GreenBuild 2012 - The largest conference on green buildings

The absence of the next version of the Leadership in Energy and Environmental Design (LEED) rating system did not at all seem to dampen GreenBuild which held in San Francisco from November 10-17 2012. GreenBuild is the world’s largest conference about green buildings and is organized each year in November by the US Green Building Council (USGBC). The LEED rating system administered by the USGBC is now prevalent in several countries including India and a new version is released every third year. 2012 was originally planned to be one of those years.

Among a multitude of themes, what emerged as a consensus was the importance of political will which is required to make the world greener. The opening plenary which included over 30,000 attendees was addressed by a series of leaders: from politicians to the CEO of twitter. Another interesting topic that emerged was related to the recent hurricane Sandy. Experts believe the hurricanes have recently increased in their intensity and frequency  due to climate change.

Energy-security was also discussed extensively. Technological advancements have afforded exploration of  gas and oil resources that were inaccessible earlier. However, the overall feeling for green building professionals was optimistic. Experts shared their vision on how green could still remain attractive in an environment where fuel security is of less concern than it used to be a few years earlier.  Synergies between economics, finance and green development were projected as the emerging trends. Various aspects of real estate, in particular, were discussed in detail. Green leasing, maintenance, development and ownership of green properties and, case studies of successful green real estate projects and were presented.

realism.IN closely tracks the developments at GreenBuild. Green real estate is one of the major focus areas at realism.IN. In addition to developing India-focused educational module on sustainable real estate, realism.IN is soon to launch an affordable preparatory module for IGBC AP exam preparation. The module contains a 1-hour lecture video, mock online exam (with scores and answers) and other relevant materials. In addition, realism.IN researchers  have also been actively involved in scientific research about green real estate. For example, a recent paper (published in the Journal of Sustainable Real Estate) by a realism.IN researcher argues that green rentals may act as a hedge against bad economic conditions. IN addition, realism.IN has also produced several white papers related to sustainability.

Webinar: Investment in 'Green' Real Estate

MARCH 31st (SAT) | 11:00 AM (India Time) | 45 Minutes

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realism.IN brings to you an unparalleled opportunity to learn from the global experts of green real estate. In this webinar, you get to attend a live online session conducted by Professor Norm Miller of University of San Diego. We also include a panel of Indian green experts with IIT pedigree and solid industry experience who will share valuable insights on green projects and investments. The session will cover the challenges and rewards of buying, selling, leasing green properties. The panel will also discuss their development process.

The event is free of cost. However, seats are limited and available on first-come-first-serve basis only.
So, CLICK HERE TO REGISTER today!!

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About the Panelists

 Dr. Norm Miller

(Global Thought Leader in Green Real Estate)

Panelist. Dr. Miller is the director of the MSRE Program, Burnham-Moores Center for Real Estate in Sand Diego, USA. He initiated the Journal of Sustainable Real Estate, a unique journal bringing together cutting edge research on the intersection of real estate finance and green development. He also worked as the VP of CoStar Group, Inc. (Nasdaq:CSGP) which is the number one provider of information, marketing and analytic services to commercial real estate professionals in the United States. His text book titled "Commercial Real Estate Analysis and Investment" is the leading real estate investment analysis book across the globe.

Dr. Avlokita Agrawal

(Green Design Expert)

Panelist. Dr. Avlokita Agrawal holds several years of work experience in the green building design industry in India. While working with Asahi India Glass (AIS) as the head of their green and architectural design division she was the front face of Asahi's technical representation at various national forums like IGBC (Indian Green Building Council) among others. She is well versed in the ins and outs of green building certification in India along with the challenges and rewards of the process. She acquired her doctoral and bachelor's degree from IIT Roorkee.

Minu Agarwal

(Head of Sustainability at realism.IN)

Moderator. She holds several years of green design and consulting experience of international projects as a consultant with New York and Atlanta based engineering firms. She holds an MS in Sustainable Design from Carnegie Mellon University and a bachelor's from IIT. One of her key areas of work is cost benefit analysis that is an inherent part of green design.

Brand new online platform for realism.IN

realism.IN is pleased to announce a state-of-the-art online platform for its patrons (which includes you)!

Thanks to the tireless efforts by Vinod Singh, the Head of Technology at realism.IN and his team, the online contents of realism.IN will be managed through a sophisticated online system. Now, the subscribers will get free access to specific sections of the online contents by simply creating an account with realism.IN. "With the new content management system, our subscribers can create and update their online profiles", says Vinod, "and once logged in, they will get direct access to our rich free contents base on clicks of the mouse. This means that they will not need to fill online forms to access such contents."

realism.IN is an emerging thought leader in the Indian real estate research and education domain. The research team at realism.IN fills the huge knowledge gaps in the real estate sector that has always haunted India. The team which consists of real estate professors and professionals offers India focused real estate knowledge which is theoretically sound and practically useful to sustain a matured real estate sector in India. realism.IN offers a team of experienced IITians, and NITians with real estate specific PhD, MBA, Masters and bachelors degree who blend the U.S. standards of real estate research and education with the local characteristics of Indian markets.

