Organizations

Several notable groups exist to promote the industry and to assist members who are in it.

The National Association of Realtors (NAR) is the largest real estate organization and one of the largest trade groups anywhere. Their membership exceeds one million. NAR also has state chapters as well as thousands of local chapters. Upon joining a local chapter, a new member is automatically enrolled into the state and national organizations. When the principals of a firm join, all licensed agents in that firm must also belong. An advantage of membership is access to the local Multiple Listing Service (MLS) (sometimes county-wide, sometimes broader in coverage, which exists for the benefit of members and which provides access following the payment of additional dues to the local system.

The Realtor Political Action Committee (RPAC) is a separate entity, and also the lobbying arm of NAR. In 2005, they were considered the largest PAC in the United States. According to realtor.org, RPAC is the largest contributor of direct contributions to federal candidates.

The National Association of Exclusive Buyer Agents is a group of agents and brokers who work in firms that represent buyers only. They assist in locating exclusive buyer agents for home buyers through the website www.naeba.org .

The National Association of Real Estate Brokers (NAREB) was founded in 1947 as an alternative for African Americans who were excluded from the dominant NAR. Both groups allow members to join without regard to race. However, NAREB has historically been an African American-centric group with a focus on developing housing resources for intercity populations.

Real estate brokers and buyers

Services provided to buyers

• Buyers as clients

With the increase in the practice of buyer brokerage in the US, especially since the late 1990s in most states, agents (acting under their brokers) have been able to represent buyers in the transaction with a written "Buyer Agency Agreement" not unlike the "Listing Agreement" for sellers referred to above. In this case, buyers are clients of the brokerage.

Some brokerages represent buyers only and are known as Exclusive Buyer Agents (EBAs). Consumer Reports states "You can find a true buyer's agent only at a firm that does not accept listings" ^[15] The advantages of using an Exclusive Buyer Agent is that they avoid conflicts of interest by working in the best interests of the buyer and not the seller, avoid homes and neighborhoods likely to fare poorly in the marketplace, ensure the buyer does not unknowingly overpay for a property, fully informs the buyer of adverse conditions, encourages the buyer to make offers based on true value instead of list price which can sometimes be overstated, and works to save the buyer money. A buyer agency firm which commissioned a study found EBA purchased homes were seventeen times less likely to go into foreclosure.^{[citation needed]}

A real estate brokerage attempts to do the following for the buyers of real estate only when they represent the buyers with some form of written buyer-brokerage agreement:

• Find real estate in accordance with the buyers needs, specifications, and cost.
• Takes buyers to and shows them properties available for sale.
• When deemed appropriate, pre-screens buyers to ensure they are financially qualified to buy the properties shown (or uses a mortgage professional to do that task).
• Negotiates price and terms on behalf of the buyers and prepares standard real estate purchase contract by filling in the blanks in the contract form. The buyer's agent acts as a fiduciary for the buyer.

Due to the importance of the role of representing buyers' interests, many brokers who seek to play the role of client advocate are now seeking out the services of Certified Mortgage Planners, industry experts that work in concert with Certified Financial Planners to align consumers' home finance positions with their larger financial portfolio(s).

• Buyers as customers

In most states, until the 1990s, buyers who worked with an agent of a real estate broker in finding a house were customers of the brokerage, since the broker represented only sellers.

Today, state laws differ. Buyers and/or sellers may be represented. Typically, a written "Buyer Brokerage" agreement is required for the buyer to have representation (regardless of which party is paying the commission), although by his/her actions, an agent can create representation.

• Find real estate in accordance with the buyers’ needs, specifications, and affordability.
• Take buyers to and shows them properties available for sale.
• When deemed appropriate, prescreen buyers to ensure they are financially qualified to buy the properties shown (or uses a mortgage professional to do that task).
• Assist the buyer in making an offer for the property.

[edit] The impact of globalization on real estate brokers' activities

Globalization has had an immediate and powerful impact on real estate markets, making them an international working place. The rapid growth of the Internet has made the international market accessible to millions of consumers. A look at recent changes in homeownership rates illustrates this. Minority homeownership jumped by 4.4 million during the 1990s, reaching 12.5 million in 2000, according to the Fannie Mae Foundation. Foreign direct investment in U.S. real estate has increased sharply from $38 billion in 1997 more than $50 billion in 2002 according to Census data.

