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Real estate construction profitability analysis iref virupaksh

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This document discusses key terms and concepts related to real estate development profitability analysis. It defines terms like floor area, floor area ratio, transferable development rights, and ready reckoner rates. It also outlines different types of real estate deals like joint ventures and outright purchases. Critical variables that impact profitability are discussed, including deal conditions, land size, construction costs, and sale prices. Formulas for calculating saleable area in different municipalities are provided. An example cash flow spreadsheet is referenced to illustrate how to assess project cash flow and return on investment.

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REAL ESTATE CONSTRUCTION PROFITABILITY ANALYSIS SIMS IREF EDP PROGRAM Sept 14, 2014
BASIC TERMS & CONCEPTS ? FLOOR AREA ¨C FLOOR AREA SHALL MEAN COVERED AREA OF A BUILDING AT ANY FLOOR LEVEL. ? FLOOR AREA RATIO (F.A.R.) / FLOOR SPACE INDEX (FSI) ¨C MEANS THE QUOTIENT OF THE RATIO OF THE COMBINED GROSS FLOOR AREA OF ALL FLOORS TO THE TOTAL AREA OF THE PLOT.
BASIC TERMS & CONCEPTS ? TRANSFERABLE DEVELOPMENT RIGHTS (TDR)- A CERTIFICATE FOR DEVELOPMENT RIGHTS OFFERED BY MUNICIPAL CORPORATION TO THE LAND OWNER WHOSE LAND IS RESERVED FOR PUBLIC UTILITIES LIKE GARDEN, PARKING, SCHOOL ETC. ? SALEABLE AREA ? READY RECKONER (RR) RATES- ? BASIS FOR COLLECTION OF STAMP DUTY ON PROPERTY PURCHASE (LAND/DEVELOPED PROPERTY; BOTH COMMERCIAL AND RESIDENTIAL) ? RATES DETERMINED ON AN ANNUAL BASIS BY THE STATE GOVERNMENT ? DIFFER FROM LOCALITY TO LOCALITY IN A PARTICULAR CITY. ? SD/REGISTRATION
BASIC TERMS & CONCEPTS ? START-UP CAPITAL ? COST OF CAPITAL ? RETURN ON INVESTMENT ? CASH FLOW STATEMENT ? INCOME STATEMENT ? OUT RIGHT (OR) & JOINT VENTURE (JV)
TYPES OF REAL ESTATE DEVELOPMENT DEALS ? JOINT VENTURE (DEVELOPER & LAND OWNER) DEAL ? OUT RIGHT PURCHASE & DEVELOPMENT DEAL ? JOINT DEVELOPMENT DEAL ? REDEVELOPMENT DEAL ? ANGEL INVESTMENT/PRIVATE PLACEMENT
DEAL PARAMETERS ? JOINT VENTURE ?RATIO: 50:50 TO 65:35 (ON DEVELOPERS FAVOR) ?DEPOSIT : 10 TO 15% OF LAND VALUE (REFUNDABLE & NON- REFUNDABLE) ?TDR PURCHASE ?TDR CONSTRUCTION COST ? OUT RIGHT PURCHASE & DEVELOPMENT ?LAND RATE ?PAYMENT TERMS
REAL ESTATE CONSTRUCTION PROFITABILITY VARIABLES ? DEAL CONDITIONS: RATIO, DEPOSIT, TDR (JV); LAND RATE & PAYMENT TERMS (OR) ? OTHER START UP INVESTMENTS: MARKETING LAUNCH, SAMPLE FLAT & SITE OFFICE ? LAND SIZE ? SALEABLE AREA ? FSI, ? LAND SIZE & SHAPE, ? ACCESS ROAD, ? MUNICIPAL CORPORATION/TOWN PLANNING (TDR/PAID PREMIUM/PAID FSI ETC), ? ROAD WIDENING/ACQUISITION
REAL ESTATE CONSTRUCTION PROFITABILITY VARIABLES ? LAND MARKET & RR RATE ? AVERAGE CONSTRUCTION COST ? AVERAGE SELLING RATE ? INFRASTRUCTURE & MSEB CHARGES FOR APARTMENT ? APARTMENT SIZE ? PLAN SANCTIONING COST AND SANCTIONING PHASES ? SD/REGISTRATION CHARGES ? TDR RATE ? UNIT SALE/MONTH & MARKETING STRATEGY
SALEABLE AREA QUICK FORMULAS PUNE MUNICIPAL CORPORATION (PMC) ?WITH TDR- 1:2 (TDR-0.55 @ RS 3500/SQFT) ?WITHOUT TDR- 1:1.3 TOWN PLANNING (TP) ?DEPENDING ON ACCESS ROAD- 1:1.5 TO 1:1.7 PIMPARI CHINCHWAD MUNICIPAL CORPORATION (PCMC) ?WITH TDR- 1:1.9 (TDR- 0.4 @ RS 900/SQ.FT) ?WITHOUT TDR- 1:1.35
PROFITABILITY ON CASH FLOW & ROI ? PROJECT CASH FLOW o EXAMPLE- REFER SPREADSHEET ? CASH FLOW VS INCOME STATEMENT METHOD o EXAMPLE ¨C REFER SPREADSHEET
THANK YOU Q & A