In a spirit of indigenous knowledge building, realism.IN frequently publishes white papers, research reports, opinion editorials, blogs, interviews which are available at free of cost. In addition, realism.IN also works on specializes research papers, reports and eLearning materials that intend to cover the Indian real estate sector in its entirety at affordable prices. The new online platform should be released by early February 2012. Stay Tuned!

Why does Chennai have the largest number of certified green buildings?

This exclusive white paper from realism.IN analyzes the different market forces that are at play in promoting LEED certification for green buildings in India. Is the demand for green buildings growing organically or is it a differentiation strategy adopted by developers? Why is the number of certified buildings so high in Chennai? These questions are pondered upon, by looking at the type of buildings going for certification in Chennai. Click here to download for free. Once you submit the form, you will be given a link to download the file.

This white paper has benefited from contributions made by Anurag Bajpai (Head of technical division at Green Tree India) and Ruju Rathod (Project Head at Edifice Consultants India).


Image: Ranking Indian states by the number pf LEED certified buildings

Ranking Indian Cities based on Home Price Movement

Increasing mobility and rising income levels of Indian families are adding an investment perspective to home buying. realism.IN analyzes the home price appreciation (from year 2007 - 2011) of 15 cities comparing them with a combined perspective of risk and return based on RESIDEX data released by the National Housing Bank. Download full paper for the explanation of the graphic below and more. Click here to download for free. Once you submit the form, you will be given a link to download the file. 




Image: Ranking Indian cities based on real estate risk and return

Seasonality in Home Prices

realism.IN expert finds out the seasonal effects of home prices and how to correct for them in valuation; a study published by the Appraisers Journal

Valuation of real estate is a complex activity. In addition to the intrinsic characteristics of a piece of property, a number of extrinsic factors play a role in putting a price on real estate. For example, however the quality of construction (good or bad), there is a 'bias' effect on the property-price based on the locality in which it stands. Some researchers found that a small house in a nice neighborhood enjoys a positive value premium but the contrary was not true (i.e. a large house in an inferior neighborhood suffers from a price discount).  Of course, when determining price a number of factors are into play including intrinsic factors such as size, number of bedrooms, construction quality, number of bathrooms, etc. and extrinsic factors such as locality, access to public transport, security, proximity to market place and so on. 

When an appraiser (valuation expert) is asked to put a price on a real estate asset, s/he considers most of the factors mentioned above. However, note that all these factors are non-temporal; meaning that they do not vary so readily with time. The appraiser, in the simplest valuation approach, compares the property under question with some similar properties which were sold recently to ascertain the price. Most often the 'temporal' (time dependent) factors are ignored which may lead to faulty valuations. The home price movements may have three components: trend, seasonality and random changes. A number of indices may claim to capture the 'trend' component. However, the seasonality component may be ignored and may often hide behind the 'random' component. A study by Dr. Vivek Sah, Head of Strategy at realism.IN and a professor of real estate at the University of San Diego (USD) and Dr. Norm Miller (USD) addresses the issue of seasonality in home prices. The paper titled "Correcting for the Effects of Seasonality on Home Prices" will soon be published by The Appraisal Journal. 

"By definition, a comparable is assumed to have similar characteristics to that of the property being appraised and adjustments  are made for time since sale, size, quality, features and location..." says the paper, "...when appraisers must reach back several months for comps it is doubtful that they consider making a seasonal adjustment to estimate what the comp would sell for if it sold in the current month, beyond some general market trend for appreciation or depreciation patterns which attempts to adjust for the average annualized time impact."

That home price is independent of the time of the year when a house is sold, may be an erroneous assumption, claims the study: "say for example, the subject property is being appraised in the month of June, while the comparable property being used was sold in the month of January. This would mean that the price of the property has to be finally adjusted (after adjusting for all other factors) by the difference in the seasonal adjustment factors between the two months...".
"Although the study is based on the U.S. data, the phenomenon of seasonality in home prices may be universally applicable," says Vivek Sah, Ph.D., "and similar studies should be carried out in India to separate the seasonal components from the overall house price indices... we are in talks with data providers for potential research collaborations in India." 

