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Reasl Estate Financing Essay

6782 words - 28 pages

A TERM PAPER ONReal Estate Financing | |

A TERM PAPER ONReal Estate Financing | |

Contents
Real Estate Sector in India 2
Role of Government in Real Estate Financing 3
What is a REIT? 3
REIT in India 4
Impact of Government Measures on Real Estate Financing 5
Why would Real Estate Finance work in India 7
Affordable Housing: 7
Smart City Investment Opportunity: 8
Smaller Tier 2 and Tier 3 Cities Offering Immense Growth Potentials: 8
Tier 2 and tier 3 cities have been offering far more real estate projects leading to a pan India growth. Some of the biggest real estate companies are focusing on smaller centers offering investment opportunities galore. With ...view middle of the document...

Size and scope. It is the second largest employer of the country after agriculture.
It is divided into sub sectors such as –
* Housing- This includes residential property deals, Development projects
* Hospitality- This Includes land traded for hotels, resorts and other recreational activities
* Retail- This includes retail and manufacturing projects
* Commercial- All commercial houses –business, It , Media would come under this

Real estate in India is growing at a rate as high as 35%. This growth has surpassed all the countries including the nations like United States and China.
The major contributing factors include:-
* Skewed Demand and Supply Ratio
* Favorable Demographics Increasing Purchasing power
* Rising Consumer Awareness
* Requirement for Business and IT Sector
* Easily available and affordable Home Loans
* Affluent Middle Class

Role of Government in Real Estate Financing
The introduction of real estate investment trusts (REITs) as announced by the finance minister Mr. Arun Jaitley in his annual budget speech is one of the positive factors likely to lead a positive impetus in the real estate sector. Real estate investment trusts (REITs) would not only increase liquidity in the cash strapped sector, it would allow end users to invest in the real estate sector from as low as Rs. 2 Lakhs and be a part of the real estate growth story. With SEBI finalizing the guidelines for REITs earmarking a minimum investment at Rs 2 Lakhs, people who were earlier willing to invest in the realty sector but did not have enough money to purchase a physical asset can now get involved in the real estate sector. 
What is a REIT?
A REIT, or Real Estate Investment Trust, is a company that owns or finances income-producing real estate. Modeled after mutual funds, REITs provide investors of all types stable income streams, diversification and long-term capital appreciation. REITs typically pay out all of their taxable income as dividends to shareholders. In turn, shareholders pay the income taxes on those dividends.
REITs allow anyone to invest in portfolios of large-scale properties the same way they invest in other industries – through the purchase of stock. In the same way shareholders benefit by owning stocks in other corporations, the stockholders of a REIT earn a share of the income produced through real estate investment – without actually having to go out and buy or finance property Congress in USA created REITs in 1960 to make investments in large-scale, income-producing real estate accessible to average investors. Congress decided that a way for average investors to invest in large-scale commercial properties was the same way they invest in other industries — through the purchase of equity. In the same way shareholders benefit by owning stocks of other corporations, the stockholders of a REIT earn a pro-rata share of the economic benefits that are derived from the production of income through...

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