Real estate consists of land and any structure that is affixed to it. It particularly denotes a property that is static. The real estate participants are usually governed by a set of rules and regulations which are referred to as real estate laws.
Classification of Real estate market
The real estate market has 2 classifications-
Commercial real estate
Commercial real estate includes the following-
- Office buildings
- Industrial premises
- Retail premises
- Office complexes
- Shopping complexes etc.
It basically consists of the buildings or structures meant for public utilization.
Residential real estate
Residential real estate market includes the following-
- Duplex
- Condominiums
- Bungalows
- Mobile homes
- Houseboats
- Dwellings that are portable
- Apartment
- Terraced house etc.
Participants of real estate market
The Real estate market consists of the real estate market participants who are involved in trading their real estate property. These include the owners, users, renters, facilitators, developers and renovators etc.
- Owner
Owners are the investors. These are the people who lease out or rent out the premises they have purchased.
- User/Owner
People who are both tenants as well as owners fall in this category. They invest in commercial property and either dwell in it or use it for business purpose.
- Developers
These are the people who work upon a raw land so that they can build structures on it which eventually get sold.
- Renters
Renters are the consumers.
- Facilitators
Attorneys, real estate brokers or agents, banks make up the facilitators. In other words, any individual or institution that assists or supports sale and purchase of real estate property may be referred to as a facilitator.
- Renovators
Renovators are the people who work upon or renovate existing structures and buildings so that they can be ready for sale in the market.
While developers as well as renovators make up the supply side of the real state market, owners, owner/user as well as renters make up the demand side of the real estate market.
Characteristics of real estate market
The real estate market has certain characteristics. They are given below-
- Diversity
Real estate properties are usually diverse and unique if seen from the point of view of financing, location as well as quality.
- Immobility
Real estate property is not mobile or lacks mobility. This explains why a physical real estate market does not exist.
- Durability
Owing to the durable nature of the real estate property, real estate markets work on a flow/stock market model.
- Consumption good and Investment good
Real estate may be bought with the expectation of getting a good return on its sale (when it becomes a good investment) or it may be bought with the expectation of utilizing it (when it becomes consumption good). A scenario when there is a combination of both is when an individual lives as well as owns the property.
- Transaction cost is high
Real estate fees, legal fees, search costs, moving fees, deed registration fees and land transfer fees are the different forms of fees that are associated with a real estate transaction. It has been observed that roughly the transaction cost for a seller varies between 1.5% and 6% of purchase price.
- Delays
Financing a real estate project, designing it, its construction and finally taking the deal to completion usually takes a long period. The main reason for this is influence of the existing market conditions.
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