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Real Estate

INTRODUCTION

India Real Estatemarket has been seeing multi level rise in the past few

years. If industry sources are to be believed, this upward graph has no sign

of coming down or even lying flat for few more years to come. The facts

that major real estate companies in India are going public, proves the

potential of the Indian propertymarket. Starting from infrastructure

development to residential comple, commercial real estate to retail spacedevelopment India property market is booming with all kinds of activities.

Thanks to the !overnment approval of "##$ %&I in India real estate

development and steady capital market, some all time big investments are

being made in the real estate sector. 'uyers from all across the world are

showing interest and Indian property now features at the top of the list of the

international real estate investors. In this contet, RealEstate(nline.in

provides a common platform for Indian property owners, potential buyers )

property dealers in India. *e have comprehensive listings of residential )

commercial property in all the major as well as the second tier cities in India,

including real estate in 'angalore, +umbai, &elhi, gra, -yderabad,

!urgaon, hennai, /une, 0olkata,1oidaand so on.

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http://www.realestateonline.in/http://www.realestateonline.in/http://www.realestateonline.in/agent-locator.phphttp://www.realestateonline.in/qs_res.php?qlinks=y&state=17&city=225&sort_by=1http://www.realestateonline.in/qs_res.php?qlinks=y&state=21&city=331&sort_by=1http://www.realestateonline.in/qs_res.php?qlinks=y&state=10&city=*&sort_by=1http://www.realestateonline.in/qs_res.php?qlinks=y&state=33&city=502&sort_by=1http://www.realestateonline.in/qs_res.php?qlinks=y&state=2&city=9&sort_by=1http://www.realestateonline.in/qs_res.php?qlinks=y&state=13&city=161&sort_by=1http://www.realestateonline.in/qs_res.php?qlinks=y&state=31&city=468&sort_by=1http://www.realestateonline.in/qs_res.php?qlinks=y&state=21&city=338&sort_by=1&prop_type=http://www.realestateonline.in/qs_res.php?qlinks=y&state=35&city=603&sort_by=1&prop_type=http://www.realestateonline.in/qs_res.php?qlinks=y&state=33&city=606&sort_by=1&prop_type=http://www.realestateonline.in/http://www.realestateonline.in/agent-locator.phphttp://www.realestateonline.in/qs_res.php?qlinks=y&state=17&city=225&sort_by=1http://www.realestateonline.in/qs_res.php?qlinks=y&state=21&city=331&sort_by=1http://www.realestateonline.in/qs_res.php?qlinks=y&state=10&city=*&sort_by=1http://www.realestateonline.in/qs_res.php?qlinks=y&state=33&city=502&sort_by=1http://www.realestateonline.in/qs_res.php?qlinks=y&state=2&city=9&sort_by=1http://www.realestateonline.in/qs_res.php?qlinks=y&state=13&city=161&sort_by=1http://www.realestateonline.in/qs_res.php?qlinks=y&state=31&city=468&sort_by=1http://www.realestateonline.in/qs_res.php?qlinks=y&state=21&city=338&sort_by=1&prop_type=http://www.realestateonline.in/qs_res.php?qlinks=y&state=35&city=603&sort_by=1&prop_type=http://www.realestateonline.in/qs_res.php?qlinks=y&state=33&city=606&sort_by=1&prop_type=http://www.realestateonline.in/


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Mission

To be known as the leading !roup in the real estate arena 2 known for

providing 3uality, futuristic and environment2friendly residential andcommercial solutions on time.

To be known as the leading !roup in the real estate arena 2 known forproviding 3uality, futuristic and environment2friendly residential andcommercial solutions on time.

To be known as the leading !roup in the real estate arena 2 known forproviding 3uality, futuristic and environment2friendly residential andcommercial solutions on time.

Our Vision

To provide true value2for2money residential and commercial realty solutionsto our clients. nd in the process build a relationship of mutual trust withnot only our clients but with all our associates... to make sure that all of usgrow together bigger and stronger

Real estateor immovable property is a legal term 4in some jurisdictions5

that encompasses land along with anything permanently affied to the land,such as buildings. Real estate 4immovable property5 is often consideredsynonymous with real property4also sometimes called realty5, in contrastwith personal property 4also sometimes called chattelorpersonality5.-owever, for technical purposes, some people prefer to distinguish realestate, referring to the land and fitures themselves, from real property,referring to ownership rights over real estate.

The terms real estateand real propertyare used primarily in common law,while civil law jurisdictios refer instead to immovable property.

In law, the word realmeans relating to a thing 4from 6atin res/rei, thing5, asdistinguished from a person. Thus the law broadly distinguishes between7real7 property 4land and anything affied to it5 and 7personal7 property4everything else, e.g., clothing, furniture, money5. The conceptual differencewas between immovable property, which would transfer title along with theland, and movable property, which a person would retain title to.

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Business sector

*ith the development of private property ownership, real estate has become

a major area of business. /urchasing real estate re3uires a significantinvestment, and each parcel of land has uni3ue characteristics, so the realestate industry has evolved into several distinct fields. Specialists are oftencalled on to valuate real estate and facilitate transactions. Some kinds of realestate businesses include8

ppraisal8 /rofessional valuation services 'rokerages8 ssisting buyers and sellers in transactions &evelopment8 Improving land for use by adding or replacing

buildings /roperty management8 +anaging a property for its owner4s5 Real Estate +arketing8 +anaging the sales side of the property

business Real Estate Investing8 +anaging the investment of real estate Relocation services8 Relocating people or business to a different

country

*ithin each field, a business may speciali9e in a particular type of realestate, such as residential, commercial, or industrial property. In addition,

almost all construction business effectively has a connection to real estate.

7Internet Real Estate7 is a term coined by the internet investment communityrelating to the parallel that eists between high 3uality internet domainnames and real2world, prime real estate. +any internet companies actuallyuse the address of properties as domain names.

Leels

ccording to The Economist, 7developed economies:7 assets at the end of

;##; was

Residential property8 trillion ommercial property8


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Total8


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Oerie' o( real estate #ar)ets

The main participants in real estate markets are8

O'ner*User2 These people are both owners and tenants. Theypurchase houses or commercial property as an investment and also tolive in or utili9e as a business.

O'ner2 These people are pure investors. They do not consume thereal estate that they purchase. Typically they rent out or lease the

property to someone else. Renter2 These people are pure consumers. Deelopers2 These people prepare raw land for building which

results in new product for the market. Renovators 2 These people supply refurbished buildings to the market. %acilitators 2 This includes banks, real estate brokers, lawyers, and

others that facilitate the purchase and sale of real estate.

