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Real estate funds will boost economic activities —FDSH

The FSDH Research has said that a real estate fund is an investment vehicle that can be used to address Nigeria’s housing shortage and encourage economic activities in the real estate sector.

FSDH Merchant Bank stated this in its report on ‘Real estate fund — Investment vehicle to address housing shortage in Nigeria.’

It observed that there was a significant shortage of affordable housing in Nigeria.

The housing gap is estimated to stand between 17 and 20 million units, it stated.

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“This means that Nigeria needs to build between 17 and 20 million housing units to ensure that Nigerians have this basic human need,” it added.

The report said, in monetary terms, Nigeria might require between N170tn to N200tn to bridge the housing gap if each unit costs N10m.

It stated, “Given the rising population in the country, the housing shortage keeps increasing. Meanwhile, the developments in the real estate sector of the Nigerian economy, which is where activities that will close the housing shortage will take place, have not been impressive.”

Economic activity in the real estate sector had been consistently contracting since Q1 2016, it said.

In addition, it added, investors (both retail and high net worth) could create wealth in real estate through regularly investing in a Real Estate Fund without investing directly in the brick and mortar.

“REF is an investment vehicle that pools resource together to invest in real estate, therefore, allowing individual investors to partake in the benefits of the underlying properties,” it added.

In Nigeria, the report said, REFs were traded on the Nigerian Stock Exchange, just like stocks/shares.

They could, therefore, be purchased through stockbrokers, just like other stocks/shares.

According to the report, every REF must have a fund manager that manages the fund to ensure the best return to shareholders.

It stated, “REFs are real estate working for the investors. The holder of a REF will earn a share of the income from the real estate investment through dividends without actually having to buy, manage or finance any housing projects.

“REFs are required to distribute at least 90 per cent of their taxable income as dividend. As a result, it provides constant income for shareholders.”

The report said there was no minimum amount to invest in a REF, adding that it was suitable for all investors.

REFs have not gained much popularity in Nigeria in terms of the numbers available and their size relative to the size of the Nigerian economy.

The report said there were currently only three REFs listed on the NSE which are Skye Shelter Fund, Union Homes Real Estate Investment Trust and UPDC Real Estate Investment Trust.

According to the Securities and Exchange Commission, the total value of the assets of all three funds stood at N43.74bn as of 18 January 2019; this represents about 0.03 per cent of Nigeria’s total Gross Domestic Product, it added.

The FSDH Research noted that the assets had recorded weak growth over the last five years, perhaps due to the slow activity in the real estate sector in general.

The inadequate information on how REFs worked and how investors could take advantage of the investment opportunities in them might also explain why REFs were not growing as they should, the FSDH said.

It stated, “FSDH Research believes REFs can be used as one of the measures to boost activity in the real estate sector. As patronage for REFs in Nigeria increases, more funds would be available to buy and develop more real estate properties. Consequently, the real estate sector would begin to experience increased activity.”

Source: Punch

Uncertainty is never good for the property market – in any country

Brexit is a decision made by Britain to leave the European Union (EU). The main reason was related to immigration matters. However, Britain’s current Prime Minister Theresa May is facing huge obstacles carrying out what has been negotiated with the EU and the deal is supposed to be finalised by March 29 this year. Imagine what this does to the world’s top six largest economies.

Brexit has been affecting Britain’s property market negatively due to the “uncertain” future of the country.

According to an article, house prices in some of the most expensive areas in the capital have fallen by almost a quarter over Brexit.

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The demand for London homes in Kensington, Chelsea and the city of Westminster has reduced dramatically over the past year due to higher taxes and Brexit.

The average house value in the exclusive postcodes have fallen to £500,000 (RM2,665,592) until November, according to Your Move.

On average, London’s ten most expensive boroughs are down by 9%. In some upmarket areas such as Hammersmith & Fulham and Camden, it has fallen by more than 10%.

The article also quoted the recent case of a five-storey mansion in Belgrave Square, regarded as prime property, that was sold for £60 million in December even though it was initially listed at £100 million.

Are there uncertainties in the Malaysian market too? To answer “no” would mean one is not objective.

During uncertain times, people are unwilling to invest. When this reluctance to invest continues, the number of jobs created reduces and the vicious cycle continues. However, the government is doing what it can to ensure our economy is moving forward.

As of now, Malaysia continues to be rated as “Investment grade” by all international rating agencies. Finance Minister Lim Guan Eng said even the deficit numbers were in check for 2018 because the SST enabled the government to collect more than what they budgeted for.

As for GDP growth, the predictions are all within a range of 4.5% to 4.9%.

Source: FMT

How to Sell Your House Without a Real Estate Agent in 2019

If you want to save as much as 7% of the sale price that your real estate agent and the buyer’s agent will share as their commission, you might want to sell your home yourself. Here’s how:

Step 1: Prepare Your House to Be Marketed

You can’t just let total strangers wander around inside your home, checking for storage space – they are looking at its potential for their lifestyle, not yours.

