Sample - Land Valuation Hyderabad

The Consultant - Realty and Social Infrastructure 1
Feasibility Report – Valuation of of Land Parcel
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DISCLAIMER
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List of Chapters
1 Executive Summary .......................................................................................................... 15

2 Introduction ...................................................................................................................... 29
3 Hyderabad - Region Overview .......................................................................................... 33
4 Site Appreciation .............................................................................................................. 41
5 Micro-Market Assessment ............................................................................................... 49
6 Applicable Regulations ..................................................................................................... 62
7 Project Concept & Configuration ..................................................................................... 72
8 Financial Evaluation .......................................................................................................... 78
9 Project Structure............................................................................................................... 86
10 Marketing Strategy & Way Ahead .................................................................................... 92
11 Annexures ............................................................................ Error! Bookmark not defined.
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Table of Contents
1 Executive Summary................................................................................ 15
1.1 Introduction .......................................................................................................................... 15
1.2 Hyderabad Region – Overview.............................................................................................. 15
1.3 Site Appreciation ................................................................................................................... 15
1.4 Micro-Market Appreciation .................................................................................................. 17
1.5 Regulatory Overview............................................................................................................. 19
1.6 Project Concept & Configuration .......................................................................................... 21
1.7 Financial Evaluation .............................................................................................................. 22
1.8 Implementation Framework – Proposed Transaction Strategy............................................ 25
1.9 Marketing Strategy ............................................................................................................... 25
1.10 Key Recommendations ......................................................................................................... 26
2 Introduction ........................................................................................... 29
3 Hyderabad - Region Overview................................................................ 33
3.1 Location & Connectivity ........................................................................................................ 34
3.2 Demography.......................................................................................................................... 34
3.3 City Growth ........................................................................................................................... 34
3.4 Economy................................................................................................................................ 35
3.5 Development Drivers ............................................................................................................ 36
4 Site Appreciation ................................................................................... 41

4.1 Location Analysis ................................................................................................................... 41
4.2 Connectivity Analysis ............................................................................................................ 41
4.3 Site Status ............................................................................................................................. 42
4.4 Traffic Analysis ...................................................................................................................... 44
4.5 SWOT Analysis....................................................................................................................... 45
4.6 Summary ............................................................................................................................... 45
5 Micro-Market Assessment ..................................................................... 49

5.1 Overview ............................................................................................................................... 49
5.2 Residential Market Overview................................................................................................ 49
5.3 Residential Market – [Site Location]Catchment ................................................................... 53
5.4 Office Market Overview ........................................................................................................ 56
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5.5 Retail Market Overview ........................................................................................................ 57

5.6 Summary ............................................................................................................................... 58
6 Applicable Regulations........................................................................... 62
6.1 Applicable Regulations .......................................................................................................... 62
6.2 Permissible Land Uses ........................................................................................................... 62
6.3 Associated Building Regulations ........................................................................................... 63
6.4 Development Potential ......................................................................................................... 65
6.5 Clearances and Permits......................................................................................................... 67
7 Project Concept & Configuration ............................................................ 72

7.1 Concept ................................................................................................................................. 72
7.2 Project Configuration ............................................................................................................ 73
8 Financial Evaluation ............................................................................... 78

8.1 Valuation Method 1 - Circle Rate .......................................................................................... 78
8.2 Valuation Method 2 - Market Rate ....................................................................................... 78
8.3 Valuation Method 3 – Discounted Cash-Flow method ......................................................... 78
8.4 Summary ............................................................................................................................... 83
9 Project Structure .................................................................................... 86

9.1 Project Structuring ................................................................................................................ 86
9.2 Recommendations on Bid Process........................................................................................ 88
10 Marketing Strategy & Way Ahead .......................................................... 92

10.1 Key marketing initiatives to be undertaken............................. Error! Bookmark not defined.
10.2 Way Ahead ............................................................................... Error! Bookmark not defined.
11 Annexures..................................................... Error! Bookmark not defined.

11.1 Site Pics .................................................................................... Error! Bookmark not defined.
11.2 Building rules and Regulations ................................................. Error! Bookmark not defined.
11.3 Circle Rates for Properties at Tarnaka – Moula Ali .................. Error! Bookmark not defined.
11.4 Residential Market – Primary & Secondary Catchment .......... Error! Bookmark not defined.
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List of Tables
Table 1: Development Potential ........................................................................................................... 21

Table 2: Financial Summary (without considering payments to CLIENT) ............................................. 22
Table 3: Payments to CLIENT ................................................................................................................ 23
Table 4: Cash Flow after Payments to CLIENT ...................................................................................... 23
Table 5: Estimated Land Valuation ....................................................................................................... 24
Table 6: Residential Benchmarks .......................................................................................................... 54
Table 7: Infrastructure Impact Fees to be paid in INR/ sq. m of Built Up Area .................................... 64
Table 8: Charges towards CLU .............................................................................................................. 68
Table 9: Development Phasing – Scenario 1 – Mid-Rise Configuration................................................ 80
Table 10: Development Phasing – Scenario 2 – Balanced Configuration ............................................. 80
Table 11: Cash-flows for Scenario 1 ...................................................................................................... 81
Table 12: Cash Flows for Scenario 2...................................................................................................... 81
Table 13: Funding Requirement............................................................................................................ 81
Table 14: Payments to CLIENT .............................................................................................................. 82
Table 15: Cash Flow after Payments to CLIENT .................................................................................... 82
Table 16: Estimated Land Valuation ..................................................................................................... 83
Table 17: Risk profile across various payment mechanisms................................................................. 87
Table 18: Payment Schedule for Various Authorities ........................................................................... 87
Table 19: List of Potential Developers ..................................................... Error! Bookmark not defined.
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List of Figures
Figure 1: Site Connectivity .................................................................................................................... 16

Figure 2: Site Zoning as per Revised Development Plan ....................................................................... 20
Figure 3: Location & Connectivity of Hyderabad Region ...................................................................... 33
Figure 4: Hyderabad Metro - Phase 1 Connectivity .............................................................................. 37
Figure 5: Site Location ........................................................................................................................... 41
Figure 6: Location of Major Connectivity Nodes around Site ............................................................... 42
Figure 7: Site Surroundings ................................................................................................................... 44
Figure 8: Launched Units, Sales Data and Price .................................................................................... 49
Figure 9: Residential Micro Markets ..................................................................................................... 50
Figure 10: Residential - Launched Units and Sales Data for Micro Markets ......................................... 51
Figure 11: [Site Location]Catchment ....................................................... Error! Bookmark not defined.
Figure 12: Average Price Points in Catchment ......................................... Error! Bookmark not defined.
Figure 13: Land Rates in the Catchment ............................................................................................... 55
Figure 14: Supply and Demand Details, Office Spaces............................. Error! Bookmark not defined.
Figure 15: Location of Existing Prime Retail Space in Hyderabad Region Error! Bookmark not defined.
Figure 16: Location and land use of site as per Master Plan – 2031 .................................................... 62
Figure 17: Location and Land Use of Site as per Revised Development Plan ....................................... 63
Figure 18: Regulations for Non-High-Rise Buildings ............................................................................. 66
Figure 19: Regulations for High-Rise Block Type Buildings ................................................................... 66
Figure 20: Regulations for High-Rise Tower and Podium Type Buildings ............................................. 67
Figure 21: Representative Site Plan - Conservative Development – Mid Rise (G + 8 Floors) ............... 73
Figure 22: Representative Site Plan – Balanced Development (G + 8 Floors & G + 16 Floors)............. 74
Figure 23: Proposed Bid Process ........................................................................................................... 88
Figure 24 Hyderabad Road Network........................................................ Error! Bookmark not defined.
Figure 25 Location of site along designated Radial road ......................... Error! Bookmark not defined.
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1 Executive Summary
1.1 Introduction
The Consultant has been commissioned to undertake the consultancy study for the valuation and best
utilization of a land parcel measuring ~8.99 hectares, located near [Site Location], Hyderabad.
This report undertakes a detailed study of Hyderabad’s micro market along with the recommended
concept, configuration, financial analysis, valuation and transaction strategy.
The Consultant had earlier submitted a Draft Feasibility and Valuations Report on 24th May 2015.
There has been significant market and regulatory changes since the submission of the draft report.
This report is the revised and updated Feasibility and Valuation Report incorporating the current
market and regulatory understanding and recommendations for PPP development of the land parcel.
1.2 Hyderabad Region – Overview

Hyderabad, the capital of Telangana state, has a population of ~6.7 mn1 with a population density of
~18,0002 people per sq km. With a share of 24%, Hyderabad district is the highest contributor to state
GDP with a contribution of ÌNR ~1.3 lac cr3 (2015-16, Current Prices).
It is spread over an area of ~650 sq km4 and falls under the purview of the Greater Hyderabad
Municipal Corporation (GHMC). The city is well connected to rest of India via airways, railways and
highways.
The city is a thriving hub for sectors such as IT/ITeS & pharmaceuticals and a growing hub for upcoming
sectors such as medical devices, electronics system design manufacturing, gaming & animation etc.
owing to proactive policy measures by the Government of Telangana.
The city is expected to grow further on the back of several development drivers such as Hyderabad
Metro and Multi-Modal Suburban Transportation Project, enabling policies, upcoming industrial
corridors etc.
1.3 Site Appreciation

CLIENT owns a land parcel admeasuring ~8.99 hectares, near [Site Location] Hyderabad and is
interested in setting up suitable real estate developments on the site to maximize its potential.
1.3.1 Location & Connectivity Analysis

The site is located in the North-Eastern part of Hyderabad. It falls under the jurisdiction of GHMC. The
site is located on a 20 m ROW main road (ring road designated as RR-16, proposed as a 30 m road in
HMDA Master Plan 2031) and has access from other three sides by minor roads of ROW 3-7 m. The
site also has good connectivity by road to key landmmarks in Secunderabad and Hyderabad.
1 http://www.census2011.co.in/census/city/392-hyderabad.html
2 http://www.census2011.co.in/facts/topdistrictdensity.html
3 http://ecostat.telangana.gov.in/PDF/PUBLICATIONS/Telangana_at_Glance_2017.pdf
4 http://mhupa.gov.in/writereaddata/Hyd_AP_sfcp.pdf
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The new international airport is approximately 38 km away from the site. The site is located at a
distance of ~1.5 km from railway station and ~5 km from Tarnaka metro station on Blue line of
Hyderabad Metro.
Figure 1: Site Connectivity
1.3.2 Social and Physical Infrastructure

The site lies within the jurisdiction of Hyderabad Metropolitan Water Supply & Sewerage Board
(HMWS&SB) for water supply and sewerage disposal. The site has 24 hrs power supply, which is
managed by Telangana State Southern Power Distribution Company Limited. GHMC supervises the
solid waste management in the area.
The site is surrounded by low-end / mid-end residential areas. The site itself is free from any
encroachments and doesn’t have any existing structures.
1.3.3 SWOT Analysis

Strengths
• Enjoys direct frontage of ~360 m along the main road
• Proximity to city metro network and railway station
• Large contiguous land parcel with plain topography
• Unavailability of such developable large parcel in the catchment
Weaknesses
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• Surrounded by LIG / EWS neighbourhood

• Located off the existing residential / commercial growth axes
• Located next to a Nallah
Opportunities
• Good connectivity and visibility from the main road
• The size of the site provides good opportunity for large scale real estate development
• Located on axial road connecting inner and outer ring roads of Hyderabad – potential for high
density development
Threats
• Not located in any of the existing developed residential areas
1.4 Micro-Market Appreciation

