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real estate

  1. 1. DEVI AHILYA VISHWAVIDYALAYA, INDORE MAJOR RESEARCH PROJECT on “To Study the Various factors that Influence Investor’s Perception towards Real Estate Investments” A Research Dissertation Submitted in Partial Fulfillment for the Award of the Degree of Masters of Business Administration (2010-2012)Submitted to: Submitted by:Prof.Vasanti Dutta Tarun Thakur MBA II Year Section ROLL NO.
  2. 2. CERTIFICATE FROM INTERNAL & EXTERNAL EXAMINERThis is to certify that ―Tarun Thakur‖ of MBA (Full Time) Semester IV in Sanghvi Institute ofManagement and Science, Indore has carried out a Major Research Project titled ―To Study theVarious factors that Influence Investor’s Perception towards Real Estate Investments‖. Thework 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 incareer. Internal Examiner External Examiner
  3. 3. CERTIFICATE FROM CHAIRPERSON & FACULTY GUIDEThis is to certify that ―Tarun Thakur‖ of MBA (Full Time) Semester IV in Sanghvi Institute ofManagement and Science, Indore has carried out a Major Research Project titled ―To Study theVarious factors that Influence Investor’s Perception towards Real Estate Investments‖.The work carried out by the student was found satisfactory and it is as per the guidance of facultyguide.Signature of Chairperson Signature of Faculty Guide
  4. 4. DECLARATIONI, ―Tarun Thakur‖, a student of School of Management, Sanghvi Institute of Management &Science, Indore, hereby declare that the work done by me to do the Major Research Project titled―To Study the Various factors that Influence Investor’s Perception towards Real EstateInvestments‖ is genuine and authentic. Signature of the Student
  5. 5. ACKNOWLEDGEMENT I sincerely and religiously devote this folio to all the gem of persons who have openly orsilently left an ineradicable mark on this research so that they may be brought into considerationand given their share of credit, which they genuinely and outstandingly deserve. This expedition of research encountered many trials, troubles and tortures along the way. Iam 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 proficientdirection. It was a privilege to work under his/her sincere guidance. I express my thanks to Dr Manoj Bhatia, Director (MBA / PGDM), Sanghvi Institute ofManagement and Science, Indore for his considerate support whenever and wherever needed. Ihonestly acknowledge the support provided by the Chairperson, Prof Gaurav Singh.I express my indebtedness to the management of Sanghvi Institute of Management and Science,for inspiring us to grab and utilize this opportunity. With profound sense of gratitude, I would like to truthfully thank a recognizable number ofindividuals whom I have not mentioned here, but who have visibly or invisibly facilitated intransforming this research into a success saga. Above all, I would like to conscientiously thank the Omnipotent, Omnipresent andOmniscient God for His priceless blessings! Signature of Student
  6. 6. CONTENTSTopicIntroductionLiterature of ReviewRationale of studyResearch MethodologyData Analysis & InterpretationScope of Real estateFactor AnalysisConclusionBibliographyAppendixQuestionnaire
  7. 7. INTRODUCTIONInvestment 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 orother assets so as to gain profitable returns in the form of interest, dividends, or appreciation ofthe value of the instrument.Investment is involved in many areas of the economy, such as business management and financeno 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 asproperty, commodity, stock, bond, financial derivatives (e.g. futures or options), or the foreignasset denominated in foreign currency, that has certain level of risk and provides the possibilityof generating returns over a period of time. When an asset is bought or a given amount of moneyis invested in the bank, there is anticipation that some return will be received from theinvestment in the future.Investment in Terms of EconomicsAccording 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 factoryor bridge and intangible goods like 6 months of on-the-job training.Investment in Terms of Business ManagementAccording to business management theories, investment refers to tangible assets likemachinery and equipments and buildings and intangible assets like copyrights or patents andgoodwill.Investment in Terms of FinanceIn finance, investment refers to the purchasing of securities or other financial assets from thecapital market. It also means buying money market or real properties with high market liquidity.Some examples are gold, silver, real properties, and precious items.
