increased the
purchasing power of the people. Due to this over the last year (2006-07) houses prices have raised by
10-90% and commercial property prices by 10-30% in different area of India. Correlation .996 is found
between PCI and real estate prices. Thus there is a positive correlation between per capita income and
real estate prices.

GDP at Market Price


Figure 4: GDP

GDP at Market Price (in Crore Rs.)

4000000 3529240
3121414
3500000
2760224
3000000 2463324
2500000

2000000

1500000

1000000

500000

0
2002-03 2003-04 2004-05 2005-06

GDP, the indicator of the national growth, from the past 2-3 years is increasing by 6.5%
to7.5%. Every rupee spend on the construction add to nearly 60% of GDP. As shown by the fig. 3 the
GDP has increased from the 2463324 crore to 3529240 crore from 2002-03 to 2005-06, so it indicates
that how the spending on the construction sector helps the real estate prices to increase.
International Research Journal of Finance and Economics - Issue 24 (2009) 249

Price Variations in Different cities

Figure 5a: Price variations in Mumbai

Mumbai (in Rs. Per Sq. Ft.)


Mar-04 Mar-05 Mar-06 Mar-07 Mar-08
Cuffe Parade 11500 18000 25000 35000 42000
Malabar Hill 15000 22000 28000 38000 46000
Worli 8500 12000 18000 26000 32500
Bandra (W) 8500 10000 13500 21500 26500
Navi Mumbai 1800 2300 2800 3500 5500

Figure 5b: Price variations in Mumbai

Delhi/NCR (in Rs. Per Sq. Ft.)


Mar-04 Mar-05 Mar-06 Mar-07 Mar-08
Shanti Niketan 11500 15000 18000 22500 27000
Vasant Vihar 11000 14500 17000 21000 26500
Friends Colony 6000 8000 10000 13500 18000
Gurgaon 2000 2500 3700 4850 6100
Nodia 2000 2800 3700 4900 6850

Figure 5c: Price variations in Chennai

Chennai (in Rs. Per Sq. Ft.)


Mar-04 Mar-05 Mar-06 Mar-07 Mar-08
Baoat Club Road 7750 8500 10000 12500 16000
Poes Garden 6200 7500 8500 11000 14800
Mylapore 3000 4500 6000 8500 11200
Tnagar, Adyar 2000 3000 4000 5800 7500
Anna Nagar 2300 2800 3500 6500 8500
Vadapalani 1900 2000 2250 3800 5200

Figure 5d: Price variations in Banglore

Bangalore (in Rs. Per Sq. Ft.)


Mar-04 Mar-05 Mar-06 Mar-07 Mar-08
White Field 1000 2000 5000 8900 12500
Richmond Town 5000 6000 7200 11000 15500
Palace Orchards 5300 6000 7500 11000 13500
Indira Nagar 3200 3700 4200 6500 9200
Kanamangala 3100 3500 4000 6500 8500

Figure 5e: Price variations in Hyderabad

Hyderabad (in Rs. Per Sq. Ft.)


Mar-04 Mar-05 Mar-06 Mar-07 Mar-08
Banjara Hills 2000 2500 3000 4800 6500
Jublee Hills 2000 2500 3000 4600 7500
Himayatnagar 1500 1700 2000 3200 4800
West & East Marredpally 1500 1700 2000 2800 4200
Secunderabad 1500 1700 2000 3100 4500
250 International Research Journal of Finance and Economics - Issue 24 (2009)
Figure 5f: Price variations in Kolkata

Kolkata (in Rs. Per Sq. Ft.)


Mar-04 Mar-05 Mar-06 Mar-07 Mar-08
Allipur 2850 3000 3400 5400 7800
Allygunj 3000 3200 3575 6200 8500
London Street 2975 3100 3575 6250 8000
Rajarhat 1100 1200 1550 2800 4200
Salt Lake 1875 1950 2075 3600 5250

Figure 5g: Price variations in Pune

Pune (in Rs. Per Sq. Ft.)


Mar-04 Mar-05 Mar-06 Mar-07 Mar-08
Karegaon Park 3000 3500 4000 5800 7250
Aungh 2000 2500 3200 5500 7000
Banger 1600 2000 2500 4500 6200
Wakad 1300 1800 2000 3500 5800
Kalyani Nagar 1800 2500 3500 5400 7500

It is clear from the above tables that in real estate prices are touching heights. In some areas the
prices are increased by 90-100%. In Gurgaon and Noida prices has jumped by as much as 200%. The
cheapest DLF apartment in Gurgaon costs Rs. 1 crore.

