The Definition of Real Estate

Anything that encompasses land or immovable property, with all that is built upon it or permanently fixed on it can be termed as real estate. Permanent fixtures can be houses or buildings. There is a school of thought that attempts to distinguish the immovable property itself from the fixtures permanently affixed upon it as being two different things. Hence, ownership of the land itself is different from ownership of a part of the building built on it. So, a person may hold land rights but not own any part of the building that stands upon it, and conversely, an owner of an apartment in the same building may not have land rights at all.

The word realty comes from ‘real property’ with which real estate can be considered synonymous. These terms ‘real estate’ and ‘real property’ are common law terms, while ‘immovable property’ falls under the category of civil law. Real estate has turned out to be quite a money spinner over the years. It has also given rise to many other industries that exist because of real estate. Mortgages, Home loans, realty agents, professional appraisers, and relocation services are just a few examples. Since it takes a lot of capital to invest in real estate, and each piece of land is different from the next, many different combinations come into play. Whether it is getting the land appraised, or contacting your nearest broker to sell it, or getting a real estate developer to build on it for you, there are many different options open to you.

Interestingly, the estimated value of assets belonging to ‘developed economies’ in 2002 as surveyed by The Economist, was estimated at around $48 trillion for residential properties and $14 trillion for commercial properties, as opposed to a total of $53 trillion in equities, government bonds, and corporate bonds. So, real estate forms 54% while the rest comprise 46%.

Poor implementation of real estate law can be a huge deterrent for investments in real estate in developing economies. In developed economies, people largely buy real estate by taking home loans or mortgages, where the property purchased itself provides the security or collateral for the loan. Those who fail to make their payments on time can have action taken against them by the lending institution in the form of foreclosure. Foreclosure is a court action that grants the lender the power to be able to retrieve the property itself so that the lender can then sell it to realize the outstanding balance on the loan. In developing economies, there is poor growth of mortgages, as this option is not correctly regulated always, making it extremely difficult for lenders to easily trust their money to home owners.

Of late, we have been seeing a global uprising in real estate prices, with a positive trend emerging worldwide. It looks like real estate is the best bet for a long term investment.