A Guide to Investments in Indian Real Estate

Real estate has traditionally been an avenue for considerable investment per se and investment opportunity for High Net-worth Individuals, Financial institutions as well as individuals looking at viable alternatives for investing money among stocks, bullion, property and other avenues.Money invested in property for its income and capital growth provides stable and predictable income returns, similar to that of bonds offering both a regular return on investment, if property is rented as well as possibility of capital appreciation. Like all other investment options, real estate investment also has certain risks attached to it, which is quite different from other investments. The available investment opportunities can broadly be categorized into residential, commercial office space and retail sectors.Investment scenario in real estateAny investor before considering real estate investments should consider the risk involved in it. This investment option demands a high entry price, suffers from lack of liquidity and an uncertain gestation period. To being illiquid, one cannot sell some units of his property (as one could have done by selling some units of equities, debts or even mutual funds) in case of urgent need of funds.The maturity period of property investment is uncertain. Investor also has to check the clear property title, especially for the investments in India. The industry experts in this regard claim that property investment should be done by persons who have deeper pockets and longer-term view of their investments. From a long-term financial returns perspective, it is advisable to invest in higher-grade commercial properties.The returns from property market are comparable to that of certain equities and index funds in longer term. Any investor looking for balancing his portfolio can now look at the real estate sector as a secure means of investment with a certain degree of volatility and risk. A right tenant, location, segmental categories of the Indian property market and individual risk preferences will hence forth prove to be key indicators in achieving the target yields from investments.The proposed introduction of REMF (Real Estate Mutual Funds) and REIT (Real Estate Investment Trust) will boost these real estate investments from the small investors’ point of view. This will also allow small investors to enter the real estate market with contribution as less as INR 10,000.There is also a demand and need from different market players of the property segment to gradually relax certain norms for FDI in this sector. These foreign investments would then mean higher standards of quality infrastructure and hence would change the entire market scenario in terms of competition and professionalism of market players.Overall, real estate is expected to offer a good investment alternative to stocks and bonds over the coming years. This attractiveness of real estate investment would be further enhanced on account of favourable inflation and low interest rate regime.Looking forward, it is possible that with the progress towards the possible opening up of the real estate mutual funds industry and the participation of financial institutions into property investment business, it will pave the way for more organized investment real estate in India, which would be an apt way for investors to get an alternative to invest in property portfolios at marginal level.Investor’s ProfileThe two most active investor segments are High Net Worth Individuals (HNIs) and Financial Institutions. While the institutions traditionally show a preference to commercial investment, the high net worth individuals show interest in investing in residential as well as commercial properties.Apart from these, is the third category of Non-Resident Indians (NRIs). There is a clear bias towards investing in residential properties than commercial properties by the NRIs, the fact could be reasoned as emotional attachment and future security sought by the NRIs. As the necessary formalities and documentation for purchasing immovable properties other than agricultural and plantation properties are quite simple and the rental income is freely repatriable outside India, NRIs have increased their role as investors in real estateForeign direct investments (FDIs) in real estate form a small portion of the total investments as there are restrictions such as a minimum lock in period of three years, a minimum size of property to be developed and conditional exit. Besides the conditions, the foreign investor will have to deal with a number of government departments and interpret many complex laws/bylaws.The concept of Real Estate Investment Trust (REIT) is on the verge of introduction in India. But like most other novel financial instruments, there are going to be problems for this new concept to be accepted.Real Estate Investment Trust (REIT) would be structured as a company dedicated to owning and, in most cases, operating income-producing real estate, such as apartments, shopping centres, offices and warehouses. A REIT is a company that buys, develops, manages and sells real estate assets and allows participants to invest in a professionally