1. Real Estate
INTRODUCTION
India Real Estate market has been seeing multi level rise in the past few
years. If industry sources are to be believed, this upward graph has no sign
of coming down or even lying flat for few more years to come. The facts
that major real estate companies in India are going public, proves the
potential of the Indian property market. Starting from infrastructure
development to residential complex, commercial real estate to retail space
development India property market is booming with all kinds of activities.
Thanks to the Government approval of 100% FDI in India real estate
development and steady capital market, some all time big investments are
being made in the real estate sector. Buyers from all across the world are
showing interest and Indian property now features at the top of the list of the
international real estate investors. In this context, RealEstateOnline.in
provides a common platform for Indian property owners, potential buyers &
property dealers in India. We have comprehensive listings of residential &
commercial property in all the major as well as the second tier cities in India,
including real estate in Bangalore, Mumbai, Delhi, Agra, Hyderabad,
Gurgaon, Chennai, Pune, Kolkata, Noida and so on.
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2. Mission
To be known as the leading Group in the real estate arena - known for
providing quality, futuristic and environment-friendly residential and
commercial solutions on time.
To be known as the leading Group in the real estate arena - known for
providing quality, futuristic and environment-friendly residential and
commercial solutions on time.
To be known as the leading Group in the real estate arena - known for
providing quality, futuristic and environment-friendly residential and
commercial solutions on time.
Our Vision
To provide true value-for-money residential and commercial realty solutions
to our clients. And in the process build a relationship of mutual trust with
not only our clients but with all our associates... to make sure that all of us
grow together bigger and stronger
Real estate or immovable property is a legal term (in some jurisdictions)
that encompasses land along with anything permanently affixed to the land,
such as buildings. Real estate (immovable property) is often considered
synonymous with real property (also sometimes called realty), in contrast
with personal property (also sometimes called chattel or personality).
However, for technical purposes, some people prefer to distinguish real
estate, referring to the land and fixtures themselves, from real property,
referring to ownership rights over real estate.
The terms real estate and real property are used primarily in common law,
while civil law jurisdictios refer instead to immovable property.
In law, the word real means relating to a thing (from Latin res/rei, thing), as
distinguished from a person. Thus the law broadly distinguishes between
"real" property (land and anything affixed to it) and "personal" property
(everything else, e.g., clothing, furniture, money). The conceptual difference
was between immovable property, which would transfer title along with the
land, and movable property, which a person would retain title to.
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3. Business sector
With the development of private property ownership, real estate has become
a major area of business. Purchasing real estate requires a significant
investment, and each parcel of land has unique characteristics, so the real
estate industry has evolved into several distinct fields. Specialists are often
called on to valuate real estate and facilitate transactions. Some kinds of real
estate businesses include:
• Appraisal: Professional valuation services
• Brokerages: Assisting buyers and sellers in transactions
• Development: Improving land for use by adding or replacing
buildings
• Property management: Managing a property for its owner(s)
• Real Estate Marketing: Managing the sales side of the property
business
• Real Estate Investing: Managing the investment of real estate
• Relocation services: Relocating people or business to a different
country
Within each field, a business may specialize in a particular type of real
estate, such as residential, commercial, or industrial property. In addition,
almost all construction business effectively has a connection to real estate.
"Internet Real Estate" is a term coined by the internet investment community
relating to the parallel that exists between high quality internet domain
names and real-world, prime real estate. Many internet companies actually
use the address of properties as domain names.
Levels
According to The Economist, "developed economies'" assets at the end of
2002 was
• Residential property: $48 trillion
• Commercial property: $14 trillion
• Equities: $20 trillion
• Government bonds: $20 trillion
• Corporate bonds: $13 trillion
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4. • Total: $115 trillion
That makes real estate assets 54% and financial assets 46% of total stocks,
bonds, and real estate assets. Assets not counted here are bank deposits,
insurance "reserve" assets, and human assets; also it is not clear if all debt
and equity investments are counted in the categories equities and bonds. For
U.S. asset levels see FRB: Z.1 Release-- Flow of Funds Accounts of the
United States.
Mortgages in real estate
In recent years, many economists have recognized that the lack of effective
real estate laws can be a significant barrier to investment in many
developing countries. In most societies, rich or poor, a significant fraction of
the total wealth is in the form of land and buildings.
In most advanced economies, the main source of capital used by individuals
and small companies to purchase and improve land and buildings is
mortgage loans (or other instruments). These are loans for which the real
property itself constitutes collateral. Banks are willing to make such loans at
favorable rates in large part because, if the borrower does not make
payments, the lender can foreclose by filing a court action which allows
them take back the property and sell it to get their money back. For
investors, profitability can be enhanced by using an off plan or pre-
construction strategy to purchase at a lower price which is often the case in
the pre-construction phase of development.
But in many developing countries there is no effective means by which a
lender could foreclose, so the mortgage loan industry, as such, either does
not exist at all or is only available to members of privileged social classes.
Real estate economics
Real estate economics is the application of economic techniques to real
estate markets. It tries to describe, explain, and predict patterns of real estate
prices, building production, and real estate consumption. The closely related
fields of housing economics is narrower in scope, concentrating on
residential real estate markets as does the research of real estate trends
focus on the business and structural changes impacting the industry. Both
draw on partial equilibrium analysis (supply and demand), urban economics,
spatial economics, extensive research, surveys and finance.
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5. Overview of real estate markets
The main participants in real estate markets are:
• Owner/User - These people are both owners and tenants. They
purchase houses or commercial property as an investment and also to
live in or utilize as a business.
• Owner - These people are pure investors. They do not consume the
real estate that they purchase. Typically they rent out or lease the
property to someone else.
• Renter - These people are pure consumers.
• Developers - These people prepare raw land for building which
results in new product for the market.
• Renovators - These people supply refurbished buildings to the market.
• Facilitators - This includes banks, real estate brokers, lawyers, and
others that facilitate the purchase and sale of real estate.
The owner/user, owner, and renter comprise the demand side of the market,
while the developers and renovators comprise the supply side. In order to
apply simple supply and demand analysis to real estate markets a number of
modifications need to be made to standard microeconomic assumptions and
procedures. In particular, the unique characteristics of the real estate market
must be accommodated. These characteristics include:
• Durability - Real estate is durable. A building can last for decades or
even centuries, and the land underneath it is practically indestructible.
Because of this, real estate markets are modeled as a stock/flow
market. About 98% of supply consists of the stock of existing houses,
while about 2% consists of the flow of new development. The stock of
real estate supply in any period is determined by the existing stock in
the previous period, the rate of deterioration of the existing stock, the
rate of renovation of the existing stock, and the flow of new
development in the current period. The effect of real estate market
adjustments tend to be mitigated by the relatively large stock of
existing buildings.
• Heterogeneous - Every piece of real estate is unique, in terms of its
location, in terms of the building, and in terms of its financing. This
makes pricing difficult, increases search costs, creates information
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6. asymmetry and greatly restricts substitutability. To get around this
problem, economists (beginning with Muth (1960)) define supply in
terms of service units, that is, any physical unit can be deconstructed
into the services that it provides. Olsen (1969) describes these units of
housing services as an unobservable theoretical construct. Housing
stock depreciates making it qualitatively different from a new
building. The market equilibrating process operates across multiple
quality levels. Further, the real estate market is typically divided into
residential, commercial, and industrial segments. It can also be further
divided into subcategories like recreational, income generating, area,
historical/protected, etc.
• High Transaction costs - Buying and/or moving into a home costs
much more than most types of transactions. These costs include
search costs, real estate fees, moving costs, legal fees, land transfer
taxes, and deed registration fees. Transaction costs for the seller
typically range between 1.5 - 6% of the purchase price. In some
countries in Continental Europe, transaction costs for both buyer and
seller can range between 15 - 20%.
• Long time delays - The market adjustment process is subject to time
delays due to the length of time it takes to finance, design, and
construct new supply, and also due to the relatively slow rate of
change of demand. Because of these lags there is a great potential for
disequilibrium in the short run. Adjustment mechanisms tend to be
slow, relative to more fluid markets.
• Both an investment good and a consumption good - Real estate can
be purchased with the expectation of attaining a return (an investment
good), or with the intention of using it (a consumption good), or both.
These functions can be separated (with market participants
concentrating on one or the other function) or can be combined (in the
case of the person that lives in a house that they own). This dual
nature of the good means that it is not uncommon for people to over-
invest in real estate, that is, to invest more money in an asset than it is
worth on the open market.
• Immobility - Real estate is locationally immobile (save for mobile
homes, but the land underneath them is still immobile). Consumers
come to the good rather than the good going to the consumer. Because
of this, there can be no physical market-place. This spatial fixity
means that market adjustment must occur by people moving to
dwelling units, rather than the movement of the goods. For example, if
tastes change and more people demand suburban houses, people must
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7. find housing in the suburbs, because it is impossible to bring their
existing house and lot to the suburb (even a mobile home owner, who
could move the house, must still find a new lot). Spatial fixity
combined with the close proximity of housing units in urban areas
suggests the potential for externalities inherent in a given location.
Demand for housing
The main determinants of the demand for housing are demographic.
However other factors like income, price of housing, cost and availability of
credit, consumer preferences, investor preferences, price of substitutes and
price of compliments all play a role.
The core demographic variables are population size and population growth:
the more people in the economy, the greater the demand for housing. But
this is an oversimplification. It is necessary to consider family size, the age
composition of the family, the number of first and second children, net
migration (immigration minus emigration), non-family household formation,
and the number of double family households, death rates, divorce rates, and
marriages. In housing economics, the elemental unit of analysis is not the
individual as it is in standard partial equilibrium models. Rather, it is
households that demand housing services: typically one household per
house. The size and demographic composition of households is variable and
not entirely exogenous. It is endogenous to the housing market in the sense
that as the price of housing services increase, household size will tend also
to increase.
Income is also an important determinant. Empirical measures of the income
elasticity of demand in North America range from 0.5 to 0.9 (De Leeuw, F.
1971). If permanent income elasticity is measured, the results are a little
higher (Kain and Quigley 1975) because transitory income varies from year-
to-year and across individuals so positive transitory income will tend to
cancel out negative transitory income. Many housing economists use
permanent income rather than annual income because of the high cost of
purchasing real estate. For many people, real estate will be the most costly
item they will ever buy.
The price of housing is also an important factor. The price elasticity of the
demand for housing services in North America is estimated as negative 0.7
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8. by Polinsky and Ellwood (1979), and as negative 0.9 by Maisel, Burnham,
and Austin (1971).
An individual household’s housing demand can be modeled with standard
utility/choice theory. A utility function, such as U=U(X1, X2, X3, X4...Xn),
can be constructed in which the households utility is a function of various
goods and services (Xs). This will be subject to a budget constraint such as
P1X1+P2X2+...PnXn=Y, where Y is the households available income and
the Ps are the prices for the various goods and services. The equality
indicates that the money spent on all the goods and services must be equal to
the available income. Because this is unrealistic, the model must be adjusted
to allow for borrowing and/or saving. A measure of wealth, lifetime income,
or permanent income is required. The model must also be adjusted to
account for the heterogeneousness of real estate. This can be done by
deconstructing the utility function. If housing services (X4) is separated into
the components that comprise it (Z1, Z2, Z3, Z4,...Zn), then the utility
function can be rewritten as U=U(X1, X2, X3, (Z1, Z2, Z3, Z4,...Zn)...Xn)
By varying the price of housing services (X4) and solving for points of
optimal utility, that household's demand schedule for housing services can
be constructed. Market demand is calculated by summing all individual
household demands.
Supply of housing
Housing supply is produced using land, labour, and various inputs such as
electricity and building materials. The quantity of new supply is determined
by the cost of these inputs, the price of the existing stock of houses, and the
technology of production. For a typical single family dwelling in suburban
North America, approximate percentage costs can be broken down as:
acquisition costs 10%, site improvement costs 11%, labour costs 26%,
materials costs 31%, finance costs 3%, administrative costs 15%, and
marketing costs 4%. Multi-unit residential dwellings typically break down
as: acquisition costs 7%, site improvement costs 8%, labour costs 27%,
materials costs 33%, finance costs 4%, administrative costs 17%, and
marketing costs 5%. Public subdivision requirements can increase
development cost by up to 3% depending on the jurisdiction. Differences in
building codes account for about a 2% variation in development costs.
However these subdivision and building code costs typically increase the
market value of the buildings by at least the amount of their cost outlays. A
production function such as Q=f(L,N,M) can be constructed in which Q is
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9. the quantity of houses produced, N is the amount of labour employed, L is
the amount of land used, and M is the amount of other materials. This
production function must, however, be adjusted to account for the
refurbishing and augmentation of existing buildings. To do this a second
production function is constructed that includes the stock of existing
housing, and their ages, as determinants. The two functions are summed
yielding the total production function. Alternatively an hedonic pricing
model can be regressed.
The long-run price elasticity of supply is quite high. George Fallis estimates
it as 8.2 (Fallis, G. 1985), but in the short run supply tends to be very price
inelastic. Supply price elasticity depends on the elasticity of substitution and
supply restrictions. There is significant substitutability both between land
and materials, and between labour and materials. In high-value locations,
multi-story concrete buildings are typically built to reduce the amount of
expensive land used. As labour costs increased since the 1950s, new
materials and capital intensive techniques have been employed to reduce the
amount of relatively expensive labour used. However supply restrictions can
significantly affect substitutability. In particular the lack of supply of skilled
labour (and labour union requirements), can constrain the substitution from
capital to labour. Land availability can also constrain substitutability if the
area of interest is delineated (that is, the larger the area, the more suppliers
of land, and the more substitution that is possible). Land use controls such as
zoning bylaws can also reduce land substitutability.
The adjustment mechanism
The basic adjustment mechanism is a stock/flow model to reflect the fact
that about 98% the market is comprised of existing stock and about 2%
consists of the flow of new buildings.
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10. In the diagram to the right, the stock of housing supply is presented in the
left panel while the new flow is in the right panel. There are four steps in the
basic adjustment mechanism. First, the initial equilibrium price (Ro) is
determined by the intersection of the supply of existing housing stock (SH)
and the demand for housing (D). This rent is then translated into value (Vo)
via discounting cash flows. Value is calculated by dividing current period
rents by the discount rate, that is, as a perpetuity. Then value is compared to
construction costs (CC) in order to determine whether profitable
opportunities exist for developers. The intersection of construction costs and
the value of housing services determine the maximum level of new housing
starts (HSo). Finally the amount of housing starts in the current period is
added to the available stock of housing in the next period. In the next period,
supply curve SH will shift to the right by amount HSo.
Adjustment with depreciation
The diagram to the left shows the effects of depreciation. If the supply of
existing housing deteriorates due to wear, then the stock of housing supply
depreciates. Because of this, the supply of housing (SHo) will shift to the
left (to SH1) resulting in a new equilibrium price of R1. The increase of
prices from Ro to R1 will shift the value function up (from Vo to V1). As a
result, more houses can be produced profitably and housing starts will
increase (from HSo to HS1). Then the supply of housing will shift back to
its initial position (SH1 to SHo).
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11. Increase in demand
The diagram on the right shows the effects of an increase in demand in the
short run. If there is an increase in the demand for housing, such as the shift
from Do to D1 there will be either a price or quantity adjustment, or both.
For the price to stay the same, the supply of housing must increase. That is,
supply SHo must increase by HS.
Increase in costs
The diagram on the left shows the effects of an increase in costs in the short-
run. If construction costs increase (say from CCo to CC1), developers will
find their business less profitable and will be more selective in their
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12. ventures. In addition some developers may leave the industry. The quantity
of housing starts will decrease (HSo to HS1). This will eventually reduce
the level of supply (from SHo to SH1) as the existing stock of housing
depreciates. Prices will tend to rise (from Ro to R1).
Real estate trends
Real estate trends is a generic term used to describe any consistent pattern
or change in the general direction of the real estate industry which, over the
course of time, causes a statistically noticeable change. This can be a result
of the economy, a change in mortgage rates, consumer speculations, or other
fundamental and non-fundamental reasons.
A real estate trend is the catalyst for the change, and it is usually a concept, a
belief, a philosophy, or an event. Sometimes a real estate trend evolves to
meet a specific need, while others evolve when new products or solutions
are launched. For example, when more lenders began offering creative
financing products, more borrowers were able to afford a mortgage (at least
on paper). At other times, a trend from another industry spills over into the
real estate industry and is adopted.
Therefore, a trend must have substance and be based on fact. Over time, it
will cause pattern of change. Monitoring changes and tracking trends is a not
an exact science and can be very hard to predict.
The residential real estate brokerage industry is approximately half way
through a 10 -15 year industry transition. This major shift is creating a
fundamental change in the way homes are being bought and sold and the
role the real estate agents are playing therein.
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13. Real estate broker
Real estate broker is a party who acts as an intermediary between sellers
and buyers of real estate and attempts to find sellers who wish to sell and
buyers who wish to buy. In the United States, the relationship was originally
established by reference to the English common law of agency with the
broker having a fiduciary relationship with his clients. Estate agent is the
term used in the United Kingdom to describe a person or organization whose
business is to market real estate on behalf of clients.
In the US, real estate brokers and their salespersons (commonly called "real
estate agents" or, in some states, "brokers") assist sellers in marketing their
property and selling it for the highest possible price under the best terms.
When acting as a Buyer's agent with a signed agreement (or, in many cases,
verbal agreement, although a broker may not be legally entitled to his
commission unless the agreement is in writing), they assist buyers by
helping them purchase property for the lowest possible price under the best
terms. Without a signed agreement, brokers may assist buyers in the
acquisition of property but still represent the seller and the seller's interests.
In most jurisdictions in the United States, a person is required to have a
license in order to receive remuneration for services rendered as a real estate
broker. Unlicensed activity is illegal, but buyers and sellers acting as
principals in the sale or purchase of real estate are not required to be
licensed. In some states, lawyers are allowed to handle real estate sales for
compensation without being licensed as brokers or agents.
The difference between salespersons and brokers
In the past, when brokers (and their agents) only represented sellers, the term
‘’real estate salesperson’’ may have been more appropriate than it is today,
given the different ways that brokers and their agents can help a buyer
through the process rather than simply “sell’’ him or her a property. Legally
however, the term 'salesperson' is still used in many states to describe a real
estate agent.
Real estate education: In order to become licensed, most states require that
an applicant take a minimum number of classes before taking the state
licensing exam. Such education is often provided by real estate brokerages
as a means to finding new agents.
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14. Today in many states, the real estate agent (acting as an agent of the broker
with whom he/she is employed) is required to disclose to prospective buyers
and sellers who represents whom. See below for a broker/agent’s
relationship to sellers and their relationship to buyers.
While some people may refer to any licensed real estate agent as a real estate
broker, a licensed real estate agent is a professional who has obtained either
a real estate salesperson's license or a real estate broker's license.
In the United States, there are commonly two levels of real estate
professionals licensed by the individual states, but not by the federal
government:
Real estate salesperson (or, in some states, Real estate broker)
When a person first becomes licensed to become a real estate agent, he/she
obtains a real estate salesperson's license (or some states use the alternative
term, "broker") from the state in which he/she will practice. If you want to
obtain a real estate license, the candidate must take specific coursework (of
between 40 and 90 hours) and then pass a state exam on real estate law and
practice. In order to work, salespersons must then be associated with (and
act under the authority of) a real estate broker.
Many states also have reciprocal agreements with other states, allowing a
licensed individual from a qualified state to take the second state's exam
without completing the course requirements, or, in some cases, take only a
state law exam.
Real estate broker (or, in some states, Qualifying Broker)
After gaining some years of experience in real estate sales, a salesperson
may decide to become licensed as a real estate broker (or
Principal/Qualifying broker) in order to own, manage or operate his/her own
brokerage. Commonly more course work and a broker's state exam on real
estate law must be passed. Upon obtaining a broker's license, a real estate
agent may continue to work for another broker in a similar capacity as
before (often referred to as a broker associate or associate broker) or take
charge of his/her own brokerage and hire other salespersons (or broker)
licensees. Becoming a branch office manager may or may not require a
broker's license. Some states such as New York allow licensed attorneys to
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15. become real estate brokers without taking any exam. In some states, such as
Colorado, there are no "salespeople", as all licensees are Brokers.
A REALTOR, pronounced “Real-tor”, is a real estate salesperson or broker
who is a member of the National Association of Realtors (NAR). All
Realtors are brokers/salespersons, but not all brokers/salespersons are
Realtors.
Agency relationships with clients versus Non-Agency relationships with
customers
• Agency relationship: Traditionally, the broker provides a
conventional full-service, commission-based brokerage relationship
under a signed listing agreement with a seller or "buyer
representation" agreement with a buyer, thus creating under common
law in most states an agency relationship with fiduciary obligations.
The seller or buyer is then a client of the broker. Some states also
have statutes which define and control the nature of the
representation.
Agency relationships in residential real estate transactions involve the legal
representation by a real estate broker (on behalf of a real estate company) of
the principal, whether that person or persons is a buyer or a seller. The
broker (and his/her licensed real estate agents) then becomes the agent of the
principal.
• Non-agency relationship: where neither written agreement nor
fiduciary relationship exists, a real estate broker (and his agents)
works with a principal who is then known as the broker’s customer.
When a buyer, who has not entered into a Buyer Agency agreement
with the broker and buys a property, then that broker functions as the
sub-agent of the seller’s broker. When a seller chooses to work with a
transaction broker, there is no agency relationship created.
Transaction brokers
Some state Real Estate Commissions, notably Florida's after 1992 (and
extended in 2003) and Colorado's after 1994 (with changes in 2003),
created the option of having no agency nor fiduciary relationship between
brokers and sellers or buyers. Having no more than a facilitator relationship,
transaction brokers assists buyers, sellers, or both during the transaction
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16. without representing the interests of either party who may then be regarded
as customers.
As noted by the South Broward Board of Realtors, Inc. in a letter to State of
Florida legislative committees :
"The Transaction Broker crafts a transaction by bringing a willing
buyer and a willing seller together and assists with the closing of
details. The Transaction Broker is not a fiduciary of any party, but
must abide by law as well as professional and ethical standards."
(such as NAR Code of Ethics)
The result was that in 2003, Florida created a system where the default
brokerage relationship had "all licensees …operating as transaction brokers,
unless a single agent or no brokerage relationship is established, in writing,
with the customer” and the statute required written disclosure of the
transaction brokerage relationship to the buyer or seller customer only
through July 1, 2008.
In both Florida and Colorado's case, dual agency and sub-agency (where
both listing and selling agents represented the seller) no longer exist.
Dual or limited Agency
Dual agency occurs when the same brokerage represents both the seller and
the buyer under written agreements. Individual state laws vary and interpret
dual agency rather differently.
Many states no longer allow dual agency. Instead, Transaction Brokerage
(see above) provides the Buyer and Seller with a limited form of
representation, but without any fiduciary obligations (see Florida law).
Buyers and sellers are generally advised to consult a licensed real estate
professional for a written definition of an individual state's laws of agency,
and many states require written Disclosures to be signed by all parties
outlining the duties and obligations.
• If state law allows for the same agent to represent both the buyer and
the seller in a single transaction, the brokerage/agent is typically
considered to be a Dual Agent. Special laws/rules often apply to dual
agents, especially in negotiating price.
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17. • In some states (notably Maryland), Dual Agency can be practiced in
situations where the same brokerage (but not agent) represent both the
buyer and the seller. If one agent from the brokerage has a home listed
and another agent from that brokerage has a buyer-brokerage
agreement with a buyer who wishes to buy the listed property, Dual
Agency occurs by allowing each agent to be designated as “intra-
company” agent. Only the broker himself is the Dual Agent.
• Some states do allow a broker and one agent to represent both sides of
the transaction as dual agents. In those situations, conflict of interest is
more likely to occur.
Types of services that a broker can provide
Since each state's laws may differ from others, it is generally advised that
prospective sellers or buyers consult a licensed real estate professional.
Some Examples:
• Comparative Market Analysis - an estimate of the home's value
compared with others. This differs from an appraisal in that property
currently for sale may be taken into consideration (competition for the
subject property).
• Exposure - Marketing the real property to prospective buyers.
• Facilitating a Purchase - guiding a buyer through the process.
• Facilitating a Sale - guiding a seller through the selling process.
• FSBO document preparation - preparing necessary paperwork for
"Sale By Owner" sellers.
• Full Residential Appraisal - but only, in most states, if the broker is
also licensed as an appraiser.
• Home Selling Kits - guides to how to market and sell a property.
• Hourly Consulting for a fee, based on the client's needs.
• Leasing for a fee or percentage of the gross lease value.
• Property Management.
• Exchanging property.
• Auctioning property.
• Preparing contracts and leases. (Not in all states.)
These services are also changing as a variety of real estate trends re-engineer
the industry.
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18. General
The sellers and buyers themselves are the principals in the sale, and real
estate brokers (and the broker's agents) are their agents as defined in the law.
However, although a real estate agent commonly fills out the real estate
contract form, agents are typically not given power of attorney to sign the
real estate contract or the deed; the principals sign these documents. The
respective real estate agents may include their brokerages on the contract as
the agents for each principal.
The use of a real estate broker is not a requirement for the sale or
conveyance of real estate or for obtaining a mortgage loan from a lender.
However, once a broker is used, the settlement attorney (or party handling
closing) will ensure that all parties involved be paid. Lenders typically have
other requirements, though, for a loan.
Services provided to both buyers and sellers
In addition to the services to sellers and buyers described below, most real
estate agents coordinate various aspects of the closing.
Real estate brokers (and their agents) typically do not provide title service
such as title search or title insurance, do not conduct surveys or formal
appraisals of the property such as those required by lenders, and do not act
as lawyers for the parties, although they may "coordinate" these activities
with the appropriate specialists. Some real estate brokers may be associated
with loan officers who may help to finance buyers to make their purchase.
Regardless of whether a real estate agent assists sellers or buyers of real
estate, negotiation and financing skills are important.
MBA 1ST
SEMESTER 18

