Real Estate Development

Group:D. Rajesh 11011BA015 Ravi Varma 11011BA019M. Samyuktha 11011BA022B. Sarath Reddy 11011BA024Seshagiri rao 11011BA026Sravani 11011BA031

School of Planning & Architecture

Submitted to:Mrs. Shivangi

Planning legislation

Department of Urban & Regional planning

Topic:

Real estate developmentespecially in Industrial sector

Need for study• Understanding the subject of real estate provides key insight into demand

characteristics of land for different land use & its impact on economy. Livability & attractiveness of an urban area is often closely interlinked with “real estate industry” & land prices.

Aim• The aim of the presentation is to understand the real estate development in

public & private sectors (especially industrial sector)Objective• To understand real estate as a facilitator of development;• Factors driving real estate sector;• Real estate as a tool for controlling land values;• Transaction & renting of real estate;Scope• The scope of the presentation will be limited to the published data available

from different websites on real estate & the study will be carried out based on the secondary data obtained with a limited primary survey.

Introduction

Basic Definitions

Real estate

• It is a ‘Property’, which refers to anything that can be owned or possessed. It

can be a ‘tangible asset’ (physical things such as land, buildings etc.) or ‘intangible asset’ (nonphysical such as contractual rights, financial claims etc.)

• In other words…. Real estate can be defined as the land & its permanent

improvements.

• Improvements on the land include any fixed structures such as buildings & they are often

referred to as infrastructure facilities development.

Land

• Property or real estate, not including buildings or equipment, that does not

occur naturally. Depending on the title, land ownership may also give the

holder the rights to all natural resources on the land.

Real estate – An industry in transition

• The Indian real estate industry, valued

at about US$ 12 billion, ranks second in

the world, after the United States, in

terms of contributing to Gross Domestic

Product (GDP) and generating

employment.

• Presently, real estate accounts for about

five per cent of India’s GDP; in the next

five years its share is expected to rise to

six per cent. It is also the second largest

employer in India after agriculture.

Real estate contributes 5% to India’s GDP

Ref: http://www.headhonchos.com/blog/survey-and-reports/real-estate-an-industry-in-transition.html

Dated: December 23, 2011

Factors driving the Indian Real estate

Real estate thrives on growth of national infrastructure and is fuelled by the Government of India’s thrust on infrastructure development.

It’s success in different sectors has given a boost for the demand in land & other properties for establishment of different firms.

The policies simplified the investment process by reducing the need for permissions and licenses for construction projects resulting in real estate development

Organized retail in India with local & multinational retail players making their foray into retailing and thus stepping up the demand for real estate

Social Economic Judicial Technological

Infrastructure• Infrastructure plays a prominent role in the real estate sector in determining

the land & property values.• Infrastructure & real estate industry are interdependent.Location• The location of the property also determines its value.Site aspectsLegal judiciariesGovernment regulationsIssues on the land/ property etc…

Real estate scenario…..It as a tool for determining the property & land prices

Impact of Real estate bill on property markets• The real estate bill has perhaps been the most debated topics of the year. The

bill encompasses the interests of a large section of the populace.Points in the bill:

• No more delays in delivery of projects: The buyers can sit happily on their investments

as the current bill seeks to totally eliminate the delays that one encounters after paying up

for the property.

• Definitions are to be made clear: The definitions of the actual carpet area, super built-

up area, built-up area and some such terms must be clearly mentioned by the builders

before the project is started.

• Projects need to be cleared by appropriate authorities before going to floors: The

necessary clearances need to be obtained before any project is started.

Land bill on real estate• The much debated Land Acquisition, Rehabilitation and Resettlement Bill, 2012 (LARR Bill)

was cleared by the lower house of parliament in the first half of the Budget session.

• This crucial Bill that seeks to replace the antediluvian Land Acquisition Act, 1894 with a

fresh legislation wherein the component of compensation for resettlement and

rehabilitation of the project affected families is added.

• The Bill covers land acquisition including for infrastructure and industrial developments

bringing in government, quasi- government and other.

INDUSTRIAL REAL ESTATEPatancheru, Isnapur, Pashamylaram

Industrial Real estate

• According to economic science, ‘land’ is termed as one among the factors of production & it is an important component for any industrial setup.

• Increase in population, demand of different products for their survival induced high growth rate in services as well as manufacturing sector has resulted in high demand industrial Real Estate.

