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28
April 2017
 |
Housing (The Total Investment & Insurance
Solutions)
Three years
ago, when Manav Singh, an aviation entrepreneur from Shimla, forayed into real
estate with the launch of a mega 100-acre luxury township in the picturesque
Auramah Valley, next to popular tourist spot of Naldera in Himachal Pradesh, he
was treading on an alien and risky terrain amidst the real estate slowdown. The Total Investment & Insurance
Solutions
But today,
after successfully selling all the 50 units (apartments, duplex and villas) in
the first phase, delivering 85,000 sq ft of residential real estate, he has
made a mark with about 50 percent appreciation registered by his RERA-compliant
property over the last three years and by establishing an all-new concept of
Build & Sell in the housing market.
The Total Investment & Insurance Solutions
Singh,
promoter of Imperial Realty and Developments Limited, who has now launched the
second phase of his township, took to the Build & Sell model as the
credibility of developers had hit an all-time low due to large-scale delivery
defaults, with buyers shying away from investing in under-construction homes.
His strategy paid rich dividends as he could sell all the inventory in the
first phase without any marketing costs and simply by word of mouth. The Total Investment & Insurance
Solutions
In the
present scenario, when the housing sector is severely hit due to the lack of
buyers' trust, the Build & Sell model holds significance in restoring the
trust of buyers/investors. Today, prospective home buyers don't want to invest
in under-construction homes and see their money getting stuck. It is because of
this precise reason that there has been a sharp decline in the off-take of
under-construction homes. On the contrary, there is a growing demand for
ready-to-move homes where buyers don't run the risk of losing their capital. The Total Investment & Insurance
Solutions
Moreover,
they get what they pay for in terms of space, amenities, specifications and
quality. It's here that the Build & Sell model comes handy. In this
backdrop, India's largest real estate developer, DLF, is mulling this new model
instead of marketing under-construction properties as most of them face long
delays and there are issues pertaining to the quality of construction.
The recent
enactment of the Real Estate Regulation Act (RERA) may well give the required
push to the Build & Sell model as one of the key provisions of the law,
cleared by parliament last year, with a May 1 deadline for its notification by
states, relates to severe punishment -- including jail terms -- for defaulting
on timely completion and delivery of projects. Also, only those projects with
prior regulatory approvals can be sold to customers under the new law. The Total Investment & Insurance
Solutions
Leading real
estate firms, like Mumbai-based Hiranandani and K. Raheja Group and
Bengaluru-based Brigade Enterprises, are fine-tuning their development
model/strategy, in line with RERA, by making their staff conversant with the
provisions of the new act, besides taking the services of RERA-compliance
experts to ensure that project approvals and construction happen in accordance
with the law.
Key players
like DLF have been putting proper systems into place and outsourcing project
work to outside professionals and project management consultants. The companies
are also deploying technology to speed up construction. Real estate experts
believe that sound development strategy and efficient processes are the key to
stay on the right side of RERA. This will also prove to be enabling framework
for the Build & Sell model. The
Total Investment & Insurance Solutions
Today, the
model has assumed greater significance as the earlier practice of developers
raising construction finance from property buyers before required regulatory
permissions were in place has been banned under RERA. Even 70 percent of
construction-linked payment received from customers has to be put in a
project-specific escrow account and cannot be deployed in any other project.
However,
there are various hurdles before this model, including expensive land
acquisition. Since land forms a major part of the project cost, for adopting
Build & Sell model, it is desirable that the developer has land with him
or, alternately, entering into partnership with land owner would come handy.
Especially as there is no bank funding available for land and bank funding for
real estate projects doesn't come easily. The Total Investment & Insurance Solutions
A reputed
developer, with credibility and good track record, stands a better chance of
adopting this model as he has greater access to funding, including cheaper bank
funding. The success of this model will also largely depend on significantly
reducing the development cycle by using technology and by better project
monitoring and project management and in turn bringing down the project cost.The Total Investment & Insurance
Solutions
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