The following section provides a comprehensive overview of the residential, office and retail markets
in Hyderabad Region.
1.4.1 Residential
Hyderabad is one of the most affordable residential markets amongst other major cities. The
emergence of IT hubs in the western part have given impetus to the residential market thereby
attracting both local and national developers. Though new launches have gradually decreased over
the last few years, sales volumes have remained stable, resulting in significant decrease in unsold
inventory and a rebalanced residential market. The average sales prices have grown at a CAGR of 5%-
6% over the last 5 years and vary significantly across different micro-markets.
West Hyderabad is the most prominent micro-market in the city accounting for ~65%5 of sales volumes
and price points of INR 3,500-4,000 psf. East Hyderabad, where the site is located, accounts for ~6-
7%5 of sales volumes with average price points of INR 2,500-3,5005 psf.
Hyderabad residential market is expected to witness healthy sales and launches in the upcoming
years, on the back of upcoming infrastructure & economic drivers as well as rising income levels and
transparency brought in by policy initiatives such as RERA. The development of the outer and inner
ring road, Hyderabad Metro, expansion of MMTS and emergence of IT parks in Pocharam are expected
to enhance the demand for residential units in the catchment.
Catchment
The catchment region near [Site Location] can be segmented into primary and secondary catchments.
The primary catchment comprises of nearby areas like Nacharam, Kapra, A S Rao Nagar, Mallapur,
Kushaigada and Cherlapalli, while the secondary catchment comprises of areas in the north – eastern
region like Sainikpuri, Yapral and the areas lying to the south of NH 163 like Uppal and Nagole.
The primary catchment has few apartments / group housing projects, largely limited to 2-5 acres
because of space constraint. These projects are low/mid rise (6-9 floors) and offer affordable to mid-
5 Knight Frank Research – India Real Estate 2017
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segment products with pricing between 2,500-3,500 psf. The secondary catchment has a number of
large scale townships and group housing projects, with price points ranging between 2,300-3,500 psf.
Land Rates
Land rates of small sized plots (<1 acre) around [Site Location] lie in the range of INR 18,000 - 22,000
per sq yd, translating into INR 8-11 Cr per acre. However, since there are no plots of considerable sizes
in the site neighbourhood and hence no recent comparable transactions, the achievable market rate
for the plot is expected to be lower and may be discounted by 20-30%. The market rates in newer
areas close to the site (Uppal, Chengicherla etc.) range between INR 2-4 crore per acre.
1.4.2 Office
Hyderabad market has a total of ~60 msf of office space. Nearly 70% of the supply is concentrated in
Madhapur and Gachibowli. The peripheral eastern region (PBD east, comprising Uppal & Pocharam)
contributes only ~3% of total commercial inventory. Low inventory, coupled with low rentals and high
vacancy levels, make Eastern Hyderabad a less favourable location for commercial Real Estate.
The demand for commercial space is expected to rise on back of the impetus provided by the State
Government and major players like Apple and Google setting up their offices, among other factors.
However, this demand is likely to be concentrated in the areas closer to the new IT hubs & CBD as
compared to the southern and eastern part of the city.
1.4.3 Retail
Hyderabad consists of ~3 msf of organised retail space, with a vacancy of ~5%. Banjara Hills, Jubilee
Hills and Punjagutta are the prime retail districts with relatively higher main street rentals (>INR 120
per sq ft) and mall rentals (>INR 200 per sq ft). The city is expected to witness additional supply of ~2.9
msf by the end of next year including the deferred projects.
Area around the site doesn’t have good quality organized retail facilities. Moreover, any new retail
off-take is expected to occur around new residential sub-regions.
1.4.4 Summary
The residential market is growing steadily in the catchment and is likely to witness demand due to
proximity to central Hyderabad, further driven by infrastructure developments such as widening of
RR-16 and macro-economic developments such as completion of IT/ITeS commercial space in
Pocharam.
While commercial and retail market are expected to grow significantly in the western and central
Hyderabad, the growth is expected to be subdued in the eastern region due to limited expected
demand.
Considering the market appetite for residential, commercial, and retail asset classes, as well as
development and revenue potential under each of the developments, it is advisable to develop the
site primarily as group housing, with ancillary retail to support the residential ecosystem. The group
housing product can be positioned as mid-segment with starting price points ranging between INR
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3,200-3,500 psf. Also, considering the market appetite, such large-scale project needs to be phased
suitably across 5-8 years sales horizon.
However, since the site is well-positioned due to its proximity with central Hyderabad and has a huge
development prospect (~3-4 msf), it has a potential to create a residential eco-system / micro-market
in itself and therefore, can command a premium in future phases. Also, considering the size and
location (mid-way between CBD and PBDs of Uppal & Pocharam), the project can be expected to cater
to 10-15% of market i.e. approximately 300-450 units per year.
1.5 Regulatory Overview

The site falls under the jurisdiction of Greater Hyderabad Municipal Corporation (GHMC) and the
larger purview of Hyderabad Metropolitan Development Authority (HMDA) and is categorized under
GHMC Circle 18 (erstwhile Municipal Corporation of Hyderabad (MCH) Area, old circle no. 8).
The following government orders and rules shall be applicable:

• Zoning Regulations – as appended to Master Plan6
• Categorization of notified commercial roads in GHMC Area7
• Building Byelaws – Andhra Pradesh Building Rules, 20128 & Amendments 2012 - 20169
While as per the overall master plan 2031 developed by HMDA, the site is classified under Multiple
Use zone, as per Revised Development Plan of Erstwhile MCH Area for GHMC Circle 18, the site is
classified under Public & Semi-Public Land use zone. Also, since the Tarnaka-[Site Location]road
(where the site has frontage) is notified as Commercial Road (C22), as per HMDA regulations,
commercial usage is allowed. However, as per existing zoning, residential development is not allowed
on the site.
Hence, a Change of Land Use (CLU) would be required for residential development. CLU approval
process is expected to take about 4-6 months.
6 Issued as G.O.Ms.No.363 Dated: 21.08.2010

7 Issued as G.O.Ms.No. 766 dated 18.10.07
8 Issued as G.O.Ms.No.168 MA Dated 07.04.2012
9 Issued as G.O.Ms No 245 MA Dated 30.06.2012, G.O.M No. 07 dated 05.01.2016
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Site
Site
Figure 2: Site Zoning as per Revised Development Plan10
1.5.1 Associated Building Regulations
Building Height
Building heights are guided by plot area and abutting road width in Hyderabad and Secunderabad
region. As per Building Rules 2012, the site area (8.99 Ha) and abutting road width (20 m currently →
proposed for expansion upto 30 m), allow for high rise building development upto 55 m height.
Organized Open Space

Over and above the mandatory setbacks, a minimum of 10% & 5% of site area, in case of high rise and
non-high rise developments respectively is required to be earmarked for organised open space. This
is required to be handed over to GHMC, free of cost through a registered gift deed, before issue of
occupancy certificate.
1.5.2 Regulatory Fee
City Level Infrastructure Impact Fee11

With a view to ensure development of City Level Infrastructure facilities, an Infrastructure Impact Fees
is levied by HMDA at the rate of INR 500 per sq m for development over 15 m height.
Shelter Fee
In order to construct EWS housing under Urban Housing Scheme by the local body/HMDA, shelter
fee of INR 750 per sq m is levied on 20% of the total site area of the project.
10 Revised Development Plan (Master Plan) of erstwhile MCH, GHMC Circle 18

11 Issued as G.O.Ms.No.168 MA Dated 07.04.2012 – Item 21.a: Table VI
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1.5.3 Development Potential

The local building regulations allow for various kinds of format for group housing including Low- rise,
Block-type High-rise and Podium type High rise. Development potential across these permissible
formats is given in the following table. It has been arrived at by taking into account different criteria
such as abutting road width, setbacks and maximum permissible height.
Maximum Ground Coverage Development

Building type Setback
Height Considered Potential
Front side – 7.5 m
Low Rise building 18 m 40-50% 2.5 – 3 msf
Other sides – 7 m
High Rise
Block type buildings 55 m 16 m 25% - 30% 4 – 4.5 msf
Podium – 7 m
Tower and podium type 30% for Podium
50 m Tower – 3 m from 2.5 – 3 msf
buildings 50% of Podium for Tower
edge of podium
Table 1: Development Potential
Hence, as per applicable regulations, built-up area of upto 4.5 msf is achievable on the site. However,
considering the market appetite, such large supply is not expected to be readily absorbed in the
market and hence is not considered viable.
1.5.4 Regulatory Approvals

As noted above, Change of Land Use approval is required for residential development on the site.
Further clearances such as building plan approvals, environment clearance, fire NOCs etc. are required
to be obtained (as detailed in the subsequent chapters) prior to the start of construction. The typical
time frame for obtaining the pre-construction approvals is 12-15 months.
1.6 Project Concept & Configuration

Taking into consideration our market analysis and development regulation for the site, The Consultant
has evaluated two configurations:
• Mid-rise development - G+8 structures (~3.0 msf), considering:
o Moderate market demand due to competition in new areas like Nacharam, Uppal and
areas in North Secunderabad
o Nature of neighbourhood developments is largely low/mid-rise
• Balanced development – Mid Rise (G+8 structures) + High Rise (G+16 structures) (~3.6 msf),
considering:
o Project can leverage its large development potential and location to create a micro-
market
Hence, The Consultant has considered a range of 3.0-3.6 msf as potential development for the site
for the purpose of valuation.12
12The Andhra Pradesh Building Rules 2012 G.O.Ms.no.168 MA Dated 07.04.2012 does not restrict the maximum development potential of
the site using the concept of Floor Space Index (FSI). Instead, the development potential is restricted by parameters such as Setbacks and
Height Restrictions.
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The project will have following products:

• Residential – 3.0-3.5 msf (i.e. 2,400 - 2,800 units), across various formats
• Retail – 0.02-0.03 msf
• Club – 0.03 msf
The proposed development has been staggered over multiple phases in line with the market appetite.
1.7 Financial Evaluation

The Consultant has conducted detailed financial analysis for the configurations mentioned above.
Valuation Methods
The land parcel has been valued based on three accepted valuation methods:
• Circle Rate or Guideline Rate
o Circle rate: INR 17,940 per sq m (INR 15,000 per sq yard)
o Valuation of the 89,972 sq mt land: ~INR 161.4 crore
• Market Rate – Basis past transactions of similar properties in the neighbourhood
o Valuation of the site is assessed as INR 18,000-19,500 per sq m i.e. INR 160-175 crore.
• Discounted Cash Flow Method - Basis market scenario and future cash-flows of the project as
discussed in the following segments.
Phasing
The development potential for the project ranges from ~2400-2800 dwelling units across the two
configurations. Considering the size of the project and the current market appetite, the project would
be required to be phased over 2-3 phases (over 5-10 years). This would allow the developer to launch
appropriate quantum based on favourable market conditions.
Project Financials (without considering payments to CLIENT)

The residential development is expected to yield reasonable returns for the developer. The financial
returns across both the scenarios, before accounting for payments to CLIENT, are:
Mid-Rise Balanced
Key Assumptions
Built-up Area 3.0 3.6 msf
Starting Sales Price 3,400 3,400 INR psf
Project Cash Flows
Cumulative Inflows 1,455 1,724 INR Cr
Cumulative Outflows (CAPEX + OPEX) 776 915 INR Cr
Pre-Tax Net Cash Flow (before payments to CLIENT) 679 809 INR Cr
Funding Requirements
Peak Funding 134 140 INR Cr
Equity 54 56 INR Cr
Debt 80 84 INR Cr
Table 2: Financial Summary (without considering payments to CLIENT)
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Payments to CLIENT - Estimation of ‘Fair Value’ of Payments

Equity IRR of ~22.5% (as mandated by CLIENT for the purpose of financial analysis), and 25% are
considered for estimation of excess residual cash flows for the developer, which would constitute the
payments to CLIENT.13 Further, suitable structuring of the payments is essential to ensure project
viability for the developer while maximizing land value for CLIENT.
Payments Structuring: Transaction of the project land is very similar in nature to land allotment,
wherein entire payment to the authority is typically taken as Upfront Consideration. However, most
private sector players today may not be comfortable with such a huge consideration upfront and
hence, it is recommended to structure the CLIENT payments across 3-5 years.
It is advisable to set an Upfront Payment, payable at the time of signing of concession agreement, as
~25%-30% of freehold value of land, estimated at circle rate / guideline rate14 (INR 40-50 cr).
The remaining payment may be collected in equal instalments across 4 years. The quantum of residual
payments may be set as bid variable for selection of the developer. Bids shall be evaluated on the
basis of Net Present Value of all payments, using a Discount Factor of 15%.
Basis this, it is estimated that following payments may be expected to CLIENT:
Mid-Rise Balanced
Residual Cash Flow Available for Payments to CLIENT 235-255 250-275 INR Cr
NPV of Payments to CLIENT (@15%) 180-195 190-210 INR Cr
Table 3: Payments to CLIENT
The resultant cashflows for developer are as follows:
Mid-Rise Balanced
Pre-Tax Net Cash Flow (before Payments to CLIENT) 679 809 INR Cr
Minus: Payments to CLIENT 235-255 250-275
Pre-Tax Net Cash Flow (after Payments to CLIENT) 424-444 535-560 INR Cr
Table 4: Cash Flow after Payments to CLIENT
The payments would be structured as follows:

• Upfront Payment – 25% of guideline land value (INR ~40 Cr)
• Remaining payment to be collected in 4 equal instalments
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For a project of this magnitude and scale, most private developers today may look at lower Equity IRR of 19-20%.
14The rates assumed pertain to commercial land use for the locality, since circle rate of public / semi-public land use are not defined. (Refer
Annexure 11.3). The circle rate (commercial unit land) is INR 17,940 per sq m (INR 15,000 per sq yard) hence the value of the 89,972 sq mt
land is assumed to be ~INR 161.4 Cr.
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Summary
The Consultant has conducted the land valuation for CLIENT using the following approaches, as below:
Land Valuation
Valuation Method Land Valuation
(INR per sq m)
INR 17,940 per sq m

Circle Rate15 INR 161 Cr
(INR 15,000 per sq yd)
Market Rate
Based on previous transactions of residential land INR 18,000 – INR 19,500 per sq m INR 160 – 175 Cr
in the catchment
Discounted Cash Flow (DCF)16

INR 20,000 – 23,000 per sq m INR 180 – 210 Cr
Estimated NPV of Payments to CLIENT (@15%)
Table 5: Estimated Land Valuation
15 Rate as per Department of Registration and Stamps, Government of Telangana for Residential / Commercial Land in Moula Ali.
16 Notes regarding Valuation by DCF Method:
• Valuation indicates the estimated returns which may be accrued to CLIENT, depending upon the configuration assumed by the
developer.
• The actual bids received from the developers may vary depending upon the bidder’s business model and risk appetite.
• The payments to CLIENT are estimated to achieve an Equity IRR of 22-23% for the developer. We understand that for a project
of this magnitude, the developers may consider a lower equity IRR of 19-20%, which will increase the overall payments to
CLIENT.
• The NPV of all payments to CLIENT is estimated at discount rate of 15% p.a. The valuation may vary in case of change in the
rate.
• The valuation assumes that the land use / zoning shall be converted to Residential. The valuation may change if residential is
not allowed on the land parcel.
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1.8 Implementation Framework – Proposed Transaction Strategy

