Wikipedia

Real estate is "property consisting of land and the buildings on it, along with its natural resources
such as crops, minerals or water; immovable property of this nature; an interest vested in this (also)
an item of real property, (more generally) buildings or housing in general. Also: the business of real
estate; the profession of buying, selling, or renting land, buildings, or housing."[1] It is a legal term
used in jurisdictions whose legal system is derived from English common law, such as India, the
United Kingdom, United States, Canada, Pakistan, Australia, and New Zealand.

What is 'Real Estate'

Real estate is property made up of land and the buildings on it, as well as the natural
resources of the land, including uncultivated flora and fauna, farmed crops and
livestock, water and mineral deposits. Although media often refers to the "real estate
market," from the perspective of residential living, real estate can be grouped into three
broad categories based on its use: residential, commercial and industrial. Examples of
residential real estate include undeveloped land, houses, condominiums and town
houses; examples of commercial real estate are office buildings, warehouses and retail
store buildings; and examples of industrial real estate include factories, mines and
farms.

1. Real estate as an investment

The real estate investment is a leveraged investment because at least 80% of the purchase price
(typically) and sometimes more is financed with debt. For example, if the purchase of a home requires a
20% cash downpayment, then a full 80% of the purchased price is financed with borrowed money. The
degree of leverage is equal to the inverse of the percentage of the down-payment, or in this example,
1/0.20, which is equal to 5.

Here is why. Once the property has been purchased, then all capital gains that arise from an increase in
the value of the property accrue to the owner.

Consider an example. Suppose you make a 20% down-payment of $50,000 to purchase a $250,000
home, which implies that you borrowed the remaining $200,000. Suppose five years later the house has
risen in value 10% to $275,000. Because you are the owner of the house, all of this capital gain accrues
to you - it represents a rise in your net worth. This is called the equity in your home. But even though
the rate of price appreciation was only 10% over the five years, the rate of return to your equity
investment, which was $50,000, is a full 50%, five times as much. In this example, the degree of leverage
is 5, as described above.

Obviously, this leverage works both ways, as was discovered by hapless real estate investors in the
terrible markets of 2004-2006 (and earlier in some cases). Clearly if you buy a house that is overpriced in
a heated market, and you put so little down that your leverage is, say, 10 to 1 or higher rather than 5 to
1 (because the down payment was 10% or less), then a decline in home prices is an open invitation to
foreclosure (the formal loss of the home) and possibly bankruptcy. Remember, the stated condition for
treating real estate as a winning investment was to buy a home at the right time at the right price. Given
the torrid real estate speculation that

You can grow your own garden ... samples from mine.

4 began before 2004 and continued to the inevitable bust, millions of new homeowners, many of them
chasing the elusive huge gains on leverage, forgot that and paid the price. As such, they have created
the market that will enable you to benefit from the long-term historical tendency of real estate prices to
rise in the United States.

Land: Land is defined as the earth’s surface extending downwards to the centre of the earth and
upwards to infinity, including things permanently attached by nature such as trees and water. The term
“land”, thus, refers to not only the surface of the land but also the underlying soil and things that are
naturally attached to the land, such as rocks and plants. Land includes the minerals and substances far
below the earth’s surface. It also includes the air above the land up into the space. Therefore, land
consists of three layers known as respectively the “surface” the “subsurface” and “airspace”.

Land is one of the basic factors of production. Primary production functions are taken place in rural land
(non-urban land) whereas the other functions are allied with urban locations. However, due to the
development of the infrastructure facilities, it is difficult to demarcate urban uses and non-urban uses
easily. Anyway, in this book, more

17

concern is given to urban property development and management.

Real Estate: Real estate is defined as the land above and below the earth’s surface, including all things
that are permanently attached to it either natural or artificial. Therefore, the term “Real Estate” is
broader than the term “land”. It includes not only the natural components of the land but also all
artificially improved immovable features made by the man.

Any artificial thing that is attached to the land, such as a building or a structure or a fence is concerned
as a part of real estate. Land is also converted into real estate as it is improved by means of providing
access, utilities, sewerage systems and other services that make it suitable for habitable buildings. They
are also called serviced-lands, improved lands or developed lands. Such parcels of lands are called real
estates since they have been reshaped from their natural features.
At the same time, it is clear that the land becomes usable when it is converted into a real estate. This
means when a land becomes a real estate, it is usable for planned activities. Therefore, it is able to argue
that the “usability of the land” is a more apparent and logical criterion to recognize real estate. In this
way, it is also able to argue that when

18

the man starts to use the land it becomes a real estate.

Real Property: The word “property” has different meanings in legal term1. In this discipline, it is the land
and tangible features on the land and permanent improvements.

“Real property” is defined as the interests, benefits and rights inherent in the ownership of real estates.
Indeed, a real estate is valuable, usable and marketable as it possesses several real properties. Hence,
the term “real property” is broader than both the terms “land” and “real estate”. It includes the physical
surface of the land, what lies above and below to it, what is permanently attached to it, as well as the
bundle of legal rights: legal rights of ownership which is attached to the ownership of a parcel of real
estate.

Real property includes not only the surface, subsurface and airspace but also the surface rights,
subsurface rights and airspace rights, all of which can be owned by different individuals.