Conducting seasonality studies requires a relatively larger time series data of house prices indices. Most house price indices in India are very recent. For example, although holding a great promise for future research, the Residex (from the National Housing Bank) was started only in 2007 and has been released at rather irregular intervals. While data availability is a basic requirement, substantial amount of academic rigor, econometric skills and professional insights are required to develop a meaningful seasonal series for house prices. realism.IN offers expertise in these areas and is exploring collaboration with potential data providers.

Some pertinent References:

• V. Sah & N. Miller, "Correcting for the Effects of Seasonality on Home Prices," The Appraisal Journal (2012), forthcoming
• K.E. Case and R.J. Shiller, “The Efficiency of the Market for Single Family Homes,” American Economic review (1989): 125-137.
• K.E. Case and R.J. Shiller, “Forecasting Prices and Excess Returns in the Housing Market,” Journal of the American Real Estate and Urban Economics Association (1990): 253-273.
•  J. Goodman, “A Housing Market Matching Model of the Seasonality in Geographic Mobility,” The Journal of Real Estate Research (1993): 117-138.
• C.L. Kuo, “Serial Correlation and Seasonality in the Real Estate Market,” Journal of Real Estate Finance and Economics (1996): 139-162.
• G. Kaplanski and H Levy, “Real Estate Prices: Seasonality's Sentiment Effect,” Working Paper (2009): Available at SSRN: http://ssrn.com/abstract=1438826
• N.G. Miller, V. Sah, M. Sklarz and S. Pampulov, “Is there Seasonality in Home Prices – Evidence from CBSAs,”, Forthcoming, Journal of Housing Research (2011)

Green Buildings protect against Down Markets: realism.IN expert

realism.IN expert discovers how 'green' real estate rental premium changes in favorable direction during down-markets; a study published by the Journal of Sustainable Real Estat.

Green office properties enjoy several types of premiums over comparable non-green buildings. A number of studies by researchers across the globe analytically establish the economic benefits of investing in green buildings. Several of these studies are focused at developed markets due to availability of data in these places. Yet, useful insights may be derived from these markets which could also be applied to Indian real estate markets. 
It has been found that green buildings (e.g. LEED certified buildings) enjoy around 6% to 18% higher rental rates. When comparing the sale price of real estate, green buildings outwit non-green buildings by up to 118%! Similarly, some studies have shown that the occupancy rates in green buildings are around 8% higher compared to non-green counterparts. Studies conducted by different researchers in the Netherlands, the United Kingdom, Singapore and Australia have established that the 'green' premium of buildings is not limited to the U.S. only; but is rather a universal phenomenon. On the other hand, the findings were contradictory in Japan where a study found that the buyers of green condominiums (multistory residential units for sale) capitalize the high maintenance cost of green buildings into the price. Therefore, green units sell at 6-10% lower prices. Nevertheless, the difference they found was statistically significant. In other words, green real estate has significantly different performance characteristics compared to non-green properties.

A recent study conducted by Prashant Das, the Head of R&D at realism.IN (and a research scholar at the Georgia State University, USA) along with Alan Tidwell (Columbus State University, USA) and Alan Ziobrowski (Georgia State University, USA) found that the rental premium of green commercial office spaces changes with market cycle. The paper titled "Dynamics of Green Rentals over Market Cycles..." (2011, Journal of Sustainable Real Estate published by the American Real Estate Society and supported by CoStar) asserts that green office properties were found to provide a 'hedge' against the market cycle. The study suggests that the changes in green premium 'tend to stabilize rental rates across various real estate market conditions'. The study also establishes that the 'green premium is counter-cyclical: positive and significant in down-markets, but substantially reduced in up-markets.'

This study provides some additional insights which are equally interesting. For example, quarterly changes in the rental rate of commercial office spaces is somewhat predictable; which is not true for non-green buildings. The study also suggests: '...as more green developments are constructed ... the dynamic nature of green premiums may diminish.' Green building premiums may potentially be attributed to their novelty effect and the economic premiums will shrink as more green buildings are supplied. If we read between the lines, real estate investors who would want to capitalize upon the green premiums should not wait for very long. More the competitive supply, lower the premiums!

Are these findings equally relevant to Indian real estate markets? There are very few reasons to believe that they are not!  After all, what is found in studies about the 'green premium' related to one country (U.S./Europe/Asia) has, more or less, been  corroborated by studies in other countries a well. The advent of green commercial spaces in India is almost contemporary to that in other nations. The novelty effect of green buildings is relevant to Indian buildings in similar fashion to other nations. Also, green buildings are quite distinguishable in India as in other nations. "Yet, we need concrete empirical studies about Indian buildings in order to establish the findings for India," says Prashant, "we hope that the IGBC (India Green Building Council) shall be as generous with data to our research efforts on India as the USGBC has been in the US." realism.IN has been working on empirical analysis pertaining to the Indian real estate markets for green buildings. However, data scarcity poses a major challenge.