The development of the land is recommended under the Public Private Partnership model.
• Payment structure - Upfront payment + Annual Concession Fees
• Land lease tenure – 90 / 99 years (Since residential development would require effective sale
of apartments to end-customers).
• Role of Developer
o Detailed design of project facilities
o Procure financing
o Construct and develop the project facilities
o Procure approvals including Change of Land Use (CLU), Environmental Clearance,
Building Plan etc.
o Market, brand and monetize the project facilities
• Role of CLIENT
o Transfer the land to the developer on an as-is-where-is basis
o Extend necessary support to the developer for obtaining approvals. CLIENT may also
consider initiating the process of CLU before selection of the developer.
The bid process for selection of developer is recommended as a single stage, two-step RFP process:
• Step 1: Screening of bids based on technical and financial qualification criteria
• Step 2: Selection of the concessionaire based on highest NPV of payments to CLIENT
(discounted at 15% pa).
1.9 Marketing Strategy

During the PPP procurement process, it is important to ensure participation of highly qualified and
experienced developers in real estate sector to ensure best-in-class project design and delivery. It is
important to communicate the scale and potential of the project to the identified players across the
country, especially in South India, in order to incite interest in the project. The Consultant will
undertake this in the following ways:
• Identification and listing of potential developers.
• Media marketing– Placing advertisements in print media and inviting proposals in response
to the RFP. This would focus on Pan-India developers and local / regional developers in South
& West India.
• Proactive marketing – Approaching players with the Project Information Memorandum (PIM)
to initiate discussions. This would target potential partners of local & regional significance,
who will then incite interest among other national players for partnerships.
Regular interactions with various potential bidders over phone calls and meetings will be undertaken
to generate interest in the project. Pre-bid conferences will be also organized to resolve any queries
of the bidders.
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1.10 Key Recommendations

• Site
oThe site has an area of 8.99 Ha and is located on a major radial road (30 m ROW)
leading from Tarnaka to [Site Location] in Secunderabad.
o It has good frontage and contiguous area, suitable for real estate development.
o It has residential LIG / MIG neighbourhood and is located away from commercial /
peripheral business districts.
• Regulatory scenario
o It is marked as Public / Semi-Public zone, allowing usage as office, retail, recreational
purposes etc. Residential development is not allowed as per current zoning and would
require change of land use for the same.
o High-rise development (upto 55 m) is allowed on the site.
• Market Scenario
o Based on the RE market study, residential group housing development (with support
retail, club facilities) is recommended on the project site to maximize its return
potential.
• Configuration
o Two configurations have been evaluated for valuation of the site – Conservative
Development (Mid-rise – ~3 msf) and Balanced Development (Mid-rise + High-rise –
~3.6 msf).
• Project Returns and Valuation
o The project is expected to have reasonable returns for the developer, with sufficient
residual cash-flows for payments to CLIENT.
o Valuation of the land across 3 methods is arrived at:
▪ Circle Rate – INR 161 crore
▪ Market Rate – INR 160-170 crore
▪ Discounted Cash-flow Method17 (possible NPV of payments to CLIENT) – INR
180-210 crore
o Payments to CLIENT may be structured as:
▪ Upfront Consideration: 25-30% of circle rate (INR 40-50 crore)
▪ Residual payment in equal instalments across 4 years
• Transaction Structure
o It is recommended to give the land on as-is-where-is basis on long-lease of 90/99
years
o Since the site falls under public and semi-public use zone, the developer would need
to obtain Change of Land Use for residential development (with CLIENT’s support).
CLIENT may also consider initiating the process of CLU before selection of the
developer, in order to reduce approval delays and uncertainties.
o It is recommended to select the developer through Single Stage, Two Step bid process.
17DCF evaluation is subjective. The actual bids received from the developers may vary depending upon the bidder’s business model, risk
appetite and configuration considered.
26
27
28
2 Introduction
The Consultant has been commissioned to undertake the consultancy study for the valuation and best
utilization of a land parcel measuring ~8.99 hectares, located near [Site Location], Hyderabad.
This report undertakes a detailed study of Hyderabad’s micro market along with the recommended
concept, configuration, financial analysis, valuation and transaction strategy.
The Consultant had earlier submitted a Draft Feasibility and Valuations Report on 24th May 2015.
There has been significant market and regulatory changes since the submission of the draft report.
This report is the revised and updated Feasibility and Valuation Report incorporating the current
market and regulatory understanding and recommendations for PPP development of the land parcel.
To assess the best use and feasibility of the site, a market attractiveness study was undertaken by The
Consultant. The report is structured as below:
• Chapter 1: Executive Summary
• Chapter 2: Introduction (this section)
• Chapter 3: The chapter provides an overview of growth potential of Hyderabad in terms of
overall economy as well as real estate sector.
• Chapter 4: The chapter discusses the site in detail and the connectivity of the site with key
destinations in Secunderabad and Hyderabad. This chapter also discusses the status of the
site and the infrastructure facilities available.
• Chapter 5: The chapter provides a comprehensive overview of the residential, commercial, &
retail markets in Hyderabad region along with the current pricing, demand estimates of
different asset classes, and upcoming supply.
• Chapter 6: The chapter discusses the applicable regulations & byelaws to identify the
development potential of the site.
• Chapter 7: Based on the study of the regulations, The Consultant has evaluated three different
configurations for development of the site as discussed in Chapter 7.
• Chapter 8: The chapter provides projections of capital cost, associated revenue, operating
cost, consolidated financials, and sensitivity analyses that are used to arrive at the NPV of
cash-flows to CLIENT.
• Chapter 9: The chapter concludes the report with recommendations on the proposed
transaction structure.
• Chapter 10: The chapter covers next steps for the project.
• Chapter 11: Annexures
29
30
31
32
3 Hyderabad - Region Overview

Hyderabad, the capital of Telangana state, has a population of ~6.7 mn18 making it the fourth19 most
populous city in India. It is spread over an area of ~650 sq km20 and falls under the purview of the
Greater Hyderabad Municipal Corporation (GHMC). GHMC comprises erstwhile Hyderabad Municipal
Corporation, 10 municipalities21 and eight panchayats of Ranga Reddy district and two municipalities
of Medak district. The twin cities of Secunderabad and Hyderabad both fall under the jurisdiction of
GHMC.
The Hyderabad Metropolitan Development Authority (HMDA) was formed in the year 200822 to enable
planning, co-ordination, supervision, and promotion of the planned development of the Hyderabad
Metropolitan Region.
NH 44 Towa rds
Towa rds
Ni za mabad
Ka ri mnagar
NH 65
SH 1
Towa rds
Sol apur
NH 163
Site Site Towa rds
Maula Ali Wa ra ngal
Secunderabad Flyover
Railway St. Tarnaka
Hyderabad Metro St.
Railway St.
Towa rds
Ka l aburagi
SH 4 NH 65
RGI Towa rds

Airport Vi ja yawada
SH 19
Towa rds NH 44 Towa rds
Towa rds
NH 765 Na ga rjuna Sagar
Ba ngalore
Chennai Da m
Site Outer Ring Road Major Roads Road along site Metro - Blue Line
Metro - Red Line Metro - Green Line RGI Airport Railway Station Metro Station
Figure 3: Location & Connectivity of Hyderabad Region
18
http://www.census2011.co.in/census/city/392-hyderabad.html
19 http://www.census2011.co.in/city.php
20 http://mhupa.gov.in/writereaddata/Hyd_AP_sfcp.pdf
21 http://csr.ghmc.gov.in/AboutGhmc.aspx`
22 https://www.hmda.gov.in/
33
3.1 Location & Connectivity

Hyderabad, the capital and the largest city of Telangana, is located in the central region of the state.
The city is well connected to rest of the country via Airways, Railways and Highways and has excellent
network on internal connectivity through metro, flyovers and system of ring roads & radial roads.
Hyderabad is well connected by rail to all parts of India. It falls under the purview of South Central
Railway (SCR) Zone of Indian Railways which is organized into six divisions, including Hyderabad
Division and Secunderabad Division. The headquarters of South Central Railways (SCR) are located at
Secunderabad. Secunderabad Railway Station is the largest station and a major intercity station &
commuter rail hub in Hyderabad.
The city is well connected to major Indian cities via roadways. NH 44 connects Hyderabad to Nagpur
in the north and to Bangalore in the south. NH 65 connects Hyderabad to Pune in the east and to
Vijayawada in the west. NH 163 connects the city to Warangal and Chhattisgarh. NH 765 connects the
city to Andhra Pradesh. For internal connectivity, SH 1 connects the city to Karimnagar in north, SH 4
connects the city to Rangareddy in west, SH 6 connects the city to Medak in north-west and SH 19
connects the city to Nalgonda in east.
Rajiv Gandhi International Airport (RGIA) provides international and national air connectivity with a
current capacity of 12 MPPA23 and proposed capacity augmentation to 25 MPPA. In addition, a green
field airport is proposed 240 km from Rajiv Gandhi International Airport in Bhadradri Kothagudem
district, Telangana.
The inner and outer ring roads improve the connectivity within the City. The inner ring road connects
the Secunderabad region to southern areas like Baba Nagar while the outer ring road facilitates
connectivity of all areas of the City with the Airport. The 30 km stretch of Hyderabad Metro connecting
Miyapur to Nagole recently became operational. The other lines proposed in phase 1 will improve the
connectivity of all parts of the city with the central and western part of Hyderabad.
3.2 Demography
Hyderabad is the fourth24 most populous city in India with a population of 6.7 mn25. Its twin City –
Secunderabad has a population of ~0.2 mn26. As per 2011 census, the city has a population density of
~18,00026 per sq km. Of the total urban population of the state, around 30%26 people reside in
Hyderabad. The city has a literacy rate of ~83%26, higher than the state average of ~67%. The projected
Human Development Index of the Hyderabad district is 0.8227, much higher than the national average
of 0.56.
3.3 City Growth

The city of Hyderabad has grown rapidly in the last two decades. With the development of Cyberabad
in the north-western part of the city, the city slowly expanded beyond its boundaries. Organic and
23
http://www.hyderabad.aero/aci-asq-passengers-survey-2016,-ranks-gmrs-hyderabad-international-airport-as-world-1.aspx
24 http://www.census2011.co.in/city.php
25 http://www.census2011.co.in/census/city/392-hyderabad.html
26 http://www.telangana.gov.in/PDFDocuments/Statistical-Year-Book-2016.pdf
34
inorganic growth has led to the city’s expansion well beyond its municipal boundaries resulting into
subsequent extension of the municipal limits of Hyderabad in 2007 and resultant formation of GHMC.
In 2008, Hyderabad Metropolitan Development Authority (HMDA) was established with an area of
7,25728 sq km under its purview. HMDA was formed by merging29of the following erstwhile entities:
Hyderabad Urban Development Authority (HUDA), Hyderabad Airport Development Authority
(HADA), Cyberabad Development Authority (CDA) and Buddha Poornima Project Authority (BPPA).
The realty market of Hyderabad which was in a near-stagnant phase owing to economic conditions
and political uncertainty, is now expected to grow gradually going forward. Apart from areas like HITEC
city and Madhapur (western Hyderabad) which form the prime real estate markets, peripheral areas
like Kokapet (west), Kompally (north), and Shamshabad (south) are fast emerging as favourable real
estate markets. Proximity to the Outer Ring Road (ORR), availability of land parcels and improving
infrastructure are expected to boost real estate development in these regions.
3.4 Economy
With a share of 24%, the district of Hyderabad is the highest contributor to state GDP with a
contribution of INR ~1.3 lac cr30 (2015-16). It also has the highest per capita income of INR 2.9 lac per
person31.
In line with the national trend, the economy of Hyderabad has also undergone a structural
transformation from a manufacturing led economy to a service based economy. Major sectors driving
the economy of Hyderabad are IT/ITeS, automobile and auto parts industry, poultry farming, textiles
and apparel industry, bulk drugs and pharmaceuticals, biotechnology, medical tourism, etc. The city
currently has 9 operational SEZs32 across IT/ITeS, aviation, and gems & jewellery sector.
Hyderabad is emerging as one of India’s central Information Technology and IT enabled service hubs.
Many IT companies such as IBM, Dell, Oracle, Google, General Electric etc have set up offices in
Hyderabad. The city is one of the fastest growing IT cities in the country and is the one of the largest
exporter of software products. In the year 2016-17, Telangana witnessed IT & ITeS exports of INR
85,470 cr with a year on year growth rate of 14%33. The development of HITEC City, a township
prepped with state of the art technologies and facilities for information technology, engineering,
health informatics, and bioinformatics, has also prompted several companies to set up operations in
the city. Major IT/ITeS activities are located in Madhapur, Bahadurpally, HITEC city and other parts of
Ranga Reddy.
Key manufacturing facilities in Hyderabad are concentrated in regions of Ramachandrapuram,

Patancheru, Bala Nagar, Uppal, Cherlapalli, Jeedimetla, and Moula Ali.
28 https://www.hmda.gov.in/
29
https://www.hmda.gov.in/bpp.aspx
32 http://www.sezindia.nic.in/writereaddata/pdf/ListofoperationalSEZs.pdf
33 Financial Express, June 1, 2017
35
Apart from IT/ITeS, Hyderabad is also emerging as a preferred destination for medical tourism. Owing
to the rise in the number of medical tourists, the government is planning to launch a facilitation centre
in early 2018 to help the tourists with accommodation, hospital and doctor details, registration
facilitation, translators, travel, and other provisions. Government is also planning to launch an
integrated medical tourism hub in Hyderabad.
To promote the start-up culture in the city, the state government has collaborated with IIIT-H, ISB &
NALSAR to establish one of the largest incubators for start-ups, called T-Hub at IIIT-H.
Additionally, the State has initiated several policy changes in technology sector including the new ICT
policy 2016. It has also undertaken several initiatives such as setting up of IT training institutes like
Telangana Academy of Skill & Knowledge, IKP Knowledge Park to lease ready to use labs for R&D.
3.5 Development Drivers

