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Lecture-01 (BECM 4205 - Real Estate Development) by SKS

This document provides an overview of real estate development as presented in a university course. It defines real estate as tangible assets like land and buildings. Real estate can also be viewed as a bundle of rights and an industry. The value of real estate is determined by the interaction of the capital market, user market, and government. Real estate markets are unique due to properties being heterogeneous and immobile, leading to localized and segmented markets.

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96 views20 pages

Lecture-01 (BECM 4205 - Real Estate Development) by SKS

This document provides an overview of real estate development as presented in a university course. It defines real estate as tangible assets like land and buildings. Real estate can also be viewed as a bundle of rights and an industry. The value of real estate is determined by the interaction of the capital market, user market, and government. Real estate markets are unique due to properties being heterogeneous and immobile, leading to localized and segmented markets.

Uploaded by

Okapia Ting
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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BECM 4205

Real Estate Development


Credits: 2.0

Presented by:

Md. Jewel Rana


Assistant Professor
Department of Building Engineering and Construction Management
Khulna University of Engineering & Technology (KUET)
Khulna-9203, Bangladesh
Reference book

Real Estate Principles


A VALUE APPROCH
By
David Ling ! Wayne Archere
Acknowledgement...

These slides are aggregations for better understanding of the topic mentioned in
the previous slide . I acknowledge the contribution of all the authors and
photographers from where I tried to accumulate the info and used for better
presentation.
The Nature of Real Estate and Real
Estate market
Chapter 1
Real Estate Principles ( David ling)
Real Estate

Real Estate is property, refers to anything that can be owned or possessed.

Tangible Asset Intangible Asset


Physical things (i.e. Contractual Rights (i.e. mortgage and lease
automobiles, clothing, land agreements), Financial Claims (i.e. stocks
and buildings etc.) and bonds), Interests, Patents and
3 Fundamental Ways to Express Real Estate

First: As Tangible Asset Second: As Bundle of Rights

Third: As Industry and Profession


As Tangible Assets
Real Estate can be defined as the land and its permanents improvements.

Improvements to the Land


the components necessary to make the land suitable
Improvements on the Land for building construction or other uses (i.e.
(i.e. buildings, fences, walls infrastructure and consists of the street, walkways,
and decks etc.) storm water drainage systems, and other systems
such as water, sewer, electric and telephone utilities
that may be required for land use.)
As Tangible Assets
Tangible assets include both Real Property and Personal Property.

Personal Property Real Property 


-things that are movable and -immovable property (i.e. land
not permanently affixed to and anything attached to the
the land land)

How personal property can be converted real property?


As Bundle of Rights
Bundle of intangible rights associated with…

the Ownership Use of the Site Improvements

 Bundle of property rights may be limited in numerous ways (i.e. land use
restrictions).
 Rights can be distributed to multiple owners and non-owners.
 The value of bundle of rights is a function of the property’s physical, locational and
As Industry and Profession
Refer to the industry activities associated with evaluation, producing, acquiring,
managing, and selling real property assets.

Real estate professions vary widely and include:


a) Real estate brokerage, leasing and property management services
b) Appraisal and consulting services
c) Site selection, acquisition and property development
d) Construction
e) Mortgage finance and securitization
f) Corporate and institutional real estate investment
g) Government activities such as planning, land use regulation, environmental
protection and taxation.
Real Estate Participants
Real estate values derive from the interaction
of 3 different sectors in the economy...
Government
Affects the supply and cost of
real estate in different ways.

Financial World or Capital Market


The capital market serve to allocate Real World or User Market
financial resources among households Characterized by competition among
and firms requiring funds. users for physical location and space.
Capital Market
Participants in capial markets invest in stocks, bonds, mutual funds, private
business enterprises, mortgage contracts and other opportunities with the
expectation of receiving a financial return on their investment.

Private Markets Public Markets


Components Components
Equity/Owners Individuals, firms, and Investors in publicly
Interests institutions traded real estate
companies
Debt/Lenders Banks, Insurance Investors in mortgage-
Interests companies, private backed securities
lenders
Government
Affects the supply, cost and quality of real estate through…

Zoning Codes, Land Use Regulations, Provision of roads, bridges, mass


Fees on New Land Development and transit, utilities, flood control, schools,
Building Codes that restrict methods of social services, and other
construction infrastructure of the community

Income Tax Policy Housing Subsidy Environmental Laws


Interaction of Value Determining Sectors
Characteristics of Real Estate Market
Real estate markets are unique when compared to other goods

Heterogeneity Immobility

Due to these two factors the buying, selling and leasing of real estate tends to be
localized and highly segmented, with privately negotiated transactions and high
transaction costs.
Heterogeneous Product
 Real estate tends to be heterogeneous, meaning that each property has unique
features and can be distinguished from one another.
 For real estate, however, age, building design, and especially location combine to
give each property distinctive characteristics.
 Even in residential neighborhoods with very similar houses, the locations differ.
 Corner lots have different locational features than interior lots; their access to
parks and transportation routes may differ, and the traffic patterns within the
neighborhood create differences.
Immobile Products
 Real estate is immobile. Although it is sometimes physically possible to move a
building from one location to another, this is generally not financially feasible.
The vast majority of structures removed from the land are demolished rather than
moved.
 Another term for location is access. For households it is access to school,
shopping, entertainment, and places of employment. For commercial properties it
may be access to customers, the labor force, or suppliers. The nuances of access
are fundamental to real estate value.
Localized Market
 Real estate markets tend to be localized.
 By this we mean that the potential users of a property, and competing sites,
generally lie within a short distance of each other.
 For example, competing apartment properties may lie within 15 minutes, or less,
in driving time from each other, while competing properties of single-family
residences may tend to be within a single elementary school district or even within
a small number of similar subdivisions.
 Clearly, the market for a neighborhood shopping center is very localized. Such
centers usually draw the majority of their customers from within a five-mile
radius, or less.
Segmented Market
 Real estate markets tend to be highly segmented due to the heterogeneous nature of the
products. Households that search for single-family detached units in the market will
generally not consider other residential product types such as an attached townhouse unit
or condominium.
 In addition, real estate is segmented by product price. The same holds true, although to a
lesser extent, in the commercial property market. Commercial property markets are
segmented by both users and investors. Larger, more valuable commercial properties,
generally well over $10 million, are often referred to as investment-grade properties, or
institutional-grade real estate.
 The localized nature of real estate markets also contributes to segmentation and explains
why rents and prices for otherwise similar property can vary significantly across
metropolitan markets and even submarkets within a given metropolitan area.

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