Professional Documents
Culture Documents
Dahisar (W)
Submitted to:
Submitted by:
Dr Hanif Kanjer
Fahad A.Kapadia
MMS II Year Section
ROLL NO.25
This is to certify that Fahad A.Kapadia of MMS (Full Time) Semester IV Studying in
Rustomjee Business School, Dahisar (W) has carried out a Major Research Project titled To
Study the Various factors that Influence Investors Perception towards Real Estate
Investments. The work done by him/her is genuine and authentic.
The work carried out by the student was found satisfactory. We wish him/her all the success in
career.
Internal Examiner
External Examiner
This is to certify that Fahad A.Kapadia of MBA (Full Time) Semester IV Studying in
Rustomjee Business School, Dahisar (W) has carried out a Major Research Project titled To
Study the Various factors that Influence Investors Perception towards Real Estate
Investments.
The work carried out by the student was found satisfactory and it is as per the guidance of faculty
guide.
Signature of Chairperson
DECLARATION
I, Fahad A.Kapadia, a student of School of Management, Rustomjee Business School,
Dahisar (W) hereby declare that the work done by me to do the Major Research Project titled
To Study the Various factors that Influence Investors Perception towards Real Estate
Investments is genuine and authentic.
ACKNOWLEDGEMENT
I sincerely and religiously devote this folio to all the gem of persons who have openly or
silently left an ineradicable mark on this research so that they may be brought into consideration
and given their share of credit, which they genuinely and outstandingly deserve.
This expedition of research encountered many trials, troubles and tortures along the way. I
am essentially indebted to my guide Vasanti Dutta for this sweating learning experience.
He/She overlooked my faults and follies, constantly inspired and mentored via his proficient
direction. It was a privilege to work under his/her sincere guidance.
I express my thanks to Dr Manoj Bhatia, Director (MBA / PGDM), Sanghvi Institute of
Management and Science, Indore for his considerate support whenever and wherever needed. I
honestly acknowledge the support provided by the Chairperson,
Signature of Student
CONTENTS
Topic
Introduction
Literature of Review
Rationale of study
Research Methodology
Data Analysis & Interpretation
Scope of Real estate
Factor Analysis
Conclusion
Bibliography
Appendix
Questionnaire
INTRODUCTION
Investment is putting money into something with the expectation of profit. More specifically,
investment is the commitment of money or capital to the purchase of financial instruments or
other assets so as to gain profitable returns in the form of interest, dividends, or appreciation of
the value of the instrument.
Investment is involved in many areas of the economy, such as business management and finance
no matter for households, firms, or governments.
An investment involves the choice by an individual or an organization such as a pension fund,
after some analysis or thought, to place or lend money in a vehicle, instrument or asset, such as
property, commodity, stock, bond, financial derivatives (e.g. futures or options), or the foreign
asset denominated in foreign currency, that has certain level of risk and provides the possibility
of generating returns over a period of time. When an asset is bought or a given amount of money
is invested in the bank, there is anticipation that some return will be received from the
investment in the future.
Investment in Terms of Economics
According to economic theories, investment is defined as the per-unit production of goods,
which have not been consumed, but will however, be used for the purpose of future production.
Examples of this type of investments are tangible goods like construction of a factory
or bridge and intangible goods like 6 months of on-the-job training.
Investment in Terms of Business Management
According to business management theories, investment refers to tangible assets like
machinery and equipments and buildings and intangible assets like copyrights or patents and
goodwill.
Investment in Terms of Finance
In finance, investment refers to the purchasing of securities or other financial assets from the
capital market. It also means buying money market or real properties with high market liquidity.
Some examples are gold, silver, real properties, and precious items.
Financial investments are in stocks, bonds, and other types of security investments. Indirect
financial investments can also be done with the help of mediators or third parties, such as
pension funds, mutual funds, commercial banks, and insurance companies.
Personal Finance
According to personal finance theories, an investment is the implementation of money for buying
shares, mutual funds or assets with capital risk.
Types of Investment
Equities
Equities are a type of security that represents the ownership in a company. Equities are traded
(bought and sold) in stock markets. Alternatively, they can be purchased via the Initial Public
Offering (IPO) route, i.e. directly from the company. Investing in equities is a good long-term
investment option as the returns on equities over a long time horizon are generally higher than
most other investment avenues. However, along with the possibility of greater returns comes
greater risk.