Further readings:

• Das, P., Tidwell, A., & Ziobrowski, A. (2011). Dynamics of Green Rentals over Market Cycles: Evidence from Commercial Office Properties in San Francisco and Washington DC. Journal of Sustainable Real Estate, 3 (1).
• Dermisi, S. V. (2009). Effect of LEED rating and levels on office property assessed and market values. Journal of Sustainable Real Estate , 23-47.
• Eichholtz, P., Kok, N., & Quigley, J. M. (2009). Doing Well By Doing Good? Green. Retrieved from UC Berkeley: Center for the Study of Energy Markets: http://escholarship.org/uc/item/4bf4j0gw
• Fuesrt, F., & McAllister, P. (2009). An investigation of the effect of eco-labeling onn office occupancy rates. Journal of Sustainable Real Estate , 49-64.
• Harisson, D., & Seiler, M. (2011). The political Economy of Green Office Buildings. Journal of Property Investment and Finance , 29 (4/5), 551-565.
• Miller, N. G., Pogue, D., Gough, Q. D., & David, S. M. (2009). Green buildings and productivity. Journal of Sustainable Real Estate , 65-89.
• Wiley, J. A., Benefield, J. D., & Johnson, K. A. (2008). Green design and the market for commercial office space. Journal of Real Estate Finance and Economics .

realism.IN @ American Real Estate Society

realism.IN experts conduct an empirical study which compares and contrasts the real estate development process between various types of companies in India and the U.S. The research will be presented at the American Real Estate Society Conference in Florida in April 2012

A paper co-authored by Realism Real Estate Consultancy Pvt. India Ltd. (realism.IN) titled "The Real Estate Development Process: An Empirical Analysis and Construction of Descriptive Models for the U.S. and India" has been accepted for presentation at the American Real Estate Society (ARES) conference. It will be held in St. Petersburg, Florida, USA in April 2012. The ARES conference is one of the world's largest real estate research events which attracts global participation of real estate thought leaders, professionals and researchers.
The research paper has been co-authored by Divyanshu Sharma & Vinod Singh (realism.IN: New Delhi / Guam), Prashant Das (Georgia State University : Atlanta), Vivek Sah & Louis Galuppo (University of San Diego: California). realism.IN facilitated a "process-tracing" survey in which an online platform equipped with "skip-logic" technology is utilized. The survey documents the process of property development by the decision makers in real estate development companies. Over 65 Indian real estate companies including some very large and start-up companies participated in the study. The researchers at the University of San Diego, with assistance from realism.IN, are currently collecting data from the U.S. developers.

Divyanshu Sharma
Head of Operations

Unlike point estimates (such as company size, investment amount, return on investments, etc.), it is challenging to mathematically analyze and model a process adopted by a firm in delivering the final output (e.g. developed properties). That is why, in spite of some "anecdotal" documentations of the real estate development process in India, to the authors' knowledge. there are no studies which address the issue statistically. Surprisingly, no such studies seem to have been done in the U.S. as well. The study adopts a unique probability distribution test to compare and contrast the real estate development processes between the U.S. and Indian samples and within the sub-samples of India. The method is based on a paper titled "How Appraisers do their Work" authored by Prof. Julian Diaz III. The analysis of Indian developers suggests that the overall real estate development process in India differs from the normative process suggested for the U.S. While the difference is significant in certain sub samples (such as the older, larger firms; or those operating in smaller cities or not seeking foreign investment); no differences were detected in the subsamples which are complimentary to these (e.g. newer, smaller firms operating in larger cities or seeking foreign investment). The study further provides details on where the differences actually exist.

Vinod Singh
Head of Innovation

'Although it may appear to be a purely academic endeavor', says Divyanshu Sharma, a co-investigator and the Head of Operations at realism.IN, 'we had a very specific purpose: to objectively understand the "what's" and "where's" of the differences. This will not only help the real estate developers in filling their skill gaps (and make their processes more efficient); but will also prepare them in standardizing their processes for effective collaborations.' The study is particularly timely as the world witnesses cross-national collaborations for real estate development projects. 'In the wake of economic slowdown in the domestic markets, a number of U.S. developers such as Hines, Trump, Tishman Speyer among others are now trying to tap the Indian markets even more eagerly. An analytical understanding of how their development processes differ from the Indian players will help both the sides', adds Vinod Singh, another co-investigator and the Head of Technology &  Innovation at realism.IN.
realism.IN intends to release an 'industry-friendly', well illustrated report with the findings of the study which should be available from the company website soon.


