With the Japanese funds plunging into real estate market, there is yet another option available for prospective landlords who wish to convert their assets into profitable ventures. The traditional joint venture development is still there but the DM model provides a complete package for landowners as a comprehensive range of services including funding, development including architecture and approvals, and marketing services are taken care of by the funds.
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After deducting the expenditure towards the overall project cost, a service charge of 15 per cent is levied on the net profit by way of service charge to the landowners. This will work out in favour of landlords as he gets a better return on investment on his land asset in comparison with joint venture model, say property consultants.
After deducting the expenditure towards the overall project cost, a service charge of 15 per cent is levied on the net profit by way of service charge to the landowners. This will work out in favour of landlords as he gets a better return on investment on his land asset in comparison with joint venture model, say property consultants.
At present, the option is restricted to residential development only including plotted development projects. A few projects have recently been undertaken in Bengaluru and Chennai.
PE investments may go up
Investments in real estate could even surpass the $4.8-billion fund infusion seen in 2015. While the way PE investments are structured could see a change, the money is set to be invested in selected cities and projects.
Anywhere between $3 billion and $4 billion are either raised or close to be raised by funds that are real estate focussed.
Taking an average investment cycle of eight years, these funds will have to deploy all the money in next four years, which means at least $1 billion will have to be invested in 2016.
Experts say the additional $1 billion that could be invested in the sector is over and above investments made by PE firms which are already sitting on funds.
Residential projects cheaper
In an end of the year report for residential market for metropolitan cities of NCR, Mumbai and Bangalore, Cushman & Wakefield research records a drop in launch prices in high development activity markets of these cities. The analysis records that new residential projects in select micro markets are cheaper by 4 per cent 20 per cent on Average Weighted Basic sale price over the last two years.
The report tracks the development activities in locations of Dwarka Expressway, New Gurgaon Southern Peripheral Road Sohna, Noida Expressway and Noida Extension in NCR; Thane, Goregaon and Malad in Greater Mumbai and SouthWest and Southern submarkets in Bangalore.
The report tracks the development activities in locations of Dwarka Expressway, New Gurgaon Southern Peripheral Road Sohna, Noida Expressway and Noida Extension in NCR; Thane, Goregaon and Malad in Greater Mumbai and SouthWest and Southern submarkets in Bangalore.
The suburban location of Goregaon in Mumbai registered the biggest decline in Average Weighted Basic Sale Price at 20 per cent where the psf rate averages at INR 10,500 per sf in 2015 followed by Thane which saw 18 per cent decline. Southern Peripheral Road in Gurgaon also saw a decline of 10 per cent in average base selling price of new launch projects compared to 2013.
In contrast, most of the submarkets in Bengaluru witnessed steady launch prices except in Far South and Western submarkets where average new launch prices in 2015 declined by 2-7 per cent compared to 2013. South East micro market of Bangalore was an exception to the rule where both the Average Weighted Basic Sale Price (19 per cent) and the Average Ticket Size (18 per cent) of apartment saw an increase.
In contrast, most of the submarkets in Bengaluru witnessed steady launch prices except in Far South and Western submarkets where average new launch prices in 2015 declined by 2-7 per cent compared to 2013. South East micro market of Bangalore was an exception to the rule where both the Average Weighted Basic Sale Price (19 per cent) and the Average Ticket Size (18 per cent) of apartment saw an increase.
Source - TOI
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