PARTICIPANTS INVOLVED IN REAL ESTATE MARKET

Participants in Real Estate

Participants are very important in Real estate as they are the Backbone of
Real Estate market. They are the one who carry out transactions in real estate
market. They are the one who are involved in Real Estate. There are various
individuals who all take part in Real estate. They are as follows:-

OWNER: These people are pure investors. They do not

consume but rent out or lease the property to someone else.
They purchase houses or commercial property as an investment
and also to live in or utilize as a business.

INVESTORS: - A real estate investor is someone who

actively or passively invests in real estate. An active
investor may buy a property, make repairs and/or
improvements to the property, and sell it later for a profit.
A passive investor might hire a firm to find and manage
an investment property for him. Typically, investors
choose real estate for several reasons: cash flow,
appreciation, depreciation, tax benefits and leverage.

DEVELOPERS: - Developers purchase a tract of land, determine the

marketing of the property, develop the building program and design, obtain
the necessary public approvals and financing, build the structure, and lease,
manage, and ultimately sell it.
 CONTRACTORS: - Real estate contractor can be described as a
person, who carries out a contract that is related to building of
architecture or providing the building material. In some cases, a
contractor also provides labor for the construction purposes. All
real estate contractors are professionals and licenses that permit
them to perform certain tasks as mentioned in the license. Some
real estate contractors also provide services related to remodeling
of buildings, roofing etc. Some contractors also provide services
after the completion of the construction work i.e. maintaining the
structure etc.

BANKERS: - Real estate investment banker provides

innovative approach to financing of real estate. There are
many types of services carried out by real estate
investment banker and these services are far beyond the
traditional banking services being offered. For example,
structuring of various types of real estate projects is one
main type of service provided by real estate investment
banker.

AGENTS: - Real Estate Agents are employed by the seller to

get the best price and conditions for the seller. Real Estate
agents have been helping buyer to buy and seller to sell the
property. Real Estate agents are Present in every corner of
world. They all act as middlemen between the Buyer and the
seller.
BROKER: - A Real estate broker finds buyers for
those wanting to sell real estate and finds sellers for
those wanting to buy real estate. Real estate brokers
help sellers market their property and sell it for the
highest possible price; they also help buyers
purchase property for the best possible price. Once
the broker successfully finds a buyer, the real estate
broker receives a commission for his or her service.

LESSOR: - They have the complete ownership of the

property but they lease or mortgage their property to
someone else. High amount of rent is charged by the
renters. These people are pure consumers.

MORTGAGER: The security created on the property by

the lender, which will usually include certain restrictions on
the use or disposal of the property (such as paying any
outstanding debt before selling the property).
 TENANT:-When a land owner or a house owner allows
someone to use his/her land or house in some way for
some time period, then the person who takes for lease
from the owner is called as a tenant and the relation
between them is called as tenancy. The tenant will pay
the rent for the leased property to the owner.

BUYERS: - Buyers are one who purchases the

property. Buyers are the one who have
bargaining power. They pay for the property.
The property can be in any form. (Residential,
commercial, retail).
 FACTORS AFFECTING REAL ESTATE PRICES

FACTORS AFFECTING REAL ESTATE PRICES

Real estate is the second important source which generates economy in our country. Real
estate almost contributes about 6 percent to gross domestic product (GDP). Therefore the
property prices, demand, supply and many more plays a vital role in Real Estate Sector.

Infrastructure: -Infrastructure is always a major driver

for price growth. Availability of social infrastructure in
the location will affect the demand. Places with better
infrastructure like rail and road connectivity and basic
amenities like hospitals and schools, car parking space,
maintenance services and many other benefits will lead
to demand and increase in the prices of property.
Location- Location is one of the most important factors
affecting real estate prices. Slopes, soils, hydrology, land
availability, Distance to employment sources, Distance to
shopping, Availability of amenities (water, restaurants
and shopping, golf, parks), Neighborhood factors: age of
surrounding housing stock, schools, crime and many
more are the factors which affect the real estate prices.
Properties in such places affect real estate prices in
positive sense. Good amenities lead to higher prices and
more demand.

Sentiments: Positive sentiments in the market and

economy will lead to better demand. People when
confident about a sustainable source of income will
be more comfortable in making property buying
decisions.
Demand & Supply- Population change is the key driver of demand. When an area becomes
popular more people want to live there. Given there are
fewer dwellings than interested parties, prices increase
and vice-versa. The other driver is availability of land.

Affordability and availability of money-

Affordability is the relationship between housing
prices, interest rates and wages. It's the cost to the
owner or investor to retain and enjoy a property. When
prices, interest rates and wages reach a ceiling in a
particular area, residents often realize they can have a better lifestyle elsewhere.

The resources boom-The demand for skilled and unskilled

workers is increasing day by day. And with an increase in
their salary scale, these workers seek to improve their
lifestyle by buying bigger and better homes, or maybe an
investment property or two.

Inflation- Inflation is a rise in the general level of prices of goods and services in an economy.
As the prices of goods increase the whole money management of people is affected. This affects
the demand in real estate. Less demand leads to fall in prices of realty.