Most local real estate agents view the foreign market as a significant revenue potential and may have already worked with international clients in their local market, new immigrants or more sophisticated investors from different cultures and from other countries. For example, they are providing value-added services to an overseas relocation employee figure out which inoculations his or her children will need as well as the steps needed to register a car in the United States. Real estate brokers want to keep central to the transaction, protect the best interests of their members and address the unique needs of each multicultural global client by acquiring specialized training and designations. (See below for more)

In 2007 the Mexican Association of Real Estate Professionals in Mexico, AMPI, and the NAR, National Association of Realtors in the US, signed a bilateral contract for international real estate business cooperation. Also at the local level, many other state and local associations are helping other countries achieve the same result. For instance, in New Mexico, a historically multicultural state, under the RANM, Realtor Association of New Mexico and the President’s Advisory Council, is looking into forming an ambassador association to help a foreign country into signing a bilateral agreement with the NAR. In New Mexico, there are 4500 licensed real estate professionals and only 14 or 15 CIPS designees, out of whom, only 6 speak a language other than English.

Potential points of contention for agents

Real estate commissions are becoming a point of controversy. Home values in many areas have quadrupled over the past 20 years. This may be contributing to the increased number of licensed agents and growing competition between them. The number of real estate agents in areas tends to rise when home values do, and the productivity of existing agents goes down.^{[citation needed]}

Another controversy exists around how commissions paid to real estate agents are disclosed to buyers and the effect additional seller incentives may have on the negotiation process and final purchase price.^[12]

If a listing agent sells a property for any amount above the listed price, he in turn will make additional income. In theory, this will motivate him/her to get top dollar price for his client, the seller. However, if the agent representing the buyer attempts to obtain a lower sales price for his client, then he/she would make a lower commission. Thus, it could be considered to be in the agent's best interest to advise his client to purchase the property at a higher price. Although not very likely since the difference in the commission is very little and the agent would not want to jeopordize the deal.

According to economist Steven Levitt in his 2005 book Freakonomics ^[13], in practical terms, there is rarely a great enough difference between the listing (asking) price and the negotiated selling price to make a significant difference between the commissions generated on each side, and certainly hardly enough to justify an agent failing in his fiduciary duty to obtain the best terms for his/her client. However, when an agent is selling their own property, there exists a greater incentive to sell for a higher price and this is seen in examining historical home sale prices. ^[14]

Another potential conflict of interest exists when a listing agent in a very active real estate market has incentive to sell properties quickly at unnecessarily low prices in order to benefit from a high volume of sales.^{[citation needed]}

Brokerage commissions

In consideration of the brokerage successfully finding a satisfactory buyer for the property, a broker anticipates receiving a commission for the services the brokerage has provided. Usually, the payment of a commission to the brokerage is contingent upon finding a satisfactory buyer for the real estate for sale, the successful negotiation of a purchase contract between a satisfactory buyer and seller, or the settlement of the transaction and the exchange of money between buyer and seller.

In North America commissions on real estate transactions are negotiable. Local real estate sales activity usually dictates the amount of commission agreed to. Real estate commission is typically paid by the seller at the closing of the transaction as detailed in the listing agreement.

[edit] RESPA

Real estate brokers who work with lenders may not receive any compensation^{[citation needed]} from the lender for referring a client to a specific lender. To do so would be a violation of a (US) federal law known as the Real Estate Settlement Procedures Act (RESPA). All lender compensation to a broker must be disclosed to all parties.A commission may also be paid during negioation of contract base on seller and agent.

[edit] Lockbox

With the sellers’ permission, a lockbox is placed on homes that are occupied and, after arranging an appointment with the home owner, agents can show the home. When a property is vacant or where a seller may be living elsewhere, a lockbox will generally be placed on the front door. The listing broker helps arrange showings of the property by various real estate agents from all companies associated with the MLS.

The lockbox contains the key to the door of the property and the box can only be opened by licensed real estate agents (often only with authorization from the listing brokerage), by using some sort of secret combination or code provided by the brokerage or the issuer of the lockbox.

[edit] Shared commissions with co-op brokers

If any buyer's broker (or any of his/her agents) brings the buyer for the property, the buyer's broker would typically be compensated with a co-op commission coming from the total offered to the listing broker, often about half of the full commission from the seller. If an agent or salesperson working for the buyer's broker brings the buyer for the property, then the buyer's broker would commonly compensate his agent with a fraction of the co-op commission, again as determined in a separate agreement. A discount brokerage may offer a reduced commission in the event no other brokerage firm is involved and no co-op commission is paid out.