The owneruser, owner, and renter comprise the demand side of the market,while the developers and renovators comprise the supply side. In order toapply simple supply and demand analysis to real estate markets a number ofmodifications need to be made to standard microeconomic assumptions and

procedures. In particular, the uni3ue characteristics of the real estate market

must be accommodated. These characteristics include8

Dura+ility2 Real estate is durable. building can last for decades oreven centuries, and the land underneath it is practically indestructible.'ecause of this, real estate markets are modeled as a stockflowmarket. bout F>$ of supply consists of the stock of eisting houses,while about ;$ consists of the flow of new development. The stock ofreal estate supply in any period is determined by the eisting stock inthe previous period, the rate of deterioration of the eisting stock, therate of renovation of the eisting stock, and the flow of newdevelopment in the current period. The effect of real estate marketadjustments tend to be mitigated by the relatively large stock ofeisting buildings.

,etero"eneous2 Every piece of real estate is uni3ue, in terms of itslocation, in terms of the building, and in terms of its financing. Thismakes pricing difficult, increases search costs, creates information

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asymmetry and greatly restricts substitutability. To get around thisproblem, economists 4beginning with +uth 4"FA#55 define supply interms of service units, that is, any physical unit can be deconstructedinto the services that it provides. (lsen 4"FAF5 describes these units ofhousing services as an unobservable theoretical construct. -ousingstock depreciates making it 3ualitatively different from a new

building. The market e3uilibrating process operates across multiple3uality levels. %urther, the real estate market is typically divided intoresidential, commercial, and industrial segments. It can also be furtherdivided into subcategories like recreational, income generating, area,historicalprotected, etc.

,i"$ Transaction costs2 'uying andor moving into a home costsmuch more than most types of transactions. These costs includesearch costs, real estate fees, moving costs, legal fees, land transfer

taes, and deed registration fees. Transaction costs for the sellertypically range between ".@ 2 A$ of the purchase price. In somecountries in ontinental Europe, transaction costs for both buyer andseller can range between "@ 2 ;#$.

Lon" ti#e %elays2 The market adjustment process is subject to timedelays due to the length of time it takes to finance, design, andconstruct new supply, and also due to the relatively slow rate ofchange of demand. 'ecause of these lags there is a great potential fordise3uilibrium in the short run. djustment mechanisms tend to beslow, relative to more fluid markets.

Bot$ an inest#ent "oo% an% a consu#ption "oo%2 Real estate canbe purchased with the epectation of attaining a return 4an investmentgood5, or with the intention of using it 4a consumption good5, or both.These functions can be separated 4with market participantsconcentrating on one or the other function5 or can be combined 4in thecase of the person that lives in a house that they own5. This dualnature of the good means that it is not uncommon for people to over2invest in real estate, that is, to invest more money in an asset than it isworth on the open market.

I##o+ility2 Real estate is locationally immobile 4save for mobilehomes, but the land underneath them is still immobile5. onsumerscome to the good rather than the good going to the consumer. 'ecauseof this, there can be no physical market2place. This spatial fiitymeans that market adjustment must occur by people moving todwelling units, rather than the movement of the goods. %or eample, iftastes change and more people demand suburban houses, people must

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find housing in the suburbs, because it is impossible to bring theireisting house and lot to the suburb 4even a mobile home owner, whocould move the house, must still find a new lot5. Spatial fiitycombined with the close proimity of housing units in urban areassuggests the potential for eternalities inherent in a given location.

De#an% (or $ousin"

The main determinants of the demand for housing are demographic.-owever other factors like income, price of housing, cost and availability ofcredit, consumer preferences, investor preferences, price of substitutes and

price of compliments all play a role.

The core demographic variables are population si9e and population growth8

the more people in the economy, the greater the demand for housing. 'utthis is an oversimplification. It is necessary to consider family si9e, the agecomposition of the family, the number of first and second children, netmigration 4immigration minus emigration5, non2family household formation,and the number of double family households, death rates, divorce rates, andmarriages. In housing economics, the elemental unit of analysis is not theindividual as it is in standard partial e3uilibrium models. Rather, it ishouseholds that demand housing services8 typically one household perhouse. The si9e and demographic composition of households is variable andnot entirely eogenous. It is endogenous to the housing market in the sense

that as the price of housing services increase, household si9e will tend alsoto increase.

Income is also an important determinant. Empirical measures of the incomeelasticity of demand in 1orth merica range from #.@ to #.F 4&e 6eeuw, %."FG"5. If permanent income elasticity is measured, the results are a littlehigher 40ain and Huigley "FG@5 because transitory income varies from year2to2year and across individuals so positive transitory income will tend tocancel out negative transitory income. +any housing economists use

permanent income rather than annual income because of the high cost ofpurchasing real estate. %or many people, real estate will be the most costlyitem they will ever buy.

The price of housing is also an important factor. The price elasticity of thedemand for housing services in 1orth merica is estimated as negative #.G

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by /olinsky and Ellwood 4"FGF5, and as negative #.F by +aisel, 'urnham,and ustin 4"FG"5.

n individual households housing demand can be modeled with standardutilitychoice theory. utility function, such as CJC4K", K;, K?, K=...Kn5,can be constructed in which the households utility is a function of variousgoods and services 4Ks5. This will be subject to a budget constraint such as/"K"L/;K;L.../nKnJM, where M is the households available income andthe /s are the prices for the various goods and services. The e3ualityindicates that the money spent on all the goods and services must be e3ual tothe available income. 'ecause this is unrealistic, the model must be adjustedto allow for borrowing andor saving. measure of wealth, lifetime income,or permanent income is re3uired. The model must also be adjusted toaccount for the heterogeneousness of real estate. This can be done by

deconstructing the utility function. If housing services 4K=5 is separated intothe components that comprise it 4D", D;, D?, D=,...Dn5, then the utilityfunction can be rewritten as CJC4K", K;, K?, 4D", D;, D?, D=,...Dn5...Kn5'y varying the price of housing services 4K=5 and solving for points ofoptimal utility, that household:s demand schedule for housing services can

be constructed. +arket demand is calculated by summing all individualhousehold demands.