managed portfolio of properties.Some REITs also are engaged in financing real estate. REITs are pass-through entities or companies that are able to distribute the majority of income cash flows to investors, without taxation, at the corporate level. The main purpose of REITs is to pass the profits to the investors in as intact manner as possible. Hence initially, the REIT’s business activities would generally be restricted to generation of property rental income.The role of the investor is instrumental in scenarios where the interest of the seller and the buyer do not match. For example, if the seller is keen to sell the property and the identified occupier intends to lease the property, between them, the deal will never be fructified; however, an investor can have competitive yields by buying the property and leasing it out to the occupier.Rationale for real estate investment schemesThe activity of real estate includes a wide range of activities such as development and construction of townships, housing and commercial properties, maintenance of existing properties etc.The construction sector is one the highest employment sector of the economy and directly or indirectly affects the fortunes of many other sectors. It provides employment to a large work force including a substantial proportion of unskilled labor. However for many reasons this sector does not have smooth access to institutional finance. This is perceived as one of the reasons for the sector not performing to its potential.By channeling small savings into property, investments would greatly increase access to organized institutional finance. Improved activity in the property sector also improves the revenue flows to the State exchequer through-increased sales-tax, octroi and other collections.Real estate is an important asset class, which is under conventional circumstances not a viable route for investors in India at present, except by means of direct ownership of properties. For many investors the time is ripe for introducing product to enable diversification by allocating some part of their investment portfolio to real estate investment products. This can be effectively achieved through real estate funds.Property investment products provide opportunity for capital gains as well as regular periodic incomes. The capital gains may arise from properties developed for sale to actual users or direct investors and the income stream arises out of rentals, income from deposits and service charges for property maintenance.Advantages of investment in real estateThe following are the advantages for investing in Real Estate Investment Schemes• As an asset class, property is distinct from the other investment avenues available to a small as well as large investor. Investment in property has its own methodology, advantages, and risk factors that are unlike those for conventional investments. A completely different set of factors, including capital formation, economic performance and supply considerations, influence the realty market, leading to a low correlation in price behaviour vis-à-vis other asset classes.• Historically, over a longer term, real estate provides returns that are comparable with returns on equities. However, the volatility in prices of realty is lower than equities leading to a better risk management to return trade-off for the investment.• Real estate returns also show a high correlation with inflation. Therefore, real estate investments made over long periods of time provide an inflation hedge and yield real returnsRisks of investment in real estateThe risks involved in investing in real estate are primarily to do with future rental depreciation or general property market risk, liquidity, tenancy risk and property depreciation. The fundamental factors affecting the value of a specific property are:Location – The location of a building is crucially important and a significant factor in determining its market value. A property investment is likely to be held for several years and the attractiveness of a given location may change over the holding period, for the better or worse. For example, part of a city may be undergoing regeneration, in which case the perception of the location is likely to improve. In contrast, a major new shopping center development may reduce the appeal of existing peaceful, residential properties.Physical Characteristics – The type and utility of the building will affect its value, i.e. an office or a shop. By utility is meant the benefits an occupier gets from utilizing space within the building. The risk factor is depreciation. All buildings suffer wear and tear but advances in building technology or the requirements of tenants may also render buildings less attractive over time. For example, the need for large magnitude of under-floor cabling in modern city offices has changed the specifications of the required buildings’ space. Also, a building which is designed as an office block may not be usable as a Cineplex, though Cineplex may serve better returns than office space.Tenant Credit Risk – The value of a building is a function of the rental income that you can expect to receive from owning it. If the tenant defaults then the owner loses