Real estate is much more than owning a house or property. It involves high stakes in the lives of rich and famous. And no wise man has lost investing in land. Today, we look at how the industry functions and who are the major players.
Real estate is a huge business world over. If one looks beyond the middle-class dream of owning a house, there is a vast and high-end segment of realty that influences and directs the economy of countries. Acquisitions and sophisticated sales deals make the sector a highly valued component of any economy. Land is a premium commodity in all cultures around the world and industrialists and multi-billionaires invest in land as it gives a good return for investments. Private individuals and companies make near-secret deals leading to owning vast expanses of land. Real Estate Advisor, Real Estate strategist, Real Estate Astrologer Hirav Shah feels realty is one market that all well-heeled must invest in.
1) How exactly do you define the real estate industry? What exactly comprises the real estate market?
The real estate industry encompasses the many facets of property, including development, appraisal, marketing, selling, leasing, and management of commercial, industrial, residential, and agricultural properties. Thus it covers a wide range of activities involving land in aspects.
2) What are the four major types of real estate?
■ Residential real estate: It includes both construction and resale of homes. The most common category is single-family homes. Then of course, there are condominiums, townhouses, co-ops, duplexes, triple-deckers, high-value homes that include celebrity abodes, multi-generational and vacation homes.
■ Commercial real estate includes shopping centres, strip malls, medical and educational buildings, hotels and offices. Apartment buildings are often considered commercial, even though they are used for residences and that’s because they are owned to produce income.
■ Industrial real estate: This includes manufacturing buildings and property, as well as warehouses. The buildings can be used for a variety of activities such as research, production, storage and distribution of goods. Some buildings that distribute goods are considered commercial real estate. This classification is important as the zoning, construction, and sales are handled differently.
■ Land includes vacant land, working farms and ranches. The sub-categories within vacant land include undeveloped, early development or reuse.
3) How exactly does the real estate industry work?
Real estate often refers to producing, buying and selling of real estate. In a country like the US, real estate is a critical driver of economic growth.
a) Construction of new buildings: It is a key component of gross domestic product. This includes residential, commercial and industrial buildings.
b) New home building: It includes construction of single-family homes, townhouses and condominiums. The data on new home sales is a leading economic indicator. It is said that it takes four months to establish a trend for new houses sold.
c) Real estate agents: They assist homeowners, businesses and investors buy and sell all four types of properties. The industry has specialists that focus on one type.
d) Sellers’ agent: They help buyers through multiple listing services or their professional contacts. Their job is to price your property using comparative listings of recently sold properties. They also help you spruce up your property so it will look best to the customers. They also negotiate with the buyer, helping them get the highest possible price.
e) Buyers’ agents: They provide similar services to the home purchaser. Since they are well-aware of the local market, they will help buyers find a property that meets their most important criterion. They also guide you to properties that are affordable as per one’s budget. They also help with legalities of the process, including title search, inspection and financing.
4) How to go about investing in real estate?
There are several factors to be considered while investing in real estate. Everyone who buys or sells a home engages in real estate investing. Will the house rise in value while you live in it. If you get a mortgage, how will future interest rates and taxes affect you?
Many people invest in homes to buy and sell as a business. One way is to flip a house, ie, to improve it and then sell it. Many people own several homes and rent them out. Others use Airbnb as a convenient way to rent out all or part of their property. Properties can also be rented as vacation homes.
In fact, you can invest in housing without buying a house. You can buy stocks of home builders. However, remember, stock prices rise and fall in the housing market. Another way is to opt for Real Estate Investment Trusts or REITS. This will help you in investing in commercial real estate.
5) What is CREDAI?
CREDAI stands for Confederation of Real Estate Developers’ Associations of India. It is the apex body of private real estate developers which was established in 1999, with a vision of transforming the landscape of Indian real estate industry. Its mandate is to pursue the cause of housing and habitat.
6) What is the importance of CREDAI in India? What are its functions?
