Vol 8 Issue 1, 2008 | Quarterly | Rs.

100
Your property investment guide
ire@magicbricks.com | June August 2008
REGULARsections
CityScan ............................................... 4
MoneyWise ........................................... 9
HouseThat ......................................... 18
PolicyUpdates .................................... 24
LegalAngle ......................................... 26
Q&A ................................................... 28
HearthMatters .................................... 36
RegionalFocus ................................... 44
UrbanVistas ....................................... 56
OTHERS
Advertiser Index ............ 92
Property listings ............ 95
City Index ....................... 93
In this issue Vol 8 Issue 1, 2008
MONEYwise
Realty Reality ..................................................... 9
Mutual funds: capitalising on real
estate potential ............................................... 12
REITs yet to be unleashed ............................... 14
HOUSEthat
Strike the right deal .......................................... 18
The retail investor dominates the market from
physical property to stocks and mutual funds
FEATUREpiece
Property purchase ............................................ 35
Shyamanand Jalan, solicitor on Magicbricks.com
talks about simplifying legal documents
COVERstory............10 For a diversifed Real Estate
Portfolio
Physical property, REITS, Real Estate
Mutual Funds and Realty Stocks can
all be managed as a comprehensive
portfolio for best returns.
E Jayashree Kurup, Head, Content &
Research, magicbricks.com, and
V Nagarajan, Publisher IRE, talk to a
cross section of experts to get to the
bottom of the issue.
ire@magicbricks.com | June August 2008
Physical property, REITs,
Real Estate Mutual Funds
and Realty Stocks can all be
managed as a comprehensive
portfolio for best returns.
E Jayashree Kurup,
Head, Content
& Research
magicbricks.com,
and V Nagarajan,
Publisher IRE talk to
a cross section of
experts to get
to the bottom
of the issue.
T
he Indian real estate boom means
good news to you. As a young
Indian who earns well, has spent
wisely and drive his own car, live in
his own house and is able to meet
daily expenses without too much
effort, good returns from real estate
investments should typically be next
on your investment agenda.
So how do you determine
how much of your investible
surplus you should invest in
real estate and how much to
put into fnancial instruments
such as mutual funds and
Unit-Linked Insurance
Policies (ULIPs). How
will your investment in
a second house allow you
to capitalise on the current real
estate boom?
Anybody who is looking at
real estate as an investment
option is currently at least
in the post-35 age group,
says chartered accountant
Raghu Marwah. In
the current scenario, other
fnancial instruments score over real
estate as a long-term
investment option. The
returns in the short and
long term are more
attractive.
Portfolio advisor Sanjay
Mittal too agrees.
Investment in mutual
funds and stock markets
is liquid. But investments
in the property market
are not. Mutual funds
yield at least 40 % year-
on-year returns. One
of my investors put in
Rs 20,000 per month
in the Reliance growth
fund and his returns
are currently over Rs
3.6 crore in 10 years.
This is way above that
in real estate. In fact, he
gives a thumb rule based
on the worst performing systematic
investment plan mutual fund over the
last 10 years. If you have invested for
over seven years, returns are normally
the amount invested multiplied by the
number of years it was invested for.
In the current scenario there is
a phenomenal growth expected
in sectors such as hospitality,
logistics,warehousing, healthcare,
etc. Investment in real estate mutual
funds, especially at a time when the
SEBI has framed the guidelines, will be
a bonanza for retail investors, explains
a market analyst.
The retail investor has more to look
forward too in the future from real
estate markets. The Securities and
Exchange Board of India (SEBI)
has already issued draft guidelines
for Real Estate Investment Trusts
(REITs) a sound fnancial instrument in
developed real estate markets around
the world. This will open up a class
of investment to the real estate retail
buyer that was earlier not possible,
says Goel. Till now investors ended up
exposing themselves to segments of the
COVERstory
BY e jayashree kurup
jayashree@magicbricks.com
ire@magicbricks.com | June August 2008
real estate market and their risks were
high. REITs function as funds which
consolidate investments in property in
different segments and geographies and
allow the retail investor to truly encash
the potential of the entire sector. It thus
minimises his risk. The investor has
different yields and rewards to choose
from.