the rental income. However, it is not just the risk of outright default that matters. If the credit quality of the tenant were to deteriorate materially during the period of ownership then the sale value will likely be worse than it otherwise would have been.Lease Length – The length of the leases is also an important consideration. If a building is let to a good quality tenant for a long period then the rental income is assured even if market conditions for property are volatile. This is one of the attractive features of property investment. Because the length of lease is a significant feature, it is important at the time of purchase to consider the length of lease at the point in time when the property is likely to be re-occupied. Many leases incorporate break options, and it is a standard market practice to assume that the lease will terminate at the break point.Liquidity – All property investment is relatively illiquid to most bonds and equities. Property is slow to transact in normal market conditions and hence illiquid. In poor market conditions it will take even longer to find a buyer. There is a high cost of error in property investments. Thus, while a wrong stock investment can be sold immediately, undoing a wrong real estate investment may be tedious and distress process.Tax Implications – Apart from income tax which is to be paid on rental income and capital gains, there are two more levies which have to be paid by the investor i.e. property tax and stamp duty. The stamp duty and property tax differ from state to state and can impact the investment returns ones expected from a property.High Cost Of Investment – Real Estate values are high compared to other forms of investment. This nature of real estate investment puts it out of reach of the common masses. On the other hand, stocks and bonds can now be bought in quantities as small as-one share, thus enabling diversification of the portfolio despite lower outlays. Borrowing for investment in real estate increases the risks further.Risk Of Single Property – Purchasing a single – property exposes the investor to specific risks associated with the property and does not provide any benefits of diversification. Thus, if the property prices fall, the investor is exposed to a high degree of risk.Distress Sales – Illiquidity of the real estate market also brings in the risk of lower returns or losses in the event of an urgent need to divest. Distress sales are common in the real estate market and lead to returns that are much lower than the fair value of the property.Legal Issues – While stock exchanges guarantee, to a certain extent, the legitimacy of a trade in equities or bonds and thus protect against bad delivery or fake and forged shares, no similar safety net is available in the property market. It is also difficult to check the title of a property and requires time, money and expertise.Overall keeping an eye on market trends can reduce most of these risks. For instance, investing in properties where the rentals are at market rates, also, investing in assets that come with high-credit tenants and looking for lease lock-ins to reuse tenancy risk are simple guidelines to follow.Future OutlookThe real estate market is witnessing a heightened activity from year 2000 both in terms of magnitude of space being developed as well as rational increase in price. Easy availability of housing loans at much lesser rates has encouraged people who are small investors to buy their own house, which may well be their second home too.High net worth individuals have also demonstrated greater zeal in investing in residential real estate with an intention of reaping capital appreciation and simultaneously securing regular returns.In the wake of strong economic growth, real estate market should continue to gain momentum resulting in falling vacancies in CBD areas and more development in suburbs; it is unlikely that commercial property prices will rise or fall significantly, beyond rational reasoning.As the stamp duty on leave and license agreements has been further reduced, it should further attract to deal in this manner encouraging the investors and the occupiers.With current budget focusing on infrastructure, it will attract quality tenants and add to market growth. Heighten retail activity will give upward push for space requirement.Further, the proposed introduction of REMF (Real Estate Mutual Funds) and REIT (Real Estate Investment Trust) will boost these real estate investments from the small investors’ point of view. These foreign investments would then mean higher standards of quality infrastructure and hence would change the entire market scenario in terms of competition and professionalism of market players.Looking forward, it is possible that with evident steps of the possible opening up of the REMF industry and the participation of financial institutions into property investment business, it will pave the way for more organized investment in real estate in India, which would be an apt way for retail investors to get an alternative to invest in property portfolios at all levels. Overall, real estate is expected to offer a good investment alternative to stocks and bonds over the coming years.