Real estate development

Residential

80%

Commercial

10%

Industrial

5%

Offices & others

5%

Markets for Real estate development

Source: Real estate sector overview by M. Chandra Sekhar Reddy, Executive Assistant, CREDAI AP

Dated: 8/7/2013

Introduction to site area

History

• The history of an industrial estate is closely linked with the current

environmental condition of the land and the health of its affected community.

And this is no different for the industrial estates in Medak district of Andhra

Pradesh.

• It was after the formation of the Andhra Pradesh Industrial Infrastructure

Corporation (APIIC) in 1973 that Patancheru grew into a mega industrial estate.

• In 2010 there were 326 industries in Patancheru, 51 industries have also come

up outside the APIIC designated area. In a 2 decade period (1975-1995) APIIC

created 6 industrial estates in ‘backward regions’ around a thirty-mile radius of

Hyderabad.

• The largest was the 440-hectare estate in Patancheru. Some of the states

biggest bulk drug and pharmaceutical industries are located in these industrial

estates.

Source: Andhra Pradesh Water Mission. Position papers and District reports (Draft). Mission Support

Unit; Water Conservation Mission. Government of Andhra Pradesh.

Dated: Report of the year 2010

Nearest Town: PatancheruDistance: 10.8 Km

Stakeholders• We have mainly studied about two different industries located in that area. 1st Degree stakeholders Residents of Isnapur village 2nd Degree stakeholders

1. GENSYNTH FINE CHEMICALS PVT. LTD plot no: 220 & 239, IDA, Phase II Pashamylaram – 502307 Size: 2 Acres Established in: 2005 Price/ sft during land acquisition – 300/-

Present- 2000/-2. Q3. MARKSMAN TEXTILE EMBROIDERY PVT. LTD plot no: 1/B, IDA textile park Pashamylaram – 502319 Size: 1 Acre Established in: April 2009 Price/ sft during land acquisition – 59.68/-

Present- 229.56/-3rd Degree stakeholders

1. Suresh Reddy

Patancheru zonal manager, APIIC Pvt. Ltd

Patancheru Municipality, Medak District

Base map

1

2

Factors driving for demand

• Industrial park, Textile park & APIIC mega infrastructure park Phase I & II.

• Work force availability

• Location of various engineering, chemical, textile, Pharmaceutical industries

already occupied induced further growth of new dependent industries.

• Availability of all infrastructure needed for setting up & running industries

• Better accessibility (40 feet wide approach road to industrial estate from NH9)

• Infrastructure facilities provided through APIIC

• Price/ sq Yard in Patancheru – 5,004/-

• Price/ sq Yard in Cherlapally – 10,000/-

Project profile

• Location• Availability of raw materials• Infrastructure• Land• Feasibility study• Nature of the product & its

application• Market potential• Installed capacity• Technology/ manufacturing

process• Plant & Machinery• Cost of the project & means of

finance• Annual operating expenses

Development process

Land allotmentThe APIIC (Andhra Pradesh Industrial Infrastructure Corporation) allots

plots & sheds in Industrial Development Area’s established in different regions

of the state on application process to different firms which are authentic &

eligible for the allotment of plots. The firms which have to be set up in

Industrial Development Area has to submit the application included with the

following details…

• Location where the land has to be allotted

• Personal details

• Project details

• Financing & Investment details

• Proposed employment

• Machinery equipped

• Land requirements

• Infrastructural details etc.

Feasibility study

• As the name implies, a feasibility

study is an analysis of the viability

of an idea.

• The feasibility study focuses on

helping answer the essential

question of “should we proceed

with the proposed project idea?”

All activities of the study are

directed toward helping answer

this question.

• It includes

Evaluating alternatives

Pre – feasibility study

Market assessment

Results & conclusions

Description of Project (Identification of business scenarios, its alternatives & relationship with surroundings)

Market feasibility (Industry competitiveness, Market potentials, market outlets, sales projections)

Technical feasibility (facility needs, suitable production technology, suitability of land, location & raw materials)

Financial/ economic feasibility (estimation of capital requirements, budget expected costs & returns)

Issues in development (may be technical, infrastructural, or an issues related to the site)

Plans, proposals, layouts, site plans & their approvals

Results & conclusions

Feasibility study outline

Cost benefit analysisWhen making a decision, especially for the

development of the industry, it is imperative to

understand the costs and benefits of the project,

to know the viability & feasibility of the project.

The main purpose of the CBA is to assess the

case for intervention and guide that

intervention. We have to know that CBA is

importantly distinct from financial analysis.