19. The "listing" contract
Several types of listing contracts exist between broker and seller. These may
be defined as:
• Exclusive Right to Sell
In this type of Agreement", the broker is given the exclusive right to market
the property and represents the seller exclusively. This is referred to as Seller
Agency. However, the brokerage also offers to co-operate with other brokers
and agrees to allow them to show the property to prospective buyers and
offers a share of the total real estate commission.
• Exclusive Agency
An alternative form, "Exclusive Agency", allows only the broker the right to
sell the property, and no offer of compensation is ever made to another
broker. In that case, the property will never be entered into an MLS.
Naturally, that limits the exposure of the property to only one agency.
• Open Listing
This is an Agreement whereby the property is available for sale by any real
estate professional that can advertise, show, or negotiate the sale. Whoever
first brings an acceptable offer would receive compensation. Real estate
companies will typically require that a written agreement for an open listing
be signed by the seller to ensure the payment of a commission if a sale
should take place.
Although there can be other ways of doing business, a real estate brokerage
usually earns its commission after the real estate broker and a seller enter
into a listing contract and fulfill agreed-upon terms specified within that
contract. The seller's real estate is then listed for sale, frequently with
property data entered into a Multiple Listing Service (MLS) in addition to
any other ways of advertising or promoting the sale of the property.
In most of North America, where brokers are members of a national
association (such as NAR in the United States or the Canadian Real Estate
Association), a listing agreement or contract between broker and seller must
include the following: starting and ending dates of the agreement; the price
at which the property will be offered for sale; the amount of compensation
MBA 1ST
SEMESTER 19