With strong infrastructure base, excellent internal and external connectivity being the backbone of
the growth of the city, Hyderabad is emerging as the one of the most important cities of India.
Following drivers are expected to contribute to the city’s growth:
3.5.1 Hyderabad Metro Rail Limited

The Hyderabad Metro Rail (MRTS) project is proposed to be developed in three high density traffic
corridors of the city spanning across 72 km in Phase-I.
• Corridor I: Miyapur – LB Nagar: 29 km; 27 stations
• Corridor II: JBS – Falaknuma: 15 km; 16 stations
• Corridor III: Nagole – Shilparamam: 28 km; 23 stations
Part of Corridor 1 from Miyapur to Ameerpet (11 stations) and Corridor 2 from Nagole to Ameerpet
(13 stations) commenced operations in November 201734.
3.5.2 Smart City features

The Government of Telangana is taking active steps to bring smart features to Hyderabad.
Telangana Government has signed an MoU35 with Cisco, Paradigm Mtuity and T-Hub to plan, develop,
and implement smart systems such as smart Wi-Fi, smart parking, smart lighting, smart transport,
smart kiosks, remote expert governance services, citizen services portal, and citizen app.
3.5.3 Hyderabad Multi-Modal Suburban Transportation Project - Phase II

Hyderabad Multi-Modal Suburban Transportation Project36 is a partnership of Government of
Telangana and South-Central Railway aimed at developing rail system in Hyderabad. The Phase 2 of
the project is estimated to cost INR 817 cr The project envisages quadrupling of the Moula Ali-
Ghatkesar section and doubling of Sanathnagar- Moula Ali, Moula Ali- Malkajgiri-Sitafalmandi and
other important sections.
34The Hindu Business Line, November 29, 2017

35 The Hindu Businessline, July 21, 2016
36 The Hindu, January 25, 2017
36
Miyapur
Jubilee Bus Station
Shilparamam
Ameerpet
Nagole
LB Nagar
Operational Falaknuma
Under construction
Figure 4: Hyderabad Metro - Phase 1 Connectivity
3.5.4 Policy Initiatives

In 2016, the State Government introduced the new ICT policy37 and several other policy frameworks
regarding Electronics, Gaming & Animation, Rural Technology Centres, Innovation, Open Data, Data
Analytics, Data Centre, Cyber Security, Internet of Things and E-Waste Management to attract
investments while facilitating job creation.
3.5.5 Key PPP Projects

Telangana is actively working with the private sector towards development of infrastructure.
Following key PPP projects have been undertaken by Telangana government in the region:
• Hyderabad Multi-Modal Suburban Transportation Project - Phase II
• Roadways between Hyderabad - Bengaluru Section
• Road Upgradation (Islam Nagar-Kadtal NH-7) Project
• Integrated Solid Waste Management (3800 TPD) for Hyderabad
• Hyderabad-Yadgiri Four-Lane NH-202 Road Project
37 http://it.telangana.gov.in/investor-info/it-policy/
37
3.5.6 Industrial Corridors

Central government has approved two industrial corridors38 in Telangana along Hyderabad-Warangal
and Hyderabad-Nagpur highways. The proposed corridors will accommodate oil refining, textiles,
handlooms, handicrafts, paper units, mining, engineering, livestock, agro-based industries, poultry
and other small and medium enterprises. The state government has also sought a dry port and railway
facility for speedy transportation of industrial production.
3.5.7 Telangana Animation & Gaming City

Under the Image Policy-201639, the state has proposed to develop Telangana Animation and Gaming
(IMAGE) City in Ranga Reddy district in Hyderabad to make the city most favoured destination for
investment in animation, visual effects and allied sectors. To promote the growth of indigenous digital
content, the state is aiming to facilitate a legal framework for Intellectual property and a suitable
venture capital funding mechanism. As a part of fiscal incentives, the policy aims to offer 25% capital
investment subsidy of INR 25 lakh for fresh investments and up to 20% reimbursement of production
cost of animation films in case 80% of the production costs are incurred in Telangana.
3.5.8 Electronic Manufacturing Cluster (EMC)

The Government of Telangana is planning to develop Hyderabad as the hub of Electronic System
Design & Manufacturing. To attract investments in the field, the government has approved setting up
of two electronic manufacturing clusters40 in e-city (Raviryal) and Maheshwaram Science Park. The
600 acres EMC at e-city is expected to cost INR 667 cr whereas the 310 acres EMC at Maheshwaram
to cost INR 437 cr to develop. The government is aiming to generate USD 10 bn in revenues and 1.75
lakh employment opportunities from the project.
3.5.9 Medical Devices Park & Pharma City

The Government of Telangana is taking steps to build world class infrastructure to promote and
support medical tourism in Hyderabad. The government has launched Medical Devices Park41 spread
over an area of 250 acres in Medak district ~50 km from Hyderabad with facilities for manufacturing,
laboratory testing, prototyping and innovation. The government envisages creation of 4,000 direct
and 4,000 indirect employment opportunities from this project. The government of Telangana is also
planning to launch Hyderabad Pharma City project spread over an area of 19,333 acres in Mucherla
village in Rangareddy District. The government is expecting to attract investments of INR 64,000 cr,
generate exports worth INR 58,000 cr and create 1.7 lakh employment opportunities from this project.
38 The Deccan Chronicle, June 17, 2016

39 http://www.telangana.gov.in/PDFDocuments/Telangana-IMAGE-Policy-2016.pdf
40 Telangana Today, August 4, 2017
41 The Hindu, October 11, 2017
38
39
40
4 Site Appreciation
CLIENT owns a ~8.99 hectare land parcel, near [Site Location], Hyderabad. CLIENT is interested in
developing suitable real estate products on the site.
4.1 Location Analysis

The site is located in the North-Eastern part of Hyderabad. The site falls under the jurisdiction of
GHMC. The location map appended below, provides a clear pictorial appreciation of the site.
Figure 5: Site Location
The site is ~8 km from the Secunderabad CBD (SP road, SD road, RP road etc) and ~15 km from the
Hyderabad CBD (Somajiguda, Banjara Hills, Jubilee Hills). It is located ~28 km from the IT destinations
at HITEC City, Kondapur and Madhapur. The site also has few hospitals and religious buildings in the
vicinity.
4.2 Connectivity Analysis

The site also has good connectivity by road to key destinations in Secunderabad and Hyderabad. The
map shows the major access roads and connectivity to the site.
41
Figure 6: Location of Major Connectivity Nodes around Site
The site is located on a 20 m ROW main road (ring road RR-16, proposed as a 30 m road in HMDA
Master Plan 2031) connecting it to Tarnaka and [Site Location] which makes it accessible from all major
parts of city.
Nearest railway station, which connects the area, through local railways, is located around 1.5 km
away from the site. The Tarnaka metro station on Blue Line is located ~5 km from the site which is
developed as part of Phase-I of Hyderabad metro. This will further enhance the connectivity of the
site. The new international airport is approximately 38 km away from the site.
4.3 Site Status
4.3.1 Approach Road

The site is easily accessible from three sides via the following access ways:
Road Connecting Tarnaka to [Site Location]

The site abuts a major road with a width of 20 m, which is proposed as a 30 m road as per HMDA
Master Plan 2031 for Hyderabad Metropolitan Area. A 4-lane flyover is located on this road over the
neighbouring railway line. A service road of approximately 6 m width also provides connectivity to the
site from the main road.
Minor Roads
An unpaved pathway along the south-western side of the site of 4 m width which further connects to
a paved road of 7 m along the north-western side of the site. This unpaved road is proposed to be
42
developed into a paved approach road. There is another secondary access along the eastern part of
the site which connects to a 6 m paved road leading to a railway colony.
4.3.2 Infrastructure
Water Supply
The major source of water is Manjeera Reservoir and ground water. There is a continuous municipal
water supply in the residential areas nearby like Railway Colony and Prasanth Nagar. Some of the
households have borewells. Hyderabad Metropolitan Water Supply & Sewerage Board (HMWS&SB)
manages the water supply in the area.
Sewerage
The site and the surroundings are partially covered by a sewerage network. Some of the household
use septic tanks for sanitation. The nearest Sewerage Treatment Plant is located at Nacharam.
Hyderabad Metropolitan Water Supply & Sewerage Board (HMWS&SB) manages the sewerage system
of the area.
Drainage
The drainage lines are present on the sides of the main roads and are managed by Greater Hyderabad
Municipal Corporation.
Solid Waste Management

Solid waste management facility is available in surrounding areas of site. GHMC supervises the solid
waste disposal and management in the area.
Power
The site has 24 hrs power supply, managed by Telangana State Southern Power Distribution Company
Limited.
Terrain and Vegetation

The site has trees mostly located at the periphery with a clear site in the middle. Most of the trees are
Babool trees with some Date trees sparsely located at the edges of the site.
4.3.3 Surroundings
Temple
There is a temple with a defined boundary along the western side of the site. It is a permanent
structure located on railway land but is not included in the site boundary.
Graveyards
Three graveyards are located adjoining the site boundary, two on western side and one on south -
eastern side. Cremation grounds exist along the main road. These graveyards are located on Railway
land but are not included in the 8.99 ha site.
43
EWS / LIG Housing

An existing pocket of EWS / LIG housing is along the north-eastern side of the site. The western side
of the site is encroached by 8-10 brick-structure households. The same has been excluded from the
total site area.
Figure 7: Site Surroundings
4.4 Traffic Analysis

The abutting road is a major radial road with significant traffic flow in both directions. Traffic volume
count is estimated as ~1500 ECUs at peak morning and evening hours.
Traffic surveys were carried out to understand the prevailing traffic characteristics of the project
influencing area and to appreciate the present characteristics of traffic in the study area.
The primary objectives of the traffic surveys were to:

• Determine the motorized and non-motorized traffic volumes along the corridor
• Determine the characteristics of morning and evening hour traffic
44
• Determine the composition of traffic presently using the corridor
4.5 SWOT Analysis

The site has been studied under the SWOT framework:
4.5.1 Strengths
• Site is located along the main city road which connects Tarnaka to Lalapet
• Large size of contiguous land parcel is favourable for development
• The site enjoys direct frontage of ~360 m along the main road which is 20 m wide and is
proposed to be 30 m as per HMDA Master Plan 2031
• Proximity to city metro network and railway station further improves the connectivity to and
from site
• Site has plain topography which is suitable for construction
4.5.2 Weaknesses
• The site has a significant LIG/EWS neighbourhood
• The development of a large-scale development of ~9 hectares requires involvement of a
strong partner
• Site is not located along current growth axes and is an offset to the core areas of the city
• Location next to open nallah would reduce the premium-ness
4.5.3 Opportunities
• The site has good connectivity and visibility from the main road. Also, the size of the site
provides good opportunity for large scale real estate development
• It is located on a potential growth axes due to development of Hyderabad metro and suburban
railway network
4.5.4 Threats
• The site is not located in any of the existing developed residential areas (Gachibowli,
Madhapur, Banjara Hills, Jubilee Hills, Begumpet); therefore, it will have to create a new
market which may delay returns
4.6 Summary
The site is located on a 20 m ROW main city road (proposed as a 30 m road in HMDA Master Plan
2031) connecting it to Tarnaka and [Site Location] which makes it accessible from major parts of city.
The absence of quality large scale residential development in this part of the city offers a market
opportunity for residential development.
45
46
47
48
5 Micro-Market Assessment
5.1 Overview
This chapter presents a comprehensive overview of the residential, office and retail markets in
Hyderabad Region. The emergence of Hyderabad as one of the major IT hubs of India, saw the
commercial office space market grow by a CAGR of 23% between 2005 and 2008. Post this, the
demand for the new state of Telangana resulted in political and economic instability, which led to
stagnancy of City’s real estate market till 2014. However, post the formation of Telangana, the City
has started witnessing a phase of recovery in the last 3 years.
The demand of residential and commercial space from the growing IT/ ITeS sector has led to flow of
investments from various developers across the country. Infrastructural development like the
construction of the outer & inner ring road and Hyderabad Metro has provided further impetus to the
real estate market.
5.2 Residential Market Overview

Hyderabad has emerged as one of the most affordable residential market amongst other major cities.
Strong political stability coupled with the city’s inherent strengths, a robust institutional base,
supportive government policies and major infrastructure initiatives have augmented Hyderabad’s real
estate development. This, along with continuous growth of the IT sector is expected to have a
cascading effect on the housing market in the corresponding hubs.
Residential launches and sales grew steadily between 2010 to 2012, peaking in 2012. Thereafter, the
market witnessed a downward trend in new launches for the next few years even though sales
volumes remained stable42. The decrease in new launches was attributed to rising unsold inventory
due to aggressive launches by developers. The decrease in new launches and stable sales volumes
resulted in decrease in unsold inventory, thus rebalancing the market.
The first half of 2017 saw new launches fall by 55% as compared to H1 of 2016. This dampening in
new launches can be attributed to the lack of clarity on implementation of RERA. H1 of 2017 saw
developers completing the existing projects before the implementation of RERA and thus led to a fall
in new launches. Nevertheless, the transparency brought in by RERA buoyed the confidence of the
buyers and led to stable sales volume over the year.
10,000 3,710 3,710 3,800
3,610 3,620
8,000
3,502 3,509 3,600
6,000
3,390
4,000 3,400
2,000
0 3,200
H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 H1 2017
Units Launched Sales Price (INR/ sqf)
Figure 8: Launched Units, Sales Data and Price43
42 Knight Frank Research

