Unit Trust of India and Real Estate Investments

UTI set up as a statutory corporation under UTI act 1963
 Objectives of UTI: The main objectives of UTI are…
Enabling common investors to participate the prosperity of capital market
through portfolio management aimed at …
Reasonable Returns / Liquidity / Safety
UTI has played a significant role in the institutional building.
It has co promoted many institutions to aid healthy development of the financial
sector.
 UTI Schemes and Plans
All the schemes of UTI with the exception of unit scheme 1964
a) Open end scheme e) Interval Scheme
b) Closed end scheme f) Balanced Scheme
c) Growth scheme g) Liquid Fund
d) Income scheme h) Money Market Fund

Real Estate Investments
Real estate offers an attractive way to diversify an investment portfolio.
Real estate differs from security investment in two ways…
1. It involves ownership of the tangible asset – real property rather than a
financial claim.
2. Managerial decisions about real estate greatly affect the returns earned
from investment in it.

Setting Real Estate Investment Objectives
1) The investor should consider how the investment characteristics of real estate
differ.
2) The investor should establish investment constraints & goals.
3) The investor should analyze important features.
 Investment Characteristics
To select wisely, the investor needs to consider the available types of
properties & whether the investor wants equity or a debt position.
Classification of real estate into two investment categories…
1) Income Properties.
2) Speculative Properties.
1) Income Properties are residential & commercial properties that are leased out &
expected to provide returns primarily from periodic rental income.
2) Speculative properties typically include raw land & investment properties that
are expected to provide returns primarily from appreciation in value due to
location, scarcity, etc rather than from periodic rental income.
 Constraints & Goals
One financial constraint is the risk return relationship he finds acceptable.
The investor must consider how much money he wants to allocate to the real
estate portion of his portfolio.
Investor needs to consider how his technical skills, temperament, repair skills &
managerial talents fir a potential investment.
 Analysis of Important Features
General features relating to real estate investment.
1) Physical Property Make sure to get both the quantity & quality of property.
2) Property Rights Law such as deeds, titles, easements, liens & encumbrances.
Make sure that along with various physical inspections, to get a
legal inspection from a qualified attorney.
3) Time Horizon Real estate prices to p & down.
Market forces pull them up slowly but surely.
Prices can fall so fast they tae an investor’s breathe away.
The investor must decide what time period is relevant.
4) Geographic Area Real estate is spatial commodity, which means that its value is
directly linked to what is going on around it.

Determinants of Value
The investor should evaluate the four major determents of real estate value.
Demand / Supply / The property / The property transfer process
1) Demand Demand refers to people’s willingness & ability to buy on rent a
given property.
Property values follow an upward path when employment is
increasing & values typically fall when employers begin to lay off
personnel.
2) Supply Supply analysis means sizing up the competition.
An integral part of value analysis required to identify sources of
potential competition & than inventory them by price & features.
3) The Property The price that people will pay is governed by their needs & the
relative price of the properties available to meet those needs.
To try to develop a property’s competitive edge, an investor should
consider five items.
Restrictions on use / Location / Site characteristics / Improvements
/ Property management
a) Restrictions on
use
Government restrictions derive from zoning laws, building &
occupancy codes, & health & sanitation requirements.
Private restrictions include deeds, leases & condominium bylaws
and operating rules.
b) location
analysis
Convenience – accessibility to the property
Environment – trees / river / lakes / air quality / esthetic
socioeconomic / legal & fiscal environments / Government services
/ Property tax
c) Site
Characteristics
The most important features of a property site are its size.
For residential property - a large yard for children to play in or for a
garden.
For Commercial property – adequate parking space
Site quality such as soil fertility, topography, elevation & drainage
d) Improvements This refers to the man made additions to a site such as buildings,
sidewalks & various on site amenities.
Amenities such as air conditioning, swimming pools & elevators
can significantly.
e) Property
Management
Management assumes responsibility for maintenance & repair of
buildings & their physical systems (electrical, heating, air
conditioning & plumbing) & for keeping revenues & expense
records.
Property management means finding the optimal level of benefits
for a property.
4) Property transfer
Process
The cash flows a property earns can be influenced significantly
through promotion & negotiation.

Real estate valuation
In real estate the concept of market value or actual worth, must be interpreted
differently from its meaning in stocks & bond.
The difference arises for a number of reasons.
1) Each property is unique.
2) Terms & conditions of sale may vary widely.
3) Market information is imperfect.
4) Properties may need substantial time for market exposure, time that may
not be available to any given seller.
5) Buyers sometimes need to act quickly.

Estimating Market Value
In real state, estimating the current market value of a piece of property is done
through a process known as a real estate appraisal.
3 imperfect approaches to real estate market values...
1) The cost approach Based in the notion that an investor should not pay more for a
property than it would cost to rebuild it.
2) The comparative
approach
This method is based on the idea that the value of a given property
is about the same as the prices for which other similar properties
have recently sold.
3) The income
approach
A property’s value is viewed as the present value of all its future
income.
The most popular income approach is called direct capitalization.
Market value = Annual net operating income
Market capitalization rate
Annual net operating income is calculated by subtracting vacancy
& collection losses & property operating expenses, including
property insurance & property taxes from an income property’s
gross potential rental income.
Using an Expert Real estate valuation is a complex & technical procedure that
requires reliable information about the features of comparable
properties, their selling prices & applicable terms of financing.

Strategic Financial Management
A unified, comprehensive & integrated plan that relates to the strategic
advantages of the firm to the challenges of the environment.
It is designed to ensure that the basic objectives of the enterprise are achieved
through proper execution by the organization.
The determination of the basic long term goals & objectives of an enterprise &
the adoption of the courses of action & the allocation of resources necessary
for carrying out these goals.

Forms and Kinds of Strategies
1) Planned Strategy Precise intentions are formulated & articulated by a central
leadership & baked up by formal controls to ensure their surprise
free implementation.
2) Entrepreneurial
Strategy
Intentions exist as the personal, unarticulated visions of a single
leader.
The organization is under the personal control of the leader &
located in a protected niche in its environment.
3) Ideological
Strategy
Intentions exist as the collective vision of the members of the
organization, controlled through strong share norms.
4) Umbrella Strategy A leadership in partial control of organizational actions defines
strategic targets or boundaries within which others must act.
5) Process Strategy The leadership controls the process aspects of strategy, leaving
the actual content of strategy to others.
6) Disconnected Strategy
Members or subunits loosely coupled to the rest of the organization
produce patterns in the streams of their own actions in the absence
of, or in direct contradiction to the central or common intentions of
the organization at large.
The strategies can be deliberate for those who make them.
7) Consensus
Strategy
Through mutual adjustment, various members converge on
patterns that pervade the organization in the absence of central or
common intentions.

The Five Tasks of Strategic Management
1) Articulating a vision of the organization’s future where the organization
needs to be heeded.
2) Translating that vision in to a mission that defines the organization purpose.
3) Converting the mission into performance objectives.
4) Detailing each objective into specific goals.
5) Formulating strategies & tactics to achieve the goals.