20. due to the broker and how much, if any, will be offered to a co-operating
broker who may bring a buyer. Without an offer of compensation to a co-
operating broker (co-op percentage or flat fee), the property may not be
advertised in the MLS system.
Brokerage commissions
In consideration of the brokerage successfully finding a satisfactory buyer
for the property, a broker anticipates receiving a commission for the services
the brokerage has provided. Usually, the payment of a commission to the
brokerage is contingent upon finding a satisfactory buyer for the real estate
for sale, the successful negotiation of a purchase contract between a
satisfactory buyer and seller, or the settlement of the transaction and the
exchange of money between buyer and seller.
In North America commissions on real estate transactions are negotiable and
have been under pressure for numerous reasons the average commission has
declined during the last decade from 6% to about 5%. Real estate
commission is typically paid by the seller at the closing of the transaction as
detailed in the listing agreement.
A growing alternative commission structure is the fee-for-service, fixed-fee,
a la carte or flat-fee structure. Real estate trends have caused the unbundling
of real estate brokerage services and according to the 2007 Swanepoel
Trends Report rising costs and cost-conscious consumers are now exploring
new innovative business models such as a la carte, multi-level marketing,
residual, auctioneering and other discount or online real estate models.
RESPA
Real estate brokers who work with lenders may not receive any
compensation from the lender for referring a client to a specific lender. To
do so would be a violation of a (US) federal law known as the Real Estate
Settlement Procedures Act (RESPA). All compensation to a broker must be
disclosed to all parties.
MBA 1ST
SEMESTER 20

