A Brief Insight About Real Estate

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Posted by : Pooja Agrawal on | Sep 24,2019

A Brief Insight About Real Estate

What is Real Estate?

In Real Estate, “Real” stands for physical and “estate” goes for Residential or commercial property. Real estate can be defined as “property consisting of land and building on it, along with its natural resources such as crops, water; immovable property of this nature, an interest vested in this also a real estate property, building and housing in general. More generally the profession of buying, selling and renting lands, buildings, or housing. 

Four Types of Real Estate Sectors works generally.

  1. Residential real estate - Residential real estate includes newly constructed homes and resale homes. The residential real estate includes a variety of housing among which single-family home is the most common one. Some of the other constructions include condominiums, townhouses, duplexes, triple-deckers, quadplexes, high-value homes, co-ops and vacation homes.

 

  1. Commercial real estate - Commercial real estate build spaces for shopping centres and malls, medical and educational buildings, hotels and offices. Residential apartments are also considered a commercial because they are owned to produce income.

 

  1. Industrial real estate - Warehouse, Industrial buildings, storage and research houses are produced under industrial real estate. Buildings that distribute goods are considered as commercial real estate. Classifications are important because zoning, construction and sales are handled by different sectors.

 

  1. Land real estate - Working farms, vacant lands and ranches. Undeveloped lands and lands for reuse also comes under land real estate.

 

What is a Condo?

Condo’s are apartments with unshared walls generally, which means whatever come under the particular apartment is rightfully owned by the owner of the property.

 

Growth of real estate sector in India.

The growth of this sector is well integrated by the growth of corporate industries and the demand for the working space as well as urban and semi-urban accommodations. The real estate industry ranks 3rd among the 14 major sectors in term of direct, indirect and induced effects in all sector of the economy. The real estate industry is expected to reach a market size of 1 trillion US$ by 2030 from 120 billion US$ in 2017 and will contribute 13% of the country’s GDP by 2025. Construction for office spaces in Indian cities has increased by 26% year-on-year to 36.4 million sq.ft. Bengaluru is expected to be the most favoured property investment destination for NRI’s, followed by Ahmedabad, Pune, Chennai, Goa, Delhi and Dehradun. Private equity and venture capital investment in the sector has reached 1.47 billion US$ between Jan-Mar 2019. Investments for institutions is expected to reach 5.5 billion US$ in 2018, the highest in the decade. According to data released by (DIIP) Department of Industrial Policy and Promotion, the real estate sector in India has received over 25.04 billion US$ in the period of April 2000-March 2019.

 

Major investment and development sector in India and their advantages.

India’s top Investment destinations.

 

  1. Gujarat- A leading industrial state, enjoys faster GDP growth than India as a whole. Geologically located on the west coast of India, provides a gateway to land-locked states in north India. The state is also home to many of India’s best-known corporation like Reliance, Mahindra and Mahindra, Adani Group, Aditya Birla Group and Godrej. The state has wetlands in the south to deserts in the northwest, Gujarat offers a variety through its geography, the state potentials as a tourist spots boosts the value of its land. The state has a literacy rate of 79.31%, so setting up a business here is at minimum risk as you get the skilled and literate workforce. This is the main reason why major business houses have their offices in Gujarat. Data shows that the project implementation for the projects is high in Gujarat. The rising industrial activity in the state has turned the state into an employment hub. More and more people are flocking to find employment here, triggering fresh demand for real estate in Gujarat.

 

Advantages

  • Trade routes to the African continent and the Persian Gulf.

  • Almost 25% of India’s sea cargo passes through the state.

  • Gateway to northern India.

  • Ranked Top consistently in ease of doing a business survey.

  • Gujarat is a mineral-rich state incapacity, reserves and production.

  • Strong agriculture, automobile, and pharmaceutical industries are settled in Gujarat.

 

  1. Maharashtra -Maharashtra is among the wealthiest and the most industrialized state in India. The state owes its success to its film industry, international trade, services, technology, aerospace, petroleum, fashion and apparel. Mumbai is the state capital as well as the financial capital of India. Serves to global banks and institutions, including the Reserve Bank of India - country’s federal bank, two largest stock exchanges (BSE and NSE) Bombay Stock Exchange and National Stock Exchange and head offices to Life and General Insurance companies, booming day-to-day construction sector in many parts of the state.

