PROJECT TITLE :

STUDY OF FINANCING
OPTIONS IN REAL
ESTATE INDUSTRY

NAME : UMESH BARVE

MFM : III, V th SEM
ROLL NO : 063
INDEX :
1)FLOW OF ACTIVITIES @ MACRO LEVEL FROM PROJECT
INCEPTION.
2)SEQUENTIAL ACTIVITIES @ MICRO LEVEL.
3)KEY MILESTONES FOR FINANCE DEPLOYMENT
4)PREVAILING FINANCING OPTIONS
5)CASE STUDY
FLOW OF ACTIVITIES IN REAL ESTATE SECTOR FROM PROJECT INCEPTION : ( Macro
Level)

1) Location identification : Criteria for identification : land availability in large

banks, minimum number of land lords as owners, clear title, testing of soil
sample rock , loose earth , ground water level, proximity of lake, river, hillock,

2) Surrounding infrastructure existing / proposed like rail, road connectivity,

any ring road , fly over, wider road construction , surrounding tourist place if
any, monumental place, air port, rail way station etc.

3) Surrounding social infrastructure : existing / proposed educational facilities,

hospital facilities, recreational facilities, retail facilities, prospective
employability etc, which will become value addition to project.

4) Market study : demand trend, assessing acceptable product configuration vis

a vis as offered by competitors with due differentiation, any commonly
followed set of beliefs influencing purchasing decision like vastu compliances,
disposable income level of most segment, affordability level, general
demographics,

SEQUENTIAL MICRO LEVEL ACTIVITIES :

1) Land Acquisition / registration / title transfer:

2) Project planning / placement of various buildings in available land bank.

3) Statutory approval process with optimum FSI per prevailing norms.

4) Interior planning of product/ provision of amenities.

5) Planning of external amenities within community.

6) Devising marketing / PR / Corporate communication campaign.

7) Project Launch / commencement of sales.

8) Setting up CRM / contractual documentation system.

9) Commencement of construction with structured construction program to

ensure committed delivery

10) Process of registration/ possession / formation of society etc

 CRITICAL MILESTONES TO DEPLOY FINANCE :

1) Land acquisition

2) Government approvals.

3) Architect / consultant’s fees.

4) Marketing Expenses/ Sales set up expenses

5) Construction Finance.

1] Location identification

For development of any community or any project its identification plays an

important role in terms of project sustenance and project in overall.

General criteria being followed in industry are :

A) Larger land banks : For developer to have ample flexibility in planning

& providing various value additions, its preferred to obtain land bank
with larger ground area.

B) Concentration of land within minimum number of owners: As transfer

of title is quiet time consuming & cumbersome process, its
recommended to attempt selecting and bank which is concentrated
within minimum land lords so that process of transfer of title gets
expedited.

C) Clear title – Very important criteria in entire process & will lay
foundation for hassle free project delivery. In absence of clarity in title
of land, will eventually lead to legal litigation, stalling the project &
tarnishing overall image of brand. Land parcel to have clear legal title
which should be transferable and without any encumbrances.

D) Soil sample : For closest estimate of cost being incurred during

construction, recommended to have testing of soil sample for rock,
loose earth and ground water level.
 E) Strategic location : Location of a land ideally to have within the
proximity of lake or river or hillock in order to promote the property
suitably seeking preference in premium of

F) buyer.

2] Surrounding infrastructure

Acceptance & sustenance of any community can happen majorly based on

its supporting infrastructure.

Community will have an added advantage and attraction of a market if has

ample supporting surrounding infrastructure facilities which will lead to
transportation, commuting & access to nearby neighborhood.

Hence community connectivity plays an important role, it could be of all

means like road, rail, air, sea etc, by which it can have access to other parts
of metro for onward trading.

Thus it is necessary to understand a development plan prevailing within the

proximity of a community for existing and proposed infrastructural
development by the government, which invest heavily into construction of
ring Roads, flyovers, mono rail, metro rail, airports, rail junctions, etc.

Community in the close proximity of tourist places, monumental places, etc

would add value to the property gain attention & awareness.

3] Social infrastructure

Community will have sustenance and enjoyable living only with surrounding,
supporting and social infrastructure facilities which would fulfill basic needs
of occupants.

These needs are generally categorized into education, hospitality, retail,

medical emergencies, etc. Thus presence of surrounding educational
institutions, convenient stores, medical set ups, entertainment, recreational
zones will fetch more attention.

However ability of surrounding to provide employment opportunities to

various strata of society also a prominent factor in deciding location. It leads
to surrounding commercial development, industrial hub etc providing
opportunities.

Thus tracking of commercial development in and around the community

which in turn would generate employment opportunities benefitting
community in general and society in particular.

4] Market study

Market study is an important parameter to be considered from the project

inception without which the project cannot get accepted and eventually
would turn out to be economically unviable.

Demand analysis & assessing its prospective trend is required to be

analyzed. It would indicate most acceptable product mix configuration which
will be in line with disposable income level of maximum strata of society
which is very important for take off of project.

Market study need not be restricted only up to such extent but should go
step forward and understand products being offered there by the
competitors. Based on such data a suitable design of a product can be
planned which will have a due differentiation from the market and thus help
appropriate positioning to the target audience.

Having done market study it is recommended to have psychological

behavior details of a buyer which generally influence their buying decision.
Every market is governed by sets of belief which greatly influence the
buying decision (for e.g. belief of compliance of vastu).

5] Sequential micro level activities

a] Land acquisition, registration, title transfer.