21. Lockbox
With the sellers’ permission, a lockbox is placed on homes that are occupied
and, after arranging an appointment with the home owner, agents can show
the home. When a property is vacant or where a seller may be living
elsewhere, a lockbox will generally be placed on the front door. The listing
broker helps arrange showings of the property by various real estate agents
from all companies associated with the MLS.
The lockbox contains the key to the door of the property and the box can
only be opened by licensed real estate agents (often only with authorization
from the listing brokerage), by using some sort of secret combination or
code provided by the brokerage or the issuer of the lockbox.
Lockboxes come in two varieties - mechanical and electronic. Mechanical
lockboxes utilize a combination dial or special mechanical key and are
readily purchased at local home improvement centers or over the internet.
Mechanical lockboxes offer the most basic protection of the homeowner's
key and therefore expose the most risk of unmonitored or potentially
unauthorized access to the home during the sales process. The risk stems
primarily from an agent forgetting to change the combination after each sale.
The frequency of use of mechanical lockboxes by agents has steadily
declined due to the availability of more secure electronic lockboxes.
Electronic lockboxes increase the level of security because agents wishing to
show a property must have a valid electronic key to open the box. The
electronic key must be renewed or refreshed at regular intervals by the agent
otherwise the key deactivates itself preventing access to the lockbox
contents. Electronic keys can range from credit card sized smart cards to a
separate electronic box. In addition to greater security, electronic lockboxes
typically record all key access activity internally. This access log can be
downloaded and reviewed by the listing agent to determine the date, time
and person accessing the lockbox. Electronic lockboxes also offer a host of
other features such as controlling allowed showing times, homeowner
privacy modes, special showing restrictions etc.
MBA 1ST
SEMESTER 21