So what can you do with the things you have in places potential buyers will want to consider for their own things? Get a storage unit to house the things you won’t need while your home is on the market. A place to hide all those things currently sitting in your garage, your attic, your basement, in closets, or even in a crawlspace. Advisers generally recommend removing about a third of such things from your home – anything you don’t use every day. And if you store it in a portable unit, it can all be brought to your new home.

Removing personal photographs and other personal memorabilia allows prospective buyers to imagine themselves living in your house, making it easier to focus on your house’s highlighted features. By the same token, don’t distract from the house itself with art, as your taste may not be the same as a buyer’s.

Deep-clean the house – scrub the kitchen counters and appliances, shampoo the carpets, clean tile or linoleum floors, and dust the shelves.

Remember that a dark or poorly lit home feels depressing. Use natural and artificial light, and even perhaps a fresh coat of paint, to brighten up the interior of your home.

Don’t forget the outside of your home – the first thing most buyers will see. Trim and shape hedges, edge the lawn, refresh mulch beds. If your siding is older, consider pressure-washing it, along with your walkways and driveway. You could even paint a fresh coat on your trim and shutters. Everything matters to buyers, even something like the brass on the front door. And know that flowers, particularly near the entrance, add color and make a home appear inviting.

Step 2: Price Your Home Competitively, to Sell

Use the internet to get an idea of sales prices for comparable homes in your neighborhood and price yours accordingly. That’s what real estate agents and tax assessors do anyway. Don’t forget, your goal is to sell your home, not to price it out of a desire to keep it.

Step 3: Get a Flat Fee Listing from the Multiple Listing Service (MLS)

The Multiple Listing Service, or MLS, contains the nation’s most comprehensive list of real estate for sale. In addition to being available to agents, the MLS is also available to prospective buyers for search purposes in some areas. While the MLS is local to your area, once listed on the MLS of your area, your listing may feed to national real estate websites such as Zillow (ZG – Get Report) and others. Services exist that will charge you a few hundred dollars to list your property on the MLS. Search online for “Flat Fee” MLS to find similar services in your area.

Step 4: Market Your Property

Besides just listing your home on the MLS, you should advertise using “for sale” signs, brochures, advertising online, and building a web site to market the property. The ‘For Sale By Owner’ website FSBO.com offers home-selling packages for homeowners. The packages include items like brochures and yard signs. There are costs involved in advertising the sale of your home, but they will be a fraction of an agent’s commission.

Step 5: Hold an Open House

You don’t need an agent to hold an open house to advertise the sale of your home. You can do it yourself. Advertise your open house like any real estate agent would, by posting it online and placing signs in your neighborhood.

Provide some light refreshments and set out brochures around the home that visitors can take with them. Recent studies have shown the scent of baking cookies does not, contrary to a popular belief, help sell a home. However, recognizable scents such as citrus, pine, basil, cedar, vanilla and cinnamon have been found the most desirable by buyers.

Step 6: Know the Selling Points of Your Property

When writing your advertisements for websites or brochures, make sure to include basic information about the house: the price, number of bedrooms, number of bathrooms, lot size, location, and any specific details that make the house special to potential buyers – its age, style, building materials, yard, garden or trees are just a few such items.

Look at other listings on real estate websites, Craigslist, or other sites to get an idea of the details sellers and agents are including. For example, they might mention things you didn’t think about, like oversized windows, stainless steel appliances, and granite countertops.

Step 7: Negotiate With the Buyer Yourself

You’ve found a buyer. Now what? A buyer will submit a contract to the seller. The seller can accept the offer, or revise the contract with the seller’s preferences and resubmit it to the buyer. Until both parties agree and sign a contract, the process continues. Most states have a standard contract for real estate purchases. If you are not familiar with the contract, as with any contract, you should have it reviewed by an attorney.

Step 8: Be Sure to Comply With All Laws in Your Area

Some laws apply to the sale of a home no matter where you live, such as the Fair Housing Act. The Fair Housing Act stipulates that sellers cannot discriminate against buyers for reasons including race, religion, and sex. While you can find contracts and other agreements online, they aren’t specific to your unique situation, so it would be a good idea to have a real estate attorney review all documents and contracts related to your home’s sale.

Step 9: Pick the Right Time to Sell Your Home

The best time to sell a home is usually spring and summer. However, because of that, buyers can be pickier as more homes will be on the market at those times.

What Does a Real Estate Agent Actually Do?

Real estate agents do essentially four things to earn a commission. An agent lists your house on the local MLS, markets your house with fliers, brochures, ads and a website; arranges showings of your house and may host open house events; and acts as an intermediary when negotiations between a buyer and seller are entered, and accompanies you at the closing. Agents don’t get paid until they close a deal, so it is in their best interest to close a deal.