Supply o( $ousin"

-ousing supply is produced using land, labour, and various inputs such aselectricity and building materials. The 3uantity of new supply is determined

by the cost of these inputs, the price of the eisting stock of houses, and thetechnology of production. %or a typical single family dwelling in suburban

1orth merica, approimate percentage costs can be broken down as8ac3uisition costs "#$, site improvement costs ""$, labour costs ;A$,materials costs ?"$, finance costs ?$, administrative costs "@$, andmarketing costs =$. +ulti2unit residential dwellings typically break downas8 ac3uisition costs G$, site improvement costs >$, labour costs ;G$,

materials costs ??$, finance costs =$, administrative costs "G$, andmarketing costs @$. /ublic subdivision re3uirements can increasedevelopment cost by up to ?$ depending on the jurisdiction. &ifferences in

building codes account for about a ;$ variation in development costs.-owever these subdivision and building code costs typically increase themarket value of the buildings by at least the amount of their cost outlays.

production function such as HJf46,1,+5 can be constructed in which H is

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the 3uantity of houses produced, 1 is the amount of labour employed, 6 isthe amount of land used, and + is the amount of other materials. This

production function must, however, be adjusted to account for therefurbishing and augmentation of eisting buildings. To do this a second

production function is constructed that includes the stock of eistinghousing, and their ages, as determinants. The two functions are summedyielding the total production function. lternatively an hedonic pricingmodel can be regressed.

The long2run price elasticity of supply is 3uite high. !eorge %allis estimatesit as >.; 4%allis, !. "F>@5, but in the short run supply tends to be very priceinelastic. Supply price elasticity depends on the elasticity of substitution andsupply restrictions. There is significant substitutability both between landand materials, and between labour and materials. In high2value locations,

multi2story concrete buildings are typically built to reduce the amount ofepensive land used. s labour costs increased since the "F@#s, newmaterials and capital intensive techni3ues have been employed to reduce theamount of relatively epensive labour used. -owever supply restrictions cansignificantly affect substitutability. In particular the lack of supply of skilledlabour 4and labour union re3uirements5, can constrain the substitution fromcapital to labour. 6and availability can also constrain substitutability if thearea of interest is delineated 4that is, the larger the area, the more suppliersof land, and the more substitution that is possible5. 6and use controls such as9oning bylaws can also reduce land substitutability.

T$e a%ust#ent #ec$anis#

The basic adjustment mechanism is a stockflow model to reflect the factthat about F>$ the market is comprised of eisting stock and about ;$consists of the flow of new buildings.

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In the diagram to the right, the stock of housing supply is presented in theleft panel while the new flow is in the right panel. There are four steps in the

basic adjustment mechanism. %irst, the initial e3uilibrium price 4Ro5 is

determined by the intersection of the supply of eisting housing stock 4S,5and the demand for housing 4D5. This rent is then translated into value 4Vo5via discounting cash flows. Nalue is calculated by dividing current periodrents by the discount rate, that is, as a perpetuity. Then value is compared toconstruction costs 4CC5 in order to determine whether profitableopportunities eist for developers. The intersection of construction costs andthe value of housing services determine the maimum level of new housingstarts 4,So5. %inally the amount of housing starts in the current period isadded to the available stock of housing in the net period. In the net period,

supply curve S,will shift to the right by amount ,So.

A%ust#ent 'it$ %epreciation

The diagram to the left shows the effects of depreciation. If the supply ofeisting housing deteriorates due to wear, then the stock of housing supplydepreciates. 'ecause of this, the supply of housing 4S,o5 will shift to theleft 4to S,15 resulting in a new e3uilibrium price of R1. The increase of

prices from Roto R1will shift the value function up 4from Voto V15. s aresult, more houses can be produced profitably and housing starts willincrease 4from ,Soto ,S15. Then the supply of housing will shift back toits initial position 4S,1to S,o5.

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Increase in %e#an%

The diagram on the right shows the effects of an increase in demand in theshort run. If there is an increase in the demand for housing, such as the shiftfrom Doto D1there will be either a price or 3uantity adjustment, or both.%or the price to stay the same, the supply of housing must increase. That is,supply S,omust increase by ,S.

Increase in costs

The diagram on the left shows the effects of an increase in costs in the short2run. If construction costs increase 4say from CCoto CC15, developers willfind their business less profitable and will be more selective in their

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ventures. In addition some developers may leave the industry. The 3uantityof housing starts will decrease 4,Soto ,S15. This will eventually reducethe level of supply 4from S,oto S,15 as the eisting stock of housingdepreciates. /rices will tend to rise 4from Roto R15.

Real estate tren%s

Real estate tren%sis a generic term used to describe any consistent patternor change in the general direction of the real estate industry which, over thecourse of time, causes a statistically noticeable change. This can be a resultof the economy, a change in mortgage rates, consumer speculations, or otherfundamental and non2fundamental reasons.

real estate trend is the catalyst for the change, and it is usually a concept, abelief, a philosophy, or an event. Sometimes a real estate trend evolves tomeet a specific need, while others evolve when new products or solutionsare launched. %or eample, when more lenders began offering creativefinancing products, more borrowers were able to afford a mortgage 4at leaston paper5. t other times, a trend from another industry spills over into thereal estate industry and is adopted.

Therefore, a trend must have substance and be based on fact. (ver time, itwill cause pattern of change. +onitoring changes and tracking trends is a not

an eact science and can be very hard to predict.

The residential real estate brokerage industry is approimately half waythrough a "# 2"@ year industry transition. This major shift is creating afundamental change in the way homes are being bought and sold and therole the real estate agents are playing therein.

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Real estate +ro)er

Real estate +ro)eris a party who acts as an intermediary between sellersand buyers of real estate and attempts to find sellers who wish to sell and

buyers who wish to buy. In the Cnited States, the relationship was originallyestablished by reference to the English common law of agency with the

broker having a fiduciary relationship with his clients. Estate agent is theterm used in the Cnited 0ingdom to describe a person or organi9ation whose

business is to market real estate on behalf of clients.

In the CS, real estate brokers and their salespersons 4commonly called 7realestate a"ents7 or, in some states, 7brokers75 assist sellers in marketing their

property and selling it for the highest possible price under the best terms.*hen acting as a 'uyer:s agent with a signed agreement 4or, in many cases,

verbal agreement, although a broker may not be legally entitled to hiscommission unless the agreement is in writing5, they assist buyers byhelping them purchase property for the lowest possible price under the bestterms. *ithout a signed agreement, brokers may assist buyers in theac3uisition of property but still represent the seller and the seller:s interests.

In most jurisdictions in the Cnited States, a person is re3uired to have alicensein order to receive remuneration for services rendered as a real estate

broker. Cnlicensed activity is illegal, but buyers and sellers acting asprincipals in the sale or purchase of real estate are not re3uired to be

licensed. In some states, lawyersare allowed to handle real estate sales forcompensation without being licensed as brokers or agents.

T$e %i((erence +et'een salespersons an% +ro)ers

In the past, when brokers 4and their agents5 only represented sellers, the termOreal estate salesperson may have been more appropriate than it is today,given the different ways that brokers and their agents can help a buyerthrough the process rather than simply Psell him or her a property. 6egallyhowever, the term :salesperson: is still used in many states to describe a realestate agent.