22. Shared commissions with co-op brokers
If any buyer's broker (or any of his/her agents) brings the buyer for the
property, the buyer's broker would typically be compensated with a co-op
commission coming from the total offered to the listing broker, often about
half of the full commission from the seller. If an agent or salesperson
working for the buyer's broker brings the buyer for the property, then the
buyer's broker would commonly compensate his agent with a fraction of the
co-op commission, again as determined in a separate agreement. A discount
brokerage may offer a reduced commission in the event no other brokerage
firm is involved and no co-op commission is paid out.
If there is no co-commission to pay to another brokerage, the listing
brokerage receives the full amount of the commission minus any other types
of expenses.
Potential points of contention for agents
Real estate commissions are becoming a point of controversy. Home values
in many areas have quadrupled over the past 20 years. This may be
contributing to the increased number of licensed agents and growing
competition between them. The number of real estate agents in areas tends to
rise when home values do, and the productivity of existing agents goes
down. The rewards have increased, but so have the demands of clients and
business risks faced by agents. In North America, agents have had to
become familiar with marketing through the internet as well as traditional
print and other media. Additionally the law is complicated with issues such
as defects in housing, grow houses and other issues of which the agent is the
front line defense for his client. There is more liability than ever in advising
buyers and sellers.
Another controversy exists for the commissions to real estate agents. If a
listing agent sells a property for any amount above the listed price, he in turn
will make additional income. In theory, this will motivate him/her to get top
dollar price for his client, the seller. However, if the agent representing the
buyer attempts to obtain a lower sales price for his client, then he/she would
make a lower commission. Thus, it could be considered to be in the agent's
best interest to advise his client to purchase the property at a higher price.
MBA 1ST
SEMESTER 22