If there is no co-commission to pay to another brokerage, the listing brokerage receives the full amount of the commission minus any other types of expenses.

Real estate brokers and sellers

Services provided to seller as client

Upon signing a listing contract with the seller wishing to sell the real estate, the brokerage attempts to earn a commission by finding a buyer for the sellers' property for highest possible price on the best terms for the seller. In Canada, most provinces' laws require the real estate agent to forward all written offers to the seller for consideration or review.

To help accomplish this goal of finding buyers, a real estate agency commonly does the following:

• Listing the property for sale to the public, often on a Multiple Listing Service, in addition to any other methods.
• Based on the law in several states, providing the seller with a real property condition disclosure form, and other forms which may be needed.
• Preparing necessary papers describing the property for advertising, pamphlets, open houses, etc.
• Generally placing a "For Sale" sign on the property indicating how to contact the real estate office and agent.
• Advertising the property. Advertising is often the biggest outside expense in listing a property.
• In some cases, holding an Open house to show the property.
• Being a contact person available to answer any questions about the property and to schedule showing appointments
• Ensuring buyers are prescreened so that they are financially qualified to buy the property; the more highly financially qualified the buyer is, the more likely the closing will succeed.
• Negotiating price on behalf of the sellers. The seller's agent acts as a fiduciary for the seller. This may involve preparing a standard real estate purchase contract by filling in the blanks in the contract form.
• In some cases, holding an earnest payment cheque in escrow from the buyer(s) until the closing. In many states, the closing is the meeting between the buyer and seller where the property is transferred and the title is conveyed by a deed. In other states, especially those in the West, closings take place during a defined escrow period when buyers and sellers each sign the appropriate papers transferring title, but do not meet each other.

[edit] The "listing" contract

Several types of listing contracts exist between broker and seller. These may be defined as:

• Exclusive Right to Sell

In this type of Agreement, the broker is given the exclusive right to market the property and represents the seller exclusively. This is referred to as seller agency. However, the brokerage also offers to co-operate with other brokers and agrees to allow them to show the property to prospective buyers and offers a share of the total real estate commission.

• Exclusive Agency

An alternative form, "Exclusive Agency", allows only the broker the right to sell the property, and no offer of compensation is ever made to another broker. In that case, the property will never be entered into an MLS. Naturally, that limits the exposure of the property to only one agency.

• Open Listing

This is an Agreement whereby the property is available for sale by any real estate professional who can advertise, show, or negotiate the sale. Whoever first brings an acceptable offer would receive compensation. Real estate companies will typically require that a written agreement for an open listing be signed by the seller to ensure the payment of a commission if a sale should take place.

Although there can be other ways of doing business, a real estate brokerage usually earns its commission after the real estate broker and a seller enter into a listing contract and fulfill agreed-upon terms specified within that contract. The seller's real estate is then listed for sale, frequently with property data entered into a Multiple Listing Service (MLS) in addition to any other ways of advertising or promoting the sale of the property.

In most of North America, where brokers are members of a national association (such as NAR in the United States or the Canadian Real Estate Association), a listing agreement or contract between broker and seller must include the following: starting and ending dates of the agreement; the price at which the property will be offered for sale; the amount of compensation due to the broker and how much, if any, will be offered to a co-operating broker who may bring a buyer. Without an offer of compensation to a co-operating broker (co-op percentage or flat fee), the property may not be advertised in the MLS system.

Net Listings: Property listings at an agreed-upon net price that the seller wishes to receive with any excess going to the broker as commission are not legal in most, if not all, states.

General

The sellers and buyers themselves are the principals in the sale, and real estate brokers (and the broker's agents) are their agents as defined in the law. However, although a real estate agent commonly fills out the real estate contract form, agents are typically not given power of attorney to sign the real estate contract or the deed; the principals sign these documents. The respective real estate agents may include their brokerages on the contract as the agents for each principal.

The use of a real estate broker is not a requirement for the sale or conveyance of real estate or for obtaining a mortgage loan from a lender. However, once a broker is used, the settlement attorney (or party handling closing) will ensure that all parties involved be paid. Lenders typically have other requirements, though, for a loan.

[edit] Services provided to both buyers and sellers

In addition to the services to sellers and buyers described below, most real estate agents coordinate various aspects of the closing.