Real estate e%ucation8 In order to become licensed, most states re3uire thatan applicant take a minimum number of classes before taking the statelicensing eam. Such education is often provided by real estate brokeragesas a means to finding new agents.

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Today in many states, the real estate agent 4acting as an agent of the brokerwith whom heshe is employed5 is re3uired to disclose to prospective buyersand sellers who represents whom. See below for a brokeragentsrelationship to sellers and their relationship to buyers.

*hile some people may refer to any licensed real estate agent as a real estatebroker, a licensed real estate a"entis a professional who has obtained eithera real estate salesperson4s license or a real estate broker:s license.

In the Cnited States, there are commonly two levels of real estateprofessionals licensed by the individual states, but not by the federalgovernment8

Real estate salesperson4or, in some states, Real estate +ro)er5

*hen a person first becomes licensed to become a real estate agent, hesheobtains a real estate salesperson:s license 4or some states use the alternativeterm, 7broker75 from the state in which heshe will practice. If you want toobtain a real estate license, the candidate must take specific coursework 4of

between =# and F# hours5 and then pass a state eam on real estate law andpractice. In order to work, salespersons must then be associated with 4andact under the authority of5 a real estate broker.

+any states also have reciprocal agreements with other states, allowing a

licensed individual from a 3ualified state to take the second state:s eamwithout completing the course re3uirements, or, in some cases, take only astate law eam.

Real estate +ro)er4or, in some states, 5uali(yin" Bro)er5

fter gaining some years of eperience in real estate sales, a salespersonmay decide to become licensed as a real estate broker 4or/rincipalHualifying broker5 in order to own, manage or operate hisher own

brokerage. ommonly more course work and a broker:s state eam on real

estate law must be passed. Cpon obtaining a broker:s license, a real estateagent may continue to work for another broker in a similar capacity as

before 4often referred to as a +ro)er associateor associate +ro)er5 or takecharge of hisher own brokerage and hire other salespersons 4or broker5licensees. 'ecoming a branch office manager may or may not re3uire a

broker:s license. Some states such as 1ew Mork allow licensed attorneys to

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become real estate brokers without taking any eam. In some states, such asolorado, there are no 7salespeople7, as all licensees are 'rokers.

RE6T(R, pronounced PReal2torQ, is a real estate salesperson or brokerwho is a member of the 1ational ssociation of Realtors 41R5. llRealtors are brokerssalespersons, but not all brokerssalespersons areRealtors.

A"ency relations$ips 'it$ clients ersus Non6A"ency relations$ips 'it$

custo#ers

A"ency relations$ip8 Traditionally, the broker provides aconventional full2service, commission2based brokerage relationshipunder a signed listing agreement with a seller or 7buyer

representation7 agreement with a buyer, thus creating under commonlaw in most states an agency relationship with fiduciary obligations.The seller or buyer is then a client of the broker. Some states alsohave statutes which define and control the nature of therepresentation.

gency relationships in residential real estate transactions involve the legalrepresentation by a real estate broker 4on behalf of a real estate company5 ofthe principal, whether that person or persons is a buyer or a seller. The

broker 4and hisher licensed real estate agents5 then becomes the agent of the

principal.

Non6a"ency relations$ip8 where neither written agreement norfiduciary relationship eists, a real estate broker 4and his agents5works with a principal who is then known as the brokers customer.*hen a buyer, who has not entered into a 'uyer gency agreementwith the broker and buys a property, then that broker functions as thesub2agent of the sellers broker. *hen a seller chooses to work with atransaction broker, there is no agency relationship created.

Transaction +ro)ers

Some state Real Estate ommissions, notably %lorida:s after "FF; 4andetended in ;##?5 and olorado:s after "FF= 4with changes in ;##?5,created the option of having no agency nor fiduciary relationship between

brokers and sellers or buyers. -aving no more than a facilitator relationship,transaction brokers assists buyers, sellers, or both during the transaction

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without representing the interests of either party who may then be regardedas customers.

s noted by the South 'roward 'oard of Realtors, Inc. in a letter to State of%lorida legislative committees 8

7The Transaction 'roker crafts a transaction by bringing a willingbuyer and a willing seller together and assists with the closing ofdetails. The Transaction 'roker is not a fiduciary of any party, butmust abide by law as well as professional and ethical standards.74such as 1R ode of Ethics5

The result was that in ;##?, %lorida created a system where the defaultbrokerage relationship had 7all licensees operating as transaction brokers,

unless a single agent or no brokerage relationship is established, in writing,with the customerQ and the statute re3uired written disclosure of thetransaction brokerage relationship to the buyer or seller customer onlythrough uly ", ;##>.

In both %lorida and olorado:s case, dual agency and sub2agency 4whereboth listing and selling agents represented the seller5 no longer eist.

Dual or li#ite% A"ency

&ual agency occurs when the same brokerage represents both the seller andthe buyer under written agreements. Individual state laws vary and interpretdual agency rather differently.

+any states no longer allow dual agency. Instead, Transaction Brokerage4see above5 provides the 'uyer and Seller with a limited form ofrepresentation, but without any fiduciary obligations4see %lorida law5.'uyers 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 re3uire written &isclosures to be signed by all parties

outlining the duties and obligations.

If state law allows for the same agent to represent both the buyer andthe seller in a single transaction, the brokerageagent is typicallyconsidered to be aDual Agent. Special lawsrules often apply to dualagents, especially in negotiating price.

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In some states 4notably +aryland5, &ual gency can be practiced insituations where the same brokerage 4but not agent5 represent both the

buyer and the seller. If one agent from the brokerage has a home listedand another agent from that brokerage has a buyer2brokerageagreement with a buyer who wishes to buy the listed property, &ualgency occurs by allowing each agent to be designated as Pintra2companyQ agent. (nly the broker himself is the &ual gent.

Some states do allow a broker and one agent to represent both sides ofthe transaction as dual agents. In those situations, conflict of interest ismore likely to occur.

Types o( serices t$at a +ro)er can proi%e

Since each state:s laws may differ from others, it is generally advised that

prospective sellers or buyers consult a licensed real estate professional.

Some Eamples8

omparative +arket nalysis 2 an estimate of the home:s valuecompared with others. This differs from an appraisal in that propertycurrently for sale may be taken into consideration 4competition for thesubject property5.

Eposure 2 +arketing the real property to prospective buyers. %acilitating a /urchase 2 guiding a buyer through the process.

