Define Real Estate

Real Estate

The real estate market offers a high return to the investors. The word real estate means land and buildings. There is a normal notion that the price of the real estate has increased by more than 12 percent over the past ten years. The population growth and the exodus of people towards the urban cities have made the prices to increase manifold. The price of the residential area land generally in South Mumbai ranges from a high of ` 19,400 per sq.ft. at Kemps Corner to a low of ` 8,400 per sq.ft. at Cuffe Parke in 1998. Recently, the recession in the economy has affected the price of the real estate. Prices, marked a substantial fall in 1998 from the 1997 prices. Reasons for investing in real estate are give below:

High capital appreciation compared to gold or silver particularly in the urban area.

Availability of loans for the construction of houses. The 1999-2000 budget provides huge incentives to the middle class to avail of housing loans. Scheduled banks now have to disburse 3 percent of their incremental deposits in housing finance.

Tax rebate is given to the interest paid on the housing loan. Further ` 75,000 tax rebate on a loan upto ` 5 lakhs which is availed of after April 1999. If an invests in a house for about ` 6-7 lakh, he provides a seed capital of about ` 1-2 lakh. The ` 5 lakh loan, which draws an interest rate of 15 percent, will work out to be less than 9.6 percent because of the ` 75,000 exempted from tax annually. In assessing the wealth tax, the value of the residential home is estimated at its historical cost and not on its present market value.

The possession of a house gives an investor a psychologically secure feeling and a standing among his friends and relatives.

Apart from making investment in the residential houses, the people in the higher income bracket invest their money in time share plans of the holiday resorts and land situated near the city limit with the anticipation of a capital appreciation. Farm houses and plantations also fall in the line. In spite of the fast capital appreciation investors generally do not invest in the real estate apart from owning one or two houses. The reasons are:

Requirement of Huge Capital: To purchase a land or house in the urban area, the investor needs money in lakhs whereas he can buy equity, gold or other form of investment by investing thousands of rupees.

Malpractices: Often-gullible investors become cheated in the purchase of land. The properties already sold are resold to the investors. The investor has lose the hard-earned money.

Restriction of the Purchase: The land ceiling Act restricts the purchase of agricultural land beyond a limit.

Lack of Liquidity: If the investor wants to sell the property, he cannot immediately realize the money. The waiting period may be months or years.

The points to be taken care of while purchasing the real estate are:

The plots should be approved by the local authority because on the unapproved layout construction of a house is not permitted.

Possibility of capital appreciation- It depends upon the locality and other facilities of the site.

Originality of title deeds- The site should be free from encumbrance. Encumbrance certificate for a minimum period of latest 15 years should be got from the Registrars Office.

Plinth area should be verified.

Credibility of the broker

The role of broker cannot be undermined because it is he who introduces to the parties and location of site. He should be faithful and loyal otherswise the investor finds himself in trouble.

Art

Paintings are most sought after form of art. The price in the art market are rising and this rise is expected to continue. The trend in the market today is to invest in young upcoming painters whose prices will soar over the years. People who have bought paintings from young painters in the last few years are happy with the kind of financial as well aesthetic appreciation they have received over the years.

For example Manask Kamal Bishwash who used to sell A 22” x 30” mixed media on paper for ` 30,000 in 1997, commands a price of ` 45,000 in 1999. If an investor likes to buy paintings as a form of investments he has to consider the following points:

Paintings of the young painters- The works of established painters are costly and scope for appreciation in their values are limited. But prices of the good quality paintings of the young painters may increase quickly.

Should possess the basic idea of the painting- This is needed to decide the quality of the paintings. He should be able to judge the primary attributes of the paintings such as spontaneity, nature of strokes, colour combination and originality.

The investor should have aestheticsense-because he may or may not be able to resell the paintings. Therefore when he possesses the art piece the investor should have a sense of fulfillment.

Antiques

In western countries’ investment in antiques is more common than in India. The antique is an object of historical interest. It may be a coin, sculpture, manuscript or any other object of olden days. The owner of the antique has to register himself with Archeological Society of India. The society after examining the authenticity of the antique issCertificategistration”ny deags I.eurchasnale ontique should be informed to the society. The government has the right to buy the antique from the owner, if it wants to keep it in the museum. In the case of investment, the investor has to be careful about the fake antique and the risk in the price of the antique is uncertain.