 About realism.IN

The new 'ism' in Indian real estate

realism.IN™ (Realism Real Estate Consultancy Pvt. India Ltd.) is a partnership of academicians and industry professionals striving to provide high quality knowledge backbone to the real estate industry in India. realism.IN™ is the first of its kind eLearning content provider to group customers (educational institutions, corporates and organizations) offering real estate education deeply embedded in the Indian context and reinforced by the U.S. pedagogical principles. In addition, realism.IN™ conducts high quality research independently and for clients. realism.IN™ also publishes focused white papers and OpEds to its subscribers and clients. More at http://www.realism.in

Real Estate Education in India: A Rendezvous with Dr. Julian Diaz III

realism.IN interviews Dr. Julian Diaz III, a distinguished expert of real estate education and research. The Interview published by the CREDAI and is available for download

Dr. Julian Diaz III

"... I believe that the burgeoning real estate industry in India will benefit greatly from increased access to local academic real estate programs. In the short run, motivated individuals may need to seek real estate education abroad, but adequate incentives could incite a return to participate in the development of quality real estate programs within India. Interim strategies such as seeking student and faculty exchange agreements with recognized real estate programs outside of India may help until Indian programs become established..."

Dr. Julian Diaz III, a renowned real estate researcher, academic and professional in a candid interview with realism.IN reveals the secrets of successful real estate higher education.

Published by the Confederation of Real Estate Developers Association of India (CREDAI). Download the full article by clicking here.

Photo Credit: Dr. SeungHan Ro

CREDAI features a paper by realism.IN

The Confederation of Real Estate Developers Association of India (CREDAI) recently featured a white paper by realism.IN that argues why real estate should be treated as an independent academic discipline in India. In spite of a very large real estate market, there is hardly any academic support available to real estate professionals in India. The paper lays out ten points positing why the industry must whole-heartedly support organizations that are working towards academic/research improvements.

At realism.IN, our foremost mission is to "...provide the highest quality research & development products in the areas of real estate development, finance, management, positioning and investment....". Our model can not dwell on the same principles that several other businesses do. Product development (eLearning modules and research papers) at realism.IN is an intellectually challenging, intense and a continuously self-enriching task. Therefore, in our mission to elevate the academic standards of the Indian realty sector, realism.IN needs to run in an entrepreneurial model so that we can attract the best researchers, professionals and academics to help us serve the industry. We have already achieved several milestones in the development process and not too long from now, the Indian Realty sector will be empowered with high-quality educational and research materials which are specially developed for the Indian realty sector, in all its uniqueness.

Download the CREDAI version of the white paper by clicking here. (User registration required)

Real Estate in 'Wrappers'

"...REITs are real estate that happens to perform like stock. The underlying asset is the same, it's just that the wrapper is different. And depending on which wrapper you put around real estate the real estate will perform differently..."

-Russell Platt (Morgan Stanley Asset Management)

From 'On the Hybrid Nature of REITs'; Journal of Real Estate Finance & Economics, Sept 2011

Real Estate – A Fast Path to U.S. Green Card

Philip Seagraves, MBA, MSRE

In 1990, the US Congress passed legislation that was part of the Immigration Act of 1990 which was aimed at increasing US jobs through foreign investment. The law created a new visa type, the EB-5 which provides an accelerated method for foreign persons to achieve permanent, legal residence in the US. The EB-5 process results in a green card for the foreign investor as well as his spouse and children making all eligible to work in the US and attend US schools. Many forms of investment in nearly every imaginable industry are eligible for consideration under this visa program as long as they result in at least 10 jobs and meet minimum dollar investment levels depending upon the location of the investment.

Many foreign investors participate in large cooperative projects through partnerships, limited liability companies, and those sponsored by Regional Centers throughout the US. The regulations require the investor to be involved in the management of the project. However, the management requirement can be somewhat minimal as the investor is permitted to be involved in “management or policy making.” By this definition, even limited partners may be considered engaged in the business so long as the partnership is properly formed and meets the definitions under the Uniform Limited Partnership Act. Structured investments through Regional Centers are a popular option for those who do not wish to be involved in the day-to-day activities of the business.

An important risk for relatively detached, remote investors in an EB-5 project is the potential for a complete loss of capital in an unsuccessful project. Investment in a service business or other enterprise with largely intellectual, non-tangible assets presents the investor with little recourse in the event of poor performance by the active management or simple business cycle downturns. One alternative that many EB-5 investors turn to is investment with a heavy real estate component which provides a tangible, hard asset element to the project. If a project does not succeed, the investor in a real estate related project will often be left with the land or building component of the investment which likely has some alternate use or liquidation value.