Financial analysis is a business tool that focuses

on financial outlays and receipts associated with

an investment. CBA is concerned with social

costs and social benefits; these can often differ

widely from simple financial outlays and

receipts.

“By conducting Cost Benefit Analysis the entrepreneur determine whether or not to proceed with the project according to the

current plan”

Cost Benefit Model

Cost of Equipment

Cost of Labor

Interventions

Enhancement in

productivity

Displacement of workers:

Remaining costs

Productivity Losses

Medical care for workers

Replacement

Lost work time

Disability

Losses due to No

Market

Avoide

d

Econo

mic

Costs

Net – Cost of

Interventions

An Overview of Cost Benefit Model of an industry

A

D

C

B

A+B+C+D

Costs Amount (PV)

Surveying & planning 5,65,000

Project Execution  

Administration 8,70,000

Legal services 5,50,000

Acquisation expences 17,25,000

Site clearance 2,15,000

Disposal, Lease & Retention costs 1,30,000

Project inspection 86,000

Construction & Machinary 1,00,00,000

Site improvements 25,45,000

Miscelenious 4,75,000

Total costs 1,71,61,000

Benefits Amount

Increase in Project area land value 10,45,000

Increase in Neighborhood property Values 15,10,000

Value of public improvements 26,60,000

Reductions in service costs  

Security11,90,000

Fire protection26,61,000

Miscelinious 15,85,000

Total Benefits 1,06,51,000

 Some Benefits are not quantitative but

Qualitative

Cost’s & Benefit’s of land for an industry

Ref: Cost Benefit analysis report of Marksman textile industry.

Benefit – Cost ratio • The first step will be to review the projected operational and maintenance costs for

the life of the system. • The second step will be to examine the projected benefits for the life of the

system. • The costs and benefits will then be compared to determine if the tangible benefits

justify the costs for operation and maintenance of the system.Description/ FY 2009 2010 2011 2012 2013 2014 2015 Total

Annual costs310000

0324500

0348000

0367500

0377555

0390000

0412500

025300550

Annual Benefits328500

0337500

0369000

0381520

0398200

0405750

0437000

026574700

Discount Factor 0.9825 0.9483 0.9154 0.8836 0.8529 0.8232 0.7946  

Discounted Costs (DC)304575

0307723

4318559

2324723

0322016

7321048

0327772

522264177

Discounted Benefits (DB)322751

3320051

3337782

6337111

1339624

8334013

4347240

223385746

Discounted Net (DB - DC)181762.

5123279 192234

123880.7

176081.2

129654 194677 1121568

Benefit/ Cost Ratio1.05967

71.04006

21.06034

5 1.038151.05468

11.04038

51.05939

4  

Average B/C ratio 1.050385Discount rate/ factor: This is effectively a desired return, or the return that an investor would expect to receive on some other typical proposal of equal risk. This means converting future costs and benefits into present value. This is also known as the social discount rate, or the rate at which society makes tradeoffs over time.

As the Benefit/ Cost ratio (1.050385) is >= 1, the project is feasible. Hence, the entrepreneur can continue with current action plan

Ref: Cost Benefit analysis report of Marksman textile industry.

Approvals & clearance required• An entrepreneur has to obtain various approvals/ clearances in order to set up

an industry in Andhra Pradesh. Such approvals/ clearance are mentioned below for the knowledge of investor:

Approvals/Clearances Required Department /Authority responsible for Approvals/ Clearances

Incorporation of Company Registrar of Companies

Registration/Industrial license/ Industrial Entrepreneur

Memorandum (IEM)

District Industries Centers for SSI / Secretariat for Industrial

Assistance (government of India) for large and medium industries

Allotment of land APIIC

Permission for land use

(in case industry is located outside an industrial area)

APIIC

Department of Town and Country  

Planning

Local authority /District Collector

NOC and consent under Water and Air Pollution Control

Acts

Andhra Pradesh State Pollution Control Board  

Forest & Environment Clearance Ministry of Forest & Environment, Government of India

Approval of construction activity and building plan Developmental Authority

Permanent Account Number (PAN) Income Tax commissioner

ISI Certificate Regional Office of the Bureau of Indian Standards (BIS)

Real estate portfolio wheel

• Lease

• Rent

• Sell• Buy

Industry

Land

ShedsWarehouse

Ownership

OwnIn general…. Price/ sft in Patancheru – 556/- (at present)Rented warehouses & shedsPer sft- 40/- to 60/-Lease• Long term lease – 15 years – 15% 10 years – 10% to 15%• Short term lease - 05 years – per month – 5% to 7%

Ref: IDA decadal report

By Patancheru zonal manager, APIIC Pvt.Ltd, Patancheru zone

Dated: 2011 report

Issues & OpportunitiesIssues• There has been no proper waste disposal facilities built in these areas,

combined with this is the fact that industries have been wantonly disposing off their waste in nearby land or into water bodies.