It’s a process of transfer of title to the name of developer from respective

land lord. During which services of mediator are engaged who in turn is well
versed with the local landlords. In order to have optimum pricing benefit it is
generally practiced not to disclose identity of a local developer to the
landlords. By engaging land consolidators Hence services of such land
consolidators are availed by way of general Power of Attorney. Such land
consolidator converts the title into their name individually approaching to the
various landlords and their legal heirs. Since it is legally mandatory to have
consent of every legal heir and a landlord the process of obtaining such
consent and eventually transfer it to the consolidator becomes tedious and
time consuming. A factor of land prices ______________ needs to be taken into
account during this process hence entire cost of project would become
haywire. Having received title in the name of the consolidator he
subsequently approached to the developer and transfer the title into the
developer’s name in a consolidated manner which is followed by process of
registration, payment of stamp duties, etc which will eventually make the
developer an absolute owner of land bank.
5] Sequential micro level activities

a] Land acquisition, registration, title transfer.

It is an important process by which transfer of title into the name of

developer happens. In this process generally the services of mediator are
engaged who in turn is well versed with the local landlords. In order to have
optimum pricing benefit it is generally practiced not to disclose identity of a
local developer to the landlords. Hence services of such land consolidators
are availed by way of general Power of Attorney. Such land consolidator
converts the title into their name individually approaching to the various
landlords and their legal heirs. Since it is legally mandatory to have consent
of every legal heir and a landlord the process of obtaining such consent and
eventually transfer it to the consolidator becomes tedious and time
consuming. A factor of land prices ______________ needs to be taken into
account during this process hence entire cost of project would become
haywire. Having received title in the name of the consolidator he
subsequently approached to the developer and transfer the title into the
developer’s name in a consolidated manner which is followed by process of
registration, payment of stamp duties, etc which will eventually make the
developer an absolute owner of land bank.
b] Project planning and placement of various buildings within the available
land.

After completing and finalizing the transfer of title of extent of land the
process of planning the project begins. During this process a brief block
work is being planned to place various buildings within the available contour
of a land. During this process due precaution needs to be taken considering
internal road layout, proximity of various proposed external amenities
(jogging tracks, landscaped gardens, children’s play area, open spaces, etc)
with respect to such building blocks. Proximity from main entry to the
community considering prospective traffic conditions and safety.

c] Statutory approval process.

Once a brief planning of the project is completed it is necessary to approach

to the competent authority for obtaining maximum permissible development
potential within the land bank. It is quite important at this stage to be well
aware about prevailing rules and regulations which would enable developer
to avail optimum floor space index which in turn could be marketed and be
used to generate revenue.

d] Internal planning.

During this process the market study helps to arrive at most acceptable
product range in terms of area offering, in terms of room configuration like (2
BHK, 3 BHK etc), provision of internal amenities which eventually appeal
buyer to take decision in the favor of product vis-à-vis other available options
like provision of pooja room, provision of open deck, provision of
independent maids room etc.

e] Planning of external amenities within community.

During this stage these amenities are planned as a value addition to the
product to generate interest received preferential treatment vis-à-vis others
and premium for price release. Generally these amenities include recreation
facilities like club house, play areas etc. Educational facilities like schooling
to the children of buyers, retail facilities like convenience stores for day to
day belongings to the family. The medical facilities like provision of nursing
homes at a mini scale, jogging track, landscaped gardens, artificial water
bodies, tree lining would be helpful for buyer to have healthy living.

f] Devising Marketing / PR / Corporate campaign.

After completing due planning and other pre-preparations, next step is to

make the market aware about this to generate interest and inquiries. To
start with public relations is an important milestone wherein an officiated
spokesperson would go to media both print and electronic and publicly
announce plans of a company in developing the community and vision
behind it with futuristic foresight. During the process a target audience
being identified and a suitable communication being sent out informing
about introduction of our product into the market. During the next stage of
marketing more direct means of reaching to market are adopted like print
media coverage, outdoor hoarding coverage so as to have maximum
visibility to all segments.

g] Project launch and commencement of sales.

Having completed all prior processes it is now necessary to start offering the
product to the market at price most appropriate to that market. It is
generally understood to have beginning of sales on an auspicious day
wherein formal ground breaking ceremony being done with lot of visibility
into media. Due to hype created prior to this stage generally launch gets
good response in terms of visitors and chain of sense activity begins.

h] Setting up of CRM / Contractual documentation system.

It is necessary to have proper customer responsive mechanism by way of

said system to develop roles with them ensuring complying with all their
concerns and queries, make them satisfied in terms of their buying decision.
It is very important stage in all these activities because one satisfied
customer turns out to be a brand ambassador and promotes the project
voluntarily to others which in turn increases level of inquiry generation.
Along with this, in order to protect mutual interest proper contractual
documentation are to be arrived at which will have mutual binding as service
provider and obligations to be fulfilled mutually by buyer in terms of
receivables.

i] Commencement of construction.

Any project if not delivered as per commitment would lead to severe

dissatisfaction, frustration and damage reputation of a brand. Thus
construction activity has to be backed up by structured construction program
considering all factors like optimum deployment of resources, cost
monitoring to avoid coherence, capturing various costs during budgeting
process, periodical monitoring system with due control of variance.

j] Having delivered the product it is necessary to transfer the title of that

into the name of respective buyer following said procedure by local
government body, this includes entry into an agreement with its registration,
payment of stamp duties etc. Adequate liasoning work is required to be
done ensuring clients to pass through this process as quickly and as hassle
free as possible. After completion of this an association of members or a
society is being formed, registered and all accounts for managing the affairs
are to be handed over to such association relieving developer from his
responsibility.