Here Are 5 Tips for Selling Your Home:

  • Prepare your house to be marketed. Remember, you’re looking to make your house appealing to a new buyer, not just a comfortable place to visit like a guest.
  • Price your house competitively, especially during the spring and summer when most homes are sold.
  • Get a flat fee listing on your local MLS, so that your home can be searchable online by agents as well as prospective buyers, nationwide.
  • Market your house by listing it online, with a website, photographs, and even yard signs and curb appeal as well as by “staging” it as a potential home for buyers inside.
  • Know your home’s selling points. You know your home better than anyone else, so you know what inspired you to buy it in the first place and what you’ve done to it that might inspire someone else to want to buy it.

Source: The Street


South Africa Real Estate Activities Report 2018 with Profiles of 140+ Companies Including Pam Golding Properties, RE/MAX, Seeff Property Services and Harcourts

This report focuses on the real estate industry which comprises commercial, industrial and residential properties, as well as property valuation and bond origination. The real estate sector contributed 5.6% to GDP, based on 2016 data. The South African listed-property sector is worth about R500bn with about 46% of the value of the sector reflecting investment in overseas markets. 

The real estate sector’s performance largely depends on economic drivers and has been challenged by slow economic growth during the past few years. In spite of this, the number of principal estate agents registered with the Estate Agency Affairs Board grew by 4.8% from 2016 to 2017. Property development is not showing signs of slowing down, but developers are struggling to increase occupancy rates due to oversupply.

Pressing Issues: 

South Africa’s real estate landscape is set to undergo major changes in the future driven mainly by regulatory changes, including land restitution, and technology disruptors. Growth in residential property prices remained subdued in the first five months of 2018 with house prices increasing 4% and 4.8% year-on-year in May. There are a number of opportunities in the sector brought about by high demand for student accommodation and gated communities and urban renewal and regeneration projects. But low projected growth rates and slowdown in economic activity could limit expansion and new development.

Report Coverage: 

The comprehensive report on South African Real Estate Activities describes current conditions and recent developments in all sub-sectors, as well as factors influencing the success of the sector. 

The report profiles 141 companies, including the main players in the residential real estate sector, Pam Golding Properties, RE/MAX of Southern Africa, Seeff Property Services and Harcourts Real Estate. Profiles also include Vukile Property Fund and Arrowhead which have made significant acquisitions and developers including Abland, WBHO and Renprop.

Key Topics Covered: 


2.1. Industry Value Chain
2.2. Geographic Position


4.1. Local
4.1.1. Corporate Actions
4.1.2. Regulations
4.1.3. Enterprise Development and Social Economic Development
4.2. Continental
4.3. International 

5.1. Economic Environment
5.2. Government Initiatives
5.3. Land Restitution
5.4. Rising Operating Costs
5.5. Water and Electricity Supply Constraints
5.6. Labour
5.7. Technology Disruptors
5.8. Information Technology (IT), Research and Development (R&D) and Innovation
5.9. Cyclicality
5.10. Transport Systems
5.11. Crime and Security
5.12. Consumer Education
5.13. Environmental Concerns 

6.1. Barriers to Entry 




10.1. Publications
10.2. Websites


Appendix 1 
Commercial Property Investment and Management Companies
Property Developers
Sustainable Human Settlements (previously RDP Housing)
Development of Leisure Resorts and Hotels
Industrial Development Zones
Residential Real Estate
Property Valuation
Bond Origination

Appendix 2
Major Property Development Projects recently Completed or in Progress

Appendix 3
Office and Industrial Property Development Projects Recently Completed or in Progress

Appendix 4
Retail Centre Projects Recently Completed or in Progress

Appendix 5
Affordable (or GAP) Housing Developments Recently Completed or in Progress