The real estate sector is continuously developing in the major commercial construction and for residential development, hospitality and  Government of India has enacted the Real Estate (Regulation and Development) Act in 2016 which came into force with effect on May 2017. Under this Act, the Government of Maharashtra established MahaRERA. for regulation and promotion of the real estate sector in the state. Maharashtra has equipped strength in the sectors like IT, telecom, petroleum and allied products, chemicals, engineering, automobiles and auto components, electrical and non-electrical machinery, and textiles. For this commercial real estate sector was in the boom in the state.

 

Advantages 

  • Geographically located on the western coast of India.

  • Gateway for imports into western India.

  • Houses the financial capital of India – Mumbai.

  • Provides a conducive business environment and can be used as a launching pad to the rest of the country.

  • Houses leading corporations and a key source and destination for FDI.

  • Competitive banking, financial, and service industries.

  • Home to one of the largest entertainment industries in the world.

 

  1. Karnataka -Bangalore, being the IT hub of the country, receives much faster economic growth than most other cities making it a better place to live in. In a populated city with engineers and other professionals moving in to settle down here, buying apartments is the best way to go. Owning a property in a endure growing city like Bangalore can never be a bad idea. Being home to the booming IT industry of India, it is worthy to invest in property in or around the city. The real estate provides security as the prices in similar cities continue to rise with financial growth and CARG.

Advantages

  • Investor-friendly government has simplified procedures and transparent administration.

  • Good connectivity to major national and international markets.

  • Excellent telecommunication system with optical fibre connectivity throughout the state.

  • Home to public sector enterprises in heavy industry, aeronautics, precision engineering, telecommunications, health and pharmacy, and software development.

  • A leading producer of auto components, machine tools, and heavy electrical machinery.

  • Globally competitive in IT services and business process outsourcing (BPO).

 

  1. Chennai - In Chennai, the properties are less expensive than Bangalore and Mumbai. As we are talking about a metropolitan city, with a constant flow of developing infrastructure day by day into the city, the demand increases as the time goes. Real estate is always a great investment option for investors in the city, with a rapidly growing appreciation value of properties, developing areas are always on the rise. Besides, the implementation of RERA and GST reforms is contributing to a transparent and fraudulent free industry though Chennai is taking place in one of the real estate developing hubs in India.

 

Advantages

  • A rapidly growing infrastructure in the city.

  • Homes typically increase in value, build equity and provide a nest egg for the future.

  • Your costs are predictable and more stable than renting because they're ideally based on a fixed-rate mortgage.

 

What is the real estate industry booming factor?

 

India’s workforce expansion, economic transition and urbanisation as well as migration from different parts of India will boost investment opportunities in the next coming years leading to growth in housing, office, retail and warehouse space says property consultant CREDAI and CBRE reports. According to reports, the real estate sector would expand tremendously by 2030. The report estimated for office space stock will touch one billion sq ft by 2030, with flexible workspace accounting for 8-10 per cent of the total stock. The retail shopping centre stock is estimated to cross 120 million sq ft by 2030, while warehousing stock could touch 500 million sq ft by then. 

 

By 2030, residential real estate has the potential to almost double from the current stock of 1.5 million units in key cities, the report said. "As the Indian economy transitions and its workforce expands, it will offer vast development and investment opportunities for the real estate sector," CREDAI-CBRE report said. The growth of cities is going to further influence the country's built environment, while technology, demographics and environmental issues will become the new value drivers.

Property tax.

What is a Property Tax?

  • Every property is an asset which is taxable and the amount which is paid by the owner of the property to the government annually is known as the property tax. The tax can be paid to the state government or the Municipal Corporation, depending on the government policies. The word “property” in this context refers to all tangible real estate under the ownership of an individual which includes houses, commercial spaces and rented spaces to a third party. 

  • The concept of property tax is been found around for centuries and is accepted across the globe, with proper records of farmers and workers paying tax on their properties even in the middle ages.



How to calculate property tax in India?

The given below is the formula used by the Municipal Corporation of India to calculate the property tax of an individual. 

 

Property tax = base value × built-up area × Age factor × type of building × category of use × floor factor.