  8. 8. Financial investments are in stocks, bonds, and other types of security investments. Indirectfinancial investments can also be done with the help of mediators or third parties, such aspension funds, mutual funds, commercial banks, and insurance companies.Personal FinanceAccording to personal finance theories, an investment is the implementation of money for buyingshares, mutual funds or assets with capital risk. Types of InvestmentEquitiesEquities 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 PublicOffering (IPO) route, i.e. directly from the company. Investing in equities is a good long-terminvestment option as the returns on equities over a long time horizon are generally higher thanmost other investment avenues. However, along with the possibility of greater returns comesgreater risk.Mutual fundsA mutual fund allows a group of people to pool their money together and have it professionallymanaged, in keeping with a predetermined investment objective. This investment avenue ispopular because of its cost-efficiency, risk-diversification, professional management and soundregulation. You can invest as little as Rs. 1,000 per month in a mutual fund. There are variousgeneral and thematic mutual funds to choose from and the risk and return possibilities varyaccordingly.BondsBonds are fixed income instruments which are issued for the purpose of raising capital. Bothprivate entities, such as companies, financial institutions, and the central or state government andother government institutions use this instrument as a means of garnering funds. Bonds issued bythe Government carry the lowest level of risk but could deliver fair returns.DepositsInvesting in bank or post-office deposits is a very common way of securing surplus funds. Theseinstruments are at the low end of the risk-return spectrum.
  9. 9. Cash equivalentsThese are relatively safe and highly liquid investment options. Treasury bills and money marketfunds are cash equivalents.Non-financial InstrumentsGoldThe 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 ofgold are available for investment. These include gold futures and gold exchange traded funds. Real EstateIn 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 estateInvestment in residential real estate is the most common form of real estate investment measuredby number of participants because it includes property purchased as a primary residence. Inmany cases the buyer does not have the full purchase price for a property and must engage alender such as a bank, finance company or private lender. Different countries have theirindividual normal lending levels, but usually they will fall into the range of 70-90% of thepurchase price. Against other types of real estate, residential real estate is the least risky.Commercial real estateCommercial real estate consists of multifamily apartments, office buildings, retail space, hotelsand motels, warehouses, and other commercial properties. Due to the higher risk of commercialreal estate, loan-to-value ratios allowed by banks and other lenders are lower and often fall in therange of 50-70%.According to real estate theories, investment is referred to as money utilized for buying propertyfor the purpose of ownership or leasing. This also involves capital risk. Indian Real Estate ScenarioIndia is the seventh largest country by geographical area, the second most populous country andthe most popular liberal democracy in the world. India is now the fourth largest economy in theworld and the second fastest growing economy.One of the noticeable recent developments has been in the field of Real Estate. India real estatemarket is booming. Some 80,000 Indians today have liquid assests greater than 5 cores and this
  10. 10. No. is increasing by 13 % a year. According to well-known source India’s large cities boasts400-500 house listed at 5 crores+.India’s emergence as a hub for global outsourcing and the consumption-driven growth of India’seconomy is contributing to its new found real estate investment image. For example upcomingglitzy shopping malls, entertainment centers, luxury hotels and multiplexes.Foreign Investment and the likes of Wal-Mart is already fuelling the demand for commercialproperty. Foreign companies can set up subsidiaries or joint-ventures to develop property,provided that their money is locked in for three years and that plots are of at least a minimumsize.However, India’s property market remains unorganized and underdeveloped. This creates risksfor investors. In the absence of clear title to property, the risk of litigation is high. For thoseforeigners who invest in India via real estate investment trusts, there are no rules on the markingof their stakes to market or on whether they must pay stamp duty on transactions.The growth was initially fuelled and subsequently sustained mainly by cheap housing loans.Years ago, when India was a closed economy with lots of government control and intervention,the interest rates for house loan used to be as high as 18% per annum. But the gradualliberalization of the Indian economy and opening up of the domestic market, unrestricted flow ofFDI and full current account convertibility of Indian currency (Rupee) brought down the PLR(prime lending rate) substantially.Also there has been an increase in the income level of Indian middle class who are nowconsiderably 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 exampleProperty 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 beenwitnessing a nonstop bull run for an unusually long time. During last couple of years share priceshave gone beyond all expectations.
  11. 11. One can draw parallels between that and Japan’s 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 usedto be transferred to the property market, and vice versa. The same thing is happening in India aswell.Several mega projects offering international lifestyles are on the anvil in different cities inIndia. Types of Real Estate PropertiesReal estate property comes in various types with each having its own distinctive structure. Thereare three major property types in the real estate business.1.Vacant Land PropertyVacant land is popular with ranchers and cultivators. The extent of property is considerable andthe price high.2.Residential PropertiesResidential property types include: 2.1Single Family Residence Property Single-family residences are single units, typically with a front and back yard, a driveway and an attached garage. 2.2.Duplex Property 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.