Appendix 6
Other Legislation Relevant to the Real Estate Sector

Appendix 7
Qualification Requirements for the Industry

Company Profiles

Commercial Property Investment And Management

  • Accelerate Property Fund Ltd
  • Acsion Ltd
  • Adrenna Property Group Ltd
  • Afhco Holdings (Pty) Ltd
  • Arrowhead Properties Ltd
  • Ascension Properties Ltd
  • Atterbury Property (Pty) Ltd
  • Beare Properties (Pty) Ltd
  • Broll Property Group (Pty) Ltd
  • City Lodge Hotels Ltd
  • Delta Property Fund Ltd
  • Emira Property Fund Ltd
  • Equites Property Fund Ltd
  • Eris Property Group (Pty) Ltd
  • Excellerate Real Estate Services (Pty) Ltd
  • Exemplar Reitail Ltd
  • Fairvest Property Holdings Ltd
  • Fieldspace Property Managers (Pty) Ltd
  • Fortress Reit Ltd
  • Freedom Property Fund Ltd
  • Gemgrow Properties Ltd
  • Growthpoint Properties Ltd
  • Heriot Reit Ltd
  • Hermans And Roman Property Solutions (Pty) Ltd
  • Homechoice Holdings Ltd
  • Hyprop Investments Ltd
  • Inframax Holdings (Pty) Ltd
  • Ingenuity Property Investments Ltd
  • Investec Property Fund Ltd
  • Jhi Retail (Pty) Ltd
  • Legacy Hotels And Resorts (Pty) Ltd
  • Liberty Holdings Ltd
  • Maxprop Holdings (Pty) Ltd
  • Merchant And Industrial Properties Ltd
  • Montagu Homes (Pty) Ltd
  • Oasis Crescent Property Fund
  • Oasis Crescent Property Fund Managers Ltd
  • Octodec Investments Ltd
  • Old Mutual Life Assurance Company (South Africa) Ltd
  • Orion Real Estate Ltd
  • Pareto Ltd
  • Passenger Rail Agency Of South Africa
  • Public Investment Corporation Soc Ltd
  • Putprop Ltd
  • Rebosis Property Fund Ltd
  • Redefine Properties Ltd
  • Renprop (Pty) Ltd
  • Resilient Reit Ltd
  • Rmg Management Group Sa (Pty) Ltd
  • Sa Corporate Real Estate Ltd
  • Sable Holdings Ltd
  • Sanlam Ltd
  • Sargas (Pty) Ltd
  • Stor-Age Property Reit Ltd
  • Strategic Real Estate Managers (Pty) Ltd
  • Texton Property Fund Ltd
  • Tourvest Holdings (Pty) Ltd
  • Tower Property Fund Ltd
  • Trafalgar Property Management (Pty) Ltd
  • Visual International Holdings Ltd
  • Vukile Property Fund Ltd
  • Zenprop Management Services (Pty) Ltd
  • Zenprop Property Holdings (Pty) Ltd

Major Property Developers

  • Abland (Pty) Ltd
  • Acsion Ltd
  • Afhco Holdings (Pty) Ltd
  • Atterbury Property (Pty) Ltd
  • Eris Property Group (Pty) Ltd
  • Free State Development Corporation
  • Group Five Ltd
  • Growthpoint Properties Ltd
  • Hyprop Investments Ltd
  • Ingenuity Property Investments Ltd
  • Investec Property (Pty) Ltd
  • Keystone Investments (Pty) Ltd
  • Liberty Holdings Ltd
  • Montagu Homes (Pty) Ltd
  • Old Mutual Life Assurance Company (South Africa) Ltd
  • Orion Real Estate Ltd
  • Rabie Property Group (Pty) Ltd
  • Renprop (Pty) Ltd
  • Rpp Developments (Pty) Ltd
  • Sable Holdings Ltd
  • Summercon Holdco (Pty) Ltd
  • Swish Property Group (Pty) Ltd
  • Tci Properties (Pty) Ltd
  • Tongaat Hulett Developments (Pty) Ltd
  • Visual International Holdings Ltd
  • Wbho Construction (Pty) Ltd
  • Westbrook Residential Development (Pty) Ltd
  • Zenprop Property Holdings (Pty) Ltd
  • Zotos Brothers (Pty) Ltd

Sustainable Human Settlements – (Previously Rdp Housing)

  • Calgro M3 Holdings Ltd
  • Inframax Holdings (Pty) Ltd
  • Nu-Way Housing Developments (Pty) Ltd
  • Power Development Projects (Pty) Ltd
  • Trustgro Developments (Pty) Ltd

Development Of Leisure Resorts & Hotels

  • City Lodge Hotels Ltd
  • Kat Leisure (Pty) Ltd
  • Legacy Hotels And Resorts (Pty) Ltd
  • Peermont Global (Pty) Ltd
  • Sun International Ltd
  • Tsogo Sun Holdings Ltd
  • Company Profile – Industrial Development Zone
  • Coega Development Corporation (Pty) Ltd
  • East London Industrial Development Zone Soc Ltd
  • Richards Bay Industrial Development Zone Company Soc Ltd

Residential Real Estate

  • Aida National Franchises (Pty) Ltd
  • Electronic Realty Associates (South Africa) (Pty) Ltd
  • Everybody Wins Real Estate Franchising (Pty) Ltd
  • First Realty Central (Pty) Ltd
  • Firzt Realty (Pty) Ltd
  • Geffen International Realty Franchises (Pty) Ltd
  • Jawitz Properties (Pty) Ltd
  • Just Property Group Holdings (Pty) Ltd (The)
  • Leapfrog Property Group (Pty) Ltd
  • My Africa Properties (Pty) Ltd
  • Pam Golding Properties (Pty) Ltd
  • Property Referral Network (Pty) Ltd
  • Realty One International Property Group (Pty) Ltd
  • Seeff Property Services (Pty) Ltd
  • Wakefields Real Estate (Pty) Ltd