%acilitating a Sale 2 guiding a seller through the selling process. %S'( document preparation 2 preparing necessary paperwork for

7Sale 'y (wner7 sellers. %ull Residential ppraisal 2 but only, in most states, if the broker is

also licensed as an appraiser. -ome Selling 0its 2 guides to how to market and sell a property. -ourly onsulting for a fee, based on the client:s needs. 6easing for a fee or percentage of the gross lease value. /roperty +anagement. Echanging property. uctioning property. /reparing contracts and leases. 41ot in all states.5

These services are also changing as a variety of real estate trends re2engineerthe industry.

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7eneral

The sellers and buyers themselves are the principalsin the sale, and realestate brokers 4and the broker:s agents5 are their agents as defined in the law.-owever, although a real estate agent commonly fills out the real estatecontract form, agents are typically not given power of attorney to sign thereal estate contract or the deedB the principals sign these documents. Therespective real estate agents may include their brokerages on the contract asthe agents for each principal.

The use of a real estate broker is not a re3uirement for the sale orconveyance of real estate or for obtaining a mortgage loan from a lender.

-owever, once a broker is used, the settlement attorney 4or party handlingclosing5 will ensure that all parties involved be paid. 6enders typically haveother re3uirements, though, for a loan.

Serices proi%e% to +ot$ +uyers an% sellers

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

Real estate brokers 4and their agents5 typically do notprovide title service

such as title search or title insurance, do notconduct surveys or formalappraisals of the property such as those re3uired by lenders, and do notactas lawyers for the parties, although they may 7coordinate7 these activitieswith the appropriate specialists. Some real estate brokers may be associatedwith loan officers who may help to finance buyers to make their purchase.

Regardless of whether a real estate agent assists sellers or buyers of realestate, negotiation and financing skills are important.

MBA 1STSEMESTER 10


19/43

T$e 8listin"8 contract

Several types of listing contracts eist between broker and seller. These maybe defined as8

Eclusive Right to Sell

In this type of greement7, the broker is given the eclusive right to marketthe property and represents the seller eclusively. This is referred to as Sellergency. -owever, the brokerage also offers to co2operate with other brokersand agrees to allow them to show the property to prospective buyers andoffers a share of the total real estate commission.

Eclusive gency

n alternative form, 7Eclusive gency7, allows only the broker the right tosell the property, and no offer of compensation is ever made to another

broker. In that case, the property will never be entered into an +6S.1aturally, that limits the eposure of the property to only one agency.

(pen 6isting

This is an greement whereby the property is available for sale by any realestate professional that can advertise, show, or negotiate the sale. *hoever

first brings an acceptable offer would receive compensation. Real estatecompanies will typically re3uire that a written agreement for an open listingbe signed by the seller to ensure the payment of a commission if a saleshould take place.

lthough there can be other ways of doing business, a real estate brokerageusually earns its commission after the real estate broker and a seller enterinto a listing contract and fulfill agreed2upon terms specified within thatcontract. The seller:s real estate is then listedfor sale, fre3uently with

property data entered into a +ultiple 6isting Service 4+6S5 in addition to

any other ways of advertising or promoting the sale of the property.

In most of 1orth merica, where brokers are members of a nationalassociation 4such as 1R in the Cnited States or the anadian Real Estatessociation5, a listing agreement or contract between broker and seller mustinclude the following8 starting and ending dates of the agreementB the priceat which the property will be offered for saleB the amount of compensation

MBA 1STSEMESTER 1


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due to the broker and how much, if any, will be offered to a co2operatingbroker who may bring a buyer. *ithout an offer of compensation to a co2operating broker 4co2op percentage or flat fee5, the property may not beadvertised in the +6S system.

Bro)era"e co##issions

In consideration of the brokerage successfully finding a satisfactory buyerfor the property, a broker anticipates receiving a commission for the servicesthe brokerage has provided. Csually, the payment of a commission to the

brokerage is contingent upon finding a satisfactory buyer for the real estatefor sale, the successful negotiation of a purchase contract between asatisfactory buyer and seller, or the settlement of the transaction and theechange of money between buyer and seller.

In 1orth merica commissions on real estate transactions are negotiable andhave been under pressure for numerous reasons the average commission hasdeclined during the last decade from A$ to about @$. Real estatecommission is typically paid by the seller at the closing of the transaction asdetailed in the listing agreement.

growing alternative commission structure is the fee2for2service, fied2fee,a la carte or flat2fee structure. Real estate trends have caused the unbundlingof real estate brokerage services and according to the ;##G Swanepoel

Trends Report rising costs and cost2conscious consumers are now eploringnew innovative business models such as a la carte, multi2level marketing,residual, auctioneering and other discount or online real estate models.

RES9A

Real estate brokers who work with lenders may not receive anycompensation from the lender for referring a client to a specific lender. Todo so would be a violation of a 4CS5 federal law known as the Real EstateSettlement /rocedures ct 4RES/5. ll compensation to a broker must be

disclosed to all parties.

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Loc)+o:

*ith the sellers permission, a lockbo is placed on homes that are occupiedand, after arranging an appointment with the home owner, agents can showthe home. *hen a property is vacant or where a seller may be livingelsewhere, a lockbo will generally be placed on the front door. The listing

broker helps arrange showings of the property by various real estate agentsfrom all companies associated with the +6S.

The lockbo contains the key to the door of the property and the bo canonly be opened by licensed real estate agents 4often only with authori9ationfrom the listing brokerage5, by using some sort of secret combination orcode provided by the brokerage or the issuer of the lockbo.

6ockboes come in two varieties 2 mechanical and electronic. +echanicallockboes utili9e a combination dial or special mechanical key and arereadily purchased at local home improvement centers or over the internet.+echanical lockboes offer the most basic protection of the homeowner:skey and therefore epose the most risk of unmonitored or potentiallyunauthori9ed access to the home during the sales process. The risk stems

primarily from an agent forgetting to change the combination after each sale.The fre3uency of use of mechanical lockboes by agents has steadilydeclined due to the availability of more secure electronic lockboes.

Electronic lockboes increase the level of security because agents wishing toshow a property must have a valid electronic key to open the bo. Theelectronic key must be renewed or refreshed at regular intervals by the agentotherwise the key deactivates itself preventing access to the lockbocontents. Electronic keys can range from credit card si9ed smart cards to aseparate electronic bo. In addition to greater security, electronic lockboestypically record all key access activity internally. This access log can bedownloaded and reviewed by the listing agent to determine the date, timeand person accessing the lockbo. Electronic lockboes also offer a host ofother features such as controlling allowed showing times, homeowner

privacy modes, special showing restrictions etc.

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S$are% co##issions 'it$ co6op +ro)ers

If any buyer:s broker 4or any of hisher agents5 brings the buyer for the

property, the buyer:s broker would typically be compensated with a co2opcommission coming from the total offered to the listing broker, often abouthalf of the full commission from the seller. If an agent or salespersonworking 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 theco2op commission, again as determined in a separate agreement. discount

brokerage may offer a reduced commission in the event no other brokeragefirm is involved and no co2op commission is paid out.