  12. 12. 2.5.Manufactured Home Property Manufactured homes are erected in a factory and set up on the dwelling site. They must conform to the federal construction regulations. 2.6.Patio Home A patio home is a single story home with one joint sidewall and a patio towards the back facing the common area. Patio homes normally contain 2-4 homes in each structure and may have a backyard. 2.7.Loft Property Lofts are usually found downtown and have high roofs, huge wide windows, metal staircase and cement floors, but no yard. 3.Commercial Properties Commercial property can refer to vacant land developed for commercial use, or analready existing commercial structure(s). Specifics about certain commercial property types: 3.1.Multi-Family Property Multi-family property comprises of buildings meant for numerous family groups, leased on a permanent basis. They typically contain five or more living units with shared amenities, such as doorways, foyers, lifts, staircases and walkabouts. 3.2.Rooming House 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.
  13. 13. 3.6.Mixed-Use PropertiesMixed-use properties are a blend of residential and commercial units such as a retail storeand a multi-family home in the same structure.3.7. Healthcare PropertiesThis property type includes hospitals and nursing homes, health care centers and assistedliving facilities. A license is mandatory to run the facility.3.8.Bed & Breakfast PropertiesBed and Breakfast inns are normally single buildings family units meant for temporaryboarding.3.9.Restaurant PropertyRestaurants are built for the making and selling of food and drinks, and include canteens,pubs, and inns.3.10.Hotel PropertiesHotel properties are constructions that provide a suite of facilities and services, typical ofthe hospitality industry. Hotels are classified as either Complete Service or RestrictedService. Hotels can also be affiliated to a national franchise chain.3.11.Day Care CentersDay Care centers provide childcare, disabled, and elderly care services; or are learningcenters, such as kindergartens and nurseries. They have playrooms, rest rooms, andsimple kitchen amenities.4.Industrial Property Industrial property types are designed for industrial commercial functions. They include:4.1. Self-Storage PropertiesThese are mini-warehouses and comprise of tiny compartments that are rented for privatestorage.4.2. Warehouse PropertiesWarehouses are commercial buildings built for holding goods and consist of massiveopen inner sections.4.3.Flex Space PropertiesFlex space is a blend of industrial and office property. It is an arrangement that has aworkplace and display area together with the industrial area.
  14. 14. 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. Investment properties pros & consIn general, property is considered a fairly low-risk investment, and can be less volatile thanshares (although, this is not always the case). Some of the advantages of investing in propertyinclude:1. Tax benefitsA number of deductions can be claimed on your tax return, such as interest paid on the loan,repairs and maintenance, rates and taxes, insurance, agents fees, travel to and from the propertyto facilitate repairs, and buildings depreciation.2. Negative gearingTax deductions can also be claimed as a result of negative gearing, where the costs of keepingthe investment property exceed the income gained from it.3. Long-term investmentMany people like the idea of an investment that can fund them in their retirement. Rentalhousing is one sector that rarely decreases in price, making it a good potential option for long-term investments.
  15. 15. 4. Positive asset baseThere are many benefits from having an investment property when deciding to take out anotherloan or invest in something else. Showing your potential lender that you have the ability tomaintain a loan without defaulting will be highly regarded. The property can also be useful assecurity when taking out another home, car or personal loan.5. Safety aspectLow-risk investments are always popular with untrained "mum and dad" investors. Property fitsthese criteria with returns in some country areas reaching 10% per year. Housing inmetropolitan areas is constantly in demand with the high purchase price being offset bysubstantial rental income and a yearly return of between 6% and 9%.6. High leverage possibilitiesInvestment properties can be purchased at 80% LVR (loan to valuation ratio), or up to 90%LVR with mortgage insurance. The LVR is calculated by taking the amount of the loan anddividing it by the value of the property, as determined by the lender. This high leverage capacityresults in a higher return for the investor at a lower risk due to having less personal finances tiesup in the property (80% of the purchase price was provided by the mortgagee).By choosing a property intelligently, investors can make this form of investment work for them.However, as with all investments there are some disadvantages to be aware of.Disadvantages of investment properties1. LiquidityIts true; you can sell the property if things go bad. However this can take many months unlessyoure willing to accept a price less than the property is worth. Unlike the stock market, you willhave to wait for any financial rewards.2. VacanciesThere will be times when mortgage payments will need to be covered out of your own pocketdue to your property being untenanted. This could just be a result of a gap between tenants orbecause of maintenance issues.