Property Valuation

  • Appraisal Corporation Cc
  • Broll Valuation And Advisory Services (Pty) Ltd
  • Cape Value (Pty) Ltd
  • Corporate Valuations Cc
  • Ddp Valuers (Pty) Ltd
  • Eris Property Group (Pty) Ltd
  • Magnus Penny Associates Cc
  • Mills Fitchet (East Coast) Cc
  • Mills Fitchet (Gauteng) Cc
  • Mills Fitchet (Kzn) Cc
  • Mills Fitchet (Natal) (Pty) Ltd
  • Mills Fitchet (Pwv) (Pty) Ltd
  • Mills Fitchet Africa (Pty) Ltd
  • Mills Fitchet Valuations (Pty) Ltd
  • Rode And Associates (Pty) Ltd
  • S A Appraisers And Valuers Cc
  • Spectrum Valuations And Asset Solutions (Pty) Ltd
  • Company Profiles – Bond Origination
  • Betterlife Group Ltd
  • Intelligent Debt Management (Pty) Ltd
  • Multinet Home Loans (Pty) Ltd
  • Ooba (Pty) Ltd

Source: Cision PR NewsWire

Rental Real Estate Is A Sound Investment For Any Market

Whether it’s stocks, commodities or real estate, all markets move in cycles. Markets can generally be classified as rising, falling or stable/stagnant. Many investments suffer in one or two of these cycles, while they prosper in another. Or, they can do well in one cycle and hold steady or suffer in one of the other two. The point is that many investments in stocks and commodities are dependent on market cycles for profit.

Inflation Influences Markets Differently

When prices for goods and services are rising at faster-than-normal rates, some stock prices can suffer due to the products or services of the corporations. When goods and services cost more, companies usually need to raise their prices to meet profit projections and please shareholders.

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If there is too much competition to raise prices as needed, higher prices to deliver the company’s products or services will bring down profits, and the stock prices will suffer. A down market for stocks as a whole can result from inflationary trends.

Real estate, particularly rental real estate, responds quite differently to inflationary trends, as a rule. There are few more labor- and material-intensive products than a new home. Building a home when labor and materials prices are rising becomes more expensive, so the prices of new homes rise. This usually drives many buyers out of the market, but they still need a place to live. They will rent, so rents can rise from higher demand.

Another effect of higher new home prices is the pushing of buyers toward existing homes. Higher demand for existing homes will create upward pressure on prices, and more buyers will leave the market and rent. The values of the rental homes rise, so the investor-owners enjoy higher equity. They also can often raise rents to increase their cash flow.

Rising Interest Rates Influence Markets Differently

When interest rates are rising, many corporations that borrow to fund their operations will find their costs rising for the money they borrow. They will be in the same situation as the corporations that suffer from inflation. They will find that raising prices is necessary. If they can, they will often see lower demand, and their stock prices may suffer. If they pay dividends, they may reduce their dividend payments as well, usually a negative hit on their stock prices.

Source: Forbes

India: Real estate tops bankruptcy chart; construction, metals and textiles follow

Though distress ruled over most sectors in the Indian economy in the last couple of years, the data of Insolvency and Bankruptcy Board of India (IBBI) shows that the companies in real estate and renting business have been affected most, besides the same in construction, retail & wholesale trade, metals and textile.

Of the 1484 companies admitted for resolution under Insolvency and Bankruptcy Code (IBC), 612 are from the broader manufacturing sector, which includes metals, textiles, food and beverages and machinery and equipment. There are only a few non-affected sectors, which include information technology (IT) and the allied services, while IBC does not cover the bankruptcy in banking, insurance and financial services (BIFS) sectors. Though gross financial mismanagement is considered one of the reasons for ending up in bankruptcy, the sectoral turbulences have also played a part in many cases.

From real estate and renting sector, 235 companies have filed for bankruptcy in the last two years until December 2018. Of that, 87 cases are closed and hearing is going on in 148 cases. The lenders are struggling to recoup loans, amounting to $20 billion from troubled property developers after worst home-sales slump of the decade. At present, the banks are taking control of land parcels and unfinished projects that can be sold along with loans for recovering the dues. The fact is, investing in residential real estate will not give 20-30 per cent annual returns or double your investment in about 3-5 years any more as it did back in the golden days of 2001-2007.

The slowdown in the construction industry has led to the bankruptcy of 153 companies, while wholesale & retail trade (151 companies in the sector have admitted for bankruptcy trials) was affected by the sluggish demands. Of the 612 manufacturing companies admitted for resolution, 259 cases are closed after hearing, while 353 cases are pending.

Almost 20 months ago, Reserve Bank of India (RBI) had first asked the banks to take the 12 big loan defaulters to National Company Law Tribunal (NCLT) and try under IBC. The move, which was perceived as a bold step, was expected to tame the ballooning non-performing assets (NPAs) on the books of banks and revive the debt-ridden companies bringing in a responsible management, has not achieved the desired results. Of the 1484 bankrupt companies admitted for resolution, just 79 are being sold until December-end. The liquidation process initiated in 302 cases and 62 companies are withdrawn from insolvency using the amended section 12A. Another 142 cases are closed on appeal or settled.