Mutual funds
A mutual fund allows a group of people to pool their money together and have it professionally
managed, in keeping with a predetermined investment objective. This investment avenue is
popular because of its cost-efficiency, risk-diversification, professional management and sound
regulation. You can invest as little as Rs. 1,000 per month in a mutual fund. There are various
general and thematic mutual funds to choose from and the risk and return possibilities vary
accordingly.
Bonds
Bonds are fixed income instruments which are issued for the purpose of raising capital. Both
private entities, such as companies, financial institutions, and the central or state government and
other government institutions use this instrument as a means of garnering funds. Bonds issued by
the Government carry the lowest level of risk but could deliver fair returns.
Deposits
Investing in bank or post-office deposits is a very common way of securing surplus funds. These
instruments are at the low end of the risk-return spectrum.
Cash equivalents
These are relatively safe and highly liquid investment options. Treasury bills and money market
funds are cash equivalents.
Non-financial Instruments
Gold
The 'yellow metal' is a preferred investment option, particularly when markets are volatile.
Today, beyond physical gold, a number of products which derive their value from the price of
gold are available for investment. These include gold futures and gold exchange traded funds.
Real Estate
In real estate, investment money is used to purchase property for the purpose of holding,
reselling or leasing for income and there is an element of capital risk.
Residential real estate
Investment in residential real estate is the most common form of real estate investment measured
by number of participants because it includes property purchased as a primary residence. In
many cases the buyer does not have the full purchase price for a property and must engage a
lender such as a bank, finance company or private lender. Different countries have their
individual normal lending levels, but usually they will fall into the range of 70-90% of the
purchase price. Against other types of real estate, residential real estate is the least risky.
Commercial real estate
Commercial real estate consists of multifamily apartments, office buildings, retail space, hotels
and motels, warehouses, and other commercial properties. Due to the higher risk of commercial
real estate, loan-to-value ratios allowed by banks and other lenders are lower and often fall in the
range of 50-70%.
According to real estate theories, investment is referred to as money utilized for buying property
for the purpose of ownership or leasing. This also involves capital risk.
Also there has been an increase in the income level of Indian middle class who are now
considerably investing in new property in prime metro cities like Delhi, Mumbai, and Bangalore.
Several mega projects offering international lifestyles are on the anvil in different cities in India.
The most developed are the Bangalore Property, Mumbai Property and Delhi.For example
Property market with luxury apartment and villas selling like hot cakes.
The Indian stock market and Indian real estate are quite related. The stock market has been
witnessing a nonstop bull run for an unusually long time. During last couple of years share prices
have gone beyond all expectations.
One can draw parallels between that and Japans real estate crash in 1991. Prior to the crash, both
the stock market and the property market were on fire. Profits from the stock markets used to be
transferred to the property market, and vice versa. The same thing is happening in India as
well.Several mega projects offering international lifestyles are on the anvil in different cities in
India.
A duplex is a structure designed for residential use and contains two living blocks sharing
a common wall. Duplex properties may be listed residential or commercial, depending on
the purposes they serve.
2.3.Condominiums Property
Condominiums, or condos, are apartments that are independently owned minus a yard
and with common parking facilities and offer many amenities.
2.4.Town House Property
Classic townhouses are doubled storied row of homes, with common sidewalls. The
living room is situated below with the bedrooms above and there is a little fenced in yard.
Rooming house properties usually have no more than 20 furnished units with common
bathroom and kitchen facilities given out on a temporary basis.
3.3.Mobile Home Parks Property
Mobile park homes are a blend of single and double spacious homes, sited in decent
neighborhoods and with at least three-fourth occupancy. Depending on the surroundings
and facilities provided mobile home parks are given star ratings.
3.4.Retail Space
Retail space comprises of single construction taken by single or multiple tenants and
exclusively meant for retail use such as sales and display of garments and electronics.
3.5.Office Buildings & Complexes
This type refers to a single structure intended for office use, or a set of offices in one
structure or a group of buildings and are ideally located on the main road.
