All Forum Posts by: Vijay Kurhade

Most uncertain or fluctuating price items as far as entire development goes are Land and Sale prices, but other areas remain fairly possible to estimate at very early stage in project.

Even then, Why does following areas are considered some of the challenges for novice to seasoned developers despite having so many tools nowadays to help them.

A] Estimating fairly accurate Construction Costs(Hard + Soft)

B] Controlling Costs, Budget

C] Financial structure (equity, debt, draws, taxation, insurance)

Thanking in advance

Thanks a lot @Pedro Hernandes for sharing your views.

I agree to portfolio reporting part; I have few questions regarding same.

Real Estate being iliquid or infrequently traded asset class, Does it really require daily portfolio reporting since changes in price are mostly on month-quarter basis unlike frequently traded assets.

Also, on automatic fundraising or investments in RE, can investors really be comfortable with it since there are not only Returns or Future cash we look for when analyze any potential investment but many experts and associated soft costs are part of almost each transaction.

Trying to understand which features for Portfolio Reporting and Automation of Fund allocation or raising through various options; automation can serve and in which capacity.

Regards-

Vijay

Since mid March 2020 many Companies in service sectors from IT Finance Insurance to others have over 70% of their workforce Working From Home; seems like it will continue till end of 2021.

All depending on vaccinations and sars-2 virus mutations; 2022 might be same or beginning of things starting to come to pre covid-19 era normalcy but even then much of early 2022 may be same case WFH for many.

Here in India at least; most Office building tenants belong to one of 3 categories;

1] Long term committed lease with significant security deposits. So they are stuck in paying rents helplessly 

2] Long term lease but flexibility of negotiations, have re-negotiated their lease and cut back significantly on rents

3] Short term flexible lease; many have closed or terminated their lease.

If you visit large Office Parks; situation is similar, great many of them have 10-20% workforce on premises than what was the case till Feb 2020.

With all this and Automation gaining momentum with 2.0 version in early stage; How do you see CRE mainly Office building space in terms of occupancy/rents/investments as well Design change to accommodate Future which seems very different from what we are used to?

Also, which areas of Real Estate, Automation will help make everyday life more easy and beneficial going forward?

Thanking in Advance

Also online services, home deliveries is where we are relying more and more since past few years.

In wake of technology and having essential services around us; how do you use neighborhood analysis to add value add in properties realistic valuation?

As a real estate expert, when you analyze properties for neighborhood linkages or proximity analysis; how do you decide on weight-ages for various attributes.

Mainly, if we look at location based data; then majority of urban areas have essential facilities like schools,parks,shopping centers,health facilities,offices,transportation etc.. in short to mid distance radius and traveling those are not such an hassle anymore.

Also, from employment perspective, many people switch their jobs and depending on new employment benefits they have no issues traveling few miles extra to workplace.

In such an case; how do we analyze properties on neighborhood analysis; how do you decide on weight-ages for various attributes?

Is neighborhood analysis really relevant like it used to be few decades ago but not so much today?

Thanking in Advance

@Bear Geiger

Thanks David, You have very valid point.

That is one of the reason out of 3 prospects (developers shown interest in land) none have started negotiations over 34% share for landowner.

But for Landowner, they have many more plots of 1+acre to few which are over 20+ acres in prime growing locations in a IT hub. Also they are known to have clear titles and all the required rights for each site.

Their stand is we have many more lots which we can bring to market in next few years, We have a reputation in market for being 0 issue plots so minute we put any lot on market there are many developers who show keen interest and with in a month or 2 max deal always gets done on our terms. Hence we are not in any hurry and will stick to our demands.

In India 60%-40% split or 65-35% or 70-30% slabs are very common in JDA's. Majority of land titles have some sort of issues which come as surprise to developers even after stringent legal due-diligence for titles. That is one reason landowners have their place in bargain if titles and rights are very clear. No surprises that 2/3rd of Litigation's in India are property related and in most cases it takes decades of wasting time n money in courts to get some verdict.

Then many landowners have bad experiences with Developers too, so many sign JDA to find developers not doing anything on project, land gets locked for years. Some cases developers who sign Unit based sharing they never complete landowners part of share. Its very common even for billions of USD worth top players to bend approval process to construct 10s of floors with out local corporations even knowing about them. If it gets caught they try to bribe or pay penalties which are peanuts n get structures authorized. One classic example I came across few years back; JDA had 13 floors of residential building, 8 floors for Developer, 5 for Landowner. Land owner got suspicious when top level water tank was built on 10th floor. That is where they came to know actual plan submitted and approved was only 10 floors not 13 floors. Matter is in court but Developer managed to sell his part of 8 floors leaving only 2 for landowner and moved away to other projects. Then till 2015 it was common practice developers used to get pre-launch bookings from buyers and launch other projects in that money instead of completing projects where buyers had paid bookings. Govt had to bring RERA act to stop this practice but even then developers have found some novel ways of bypassing this law. There is too much money in real estate as far as india goes. But Sadly, In all this property prices have gone up insanely leaving common buyer in lurch.

To my question;

Mainly, trying to understand; what type of numbers matter a lot for back of the napkin proforma when as a developer you evaluate any plot which is brought to your attention.

Hi @Bear Geiger,

Appreciate taking out time and responsing.

Here are more details about the deal.

Here in India JDA split are most commonly of two types.

1 ] 55% - 45% share is either Profit/Margin/spread generated out of venture split in 55% for Developer and 45% for Land owner.

Or

2] 55% constructed Units are marketed and sold/leased out by Development firm and revenue generated out of it is entirely for Development Firm, they own this share of project.

45% constructed Units are marketed and sold/leased out by Land owner and revenue generated out of it is entirely for Land owner, they own this share of project.

Then, At the signing of JDA/JV agreement depending on deal size, some money is transferred as guarantee or token to land owners, which is adjusted to above Share split.

In this case, $1,200,000 US Dollars are to be transferred as Guarantee or Token amount to Land Owners firm

This amount is later on adjusted to either Agreed upon number of Units or Profits generated. So lets say Margin at end of deal is $10,000,000 USD. 55%-45% agreement, developers share is 5.5 mn USD, Land owners is 4.5mn USD. Token amount of $1.2mn USD is adjusted to developers share and they get $3.3mn USD.

If it was no of units; then depending upon market price developer gets to keep $1.2mn USD worth no of units from land owners share against Token amount paid at agreement.

Please let me know if any more info will help.

Information I am looking to understand is; in such terms, which are some of the financials Developers workout on to decide what Split percentage is agreeable or to be negotiated further.

Regards-
Vijay

What is the best way to figure out residual value of development land at preliminary stage, considering as many high project complexities like Duration/Delays, Cost of Finance, Supply chain(Material-Labor-Logistics) price, availability uncertainties?

Newer and newer requirements are becoming mandatory slowly in design be it high energy efficiency, material which gives more light-air but blocks noise pollution, unhindered connectivity, better insulation, common areas designed for privacy.

Which trends you think will be in future of construction specially in term of Design phase and Materials which will allow designers and developers to deliver future requirements.

Which all variables one should consider for a well thought out cost plan so that it serves purpose in per-construction to delivery/handover stage as well.