Showing posts with label housing. Show all posts
Showing posts with label housing. Show all posts

Transacting & Using your Real Estate Asset

After a project is constructed, it is time for actual transactions and possessions to happen. There are various intricacies involved in these seemingly simple stages. Let's see how.


The sell and purchase transactions in the real estate sector follow several innovative methods. More often than not, builders initiates the transaction process much before the actual project is constructed - as soon as from the concept stage. Just to have a better picture of this look at the following chart:

The above chart is a snapshot of one of the prevalent schemes that builders follow for selling off the constructed property. This process of interval payments ensures that ready supply of funds is available with the builder which can be used to service the operational costs of the project.

Usually the process of transactions is carried out by:
1. Brokers
2. In-house marketing
3. Word of mouth publicity

Out of the above 3 channels, brokers are the most prevalent and considered-effective means of carrying out transactions. In Indian scenario, especially, brokers form an integral part of the real estate value chain. Although they are the most convenient means of sell/purchase of properties but having brokers in the transaction process gives rise to a plethora of additional costs for both the parties - buyers and the sellers.

Of course having brokers for this process reduces the time-to-possession and do not divert builder's attention from his main job, but if some other effective channel can be devised for this process, we are sure that a lot of costs can be saved in every project - nearly to the tune of approximately 5-10%!


As already discussed by us in our first post - Understanding the reality in RealT – Generic Real Estate Value Chain, usage can be divided into following 3 categories, depending on the nature of use.

There are different norms and procedures for acquiring the possession of all the above mentioned categories, but more or less the underlying process is the same.

Ending Notes: With this post, we have completed an eagle-eye view of all the phases of value chain which are involved in any, literally ANY, real estate project. We will now cover various topics which we think will be benefitial for a first-time investor in understanding how one can make money here ;-)

----- Till then, Keep reading RealT Horizon :-) -----

Understanding the reality in RealT – Generic Real Estate Value Chain

As soon as I sat down to pen the first post for RealT Horizon, I was bombarded with several areas of concern which need to be addressed here. To start with, I decided to go with the basics. So let’s look at the overview of the Value Chain of this sector.

Real Estate Value Chain typically comprises of 5 broad levels:

Figure 1: Broad levels of Real Estate Value Chain

These 5 steps more-or-less comprise all the possible activities that one can associate with the development and transaction of a property. Of course some of the blocks shown above do interchange their positions sometimes, depending on the usage category. I will try to touch on that aspect later, or in the following posts. But before that, the usage categories:

Whether the 5 levels shown in figure 1 will remain intact or some of them will get merged or eliminated depends totally on the 3 usage categories. If, for instance, the category is ‘Residential’ and that too for single housing, probably the ‘Transactions’ level can be skipped.

Let me dig a little deeper in the value chain. If expanded, the chain will take the following shape:

Figure 2: Detailed Generic Real Estate Value Chain

As can be seen in the above figure, each level can be further fragmented into several components. This is the multiplicity that results in all the complexities that this sector is facing currently in India and probably in various other developing nations.

This sector needs treatment, and it will be possible only if there is a subtle understanding of its basics ingrained in all the investors. I will cover all the components individually in my future posts. So stay tuned and pour in your comments & suggestions to help me analyze RealT Sector more effectively!

Forward detailed links to each level:

- - - - -  Thanks for reading J   - - - - -

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