Some examples of real estate related projects that have been used for EB-5 investment include hotels, shopping centers, and even agricultural enterprises. These projects provide the foreign investor with some sense of comfort knowing that their capital is going, at least in part, toward real assets with a measurable market value and some future value regardless of the success of the job creating component of the project. This added element of security, combined with relatively low real estate prices in the US have served to increase interest and activity in real estate related EB-5 projects and the Regional Centers offering real estate projects.

Upon approval of an applicant’s original request on form I-529, the Petition for an Alien Entrepreneur, the individual, spouse and children receive a conditional green card for two years. During the last 90 days of the conditional period, they must document the completed investment as well as the job creation promised when applying and file form I-829, the Petition by Entrepreneur to Remove Conditions. When the conditions are removed, the investor and family are granted permanent residence status permitting free movement, work, and enrollment in US schools.

In summary, individuals seeking permanent residence in the US may leverage a relatively safe, secure investment in real estate to bypass the quotas, backlogs and sponsorship requirements of other permanent residence and citizenship approaches. Upon approval of the original form I-529, the , individuals and their families immediately are granted a conditional green card with conditions completely removed during the first two years following the investment. Utilizing real estate as the key element of the investment provides the investor with the assurance that their capital is being put to use in purchasing something of true, lasting value. Certainly, real estate can lose value like any other investment. However, land and improvements such as buildings provide a significant backstop against an entire loss of capital in a foreign land. 

The Opinion Editor Philip Seagraves, MBA, MSRE is an Academic Consultant to realism.IN. He is a Visiting Lecturer at Mississippi State University. Philip helps international investors with real estate acquisition in the United States and can be reached at philip [AT] chanpart [DOT] com.

Real Estate | Space versus Asset

"...The distinction between real estate as space and real estate as an asset is most clear when buildings are not occupied by the owners..."

-Denise DiPasquale & William C. Wheaton; in "The Market for Real Estate Assets and Space: A Conceptual Framework; Journal of American Real Estate and Urban Economics Association; 1992; Vol 20 Issue 1; page 180"

How should Indian Realtors use Internet (and how not)

Until a few years back,  the only places to look for real estate projects were yellow pages, pamphlet, newspapers, magazines (and, rarely, local TV channels). The market was informationally inefficient. Times have changed drastically since then. Now, information flows incessantly in the public domain. New information spreads in real time and quite inexpensively. Getting information for anyone and virtually about anything is easier than ever. Information & Communications Technology (ICT) seems to have become one of our sensory tools.

With internet-enabled mobile phones and laptops, the whole world of information stays with you anywhere you go. Technology has changed the dynamics in which consumers contemplate their requirements and decide on the products and the way sellers market their products.
Although some players are picking up the momentum in this area, the real estate players in India seem to have underutilized (or even 'over-utilized') the internet power. In short, we are yet to reach an optimum level of internet marketing. Even today, a large number of real estate developers rely on huge banners and full-page ads in newspapers. These are certainly the basic advertising techniques which will not cease to exist for coming several years. However, these are not the ‘trendiest’. Also, these are quite inefficient when it comes to hitting the precise ‘targets’. The new world of ICT believes in marketing products to the 'targeted' customer segments. There are endless advantages that can be garnered through internet.

Buying a newly developed real property calls for an extensive research on the (real estate) project and the developer. Searching on websites for the developers, projects and the current projects status often leads to disappointments as the hits provide little relevant information that a prospective buyer needs. A large portion of the search results would lead to real estate brokers or real estate consultants. Since the real estate brokerage/agency is not very well regulated in India, the prospective buyers remain skeptical of such online information. Thus, buyers may not feel comfortable collecting information from third-party consultants. In other words, the lack of transparency and first-hand information may keep the buyers away. 


[P.S. We are not arguing against the efficacy of third-party sales deals. The role of real estate brokers and agents is, in fact, crucial to improving the efficiency of the market. However, the current (lack of) regulatory framework may blur the apparent distinction between trustworthy sales agents and others. It will not only help the buyers; but also the sellers if the developers categorically publish the list of their authorized agents/brokers on the official website. It is not unlikely that a newly constructed property is 'flipped' and soon listed in the secondary market. The original buyer (the developer), in such a scenario, may lose control of the sales. However, in the case of the original property sales, they may offer some kind of broker-certification to the buyers for specific properties that are still listed on sale. More importantly, such information should be updated frequently.] 

Recently, some developers seem to have recognized the potential of online markets. Amrapali Developers, for example, offer frequently updated 360 degree view of their construction site (http://www.amrapali.in/virtual/amrapali-siliconcity/5.html). Mantri Developers maintain a twitter account which provides updates about the company and their latest developments (http://twitter.com/#!/mantriblr).These ideas of connecting to the clients offer easier and affordable ways to market the projects and build trust.