INFLATION LOW DEMAND FALL IN PRICES

Interest rates- An interest rate is the cost of borrowing money. Among the many industries
affected by fluctuations in interest rates, real estate and banking are perhaps the most directly
impacted. When interest rates increase, borrowing becomes more expensive, dampening
consumer demand for mortgages and other loan products and negatively affecting residential real
estate prices. (Low interest rates = higher prices; high interest rates = lower prices).

Low interest rates = Higher prices

High interest rates = Lower prices

Recession- Recession is the most important factor affecting the

real estate prices. Recession is nothing but the economic
slowdown. It is a tense mood having features like downsizing,
deductions in salaries, less investments, unemployment,
insolvency etc. If people do not have money and bankers do not
have money to give loan then it’s directly going to affect the real
estate prices. As it is common principle of real estate low demand
then fall in prices and high demand then increase in prices of
property

Demographic factors- One cannot sell an IPod to

deaf and a television to blind. Same is with
demographic factor also. A seller should divide the
market into three- higher income group, lower
income group and middle income group. If he tries
to sell a high priced property to lower income group
then it is definitely going to affect the prices in
negative sense i.e. he will have to reduce the prices of huge property. Changing age profiles also
affect the prices. Greater young population will create more demand and will also bring increase
in price level of property vice-versa.

Legal frame work- Legal frame work is also an important

factor affecting real estate prices. The registration and
documentation of real estate is complex and costly. Buyers
are not ready to pay much amount after going through legal
framework.

Fluctuations in prices of inputs- Input includes the

raw material used for construction. Many builders tend
to stop work when the prices of inputs like cement; iron
etc goes up so as to wait for the time when they expect
the prices will come down. This result in unnecessary
delay in the work and the cost of wasting time would
actually be more than the increase in price.

Economic Factor- Economic factor is nothing but the

national income of the salaried persons. The distribution of
national income, per capita income directly affects the
purchasing ability of individual and the employment is
closely related with the housing development.
IMPACT OF RECESSION ON REAL ESTATE MARKET
 After seeing a continuous rise in demand and prices for the last few years in the
residential market the market is facing a sudden downturn. All the markets have bearished. This
all is just because of “US subprime crises.”

Impact of Recession on Indian market:-

A recession is when GDP growth slows, businesses stop expanding, employment falls,
unemployment rises, and housing prices decline. Due to subprime crises there was a recession all
over world. A recession had far-reaching impact on whole world. The US subprime crises also
affected India as there were many foreign investors like Lehman brothers, Bear Sterns, Merrill
Lynch, AIG etc. These investors or lenders almost become bankrupt. Thus leading to fall in
property prices in India.

REAL ESTATE industry is taking on correction period all over India. Brokers,
especially, seem to be convinced that the market is set to fall. In many areas, the property rates
have already started falling.
Pune, Nashik, Noida, Jaipur, Bangalore, Chennai and Hyderabad are also feeling the cold
wave in the property market. Reason for the same is related with hike in housing finance interest
rates and unaffordable property rates.
Investors are, now, not buying any property and have stopped going in for more
investments. Practically, when no one buys, rates are stagnated at some particular point. That is
what is happening today. The sale price has stopped further climbing up, since there are no
takers. Malls are worst hit. The recession started with them, while the exhibiting rates were much
less than the actual investments made.
It may be a recess. For the time being, investors want the market to show its true colour.
And after they sell off certain non moving stock, buying spree may start again afresh. It is also
linked with the liquidity crunch in the economy and falling stock exchanges in the country. A
lobby of investors does not want share market money to go easily from the real estate market.
People, who have invested in real estate from earning of share market, want an exit to pay off the
liabilities created by them in the share market. Players in real estate market want the rates to stop
climbing up for some time, so that they can capitalize on such panic sale. Big game plan is on the
hands of few groups of individuals and few finance companies that have entered recently in the
trade.

A slowdown in the construction sector potentially has large knock-on effects on the
economy as the sector directly accounts for 7.3% of GDP, its backward linkages in terms of the
sector’s usage of iron, steel, cement etc., and forward linkages to other sectors, impacts an
estimated 14% of GDP.

Realty companies that had raised funds through the capital markets and private equity
funds suddenly started finding themselves in a soup. Funding options began to dry up. Asset
values fell. Stock markets took on a bear run. Stock valuations of realty companies plunged and
inflation reached alarming proportions. The RBI raised key rates to curtail money inflow in the
system.

Builders, today, have started to reduce the price everywhere in the country. Ready stock
is still not available, as the builders have already sold 30 to 50 per cent of their stock, during
under construction phase, to investors. As the investors want handsome returns on the finished
stock, while they do not sale in the open market, but through the builder only. That stock again is
sold by the builders to the actual buyers by mounting another profit margin. Hence, when the
actual user buys the property, he has to pay investor’s hidden margins, which change hands five
times during the time of construction.
The fall in collateral will also hurt firms’ balance sheets, increase their funding costs, hurt
confidence, and reduce investment demand. However, the impact on demand will be lower than
in developed countries.
Banks hiked consumer loan rates as also home loan rates. Corporate waking up to
pressure on expenditure began to announce layoffs, salary cuts and many such cost cutting
measures. Cautious consumers battling multiple whammies began to put off home buying
decisions. Demand has since stagnated and fallen drastically.