  • Different civic corporations use different methods to calculate tax, but the general overview of such calculations remains the same.

  • Property tax in India depends on the location of the property, with taxes varying from state to state.

  • The first assessment is carried by finding the occupancy status whether it is self-occupied or rented out, type of property (residential or commercial), amenities provided (car parking, rainwater harvesting, store, etc.), year of construction (single floored or kutcha structure etc), and the carpet area of the property.

  • After getting the necessary details the civic agencies use the formula to calculate the tax.

  • The property tax can also be calculated online. Just visit the municipal corporation website and have a search for Property Tax Calculator.





How to find the real home value?

  • Start with online valuation tools

  • The information provided by you will be used along with the information gleaned from public records to get the estimated value of the property. It is a simple and convenient way to get a crystal clear idea of what your home might be worth.

 

  • Work with a realtor.

      - Realtors use their own techniques for determining the value and it can be helpful  

                         to get a second opinion. The process used by realtors is known as Comparative   

                         Market Analysis (CMA).

                  -      Working on with CMA, realtors usually look for the recently sold homes that are 

                         Similar in size, location, no of bedrooms, location and in design.

                  -      Broker Price Opinion (BPO) is another tool to determine your home value. BPOs                  

                         are often use more than CMA for short sale or foreclosure situation rather than a  

                         regular home sales. BPOs costs money.

                  -      Keeping in mind that CMA or a BPO still miss the mark because of the untaken feature that affects the property value.

 

  • Hiring a professional appraiser

  • The job of the appraiser is to provide an impartial, thoroughly researched estimate of a home’s value. They get the details by visiting the property and reviewing the recently sold or pending sales comps.

  • If you are planning to hire an appraiser, do note down what report will be provided by the results of the appraiser.

  • On a point, the appraiser uses a checklist named “Fannie Mae’s Uniform Residential Appraisal Report”, this checklist is verified by the appraiser to check whether the conditions are met or not.

  • An appraiser should look for the following details

 

  • Location of the home.

  • Whether the home is in the FEMA flood zone.

  • Condition of the utility service and fixture on the property.

  • Details of when the home was built.

  • On what type of foundation it was built.

  • Conditions of the attic and basement, heating and air system, walls, windows and doors.

  • Looking out for amenities.

  • Any additional repairs and improvements are needed.

  • Condition of appliances in the home.

  • Finding out any sign of damage that would compromise the structural soundness of the home.

 

  • Analyzing your own comps.

we can also compare our house using some factors to a similar one selling in our area.

  • Structural components and features.

  • Size and age of your property.

  • Sales history if any

  • Any improvement or construction.

  • Overall condition of the home.

  • Neighbourhood and location

  • Listing price vs Actual sale price.

 

Impact of GST on the Real Estate sector.

Indian economy is established by many industries working to make the economy strong and real estate industry is one of it. In present real estate industry contributes 6-8% of GDP and it is assumed that it will grow up to 13% by 2030. 

 

At the recent GST council meeting held on 24th of February 2019, new GST rates have been introduced for residential real estate that will be applicable from 1st of April 2019. During the pre-GST era of taxation, multiple taxes were applicable such as VAT, stamp duty, registration charges and services charges that varied among different states with different charges. GST has played a significant role in simplifying the rates of taxation in the real estate sector that ranges from 5% - 18% depending upon some key factor.



New rates were applicable for GST in the Real Estate Sector.

 

  Types of Real estate property.                               Rates before GST Rates after GST 

Residential Property (affordable housing segment)

8% with Input Tax Credit (ITC)

1% without ITC

Residential Property (non-affordable housing segment)

12% with ITC

5% without ITC

Commercial Properties

12% with ITC

12% with ITC (unchanged)

 

After the GST implementation on real estate in 2017, the industry was in assuming a dropping posture. However, in early 2018, there was an increase in demand and supply for real estate.

 

The growth was increased in affordable mid-income housing. The rates for the sales property witnessed an increase while in larger cities such as Delhi has a 2% decline in property sales, not because of GST but of oversupply of the housing sector. As on a note 2019 promises to be a better year for Indian Real Estate as the demand for both commercial and residential properties is expected to get a boost.

 

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