  16. 16. 3.Bad tenantsIts every investment property owners worst nightmare: problem tenants. They can significantlydamage your property, refuse to pay rent and refuse to leave. Disputes can sometimes takemonths to resolve.4. Property oversupplyIn recent years, inner-city builders have created a glut of high-rise apartment blocks, resulting infierce competition and many units being increasingly difficult to rent out.5.Ongoing costsIn 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 basketIf you have all your money tied up in property, overexposure to one particular type of investmentcan be a dangerous thing. If the property market crashes you can stand to lose significantly.7. Capital Gains TaxIt is imposed by the Federal Government on the appreciation of investments and payable ondisposal.8. Other costsNegative gearing may offer tax deductions each financial year, however ongoing payments tocover the shortfall need to be budgeted for every month. Also, costs involved in purchasing anddisposing of the property can be substantial. Factors Affecting Investment1.Management OutlookIf the management is progressive and has an aggressively marketing and growth outlook, it willencourage innovation and favor capital proposals which ensure better productivity on quality orboth.
  17. 17. 2. Frequency of returnThe 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 thereturns for various needs of the individual.3.LiquidityThe investor has to understand the needs to have money in hand for either an emergency or evena sudden change in investment strategy to earn a high rate of return on the investment.4. InflationEach of the persons investments have to beat the inflation rate present at that time for the returnon investment to be positive. If the inflation rate is more than the return on the investment of aperson, then the return is negative when inflation is taken into consideration. Any investment hasto beat the inflation to be efficient.5. Rate of ReturnThe main reason for people investing money is to earn a high return on the investment. Anindividual may have various investments. Some may be fixed investments and others may behigh 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 inevery field and able to taking risk but in old age every investor wants to invest in securities.7. Investment horizonThe length of time a sum of money is expected to be invested. An individuals investmenthorizon depends on when and how much money will be needed, and the horizon influences theoptimal investment strategy. In general, the shorter the investors horizon, the less risk he/sheshould be willing to accept.Sources and acquisition of investment propertyReal estate markets in most countries are not as organized or efficient as markets for other, moreliquid investment instruments. Individual properties are unique to themselves and not directlyinterchangeable, which presents a major challenge to an investor seeking to evaluate prices and
  18. 18. investment opportunities. For this reason, locating properties in which to invest can involvesubstantial work and competition among investors to purchase individual properties may behighly variable depending on knowledge of availability. Information asymmetries arecommonplace in real estate markets. This increases transactional risk, but also provides manyopportunities for investors to obtain properties at bargain prices. Real estate investors typicallyuse a variety of appraisal techniques to determine the value of properties prior to purchase.Typical sources of investment properties include:• Market listings (through a Multiple Listing Service or Commercial Information Exchange)• Real estate agents• Wholesalers (such as bank real estate owned departments and public agencies)• Public auction (foreclosure sales, estate sales, etc.)• Private salesOnce an investment property has been located, and preliminary due diligence (investigation andverification of the condition and status of the property) completed, the investor will have tonegotiate a sale price and sale terms with the seller, then execute a contract for sale. Mostinvestors 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 theacquisition of a property, an investor will typically make a formal offer to buy including paymentof "earnest money" to the seller at the start of negotiation to reserve the investors rights tocomplete the transaction if price and terms can be satisfactorily negotiated. This earnest moneymay or may not be refundable, and is considered to be a signal of the seriousness of the investorto purchase. The terms of the offer will also usually include a number of contingencies whichallow the investor time to complete due diligence and obtain financing among other requirementsprior to final purchase. Within the contingency period, the investor usually has the right torescind the offer with no penalty and obtain a refund of earnest money deposits. Oncecontingencies have expired, rescinding the offer will usually require forfeit of earnest moneydeposits and may involve other penalties as well.