Real estate brokers (and their agents) typically do not provide title service such as title search or title insurance, do not conduct surveys or formal appraisals of the property such as those required by lenders, and do not act as lawyers for the parties, although they may "coordinate" these activities with the appropriate specialists. Some real estate brokers may be associated with loan officers who may help to finance buyers to make their purchase.

Regardless of whether a real estate agent assists sellers or buyers of real estate, negotiating skills and knowledge of financing options are important.

Types of services that a broker can provide

ince each state's laws may differ from others, it is generally advised that prospective sellers or buyers consult a licensed real estate professional.

Some Examples:

• comparative market analysis (CMA) - an estimate of the home's value compared with others. This differs from an appraisal in that property currently for sale may be taken into consideration (competition for the subject property).
• Exposure - Marketing the real property to prospective buyers.
• Facilitating a Purchase - guiding a buyer through the process.
• Facilitating a Sale - guiding a seller through the selling process.
• FSBO document preparation - preparing necessary paperwork for "Sale By Owner" sellers.
• Full Residential Appraisal - but only, in most states, if the broker is also licensed as an appraiser.
• Home Selling Kits - guides to how to market and sell a property.
• Hourly Consulting for a fee, based on the client's needs.
• Leasing for a fee or percentage of the gross lease value.
• Property Management.
• Exchanging property.
• Auctioning property.
• Preparing contracts and leases. (Not in all states.)

These services are also changing as a variety of real estate trends re-engineer the industry.

Dual or limited agency

Dual agency occurs when the same brokerage represents both the seller and the buyer under written agreements. Individual state laws vary and interpret dual agency rather differently.

Many states no longer allow dual agency. Instead, "transaction brokerage" provides the buyer and seller with a limited form of representation, but without any fiduciary obligations (see Florida law). Buyers and sellers are generally advised to consult a licensed real estate professional for a written definition of an individual state's laws of agency, and many states require written Disclosures to be signed by all parties outlining the duties and obligations.

• If state law allows for the same agent to represent both the buyer and the seller in a single transaction, the brokerage/agent is typically considered to be a Dual Agent. Special laws/rules often apply to dual agents, especially in negotiating price.
• In some states (notably Maryland^[11]), Dual Agency can be practiced in situations where the same brokerage (but not agent) represent both the buyer and the seller. If one agent from the brokerage has a home listed and another agent from that brokerage has a buyer-brokerage agreement with a buyer who wishes to buy the listed property, Dual Agency occurs by allowing each agent to be designated as “intra-company” agent. Only the broker himself is the Dual Agent.
• Some states do allow a broker and one agent to represent both sides of the transaction as dual agents. In those situations, conflict of interest is more likely to occur, typically resulting in the loss of advocacy for both parties.

Transaction brokers

Some state Real Estate Commissions, notably Florida's ^[6] after 1992 (and extended in 2003) and Colorado's ^[7] after 1994 (with changes in 2003), created the option of having no agency nor fiduciary relationship between brokers and sellers or buyers. Having no more than a facilitator relationship, transaction brokers assists buyers, sellers, or both during the transaction without representing the interests of either party who may then be regarded as customers.

As noted by the South Broward Board of Realtors, Inc. in a letter to State of Florida legislative committees ^[8]:

"The Transaction Broker crafts a transaction by bringing a willing buyer and a willing seller together and assists with the closing of details. The Transaction Broker is not a fiduciary of any party, but must abide by law as well as professional and ethical standards." (such as NAR Code of Ethics)

The result was that in 2003, Florida created a system where the default brokerage relationship had "all licensees …operating as transaction brokers, unless a single agent or no brokerage relationship is established, in writing, with the customer"^[9][10] and the statute required written disclosure of the transaction brokerage relationship to the buyer or seller customer only through July 1, 2008.

In both Florida ^[10] and Colorado's ^[7] case, dual agency and sub-agency (where both listing and selling agents represented the seller) no longer exist.

Agency relationships with clients versus Non-Agency relationships with customers

• Agency relationship: Traditionally, the broker provides a conventional full-service, commission-based brokerage relationship under a signed listing agreement with a seller or "buyer representation" agreement with a buyer, thus creating under common law in most states an agency relationship with fiduciary obligations. The seller or buyer is then a client of the broker. Some states also have statutes which define and control the nature of the representation.