CREDIA sets certain norms and standards to be followed by all its members. Since many builders are members of CREDAI, the practices go a long way in bringing uniformity in the practices and policies adopted by builders throughout India. CREDAI carries out several functions such as mediating disputes between end buyers and builders/ developers. It is also responsible for representing its members before government on policy matters affecting the real estate business.
7) How will property be inherited if a person dies without a will?
In case a person dies without a will, the rules of succession or inheritance have to be followed to distribute the deceased person’s property among his legal heirs. The rules of succession will determine who the heirs of a deceased and what their share would be in inheritance. It has to be noted here that property refers to immovable property.
8) How does one differentiate between ancestral property and self acquired property?
Ultra rich or a normal person, this is very important to know what comes to one’s share and what doesn’t. The right to ancestral property comes from the mere fact that one is born into the family. It cannot be taken away from the person. In terms of self acquired property, a father can exclude his children from it as he earned it.
9) On what criterion is GST ( goods and service tax) imposed?
As is known, real estate is an important pillar of Indian economy or countries abroad. In India, under the earlier tax regime, various taxes like VAT, service tax, stamp duty and registration charges were paid by the buyers. However, under GST, a single rate of 12% is applicable on under construction properties, whereas no GST is applicable on completed or ready to sale properties, only after the completion certificate has been issued.
In recent times, GST council has cut the tax rates to 5% from 12% on premium houses and 1% from 8% for affordable houses.
10) What is the real estate industry worth?
As per 2019 statistics, real estate is the world’s largest and most important asset class. All property in the world, both commercial and residential, was worth $228 trillion.
11) Which is the biggest real estate company in the world?
Brookfield Asset Management is the largest real estate company in the world by sales. Boasting 2,000 assets in 30 countries on 5 different continents, this alternative asset management company focuses on renewable energy, property, and infrastructure.
12) What is the worth of the real estate industry in India?
By 2040, real estate market will grow to Rs 65,000 crore (US$ 9.30 billion) from Rs 12,000 crore (US$ 1.72 billion) in 2019. Real estate sector in India is expected to reach a market size of US$ 1 trillion by 2030 from US$ 120 billion in 2017 and contribute 13% to the country’s GDP by 2025.
13) Who owns most property around the globe?
■ The front-runner happens to be Queen Elizabeth II, who owns around 2.7 billion hectares of land. Apart from prime chunks in London, she has agricultural land in rural Britain and owns more than half of the UK’s foreshore. The Crown also owns over 90% land in Canada. However, land cannot be sold by the Queen, it is not considered her private property.
■ The catholic church is estimated to hold 71.6 million hectares of land in its bulging real estate portfolio, which happens to be an area larger than France. They have vast swathes of land in countries like Germany and India.
■ The inuit people in northern Canada have title over 35.2 million hectares. The land was handed over by Canadian government in Nunavut Land Claim agreement in 1993.
■ Gina Rinehart: Australia’s wealthiest person is the country’s number one private landowner too. In 2016 mining magnate Gina Rinehart, worth $16.1 billion (£12.2bn), teamed up with China’s Shanghai CRED Pastoral to buy the lion’s share of S Kidman & Co, the largest individual private land holding on the planet, adding to her already bulging real estate portfolio. And she isn’t slowing down – controversially Rinehart is looking to open a huge new coal mine in Canada’s Rocky Mountains.
■ Inuvialuit of Inuvialuit settlement land: Thanks to the Western Arctic (Inuvialuit) Claims Settlement Act, signed in 1984, the Inuvialuit living in Canada’s western Arctic hold title to 910,000 sq kilometres of land, which is equivalent to 9.1 million hectares of land.
14) Who are the richest real estate developers in India?
According to reports from December 2019, Mangal Prabhat Lodha and his family have been named the richest real estate entrepreneur with a wealth of Rs 31, 960 crore, followed by DLF Ltd vice chairman Rajiv Singh and Embassy Group foundr Jitendra Virwani.
15) Which is India’s biggest real estate company?
DLF Ltd. According to reports from January 2020, DLF Ltd is the largest real estate developer in India with more than 73 years of experience in the realty sector. The company operates in all stages of real estate development such as land identification, acquisition, planning, execution, construction and marketing of projects.