Real Estate Finance: Book, Videos, write-ups and Workshops

Visit our site with comprehensive information on REITs and InvITs in India:

https://reitspro.com/

A compilation of information in this blog:

1.  Link to an awarded book (click on link to see details): 
"Real Estate Investment & Financial Analysis: The Four Essentials of Building Wealth with Realty" by Gaurav Jain
Named by BookAuthority as "Best Books of All Time"

 
2. Contact details (please do give your feedback):

3. Workshops conducted for Corporates and Institutions
Information on workshops on REITs and InvITs in India  (CLICK HERE)



4. Real estate and finance: List of topics (click on topic to read)

4A.  ECONOMIC POLICES & CAPITAL MARKETS: USEFULESS IN CONTEXT OF REALTY CYCLES
(i). Part 1: An introduction of the current scenario of real estate market, role of capital markets and policy levers available for real estate markets : Introduction
(ii) Linkage of real estate assets and capital markets
(iii) Measures to give impetus to Real estate: Tapping both the “Direct investment” and “Capital Markets Route”
 

4B. The basic concept and use of financing- aggregation and segregation of money

4C. Real Estate Education in India: Need and Importance 

4D. Why invest in realty: Factors that drive this investment

4E. REITs units just any other debt instruments: The prevalent myth

5. Mortgages and variations (youtube videos for debt related concepts): 

Link : https://www.youtube.com/playlist?list=PLxQSVtDmYPG21D8dOGehp1SI1NwNWzE-l

Explanation of the above link for the videos: The videos explain in a pictorial manner, how debt can be structured for real estate assets. The EMI or equated installments method (which is widely practiced) is only one method and is explained pictorially. Further, by varying the basic parameters in a loan, several structures of loans can emerge that can suit a wide variety of people. Of course, the basic principle on which loans are given is kept intact in all variations.

Workshops on REITs and InvITs in India

REITs and InvITs: The Upcoming Investment Tools of Indian Capital Markets

Real Estate Financing in India has traditionally been done by direct investment i.e. by way of own finances in properties. Only in the last 15 years has there been an exponential growth in properties financed by way of debt (home loans, extension loans, loan against property, etc). This has contributed to high volumes and prices but simultaneously, the real estate assets have been integrated immensely with the capital markets of the country. The recent NBFC crisis, to some extent, is a pointer to this gradual yet seamless integration.

In a further growing bond between the two markets (realty and capital markets) we shall soon see inflow of large finances in capital markets directed towards real estate assets, since both the capital & realty markets are gaining maturity over time. The vehicles that are to make this possible are REITs (Real Estate Investment Trusts) and InvITs (Infrastructure Investment Trusts).  These Regulations were notified on September 26, 2014 and we currently have 3 InvITs which have gathered Rs. 10,000 crores from the markets and listed their units on stock exchanges. Additionally, 1 REIT is in the process of making a public offer and several others are to follow soon.

The inevitability of their future popularity is evident if we look at the global scenario where the REIT concept is highly popular and still gathering pace. In the US alone, REITs own more than $3 trillion in gross real estate assets. The economic and investment reach of those assets are felt by millions of Americans all across the country. By this estimate alone, REITs/ InvIT capitalization in India is set to go up by 300 times in coming years!

In India, several mutual funds have already incorporated an option to allocate up-to 10% of their corpus to REITs/ InvITs units as per the amended SEBI rules notified in 2017.

About REITs and InvITs

A REIT is an entity that owns, operates or finances income-producing real estate. Modeled after mutual funds, REITs provide all investors the chance to own valuable real estate and present the opportunity to access dividend-based income and total returns. They allow anyone to invest in portfolios of real estate assets the same way they invest in other industries and the stockholders of a REIT earn a share of the income produced through real estate investment, without actually having to go out and buy, manage or finance property.  InvITs can be treated as the modified version of REITs designed to suit the specific circumstances of the infrastructure sector.

Together, REITs and InvITs have a tremendous scope for use in the finance world and their units can help raise finances, control assets or to make money by trading in them. These entities can be used in wide and amazingly varied places– offices,  parking, warehouses, infrastructure such as roads, telecommunications, power generation, utilities, shopping malls, housing rentals, vacation homes, hotel industry, sports facilities and even prison facilities– the list can go on. The legislation is changing continually to suit the needs of Indian market environment so that these vehicles can be fully utilized (as our understanding of these vehicles/instruments increases in the Indian context, over time).