  19. 19. Sources of investment capital and leverageReal estate assets are typically very expensive in comparison to other widely-availableinvestment instruments (such as stocks or bonds). Only rarely will real estate investors pay theentire amount of the purchase price of a property in cash. Usually, a large portion of the purchaseprice will be financed using some sort of financial instrument or debt, such as a mortgage loancollateralized by the property itself. The amount of the purchase price financed by debt isreferred to as leverage. The amount financed by the investors own capital, through cash or otherasset transfers, is referred to as equity. The ratio of leverage to total appraised value (oftenreferred to as "LTV", or loan to value for a conventional mortgage) is one mathematical measureof the risk an investor is taking by using leverage to finance the purchase of a property. Investorsusually seek to decrease their equity requirements and increase their leverage, so that their returnon investment (ROI) is maximized. Lenders and other financial institutions usually haveminimum equity requirements for real estate investments they are being asked to finance,typically on the order of 20% of appraised value. Investors seeking low equity requirements mayexplore alternate financing arrangements as part of the purchase of a property (for instance, sellerfinancing, seller subordination, private equity sources, etc.)Some real estate investment organizations, such as real estate investment trusts (REITs) andsome pension funds, have large enough capital reserves and investment strategies to allow 100%equity in the properties they purchase. This minimizes the risk which comes from leverage, butalso limits potential ROI. Risk managementManagement and evaluation of risk is a major part of any successful real estate investment strategy. Risk occurs inmany different ways at every stage of the investment process. Below is a tabulation of some common risks andtypical risk mitigation strategies used by real estate investorsRisk Mitigation StrategyFraudulent sale Verify ownership, purchase title insuranceAdverse possession Obtain a boundary survey from a licensed surveyorEnvironmental contamination Obtain environmental survey, test for contaminants (lead paint, asbestos, soil contaminants, etc.)
  20. 20. Building component or system failure Complete full inspection prior to purchase, perform regular maintenanceBuilding component or system failure Obtain third-party appraisals and performOverpayment at purchase discounted cash flow analysis as part of the investment pro forma, do not rely on capital appreciation as the primary source of gain for the investmentCash shortfall 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 fromEconomic downturn competition, control cost structure, have tenants sign long term leases Screen potential tenants carefully, hireTenant destruction of property experienced property managers Carefully analyze financial performance using conservative assumptions, ensure that theUnderestimation of risk property can generate enough cash flow to support itself Purchase properties based on a conservativeMarket Decline approach that the market might decline and rental income may also decreaseFire, flood, personal injury Insurance policy on the property Plan purchases and sales around an exit strategyTax Planning to save taxes. Scope of Real EstateIn India, small real estate investors currently do not have as much scope as institutionalinvestors. They can hold multiple properties, but banks will generally not fund beyond a secondhome loan.That does not mean they cannot invest beyond that from their personal accruals. They certainlyhave the option of investing in rent-generating assets, which can fetch very decent returns if theyhave been purchased wisely.Despite the present limitations for small investors, a property investment can give the buyerprotection 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.
  21. 21. REVIEW OF THE LITERATURESullivan and Ross (1999) the senior investment market is expanding as a large segment ofinvestors. Age is predictive of investment clients attitudes and behavior. They concluded thatolder clients tend to be frugal, regard investing in the stock market as an emotionally threateningexperience, and want firm recommendations from their financial advisors. Kaplan (1999)indicated that most seniors want help and information in order to understand their investmentchoices. Different asset allocations have been recommended across age groups (Stovall, 1997).Likewise, Weil (1999) and Bakshi and Chen (1994) investigated life-cycle investments. Less riskwas recommended for older investors. Moreover, the literature seems to suggest thatconservative investing and guidance from the financial advisor are needed for older clients.Greco (1991), Marsh (1998), and Schumell (1996) that the womens investment market isincreasing although men have traditionally controlled most of the wealth but womens financialholdings are on the rise. Smith Barney noted that the percentage of women clients jumped from28% in 1995 to 40% in 1997. Marsh, 1998; Schumell, 1996). Greco (1991) and West (1996)reported that women are often unprepared to manage finances. They need education and want totrust and learn from their investment advisor. Women may also be more cautious and trade lessthan men (Barber &Odean, 2001). Thus, the womens market may require substantial time andservice from financial advisors and brokers.Wang (1994) according to this study, sales representatives at brokerages take female investorsless seriously than men. The brokers studied tended to spend more time with men andrecommend higher risk and return investments to men. Jacobius (2001) reported that women areless involved with their retirement accounts than are men. Conversely, Friedman (1996)contended that baby boomers and women are gaining financial sophistication. Women aredeveloping the ability to distinguish between levels of investment service quality. Inadequatebroker attention and recommendations could lead to dissatisfaction on the part of knowledgeablewomen clients, which in turn may cause brokers to lose clients from this market segment.