3.6.Mixed-Use Properties
Mixed-use properties are a blend of residential and commercial units such as a retail store
and a multi-family home in the same structure.
3.7. Healthcare Properties
This property type includes hospitals and nursing homes, health care centers and assisted
living facilities. A license is mandatory to run the facility.
3.8.Bed & Breakfast Properties
Bed and Breakfast inns are normally single buildings family units meant for temporary
boarding.
3.9.Restaurant Property
Restaurants are built for the making and selling of food and drinks, and include canteens,
pubs, and inns.
3.10.Hotel Properties
Hotel properties are constructions that provide a suite of facilities and services, typical of
the hospitality industry. Hotels are classified as either Complete Service or Restricted
Service. Hotels can also be affiliated to a national franchise chain.
3.11.Day Care Centers
Day Care centers provide childcare, disabled, and elderly care services; or are learning
centers, such as kindergartens and nurseries. They have playrooms, rest rooms, and
simple kitchen amenities.
4.Industrial Property
Industrial property types are designed for industrial commercial functions. They include:
4.1. Self-Storage Properties
These are mini-warehouses and comprise of tiny compartments that are rented for private
storage.
4.2. Warehouse Properties
Warehouses are commercial buildings built for holding goods and consist of massive
open inner sections.
4.3.Flex Space Properties
Flex space is a blend of industrial and office property. It is an arrangement that has a
workplace and display area together with the industrial area.
5. Manufacturing Property
Manufacturing property is designed for producing goods for sale or lease like factories.
5.1.Cold Storage Property
Cold storage property is a specialized structure that makes available storage in a chilled
or icy setting.
5.2.Automotive Property
Automotive structures are built specifically for the automobile industry and usually have
a small office cubicle, car lifts, and overhead doors. They include repair units, used car
hubs, and tier fixing facilities. Detailed study of property types and their comparative
values is crucial in deciding the best option to work with and the possible monetary
benefits accruing from each.
A number of deductions can be claimed on your tax return, such as interest paid on the loan,
repairs and maintenance, rates and taxes, insurance, agent's fees, travel to and from the property
to facilitate repairs, and buildings depreciation.
2. Negative gearing
Tax deductions can also be claimed as a result of negative gearing, where the costs of keeping
the investment property exceed the income gained from it.
3. Long-term investment
Many people like the idea of an investment that can fund them in their retirement. Rental
housing is one sector that rarely decreases in price, making it a good potential option for longterm investments.
4. Property oversupply
In recent years, inner-city builders have created a glut of high-rise apartment blocks, resulting in
fierce competition and many units being increasingly difficult to rent out.
5.Ongoing costs
In addition to the standard costs associated with a property, ongoing maintenance costs,
especially with an older building, can be substantial.
6. Putting all your eggs in one basket
If you have all your money tied up in property, overexposure to one particular type of investment
can be a dangerous thing. If the property market crashes you can stand to lose significantly.
7. Capital Gains Tax
It is imposed by the Federal Government on the appreciation of investments and payable on
disposal.
8. Other costs
Negative gearing may offer tax deductions each financial year, however ongoing payments to
cover the shortfall need to be budgeted for every month. Also, costs involved in purchasing and
disposing of the property can be substantial.
2. Frequency of return
The frequency with which the individual gets return on his investment is also very important.
These have to be very carefully followed for efficient reinvestment and also for the use of the
returns for various needs of the individual.
3.Liquidity
The investor has to understand the needs to have money in hand for either an emergency or even
a sudden change in investment strategy to earn a high rate of return on the investment.
4. Inflation
Each of the persons investments have to beat the inflation rate present at that time for the return
on investment to be positive. If the inflation rate is more than the return on the investment of a
person, then the return is negative when inflation is taken into consideration. Any investment has
to beat the inflation to be efficient.
5. Rate of Return
The main reason for people investing money is to earn a high return on the investment. An
individual may have various investments. Some may be fixed investments and others may be
high risk equity investments.
6. Age and risk taking ability:
All investment and insurance needs changes based on stage of life. Younger are able to invest in
every field and able to taking risk but in old age every investor wants to invest in securities.