Recently SEBI has also issued
clarifcations on the functioning of
Real Estate Mutual Funds. According
to these guidelines the REMFs have to
be close-ended and have to declare Net
Asset Values every three months. While
REITs invest in physical properties
and capitalise on regular rental returns,
REMFs invest in the real estate stocks.
So why are people investing in real
estate at all? Where did all the hype
about real estate growth come from?
Explains Arun Vikram Goel, CEO
of Dewan Housing Finance Venture
Capital, The hype around the real
estate market comes primarily from
speculative, extremely short-term
investors. They have bought at launch
prices and sold as the values of each
subsequent release by the developer
was raised and encashed their
investment in the short term. These
would have yielded very high gains.
Nobody who has invested for the
long term has contributed to the hype
because chances are that they have not
exited the market and their computed
returns are notional. A long-term
investor should not be looking at hyped
gains.
Explains another property investment
advisor, At the height of the boom,
I had advised various investors to put
their money into multiple projects
and to recycle the investments for
maximum returns. In fact, I managed
portfolios of investors who had upto
Rs 1 crore to invest by putting in the
10 per cent that was required to book
a property and then to exit when the
next instalment was due. The gains so
achieved were then reinvested in newer
launches and the money was constantly
increasing.
But the current scenario is different.
After 8-10 months of slow-down
in transactions, developers are
completing projects rather than
launching numerous new ones. Even
the rate of hike of value is steady and
therefore the short-term speculator
is kept at bay. Goel explains this
phenomenon. Immature markets tend
to behave erratically. Initially rental
markets are not stable and more users
think of purchase rather than rentals.
Once the supply comes in the rental
markets pick up and those who do not
want to occupy, lease out property.
This hike in demand brings in the
speculators and short-term buyers.
Finally when there is a glut and capital
values stop rising, the rentals will rise.
But typically yields from residential
real estate investments is only 5-6% in
stable markets and 3-4% in unstable
markets.
So again why invest in real estate at
all? Why not only in mutual funds if
you are a retail investor? To diversify
your portfolio, says Goel. And he has
a simple mantra for the retail investor:
Do not make investments on the
basis of hype. Remember that in
a market correction hype comes
down and you get a realistic
picture.
It is wise to hold a diversifed
portfolio with real estate as one of
the options.
Time your entry correctly. The
hype typically starts when the peak
is reached. If you enter at the peak,
you will not get the best rates and
you may be part of the slide.
During investing for the long-term
remember that returns average out.
The property advisor who does
not wish to be named, maintains
that normally even in weak market
cycles property values double in
fve years. So if you are a 35+ age
group, your property value will at
least double every fve years and you
will never lose out. However, the rate
of enhancement of the mutual fund
investments are greater in the short
term.
Sanjay Mathur of Pearls
Infrastructure says long-term real
estate investments can be upto
200-300% if you choose your
investment destination correctly. If
you invest in what is the periphery
of the city today and hence cheaper,
but if there is good economic activity
there, the returns in the long term are
defnitely positive. Short-term returns
are only high during speculative
high-growth immature market cycles.
Goel agrees that the choice of
investment destination is very
important. But real estate decisions
are often very emotionally driven
too. Aspirational considerations may
drive the investors to look at property
purchase than yield analysis alone.
However, if the investor reads the
future potential of markets correctly,
he can get good returns.
Goel sees younger investor opting
more for systematic investments
in mutual funds that is more
speculative but has greater returns.
The REITs, which is expected to
be functional by the next year,
if the government gets its policy
framework right, will attract an older
investor who takes less risks, but
opts for steady returns.
Investment in real estate
mutual funds, especially at
a time when the SEBI has
framed the guidelines, will be
a bonanza for retail investors
ire@magicbricks.com | June August 2008
Ansal API
An all-familiar
name since over four decades in
the real estate world, Ansal API is
known for its ever expanding vision
in the real estate domain and has
always been the forerunner in the
development of the quality real estate
in India.