What Are the Workplace Safety Furnishings and Supplies in Construction Industry

All construction companies are required to have their workplace safety policy that is compliant to the area’s OSHA or Occupational Safety and Hazard Management. Each construction project must be able to create an internal system that ensure proper safety measures and management so that their construction workers are able to work without worrying for their safety. Accidents do happen and being prepared is the only way to go. Construction companies who happen to have absences from their employee, There are so many things to consider in workplace safety but it can help you in managing safety in your group.Safety Equipment Supplies like goggles, hard hats, working gloves, harness, safety boots can be provided by some of the Industrial Safety Supplies companies in the area. Different types of work requires different types of safety equipment and get-up. For example, workers who are in the cutting or handling hard and sharp objects on site must be provided with Kevlar Cut Resistant Gloves or Puncture Resistance Gloves to prevent them from suffering gushes or cuts. Workers who happen to perform rounding duties usually wore lifelines or harness just in case they might fall off. Still, other use other pertinent equipment and gear to handle their job without harm. Typical safety gear kits include goggles for eye protection, hard hat for head protection, and safety steel-toe boots to protect the feet from falling objects. Some even have tools like a torch, lighter and other stuffs….Each worker should have these three essentials in working in a construction site. The head of the workplace safety management is usually called a Safety Engineer. He is the on responsible for overseeing the safety status of the whole project. He devises plans and systems that can comply and implement OSHA. He conducts the emergency management training for the workers and as well as basic first aid. These are essential in helping out those who will be in an accident. If the project is long term, trainings are continuously conducted on a periodic frequency.Rarely do Hazmat Suits, specifically Level A Hazmat Suit are used in the construction industry because they are not applicable in the area. Level A Hazmat Suit is actually a full head-to-toe costume that has its own breathing apparatus and communication abilities within the confines of the suit. Although, they can protect the wearer from toxic substances and extreme heat or cold, the lack of inter human relations can prove to be wrong. So let us get starting seriously.As much as possible, remember to ask around the local laws about having to deal with the OSHA policy. The workplace safety might be ignored or neglected but when something bad happens, it is usually the first to be looked upon. If accidents do happen, then the Safety Engineer is liable for the reputation of the company he represents. He can loose his license and his job by being too lax. He constantly think of furnishings and supplies that can best fit the items in his Safety Management Plan.

Major Components of Indian Construction Industry

Construction in India is the second most important activity, next only to agriculture. The country is on the path of fast development of infrastructures in the fields like education, health, power and research. At the same time, the civil construction projects are on fast tracks to improve the conditions of roads, rails, highways and bridges. In addition, the country has managed to lend construction services and products to the foreign markets too.The construction activities offered by the construction companies in India have improved in terms of quality. The construction equipment manufacturers follow the international standards to offer advanced technology-based tools. There are four major components that work in favor of the exponentially growing sector. Here is a discussion about them.Skilled Construction ExpertsArchitects, civil engineers, project managers and many other important role-players in the Indian construction industry are admired for their skills and talent. Construction project managers from India have the experience and training to supervise different types of projects. In the past one decade, many praiseworthy projects have been completed by the skilled construction teams of the country. Construction labor contraction services are offered by many Indian firms for the recruitment of these skilled workers around the world.Quality Construction EquipmentsWhen it comes to construction tools and equipments, there are many Indian construction equipment manufacturers engaged in this field. The equipments like bulldozers, scrapers, backhoe loaders, concrete vibrators, earth compactors, concrete mixers, hydraulic excavators and many others are manufactured in the country and supplied to different parts of the world. The focus is one manufacturing technologically advanced equipments that can safe human efforts significantly, reduce energy consumption and are safe.Top Grade Construction MaterialThe Indian construction services and products are not limited to construction tools and equipments only. The manufacturers and suppliers engaged in the industry also focus on supplying high grade construction materials in different categories. Glass, ceramic, wood, plastic and many other materials are available with these industry players. In addition, these companies offer hardware materials like pipes and tubes made of materials like PVC, aluminum, copper, bronze and others. Tiles for flooring and a variety of sanitary ware products form other important categories of construction materials from India.Impressive Construction ServicesFrom expert construction counseling to interior decoration and house and commercial building construction, the construction services from India cover all possible fields. Turnkey industrial construction is one service which is in great demand and the experts from the country are capable of offering it. Real estate construction services from India serve the projects like construction of houses, industrial plants, corporate offices spaces and commercial constructions like shopping malls and restaurants.The construction services from India have become more accessible with the help of the online business directories. These online marketplaces provide detailed information about the service providers from the Indian construction industry. Small and medium sized equipment manufacturers and suppliers from different parts of the company have made it possible to earn exposure for their businesses through these directories. In a way, these directories have become another major component of the industry.