7. Investment horizon
The length of time a sum of money is expected to be invested. An individual's investment
horizon depends on when and how much money will be needed, and the horizon influences the
optimal investment strategy. In general, the shorter the investor's horizon, the less risk he/she
should be willing to accept.
Wholesalers (such as bank real estate owned departments and public agencies)
Private sales
Once an investment property has been located, and preliminary due diligence (investigation and
verification of the condition and status of the property) completed, the investor will have to
negotiate a sale price and sale terms with the seller, then execute a contract for sale. Most
investors employ real estate agents and real estate attorneys to assist with the acquisition process,
as it can be quite complex and improperly executed transactions can be very costly. During the
acquisition of a property, an investor will typically make a formal offer to buy including payment
of "earnest money" to the seller at the start of negotiation to reserve the investor's rights to
complete the transaction if price and terms can be satisfactorily negotiated. This earnest money
may or may not be refundable, and is considered to be a signal of the seriousness of the investor
to purchase. The terms of the offer will also usually include a number of contingencies which
allow the investor time to complete due diligence and obtain financing among other requirements
prior to final purchase. Within the contingency period, the investor usually has the right to
rescind the offer with no penalty and obtain a refund of earnest money deposits. Once
contingencies have expired, rescinding the offer will usually require forfeit of earnest money
deposits and may involve other penalties as well.
Risk management
Management and evaluation of risk is a major part of any successful real estate investment strategy. Risk occurs in
many different ways at every stage of the investment process. Below is a tabulation of some common risks and
typical risk mitigation strategies used by real estate investors
Risk
Mitigation Strategy
Fraudulent sale
Adverse possession
Environmental contamination
surveyor
Obtain
environmental
contaminants
(lead
survey,
paint,
test
for
asbestos,
soil
contaminants, etc.)
Complete full inspection prior to purchase,
Overpayment at purchase
and
perform
Economic downturn
Tenant destruction of property
Underestimation of risk
Market Decline
Fire, flood, personal injury
Tax Planning
investment
Maintain sufficient liquid or cash reserves to
cover costs and debt service for a period of time,
Purchase properties with distinctive features in
desirable locations to stand out from competition,
control cost structure, have tenants sign long term
leases
Screen potential tenants carefully, hire
experienced property managers
Carefully analyze financial performance using
conservative assumptions, ensure that the
property can generate enough cash flow to
support itself
Purchase properties based on a conservative
approach that the market might decline and rental
income may also decrease
Insurance policy on the property
Plan purchases and sales around an exit strategy
to save taxes.
In India, small real estate investors currently do not have as much scope as institutional
investors. They can hold multiple properties, but banks will generally not fund beyond a second
home loan.
That does not mean they cannot invest beyond that from their personal accruals. They certainly
have the option of investing in rent-generating assets, which can fetch very decent returns if they
have been purchased wisely.
Despite the present limitations for small investors, a property investment can give the buyer
protection against inflation. Like gold, real estate tends to retain its intrinsic value. However,
unlike with gold, it is possible to earn a regular income on it.
Wang (1994) according to this study, sales representatives at brokerages take female investors
less seriously than men. The brokers studied tended to spend more time with men and
recommend higher risk and return investments to men. Jacobius (2001) reported that women are
less involved with their retirement accounts than are men. Conversely, Friedman (1996)
contended that baby boomers and women are gaining financial sophistication. Women are
developing the ability to distinguish between levels of investment service quality. Inadequate
broker attention and recommendations could lead to dissatisfaction on the part of knowledgeable
women clients, which in turn may cause brokers to lose clients from this market segment.
Shukla Ravi (2004), analyses the value of interim portfolio revision, an integral component of
active management of mutual funds by comparing the returns on actively managed mutual fund
portfolios with the returns the fund portfolios would have earned had there been no interim
revision. The results show that, on an average, excess returns from interim portfolio revision do
not cover the incremental trading costs, even over holding periods as long as 6 months. Across
mutual funds, we find evidence of a positive relationship between the excess returns and mutual
fund expense ratios suggesting that those managers who generate higher excess returns charge
higher fees from the stockholders.