• The combined industrial estates in Bollaram and Patancheru generate a cumulative 8 X 106 1/day of effluents which are directly discharged into surrounding land, irrigation fields and surface water bodies.

• The Nakkavagu stream that flows through the industrial estate in Patancheru bears the brunt of waste disposal of over 100 industries.

• Effect of pollutants on the agricultural lands and water bodies extends 0.25 to 0.5 km to either side of the Nakkavagu river over a length of 25 km.

Opportunities• APIIC Mega Infrastructure Park is currently in progress. Phase 1 & 2 are already

occupied.• Textile park, 2008, 11.02 crores expenditure industrial park Pashamylaram

Patancheru is located in Patancheru sub-locality, Hyderabad locality, Medak District, Andhra Pradesh State of India Country.

• March 29: Mr. N. Kiran Kumar Reddy laid the foundation stone for Friendly Industrial Park for ladies in Nandigama Village of Patancheru. The area allotted for this park in 100 acres.

• He assured that Rs. 200 crore would be spent for this park.

Government orders

• GO.Rt.663.2005Setting up of Integrated Textile Parks in Andhra Pradesh - Preparation of Project feasibility reports by Infrastructure Leasing and Financial Services Ltd., (IL&FS) - Creation of separate revolving fund - Orders - Issued. ...

• GO.Ms.336.2002The Andhra Pradesh Industrial Single Window Clearance Rules, 2002 – Providing for speedy processing of applications for issue of various clearances required for setting up of industries...

• GO 178• Industries & Commerce Department – Incentives for setting up of New

Industries in Andhra Pradesh- Industrial Investment Promotion Policy for 2005-2010- Orders- Issued. (100% reimbursement of Stamp duty and transfer duty paid by the industry on purchase of land meant for industrial use, 100% reimbursement of Stamp duty for Lease of Land/Shed/Buildings, 100% reimbursement of Stamp duty and Transfer duty paid by the industry on financial deeds and mortgages etc.)

Real estate transaction

• Land can only be transferred from one individual to another in the legally prescribed manner. Historically speaking, a written deed is the instrument used to convey ownership of real property.

• A verbal grant was sufficient to complete the transaction, provided that it was accompanied by a transfer of possession.

“Deed A written instrument, which has been signed and delivered, by which one individual, the grantor, conveys title to real property to another individual, the grantee; a conveyance of land, tenements, or hereditaments, from one individual to another.”

• Sale deed: sale deed is a deed which recites a consideration and shows all of the interest of the grantor in the property to the grantee. It is a deed that does not carry any warranties against liens; hence, it implies that the grantor is allowed to convey a title.

• Rental deed: A rental agreement includes any written or oral agreement that provides for the use of tangible property and is treated as a lease for federal income tax purposes."

• Lease deed: A leasehold deed of trust is a long-term lease that is acquired by a leaseholder. It combines leasehold, which is a rental contractual agreement for an extended period of time and a deed of trust, which is a deed that pledges one's property as collateral when applying for a loan.

Deed drafting

• Title• Date of execution• Place of execution• Description of parties• Recitals - Contain the Background / factual details of the transaction between parties• Testatum Witnessing Clause – After Recitals & Before the Terms & Covenants• Terms & conditions• Attestation Signature• Annexure’ & schedules used to describe the property • Endorsements  means “write on back” Used only on Negotiable Instruments Eg. Bills

of Exchange, Cheques, etc.

Conclusion

• This study has found the sensitivity of various parameters of real estate

development, its impact on industrial markets & location of industries, type

and ownership preferences of the industries demand in Patancheru area since

they act as growth poles.

• Some of the groups of the real estate market are very sensitive to geographical

parameters whereas others are more responsive to economic and social

parameters.

• Changing the geographic, social and economic parameter values through

various policies, actions and strategies can alter the attractive potential of

these zones.

• These findings can have immense bearing on policy and regulatory

frameworks for future industrial development anticipated in the Master Plan of

the city& economical development of the country since real estate is a global

scenario.