23. In practical terms, there is rarely a great enough difference between the
listing (asking) price and the negotiated selling price to make a significant
difference between the commissions generated on each side, and certainly
hardly enough to justify an agent failing in his fiduciary duty to obtain the
best terms for his/her client.
Another potential conflict of interest exists when a listing agent in a very
active real estate market has incentive to sell properties quickly at
unnecessarily low prices in order to benefit from a high volume of sales.
In any case, agents who create satisfied clients and develop subsequent
referrals are likely to do far better in the long run.
Real estate brokers and buyers
Services provided to buyers:
• Buyers as clients
With the increase in the practice of buyer brokerage in the US, especially
since the late 1990s in most states, agents (acting under their brokers) have
been able to represent buyers in the transaction with a written "Buyer
Agency Agreement" not unlike the "Listing Agreement" for sellers referred
to above. In this case, buyers are clients of the brokerage.
Some real estate brokerages choose only to represent buyers in an exclusive
buyer's agency relationship and do not take "listings" from sellers.
A real estate brokerage attempts to do the following for the buyers of real
estate only when they represent the buyers with some form of written buyer-
brokerage agreement:
• Find real estate in accordance with the buyers’ needs, specifications,
and cost.
• Takes buyers to and shows them properties available for sale.
• When deemed appropriate, prescreens buyers to ensure they are
financially qualified to buy the properties shown (or uses a mortgage
professional to do that task).
• Negotiates price and terms on behalf of the buyers and prepares
standard real estate purchase contract by filling in the blanks in the
contract form. The buyer's agent acts as a fiduciary for the buyer.
MBA 1ST
SEMESTER 23

24. Due to the importance of the role of representing buyers' interests, many
brokers who seek to play the role of client advocate are now seeking out the
services of Certified Mortgage Planners, industry experts that work in
concert with Certified Financial Planners to align consumers' home finance
positions with their larger financial portfolio(s).
• Buyers as customers
In most states, until the 1990s, buyers who worked with an agent of a real
estate broker in finding a house were customers of the brokerage, since the
broker represented only sellers.
Today, state laws differ. Buyers and/or sellers may be represented.
Typically, a written "Buyer Brokerage" agreement is required for the buyer
to have representation (regardless of which party is paying the commission),
although by his/her actions, an agent can create representation.
• Find real estate in accordance with the buyers’ needs, specifications,
and affordability.
• Take buyers to and shows them properties available for sale.
• When deemed appropriate, prescreen buyers to ensure they are
financially qualified to buy the properties shown (or uses a mortgage
professional to do that task).
• Assist the buyer in making an offer for the property.
The impact of globalization on real estate brokers' activities
Globalization has had an immediate and powerful impact on real estate
markets, making them an international working place. The rapid growth of
the Internet has made the international market accessible to millions of
consumers. A look at recent changes in homeownership rates illustrates this.
Minority homeownership jumped by 4.4 million during the 1990s, reaching
12.5 million in 2000, according to the Fannie Mae Foundation. Foreign
direct investment in U.S. real estate has increased sharply from $38 billion
in 1997 more than $50 billion in 2002 according to Census data.
Most local real estate agents view the foreign market as a significant revenue
potential and may have already worked with international clients in their
local market, new immigrants or more sophisticated investors from different
cultures and from other countries. For example, they are providing value-
added services to an overseas relocation employee figure out which
MBA 1ST
SEMESTER 24

25. inoculations his or her children will need as well as the steps needed to
register a car in the United States. Real estate brokers want to keep central to
the transaction, protect the best interests of their members and address the
unique needs of each multicultural global client by acquiring specialized
training and designations. (See below for more)
Recently the Mexican association of real estate practitioners in Mexico,
AMPI, and the NAR, National Association of Realtors in the US, signed a
bilateral contract for international real estate business cooperation. Also at
the local level, many other state and local associations are helping other
countries achieve the same result. For instance, in New Mexico, a
historically multicultural state, under the RANM, Realtor Association of
New Mexico and the President’s Advisory Council, is looking into forming
an ambassador association to help a foreign country into signing a bilateral
agreement with the NAR. In New Mexico, there are 4500 licensed real estate
professionals and only 14 or 15 CIPS designees, out of whom, only 6 speak
a language other than English.
Real estate brokers / agents and further education
In addition to completing the educational requirements for a state real estate
license, most states issue real estate licenses for limited time periods and
require real estate professionals to complete a certain number of hours of
further education on an annual or biannual basis in order to renew their
licenses.
Required course hours range from 10 to 20 per license period. Typically,
some specific courses are required to be taken; these would include real
estate law updates.
NAR educational requirements and recognized designations
As adherents to NAR's Code of Ethics, Realtors are required to update their
acquaintance with the Code every 4 years by taking a course, available on-
line or "live".
However, Realtors, as members of NAR, also have the option of studying
for additional certifications in a variety of specialties, several of which are
backed by NAR with offerings of certification and update courses available
nationwide.
MBA 1ST
SEMESTER 25

26. The most well known NAR sponsored designations are the following:
• Accredited Buyer Representative (ABR). The Real Estate Buyers
Agent Council has over 40,000 members and is the largest association
of real estate professionals focusing on all aspects of buyer
representation. Of the REBAC members, over 30,000 have completed
REBAC’s two-day course and provided documentation of buyer
agency experience. Linked to the ABR is the ABRM, Accredited
Buyer Representative Manager (ABRM) for managers.
• Accredited Land Consultant (ALC). ALC’s are the recognized
experts in land brokerage transactions of all kinds of specialized land
services including farms and ranches, raw land sales and
development.
• Certified Commercial Investment Member (CCIM). CCIMs are
recognized experts in commercial real estate brokerage, leasing,
valuation and investment analysis. There are more than 7,500
designees and an equal number of candidates principally in North
America, but also in Asia and Europe.
• Certified Property Manager (CPM). Geared to real estate property
management specialists, designees handle all forms of management
from residential to commercial to industrial.
• Certified Real Estate Brokerage Manager (CRB). The designation
is awarded to REALTORS® who have completed the Council's
advanced educational and professional requirements. CRB designees
consistently increase their level of industry knowledge, advance their
earning and career potential, increase their firm’s profitability and
benefit from active involvement in our network of real estate
professionals.
• Certified Residential Specialist (CRS). Designees, with 44,000
members - 4% of NAR members - who average 43 transactions per
year and earn four times as much as the average Realtor, belong to the
Council of Residential Specialists which is the largest affiliate of
NAR. They are involved in over 27% of all transactions because the
consumer prefers to work with a more knowledgeable and seasoned
brokers or agents. Requirements for this designation include a total of
at least 25 transactions (or specific $$ volume of sales) over a specific
MBA 1ST
SEMESTER 26