Robert A. Olsen , 2001, O'Barr and Conley according to the author this article suggests that, even
with equivalent training, experience and information, investment managers make different
decisions based on identifiable cultural differences. This study focuses on professional men and
women investment managers who perceive and respond to risk differently. Author suggests
cultural factors may be responsible for this risk related gender effect. There is extensive evidence
that when faced with social and technological hazards, women are more risk averse than men.
Tahira K. Hira and Cazilia Loibl,2008, Gender Differences in Investment Behavior The
objectives of this chapter are to identify significant personal and environmental factors that
influence investment behavior and to specify the investment decision-making process,
particularly with respect to female investors. It is expected that the results presented here will
help readers to consider new approaches to investment education. Specifically, this chapter aims
to: (a) explore differences between men and women in a variety of financial behaviors,
understand investors perception toward the real estate investments. And the factors in which
attention should be focused to increase number of investors in real estate.
RESEARCH METHODOLOGY
1. THE SAMPLE
The present research is to be conducted on a sample of 100 prospective customers.
Population: Our populations are the investors of real estate in Mumbai.
Sample Size: We have used a small number of items or a small portion of a population to draw
conclusions regarding the whole population. Our sample size is 100 respondents.
2. THE TOOLS FOR DATA COLLECTION
Collection of Data
As there are several research techniques, there are a number of data collection methods as
well.
Secondary Data- A secondary data is concerned with the analysis of already existing
data that is related to the research topic. We have gathered data from books, journals,
articles, through internet.
Primary Data- Primary data is that data which is collected directly from respondents
using data collection methods like survey interviews, questionnaires, direct observation,
or charts. We have collected primary data through questionnaires.
For the analysis of the data collected, various statistical tools as well as SPSS software
was used as per the requirements.
LIMITATIONS
In spite of every care taken on the part of the researcher there are certain limitations which could
not be overcome:
Sample size is limited to 100 customers and may not adequately represent the whole
market.
The above are some of the aspects which posed real problems in the way of completion of the
research work but the majority of respondents were cooperative.
8%
32%
22%
Strongly Agree
Agree
Neutral
Disagree
38%
Strongly Disagree
After study we found that 0% investors are strongly disagree, 8%people are disagree, 22%people
are neutral, 38%people are agree and 32%people are strongly agree with the statement.
15%
5% 1%
30%
Strongly Agree
Agree
Neutral
49%
Disagree
Strongly Disagree
After study we found that 1% investors are strongly disagree, 5%people are disagree, 15%people
are neutral, 49%people are agree and 30%people are strongly agree with the statement.
Q3. Real Estate is better option for investors?
8% 3%
22%
Strongly Agree
Agree
32%
35%
Neutral
Disagree
Strongly Disagree
After study we found that 3% investors are strongly disagree, 8%people are disagree, 32%people
are neutral, 35%people are agree and 22%people are strongly agree with the statement.
12%
32%
24%
Strongly Agree
Agree
Neutral
32%
Disagree
Strongly Disagree
After study we found that 0% investors are strongly disagree, 12%people are disagree,
24%people are neutral, 32%people are agree and 32%people are strongly agree with the
statement.
15% 1%
21%
Strongly Agree
Agree
23%
Neutral
40%
Disagree
Strongly Disagree
After study we found that 1% investors are strongly disagree, 15%people are disagree,
23%people are neutral, 40%people are agree and 21%people are strongly agree with the
statement.
4% 4%
23%
39%
Strongly Agree
Agree
Neutral
30%
Disagree
Strongly Disagree
After study we found that 4% investors are strongly disagree, 4%people are disagree, 23%people
are neutral, 30%people are agree and 39%people are strongly agree with the statement.
7% 2%
16%
30%
Strongly Agree
Agree
Neutral
Disagree
45%
Strongly Disagree
After study we found that 2% investors are strongly disagree, 7%people are disagree, 16%people
are neutral, 45%people are agree and 30%people are strongly agree with the statement.
12% 2%
30%
Strongly Agree
Agree
30%
Neutral
26%
Disagree
Strongly Disagree
After study we found that 2% investors are strongly disagree, 12%people are disagree,
30%people are neutral, 26%people are agree and 30%people are strongly agree with the
statement.
Q9. Volatile market affected investment decision in Real Estate.