There are 898 cases pending for resolution. The IBC allowed resolution time of 270 days are over in 275 cases. The current law allows a maximum 270 days for resolution— an initial 180 days and an extra 90 days extension on case-by-case basis. By December end, 166 cases have crossed initial deadline of 180 days. One reason for the delays is that the government has made many changes in the law through amendments. There are lengthy legal proceedings due to complications in defining the law. The lack of sufficient resources in terms of insolvency professionals, judicial benches, and technical experts at NCLT is another issue.

The resolution process was first initiated in the 12 big companies, which together had an outstanding claim of Rs 3.45 lakh crore, and soon after four companies had been handed over to the new promoters — Electrosteel Steels to Vedanta, Bhushan Steel to Tata Steel, Monnet Ispat to JSW Steel, and Amtek Auto to Liberty House. NCLT had ordered to liquidate Lanco Infratech and Jyoti Structures. The remaining six cases are still stuck in the lengthy court proceedings. The Ahmadabad bench of the National Company Law Tribunal (NCLT) recently concluded the hearing on the Rs 42,000 crore resolution plan of ArcelorMittal for the distressed Essar Steel India and reserved its judgement.

Source: Business Today

Greeks left out as Athens property market booms

Geraldine Hynes is panicking about the future.

The 63-year-old has been been trying to buy an apartment ever since she was evicted from the home she rented for 32 years – when it was bought by Chinese investors two years ago.

“I want some security in case the same thing happens again,” says Ms Hynes, originally from Ireland. She earns a modest salary as an English teacher, while her Greek husband’s monthly pension was cut from €1,500 (£1,315; $1,690) to €500 during the country’s economic crisis, which began in 2010.

“When we were evicted there were still apartments selling nearby for €100,000. Now I can’t find anything under €250,000. These are Chinese and Russian prices. Not Greek.”

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Greece’s financial crisis a decade ago shrank the country’s economy by more than 25% in the following years, but there are finally signs of improvement.

The property market, once completely dead, is on the rise – house prices in Athens rose 3.7% last year.

But this news is causing unease.

The boom appears to be driven by a controversial “golden visa” scheme, in which non-EU citizens receive residency and free movement in the EU’s Schengen zone, in exchange for investing in property.

The worry is that foreign investors are benefiting while ordinary Greeks miss out.

What are golden visas?

Many EU countries including the UK, Portugal and Spain, have golden visa schemes, but Greece has the lowest threshold. Investors receive five-year residency after purchasing €250,000 of property, making the country a new hotspot for foreign buyers.

According to Enterprise Greece – a business promotion body – 9,756 residence permits for investors and their families were issued in 2018 up to the end of November – up from 6,205 in 2017 and 3,695 in 2016.

The biggest market was Chinese buyers, followed by Russians and Turks, with hundreds arriving at Athens airport every week to be driven around by real estate agents.

“There are a lot of companies buying properties from Greeks and reselling to the Chinese,” says Lefteris Potamianos, president of the Athens Real Estate Association, who estimates at least one-third of property sales in the city now go to golden visa investors.

“It affects local people trying to rent properties, who see the prices going up. A lot of properties are going from Greek hands to foreign hands. We can’t control this.

How is this linked to Airbnb?

Because prices in central Athens fell so much during the crisis – down to €1,000 per square metre or less – Mr Potamianos explains that investors will typically purchase three or four apartments in popular tourist spots and rent them out on Airbnb.

This has caused rents to rise – by 17% last year, according to Greek rental site Spitogatos.

Residents who have benefited from tourist cash, despite Greece’s general economic malaise, are now starting to feel the negative effects.

“Every year I’ve had an increase in visitors, which is good,” says Spyros Bellas, who owns a cafe in Koukaki, a neighbourhood named by Airbnb as one of its top growth areas globally in 2016.

“But now I think it’s gone too far. Rents have doubled to €600, sometimes they’re as much as €1,000. I do not think this reflects the Greek reality. Half of my staff have had to move away.”

His friend George Lafe says his landlord recently increased the rent on his studio apartment from €220 to €400 a month. “If you work in a bar or restaurant here, your salary is only €600-700,” he explains.

Who is benefiting?

Some Athens residents, such as Iro Christodoulaki, have worked the situation to their advantage. The 31-year-old and her boyfriend have bought and renovated three apartments for Airbnb. One recently sold to a Chinese investor for €58,000 – eight times what they paid for it two years ago.

The couple targeted foreign buyers “because they pay more than Greeks” and sold through a Chinese management company to a buyer who has never viewed the apartment.

“During the crisis there were so many abandoned flats that people did not have the money to renovate,” Ms Christodoulaki says. “All our apartments were unliveable when we bought them.”

“We have not taken them off the rental market – we created something new.”

What might happen next?

It’s not just Greeks who are concerned about the volume of golden visas being issued. The EU Commission has warned that the scheme may facilitate organised crime and money-laundering.

The Greek government has introduced tighter controls, yet still plans to expand the scheme to include bonds and shares.

On the streets of Athens, many are calling for far tighter regulation.