Vinod Singh | Partner: realism.IN

A large proportion of the real estate market in today's urban India is made of first-time home buyers working for multinationals in IT, BFSI etc industries. These are sophisticated professionals who have easy access to computers and the internet. The NRI and HNI buyers, too, are often internet savvy. Be it the first time home buyers or NRI investors; all are risk averse when it comes to putting their money in Indian realty. As a result, they tend to conduct extensive research before buying or investing. Of course, online research is one of the first things they want to do. There are real estate forums (e.g. http://www.indianrealestateforum.com/ ) canvassing projects, their pros and cons. Real estate portals offering updates on the upcoming projects and their current status are sprouting. These rather ‘third party’ sources of information may substantially affect the rapport of the builder/developer and the projects. Any bad feedback about a project on such platforms could cause the loss of several prospective buyers/investors. But, why would customers resort to third parties if the best place for the richest information on your projects is your own website? Small and medium size developers may find it challenging to maintain such online platforms. However, professional organizations such as NAREDCO/ CREDAI can help in fostering a combined platform for developers to offer real time project updates. In any case, the realty sector has to start focusing and considering internet marketing in a more serious manner; and include it in their strategic plan. 


A highly misunderstood aspect of online media manifests in how the developers have been using twitter, facebook, linkedin profiles and social media. Researchers have come to realize that these social networking website have started behaving like “mouthpieces” of the companies (and not like sources of objective information). Such tactics (which are often employed for search engine optimization) may temporarily improve the traffic on the website; but would hardly improve the brand image and/or sales. A twitter/social networking update on a residential project "1st floor slab done, construction on full swing ...." can give the buyers an extra level of comfort and dependability on the developer. Real-time video/ image captures of the current projects will be a far more effective brand-building exercise. Of course, it will require a higher degree of professionalism in project execution. Similarly, a Facebook page posting the pictures of the project status could be an effective idea. 

 
Integrating online marketing into the core strategy will not only build the trust but may also substantially improve the sales. With more reforms in Indian real estate market and many big players joining the arena, internet strategy should surely be at the top of the list. How to increase Internet presence and what real estate players can do to achieve these goals? Stay tuned for our upcoming blogs!

- The Opinion Editor (Vinod Singh) is a Partner  and Head of Technology at realism.IN.

Are You Spending Too Much on Energy?

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The "for-sale" real estate represents an overwhelmingly large portion of the business that the Indian real estate developers are used to. However, the customers (in case of office/retail real estate in particular) have started asking for "rental" properties. If REITs become a reality in India, developers will have to learn about the "for-lease" business model. In either case, lower operating costs increase the marketability of a property. realism.IN, in this article published in the June 2011 issue of the CREDAI magazine discusses the energy efficiency aspect in detail.

Assessing India‘s Investment Potentials: A Rendezvous with Global Experts

As an outcome of its endeavor to assess the investment potentials in India Wells Fargo Advisors recently released a report titled “India Comes of Age” which takes a fresh look at the risk and return characteristics of the Indian markets and identifies their relationships adopting a macroeconomic perspective.

Paul Christopher, and Sean Lynch of Wells Fargo, in an interview with Prashant Das of realism.IN and Anitha Vadavatha of the India China America (ICA) Institute.

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Property Taxes in India

Data Source: Mathur, Om Prakash; Thakur, Debdulal & Rajadhyaksha, Nilesh; "Urban Property Tax Potential in India"; National institute of Public Finance & Policy; July 2009

A team of researchers at the National Institute of Public Finance and Policy, New Delhi with support from Professor Roy Bahl (Andrew Young School of Policy Studies, Georgia State University, Atlanta) conducted a study using the data of 36 large municipal corporations to estimate the potential of property taxes and suggest how that potential might be realized. The study provides an incisive commentary on how the property taxation works in various parts of India. In addition, the report also provides useful data, analysis and information related to property taxation. In particular, analysis of productivity and performance of property taxes have been discussed. In the end, the study suggests policy strategies on how to tap the untapped property taxation potentials.
At realism.IN, we provide some basic graphs derived from the data published in the report.

Per Capita Property Tax in Selected Indian Cities (2006-07)
(Click on the images to view them in better quality)

Property Tax Demand and Collection in Indian Cities (2004-07)
(Click on the images to view them in better quality)


Property Tax Collected as a Percent of Demanded in Indian Cities (2004-07)
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realism.IN is Incorporated!

New Delhi June 15' 2011
The Directors of realism.IN™ are pleased to announce the incorporation of realism.IN™ ('the company') as 'Realism Real Estate Consultancy Private Limited'. The incorporation is given in Delhi under the Companies Act, 1956. We shall continue to maintain the "realism.IN™ " short name for our branding purposes.