11%
20%
Strongly Agree
20%
Agree
23%
26%
Neutral
Disagree
Strongly Disagree
After study we found that 11% investors are strongly disagree, 20%people are disagree,
26%people are neutral, 23%people are agree and 20%people are strongly agree with the
statement.
19%
1%
18%
Strongly Agree
Agree
24%
38%
Neutral
Disagree
Strongly Disagree
After study we found that 1% investors are strongly disagree, 19%people are disagree,
24%people are neutral, 38%people are agree and 18%people are strongly agree with the
statement.
Q11. Interest rate have major impact on the Real Estate Investment?
11%
20%
23%
Strongly Agree
Agree
Neutral
46%
Disagree
Strongly Disagree
After study we found that 0% investors are strongly disagree, 11%people are disagree,
23%people are neutral, 46%people are agree and 20%people are strongly agree with the
statement.
8%
23%
18%
Strongly Agree
Agree
17%
34%
Neutral
Disagree
Strongly Disagree
After study we found that 8% investors are strongly disagree, 18%people are disagree,
17%people are neutral, 34%people are agree and 23%people are strongly agree with the
statement.
Q13. Tax benefit is a very important aspect when a person invests his money.
10%
7%
24%
14%
Strongly Agree
Agree
Neutral
45%
Disagree
Strongly Disagree
After study we found that 7% investors are strongly disagree, 10%people are disagree,
14%people are neutral, 45%people are agree and 24%people are strongly agree with the
statement.
CONCLUSION
It can be concluded from the study that factors which can influence the decision regarding real
estate investment are divided into five different groups and first group include four factors which
highly affect the real estate investment decision. These are better option, Price, Volatile Market,
and Government Polices. Most of the investors depend upon it. Second group also have four
factors which affected the investors perception less than first group. These factors are Tax
Benefit, Interest Rate, Location and Profit Percent. The third group is low affective then the
second group. This group have only two factors. These are Low Risk and interest.Only two
factors are present in fourth group that is safe investment and economic growth. Data analysis
result shows that these factors are moreaffective in Real Estate investment. Group five have only
single factor High Return. This has negligible affect because most of the investors know that it is
possible only in long term investment. All the factors affects investment decision but economic
growth and safe investment factor are more affective towards the real estate investment decision.
For investors, a property investment can give the protection against inflation.From the research
study It can beconcludedthat Real estate is a great investment option. It can generate an ongoing
income source. It can also rise in value overtime and prove a good investment in the cash value
of the home or land that you buy. However you need to be sure that you are ready to begin
investing in real estate.
BIBLIOGRAPHY
Books Referred:
Boo
Dr. Jai Narain Sharma, The discipline and its Dimension, Deep & Deep Publications Pvt.
Ltd., New Delhi.
Websites:
www.valueresearchonline.com
http://www.ebook3000.com/Investment-Analysis-and-Portfolio-Management--Solutions-Manual_html
http://www.wepapers.com/Papers/Investment_Analysis_and__Portfolio_Management
http://www.experiment-resources.com/research-methodology.html
http://www.saching.com/Article/Factors-that-can-affect-investment-decisions-formaximum-return-on-investment
Search Engines:
www.yahoo.com
www.google.co.in
www.rediff.com
Appendix
QUESTIONNAIRE
We are approaching you with this questionnaire to know your Perception towards the Real Estate
investment. The information provided by you would be kept confidential and will be used for
academic purpose only. Kindly tick your choice against each statement.
Name : ___________________________________________________________
Gender : __________________________________________________________
Age : ____________________________________________________________
Qualification : _____________________________________________________
Income Status : ____________________________________________________
S.
NO
.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Statements
Are you interested to invest
money in Real Estate
Investment based on profit
percent.
Real Estate is better option for
investors.
Real Estate investment giving
high return
Real Estate investment is safe
investment
Location influence the investors
perception towards investment
Price play important role in Real
Estate investment
Economy growth affect the Real
Estate investment.
Volatile
market
affected
investment decision in Real
Estate.
Real Estate is low risk
investment
Strongly
Agree
(5)
Agree
(4)
Not
Sure
(3)
Disagree
(2)
Strongly
Disagree
(1)
11.
12.
13.