43
Knight Frank Research, 2017
49
The market is expected to witness healthy sales and launch trend in the upcoming years on the back
of upcoming infrastructure and economic drivers discussed in earlier segments as well as rising income
levels and transparency brought in by policy initiatives such as RERA. Hyderabad’s residential market
is distributed into five major micro-markets as discussed in the following sub-section.
5.2.1 Micro-Market Overview

The Hyderabad residential market can be divided into the following micro-markets:
Figure 9: Residential Micro Markets
The micro-markets witnessed varying developer and customer interests as shown in the following
figures. Western region dominated in launches and sales, contributing ~80%-85% and ~65%-70%
towards launches and sales respectively, while the Eastern region (site catchment), contributed ~2-
3% and 6-7% respectively.
50
Micro-Markets - Launched Units Micro Markets - Sales Data
87%
87%
100%
69%
80%
65%
80%
63%
70%
80%
60%
60% 50%
40%
40% 30%
13%
11%
10%
11%
20%
9%
9%
9%
20%
8%
8%
7%
7%
7%
6%
6%
6%
3%
3%
3%
4%
2%
2%
2%
2%
2%
10%
0% 0%
West Central North South East West Central North South East
H1 2016 H2 2016 H1 2017 H1 2016 H2 2016 H1 2017
Figure 10: Residential - Launched Units and Sales Data for Micro Markets44
West Hyderabad
The western part of Hyderabad attracts most of the development in the city due to its proximity with
the IT/ITeS and BFSI sector hubs such as Hyderabad Information Technology and Engineering
Consultancy (“HITEC”) City. The areas like Kukatpally, Madhapur, Gachibowli, Raidurgam, Kondapur
and Manikonda witnessed maximum new launches in 2016 and H1 of 2017, comprising ~80% of all
the residential launches. The saturation of the residential market in Central Hyderabad has led to
growth of real estate in the western part which now constitutes nearly 65-70% of the sales volume in
the overall Hyderabad residential market.
Anticipating higher demand from the growing IT community, there have been many new launches in
the areas of Manikonda and Narsingi-Puppal Guda. The demand of the market can be judged from the
fact that despite constituting 60% of all under-construction units in Hyderabad residential market, the
average age of unsold inventory is the lowest as compared to other areas.
The average price in this region ranges from INR 3,500-4,000 per square feet. The prices have been
rising steadily by 4-5% over the last couple of years. This affordable price range as compared to the
established settlements of Central Hyderabad, is expected to attract investments from the market.
Key Drivers
• The high growth IT corridor in HITEC City and the Financial District in Gachibowli will continue
to stimulate growth in the residential market
• With improved connectivity with the Airport and other parts of Hyderabad via the Outer and
Inner Ring road, the markets will experience stability in the future.
Central Hyderabad
The Central Hyderabad region has traditionally been the residential hub of the City. The region
constitutes of areas like Begumpet, Banjara Hills, Jubilee Hills, Panjagutta, Somajiguda, Himayat Nagar
and others. This region has been a hub of individual residential units and premium/ luxury housing.
Most of the dwellers are from trading community, government employees, bureaucrats and NRIs. The
44 Knight Frank Research, 2017
51
health of the Central zone in terms of supply-demand can be gauged from the fact that despite higher
price points, the age of unsold inventory is quite low as compared to other residential markets of
Hyderabad (14 quarters in West as compared to 19-22 quarters in North, South and East).
The average price per square feet for newly launched units in this region has seen a steady rise of 3-
4% annually and currently stands at INR 7,000 – 7,500 per square feet.
Key Drivers
• The corporate offices in Central Business District (CBD) will continue to drive the residential
market in this region
• Proximity to NH-65 and NH-44 provide connectivity to all parts of Hyderabad
• Upcoming infrastructure including Hyderabad Metro will further enhance the connectivity
and de-congest the traffic
North Hyderabad
Northern Hyderabad region has witnessed a surge in development of affordable housing in the recent
years due to proximity to the Central Business district, trading companies and pharmaceutical
companies. The areas of Kompally, Medchal, Alwal, Quthbullanpur, Sainikpuri, etc. have presence of
local developers majorly. However, the developed micro market has seen a drop in the number of
new launches due to unavailability of land and hence constituted only 10% of the total sales volume
in H1, 2017 as compared to 13% in H2, 2016.
The prices in this region have remained stagnant between INR 2,200 – 2,500 per square feet over the
last 2-3 years. With more demand for affordable housing and availability of supporting social infra in
terms of schools and hospitals, the prices are expected to rise in the future.
Key Drivers
• The NH 44 connecting this region to Southern and Central Hyderabad and proximity to the
outer ring road might help in gaining traction for the residential market
• The demand for industrial and warehouse development will be a driving factor for real estate
in this region
South Hyderabad
The regions of Rajendra Nagar, Shamshabad, Balapur are in a relatively nascent stage as compared to
other regions in the city. These regions being away from the central part of the city have not been able
to gain traction in the residential market and are dominated by affordable villas and plotted
developments. However, the areas close to the Shamshabad Airport have gained the attention of the
developers with a long-term view.
The average price range in this region varies between INR 2,100 – 2,300 per square feet and have
remained stagnant over the last couple of years.
52
Key Drivers
• Development of International Airport and a couple of SEZs like Hardware Park and Fab City
might trigger residential development in the region
• The upcoming metro line will improve the connectivity to Central Hyderabad.
East Hyderabad
The site is located in East Hyderabad region. The regions like Uppal, Malkajgiri, L.B. Nagar, Pocharam,
Nacharam, Tarnaka, [Site Location]constitute 6-7% of the total residential sales in the City. These areas
house government establishments and public-sector units and are primarily driven by the unorganised
sector. Traditionally, these regions have been characterised by mid-scale apartments and plotted
layouts. Though the lack of land availability has led to a decline in new launches over the years, the
region might witness demand for residential units due to the spill-over demand from the Central
Hyderabad region. Also, the development of Infosys campus in Pocharam is expected to drive the
demand for affordable housing in this region.
The average price in this region varies from INR 2,500 – 3,500 per square feet, growing at a rate of 1-
2% compared to last year.
Key Drivers
• The MMTS corridor passing through this region will enhance its connectivity with other parts
of Hyderabad.
• The inner ring road passing through this area coupled with the proposed east-west metro line
will enhance the connectivity with HITEC City in the west.
• The market may witness a gradual evolution with further development of IT/ITeS facilities
after the present IT Hubs reach saturation in terms of supply.
5.3 Residential Market –Catchment
5.3.1 Overview
The catchment region near [Site Location] can be segmented into primary and secondary catchments.
The primary catchment comprises of nearby areas like Nacharam, Kapra, A S Rao Nagar, Mallapur,
Kushaigada and Cherlapalli, while the secondary catchment comprises of areas in the north – eastern
region like Sainikpuri, Yapral and the areas lying to the south of NH 163 like Uppal and Nagole.
Though the catchment majorly comprises of low rise residential projects (5-6 floors), several projects
such as Raheja Vistas, Sai Sukha Vistas, Aakruthi Township, and Janapriya Lakefront, which are located
outside erstwhile MCH area, offer high rise apartments of 9-12 floors height.
5.3.2 Upcoming Projects

There is a visible existing & upcoming supply (recently delivered, under-construction, and launched
projects) of ~7,500-8,000 residential units across 25-30 projects in the primary and secondary
catchment. The project sizes range from 5-10 acres. The following figure provides prevalent residential
prices in the region along with a few key projects.
53
Major projects in the region are listed in the following table. A detailed list of projects is given in
Annexure 11.4.
Project Name Location No. of units Price (INR psf)

Primary Catchment
Raheja Vistas Nacharam 800 3100
Modi Mayflower Grande Mallapur 370 3200
Happy Bandas Signature Tower Tarnaka 180 3800
Concrete Palazzo Nacharam 180 4000
Mahayana MJ Heights Moula Ali 145 2800
Secondary Catchment
Janpriya Sitara Sainikpuri 1100 2700
Janapriya Lake Front Sainikpuri 800 2300
ARK Homes Bolarum 560 2500
GK Pride Yapral 490 2800
Sai Aakruthi Township Uppal 480 2850
Saket Sriyam Kapra 450 2800
Modi Vista Homes Kushaiguda 403 2600
Sri Sai Anandmayi Uppal 390 2900
Sai Sukha Vistas Habsiguda 384 4000
Palm Cove Uppal 150 3200
Sarojini Happy Homes Habsiguda 20 5000
Manbhum Kakatiya Habsiguda 10 4850
Table 6: Residential Benchmarks
Key observations from the market study are as follows:

• Primary Catchment: The primary catchment has few apartments / group housing projects,
largely limited to 2-5 acres because of space constraint. These projects are low rise (5-6 floors)
and offer affordable to mid-segment products with pricing between INR 2,500-3,500 psf.
Premium projects like Concrete Palazzo charge prices of INR 3,500-4,000 per sq ft.
• Secondary Catchment: The secondary catchment has a number of large scale townships and
group housing projects, with price points ranging between 2,300-3,500 psf. Projects in
Habsiguda like Sri Sai Sukha Vistas charge premium prices of INR 3,800-4,200 per sq ft while
luxury projects offering limited apartments (~10 – 20 units each) such as Sarojini Happy Homes
& Manbhum Kakatiya charge INR 4,800-5,000 per sq ft.
5.3.3 Demand Projections

The current sales velocity of Eastern and Northern Hyderabad translates into ~2,500 – 3,000
residential units per year and is expected to grow in the future on the back of following demand
drivers:
• The upcoming MMTS corridor and Metro line through the area will enhance connectivity with
other parts of Hyderabad
• Connectivity (via NH 163) with the upcoming IT park in Pocharam will also enhance the
demand for residential units in the catchment area
54
• Lack of space in the northern regions of Hyderabad like Alwal and Medchal is expected to
boost demand in the catchment region
5.3.4 Residential Land Rates

Land availability is scarce in the region with limited availability of large contiguous land parcels. Land
rates of smaller sized plots (<1 acre) lie in the range of INR 18,000-19,000 per sq yd for residential
plots, translating into INR 8-9 Cr per acre. However, since there are no plots of considerable sizes in
the site neighbourhood and hence no recent comparable transactions, the achievable market rate for
the plot is expected to be lower and may be discounted by 20-30%. The market rates in areas close to
the site (Uppal, Sainikpuri, Chengicherla etc.) range between INR 2-4 crore per acre.
2 Cr / Acre
Kompally
NH 44 SH 1
2.5 Cr / Acre
Yarpal
4 Cr / Acre
Sainikpuri 3 Cr / Acre
Kapra
INR 24,000 / sq yd
(11.6 Cr / Acre)
A.S.Rao Nagar
INR 18,500 / sq yd
(9 Cr / Acre)
Moula Ali
Site 1.6 Cr / Acre

SITE INR 20,500 / sq yd
(10 Cr / Acre) Chengicherla
Nacharam
INR 22,000 / sq yd
(10.6 Cr / Acre)
Tarnaka
3 Cr / Acre
Uppal
Land Rates (INR Cr per acre)

Plot Prices (INR per sq yd)
Figure 11: Land Rates in the Catchment
55
5.4 Office Market Overview

Traditional commercial spaces located in Hyderabad were small office complexes or building having
mix of retail and office areas. The emergence of IT/ITeS industry has changed the scenario of office
spaces in the city. However, most of the development in the Commercial spaces has been
concentrated in the north-western part of the City in areas like Madhapur, Banjara Hills, Jubilee Hills,
Gachibowli, Manikonda, etc.
Broadly, the market for office space in Hyderabad can be divided into 5 major groups:
• CBD & Off CBD: Locations like Begumpet, Ameerpet, Somajiguda, Raj Bhavan Road, S.P Road,
Banjara Hills, Himayath Nagar, Somajiguda and Jubilee Hills form the CBD & Off CBD office
markets. These areas have the oldest office spaces in Hyderabad
• Suburban Business District - Madhapur: This area primarily comprises of the IT/ITeS industry
and include areas like Madhapur (including HITEC City), Kondapur, Manikonda and Raidurg
• Suburban Business District - Gachibowli: Another key IT/ITeS hub, Gachibowli, forms a part
of the Suburban Business District-West and includes areas like Gachibowli, Nanakramguda
and Manikonda
• Peripheral Business District East: This area consists of areas like Pocharam and Uppal
5.4.1 Demand Supply Analysis

The total office space supply in Hyderabad is ~60 msf. Nearly 70% of this supply is in the north-west
region of Madhapur and Gachibowli, while the peripheral eastern region constitutes only 3% of the
total supply.
The rent in regions like Uppal and Pocharam is INR 30 psf per month, though regions in HITEC City and
CBD command a premium price of INR 50-55 psf per month. The major reason for high rentals in the
western region is the lack of new launches of grade A offices in Madhapur region and decreasing
vacancy levels (3%, as of Q1, 2017). With tenants currently competing for limited space options, rents
are increasing gradually. However, the increasing rents are expected to subdue in the coming year as
several grade A projects are due to be delivered.
With the increasing demand and lack of quality supply the average transaction size decreased from
40,000 sq. ft. in H2 2016 to ~20,000 sq. ft. in H1 201745. All the transactions were skewed towards the
north-western part of the City with the eastern regions having only ~3% share of the total transactions.