“There’s too much freedom right now,” says Mr Bellas. “We need someone to bring rules in, otherwise everything is going to change.”

By: Jessica Bateman

Why a U.S. university endowment invested 60% of its cash in real estate

Major funds are continuing to shift investment efforts toward commercial real estate markets, a signal that stable returns and reliable cash flows are increasingly a priority after a decade of growth for financial markets.

The University of California (UC) endowment recently announced a greater focus on real estate. Out of the roughly US$500 million cash position that the UC system invested in the third quarter last year, 60 percent went into property, said Edmond Fong, the Senior Managing Director of Absolute Return Investments in the UC Office of the President, in a televised meeting.

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California’s state university system is not alone in increasing its allocations to real estate. Yale University’s endowment allocated 15.1 percent between 2013 and 2017. The University of Pennsylvania endowment’s latest report showed that its target allocation to real estate had increased several percentage points over the past decade.

“Real estate in general is seeing an uptick from institutional investment allocations, and that includes endowments,” says Jerry Cain, Head of Funds Advisory – Americas with JLL. “We’re late cycle and investors want inflationary protection and durable cash flows. There is definitely strategic thinking around, ‘How do we position our portfolio for a potential downturn.’”

It’s not just university endowments, either. Funds worldwide are putting more money into real estate in a hunt for stable returns. Real estate in institutional portfolios increased to 10.4 percent in 2018, up from 8.9 percent in 2013, according to a recent survey.

Sign of the times

Commercial real estate allocations have been increasing as jitters appear in other markets, like stocks and bonds. Quantitative tightening – the process where the Federal Reserve is decreasing liquidity – along with rising inflation, heightened political uncertainties and international trade tensions are weighing on global economic growth prospects. Equity and bond markets are expected to see increasing volatility in this environment.

Real estate markets are benefiting, in part due to the perception of being a stable, long-term alternative, Cain says. The sector has shown little correlation to stocks and bonds, with changes in property values generally lagging economic performance.

Real assets, including real estate, also have “inflation protection because rents reset,” he says. “Endowments and other institutional investors keep a watchful eye on this and utilize real estate as an inflation hedge.”

Not always easy sailing

While funds are increasingly allocating more capital to commercial real estate, finding product to buy can be a challenge. Competition for high-yielding property is fierce after a decade-long property boom.

Dry powder — or unspent capital in a fund – reached another record level in 2018. For private equity, that entailed almost US$2.1 trillion as of June 30, 2018, up from $1.8 trillion as of December 31, 2017, according to Preqin.

Still, real estate is unlikely to lose its luster, as the market has continued to mature.

“It’s important to identify Fund Managers that are differentiated and can be nimble while navigating this competitive real estate environment,” Cain says. “There are still attractive investment opportunities and it’s important to work with investors who can unlock value.”

Source: theinvestor.jll

East African Real Estate Investors Discover the Working Class

The last 20 years of real estate boom in East Africa has changed our building landscape and inventory, as it quite rightly should have done.

Our starting point was a region that was short of every kind of building, from housing, to shops, through offices, warehouses, hotels, and even student hostels. In all, we faced a real estate landscape that was cripplingly underinvested. And we invested.

Choosing which type of investment barely mattered. Every type of property sold fast. Developments got snatched up even before the building bricks were laid, simply because the market had little to offer.

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We are no longer in that situation. But confusing our sector’s move to maturity with the end of real estate investment opportunities is a mistake.

For, in our first years of heavy real estate investment, we concentrated primarily in high-end assets, because we all believed they delivered higher margins and higher returns. In fact, that is no longer the case, and may never have been the case. But, nonetheless, when we were short of everything, we began with expensive buildings.

We built estates of detached houses and town houses, high end rental apartments, shopping malls, often huge ones, and towering office blocks.

Until in some areas, and for the high-end market, we began to reach market saturation. As a result, an investor is now putting up Sh100m worth of penthouses, unless they are building for a specific unmet need, would be lucky to fill it in four years.

Yet only a tiny proportion of Kenyans live in high-end neighbourhoods. When we look at the needs of the country’s working classes, market researchers have reported demand for two million units. Of this, over two thirds are for earners who can afford rent of Sh18,000 to Sh50,000 a month.

Today, I cannot easily pinpoint any stock that is coming to the market for this segment, certainly not to the scale that responds to this opportunity. Instead, investment in this type of property has been left to unsophisticated investors, in what is largely a landlord market delivering developments found in the more densely populated Nairobi estates.

The buildings are unplanned and non-compliant with construction standards, as developers seek to lower construction costs and complete projects more quickly to increase returns.

However, a huge opportunity exists for a better quality of real estate in this segment. Moreover, while the perception that rental yields in high- end areas are higher has driven investors and developers to areas such as Kilimani and Lavington, research has shown that yields are actually higher in the mid-market areas.

