Global and Indian economy 2010

Global economy is seems to be expanding after a recent shock. Indian Economy, however just felt the blow of the global economic recession and the real economic growth have seen a sharp fall followed by the lower exports, capital outflow and corporate restructuring. It is expected that the global economies continue to stay strong in the short-term as the effect of stimulus is still strong and the tax cuts are working. Due to strong position of liquidity in the market, large corporations now have access to capital in corporate credit markets. Over the past few months, inflation is projected as the most crucial thing to look out for. Economists believe, that inflation would remain high and will be a roadblock for the economic expansion.

World Economy 2011

Inflation is rising because there are some reason, which does exist. Fundamentally, inflation is rising due to supply side constraint and inflation is not only making a new monthly highs alike gold prices in India, but other largest emerging economies such as China, Brazil and Russia too has high inflation rate at 5.1 per cent, 5.63 per cent and 8.1 per cent respectively and developed economies are also seeing the risk of high inflation. The reason is simple, one: food prices and two: economic recovery around the world pushing commodity prices upward. For every country, abnormal inflation is a problem. Moreover, consistent rise in government borrowings and expansion of money supply in the United States or so-called Quantitative Easing has also propelled the higher growth in inflation as the expansion of money supply means, more dollars or rupees in hand to spend.

Indian economy 2011

The new decade starts with the bang of inflation, and everyone believes it is going to impede the faster expansion of global economy. Predominantly, inflation is playing a bigger role for the policy makers to factor in while cogitating the policy for the sustainable economic expansion and without affecting the current economic growth rate and this trend in real is followed across the globe as the apprehension of discernible impact of inflation on the economy is high. India has a high inflation rate of around 8 per cent and core consumer prices is currently reading at more than 15 per cent, giving policy makers a food for thought for a stricter policy to contain the rise in prices, since VMW believes, high inflation could come down to 6 per cent in the next few months

Effects of Indian Economy on Real Estate

India, like many other parts of the world is zooming away 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 already sky high Mumbai the story is the same. There are those who believe that this boom will continue, there are those who are not sure and those who think that this is irrational exuberance to borrow a phrase used by Alan Greenspan The concern is that in India, stock prices are at the height of a boom. As it happens, a boom in one sector (usually stocks) translates into a boom in another sector (usually real estate) with investors rushing to park their money in a safe place. Also, add the foreign exchange glut in India fuelled to a great extent by software engineers parking their dollar salaries in real estate (especially near the tech hubs). Low interest rates over the last few years made bank loans easier. Needless to say, it became a self-fulfilling boom. There is a latent demand for housing in India, but the people who buy today do so more with a view to make money out of rentals rather than with a view to stay in these houses. The end result is that people own multiple houses,

when all they need is one and real estate is now a speculators paradise. On the other hand it is true that there is a lot of demand for real estate options in India. Vast portions of India are undeveloped or underdeveloped, but this is not necessarily where the boom is happening. Also, the connections in terms of better roads, urban transport systems, public transport, water and reliable electricity need to improve by leaps and bounds. People want cheaper, affordable (not low quality) housing options too, which atleast in places like Bangalore is non existent. The market at the premium end is only so much. A significant portion of the demand is real, but with about 20-25% driven by speculation.

Overview: Real estate

Real estate is a legal term (in some jurisdictions, such as the United Kingdom, Canada, Australia, USA and The Bahamas) that encompasses land along with improvements to the land, such as buildings, fences, wells and other site improvements that are fixed in locationimmovable. the term "real estate" refers to the land and fixtures together, as distinguished from "real property", referring to ownership of land and appurtenances, including anything of a permanent nature such as structures, trees, minerals, and the interest, benefits, and inherent rights thereof

Real estate in India

With around 1.1 billion people, India is the second most populous country after China and it is expected to overtake it by 2030. Its economic transformation over the past decade has pushed up real GDP growth to an average of 6 per cent per

annum since 1992. India is emerging as an important business location, particularly in the services sector. Its favourable demographics and strong economic growth make the country an attractive place for property investors, given that demand for property is determined chiefly by business development and demographic trends. Historically, the real estate sector in India was unorganised and characterized by various factors that impeded organised dealing, such as the absence of a centralized title registry providing title guarantee, lack of uniformity in local laws and their application, nonavailability of bank financing, high interest rates and transfer taxes, and the lack of transparency in transaction values. In recent years however, the real estate sector in India has exhibited a trend towards greater organisation and transparency, accompanied by various regulatory reforms. These reforms include: Government of India support to the repeal of the Urban Land Ceiling Act, with nine state governments having already repealed the Act; Modifications in the Rent Control Act to provide greater protection to homeowners wishing to rent out their properties; Rationalization of property taxes in a number of states; and The proposed computerization of land records The trend towards greater organisation and transparency has contributed to the development of reliable indicators of value and the organised investment in the real estate sector by domestic and international financial institutions, and has also resulted in the greater availability of financing for real estate developers. Regulatory changes permitting foreign investment are expected to further increase investment in the Indian real estate sector. The nature of demand is also changing, with heightened consumer expectations that are influenced by higher disposable incomes, increased globalization and the introduction of new real estate products and services.