  22. 22. Shukla Ravi (2004), analyses the value of interim portfolio revision, an integral component ofactive management of mutual funds by comparing the returns on actively managed mutual fundportfolios with the returns the fund portfolios would have earned had there been no interimrevision. The results show that, on an average, excess returns from interim portfolio revision donot cover the incremental trading costs, even over holding periods as long as 6 months. Acrossmutual funds, we find evidence of a positive relationship between the excess returns and mutualfund expense ratios suggesting that those managers who generate higher excess returns chargehigher fees from the stockholders.Robert A. Olsen , 2001, OBarr and Conley according to the author this article suggests that,even with equivalent training, experience and information, investment managers make differentdecisions based on identifiable cultural differences. This study focuses on professional men andwomen investment managers who perceive and respond to risk differently. Author suggestscultural factors may be responsible for this risk related gender effect. There is extensive evidencethat 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 Theobjectives of this chapter are to identify significant personal and environmental factors thatinfluence investment behavior and to specify the investment decision-making process,particularly with respect to female investors. It is expected that the results presented here willhelp readers to consider new approaches to investment education. Specifically, this chapter aimsto: (a) explore differences between men and women in a variety of financial behaviors,investment decision-making process; (b) identify patterns of investment involvement andlearning preferences; and (c) determine socio-economic and behavior factors that explain genderdifferences in specific investment behavior (portfolio diversification).According to Ronald &lisa (1998) This paper examines the extent to which real estate returns aredriven by continental factors. This subject is relevant for determining the country allocation ofinternational real estate portfolios. If returns are driven by a continental factor, investors shouldlook for diversification opportunities outside their own continent. This paper finds strongcontinental factors in North America and especially in the United States. For the Asia–Pacific
  23. 23. region, real estate returns are not driven by a continental factor. The results suggest that, forEuropean, North American and Asia—Pacific real estate portfolio managers, the Asia—Pacificregion provides attractive international diversification opportunities.According to Robert A. Nagy and Robert W. Obenberger (1994) Previous studies of retailinvestor behavior have examined motivation from economic perspectives or studied relationshipsbetween economic and behavioral and demographic variables. Examination of the various utility-maximization and behavioral variables underlying individual investor behavior provides a morecomprehensive understanding of the investment decision process. These variables can begrouped into seven summary factors that capture major investor considerations. Data collectedfrom a questionnaire sent to a random sample of individual equity investors with substantialholdings in Fortune 500 firms reveal that individuals base their stock purchase decisions onclassical wealth-maximization criteria combined with diverse other variables. They do not tendto rely on a single integrated approach. RATIONALE OF THE STUDYThere are various segments of investors according to age, occupation, annual income etc.Different type of investors wants to invest indifferent sectors such as gold, insurance policies,mutual funds, silver, , national saving certificate, fixed deposit, real estate etc. The real estateinvestor has a bit more control over the risks to that cash flow also and property is considered afairly low-risk investment, and can be less volatile than shares. This research will help us tounderstand investor’s perception toward the real estate investments. And the factors in whichattention should be focused to increase number of investors in real estate. OBJECTIVE OF THE STUDYTo Study the factors Influencing Real estate Investment decisions.
  24. 24. RESEARCH METHODOLOGY1. 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 Indore.Sample Size:We have used a small number of items or a small portion of a population to drawconclusions 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 SPSSsoftware was used as per the requirements.
  25. 25. LIMITATIONSIn spite of every care taken on the part of the researcher there are certain limitations which couldnot be overcome:• Sample size is limited to 100 customers and may not adequately represent the wholemarket.• The research is confined to a certain part of Indore.The above are some of the aspects which posed real problems in the way of completion of theresearch work but the majority of respondents were cooperative. Data Analysis & Interpretation Graph AnalysisThe present research is conducted on a sample of 100 of prospective customers. The briefdiagrammatic descriptions of each of respondents are as follow:-Q1. Are you interested to invest money in Real Estate? 0% 8% 32% Strongly Agree 22% Agree Neutral 38% Disagree Strongly DisagreeAfter study we found that 0% investors are strongly disagree, 8%people are disagree, 22%peopleare neutral, 38%people are agree and 32%people are strongly agree with the statement.