Workshop’s Objective

The functioning of these instruments is different from other financial assets for debt or equity. REITs and InvITs units are NOT debt instruments as perceived by many. In fact they are hybrid in nature, replicating features of both debt and equity. REITs units offer potentially stable returns like rentals from property investment and have a simultaneous scope for upward movement (property features are reflected in the units themselves). Due to inherent complexities, it is essential to understand their financial characteristics as a separate study.

For example, the growth in debt finance to real estate was facilitated by the process of securitization since 2000s, which helped many investors participate in financing real estate for debt based returns. However, real estate’s asset-level impact on the capital markets through this kind of debt financing can be seen in the way mortgage crisis of 2008 changed the fortunes of many nations.

REITs instruments have high yet stable return potential, but there are also several issues that need deeper analysis. Due to this typical need, a major change was witnessed in 2016. The Global Industry Classification Standard or GICS® which was created in 1999 by MSCI and Standard & Poor's for use by the global financial community was changed - in 2016, the real estate was added as the 11th sector to GICS  and was the first new headline sector added since its creation.  This event points to two important facts. Firstly, it will be highly desirable to include real estate assets in a portfolio for both higher returns as well as diversification (possible due to availability of these instruments now). Secondly, a proper understanding of the financial characteristics, which differentiate themselves from other assets, is a must before their inclusion in any portfolio.

A sample of some questions in this context:

·         Are REITs and InvITs units purely ‘debt’ instruments or are these purely ‘equity’ in nature?

·         Are they like ETFs (Exchange Traded Funds) or are REITs like mutual funds?

·         What differentiates them from realty stocks like those of DLF /Shobha developers?

·         What are the benefits in terms of returns?

·         What are the risks and usefulness for portfolio diversification?

·         How can we achieve miscellaneous other objectives (e.g. raising finances for large corporations) with these new and innovative products?

·         What are the challenges that we can face in incorporating these tools?

The above is only a primer and there exists a large need-gap in the current scenario of financial awareness for REITs and InvITs which the workshop seeks to fill.

Who should attend the workshop?

Ø  Fund Managers and wealth advisors

Ø  Institutional investors 

Ø  Investment bankers

Ø  Real estate companies and real estate consultants

Ø  Infrastructure operators and infrastructure investors

Course Outline

Note: Course outline can be worked out in detail (in accordance with the hours planned) since workshops are conducted as per requirements of the participants. You may contact on email below, giving your requirement and details:

The first book by an Indian author giving in-depth financial analysis for realty investments

Real Estate Investment and Financial Analysis (REIFA): A comprehensive manual

"Real Estate Investment & Financial Analysis: The Four Essentials of Building Wealth with Realty", made it to BookAuthority's Best Books of All Time.

BookAuthority collects and ranks the best books in the world

Directly go to:

Amazon.in

OR
View some articles and write-ups on real estate finance
Write-up 1. Linkage of real estate assets and capital markets
Write-up 2. The basic concept and use of financing- aggregation and segregation of money
Write-up 3. Real Estate Education in India: Need and Importance 




OR

Read more about the REIFA book...

TABLE OF CONTENTS: EXTRACTS (in four parts as below)

1^ST PART: INTRODUCTION; INVESTMENT BASICS (FOUNDATION FOR REALTY INVESTING): Meaning of Real Estate and Realty Investment; Real Estate as an Asset Class; Real Estate Investment Basics. Consumption View vs. Investment View, Secondary Use Investment Goals, Caveats, Strategies and Investing Styles, Combining Leverage, Portfolios, Wealth Management, Financial Planning, Investment Planning, Wealth Preservation, Comparison to Other Asset Classes, Inflation and Hedging; Tools for Real Estate Investment Study Mathematics for Real Estate Investment Analysis, TVM, Misc Financial Tools

2^nd PART: REAL ESTATE INVESTMENT ANALYSIS (METHODOLOGY): Macro Approach to Realty Investing , Study of Cycles, Economic Cycle, Real Estate Cycle, Construction Activity and Cycles, Geographical Factors, Localities and the Value Forces, Globalization impact; Realty Indices: Prevalent Indices based on their Origins, The Pros and Cons of Different Indices, Real Estate Indices in India, Private Indices, sentiment index; Understanding Returns & Risk in Real Estate, Rental Concepts Prevalent, Evaluating Returns with NPVs, IRRs and more; Evaluation of Risk, Net Effective Rent, Risks in Real Estate, Statistical Tools for Risk-Return Study. Valuation of Properties, Guiding Principles, Value forces, Highest & Best use, methods- DCF, capitalization, comparison, cost, reconciling

3^rd PART: FINANCING THE INVESTMENT(FUNDAMENTALS): Financing Real Estate Investments and the Eight Tenet Matrix of Real Estate Finance; Equity Investment: Direct Equity Investment, Risk & Return, Pooled Equity Investments;  Debt Investment, debt evaluation with LTV and DSCR, leverage concept, mortgages and various loan structures possible, mezzanine finance, LAP, LRDs, balloon loans, CLSS scheme.

