Land is the baseline for all types of real property. The most essential things in real estate are resources consisting of lands and buildings,air rights above the land and underground rights below the land along with natural resources.The term real estate simply means real or physical property.
Types of Real estate:-
There are 4 types of real estate:
- Residential real estate – It is an area developed for people to live on.Simply any property used for residential purposes which included both new construction and resale homes.Examples include single-family homes,townhouses,cooperatives,triple-
Deckers,multigenerational and vacation homes.
- Commercial real estate – It is property that is used exclusively for business-related purposes.
It is intended to generate a profit either from capital gains or rental income.Examples include shopping centers, strip malls,medical and educational buildings,hotels and offices apart from these apartment buildings are considered commercial.
- Industrial real estate – It includes property and all the domains of manufacturing buildings which can be used for research,production,storage and distribution of goods.It sounds simple but it comes in all shapes and sizes i.e small,big and enormous.Some buildings that distribute goods are considered commercial real estate.
- Land – typically refers to undeveloped property,vacant land,working farms and ranches etc. Developers acquire land and combine it with other properties(called assembly) and rezone it so they can increase the density and increase the value of the property.
How does real estate works:-
A real estate business is a business entity that deals with the buying, selling, management, or investment of real estate properties. In one word we can call real estate business is real estate transaction. This is the process whereby rights in a unit of property are transferred between two or more parties e.g. in the case of conveyance one party being the seller(s) and the other being the buyer(s). It can be quite complicated sometimes due to the complexity of property rights being transferred, the amount of money being exchanged, and government regulations. Conventions and requirements also vary from one country to another country of the world and among smaller legal entities.
There are 6 main pillars of the real estate business which make this business more profitable than others.
- Development – Also called property development and it is a business process that involves the get hold of underdone land,rezoning,framework and renovation of buildings and sale or lease product to end users.Developers buy land,finance real estate deals,build projects,create,imagine and control the process of the development from the beginning to end.They usually take greater risk in the creation or renovation of real estate.
- Sales and marketing – Sales and marketing firms established their work with developers to sell the buildings and units they create.These firms use lots of selling tricks to dominate in the real estate business like making contact from social networking sites,sharing property details for advertisement in social platforms etc.
- Brokerage – A real estate brokerage is a firm that employs a team of real estate agents (realtors) who help facilitate a transaction between the buyers and sellers of property.And ther person who do this firm is known as broker.Their job is to represent either party and help them achieve a purchase or sale with the best possible terms.
- Property management – The term property management refers to managing real estate by third-party property management firms. It typically involves the management of property owned by another party. Its examples are residential, commercial, and industrial real estate, and are normally investment properties such as apartments, detached houses, condominium units, and shopping centers. Property managers act on behalf of owners to preserve the value of the property while generating income.
- Lending – Lending (also known as “financing”) occurs when someone allows another person to borrow something. Money, property, or another asset is given by the lender to the borrower, with the expectation that the borrower will either return the asset or repay the lender.Lenders play a vital role in the industry as virtually all properties and developments use leverage (debt) to finance their business. It can include banks, credit unions, private lenders, and government institutions.
- Professional services – Essentially, Professional Services involves a range of different occupations that provide support to real estate businesses in the form of advice or performing tertiary roles.The Professionals are helping clients manage, support and grow their businesses covering a wide array of areas.The most common examples are accountants, lawyers, interior designers, stagers, general contractors, construction workers, and tradespeople.
Impact of COVID-19 in real estate business:-
For the last few years, real estate investments have generated firm cash flow and return However, since the virus outbreak, the reality has quickly changed, and the real estate market has been hit hard all over Europe. The Covid-19 outbreak of the supposedly insurmountable, this outbreak has proved to be a stumbling block for European Real Estate markets. The breakneck spreading speed of the coronavirus worldwide has forced governments to take strong and substantial containment measures, leading to a sharp decline in GDP for European countries in 2020 to an extent never seen since 1945.
The European residential market has got badly affected by the pandemic-induced lockdowns and subsequent decline in the GDP activity.
According to one of the reports by Natixis, which conducted a study about the impact of the Covid-19 crisis on real estate valuations in the form of an econometric exercise that focused on four main European markets, namely Germany, France, Spain, and Italy. The report showed residential properties to be more resilient, followed by offices and retail. The report finds that the GDP level at the end of 2021 will be still below the level at the end of 2019. At a time when Real Estate is suffering from the effects of Covid19, countries have come with their own policies to deal with it. For instance, in Europe, some countries, including Germany, France, and the UK, have suspended evictions. Similarly, Italy and the U.K have started providing temporary mortgage relief to their citizens and various European banks are being strongly encouraged to give relief to their customers while governments have granted retailers tax reliefs.
- Since the European economy was significantly affected by the global financial crisis of 2008. It slightly recovered during 2010 and 2011 after the resulting recession. However, the EU was struck by the debt crisis of some of its member states in 2012 and the economy went through another short recession. The last five years were years of moderate growth. The European economy continued growing in 2018 however, the growth decelerated. GDP in the whole EU-28 grew by 2.0%, the Eurozone rose by 1.8%.Correlation between lagged GDP growth and house prices in the EU reached 83% during the last 10 years.
- After many years of growth across all segments of the real estate market, the year 2020 was anticipated to confirm this trend. Nevertheless, in late December 2019, a new type of coronavirus started to spread across the world from China. In February and March 2020, most of the European countries were hit by the pandemic and were forced to impose restrictive measures on their economies and the free movement of citizens. Some countries reported a year-on-year decline in transactions by up to 80%. The effect on construction activity varied between countries based on the tightness of protective measures. For example in France, works on 90% of construction sites were interrupted. Together with the rest of the economy, the real estate market has also been affected. The current unexpected situation brought several restrictions into the functioning of the real estate market. This crisis gives the whole market a new perspective on how people across Europe live and has the potential to change it.