Agency relationships in residential real estate transactions involve the legal representation by a real estate broker (on behalf of a real estate company) of the principal, whether that person or persons is a buyer or a seller. The broker (and his/her licensed real estate agents) then becomes the agent of the principal.

• Non-agency relationship: where no written agreement nor fiduciary relationship exists, a real estate broker (and his agents) works with a principal who is then known as the broker’s customer. When a buyer, who has not entered into a Buyer Agency agreement with the broker and buys a property, then that broker functions as the sub-agent of the seller’s broker. When a seller chooses to work with a transaction broker, there is no agency relationship created.

The difference between salespersons and brokers

Before the Multiple Listing Service was introduced in 1967, when brokers (and their agents) only represented sellers, the term "real estate salesperson" may have been more apt than it is today, given the various ways that brokers and agents now help buyers through the process rather than merely "selling" them a property. Legally, however, the term "salesperson" is still used in many states to describe a real estate agent.

Real estate education: In order to become licensed, most states require that an applicant take a minimum number of classes before taking the state licensing exam. Such education is often provided by real estate brokerages as a means to finding new agents.

Today in many states, the real estate agent (acting as an agent of the broker with whom he/she is employed) is required to disclose to prospective buyers and sellers who represents whom. See below for a broker/agent’s relationship to sellers and their relationship to buyers.

While some people may refer to any licensed real estate agent as a real estate broker, a licensed real estate agent is a professional who has obtained either a real estate salesperson's license or a real estate broker's license.

In the United States, there are commonly two levels of real estate professionals licensed by the individual states, but not by the federal government:

Real estate salesperson (or, in some states, Real estate broker):^[2]

When a person first becomes licensed to become a real estate agent, he/she obtains a real estate salesperson's license (or some states use the alternative term, "broker") from the state in which he/she will practice. If you want to obtain a real estate license, the candidate must take specific coursework (of between 40 and 90 hours) and then pass a state exam on real estate law and practice. In order to work, salespersons must then be associated with (and act under the authority of) a real estate broker.

Many states also have reciprocal agreements with other states, allowing a licensed individual from a qualified state to take the second state's exam without completing the course requirements, or, in some cases, take only a state law exam.

Real estate broker (or, in some states, qualifying broker):^[3]

After gaining some years of experience in real estate sales, a salesperson may decide to become licensed as a real estate broker (or Principal/qualifying broker) in order to own, manage or operate his/her own brokerage. In addition, some states allow college graduates to apply for a broker license without years of experience. College graduates fall into this category once they have completed the state required courses as well. California allows licensed attorneys to become brokers upon passing the broker exam, without having to take the requisite courses required of agent. Education in lieu of experience Commonly more course work and a broker's state exam on real estate law must be passed. Upon obtaining a broker's license, a real estate agent may continue to work for another broker in a similar capacity as before (often referred to as a broker associate or associate broker) or take charge of his/her own brokerage and hire other salespersons (or broker) licensees. Becoming a branch office manager may or may not require a broker's license. Some states such as New York allow licensed attorneys to become real estate brokers without taking any exam. In some states, such as Colorado, there are no "salespeople", as all licensees are brokers.

A Realtor is a real estate professional, usually a broker or salesperson, who is a member of the National Association of Realtors (NAR). There are 1.3 million Realtors, mostly in the US, and an additional 1 million licensed real estate agents who are not members of NAR and cannot use the term "realtor".^[4] However, note that the US Bureau of Labor Statistics claims only about 600,000 working brokers/salespersons.^[5]

Realtor

A real estate broker is a term in the United States and Canada which describes a party who acts as an intermediary between sellers and buyers of real estate (or real property as it is known elsewhere) and attempts to find sellers who wish to sell and buyers who wish to buy. In the United States, the relationship was originally established by reference to the English common law of agency with the broker having a fiduciary relationship with his clients.

Estate agent is the term used in the United Kingdom to describe a person or organization whose business is to market real estate on behalf of clients, but there are significant differences between the actions and liabilities of brokers and estate agents in each country. Beyond the US, other countries take markedly different approaches to the marketing and selling of real property.

In the US, real estate brokers and their salespersons (commonly called "real estate agents" or, in some states, "brokers")^[1] assist sellers in marketing their property and selling it for the highest possible price under the best terms. When acting as a Buyer's agent with a signed agreement (or, in many cases, verbal agreement, although a broker may not be legally entitled to his commission unless the agreement is in writing), they assist buyers by helping them purchase property for the lowest possible price under the best terms. Without a signed agreement, brokers may assist buyers in the acquisition of property but still represent the seller and the seller's interests.