4^th PART: FINANCING REAL ESTATE THROUGH POOLED INVESTMENTS: (CONCEPTS, INVESTMENT VEHICLES AND ANALYSIS): Securitization, Securitization Process; Types, Residential and commercial Mortgage Backed Securities (RMBS and CMBS), CMOs, mortgage pools and assessments, REITs overview, classification, investment strategies and aims, objectives of REITs. REITs and InvITs in India, REMFs, CIS, VCs, AIFs, foreign funds in real estate, discussions on REITs in India; REITs Analysis and Valuation – methods, Portfolio Analysis, Risk Return Analysis, Valuation of REIT Stocks, Real estate cash flow modelling

Notable Comments:

This is the first book by an Indian author giving in-depth financial analysis for realty investments. A unique feature of this book is the interesting linkage of financial concepts with real estate asset analysis. This approach helps in a thorough study of real estate, an extremely important asset class for everyone.

-Mr. Deepak Jain, Country Head, India and South Asia, American Academy of Financial Management

As the capital markets deepen their relationship with real estate, the importance of such a structured study cannot be undermined. It will be very helpful to all investors and market participants, especially with the arrival of an era of financial inclusion for real estate investing.

-Mr. G C Sharma, Head-Financial Education, Schools & Universities, National Stock Exchange of India (NSE)

The author has an interesting way of explaining finance concepts with the help of diagrams and pictures. A much needed book on the subject.

-Mr. Ruchir Sharma, author of ‘Breakout Nations’ and ‘Rise and Fall of Nations’; Chief Global Strategist & Head Emerging Markets, Morgan Stanley Investment Management

Savvy investors look beyond the evident. 

(Diversifying investments, discovering potential growth assets and learning continually are a part of their strategic wisdom)

This book comes at a crucial time, when the need to understand real estate as an asset class is being widely felt. It analyzes real estate investments and related financial aspects methodically, in the same manner that we carry out study of other assets such as equity, fixed income instruments, and currency. If you are a student of finance, an investor, a money manager, wealth manager or someone who is just curious about real estate from the viewpoint of investment and finance, you now have an in-dispensable tool in the form of this book.

Book Description

Real Estate is not everyone’s piece of cake. Or can it be? Real estate investing can generate good returns, act as an effective hedge against inflation, and be useful for diversification. But we often wonder if the ‘not-so-wealthy’ have any way to gain by participating in this form of investment or if it is just a dream. 

In order to understand this, we can look at the life of humans and draw some comparisons. Asset investing, like humans, gains maturity over time - the asset market evolves, gathers more wisdom, and associates more people with it as time progresses. Being equity share-holders, many of us are already fractional owners of some of the biggest manufacturing companies in the world.  Would this have been possible more than 50 years ago? At that time, being an owner of a manufacturing unit meant putting up a factory and assembling all factors of production. Now, the investment avenues are well developed and the whole ecosystem makes this process not only better but also more inclusive to all.

This change in stock markets was brought about by a change in the framework at a very fundamental level in each such stock market in the world. Indian markets welcomed this era in the 1980s and the process gained tremendous momentum with advent of SEBI in 1992. Participation in industrial growth of the nation became an opportunity for everybody and gradually the rest of the world participated with India. The real estate industry is also set to alter dramatically and in a similar way. At a global level, we see this already- the real estate sector is the first new headline sector added since GICS® created in 1999 (by MSCI and Standard & Poor's for use by the global financial community) - it became the 11th sector in 2016. In India too, the new environment is now in place- RERA, REITs and the frameworks in India are now conducive to this transformation. Real estate investing is set to undergo a seachange and we can all benefit by being pro-active in this transition.