27. time period, significant experience, as well as complete rigorous
educational requirements.
• Certification for Internet Professionalism (e-PRO). An e-PRO is a
Realtor who has undergone a new training program presented entirely
online in order to be certified as Internet Professionals. NAR is the
first major trade group to offer certification for online professionalism
which involves all aspects of doing business on the internet.
• Certified International Property Specialist (CIPS). Realtors with
the CIPS designation have both hands-on experience in international
real estate transactions, Whether traveling abroad to put transactions
together, assisting foreign investors, helping local buyers invest
abroad, or serving an immigrant niche in local markets. CIPS
designees have also successfully completed an intensive program of
study focusing on critical aspects of transnational transactions,
including currency and exchange rate issues and cross-cultural
relationships, regional market conditions, investment performance, tax
issues and more. The CIPS network is comprised of 1,500 real estate
professionals from 50 countries who deal in all types of real estate.
• Counselor of Real Estate (CRE). A CRE designee is one of only
1,100 by-invitation-only members of an international group of
professionals who provide seasoned, objective advice on real property
and land-related matters.
• Graduate of the Realtors’ Institute (GRI). The GRI designation is
held by 19% of Realtors and courses are offered through state Realtor
Associations with 90 hours of coursework on marketing and servicing
listed properties to real estate law. In a 2003 survey, NAR has
determined that GRIs earned over $33,200 more annually than non-
designees.
• Real Estate Professional Assistant (REPA). Designed for
administrative assistants or employees of Realtors (who may or may
not hold a real estate license), a two-day certificate course provides an
intensive introduction to the real estate business and to the specific
ways support staff can become valuable assets to their employers.
MBA 1ST
SEMESTER 27

28. Changing Industry
The real estate brokerage industry is approximately half way through a 10
-15 year industry transition. This major shift is creating a fundamental
change in the way homes are being bought and sold and the role the real
estate agents are playing therein and many new real estate brokerage models
are evolving.
Compensation has traditionally been based on a percentage of the sales
price, split between the buying and selling brokers, and then between the
agent(s) and his/her real estate agency. While a split based on the percentage
received by the broker is generally normal, in some brokerages agents may
pay a monthly "desk fee" for office costs, monthly fee, etc. and then retain
100% of the commission received.
The business and compensation structures are however changing as the real
estate trends create various new real estate models and real estate related
services such as Zillow, Red fin, Trulia, Point2, House values,
Realestate.com and RealEstateStoreUSA.com.
The Dangerous Disconnect Between Home Prices and
Fundamentals
Today's home prices can best be described as a recession in the making, but
are most often referred to as a bubble. Prices have grown so much in the last
decade that they are now completely disconnected from the fundamentals
that have historically ruled the real estate market. Today's prices are not
sustainable and the graphs and analysis below demonstrate why.
MBA 1ST
SEMESTER 28

29. The Disconnect Between Wages and Home Prices
Price increases are nothing new, since home values tend to go up over time.
What makes this housing bubble different (besides the fact that it is the
largest bubble in U.S. history) is the dangerous disconnect between home
prices and the basic fundamentals that typically rule the housing market.
For example, increases in home prices typically keep pace with increases in
wages. But this has not happened. National median home prices have
increased by more than 45 percent in the last decade (when adjusted for
inflation). Median wages per worker, on the other hand, have only increased
by 10 percent in the same period.
As a result, for almost the first time ever, individuals who are making the
median household income cannot afford to buy a median priced home.
In order to qualify buyers for loans, lenders loosened credit regulations and
encouraged risky mortgage products like interest-only loans, negative
amortization loans and ARM loans. This made it easier to get a mortgage,
but admittedly much harder to keep it.
MBA 1ST
SEMESTER 29

30. In recent years, a large portion of the buyers bought out of their price range.
In many cases, their loan qualification was based on a teaser rate and/or an
interest-only mortgage payment. Now that the interest rate is due to reset on
these loans, millions will not be able to afford their mortgage and will likely
lose their homes to foreclosure.
The Disconnect Between Rents and Home Prices
Also disconcerting is the disconnect between rents and home prices. At one
point, the only thing that stopped most people from buying versus renting
was lack of a down payment. Sure, it cost a little more each month to buy -
but not much.
But thanks to the housing boom, everything has changed. Home price
increases have far outpaced rent increases, rising 45 percent in the last ten
years. In the same time period, rents, like wages, increased by only 10
percent.
Nationally, it now costs 60 percent less to rent than it does to buy. But for
some reason, this hasn't stopped people from buying. Between 1995 and
present day, the homeownership rate has soared. In contrast, the number of
people who rent has declined for the first time since WWII.
Since we already know that rising wages and lower home prices were a
factor, the increase in homeownership can be easily traced back to the
lenders who loosened credit and mortgage lending restrictions. Thanks to
these lenders, buyers who would have never stood a chance of getting a
mortgage just a few years ago were now being approved for outrageous
amounts of money.
MBA 1ST
SEMESTER 30

31. The Disconnect Between Home Prices and Home Sales
Although the disconnect between home prices and home sales was not
present during the housing boom, it most certainly is now. The public has
either lost interest or simply can't afford to buy into the current housing
market. Home sales have slowed nationally, and are down significantly in
cities within California, Florida, Nevada, Michigan and Ohio.
As a result, supply has now exceeded demand in most areas. It would take
several months, and in some cases years, to sell all of the homes that are
currently on the market. Yet, home prices are staying level for the most part
- for now. If sales do not pick up soon, home prices will most definitely
begin to fall.
MBA 1ST
SEMESTER 31

32. SHRI KRISHNA REALESTATE AGENCY
A/3, LAXMI NARAYAN, SOCIETY ROAD NO 1,
JOGESHWARY – (E), MUMBAI-400060.
STATUS : 5PARTENERS
ASSESS. YEAR : 2008-2009
GIR/PAN NO : JMAMS2695N/Wd
COMPUTATION OF TOTAL INCOME
BUSINESS INCOME
NETPROFIT AS PER BUSINESS 84,970.00
OTHER SOURCES NIL
GROSS TOTAL INCOME 84,970.00
TOTAL TAXABLE INCOME 84,970.00
TAXABLE INCOME ROUNDOFF u/s 288A 84,970.00
INCOME TAX PAYABLE NIL
MBA 1ST
SEMESTER 32

33. SHRI KRISHNA ESTATE AGENCY
PROFIT AND LOSS ACOUNT for the year ended 31st
March, 2008
Particulars Rs. Particulars Rs.
To Shop Rent 1,20,000 By Telephone 72,000
To Telephone Expenses 15,000 By Commission Received 2,00,000
To Electricity 7,500
To Profession Tax 21,080
To Convinces 5,000
To Repair & Maintenance NIL
To Stationary 5,000
To Depreciation 6,950
To Miscellaneous
Expenditures
6,500
To Net Profit 84,970
2,72,00
0
2,72,000
MBA 1ST
SEMESTER 33