If there is no co2commission to pay to another brokerage, the listingbrokerage receives the full amount of the commission minus any other typesof epenses.

9otential points o( contention (or a"ents

Real estate commissions are becoming a point of controversy. -ome valuesin many areas have 3uadrupled over the past ;# years. This may becontributing to the increased number of licensed agents and growingcompetition between them. The number of real estate agents in areas tends to

rise when home values do, and the productivity of eisting agents goesdown. The rewards have increased, but so have the demands of clients and

business risks faced by agents. In 1orth merica, agents have had tobecome familiar with marketing through the internet as well as traditionalprint and other media. dditionally the law is complicated with issues suchas defects in housing, grow houses and other issues of which the agent is thefront line defense for his client. There is more liability than ever in advising

buyers and sellers.

nother controversy eists for the commissions to real estate agents. If a

listing agent sells a property for any amount above the listed price, he in turnwill make additional income. In theory, this will motivate himher to get topdollar price for his client, the seller. -owever, if the agent representing the

buyer attempts to obtain a lower sales price for his client, then heshe wouldmake 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.

MBA 1STSEMESTER 22


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In practical terms, there is rarely a great enough difference between thelisting 4asking5 price and the negotiated selling price to make a significantdifference between the commissions generated on each side, and certainlyhardly enough to justify an agent failing in his fiduciary duty to obtain the

best terms for hisher client.

nother potential conflict of interest eists when a listing agent in a veryactive real estate market has incentive to sell properties 3uickly atunnecessarily low prices in order to benefit from a high volume of sales.

In any case, agents who create satisfied clients and develop subse3uentreferrals are likely to do far better in the long run.

Real estate +ro)ers an% +uyers

Serices proi%e% to +uyers;

Buyers as clients

*ith the increase in the practice of buyer brokerage in the CS, especiallysince the late "FF#s in most states, agents 4acting under their brokers5 have

been able to represent buyers in the transaction with a written 7'uyergency greement7 not unlike the 76isting greement7 for sellers referredto above. In this case, buyers are clientsof the brokerage.

Some real estate brokerages choose only to represent buyers in an eclusivebuyer:s agency relationship and do not take 7listings7 from sellers.

real estate brokerage attempts to do the following for the buyers of realestate only when they represent the buyers with some form of written buyer-brokerage agreement8

%ind real estate in accordance with the buyers needs, specifications,and cost.

Takes buyers to and shows them properties available for sale. *hen deemed appropriate, prescreens buyers to ensure they are

financially 3ualified to buy the properties shown 4or uses a mortgageprofessional to do that task5.

1egotiates price and terms on behalf of the buyers and preparesstandard real estate purchase contract by filling in the blanks in thecontract form. The buyer:s agent acts as a fiduciary for the buyer.

MBA 1STSEMESTER 2!


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&ue to the importance of the role of representing buyers: interests, manybrokers who seek to play the role of client advocate are now seeking out theservices of ertified +ortgage /lanners, industry eperts that work inconcert with ertified %inancial /lanners to align consumers: home finance

positions with their larger financial portfolio4s5.

Buyers as custo#ers

In most states, until the "FF#s, buyers who worked with an agent of a realestate broker in finding a house were custo#ersof the brokerage, since the

broker represented only sellers.

Today, state laws differ. 'uyers andor sellers may be represented.Typically, a written 7'uyer 'rokerage7 agreement is re3uired for the buyer

to have representation 4regardless of which party is paying the commission5,although by hisher actions, an agent can create representation.

%ind real estate in accordance with the buyers needs, specifications,and affordability.

Take buyers to and shows them properties available for sale. *hen deemed appropriate, prescreen buyers to ensure they are

financially 3ualified to buy the properties shown 4or uses a mortgageprofessional to do that task5.

ssist the buyer in making an offer for the property.

T$e i#pact o( "lo+ali


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inoculations his or her children will need as well as the steps needed toregister a car in the Cnited States. Real estate brokers want to keep central tothe transaction, protect the best interests of their members and address theuni3ue needs of each multicultural global client by ac3uiring speciali9edtraining and designations. 4See below for more5

Recently the +eican association of real estate practitioners in +eico,+/I, and the 1R, 1ational ssociation of Realtors in the CS, signed a

bilateral contract for international real estate business cooperation. lso atthe local level, many other state and local associations are helping othercountries achieve the same result. %or instance, in 1ew +eico, ahistorically multicultural state, under the R1+, Realtor ssociation of

1ew +eico and the /residents dvisory ouncil, is looking into formingan ambassador association to help a foreign country into signing a bilateral

agreement with the 1R. In 1ew +eico, there are =@## licensed real estateprofessionals and only "= or "@ I/S designees, out of whom, only A speaka language other than English.

Real estate +ro)ers * a"ents an% (urt$er e%ucation

In addition to completing the educational re3uirements for a state real estatelicense, most states issue real estate licenses for limited time periods andre3uire real estate professionals to complete a certain number of hours offurther education on an annual or biannual basis in order to renew their

licenses.

Re3uired course hours range from "# to ;# per license period. Typically,some specific courses are re3uired to be takenB these would include realestate law updates.

NAR e%ucational re=uire#ents an% reco"ni


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The most well known 1R sponsored designations are the following8

Accre%ite% Buyer Representatie4'R5. The Real Estate 'uyersgent ouncil has over =#,### members and is the largest associationof real estate professionals focusing on all aspects of buyerrepresentation. (f the RE' members, over ?#,### have completedRE's two2day course and provided documentation of buyeragency eperience. 6inked to the 'R is the 'R+, ccredited'uyer Representative +anager 4'R+5 for managers.

Accre%ite% Lan% Consultant465. 6s are the recogni9edeperts in land brokerage transactions of all kinds of speciali9ed landservices including farms and ranches, raw land sales anddevelopment.

Certi(ie% Co##ercial Inest#ent Me#+er4I+5. I+s arerecogni9ed eperts in commercial real estate brokerage, leasing,valuation and investment analysis. There are more than G,@##designees and an e3ual number of candidates principally in 1orthmerica, but also in sia and Europe.

Certi(ie% 9roperty Mana"er4/+5. !eared to real estate propertymanagement specialists, designees handle all forms of managementfrom residential to commercial to industrial.

Certi(ie% Real Estate Bro)era"e Mana"er4R'5. The designationis awarded to RE6T(RS who have completed the ouncil:sadvanced educational and professional re3uirements. R' designeesconsistently increase their level of industry knowledge, advance theirearning and career potential, increase their firms profitability and

benefit from active involvement in our network of real estateprofessionals.