PART-3: Constraints in the Real Estate Investment


The various constraints are as under-

Urban Land Ceiling Regulation Act (ULCRA)


The central government has replaced this archaic law in 1999-2000, but the state government has not
followed the lead. Some states like Punjab, UP, MP, Rajasthan, Gujrat and Orissa are yet to act on it.
This law has been failed and this is the right time to act on it and to release more land into the market.
This will definitely lower the price of land, which accounts for about 50% of the price of real estate
property in India, unlike the developed countries, where it is much less. Distribution of cost of Housing
in India and USA:

Figure 6: Housing Cost in India & US

50%
45% 49%
37%
40%
35%
28%30%
30% 24%
25%
18% India
20%
US
15%
10% 5%
3%
5%
0%
Land Material Labor Prof it
Costs Costs Costs
International Research Journal of Finance and Economics - Issue 24 (2009) 251

Clear Title
90% of the lands in India do not have clear title. The ownership is unclear, thereby creating a scarcity
of land. This is due to poor record keeping and outdated complaint processes. All updated records must
be computerized to increase transparency in land ownership. And special fast track courts must be set
up to clear all legal land disputes in a short period of time.

Stamp Duty & Registration


The cost of transferring land titles must be reduced from rates of 10% stamp duties to reasonable levels
of 3 to 5%; similar to prevailing rates in developed countries. This will encourage sellers to pay stamp
duties, instead of trying to cheat the government, thus increasing the revenue for the country. The high
duties have also encouraged unaccounted money being used in most real estate transactions in India.
The registration procedure should also be made transparent and simple so that corruption can be
minimized.

Rental Laws
Obsolete tenancy and rental control laws keep a large part of the urban properties off the market. The
rental laws must be revised to protect the owner and his/her property from the tenant. The tax laws
must be revised to make renting of properties a financially viable option. Some states like Maharashtra,
Goa, Bengal and Karnataka have already made amendments to the rent act.

Foreclosure Laws
Though the level of foreclosure for the housing finance companies are relatively low at around 1.5 to
2%, these must be revised and made up-to-date to suit the current context. The laws for non-payment
of Equated Monthly Installments (EMIs) and consequent foreclosure and repossession of the property
law must be revised so that the financing companies have the final rights on the property, which is
collateral for the housing loan.

Building Codes, Standards & Permissions


There are several building guidelines and standards in various cities and states, however they are
neither followed by the developers nor implemented by the authorities.

Development and Planning


In India development and planning concerned with real estate sector is not up to the mark. The city or
state authorities must use professionals to plan and execute all development plans for cities and towns,
with future development in mind. This must be done without political compulsions. This will allow
proper zoning within cities and towns, green areas and other infrastructure systems to fall into place as
the development plans unfold.

Present Scenario in India


Up to the end of 2007 real estate sector in India was growing at a very high rate. There was a situation
of boom in this sector. The home loans were easily available and RBI was following very liberal
policies regarding the interest rates. But in 2008 the things are changing due to the high rate of
inflation in the Indian economy. There is uncertainty in the market as share market is showing
depression and the RBI is also increasing the Bank rate leading to the increase in the interest rates. So
the buying power is reducing. The major reasons for this downfall are inflation and the low rate of
GDP. Inflation rate is touching the heights as shown by the figure given below:
252 International Research Journal of Finance and Economics - Issue 24 (2009)

Inflation rate in India

Figure 7: Inflation rate

Date Inflation rate


Feb 5, 08 3%
Mar 22, 08 6.68%
April 4, 08 7%
April 26, 08 7.61%
May 10, 08 7.82%
May 24, 08 8.24%
June 7, 08 11.05%
June 14, 08 11.43%

Inflation rate is increasing continuously in India making the market unstable.

Barriers in GDP Growth


The present contribution of the housing construction industry in India is small when compared to
developing and developed countries. This sector contributes only 1% of the GDP in India, as compared
to 3 to 6% in other developing countries. If the above issues are addressed and the economy was to
grow at 10% a year, the housing sector would grow at 14% a year and create over new3.2 million jobs
over the next 10 years. The problems are numerous, the solutions are obvious and clear, but the choices
are difficult and few. The advantages of implementing these changes will overcome all the negative
and political issues, which have kept the problems dormant for so long. India does not have option, but
to act strongly and immediately. This will provide the impetus to get Indian economy back on the track
for a double digit growth. Figure 8 shows the various barriers, keeping the GDP growth in India at
5.5% in 2000, and the resulting GDP growth of 10.1% with the complete reforms by 2010.

