Buying or selling property as an end user or an investor remains a fairly daunting and complex task for the ordinary citizen. Unlike other asset classes, real estate investments are capital intensive, have a medium to long term perspective and cannot be easily liquidated. Such investments thus require extremely well thought out and considered decisions to be made, with foresight and due diligence. These are enough reasons by themselves to make most potential buyers / sellers and investors reluctant to commit their hard earned financial resources. Other reasons that further erode end user / investor confidence and deter investment in real estate are: –
- Lack of adequate knowledge of how the sector operates.
- Need to deal with a multitude of agencies such as real estate developers, banks, financial institutions, revenue authorities, lawyers, taxation experts and RWAs / Owners Associations etc.
- Availability of wide range of options across the real estate spectrum leading to difficulty in decision making.
- Lack of transparency in pricing/ valuations.
- Inadequate safeguards to protect buyers/ investors interests.
- Fear of inaccurate assessment of growth potential, capitalization rates and rental incomes leading to erosion of capital.
- Inadequate knowledge of zonal plans, master plans, infrastructure development plans, laws, bye-laws, compliance, encumbrances, liens, transfer of property rights, property titles and other legalities applicable.
- Inadequate financial knowledge of circle rates, registration fees, stamp duties, applicable taxes, rebates and subsidies etc.
The Benefits of Investing in Real Estate. Notwithstanding the above, the real estate sector has the potential to generate dual benefits of sustained rental income and capital appreciation. From an investment perspective, these benefits can easily surpass the returns from any other asset class over the long term. Whereas from an end user’s perspective the immense satisfaction and security of owning one’s own residential or commercial property is hard to match. To gain these benefits, the solution lies not in avoiding the real estate sector as an asset class, but in overcoming the challenges and minimizing the risk involved.
Real Estate Consultants – Friend, Philosopher and Guides. To avoid floundering in the maze of real estate decision making and to ensure safety of your hard earned capital, it is of utmost importance to bank upon someone who is fully aware of the workings of the sector, someone who can fill the information voids and enable you to make the best possible decision. Well, that someone is a professional and qualified real estate consultant. The advantages you will gain by retaining a qualified, experienced and professional real estate consultant are huge, as highlighted below.
- Sectoral Expertise. Self-professed knowledgeable friends and well-wishers generally provide piecemeal, disjointed and haphazard advice based on incomplete, half-baked information or tips from unreliable sources. Relying on such information is a pitfall which certainly leads to grief and distress. When such large amounts of your capital are to be committed it pays to have an expert on your side. Qualified real estate consultants bring tremendous expertise to the table as they have a holistic and superior understanding of the factors that impact the sector. Their ability to understand your requirements, optimize a solution and then translate it into an action plan which is successfully executed, saves you lot of time, effort and resources.
- Knowledge of Market. Real estate consultants remain abreast with latest developments and closely follow market trends, which makes their market knowledge indispensable. Competent consultants are well versed with the various urban development plans including zoning, land use, regional plans, master plans, city plans etc. They are well aware of the infrastructure developed and the proposed developments in an area, which has a direct impact on the quality of life and future potential of any asset. In addition, they have good knowledge of various building laws, bye-laws, FAR / FSI regulations and other factors such as environmental clearances or restrictions in an area. This knowledge is extremely useful in identifying potential areas for investment. Being actively involved with the real estate market they have a high degree of awareness of various options available (listed and unlisted) and the advantages / disadvantages of each.
- Shortlisting and Inspection of Properties. Based on parameters specified by you the consultant is in a position to work out a number of options for you. This saves you considerable time and effort as after detailed discussion you can easily shortlist properties that you would like to physically visit and inspect. Further a consultant with a sharp eye knows what to inspect and where to inspect the property to check its fitness for purpose. A layman could easily overlook critical issues and faults.
- Research and Diligence. Investment in real estate requires considerable research and diligence. Diligence includes detailed study of the type of property, quality of its construction, age and condition of the property, pricing, title searches, encumbrances, liens, outstanding taxes and a host of other issues. Such a detailed study is best left to the experts who would bring the deficiencies, if any, to your notice. A good real estate consultant would take this load off your shoulders but you should remember that it does not absolve you in anyway of your own responsibility. You would still need to ask a lot of questions to clarify your mind, instead of blindly following another’s analysis.
- Valuations and Appraisals. The market is opaque and not transparent. It is difficult for an end user or an investor to be absolutely certain of the correct valuation of the property. The nagging doubt always remains about whether you are getting a fair deal or have been taken for a ride. The advice of a consultant can prove invaluable to help assess the correct value of a property. The consultant relies upon a series of tools such as comparative market analysis, cost approach or an income approach to provide you with accurate data.
- Growth Potential and Capitalization Rates. Highly qualified and experienced consultants understand where a market is positioned today and what is its likely growth potential over the period of your investment horizon. They can provide you with a fairly accurate assessment of your future rental incomes and capital appreciation based on a combination of objective and subjective methodologies.
- Negotiating Edge. Once you finalize a decision it boils down to arm’s length negotiations between the buyer and seller. Remember the consultant does this on a regular basis and his skills are sharply honed to ensure you get the best possible deal.
- Legalities. The struggle does not come to an end with the conclusion of the arm’s length negotiations, rather it is the start of another major exercise, one that deals with the transfer of ownership rights and exchange of considerations. A host of legalities are involved such as preparation of sale agreements, execution of sale deeds, mortgages, liens, registrations with revenue authorities, payment of stamp duties, taxes etc. Once again it will be your consultant to the rescue as he will help you wade through all the legalities.
- Connections and Networking. Most consultants are heavily networked across the real estate value chain. This network generally includes land owners, aggregators, developers, builders, contractors, architects, revenue and urban development authorities, lawyers, financiers, bankers, taxation experts, service providers, other consultants, owners associations etc. This network is a huge resource that can be tapped into for any specific aspect that needs to be dwelt upon.
- Professionalism. In a complex and opaque system, dealing with a multitude of independent agencies can be a mind-numbing experience. A professional consultant can bring in a sense of order and direction to what may seem like chaos to the untrained eye. Having such a surefooted and trained soldier who knows what he is doing by your side through this journey is sure to inspire you with confidence that you will make the right decision and ultimately benefit immensely from it.
Selecting the Right Real Estate Consultant. Though real estate brokers and agents abound, it is very difficult to find a well-qualified, experienced, skillful, trustworthy and professional consultant. And should you find one hang onto him for the rest of your life. Make him part of your investment loop, as not only is he in a position to advise you correctly about the real estate sector but he can also provide you with keen insights into the macro economic factors and performance of other asset classes as well. Some of the qualities that you should look for in a real estate consultant are: –
- Professional Qualification.
- Thorough knowledge of his core competence.
- High degree of professionalism.
- Transparency, Honesty and Integrity.
- Financial Prudence.
- Extraordinary ability to strategize, plan and successfully execute the plan.
- Solution centric approach.
It is abundantly clear from the above that the contribution of a real estate consultant is invaluable for ensuring optimal decision making by you, to meet your real estate needs. His support and guidance will allow you to successfully negotiate the real estate minefield and achieve all your desired goals and objectives. So, once you have found the right real estate consultant and established a genuine rapport with him, he will truly be your friend, philosopher and guide. Sticking with the right consultant over the long term will make it increasingly easier for you to pick out winning opportunities. The benefits of retaining such a consultant far outweigh the costs involved. Qualified , professional , competent and trustworthy real estate consultants prove to be a boon not only for you , but for your extended family, pool of friends and colleagues as well. You will find all of them thanking in earnest for providing a referral to such a hard to find resource.
Article by Sandeep Singh