Certi(ie% Resi%ential Specialist4RS5. &esignees, with ==,###

members 2 =$ of 1R members 2 who average =? transactions peryear and earn four times as much as the average Realtor, belong to theouncil of Residential Specialists which is the largest affiliate of

1R. They are involved in over ;G$ of all transactions because theconsumer prefers to work with a more knowledgeable and seasoned

brokers or agents. Re3uirements for this designation include a total ofat least ;@ transactions 4or specific


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time period, significant eperience, as well as complete rigorouseducational re3uirements.

Certi(ication (or Internet 9ro(essionalis#4e2/R(5. n e2/R( is aRealtor who has undergone a new training program presented entirelyonline in order to be certified as Internet /rofessionals. 1R is thefirst major trade group to offer certification for online professionalismwhich involves all aspects of doing business on the internet.

Certi(ie% International 9roperty Specialist4I/S5. Realtors withthe I/S designation have both hands2on eperience in internationalreal estate transactions, *hether traveling abroad to put transactionstogether, assisting foreign investors, helping local buyers investabroad, or serving an immigrant niche in local markets. I/S

designees have also successfully completed an intensive program ofstudy focusing on critical aspects of transnational transactions,including currency and echange rate issues and cross2culturalrelationships, regional market conditions, investment performance, taissues and more. The I/S network is comprised of ",@## real estate

professionals from @# countries who deal in all types of real estate.

Counselor o( Real Estate4RE5. RE designee is one of only","## by2invitation2only members of an international group of

professionals who provide seasoned, objective advice on real property

and land2related matters.

7ra%uate o( t$e Realtors> Institute4!RI5. The !RI designation isheld by "F$ of Realtors and courses are offered through state Realtorssociations with F# hours of coursework on marketing and servicinglisted properties to real estate law. In a ;##? survey, 1R hasdetermined that !RIs earned over


28/43

C$an"in" In%ustry

The real estate brokerage industry is approimately half way through a "#2"@ year industry transition. This major shift is creating a fundamentalchange in the way homes are being bought and sold and the role the realestate agents are playing therein and many new real estate brokerage modelsare evolving.

ompensation has traditionally been based on a percentage of the salesprice, split between the buying and selling brokers, and then between theagent4s5 and hisher real estate agency. *hile a split based on the percentagereceived by the broker is generally normal, in some brokerages agents may

pay a monthly 7desk fee7 for office costs, monthly fee, etc. and then retain"##$ of the commission received.

The business and compensation structures are however changing as the realestate trends create various new real estate models and real estate relatedservices such as Dillow, Red fin, Trulia, /oint;, -ouse values,Realestate.com and RealEstateStoreCS.com.

T$e Dan"erous Disconnect Bet'een ,o#e 9rices an%

?un%a#entals

Today:s home prices can best be described as a recession in the making, butare most often referred to as a bubble. /rices have grown so much in the last

decade that they are now completely disconnected from the fundamentals

that have historically ruled the real estate market. Today:s prices are not

sustainable and the graphs and analysis below demonstrate why.

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T$e Disconnect Bet'een @a"es an% ,o#e 9rices

/rice increases are nothing new, since home values tend to go up over time.

*hat makes this housing bubble different 4besides the fact that it is the

largest bubble in C.S. history5 is the dangerous disconnect between home

prices and the basic fundamentals that typically rule the housing market.

%or eample, increases in home prices typically keep pace with increases in

wages. 'ut this has not happened. 1ational median home prices haveincreased by more than =@ percent in the last decade 4when adjusted for

inflation5. +edian wages per worker, on the other hand, have only increased

by "# percent in the same period.

s a result, for almost the first time ever, individuals who are making the

median household income cannot afford to buy a median priced home.

In order to 3ualify buyers for loans, lenders loosened credit regulations andencouraged risky mortgage products like interest2only loans, negative

amorti9ation loans and R+ loans. This made it easier to get a mortgage,

but admittedly much harder to keep it.

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In recent years, a large portion of the buyers bought out of their price range.

In many cases, their loan 3ualification was based on a teaser rate andor an

interest2only mortgage payment. 1ow that the interest rate is due to reset on

these loans, millions will not be able to afford their mortgage and will likelylose their homes to foreclosure.

T$e Disconnect Bet'een Rents an% ,o#e 9rices

lso disconcerting is the disconnect between rents and home prices. t one

point, the only thing that stopped most people from buying versus renting

was lack of a down payment. Sure, it cost a little more each month to buy 2

but not much.

'ut thanks to the housing boom, everything has changed. -ome price

increases have far outpaced rent increases, rising =@ percent in the last ten

years. In the same time period, rents, like wages, increased by only "#

percent.

1ationally, it now costs A# percent less to rent than it does to buy. 'ut for

some reason, this hasn:t stopped people from buying. 'etween "FF@ and

present day, the homeownership rate has soared. In contrast, the number of

people who rent has declined for the first time since **II.

Since we already know that rising wages and lower home prices were a

factor, the increase in homeownership can be easily traced back to the

lenders who loosened credit and mortgage lending restrictions. Thanks to

these lenders, buyers who would have never stood a chance of getting a

mortgage just a few years ago were now being approved for outrageous

amounts of money.

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T$e Disconnect Bet'een ,o#e 9rices an% ,o#e Sales

lthough the disconnect between home prices and home sales was not

present during the housing boom, it most certainly is now. The public has

either lost interest or simply can:t afford to buy into the current housing

market. -ome sales have slowed nationally, and are down significantly in

cities within alifornia, %lorida, 1evada, +ichigan and (hio.

s a result, supply has now eceeded demand in most areas. It would take

several months, and in some cases years, to sell all of the homes that are

currently on the market. Met, home prices are staying level for the most part

2 for now. If sales do not pick up soon, home prices will most definitely

begin to fall.

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S,RI RIS,NA REALESTATE A7ENC

?, 6K+I 1RM1, S(IETM R(& 1( ",(!ES-*RM U 4E5, +C+'I2=###A#.

STTCS 8 @/RTE1ERS

SSESS. MER 8 ;##>2;##F

!IR/1 1( 8 ++S;AF@1*d

COM9UTATION O? TOTAL INCOME

BUSINESS INCOME

1ET/R(%IT S /ER 'CSI1ESS >=,FG#.##

OT,ER SOURCES 1I6

!R(SS T(T6 I1(+E >=,FG#.##

T(T6 TK'6E I1(+E >=,FG#.##

TK'6E I1(+E R(C1&(%% us ;>> >=,FG#.##

I1(+E TK /M'6E 1I6

MBA 1STSEMESTER !2


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S,RI RIS,NA ESTATE A7ENC

9RO?IT AND LOSS ACOUNT for the year ended ?"st +arch, ;##>

9articulars Rs 9articulars Rs

To Shop Rent ",;#,### 'y Telephone G;,###

To Telephone Epenses "@,### 'y ommission Received ;,##,###

To Electricity G,@##

To /rofession Ta ;",#>#

To onvinces @,###

To Repair ) +aintenance 1I6

To Stationary @,###

To &epreciation A,F@#

To +iscellaneousEpenditures

A,@##

To 1et /rofit >=,FG#

2/233

3

2/2333

MBA 1STSEMESTER !!