The demand for commercial space is expected to rise on back of the impetus provided by the State
Government and giants like Apple and Google setting up their offices. Also, upcoming physical and
social infrastructure projects like Hyderabad Metro are expected to boost commercial office space
demand. However, this demand is likely to be high in the areas closer to the IT hubs and CBD of the
City and the commercial market in the southern and eastern part are expected to be lukewarm.
45 Knight Frank Research, 2017
56
5.5 Retail Market Overview
5.5.1 Existing Organised Retail Space Options

The traditional retail hubs in the city have been M.G. Road, Abids, Charminar and Bank Street in Koti,
characterized by small unorganised shops. In the past decade, there has been emergence of popular
retail destinations with organised retail at places such as Somajiguda, Sardar Patel Road and
Punjagutta. At present, the most sought after organised retail destinations are Banjara Hills and
Jubilee Hills, providing a mix of high street and mall spaces. This is largely due to bulk of the malls and
premium high street stores are concentrated in the IT corridor of the HITEC City road, Banjara Hills
and Jubilee Hills to attract the high-income earners/spenders of the city. Though eastern zone has the
second highest retail spending, it has the lowest modern retail to total retail spending ratio among all
zones of Hyderabad.
5.5.2 Demand Supply Analysis

The mall supply in Hyderabad was ~3 mn sq. ft.t in 2014, with a vacancy level of 6-7%. However, mall
supply of nearly 1.5 msf, which was anticipated, has been overdue owing to construction delays.
Therefore, the city has not witnessed any new mall supply for nine consecutive quarters. As a result
of low supply and moderate demand, the city has maintained low vacancy levels of 5%, while the
rentals have remained steady over past few years.
The following map shows the current presence of organised retail space in Hyderabad:
High Street Format

The average high street rentals vary from INR 90 – 155 psf per month. Areas like Banjara Hills,
Punjagutta and Kukatpally boast of the highest rentals, while areas like A S Rao Nagar in the eastern
region have average rentals of INR 120 psf per month.
Mall Format
The average rentals in malls vary from INR 100 – 260 psf per month. A large variation is observed in
the mall rentals based on the location. The malls located in Banjara Hills have the highest average
rentals of INR 260 psf per month.

With the increasing average income, growing demand for organised retail and expected completion
of delayed projects, Hyderabad is set to witness around 2.9 msf of new mall space by end of 2018
across different submarkets. The west, north and central zones are expected to witness modern retail
spending increase to 21%, 24% and 10% respectively while the Eastern zone is expected to witness an
increase in modern retail spending to only 5%46.
46 Cushman & Wakefield – Hyderabad Retail Market Outlook 2017
57
5.6 Summary
The residential market is growing steadily in the catchment and is likely to witness demand due to
proximity to central Hyderabad, further driven by infrastructure developments such as widening of
RR-16 and macro-economic developments such as completion of IT/ITeS commercial space in
Pocharam.
While commercial and retail market are expected to grow significantly in the western and central
Hyderabad, the growth is expected to be subdued in the eastern region due to limited expected
demand.
Considering the market appetite for residential, commercial, and retail asset classes, as well as
development and revenue potential under each of the developments, it is advisable to develop the
site primarily as group housing, with ancillary retail to support the residential ecosystem. The group
housing product can be positioned in affordable to mid-segment with starting price points ranging
between INR 2,800-3,500 psf. Also, considering the market appetite, such large-scale project needs to
be phased suitably across 5-8 years sales horizon.
However, since the site is well-positioned due to its proximity with central Hyderabad and has a huge
development prospect (~3-4 msf), it has a potential to create a residential eco-system / micro-market
in itself and therefore, can command a premium in future phases. Also, considering the size and
location (mid-way between CBD and PBDs of Uppal & Pocharam), the project can be expected to cater
to 10-15% of market i.e. approximately 300-450 units per year.
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59
60
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6 Applicable Regulations
The following chapter provides as overview of the various building regulations applicable to the given
site and the appropriate clearances required for development of the site.
6.1 Applicable Regulations

The site falls under the jurisdiction of Greater Hyderabad Municipal Corporation (GHMC) and the
larger purview of Hyderabad Metropolitan Development Authority (HMDA) and is categorized under
GHMC Circle 18 (erstwhile Municipal Corporation of Hyderabad (MCH) Area, old circle no. 8).
While as per the overall master plan 2031 developed by HMDA, the site is classified as Multiple Use,
as per Revised Development Plan of Erstwhile MCH Area for GHMC Circle 18, the site is classified under
Public & Semi-Public Land use zone.
Hence, the following government orders and rules shall be applicable:

• Zoning Regulations – as appended to Master Plan47
• Categorization of notified commercial roads in GHMC Area48
• Building Byelaws – Andhra Pradesh Building Rules, 201249 & Amendments 2012 - 201650
6.2 Permissible Land Uses

The uses possible as per the above orders have been captured in the following sub sections.
6.2.1 As per Development Plan

As per HMDA Master plan, the site falls in the Multiple Use Zone as shown in following figure.
Site
Figure 12: Location and land use of site as per Master Plan – 2031
However, as per Revised Development Plan of GHMC Circle 18 (for erstwhile MCH area, old Sitecircle no.
8), the site falls under Public and Semi-Public Land Use Zone as shown in the following figure. Some
of the major land uses possible as per the Zoning Regulations are:
• Offices
• Hospitals / clinics / dispensaries
• Clubs / community halls
• ITES Units
47 Issued as G.O.Ms.No.363 Dated: 21.08.2010

48 Issued as G.O.Ms.No. 766 dated 18.10.07
50 Issued as G.O.Ms No 245 MA Dated 30.06.2012, G.O.M No. 07 dated 05.01.2016
62
• Educational Institutes / Polytechnic / Universities

• Residential Group Housing for staff / employees
• Auditoriums / Open Air Theatre
• Guest house
• Hostels
Site
Site
Figure 13: Location and Land Use of Site as per Revised Development Plan
For the purpose of current assessment, the land use considered for the site is Public and Semi-Public
Use. Hence, a Change of Land Use would be required for residential development on the site.
6.3 Associated Building Regulations
6.3.1 Building Height

Building heights are guided by plot area and abutting road width in Hyderabad and Secunderabad
region. Buildings are classified are non-high rise (upto 18 m height) and high-rise buildings (greater
than 18 m height) as per building regulations. The following regulations are applicable for ascertaining
permissible height of building(s) on the site.
• As per regulations, High Rise Buildings / Complexes are permissible in areas other than those
given in Annexure - I & II of Building Rules 201251 (refer Annexure 11.2.3). For abutting road
of 30 m width and plot area greater than 2000 sq m, heights of up to 55 m are allowed.
• Annexure I areas (as per Building Rule 201251) – While [Site Location]area that falls outside
erstwhile MCH area is prohibited for high rise construction as per Annexure I of the said
63
regulations51, the site falls inside erstwhile MCH area with no regulation explicitly
prohibiting such development.
• Annexure II areas (as per Building Rule 201251) – On the other hand, areas in the vicinity,
namely Lalapet, Lalaguda, and Malkajgiri municipality fall in Annexure II areas prohibited for
high rise buildings. However, the list does not explicitly include [Site Location]area. The list
further states that the regulations / restrictions would not be applicable on plots in erstwhile
MCH area that about 30 m and wider roads (refer Annexure 11.2.3). The site abuts a radial
road of 20 m with proposed expansion to 30 m width.
Hence, for the purpose of current valuation, it is assumed that high-rise buildings are allowed on the
site.
6.3.2 Organized Open Space

Over and above the mandatory setbacks, a minimum of 10% of site area in case of high rise and 5% in
case of non-high rise development shall be earmarked for organised open space. This shall be handed
over to GHMC, free of cost through a registered gift deed before issue of occupancy certificate.
As per HMDA’s regulations 10% of the built-up area in the ground floor or first floor or the second
floor must be handed over to the sanctioning authority by way of a notarised affidavit, as surety for
compliance of the development works. This shall be released back to the developer by HMDA after
the completion of the development work and handing over open spaces.
6.3.3 Area for Common Amenities

As per the regulations, in case of group housing with more than 100 units, up to 3% of the total built
up area, or, 50,000 sq. ft. whichever is lower, shall be planned and developed for common amenities
and facilities like convenient shopping, committee hall/ club house, crèche, gymnasium etc.
6.3.4 City Level Infrastructure Impact Fee52

With a view to ensure development of City Level Infrastructure facilities, the City Level Infrastructure
Impact Fees shall be levied as given in the table below:
Above 15m and up to 17 floors Above 17 floors

Commercial, ITES, office, Commercial, ITES, office,
Residential Institutional, Residential Institutional,
Educational Educational
500 1000 750 1500
Table 7: Infrastructure Impact Fees to be paid in INR/ sq. m of Built Up Area
The first 15 m height of the building (excluding stilt floor) there will be no levy of City Level Impact
Fee. The amount levied and collected shall be credited and maintained in a separate escrow account
by the concerned sanctioning authority and 50% of it shall be utilized by the authority for development
52 Issued as G.O.Ms.No.168 MA Dated 07.04.2012 – Item 21.a: Table VI
64
of infrastructure in the same area and balance amount is to be utilized by the authority towards
improvement of city level capital infrastructure in the area.
6.3.5 Shelter Fee

In case of Group Housing / Group Development Schemes whose land extent is more than 3000 sq. m,
shelter fee shall be collected. For a plot within GHMC’s jurisdiction the fee is INR 750/ sq. m. This will
be levied on 20% of the total site area of the project.
The shelter fee so collected shall be utilized for construction of EWS housing under Urban Housing
Scheme by the local body/HMDA.
6.4 Development Potential

The development potential which can be realized across various permissible formats is detailed in the
following sub-sections in accordance with the applicable regulations i.e. The Andhra Pradesh Building
Rules 201253. The development potential54 is restricted by criteria that are dependent on the width of
the road abutting the site, which is 100 feet wide in this case, as well as site set back and maximum
permissible height.
6.4.1 Regulations for non-high-rise buildings

• Maximum height: 18 m
• Setbacks:
o Front side (widest abutting road) – 7.5 m
o Set back on Remaining sides
▪ for 7 m height – 5 m setback
▪ for 15 m height – 6 m
▪ For 18 m height – 7 m
• Open space (exclusive of setbacks): At least 5% of total site area (open spaces at least 3 m
wide and greater than 15 sq m)
• Distance between two building blocks: Minimum 7 m
• Parking Norms –
o Minimum 30% of built up area for residential buildings (Stilt + 2 or more cellar floors)
o Minimum 40% of built up area, for commercial development, can be a mix of basement
/ upper floors / stilt floor / open space in any combination for commercial development
apart from multiplexes. (Stilt + 2 or more cellar floors)
o The stilt floor meant for parking is excluded from the permissible height
o The parking area to be provided is exclusive of the Built - Up Area
As per the above regulations, and considering a ground coverage of 40%-50%, the maximum built
up area possible is ~2.5 -3 msf.
53Andhra Pradesh Building Rules 2012 G.O.Ms.no.168 MA Dated 07.04.2012

54The maximum development potential derived in this section does not include the impact of 10% Land Area / 5% BUA to be provided to
GHMC as the Concessionaire is free to suitably decide between the options available and carve out the plots to be provided to GHMC. Thus,
the resultant maximum development potential available to concessionaire is then contingent on the option exercised by concessionaire.
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Site
Boundary
Access
road
Area for
development
Front
Side
7 m set 7.5 m set

back back
Figure 14: Regulations for Non-High-Rise Buildings
6.4.2 Regulations for high rise buildings

• Block type buildings
o Maximum Height: 55 meters
o Setbacks: Minimum 16 m on all sides
o Open space (exclusive of setbacks): At least 10% of total site area (open spaces at least
3 m wide and greater than 50 sq m)
o Distance between two building blocks: minimum 16 m
Considering ground coverage of 25%, as per the above regulations, maximum built up area
possible is 4.1-4.5 msf.
Site
Boundary
Access
road
Area for
development
Front
16 m set Side
back
Figure 15: Regulations for High-Rise Block Type Buildings
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• Tower and Podium type buildings

o Maximum Height: 50 meters
o Setbacks
▪ Podium: Minimum 7 m on all sides
▪ Tower: Minimum 3 m from edge of podium
o Coverage: Tower shall cover minimum 50% of podium area
As per the above regulations, maximum built up area possible is ~2.5 msf.
Site
Boundary
Access
road
Area for
development
Front
7 m set
Side
back -
Podium
Area Under Tower

Area Under Podium
Figure 16: Regulations for High-Rise Tower and Podium Type Buildings
• Internal roads
o 9 m to 18m for main internal approach roads;
o 9 m for other internal roads and also for looped roads.
• Parking Norms
o Minimum 30% of built up area for residential buildings (Stilt + 2 or more cellar floors)
o Minimum 40% of built up area, for commercial development, can be a mix of basement
/ upper floors / stilt floor / open space in any combination
o The stilt floor meant for parking is excluded from the permissible height
o The parking area to be provided is exclusive of the Built - Up Area
6.5 Clearances and Permits