We would take this opportunity to congratulate all our clients, consultants, subscribers and service providers on the incorporation of realism.IN™ . Since the inception of our company last year, we have received wholehearted support from the industry and the academia in India. With time our commitment towards excellence and enrichment of product volume has only strenghthened.

About realism.IN

realism.IN™ is a partnership of academicians and industry professionals striving to provide high quality knowledge backbone to the real estate industry in India. realism.IN™ is the first of its kind eLearning content provider to group customers (educational institutions, corporates and organizations) offering real estate education deeply embedded in the Indian context and reinforced by the U.S. pedagogical principles. In addition, realism.IN™ conducts high quality research independently and for clients. realism.IN™ also publishes focused white papers and OpEds to its subscribers and clients. More at http://www.realism.in

Portfolios with Real Estate Stocks in India

Explore the performance of realty sector stocks when mixed with other sectors such as Banking, FMCG, IT, Oil & Gas, Power and PSU. In this exclusive study from realism.IN, we provide the asset allocation of publicly traded stocks in an optimum portfolio that minimizes the risks. Utilizing the optimization algorithms, we suggest asset allocation to sectoral stocks indices derived from the Bombay Stock Exchange data. Weekly returns on the indices are analyzed with two portfolios including (or excluding) Sensex along with sectoral indices. An efficient frontier of the portfolios is also laid out.

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The Curious Case of Indian Real Estate

The Paradox of Manpower Resources

"If we keep doing what we are doing, then we will keep getting what we are getting":

-David Thornburg, a noted American author 

Our recent primary study of real estate developers across India suggests that they, on average, intend to triple their development activity within a year. For sure, they see a clear demand for real property in their respective markets. More importantly, their intentions to triple their space production also means that they are confident to capture that share of the market.

This made us wonder about the dynamics of their manpower. In other words, we wanted to see how sensitive the size of their manpower is given a larger market they get to serve every passing year. Since we do not have any time-series data on the companies, we conducted a cross sectional analysis (i.e. we looked at our sample of companies at a given time rather than analyzing them over time). Our approach was simple: correlate the company's size with its manpower size as was reported in our study. The results are encouraging but not at par with the growth in demand! With each year of increase in the company age, the Indian real estate companies in our sample reported to have increased less than 85% of the man power.  Now, compare this manpower growth (<85%) with the companies' product growth (>300%) and you will get a picture of how critical the dearth of skill in Indian real estate is. Thus, although the opportunities triple, the manpower does not even double itself.

Variation of Company size with respect to Company Age | realism.IN Research

We argue that the dearth of skilled manpower is a far more serious problem than what it looks like. It points out a dire need for specialized real estate expertise the absence of which has made Indian real estate what it is: unorganized, opaque, volatile and, above all, unpredictable.
In our paper titled "10 Reasons Why Indian Real Estate Needs Specialists", we have uncovered many facets of this issue in detail.
In our follow up to this article, we will present the volatility pattern in the publicly traded realty sector of India. We examine the connection between the capital markets of Indian real estate and the underlying property market fundamentals. The question then arises is do we understand these fundamentals? More importantly, have we developed those fundamentals? Well, in spite of being one of the largest real estate markets in the world, we do not have many dedicated research/educational institutions that focus on the development of fundamental knowledge of real estate. It is a challenging task. First, we need to have institutions which have serious interest in developing the right, localized knowledge of real estate. Second, we need robust mechanisms to disseminate the knowledge sustainably. In order to fill the gap, private research and educational institutions should be encouraged and funded; not only by the government; but also by the private sector. In addition, the public institutions need to partner with the private ones to uplift the standard of real estate research and education in India.

Real Estate was established as an independent research & educational discipline in the United States during 1800s and in the UK in early 1900s. The understanding of real estate sector in these nations is superior, sophisticated and forward looking. Moreover, there has been an increasingly higher push on differentiating the  real estate assets from other financial assets. In India, we keep treating real estate as just another type of financial assets. That is why, we have failed to identify the need for regulatory changes in this sector. We face major challenges in establishing the REIT system as we lack the insights pertaining to their implications. Our secondary mortgage markets are embarrassingly smaller compared to an implied primary market. We continue to treat real estate as a subsidiary of either finance or infrastructure or engineering or design sectors (without being sure of which one of these does the realty sector actually belong to).

Some educational institutions and professional bodies (which can be counted on finger tips) have dared to come forward and fill the gaps and transform the realty sector. At realism.IN, we are committed to participate in the transformation.




Prashant Das, the opinion editor is a partner at realism.IN