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S,RI RIS,NA ESTATE A7ENC

BALANCES,EET s on ?"st +arch, ;##>

Lia+ilities Rs Assets Rs

apital ?,##,### %ied ssets 8 ==,@##

6ess8 &epreciation A,F@#

?G,@@#

dd8 1et /rofit >=,FG# Investment 1I6

&eposit8

+T16 @#,###Electricity ;,@##Shop ",##,###

"@;@##

'ank8%ied &eposit ",##,###urrent c @#,###

"@####

ash t -and ==,F;#

!0&/

3

!0&/3

MBA 1STSEMESTER !&


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S,RI RIS,NA REALESTATE A7ENC

?, 6K+I 1RM1, S(IETM R(& 1( ",(!ES-*RM U 4E5, +C+'I2=###A#.

STTCS 8 @/RTE1ERS

SSESS. MER 8 ;##F2;#"#

!IR/1 1( 8 ++S;AF@1*d

COM9UTATION O? TOTAL INCOME

BUSINESS INCOME

1ET/R(%IT S /ER 'CSI1ESS ", ;F,?##.##

OT,ER SOURCES 1I6

!R(SS T(T6 I1(+E ", ;F,?##.##

T(T6 TK'6E I1(+E ", ;F,?##.##

TK'6E I1(+E R(C1&(%% us ;>> ", ;F,?##.##

I1(+E TK /M'6E 1I6

MBA 1STSEMESTER !-


36/43

S$ri ris$na Estate A"ency

9ro(it Loss Account %or the year ended ?"st +arch, ;##F


Rent ",;#,### 'y Telephone G@,A##

Telephone "@,### 'y ommissionReceived

;,@#,###

Electricity >,###

onveyance A,###

Repair )+aintanous

;,###

Stationary @,###

&ep. A,F@#

+is.ep >,###

/rofession ;A,?@#

1et profit ",;F,?##

!2-.33 !2-.33

S$ri ris$na Estate A"ency

MBA 1STSEMESTER !.


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BALANCES,EET s on ?"st +arch, ;##F

Lia+ilities Rs Assets Rs'al. '& ",F=,F;# %ied ssets 8 ?G,@@#

6ess8 &epreciation A,F@#

?#,A##

dd8 1et /rofit ",;F,?## Investment 1I6

dd82 'ank Int. A,?G@ &eposit8

+T16 @#,###Electricity ;,@##Shop ",##,###

",@;,@##

'ank8%ied &eposit ",##,###urrent c =#,###

",=#,###

ash t -and G,=F@

!!3-

-

!!3--

MBA 1STSEMESTER !/


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RATIO>s

9roprietary Ratio6

/roprietary Ratio is a test of the financial and credit strength of the business.It is related with shareholders funds and total assets. This ratio determinesthe long term or ultimate solvency of the business. It is also called PNetorth to Total Assets !atioQ or PE"uity !atioQ or PAssets Backing !atioQ orPNet orth !atio#Shareholders funds comprise of ordinary share capital, preference sharecapital and all items of reserves and surplus. Total assets include all tangibleassets and only those intangible assets which have a definite reali9ablevalue.

9roprietary Ratio F 9roprietors ?un%s: 133

Total Assets

9roprietors ?un% F E=uity S$are Capital G 9re( Capital G

Capital Resere G Re Res H ?ictitious Assets

Total Assets F All ?i:e% Assets G All Current Assets G

Inest#ents

OR

9RO9RIETAR RATIO F 9roprietors> ?un%s

: 133

Total ?un%s

Total ?un%s F O'ne% ?un%s G +orro'e% ?un%s

Si"ni(icance an% O+ecties

/roprietary ratio shows the etent to which shareholdersown the business and thus indicates the general financial strength of the

business. The higher the proprietary ratio, the greater the long termstability of the company and conse3uently greater protection to creditors.-owever, a very high proprietary ratio may not necessarily be good

MBA 1STSEMESTER !0


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because if funds of outsiders are not used for long term financing, a firmmay not be able to take advantage of trading e3uity.

2330;6

?, ##,### K "## J G>."?$?, >=,###

233;6

?, ;=,;;# K "## J F>.#G$?, ?#,@F@

(ur proprietary ratio indicates the higher growth of financial strength ofour business which is greater for long term stability of the company )conse3uently greater protection to the creditors.

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S$ri ris$na Ice Crea# 9arlor

9ro(it Loss Account %or the year ended ?"st +arch, ;##>


Telephone ?,A## 'y Income ",#>,"G@

+aintainous F,A## 'y (rder Received ;@,###

Electricity G;,###

Stationary ;,###

+arketing =,###

Intrest harges ;F,FG@

1et profit ";,###

1!!1/- 1!!1/-

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BALANCES,EET s on ?"st +arch, ;##>


/IT6 G,##,### %ied ssets 86 ) ' F,A#,###6ess8 &ep. =>,###%an "AAA425 dep. "AA

F,";,### ",@#

#

dd8 1et /rofit ";,### Investment 1I6

'ank 6oan ?,##,###42582Repayment A#,###

;,=#,### &eposit8

+T16 ?,###Electricity ;,@##%ridge "@,###

;#,@##

ash t -and ">,###

-2333 -2333

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9ro(it Loss Account %or the year ended ?"st +arch, ;##F


Telephone ?,A## 'y Income ",#?,=;@

+aintanous F,A## 'y (rder Received ?;,###

Electricity G;,###

Stationary ;,###

+arketing =,###

Interest harges ;F,FG@

1et profit "=,;@#

1!-&2- 1!-&2-

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BALANCES,EET s on ?"st +arch, ;##F


apital'al bd

G,##,###";,###

%ied ssets 86 ) ' F,";,###6ess8 &ep. =@,A##%an "@##425 dep. "@#

>,AA,=## ",?@

#

dd8 1et /rofit "=,;@# Investment 1I6

'ank 6oan ;,=#,###42582Repayment A#,###

",>#,### &eposit8

+T16 ?,###Electricity ;,@##%ridge "@,###

;#,@##

ash t -and ">,###

3.2-3 3.2-3

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