  26. 26. Q2. Investment based on profit percent? 5% 1% 15% 30% Strongly Agree Agree Neutral 49% Disagree Strongly DisagreeAfter study we found that 1% investors are strongly disagree, 5%people are disagree, 15%peopleare neutral, 49%people are agree and 30%people are strongly agree with the statement.Q3. Real Estate is better option for investors? 3% 8% 22% Strongly Agree Agree 32% Neutral 35% Disagree Strongly DisagreeAfter study we found that 3% investors are strongly disagree, 8%people are disagree, 32%peopleare neutral, 35%people are agree and 22%people are strongly agree with the statement.
  27. 27. Q4. Real Estate investment giving high return. 0% 12% 32% Strongly Agree 24% Agree Neutral Disagree 32% Strongly DisagreeAfter 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 thestatement.Q5. Real Estate investment is safe investment? 1% 15% 21% Strongly Agree Agree 23% Neutral 40% Disagree Strongly DisagreeAfter 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 thestatement.
  28. 28. Q6.Location influences the investor’s perception towards the investment? 4% 4% 23% 39% Strongly Agree Agree Neutral 30% Disagree Strongly DisagreeAfter study we found that 4% investors are strongly disagree, 4%people are disagree, 23%peopleare neutral, 30%people are agree and 39%people are strongly agree with the statement.Q7. Price play important role in Real Estate investment? 2% 7% 30% 16% Strongly Agree Agree Neutral 45% Disagree Strongly DisagreeAfter study we found that 2% investors are strongly disagree, 7%people are disagree, 16%peopleare neutral, 45%people are agree and 30%people are strongly agree with the statement.
  29. 29. Q8. Economy growth affects the Real Estate investment? 2% 12% 30% Strongly Agree Agree 30% Neutral 26% Disagree Strongly DisagreeAfter 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 thestatement.Q9. Volatile market affected investment decision in Real Estate. 11% 20% Strongly Agree 20% Agree 23% Neutral 26% Disagree Strongly DisagreeAfter 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 thestatement.
  30. 30. Q10. Real Estate is low risk investment? 1% 19% 18% Strongly Agree Agree 24% Neutral 38% Disagree Strongly DisagreeAfter 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 thestatement.Q11. Interest rate have major impact on the Real Estate Investment? 0% 11% 20% Strongly Agree 23% Agree Neutral 46% Disagree Strongly DisagreeAfter 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 thestatement.
  31. 31. Q12. Government policies affect the Real Estate investment? 8% 23% 18% Strongly Agree Agree Neutral 17% 34% Disagree Strongly DisagreeAfter 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 thestatement.Q13. Tax benefit is a very important aspect when a person invests his money. 7% 10% 24% Strongly Agree 14% Agree Neutral 45% Disagree Strongly DisagreeAfter 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 thestatement.
  32. 32. Factor Analysis Total Variance Explained Initial Eigen values Extraction Sums of Squared LoadingsComponent % of Cumulative % of Cumulative Total Total Variance % Variance % 1 2.625 20.195 20.195 2.625 20.195 20.195 2 1.888 14.526 34.721 1.888 14.526 34.721 3 1.550 11.927 46.648 1.550 11.927 46.648 4 1.248 9.601 56.249 1.248 9.601 56.249 5 1.031 7.931 64.181 1.031 7.931 64.181 6 .970 7.463 71.644 7 .842 6.475 78.119 8 .657 5.056 83.176 9 .593 4.558 87.734 10 .470 3.614 91.348 11 .425 3.266 94.614 12 .356 2.738 97.352 13 .344 2.648 100.000 Rotated Component Matrixa Component 1 2 3 4 5 VAR00012 .805 .207 .031 .048 -.042 VAR00009 .754 -.039 .020 -.016 .228 VAR00008 .725 -.171 -.041 .268 -.086 VAR00007 .570 .112 .149 -.146 .159 VAR00013 .155 .809 -.146 -.002 -.127 VAR00002 -.061 .683 -.066 .135 .489 VAR00006 -.248 .514 .483 -.294 .156
  33. 33. VAR00011 .242 .435 .391 .213 -.121 VAR00005 -.014 .084 .719 .326 .176 VAR00010 .184 -.343 .715 -.053 -.038 VAR00001 -.076 .043 .156 .809 -.104 VAR00003 .148 .035 .010 .688 .314 VAR00004 .195 -.016 .111 .074 .852Extraction Method:Principal Component Analysis.Rotation Method: Varimax with Kaiser Normalization a. Rotation converged in 8 iterations. Variable Number Variable Name VAR00001 Interest VAR00002 Profit Percent VAR00003 Better Option VAR00004 High Return VAR00005 Safe Investment VAR00006 Location VAR00007 Price VAR00008 Economic Growth VAR00009 Volatile Market VAR00010 Low Risk VAR00011 Interest Rate VAR00012 Government Policies VAR00013 Tax Benefit