However, real estate investing is more complex and different from other investments. It has a certain pattern of returns, unique characteristics and many other nuances. The mortgage crisis of 2008 proved that even if we invest indirectly through various financial instruments and investment vehicles, the asset’s nature & behavior have a strong bearing on the way our investment functions. Thus, a person can buy ‘real estate’ or buy a ‘piece of the real estate pie’ (just like ‘owning a factory’ or ‘some equity’ in it), but the characteristics of real estate make investing herein quite different from other assets.

This book takes the readers through a journey of learning, one step at a time. It shows how real estate can be used efficiently by investors - both big and small- for wealth generation and financial growth. Plenty of examples, diagrammatic explanations and numerically worked out problems (with solutions) make it a truly knowledge enriching experience. We can therefore, start the learning process in order to ’have the cake, and eat it too!’

***** -----*****

You may please share your comments by email to the address below (You may also write-in to request for the detailed table of contents)

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Learn more about the four essentials of building wealth with real estate

This book presents a structured study of real estate as an asset that can be useful for any investor. It elaborately explains the 4 essentials of real estate investing and building wealth. However, the guiding principle in presenting this work is to break down concepts into smaller parts so as to simplify even the complex aspects.  Because, a focus on simplifying the complexities can make a work of such nature far more meaningful to any reader. (In fact an understanding of the concepts outlined herein can be useful for other asset studies as well). 


The 4 parts or 'the 4 essentials of building wealth with realty' are:

Part A (Investment Basics): The foundation for real estate investing

“Part A” lays the foundation for the study of real estate investing. It familiarizes the reader with the very basics of real estate and also the investment angle to real estate. Instead of going into complexities of properties, it tries to define in clear terms what real estate is all about from the point of view of the title of our subject study. It then elaborates real estate from the perspective of an asset class. We take up basic issues concerning investors such as investment strategies, asset portfolios and inflation hedging etc. The investment study tools i.e. mathematical and financial concepts are elaborated herein. Together, these lay a foundation for both the investment as well as the financing aspects to be covered later.

Part B (Investment Analysis): Real estate investment analysis

“Part B” comprises all the modules which seek to interpret and analyze real estate in the sense of an investment. The goal is to use the foundations in Part A to start looking at the asset from the point of view of investing therein. We begin by first taking a broad view (macro), then understanding real estate indices, thereafter taking up a risk-return analysis for real estate assets and lastly asset specific analysis or valuation of the individual properties.

Part C (Financing Basics): Financing the Investment, Fundamentals

“Part C” is taken up after the investment analysis section, which is keeping into account the logical sequence of investing. After the investment analysis has been done (covering timing, identification of properties etc.) it is natural to look deeper into how to finance the asset and structuring of finances. It begins with coverage of basic concepts of equity and debt analysis for real estate, from their different perspectives. Then we go through understanding debt structures in a detailed way, since debt is integral to real estate finance. The last module in this section relates to prevalent debt finance structures, both in residential as well as other categories of real estate financing.

Part D (Pooled Finances): Financing Real Estate through Pooled Investments

“Part D” covers those aspects of realty finances which fall in the realm of pooled investments. The objective is to study newer ways of financing real estate - where many investors get together and invest money, taking help of investment vehicles and instruments, through capital markets (enabled of course, by legislative framework). Aspects covered here are important to understand since this is the way market for any asset class matures and comes of age. For any asset to perform well and gain popularity with investors, it must be within reach of investors – in case of real estate these avenues help investors with a smaller ticket size compared to direct real estate investment. Additionally, the investments should be liquid while also catering to the varying risk-return profiles of investors. This is the reason for pooled forms of financing gaining importance. The concept of securitization and investment vehicles in form of REITs are a great way to generate pooled investments in real estate.

The above four essentials are the foundation for the entire book. 

In order to maintain a logical sequence for clarity of understanding, these 4 essentials are presented under two separate volumes - the investment volume (contains 2 essentials) and the financing volume (contains the remaining 2 essentials). The book has a total of 17 modules (chapters) and the modules are split almost equally between these 4 essentials. The following diagram can be helpful to understand the entire structure of this extremely comprehensive book :

However, when we say that the book is 'comprehensive', it may be clarified that it does not mean that nothing more can be studied on the subject. In fact, real estate is a very vast subject and the focus of the book, as evident from above, is on two very important areas for asset investors- 'investment analysis' and 'financial analysis'.  An effort has been made to make the book a one stop reference point in these spheres, keeping in line with the title “Real Estate Investment And Financial Analysis”. However, such is the vastness of the subject at hand that each of the chapters in the book also has the potential to be expanded further into a mini book!