In most jurisdictions in the United States, a person is required to have a license in order to receive remuneration for services rendered as a real estate broker. Unlicensed activity is illegal, but buyers and sellers acting as principals in the sale or purchase of real estate are not required to be licensed. In some states, lawyers are allowed to handle real estate sales for compensation without being licensed as brokers or agents.

Educational Courses in Real Estate Management

Management institutes should start diploma and degree courses in real estate property management open to all irrespective of age limit. Should help people who want to start a career in real estate brokerage and consultancy by imparting genuine real estate knowledge and expertise to investors, employees of real estate project promoters, real estate dealers, financial advisors, bank officials, tax planners and others interested in real estate investment.

Deal with conversion of land, obtaining RTCs and khatas, registration, selection of apartments and sites, property valuation, vaastu, feng sui, capital gains tax, legal procedures and documentation, property insurance, housing loan, service and sales tax pertaining to real estate operations and effective use of Right to Information Act with special reference to real estate.

Anyone residing in India and Non-Resident Indians (NRIs) could join this course with state specific subjects as property laws differ from one State to another in India. Realty diploma should become criteria for consumers while choosing a real estate consultant who have knowledge related to the field. While purchasing properties it is important for buyer to know whether the builders have adhered to the National Building Code, whether the flat is in an earthquake-prone zone and whether the builder has taken proper care in construction, litigation of land, inheritance laws and many other factors.

A professional realtor with education will be in a good position to help the end-buyer. We will be publishing list of some reputed institutes and organizations offering courses in India as well as publishing real estate companies, employers and jobs. Stay tuned.

The price of exclusive real estate in Europe is declining

Does the economic crisis touch only upon those who live in poorer conditions? Or is it on the contrary – it is the most painful for the riches? Recently, the prices of exclusive real estate has been growing, it seemed, without a stop. Until this summer – you could see going trough World-Estate.com database. For some time the prices of expensive flats were several times higher than their real value. However, the international crisis is making corrections in these numbers.

It was London which felt the disadvantages of the crisis first. The prices of real estate in the central districts of the capital of Great Britain have been growing constantly for several years and reached the top in March, 2008. However it took only half a year and the prices of exclusive houses and flats in London have been cut in 13 percent.

Paris came next after London. September and October were worthless in real estate market – sales were dropping catastrophically. The forecasts of “downing lightly” were not proved at all in the capital of France. The crisis has mostly touched flats the worth of which was from 1M to 3 M euros – compared to 2007, sales in 2008 dropped in 24 percent. In one of the most beautiful cities of the world one could buy exclusive and very exclusive apartment in an old-style Parisian house for such a price.

It was locals who bought such flats in Paris. They spent 8500 euros per square meter in 2007, and 10000 euros – later. During the crisis prices has dropped to the previous level. Experts declare two reasons for the drop in real estate value: on one hand, buyers are not sure about their own future, on the other hand, the smarter are waiting for a bigger drop in prices.

Some sellers who have no more patience made 3000 euros per square meter discount in selling the exclusive flats. However, News.World-Estate.com observe not all sellers felt headaches because of the crisis. For instance, a few weeks ago a flat on the banks of the river Seine was sold for 51000 euros per square meter.

Most often exclusive flats are bought by Italian, Englishman, Belgians and Swiss people. A part of income is created by Americans. Russians and people from the former Soviet Union have made a hard hit on their investments to real estate. By the way, it is foreign clients who are forming real estate market by their wishes. Foreigners who pay cosmic money for an exclusive flat require servants, drivers, house keepers and other people on duty.

In a sector of even more exclusive real estate where a flat costs more than 5 M euros, no changes have been fixed as the number of buyers has always been low here. For example, a Russian has bought a flat for 66 M euros recently. Crisis has touched upon the market of exclusive villas on the banks of the Mediterranean Sea too. Average prices in Monaco, Saint-Tropez or the Blue Coast were up to 15 M euros, though the number of buyers has evidently decreased. Also, it is feared that British and Irish clients who has bought exclusive villas on credit will be required to sell them by their banks.