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Real estate construction profitability analysis iref virupaksh

  • 2. BASIC TERMS & CONCEPTS ? FLOOR AREA ¨C FLOOR AREA SHALL MEAN COVERED AREA OF A BUILDING AT ANY FLOOR LEVEL. ? FLOOR AREA RATIO (F.A.R.) / FLOOR SPACE INDEX (FSI) ¨C MEANS THE QUOTIENT OF THE RATIO OF THE COMBINED GROSS FLOOR AREA OF ALL FLOORS TO THE TOTAL AREA OF THE PLOT.
  • 3. BASIC TERMS & CONCEPTS ? TRANSFERABLE DEVELOPMENT RIGHTS (TDR)- A CERTIFICATE FOR DEVELOPMENT RIGHTS OFFERED BY MUNICIPAL CORPORATION TO THE LAND OWNER WHOSE LAND IS RESERVED FOR PUBLIC UTILITIES LIKE GARDEN, PARKING, SCHOOL ETC. ? SALEABLE AREA ? READY RECKONER (RR) RATES- ? BASIS FOR COLLECTION OF STAMP DUTY ON PROPERTY PURCHASE (LAND/DEVELOPED PROPERTY; BOTH COMMERCIAL AND RESIDENTIAL) ? RATES DETERMINED ON AN ANNUAL BASIS BY THE STATE GOVERNMENT ? DIFFER FROM LOCALITY TO LOCALITY IN A PARTICULAR CITY. ? SD/REGISTRATION
  • 4. BASIC TERMS & CONCEPTS ? START-UP CAPITAL ? COST OF CAPITAL ? RETURN ON INVESTMENT ? CASH FLOW STATEMENT ? INCOME STATEMENT ? OUT RIGHT (OR) & JOINT VENTURE (JV)
  • 5. TYPES OF REAL ESTATE DEVELOPMENT DEALS ? JOINT VENTURE (DEVELOPER & LAND OWNER) DEAL ? OUT RIGHT PURCHASE & DEVELOPMENT DEAL ? JOINT DEVELOPMENT DEAL ? REDEVELOPMENT DEAL ? ANGEL INVESTMENT/PRIVATE PLACEMENT
  • 6. DEAL PARAMETERS ? JOINT VENTURE ?RATIO: 50:50 TO 65:35 (ON DEVELOPERS FAVOR) ?DEPOSIT : 10 TO 15% OF LAND VALUE (REFUNDABLE & NON- REFUNDABLE) ?TDR PURCHASE ?TDR CONSTRUCTION COST ? OUT RIGHT PURCHASE & DEVELOPMENT ?LAND RATE ?PAYMENT TERMS
  • 7. REAL ESTATE CONSTRUCTION PROFITABILITY VARIABLES ? DEAL CONDITIONS: RATIO, DEPOSIT, TDR (JV); LAND RATE & PAYMENT TERMS (OR) ? OTHER START UP INVESTMENTS: MARKETING LAUNCH, SAMPLE FLAT & SITE OFFICE ? LAND SIZE ? SALEABLE AREA ? FSI, ? LAND SIZE & SHAPE, ? ACCESS ROAD, ? MUNICIPAL CORPORATION/TOWN PLANNING (TDR/PAID PREMIUM/PAID FSI ETC), ? ROAD WIDENING/ACQUISITION
  • 8. REAL ESTATE CONSTRUCTION PROFITABILITY VARIABLES ? LAND MARKET & RR RATE ? AVERAGE CONSTRUCTION COST ? AVERAGE SELLING RATE ? INFRASTRUCTURE & MSEB CHARGES FOR APARTMENT ? APARTMENT SIZE ? PLAN SANCTIONING COST AND SANCTIONING PHASES ? SD/REGISTRATION CHARGES ? TDR RATE ? UNIT SALE/MONTH & MARKETING STRATEGY
  • 9. SALEABLE AREA QUICK FORMULAS PUNE MUNICIPAL CORPORATION (PMC) ?WITH TDR- 1:2 (TDR-0.55 @ RS 3500/SQFT) ?WITHOUT TDR- 1:1.3 TOWN PLANNING (TP) ?DEPENDING ON ACCESS ROAD- 1:1.5 TO 1:1.7 PIMPARI CHINCHWAD MUNICIPAL CORPORATION (PCMC) ?WITH TDR- 1:1.9 (TDR- 0.4 @ RS 900/SQ.FT) ?WITHOUT TDR- 1:1.35
  • 10. PROFITABILITY ON CASH FLOW & ROI ? PROJECT CASH FLOW o EXAMPLE- REFER SPREADSHEET ? CASH FLOW VS INCOME STATEMENT METHOD o EXAMPLE ¨C REFER SPREADSHEET