34. SHRI KRISHNA ESTATE AGENCY
BALANCESHEET As on 31st
March, 2008
Liabilities Rs. Assets Rs.
Capital 3,00,000 Fixed Assets : 44,500
Less: Depreciation 6,950
37,550
Add: Net Profit 84,970 Investment NIL
Deposit:
MTNL 50,000
Electricity 2,500
Shop 1,00,000
152500
Bank:
Fixed Deposit 1,00,000
Current A/c 50,000
150000
Cash At Hand 44,920
3,84,97
0
3,84,970
MBA 1ST
SEMESTER 34

35. SHRI KRISHNA REALESTATE AGENCY
A/3, LAXMI NARAYAN, SOCIETY ROAD NO 1,
JOGESHWARY – (E), MUMBAI-400060.
STATUS : 5PARTENERS
ASSESS. YEAR : 2009-2010
GIR/PAN NO : JMAMS2695N/Wd
COMPUTATION OF TOTAL INCOME
BUSINESS INCOME
NETPROFIT AS PER BUSINESS 1, 29,300.00
OTHER SOURCES NIL
GROSS TOTAL INCOME 1, 29,300.00
TOTAL TAXABLE INCOME 1, 29,300.00
TAXABLE INCOME ROUNDOFF u/s 288A 1, 29,300.00
INCOME TAX PAYABLE NIL
MBA 1ST
SEMESTER 35

36. Shri Krishna Estate Agency
Profit & Loss Account For the year ended 31st
March, 2009
Particulars Rs. Particulars Rs.
Rent 1,20,000 By Telephone 75,600
Telephone 15,000 By Commission
Received
2,50,000
Electricity 8,000
Conveyance 6,000
Repair &
Maintanous
2,000
Stationary 5,000
Dep. 6,950
Mis.exp 8,000
Profession 26,350
Net profit 1,29,300
3,25,600 3,25,600
Shri Krishna Estate Agency
MBA 1ST
SEMESTER 36

37. BALANCESHEET As on 31st
March, 2009
Liabilities Rs. Assets Rs.
Bal. B/D 1,94,920 Fixed Assets : 37,550
Less: Depreciation 6,950
30,600
Add: Net Profit 1,29,300 Investment NIL
Add:- Bank Int. 6,375 Deposit:
MTNL 50,000
Electricity 2,500
Shop 1,00,000
1,52,500
Bank:
Fixed Deposit 1,00,000
Current A/c 40,000
1,40,000
Cash At Hand 7,495
3,30,59
5
3,30,595
MBA 1ST
SEMESTER 37

38. RATIO’s
Proprietary Ratio-
Proprietary Ratio is a test of the financial and credit strength of the business.
It is related with shareholders funds and total assets. This ratio determines
the long term or ultimate solvency of the business. It is also called “Net
Worth to Total Assets Ratio” or “Equity Ratio” or “Assets Backing Ratio” or
“Net Worth Ratio"
Shareholders funds comprise of ordinary share capital, preference share
capital and all items of reserves and surplus. Total assets include all tangible
assets and only those intangible assets which have a definite realizable
value.
Proprietary Ratio = Proprietors Funds
x 100
Total Assets
Proprietors Fund = Equity Share Capital + Pref. Capital +
Capital Reserve + Rev. Res. – Fictitious Assets
Total Assets = All Fixed Assets + All Current Assets +
Investments.
OR
PROPRIETARY RATIO = Proprietors’ Funds
x 100
Total Funds
Total Funds = Owned Funds + borrowed Funds
Significance and Objectives
Proprietary ratio shows the extent to which shareholders
own the business and thus indicates the general financial strength of the
business. The higher the proprietary ratio, the greater the long term
stability of the company and consequently greater protection to creditors.
However, a very high proprietary ratio may not necessarily be good
MBA 1ST
SEMESTER 38

39. because if funds of outsiders are not used for long term financing, a firm
may not be able to take advantage of trading equity.
2008:-
3, 00,000 X 100 = 78.13%
3, 84,000
2009:-
3, 24,220 X 100 = 98.07%
3, 30,595
Our proprietary ratio indicates the higher growth of financial strength of
our business which is greater for long term stability of the company &
consequently greater protection to the creditors.
MBA 1ST
SEMESTER 39

40. Shri Krishna Ice Cream Parlor
Profit & Loss Account For the year ended 31st
March, 2008
Particulars Rs. Particulars Rs.
Telephone 3,600 By Income 1,08,175
Maintainous 9,600 By Order Received 25,000
Electricity 72,000
Stationary 2,000
Marketing 4,000
Intrest Charges 29,975
Net profit 12,000
1,33,175 1,33,175
MBA 1ST
SEMESTER 40

41. Shri Krishna Ice Cream Parlor
BALANCESHEET As on 31st
March, 2008
Liabilities Rs. Assets Rs.
CAPITAL 7,00,000 Fixed Assets :
L & B 9,60,000
Less: Dep. 48,000
Fan 1666
(-) dep. 166
9,12,000
1,50
0
Add: Net Profit 12,000 Investment NIL
Bank Loan 3,00,000
(-):-Repayment 60,000
2,40,000 Deposit:
MTNL 3,000
Electricity 2,500
Fridge 15,000
20,500
Cash At Hand 18,000
9,52,000 9,52,000
MBA 1ST
SEMESTER 41

42. Shri Krishna Ice Cream Parlor
Profit & Loss Account For the year ended 31st
March, 2009
Particulars Rs. Particulars Rs.
Telephone 3,600 By Income 1,03,425
Maintanous 9,600 By Order Received 32,000
Electricity 72,000
Stationary 2,000
Marketing 4,000
Interest Charges 29,975
Net profit 14,250
1,35,425 1,35,425
MBA 1ST
SEMESTER 42

43. Shri Krishna Ice Cream Parlor
BALANCESHEET As on 31st
March, 2009
Liabilities Rs. Assets Rs.
Capital
Bal b/d
7,00,000
12,000
Fixed Assets :
L & B 9,12,000
Less: Dep. 45,600
Fan 1500
(-) dep. 150
8,66,400
1,35
0
Add: Net Profit 14,250 Investment NIL
Bank Loan 2,40,000
(-):-Repayment 60,000
1,80,000 Deposit:
MTNL 3,000
Electricity 2,500
Fridge 15,000
20,500
Cash At Hand 18,000
9,06,250 9,06,250
MBA 1ST
SEMESTER 43