ROI and Real Estate Value Addition

When you are building commercial property, you need to ensure that the returns from the investment are as high as possible. It is in this direction that the builder tries to add features that will add greater value and hence enhance the chances of making more from the deal or new construction. A commercial property consists of both immovable assets like the building itself and movable assets in the from of various fixtures and fitting that have a vital role to play as far as value addition goes. Even a small bit of renovation or and spending more finances will raise the value of the property and it's marketability.

Top of your construction: A prospective buyer or tenant would like to have a well made ceiling and that should be as presentable as possible so that once a person sitting inside looks up at it, he gets a feeling of happiness both visually and satisfaction. There are a number of options in the aspect of sprucing up the building and perhaps one of the best and more attractive that are present in buildings of the developed world is to have new ceiling by suspension. Another option is a coffered ceiling look with units hanging from the ceiling wit lighting fixtures provided for maximum benefit at low energy cost.

Other important aspects are taps, sinks, and other devices that are connected with plumbing work, ensure that the quality of such fixtures are good and do not create a sense of irritation down the line. And by doing such things that please the eye and ad to the overall aesthetic value of the building, you can be sure that any evaluator will give more point on account of these changes. Side by side is the connection it would be pertinent to mention that the better the quality of paint, the more elegant the building looks. The quality of paint should used and any property and also ensure that no one will turn the back on this aspect. Paint should be applied with discretion and use only appealing colors.

Furniture appeals and gives more comfort. It may directly affect the property value, but can surely help provide customer comfort and increase the flow of cash. You should be aware of the fact that value of a commercial property depends on the income it generates, which is used for mortgage calculation, rent, taxes and extending the property as collateral for loans.

Rising Property Costs - Souring Housing Dreams!

Property costs has risen in cities such as Mumbai, Bangalore and New Delhi over the past two years and even the richest NRI find themselves struggling to invest.

In some areas of Mumbai, property prices are equalling London/New York levels, although middle class salaries are rising fast with wage costs at top private companies, incomes remain a tiny fraction of those in the UK or US.

Sounds like the market is overhyped and overvalued. Realtors say it may be less than a year before the air gets sucked out of some of India's localised property bubbles. But such predictions have been common for months and the market shows no sign of cooling.

There is a lack of reliable data, but over the last two months, there've been lot more speculators coming into the market than first-time buyers and that's not encouraging. Prices are sky-rocketing in neighbourhoods in Gurgaon, national capital territory of Delhi.

In South Mumbai, spoilt sellers can pick from lines of willing buyers. Prices are sky-high for decent buildings and available properties, even for those with few millions to spend, can be counted on two hands. The sharp rise in prices has been driven by the easy availability of cheap capital.

But there are India centric factors at work too. Banks have been cavalier, with loans for housing rising by more than 50% year on year and credit to commercial real estate more than doubling. RBI in a belated move aimed at mitigating the risk of a housing-related banking crisis, increased the amount its own capital banks must set aside against property loans. It lifted the CRR by 50 points to 5.5 per cent. With consumer price inflation hovering about 7%, economists expect further interest rate rises early this year. This would affect the finances of thousands of middle-class Indians who have stretched themselves to buy homes.

With the economy driven by consumption, a drop in housing would hurt. The potential impact growth rates may be magnified if it is accompanied by a slump in the stock market.

As per economists: There is a wealth effect from rising equity prices, but not as a dominant determinant of Indian growth rates. The corrective process in the property market is for prices to plateau rather than crash.

Banks & The Indian Property Market

Indian banks are opening their doors to real estate developers but remain wary about the risks of a rapidly growing but new property market, making loans expensive and difficult to come by. Rules on inward investment in the construction industry got eased last year, unleashing a wave of activity and a flurry of deals involving foreign funds.

The realty industry is shedding a shady image of self-financed wheeler dealer property developers. Young businessmen are eager for bank borrowing to help lure foreign partners and turn plots of family land into offices, shopping centers and housing befitting an economy growing at more than eight per cent a year. But industry professionals complain banks have been slow to adapt.

Prospective foreign investors, such as US shopping mall developer Taubman Centers, are also keen to borrow locally but balk at the personal and corporate guarantees on loans often required by Indian banks.

"The immaturity of India's debt markets is one of the most constraining conditions of investing there," said Taubman's Asia president, Morgan Parker. "It's not only the requisite guarantees but the cost of debt and low leverage that make Indian sourced real estate debt generally unattractive."

On the equity side, India's regulators are allowing real estate mutual funds (REMFs) to set up to channel much needed capital into the property industry.