  34. 34. Grouping of Variables: Groups Groups Variables Total load of Group Group 1 Variable 12 + Variable 9 + Variable 3 + 0.356+0.593+0.657+0.842=2.448 Variable 7 Group 2 Variable 13 + Variable 2 + Variable 6 + 0.344+1.888+0.970+0.425=3.627 Variable 11 Group 3 Variable 1+ Variable10 1.031+0.470=1.501 Group 4 Variable 5 + Variable 8 2.625+1.550=4.175 Group 5 Variable 4 1.248Analysis:-On the above basis it can be concluded that all the variables of group 1, that is GovernmentPolicies, Volatile Market, better option , Price, have load of 2.448, and group 2 that is TaxBenefit, Profit Percent, Location and Interest Rate have load of 3.627 and group 3 that isinterest, Low Risk have load of 1.501 and group 5 that is High Return have load of 1.248.But variables of group 4 that is economic growth and safe investment have been adopted moresignificantly with maximum load of 4.175.So we can understand from the result that variables like and economic growth and safeinvestment is more important while taking decision regarding real estate investment.
  35. 35. CONCLUSIONIt can be concluded from the study that factors which can influence the decision regarding realestate investment are divided into five different groups and first group include four factors whichhighly 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 fourfactors which affected the investor’s perception less than first group. These factors are TaxBenefit, Interest Rate, Location and Profit Percent. The third group is low affective then thesecond group. This group have only two factors. These are Low Risk and interest.Only twofactors are present in fourth group that is safe investment and economic growth. Data analysisresult shows that these factors are moreaffective in Real Estate investment. Group five have onlysingle factor High Return. This has negligible affect because most of the investors know that it ispossible only in long term investment. All the factors affects investment decision but economicgrowth 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 researchstudy It can beconcludedthat Real estate is a great investment option. It can generate an ongoingincome source. It can also rise in value overtime and prove a good investment in the cash valueof the home or land that you buy. However you need to be sure that you are ready to begininvesting in real estate.
  36. 36. BIBLIOGRAPHY Books Referred:Boo  Dr. Jai Narain Sharma, The discipline and its Dimension, Deep & Deep Publications Pvt. Ltd., New Delhi.  R. Panneersevam, Prentice-Hall of India Pvt. Ltd, New Delhi, 2008.  Dr. S. Shajahan, Research Methods for Management, 2nd Edition, 2004. 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-for- maximum-return-on-investment Search Engines:  www.yahoo.com  www.google.co.in  www.rediff.com
  37. 37. Appendix QUESTIONNAIREWe are approaching you with this questionnaire to know your Perception towards the Real Estateinvestment‖. The information provided by you would be kept confidential and will be used foracademic purpose only. Kindly tick your choice against each statement.Name : ___________________________________________________________Gender : __________________________________________________________Age : ____________________________________________________________Qualification : _____________________________________________________Income Status : ____________________________________________________ S. Statements Strongly Agree Not Disagree StronglyNO. Agree Sure Disagree (5) (4) (3) (2) (1)1. Are you interested to invest money in Real Estate2. Investment based on profit percent.3. Real Estate is better option for investors.4. Real Estate investment giving high return5. Real Estate investment is safe investment6. Location influence the investors perception towards investment7. Price play important role in Real Estate investment8. Economy growth affect the Real Estate investment.9. Volatile market affected investment decision in Real Estate.10. Real Estate is low risk investment11. Interest rate have major impact on the Real Estate investment12. Government policies have a important affect to invest in Real Estate.13. Tax benefit is a very important aspect when a person investshis money.
  38. 38. .