The section below lists the indicative approvals that would be required for the project. Additional
clearance may be required based on the nature of the development and the asset class to be
developed.
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CLIENT would need to obtain the following regulatory documents for the site before going for
procurement of the private developer:
• Land use certificate from HMDA
• Demarcation plan
• Land related documents including encumbrance document, mutation & title certificates
• Tax receipts
An indicative list of approvals required before the start of construction is detailed below.
• Land use certificate issued by HMDA
• Building plan approval from competent authority
• Structural plan approval from competent authority (if required)
• Encumbrance certificate by registration department
• Environment Clearance from State Environmental Impact Assessment Authority (SEIAA)
• Approvals for temporary power and water supply
• Consent to Establish from the Pollution Control Board (PCB) (if required)
Change of Land Use

The site falls under public and semi-public use zone as per the Development Plan. The site can be
developed for residential uses by applying for change of land use based on the guidelines of Hyderabad
Metropolitan Development Authority (HMDA) as follows:
• The approving authority for change of land use is HMDA
• The process is online and can be initiated through the online portal of Development
Permissions Management System55 available on Hyderabad Metropolitan Development
Authority’s website
• The application is divided into two sections:
o Proposal information – includes the basic details of land such as, area category, plot
details, location and surroundings
o Applicant Information – includes personal information of applicant such as name/
firm’s name, address and contact details
• Charges to be levied for change of land use56 by HMDA are as follows:
Change of Land Use For Land (GHMC area) For Built up area (GHMC area)
Miscellaneous to
INR 250 / sq m INR 125 / sq m
Residential
Table 8: Charges towards CLU
Change of Land Use typically take ~4-6 months. It is recommended that CLIENT would transfer the
land on an as-is-where-is basis and the developer would obtain CLU for the land. However, CLIENT
may choose to initiate process of CLU before developer selection, in order to reduce approval
uncertainties and delays.
Approvals required for buildings up to 10 m height are as follows:
55 https://dpms.hmda.gov.in/BPAMSClient/
56 Issued as G.O.Ms. No. 223 Dated: 30.08.2016 – Under Section 45(1) of Hyderabad Metropolitan Development Authority Act 2008
68
• Fire scheme approval from Fire Services Department (For School / Functional hall/ Public
Congregation buildings in plots of 500 sq m and above or >6 m height as per Fire Services Act)
Approvals required for buildings above 10 m height are as follows:

• Fire scheme approval from Fire Services Department (For buildings 18 m and above height
and for all School buildings / Functional halls/ Public Congregation building in plots of above
500 sq. m and for all Commercial building of 15 m and above as per Fire Services Act)
• Soil test approvals
• Structural Stability Certificate by Licensed Structural Engineer
• Approval from AAI, if applicable (For buildings above 18 m height as per G.O.Ms.No.168 MA,
dt 07.04.2012)
These approvals are to be obtained prior to construction launch by the developer. The typical time
frame for these approvals is ~11-12 months.
An indicative list of approvals required during /after construction completion is as follows.

• NOC – Telangana State Disasters Response & Fire Services Department
• NOC – Lift Inspector
• NOC – Storage of Diesel for backup power from the Chief Controller of Explosives
• Occupancy Certificates
• Permanent connections for power, water supply and sewerage
These approvals typically take ~2-3 months.

There may be further approvals required on a case-specific basis or as per regulatory requirements.
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7 Project Concept & Configuration

This chapter discusses the scale and configuration of the proposed development.
7.1 Concept
The project is recommended to be developed as a Residential Group Housing. Considering the location
and magnitude, the project can be positioned as a mid-market product with various formats of
residential units. The project will also comprise of products like retail and club to support the large
residential eco-system proposed.
As per applicable regulations, built-up area upto 4.5 msf is achievable on the site57. However,
considering the market appetite, such large supply is not expected to be readily absorbed in the
market and hence is not considered viable.
Taking into consideration our analysis of the market demand in the locality and development
regulations for the site, The Consultant has evaluated the following two configurations:
• Conservative development
o Format – Mid Rise, with G+8 structures
o Achieved Development Potential - ~3 msf
o Drivers:
▪ Moderate market demand due to competition in new areas like Nacharam,
Uppal and areas in North Secunderabad
▪ Nature of neighbourhood developments is largely low/mid-rise
• Balanced development
o Format - Mid Rise (G+8 structures) + High Rise (G+16 structures)
o Achieved Development Potential - ~3.6 msf
o Drivers - Project can leverage its large development potential and location to create a
micro-market
Hence, The Consultant has considered a range of 3-3.6 msf as potential development for the site.
The proposed development has been staggered across multiple phases in line with the market
appetite. The private developer may utilize the development potential at earlier/later stages,
depending on favourable market conditions.
57The Andhra Pradesh Building Rules 2012 G.O.Ms.no.168 MA Dated 07.04.2012 does not restrict the maximum development potential of
the site using the concept of Floor Space Index (FSI). Instead, the development potential is restricted by parameters such as Setbacks and
Height Restrictions.
72
7.2 Project Configuration
7.2.1 Conservative / Mid-rise Development

The mid-rise development is considered with G+8 structure. A representative concept plan is shown
below.
CONSERVATIVE DEVELOPMENT
( G+ 8 )
N
Towards
Moula Ali
Site boundary
Mid rise (G+8)
Open spaces
Internal roads
Towards Tarnaka
Figure 17: Representative Site Plan - Conservative Development – Mid Rise (G + 8 Floors)
• Assumed Ground Coverage : 35%

• Total Built-up Area achieved : ~3 msf
• Amenities : 50,000 sq ft
o Community retail : 30,000 sq ft
o Common Amenities : 20,000 sq ft
o Retail to be provided as arcade / high-street format
o Common amenities to include club-house, administrative block etc.
• Residential Area achieved
o Built-up Area : ~3 msf
o Number of Dwelling Units: ~2,400
o Type of units : 2 and 3 BHK
73
7.2.2 Balanced Development

For a more practical and achievable development potential, while benchmarking with the existing
market, this option evaluates a combination of high rise (G+16) and mid-rise (G+8) formats.
BALANCED DEVELOPMENT
( G+8 & G+16)
N
Towards
Moula Ali
Site boundary
Mid rise (G+ 8)
High rise (G+ 16)
Open spaces
Internal roads
Towards Tarnaka
Figure 18: Representative Site Plan – Balanced Development (G + 8 Floors & G + 16 Floors)
• Assumed Ground Coverage : 30%

• Total Built-up Area achieved : ~3.6 msf
• Amenities : 50,000 sq ft
o Community retail : 30,000 sq ft
o Common Amenities : 20,000 sq ft
o Retail to be provided as arcade / high-street format
o Common amenities to include club-house, administrative block etc.
• Residential Area achieved
o Built-up Area : ~3.5 msf
o Number of Dwelling Units: ~2,800
74
75
76
77
8 Financial Evaluation
As discussed in the previous chapter, The Consultant has evaluated the following configurations for
valuation of the land parcel.
• Mid-rise development – G+8 structures (~3 msf)
• Balanced development – Mid Rise (G+8 structures) + High Rise (G+16 structures) (~3.6 msf)
The Consultant has evaluated the project taking a set of assumptions based on inputs from CLIENT
and understanding of industry standards / trends.
Valuation Methods
The land parcel has been valued based on three accepted valuation methods:
• Circle Rate or Guideline Rate
• Market Rate – Basis past transactions of similar properties in the neighbourhood
• Discounted Cash Flow Method - Basis market scenario and future cash-flows of the project
8.1 Valuation Method 1 - Circle Rate

The circle rates of residential / commercial lands in locality Moula Ali, as provided by the Department
of Registration and Stamps, Government of Telanaga, are assumed for the purpose of valuation of the
site. (Refer Annexure 11.3).
• Circle rate: INR 17,940 per sq m (INR 15,000 per sq yard)

• Valuation of the 89,972 sq mt land: ~INR 161.4 crore
8.2 Valuation Method 2 - Market Rate

Market rate based valuation accounts for past transactions of similar properties in the catchment.
Most transactions in neighbouring area (Moula Ali, Tarnaka etc.) are for small-size land parcels (<1
acre) and the transaction values range between INR 18,000 - 22,000 per sq yd (21,500-26,000 per sq
m), translating into INR 8-11 Cr per acre.
Since there are no plots of considerable sizes in the site neighbourhood and hence no recent
comparable transactions, the achievable market rate for the plot is expected to be lower and may be
discounted by 20-30%. Hence, the market-rate valuation of the site is assessed as INR 18,000-19,500
per sq m i.e. INR 160-175 crore.
8.3 Valuation Method 3 – Discounted Cash-Flow method

The Discounted Cash-Flow Method (DCF Method) evaluates the project based on future cash-flows,
assessed basis the market potential of the proposed development. This section covers the various
assumptions and estimated cash-flows.
8.3.1 General Assumptions

The assumptions applicable to the land parcel are given below:
• Duration of Lease – 99 years
• Financing Assumptions
78
o Debt/Equity Ratio – 1.5

o Cost of Debt – 11%
o Cost of Equity – 22.5%
o WACC – 13%58
o Rate of return to CLIENT – 15%
• Corporate Tax Rate – 34.61%
o Income Tax – 30.00%59
o Surcharge – 12.00%60
o Education Cess and Higher Education Cess – 3.00%
• Minimum Alternate Tax – 21.34%
o MAT Income Tax – 19%
o Surcharge – 12.00%
o Education Cess and Higher Education Cess – 3.00%
• Service tax: 12%
8.3.2 CAPEX Assumptions

The development cost assumptions that have been considered based on the industry standards and
are shown below:
• Construction cost
o Residential Group Housing – INR 1,800 psf61 of BUA
o Community Retail – INR 2,000 per sq ft of BUA
o Common Amenities (Clubhouse, Gym) – INR 3,500 per sq ft of BUA
• Infrastructure Development Cost – INR 0.75 crore per acre
• Miscellaneous (PMC, Contingency, Approvals) – 5% of CAPEX
• Architect and other Consultant fees – 2% of CAPEX
• Regulatory Fee
o Impact Fee – INR 6.3-9.9 crore (payable at start of each phase)
o Shelter Fee – INR 1.3 crore (payable at start of development)
Construction is expected to be phased across 3 years. The following tables indicates the development
phasing considered over the development period for the 2 scenarios:
Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10
Infrastructure phasing 40% 40% 20% - - - - - - -
Residential
Construction Launch –
50% - - 50% - - - - - -
Phase
Construction phasing –
30% 35% 35%
For each phase
58 For the purpose of estimation of true value of project returns, the return on equity has been assumed to be 22.5% and average tax rate
has been assumed to be 34.61% which leads to a Weighted Average Cost of Capital (WACC) of 14.1%.
59Corporate tax rate for financial year 2017-18 for revenues more than 50 cr is 30%.
60 Union Budget 2015-16 has increased the surcharge from 10% to 12%.
61 The construction costs have been taken based on benchmarks of similar properties in Hyderabad. Low-rise developments have been
factored at lower construction costs as compared to high rise developments.
79
Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10
Aggregate Construction
15% 18% 18% 15% 18% 18% - - - -
Phasing
Ancillary Spaces – Construction
Retail construction - 50% 50% - - - - - - -
Common amenities - 50% 50% - - - - - - -
Table 9: Development Phasing – Scenario 1 – Mid-Rise Configuration
Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10
Infrastructure phasing 40% 40% 20% - - - - - - -
Residential
Construction Launch –
50% - - 50% - - - - - -
Phase
Construction phasing for
20% 40% 40%
each phase
Aggregate Construction
10% 20% 20% 10% 20% 20% - - - -
Phasing
Ancillary Spaces - Construction
Retail - 50% 50% - - - - - - -
Common amenities - 50% 50% - - - - - - -
Table 10: Development Phasing – Scenario 2 – Balanced Configuration
The phasing assumptions have been made based on the absorption trends displayed by the residential
market of the catchment.
8.3.3 Revenue Assumptions

• Sales Phasing:
o Scenario 1 – Y1-Y6 (240-480 units per year)
o Scenario 2 – Y1-Y7 (280-560 units per year)
• Average residential sale price:
o Scenario 1 - INR 3,400 psf
o Scenario 2 – INR 3,400 psf
• Average retail sale price – INR 5,000 psf
• Residential revenue escalations – Increase by 5-6% every year
8.3.4 OPEX Assumptions

• Operating Costs – 2.5% of Revenues, inclusive of brokerage, administrative cost, marketing
Costs
• Operating cost escalation – Increase by 5% every year
80
8.3.5 Project Cash Flows (Pre-Tax) – Without considering payments to CLIENT

The cash flows for Scenario 1 and 2 are presented below:
Scenario 1 – Mid-rise Development

The table below outlines the cash flows expected (without payments to CLIENT) to be incurred:
All figures in INR Cr Total Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10

Revenues 1,455
CAPEX 739
OPEX 36
Pre-tax Cash flow 679
Tax 223
Post-tax Cash flow 456
Table 11: Cash-flows for Scenario 1
Scenario 2 – Balanced Development

The table below outlines the cash flows expected (without payments to CLIENT) to be incurred:
All figures in INR Cr Total Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10

Revenues 1,724
CAPEX 872
OPEX 43
Pre-tax Cash flow 809
Tax 268
Post-tax Cash flow 542
Table 12: Cash Flows for Scenario 2
Funding Requirement
The funding requirement for the two scenarios is given in the following table:
All figures in INR Cr Scenario 1 (Mid-Rise) Scenario 2 (Balanced)

Peak Funding 134 140
Equity 54 56
Debt 80 84
Table 13: Funding Requirement
8.3.6 Payments to CLIENT
Estimation of ‘Fair Value’ of Payments