But traditionally, the central bank has tried to steer banks away from lending too heavily to the property sector, wary that banking systems in other developing countries, such as Thailand, have nearly disintegrated because of property market crashes.

Property project funding by Indian banks adds up to $1.8 billion, about 1.5 per cent of outstanding bank loans, according to the Reserve Bank of India. In comparison, Chinese bank exposure to developers in a private property market barely a decade old is worth $114.7 billion, 4.7 per cent of total loans.

Murky land titles
Banks are wary of murky land titles and lack of centralised title registry in India, and land disputes are hotting up as property prices soar. Projects can also get tied up in red tape, and few developers have proven track records.

Yes Bank, says it is leading the way in property project lending, together with ICICI Bank and UTI Bank.

Some 12 per cent of Yes Bank's loans have been to relty developers, and around a third of those are non-recourse loans, which are priced just on projected cash flows with the property as collateral and do not require personal guarantees.

The bank, with outstanding loans of $750 million after two years, aims to double its business each year. Many of its property loan deals are syndicated to other banks. "We're the active players, the rest are frankly followers," as per Yes Bank's president for corporate finance.

Charges and interbank rates: Loans with personal guarantees are charged at a 10.0% to 10.5% rate, compared with an interbank rate of 6.1%. Chinese banks lend to small developers at around 6.0%, but offer much lower rates to listed developers. Loan to value for a project in India is typically 65%, similar to emerging property markets such as China, but much lower than developed markets such as Japan or Hong Kong.

Maytas Infrastructure & Satyam Connection

Shares of Maytas Infrastructure, a company promoted by Satyam family are falling after Andhra Pradesh Chief Minister said the state government is reviewing the ability of the company to carry out the work awarded to it. Earlier, CM had reported to have said Maytas and its joint venture partners together have been awarded Rs 13,000-crore worth of works out of Rs 38,000 crore Pranahita-Chevella lift irrigation project. Maytas consortium was also awarded Rs 12,000-crore Hyderabad Metro Project and Rs 1,200-crore Machilipatnam Sea Port project by the state government.

The Hyderabad Metro project is expected to announce its financial closure by March 2009, while Sea Port project will take about six months for the same. Earlier, bid of Maytas Infra for Metro Rail seems to had a self-serving side. Maytas has not only foregone the Rs 4000 crore grant from the government but has also assured that it will pay the government Rs 30,000 crore in 30 years.

The bid caught the attention of the Planning Commission, which recommended to the Center that it should not entertain requests for funding Metro Rail projects elsewhere. Now, the group is believed to be looking at expanding the project on two routes not just to make its bid viable but also to get more value for its properties by providing connectivity. Satyam, the parent company of Maytas, owns thousands of acres on the city outskirts which the latter is developing into real estate ventures.

As per sources, the company planned to take the Metro Rail beyond Shilparamam to Sankarpalle on the Line 3 and to Patancheru beyond Miyapur on Line 1. In both the places, Maytas has taken up or has proposed to build mega residential and commercial ventures, including Hill County, spread over hundreds of acres. Sources said the government had agreed to give the company the opportunity to expand routes and therefore additional land.

A clause in the agreement of Kakinada port clearly gives the first right of refusal to the existing developer over future expansion. Similar leverage could be given to Maytas for the Metro. The Hyderabad Metro Rail Corporation is reported to have said there was lot of pressure on the government to extend the Metro Rail route to Patancheru and Alwal. Referring to the argument that metros in the west are making losses, HMRC said the high density of population would ensure revenues. Nine lakh commuters already travel every day on the LB Nagar-Kukatpally stretch. The Maytas proposal would click if 26 lakh passengers travel by 2026.

Real Estate Deals worth more than 23,000 crore rupees in this year.

Despite slowdown in the real estate market, land deals are thriving. According to a ET report, the total value of such deals, in the first few months of this year, have touched around Rs. 23,000 Crore.. As per a study by JP Morgan, BPTP Developers' (Delhi) Rs. 5,000 Crore land deal in Noida was largest, while land auctions in Bandra Kurla Complex had fetched around Rs. 4,000 Crore.

Deals in the pipeline are Indian Railways 50 acres worth Rs. 10,000 crore, Rs 115-crore deal between the Balaji group and Prestige group, etc.

This report comes at a time when it is expected that a tightening in global liquidity and a slowdown in the economy, could put the brakes on the real estate markets witnessing a sharp rising growth in the past few years.