Types of Real Estate

Income-Producing and Non-Income-Producing Investments There are four broad types of income-producing real estate: offices, retail, industrial and leased residential. There are many other less common types as well, such as hotels, ministorage, parking lots and seniors care housing. The key criteria in these investments that we are focusing on is that they are income producing. Non-income-producing investments, such as houses, vacation properties or vacant commercial buildings, are as sound as income-producing investments. Just keep in mind that if you invest equity in a non-income producing property you will not receive any rent, so all of your return must be through capital appreciation. If you invest in debt secured by non-income-producing real estate, remember that the borrower's personal income must be sufficient to cover the mortgage payments, because there is no tenant income to secure the payments. Office Property Offices are the "flagship" investment for many real estate owners. They tend to be, on average, the largest and highest profile property type because of their typical location in downtown cores and sprawling suburban office parks. At its most fundamental level, the demand for office space is tied to companies' requirement for office workers, and the average space per office worker. The typical office worker is involved in things like finance, accounting, insurance, real estate, services, management and administration. As these "white-collar" jobs grow, there is greater demand for office spaces. Returns from office properties can be highly variable because the market tends to be sensitive to economic performance. One downside is that office buildings have high operating costs, so if you lose a tenant it can have a substantial impact on the returns for the property. However, in times of prosperity, offices tend to perform extremely well, because demand for space causes rental rates to increase and an extended time period is required to build an office tower to relieve the pressure on the market and rents. Retail Property There is a wide variety of Retail properties, ranging from large enclosed shopping malls to single tenant buildings in pedestrian zones. At the present time, the Power Center format is in favor, with retailers occupying larger premises than in the enclosed mall format, and having greater visibility and access from adjacent roadways. Many retail properties have an anchor, which is a large, well-known retailer that acts as a draw to the center. An example of a well-known anchor is Wal-Mart. If a retail property has a food store as an anchor, it is said to be food-anchored or grocery-anchored; such anchors would typically enhance the fundamentals of a property and make it more

desirable for investment. Often, a retail center has one or more ancillary multi-bay buildings containing smaller tenants. One of these small units is termed a commercial retail unit (CRU). The demand for retail space has many drivers. Among them are: location, visibility, population density, population growth and relative income levels. From an economic perspective, retails tend to perform best in growing economies and when retail sales growth is high. Returns from Retails tend to be more stable than Offices, in part because retail leases are generally longer and retailers are less inclined to relocate as compared to office tenants. Industrial Property Industrials are often considered the "staple" of the average real estate investor. Generally, they require smaller average investments, are less management intensive and have lower operating costs than their office and retail counterparts. There are varying types of industrials depending on the use of the building. For example, buildings could be used for warehousing, manufacturing, research and development, or distribution. Some industrials can even have partial or full office build-outs. Some important factors to consider in an industrial property would be functionality (for example, ceiling height), location relative to major transport routes (including rail or sea), building configuration, loading and the degree of specialization in the space (such as whether it has cranes or freezers). For some uses, the presence of outdoor or covered yard space is important. Multi-family Residential Property Multi-family residential property generally delivers the most stable returns, because no matter what the economic cycle, people always need a place to live. The result is that in normal markets, residential occupancy tends to stay reasonably high. Another factor contributing to the stability of residential property is that the loss of a single tenant has a minimal impact on the bottom line, whereas if you lose a tenant in any other type of property the negative effects can be much more significant. For most commercial property types, tenant leases are either net or partially net, meaning that most operating expenses can be passed along to tenants. However, residential properties typically do not have this attribute, meaning that the risk of increases in building operating costs is borne by the property owner for the duration of the lease. A positive aspect of residential properties is that in some countries, government-insured financing is available. At the expense of a small premium, insured financing lowers the interest rate on mortgages, thereby enhancing potential returns from the investment.

SWOT Analysis Strengths

Real estate development is on high and it is attracting the focus of the industry towards construction. Private sector housing boom and commercial building demands Construction of the multi building projects on the feasible location in the country. Low cost well-educated and skilled labour force is now widely available across the country. Good structured national network facilitates the boom of the construction industry.

Weakness
Training itself has become a challenge Improve in long term career prospects is highly required to encourage staff retention and new entrants External allocation of large contracts becomes difficult Huge amount of money needs to be invested in this industry.

Opportunities
Continuous private sector boom Public sector projects through public private partnership will bring further opportunities. Renewable energy projects will offer opportunities to develop skills and capacity in new markets Financial supports like loan insurance and growth in income of people provide a creative platform for the industry.

Threats
Long term market instability and uncertainty may damage the opportunities and prevent the expansion of training the development facilities. Infrastructure safety is a challenging task. Lack of political willingness and support on promoting new strategies. Inefficient accessibility in planning and concening the infrastructure

and signs.