Figure 8: Barriers in GDP

Status Quo
Gro wth, 5.50%

P ro duct M kt
B arriers, 2.30%

Land M kt
B arriers, 1.30%
P rivatizatio n,
Lack o f
0.70% Labo r M kt
Infrastructure,
B arriers, 0.20%
0.10%

Findings
Findings of the paper are as under-
• As the GDP increases the real estate prices also increases because there is a high degree of
positive correlation between the real estate prices and GDP.
• Real estate prices also increases with increase in the per capita income as there is high degree of
positive correlation between these two also.
International Research Journal of Finance and Economics - Issue 24 (2009) 253

• The infrastructure of India is also growing day by day so it adds to the better facility to different
sectors which affect the real estate prices.
• The FDI into the country affects the real estate FDI and real estate having a positive correlation
leads to the boom in this sector. Increase in FDI from 2006 to march 2007 is 10%. Earlier it was
16% and now in 2008 it is 25%.
• The interest rate also affects the real estate prices because it affects the lending and borrowing by
the investors.
• The growth in the real estate sector is between 25-30% in a residential sector, 10-15% in
commercial sector and agriculture sector.
• Housing sector constitute 80% of real estate in terms of value and 20% by commercial sector.
• In residential segment, availability of easy home finance and rising purchasing power has driven
the growth. Builders are launching high-end, life style residential products to cater to the growing
bunch of high net worth individuals.
• In 2008 the growth of real estate sector is going down due to high inflation and hike in home loan
rates by the banks following the increase in bank rate and SLR by the RBI.
• The outsourcing and IT/ITES industry have contributed to the demand for quality office-space.
The estimated demand from IT/ITES sector alone is expected to be 150mm sq. ft. of space across
the major cities by 2010.

Suggestions
The following recommendations are made by this paper-
• Due to high prices the lower income group is not able to purchase the land, so govt. should take
measures to protect the lower income group.
• The agriculture land covered into the commercial and residential purpose. But the population is
also increasing day by day. So govt. should steps for the same.
• The investors should analyze the type of land in which they are going to invest and the potential
returns from it.
• Privatization of Airports and ports needs to be speed up.
• There is a lack of proper data and management of the real estate sector so govt. should take the
corrective steps in this regard so that the proper estimation and management of the real estate
can be made possible.
• Commonwealth is scheduled for 2010. Hotels, sport stadiums and other infrastructure to have
successful games need to be expedited. This is another great opportunity for foreign developers
and investors to step in India. Thus more and more encouragement should be given to foreign
investors.
• Stamp duty is extremely high and must be rationalized and brought down to 2-3% as per global
practice, which is now in India varies from 13-14%.
• Due to lot of investment avenues in real estate in India, fraud cases are also increasing day by
day like in Delhi deconstruction of buildings. Thus careful measures and laws should be
enacted to deal with these types of situations.
254 International Research Journal of Finance and Economics - Issue 24 (2009)

Conclusion
After studying all the factors of the real estate it can be concluded that the Real Estate is a very wide
concept and it is highly affected by the macro-economic factors like GDP, FDI, per capital income,
Interest rates and employment in the nation. The most important factor in the case of Real Estate is
location which affects the value and returns from the Real Estate.
India needs a stronger capital market base for property financing. The debate on the potential
introduction of REITs and real estate funds points in the right direction. The introduction of REIT s in
2007, will give international investors in particular a familiar investment vehicle. Private investors
could also enter into indirect investment in real estate. Although interest in new projects is most likely
to come primarily from institutional investors, the rising middle class is likely to seek new instruments
aside from direct property investments in the medium term.
So, in the end we can say that the investment in Real Estate in India is a very good investment
opportunity. But one should be very careful while taking decision in this direction due to rising
inflation and interest rates. Legal issues should also be kept in mind while choosing a property.

References
[1] Seiler, J. Michael (1999), “Diversification Issues in Real Estate Investment”, Journal of Real
Estate Literature, Vol. No. 07, Page 163 to 179.
[2] Jackson, O. Thomas (2001), “The Effects of Environmental Contamination on Real Estate”,
Journal of Real Estate Literature, Vol. No. 09, Page 91 to 116.
[3] Benjamin, D. John (2003), “The Environment and Performance of Real Estate”, Journal of Real
Estate Literature, Vol. No. 11, Page 279 to 324.
[4] Malpezzi, Stephen, ````The role of Speculation in Real Estate Cycles”, Journal of Real Estate
Literature, Vol. No. 13, Page 141 to 164.
[5] Focke, Christian, “The Development of German Open-Ended Estate Funds”, Journal of Real
Estate Literature, Vol. No. 14, Page 39 to 56.

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