Gardenia India Ltd.
Gardenia Group
of builders has
uniquely and
successfully managed to spread its
fragrance in the world of real estate
development.
With projects running across the nation,
Gardenia group has particularly spread
its wings in the states of Goa, Madhya
Pradesh, Delhi NCR, Karnataka and
Andhra Pradesh.
Omaxe
Maximizing
gains for
maximum populace seems to be
the forte of Omaxe, one of the most
successful developers of the country.
The company is at present developing
over 156 million sq ft of area across 31
towns in 10 states in Northern Central
India and Southern India.
Sun City
Suncity Projects
penetrates the
real estate arena with a stronghold on a
variety of projects.
The company fne-tunes the expertise
of three of Indias most reputed
business conglomerates: the Essel
Group, the Action Group and the
Odeon Builders.
Parsvnath Group
The Parsvnath Group is a buoyant
conglomeration of companies
endowed with impeccable foresight,
enviable expertise and innate acumen.
With more than two decades of
experience in its repertoire, the group
has already stamped its presence
already in seventeen states and going
PanIndia.
MagicBricks.com
MagicBricks.com
is widely recognised as Indias leading
property portal that caters to a spectrum
of property brokers, agents, developers,
research agencies as well as the end
users.
The site has a viewer ship of two
million users per month and has more
than fve lakh property listings live.
A dedicated content and research team
tracks the property rates all across the
country and also does special stories
pertaining to real-estate.
Gulshan Homz
Known for buliding
luxury homes and
apartments in fully
integrated communities for a for high
end users, Gulshan Homz is known
for delivering quality. GC Centrium,
GC Emerald Heights and GC Grand
in Ghaziabad are some of the fagship
projects of the company.
Octagon Builders
Octagon Builders
has rapidly gained
a global presence in the real estate
industry.
Projects like Santour City and Santour
Hills at Haridwar and Dehradun
comprise townships with plots and
villas with ultra modern facilities.
CCPS
The Confederation
of Construction
Products and Services (CCPS) is a
non-proft organisation dedicated to
the growth of construction products by
working collectively with its members
and others to improve quality and
effciency in construction.
Geberit Installation Systems
The Geberit
Group is the
European market leader in sanitary
technology with global presence.
Geberit has 17 production sites in eight
different countries, with its main ones
located in Switzerland, Germany and
Austria.
Canopy Group
The Canopy Group
in Bangalore, is
a professionally managed property
development frm with expertise in
creating comprehensive solutions for
residential and commercial projects.
SVP Group
The SVP group,
which has been
the pioneer in infrastructure
development in Ghaziabad since
1992 is a Rs 2000-crore real estate
development company headquartered
in Ghaziabad.
The group is an ISO 14001-2002
certifed company that is changing
the face of Indian real estate with
a unique approach to building and
development.
Advertiser Index
Subscription Form
for
Name .................................................................................................................................................................
Postal address ...................................................................................................................................................
Tel. No. ...................................................................................Fax: ....................................................................
Email: .................................................................................................................................................................
I am sending Rs ........ towards subscription for Indian Real Estate / A Guide to Bangalore Real Estate / A Guide to Chennai Real Estate
(please tick whichever is appropriate) to receive the copies at the Indian address specified above.
Signature ................................................................................Date: ..................................................................
Note: Payment can be made by cheque (if within Chennai city) or DD if sent from other cities. All communication in connection with the publication should be sent to
Priya Publications, 26/10, South Mada Street, Sri Nagar colony, Saidapet, Chennai 600015.
Subscription fee Cover Price Subscription You save
Indian Real Estate
(for four editions)
Rs 400
@ Rs 100
Rs 350 Rs 50
A Guide to Bangalore Real Estate
(for six editions)
Rs 300 Rs 250 Rs 50
A Guide to Chennai Real Estate
(for six editions)
Rs 300 Rs 250 Rs 50
Priya Publications, Chennai
Indian
Real Estate
(Quarterly)
A Guide to
Chennai Real Estate
(Biannual)
A Guide to
Bangalore Real Estate
(Biannual)