It is intended to make the present study of real estate interesting, relevant and future proof also. For this purpose, concepts have been focused on, rather than current facts and figures. This analysis is similar to the way we undertake study of other asset classes like equities and bonds.  After all real estate is also an asset, with its own characteristics and nuances. Financial assets are studied in a structured way, and there is a definite need to view real estate investments similarly. 

 A unique feature of the book and the one which makes it easy to comprehend, is the explanation of concepts with the help of flow charts, diagrams and tables. The concepts are further elaborated with use of many practical examples which are solved by making use of financial calculations, wherever needed. Since it is possible that many readers may be studying the subject  for the first time,  the explanations in the book start from a basic level and then move on to higher level. Also, prior knowledge of the subject of finance is not a must but is desirable.

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Understanding the four essentials with some analogies

(This page is best viewed in web version/ desktop view)

Sometimes we need analogies and simple examples to help understand things better, and also retain in our memories for a longer time. The simplicity that follows can look child-like but do we not understand best when we learn as children? We have probably not forgotten even today, whatever we learnt well when we were children. Many concepts in this book have been presented in this manner.

The analogies presented are of a tree (our investment tree) and a money box (finances that help the investment tree grow)...

The table of contents is presented below, in relation to these analogies, to help relate to the flow / structure of this book. This manner of relating the modules (chapters) with the analogies, can help in easy understanding and also remembrance. But first, a recall of the 'snapshot of table of contents':

Above: Recap of our table of contents: structuring of the four essentials

The analogies related to the table of contents....

Module 1:	Introducing the four essentials Let us inspect the field where we plant our investment tree. We will understand this ‘field’ which serves as a base for our entire future activities.
Volume 1: Real Estate Investment The Tree Analogy (or our investment tree) If we compare the steps taken for our investment decision to planting and growing a tree, we may understand many aspects quite easily.
PART A: Understanding the basic nature and characteristics of our investment tree: starting with the seed.
Module 2	Meaning of (i) Real Estate (ii) Realty Investment The seed of our investment tree
Module 3	Real Estate as an Asset Class Identifying the species and the genus of our investment tree
Module 4	Real Estate Investment Basics What, when, and how will we get the fruit or flower or timber or maybe even shade?
Module 5	Tools for Real Estate Investment Study Wait! Before we go further, we need some tools to measure the height or weigh the fruits of the tree
PART B: Planting the investment tree, protecting it and gaining from it
Module 6	Macro Approach to Realty Investing Is it the environment all-right now for the tree to grow, or should we wait for the season to change?
Module 7	Realty Indices: Macro Assessment for Realty Investing Using data of the meteorological department to assess the correct season.
Module 8	Understanding Returns & Risk in Real Estate This tree should give us plenty of sweet mangoes. But, could something harm the tree and its fruits?
Module 9	Valuation of Properties: Core of Investment Analysis Evaluating the investment tree and assessing the potential for fruit, flower or girth.

Volume 2: Real Estate Financing The Money Box Analogy (or the finances for our investment) To help us grow and nourish the tree, we need resources - a money box. All that is mentioned in Volume 1 is impossible to do without this box. It is also a symbiotic relationship - the tree in turn helps fill up this box even more
PART C: The basic understanding of our money box: structure, compartments etc.
Module 10	Basic Concepts What is the structure of the money box? Taking the box apart bit-by-bit and understanding its compartments.
Module 11	Debt Finance: Variations and Applications Inspecting a prominent compartment in the money box - the loan compartment.
Module 12	Debt Finance in Realty: The Prevalent Styles A closer look inside the loan compartment of the box: who takes what (and ways to take it!).
PART D: Making bigger and better money boxes; a deeper understanding of this process and of the boxes
Module 13	Securitization: Enabling Pooled Debt finance How to get more people to put their money in the box? Working out new structures of the loan compartment to suit more people.
Module 14	REITs: General Overview Innovating sturdier boxes to help many more people fill them up.
Module 15	Pooled Finance in India: REITs, InvITs & More A look at some bigger boxes that are marked “Made in India”.
Module 16	REITs Analysis and Valuation Getting more knowledgeable about our ‘innovative’ boxes- tones, textures and usage. How could we benefit from them?
Module 17	Real Estate Cash Flow Modeling Accounting and money box statistics- keeping a check on what comes in or goes out of any type of money box

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