30-07-2012, 09:52 AM
A STUDY ON INVESTMENT BHEHAVIOUR IN REAL ESTATE INDUSTRY
WITH REFERNCES TO JAI CITY/ OMAXE/ ANSAL TOWN
A STUDY ON INVESTMENT.docx (Size: 243.87 KB / Downloads: 42)
INTRODUCTION TOREAL ESTATE
Over the last two decades, the application of financial option theory to investment in real assets has altered the way researchers model investment. Under the real options approach, firms should apply a higher user cost to new investments in irreversible assets when returns are stochastic, reflecting the option to delay that is lost when investment occurs. Nonetheless, the existing empirical literature on irreversible investment and uncertainty has sometimes obtained mixed results when estimating the relationship between the two.Negative relationship between uncertainty and investment, it is usually not possible to reject standard alternative interpretations to real options such as non-diversifiable risk or incomplete markets combined with risk averseinvestors.Some theoretical models show that real options models can have limits on their power to predict investment behavior.In the presence of demand and cost uncertainty, an investment in a real asset has a call option, the ability to delay investment, and a put option, the opportunity to disinvest and deploy that asset in an alternative use. Uncertainty raises the value of the call option, increasing the user cost and reducing investment, but it may also raise the value of the put option, increasing investment. Although the importance of each option depends on the degree of irreversibility in the investment, much of the empirical literature focuses on the call option.
Current Scenario of the Real Estate Market in India
Commercial real estate sector is in boom in India. In the last fifteen years, post liberalization of the economy, Indian real estate business has taken an upturn and is expected to grow from the current USD 14 billion to a USD 102 billion in the next 10 years. This growth can be attributed to favorable demographics, increasing purchasing power, existence of customer friendly banks & housing finance companies, professionalism in real estate and favorable reforms initiated by the government to attract global investors.
JAI CITY
Jai City is a part of AERENS GROUP which is the reputed name in real estate industry since 1969.It is headed by ShriSurender Gupta (Chairman) with ShriDevender K. Gupta( Vice chairman ), ShriSanjiv J. Aeren(Director) and many more people concerned with the project.It is technology driven corporation with highly trained and professionally and qualified team.
Risks involved in the Real Estate Investment Market
Liquidity risk
The real estate investment market is still in its infant stage. The time required for liquidity of real estate property can vary depending on the quality and location of the property.
Regulatory risks
In terms of property ownership, permission from the Reserve Bank of India is required for foreign investors. For capital repatriation, investors need to apply for approval from the RBI, and foreign direct investment is limited to a limited set of opportunities (e.g. townships). The REMFs work within the SEBI framework. Being a developing and growing sector, the rules, regulations and legalities demonstrate frequent changes, making it seem as a cumbersome investment option to the investors.
Property market transparency risk
The Indian property market has low transparency when compared to the more mature and developed real estate markets. Although market transparency has improved, reliable and consistent information on the Indian property market is still not easily available. There are also more professional due diligence and valuation institutions needed.
Macroeconomic risks
Interest rates, inflation and exchange rate risks are amongst the important macroeconomic indicators and have shown decreased volatility. The provision of facilities, is in many regions, still inadequate (education, transport infrastructure). These risk factors are not likely to disappear in the near future, impeding the development of the real estate sector.