Equity IRR is an indicator of the actual returns which the developer would make on its investment. As
such, it can also be used as a surrogate measure of determining excess residual cash flows available
to the developer.
81
Equity IRR of ~22.5% (as mandated by CLIENT for the purpose of financial analysis), and 25% are
considered for estimation of excess residual cash flows for the developer, which would constitute the
payments to CLIENT.62
Payment Structuring
Suitable structuring of the payments is essential to ensure project viability for the developer while
maximizing land value for CLIENT. Transaction of the project land is very similar in nature to land
allotment, wherein entire payment to the authority is typically taken as Upfront Consideration.
However, most private sector players today may not be comfortable with such a huge consideration
upfront and hence, it is recommended to structure the CLIENT payments across 3-5 years.
It is advisable to set an Upfront Payment, payable at the time of signing of concession agreement, as
~25%-30% of freehold value of land, estimated at circle rate / guideline rate63 (INR 40-50 cr).
The remaining payment may be collected in equal instalments across 4 years. The quantum of residual
payments may be set as bid variable for selection of the developer. Bids shall be evaluated on the
basis of Net Present Value of all payments, using a Discount Factor of 15%.
Basis this, it is estimated that following payments may be expected to CLIENT:
Scenario 1 Scenario 2
All figures in INR Cr
(Mid-Rise) (Balanced)
Residual Cash Flow Available for Payments to CLIENT 235-255 250-275 INR Cr
NPV of Payments to CLIENT (@15%) 180-195 190-210 INR Cr
Table 14: Payments to CLIENT
The resultant cashflows for developer are as follows:
Scenario 1 Scenario 2
All figures in INR Cr
(Mid-Rise) (Balanced)
Pre-Tax Net Cash Flow (before Payments to CLIENT) 679 809 INR Cr
Minus: Payments to CLIENT 235-255 250-275
Pre-Tax Net Cash Flow (after Payments to CLIENT) 424-444 535-560 INR Cr
Table 15: Cash Flow after Payments to CLIENT
Hence, an NPV (@ discount rate 15%) of ~INR 180-210 crore may be expected as payments to CLIENT.
The payments would be structured as follows:

• Upfront Payment – 25% of guideline land value (INR ~40 Cr)
• Remaining payment to be collected in 4 equal instalments
62
For a project of this magnitude and scale, most private developers today may look at lower Equity IRR of 19-20%.
63The rates assumed pertain to commercial land use for the locality Tarnaka to Moula Ali, since circle rate of public / semi-public land use
are not defined. (Refer Annexure 11.3). The circle rate (commercial unit land) is INR 17,940 per sq m (INR 15,000 per sq yard) hence the
value of the 89,972 sq mt land is assumed to be ~INR 161.4 Cr.
82
8.4 Summary
The Consultant has conducted the land valuation for CLIENT using the following approaches, as below:
Land Valuation
Valuation Method Land Valuation
(INR per sq m)
INR 17,940 per sq m

Circle Rate64 INR 161 Cr
(INR 15,000 per sq yd)
Market Rate
Based on previous transactions of residential land INR 18,000 – INR 19,500 per sq m INR 160 – 175 Cr
in the catchment
Discounted Cash Flow (DCF)65

INR 20,000 – 23,000 per sq m INR 180 – 210 Cr
Estimated NPV of Payments to CLIENT (@15%)
Table 16: Estimated Land Valuation
64 Rate as per Department of Registration and Stamps, Government of Telangana for Residential / Commercial Land in Moula Ali.
65 Notes regarding Valuation by DCF Method:
• Valuation indicates the estimated returns which may be accrued to CLIENT, depending upon the configuration assumed by the
developer.
• The actual bids received from the developers may vary depending upon the bidder’s business model and risk appetite.
• The payments to CLIENT are estimated to achieve an Equity IRR of 22-23% for the developer. We understand that for a project
of this magnitude, the developers may consider a lower equity IRR of 19-20%, which will increase the overall payments to
CLIENT.
• The NPV of all payments to CLIENT is estimated at discount rate of 15% p.a. The valuation may vary in case of change in the
rate.
• The valuation assumes that the land use / zoning shall be converted to Residential. The valuation may change if residential is
not allowed on the land parcel.
83
84
85
9 Project Structure
9.1 Project Structuring
9.1.1 Project Tenure

Since residential development would require effective sale of apartments to end-customers, a 90/99-
year lease would be essential for the project.
The development potential for the project ranges from ~2000-3000 dwelling units across the three
configurations. The current market appetite would require the project to be phased over 2-3 phases.
This would allow the developer to launch appropriate quantum based on favourable market
conditions, thus reducing upfront CAPEX & the resultant unsold inventory, as well as maximizing the
return potential for the developer and CLIENT.
9.1.2 Payment Structuring

The concessionaire would also be required to make suitable payments to CLIENT. The following
options for payment structuring have been explored:
• Upfront Payment to CLIENT

• Upfront + Annul Concession Fee (ACF)
• Revenue Share
Upfront Payment to CLIENT (Land Auction)

While this option would lead to instant unlocking of the land value from CLIENT’s perspective, the
option would require significant outflow for the private developers. This option would be an
equivalent of land auction and is less preferred given the inherently high land value that would make
the project unattractive and overtly risky for most potential bidders.
Upfront + Annul Concession Fee (ACF)

In order to reduce early cash flow pressures on the private developer, a mix of upfront and subsequent
annuity payments for 3 years to CLIENT can be considered. This allows securing CLIENT’s interests in
form of the upfront payment while reducing cash flow pressures on the private developer since the
annuity payments are mostly funded by project sales. This makes the project reasonably attractive to
the private developers and ensures a healthy income for CLIENT.
Revenue Share
Alternatively, CLIENT can seek a revenue share of the project revenues instead of a fixed annuity as in
the previous model. While the option provides potential for upside / higher revenues than fixed
annuity streams, it also exposes CLIENT to significant market risks as well as delays the payments made
to CLIENT depending on the actual duration of project sale. Additionally, it increases audit
requirements significantly and hence is not recommended.
The risk profile across these payment mechanisms is shown in the following table:
86
Type of Risk Upfront Payment Upfront + ACF Revenue Share

Market Risk Private Private Shared
Demand Risk Private Private Shared
Inflation Risk Private Private Private
Operations Risk Private Private Private
Approval Risk Private Shared Shared
Table 17: Risk profile across various payment mechanisms
The payment plans of several authorities such as Noida Authority, Haryana State Industrial &
Infrastructure Development Authority (HSIIDC), Haryana Urban Development Authority (HUDA), and
Gujarat Industrial Development Corporation (GIDC) were studied for benchmarking their payment
structures as shown in the following table.
Remaining Payment
Authority Upfront
Type of Land Time No. of Interest
Name Payment Frequency
Years Rate
100% 60 days -
HUDA All
25% 30 days 6 Annual 9%
100% 90 days -
HSIIDC All
50% 60 days 2 Half-yearly 12%
100% 90 days -
IT/ITeS
Noida 40% 60 days 5 Half-yearly 11%
Authority 100% 90 days -
Other
20% 60 days 5 Half-yearly 11%
100% 60 days -
GIDC >50,000 sq. m
50% 60 days 3 Quarterly 13%
Table 18: Payment Schedule for Various Authorities
As seen in the table above, two structures are found prevalent:

• 100% down-payment / upfront payment
• Structured Payment: Upfront Payment / Down Payment (of 25%-50% of land value) +
Remaining land value to be paid across 3-5 years in quarterly / half-yearly / annual instalments
(with/without interest charge @ 9-13%).
Hence, considering the developer expectation to spread authority payments over a reasonable
period, and the need to protect CLIENT from market risks, it is recommended to structure the project
with an Upfront Fee + Annual Concession Fee (ACF) for 4 years. Since residential development would
require effective sale of apartments to end-customers, a 90/99- year lease would be essential for
the project.
The One-time upfront payment allows for the early unlocking of value for the land parcel for CLIENT.
The ‘Annual Concession Fee’ structure allows for CLIENT to receive an assured concession fee for next
3-5 years irrespective of performance, shielding CLIENT from market risks. Additionally, the ACF allows
the developer to make the payments from project proceeds, thus reducing upfront capital
requirement.
87
Therefore, a lease consisting of a one-time Upfront Consideration and Annual Concession Fee (as
bid variable) for a concession period of 90/99 year is the recommended transaction option for the
land parcel. The developer would be required to procure all approvals including Change of Land Use
(CLU) and Environmental Clearance. CLIENT shall be required to extend necessary support to the
developer for such approvals. CLIENT may also consider initiating the process of CLU before selection
of the developer.
Further, to protect CLIENT from deflated bids / bids with skewed annual fees to upfront ratio, it is
advisable to set the Upfront Consideration as ~25%-30% of guideline land rates (INR 40-50 cr), while
keeping annual concession fee as a free bid variable. Further, bids shall be evaluated on a Net
Present Value basis evaluated using a Discount Factor of 15%.
Summary of proposed transaction structure is given as follows:

• Land Transfer: Lease for 90/99 years
• Payment Structure: Upfront Payment (INR 40-50 Cr, 25%-30% of circle rate) + ACF (4 years)
9.1.3 Roles and Responsibilities
Roles and Responsibilities of CLIENT

• Land lease on as-is-where-is basis
Roles and Responsibilities of Private Partner

• Change of Land Use from Public and Semi Public to Residential, if required
• Detailed configuration and design of the project
• Approvals related to project development and operations
• Development of project components
• Financing the entire project
• Payment of Upfront + ACF to CLIENT
9.2 Recommendations on Bid Process

The bid process can be run as a single stage, two step RFP process, where in the bids would be
screened based on technical and financial qualification criteria. The selection of the concessionaire
would be based on suitable bid variables. This is described in the following flowchart:
Evaluation of Pre-qualification Criteria
Technical Qualification Financial Criteria
Qualified Bidders
Opening of Submitted Financial Bids

Identification of highest NPV bid(s)
Award of Concession
Figure 19: Proposed Bid Process
88
Stage 1: Request for Proposal (RFP)

• Step 1: Pre-Qualification
• Step 2: Selection
9.2.1 Step 1: Pre-Qualification

At this stage, the pre-qualification proposals of the bidders would be opened and only bidders, whose
proposals match the given eligibility criteria, would be shortlisted for further evaluation.
9.2.2 Step 2: Selection

The financial proposal of those bidders who qualify in Step 1 will be opened. The bid variable shall be
Annual Concession Fee (ACF) payable by the concessionaire to CLIENT in 3 years
The bidder quoting highest ACF / NPV of total payments shall be selected.
89
90
91
10 Marketing Strategy & Way Ahead
92
93
The Consultant - Realty and Social Infrastructure 94
Project Report – Residential Development of Railway Land near Moula Ali Flyover, Hyderabad
The Consultant – Infrastructure Advisory Division 95

Project Report – Residential Development of Railway Land near Moula Ali Flyover, Hyderabad
The Consultant – Infrastructure Advisory Division 96

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The Consultant - Realty and Social Infrastructure 1

Feasibility Report – Valuation of of Land Parcel

1 Executive Summary .......................................................................................................... 15

4 Site Appreciation ................................................................................... 41

5 Micro-Market Assessment ..................................................................... 49

5.5 Retail Market Overview ........................................................................................................ 57

7 Project Concept & Configuration ............................................................ 72

8 Financial Evaluation ............................................................................... 78

9 Project Structure .................................................................................... 86

10 Marketing Strategy & Way Ahead .......................................................... 92

11 Annexures..................................................... Error! Bookmark not defined.

Table 1: Development Potential ........................................................................................................... 21

Figure 1: Site Connectivity .................................................................................................................... 16

1.2 Hyderabad Region – Overview

1.3 Site Appreciation

1.3.1 Location & Connectivity Analysis

Figure 1: Site Connectivity

1.3.2 Social and Physical Infrastructure

1.3.3 SWOT Analysis

• Surrounded by LIG / EWS neighbourhood

1.4 Micro-Market Appreciation

5 Knight Frank Research – India Real Estate 2017

1.5 Regulatory Overview

The following government orders and rules shall be applicable:

6 Issued as G.O.Ms.No.363 Dated: 21.08.2010

Figure 2: Site Zoning as per Revised Development Plan10

1.5.1 Associated Building Regulations

Organized Open Space

1.5.2 Regulatory Fee

City Level Infrastructure Impact Fee11

10 Revised Development Plan (Master Plan) of erstwhile MCH, GHMC Circle 18

1.5.3 Development Potential

Maximum Ground Coverage Development

1.5.4 Regulatory Approvals

1.6 Project Concept & Configuration

The project will have following products:

1.7 Financial Evaluation

Project Financials (without considering payments to CLIENT)

Payments to CLIENT - Estimation of ‘Fair Value’ of Payments

Basis this, it is estimated that following payments may be expected to CLIENT:

The resultant cashflows for developer are as follows:

The payments would be structured as follows:

INR 17,940 per sq m

Discounted Cash Flow (DCF)16

Table 5: Estimated Land Valuation

1.8 Implementation Framework – Proposed Transaction Strategy

1.9 Marketing Strategy

1.10 Key Recommendations

3 Hyderabad - Region Overview

RGI Towa rds

Figure 3: Location & Connectivity of Hyderabad Region

3.1 Location & Connectivity

3.3 City Growth

Key manufacturing facilities in Hyderabad are concentrated in regions of Ramachandrapuram,

3.5 Development Drivers

3.5.1 Hyderabad Metro Rail Limited

3.5.2 Smart City features

3.5.3 Hyderabad Multi-Modal Suburban Transportation Project - Phase II

34The Hindu Business Line, November 29, 2017