For instance, the average rental yields in 2016 in the mid-market were 6.5 per cent, compared with 6.3 per cent for high-end apartments. That premium in the mid-market has continued. In 2018, mid-market rental yields ran at 5.4 per cent, compared to high-end yields at 5.3 per cent.

Thus, if the NSSF were to put up an estate such as the organized Nyayo Estate in Embakasi, it would not struggle with tenancy, as tenants look for quality stock that is currently close to nonexistent.

Such estates offer almost the same amenities as homes in Kilimani, across modern, 24-hour security systems with professional security personnel, ample parking space, borehole water to cover for water shortages, and maintenance services, but at far lower rents.

Similarly, for developers building commercial properties such as stalls or retail centres, as opposed to large malls, occupancy will never be their biggest challenge as they attract SMEs and private businesses dealing with the routine needs of Kenyan consumers.

In sum, the investment opportunities in real estate remain enormous. But now it is the turn of the working classes. And the returns are just as high for investors.

exhibitIt’s a challenge we welcome, with the region’s annual investor conference, the East Africa Property Investment summit, set to be the largest yet and a key platform for developing real estate policy and white papers for government.

In this, our own compass is clearly set. We do not face a depressed real estate industry. We face the next opportunity, and it is far larger than the last one.

Source: businesspost.ng

Equity contribution and the paradox of bring money to take money

Except in the informal economy where documentation and financial technicalities are overlooked or, at least, taken for granted, giving and taking of money always is always a serious business and has to do with security or collateral from he who takes.

In some cases, however, in the informal economy, depending on the size of the money that is given and taken, an eyewitness is often required from both parties involved in the transaction and the aim of this is to have a third party who will tell the story in case of default.

But the story is different in the formal sector, especially in the mortgage market where the business is largely about lending and borrowing.

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The mortgage market is structured in such a way that even when high interest rate, which is a big challenge, is removed from mortgage business, borrowers will still have some hurdles to cross and one of such hurdles is equity contribution, usually demanded by mortgage institutions before they can advance loans to borrowers.

Equity contribution is the financial commitment, always calculated in terms of the percentage of the money to be lent out, is the money which a lending institution, a mortgage bank, that is, demands from somebody seeking loan to enable him buy, build or renovate a residential building.

To the man on the street, the idea of equity contribution does not square up. He does not understand why somebody that is looking for money to borrow is required to bring money in order to get that money. The question he frequently asks is ‘why borrow if I had money to give?’

But the lender, the person who gives out the money, thinks differently and so has an answer to give to the question.

Before now, mortgage loans were given at very high interest rate of between 20 and 25 percent and the borrower is also required to bring about 30 percent of the loan amount he wants to borrow as equity contribution.

The street man wonders why somebody who wants to borrow N10 million, for instance, is required by the lender to bring upwards of N3 million in order to access the N10 million. He argues that if he had such money, he probably would not have gone for the loan in the first place.

Mortgage banking operators, however, say there are reasons they demand equity contribution. One of these reasons is for the contribution to act as “a hedge against loan repayment default”. Equity contribution, they say, is fundamental to mortgage lending just as regular flow of income is.

Equity contribution is fundamental because there are institutional and regulatory developments that are still being expected in the industry. There is no sound data-base of Nigerians yet; the national ID card remains largely unreliable and foreclosure laws are still not strong.

All these issues, according to mortgage operators, have compelled mortgage banks to demand for equity contribution and they argue that if they had all the above issues resolved, they would give people mortgage based on their credit rating.

Because mortgage banks do financial intermediation, it is their responsibility to protect depositors’ money and for them to protect those deposits, they have to ask for something that would act as a back-up to the money they give out to borrowers.


“If we had development funds, the kind of funds that we have in the manufacturing and agriculture sectors of the economy, where government gave out intervention funds over a period of 15 years at a single digit interest rate; if we had that kind of fund in the mortgage banking industry, it would be very helpful in a number of ways”, says a mortgage bank CEO who does not want his name mentioned.

Anthony Owuye, a finance expert, notes that “the banker and the borrower are in the same market in which case both suffer a common problem; we should not forget that we are all trading in one commodity which is money, and the trading is done in such a way that you sell according to how you buy”.

Another argument by mortgage operators is that the credit the banks, including the mortgage institutions, have are short term in nature. So, they can’t lend long term and they do business in an environment that is very costly.

Time is now for the federal government, through the CBN, to do something about high interest rate charged by both the commercial and mortgage banks if the housing demand-supply gap is to be bridged.

In other economies, there are special interest rates on loans to real estate. Nigeria can do the same and the relevant authorities should look critically into the whole issue of equity contribution demanded from home loan seekers, especially the low income earners who cannot afford such loans.

Equity contribution is reason for the huge housing deficit and low home ownership level in Nigeria today. It could, perhaps, be reason too for the a performance of the Federal Mortgage Bank of Nigeria (FMBN).The apex mortgage bank administers the National Housing Fund (NHF) and is responsible for the disbursement of mortgage loans from contributors to the NHF.

Source: Chuka Uroko

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