All You Need To Know About Property Exhibitions

Kishor PateKishor Pate, CMD – Amit Enterprises Housing Ltd.

Property exhibitions are one of the most popular and often used property marketing platforms in Indian residential real estate.

Almost all cities in India have their yearly share of regular property exhibitions – booming markets like Pune, Navi Mumbai and Thane have as many as four or five a year.

Property exhibitions serve a valid purpose – in the first place, they give developers the opportunity to display and create awareness about their projects.

Since India is a country where every denizen of the middle class who does not yet own a home is on the market for a residential property, the turnout at property exhibitions tends to be fairly large.

This allows developers to connect directly with potential customers. For this reason, property exhibitions tend to be by far the most effective marketing mechanism.

Of course, prospective property buyers at these exhibitions are also benefited by the fact that they get a good overview of the available options in their budgets and locations of choice. They can visit the sites of the projects they are interested in right away, or schedule a viewing in the near future.

Also, since property exhibitions also have banks and financial institutions specializing in home loans in attendance, visitors who make a firm purchase decision can avail of their services on the spot. Finally, many developers also offer add-on incentives at such exhibitions.

At times – though this is definitely not a given – one can get a fairly decent bargain, since the presence of many competing developers for the same buyer segment can give rise to a favourable situation for bargaining. However, this is variable that depends on the prevailing market dynamics and also the skills of the buyer at identifying and acting on such a situation.

property exhibition

Despite all the positives of such exhibitions, prospective property buyer should not attend them without knowing what to expect – and what not to expect. What they can expect is to see a lot of showcased residential projects, along with their facillities, amenities and pricing.

What they cannot expect is a seamless viewpoint of every project that is within their means and personal requirements. This is because not all developers active in a certain city or location participate in property exhibitions.

For this reason, serious intending home buyers should not think of property exhibitions as a one-stop solution for their search for a dream home. They should take the additional guidance of an experienced property broker to get a better perspective of the market.

Noting the contact numbers of marketing personnel on hoardings and in newspaper advertisements featuring projects that are of interest is another ingredient of a holistic search for the right property.

If a prospective buyer does find the ideal match at a property exhibition, accepting an invitation for a site visit is definitely in order. A number of home seekers do find what they want at property exhibitions, and have no reason to look back.

At the same time, there is no shortage of those who bought a home at a property exhibition on impulse and regretted it because they learned of much better options later on. Even if a buyer finds what he or she is looking for at the exhibition, it is prudent to ask for all the documents related to a registered and approved residential project.

For a project which is still under construction, these include the commencement certificate and the IOD (Intimation Of Disapproval). This is a set of documents which attest to the fact that the developer has complied with all the procedures that presage a legal thumbs-up for the project.

For a ready-to-move-in project, the documents to be verified are the approved drawings of the project, a copy of the IOD, the completion certificate and a clear land title.

Image source: Gulf Goans

The Stages Of Residential Real Estate Development

Kishor PateKishor Pate, CMD – Amit Enterprises Housing Ltd.

The builder will evaluate the market and decide on a suitable location based on historic and projected demand for housing in that area.

The location should either have more demand than supply or there should be a lot of infrastructure coming up there.

Experience plays a big role at this stage – developers with insufficient experience tend to misjudge an area’s potential and suffer resulting losses.

Viability Analysis

Once the site is identified, the builder needs to undertake a preliminary viability analysis, which is ideally done through an outside agency. The agency will conduct a feasibility study based on how many households already exist in the area and how many will be required over the ensuing 2-3 years (which is the average period required for a mid-income residential project).

The local property registration office is the first port of call to obtain the information of existing households. The expected demand is invariably based on a certain degree of academic extrapolation. However, the location’s overall development profile will provide sufficient control points to ensure a fair degree of accuracy.

Another aspect included in a viability study is the average income profile of the existing and expected population. This aspect, which basically centers around how much potential property buyers would be able and willing to spend in the area, is very important in order to arrive at the most appropriate project profile.

This, again, is where many inexperienced developers go wrong. They buy into uninformed opinions and guesswork about a location and launch projects with units whose price tags are not calibrated to the locality’s economic profile.

Once the results of this miscalculation become apparent, it is too late. Considering the cost of constructing larger and better-equipped flats, they cannot reduce rates retrospectively without incurring heavy losses and marring their company image.

Competition analysis plays an important part in the feasibility study. In any area with sufficient real estate market potential, there are bound to be quite a few other developers in the fray.

While analysing the viability of a developer’s proposed project, the agency will have to assess how many competitors exist, what kind of projects they are launching and when these projects are likely to be completed.

If too many other projects are scheduled for completion at the time when the developer intends to launch, the resulting glut will result in reduced demand and give rise to a pricing war.

Astonia Royale under construction

Land Acquisition

Once the location and the type of project to be launched there are finalized, the developer scopes the area for available sites. Not all sites are equal even within a small location – some do not have sufficient ground water, while others may have geological flaws which would be very costly or impossible to correct.

Some have existing access roads or potential for creation of such roads, while others lack roads and zoning regulations do not permit their creation. Yet others may be ideal but not for sale. Once a suitable site is selected, the developer enters into an option agreement or a contract of purchase for the selected site.

In a number of cases, developers have land banks in locations that they judged to hold potential for the future. Since such land may have been held for a number of years before actual use, such developers are at a distinct advantage.

Project Planning And Development Permits

If the feasibility study gives a general green signal, the developer will engage an architect to prepare the preliminary plans along with projected costs. These plans then need to be submitted to the planning authorities for clearance.

This is invariably an extremely tedious and time-consuming process as a multitude of permits need to be obtained before the authorities give clearance.

Financing The Project

Once all permits are in place, the developer will have to raise capital in order to fund purchase of the site and the construction of the project. Established builders with good success records tend have significant cash reserves from previous projects and also have healthy investor pools.

Their reliance on bank lending is therefore lower. Less established developers would depend a lot on their personal reserves, revenue generated by pre-sales and costly debt funding.

After funding is ensured, the developer can draft the final project plans and layouts and begin construction. Marketing of the project begins alongside. Sample flats are constructed first to offer prospective buyers a visual of what their flat would look like.

At this stage, the developer will also begin marketing the project aggressively, employing various avenues of promotion and advertising. Brokers are engaged to supplement the marketing efforts of the developer’s own direct sales staff.

Safe Investment In Residential Property

Kishor PateKishor Pate, CMD – Amit Enterprises Housing Ltd.

There are many variables that can have a negative effect on one’s property investments. Being aware of these is an inalienable part of successful property investment.

The Rising Cost of Money

Increasing inflation is the first factor that inhibits the profitability of a real estate investment. While investing in any kind of property, one should always consider what the overall earnings would be worth at the point in time one wishes to liquefy them.

If one fails to plan for the inflationary effect, further property purchases may be out of reach – rendering the whole concept of real estate investment an exercise in futility.

A simple method of establishing whether inflation will erode one’s real estate investment is to determine if the interest rate earned on one’s savings is less than or equal to the rate of inflation. If it is, it means that your real estate investment too will suffer because of inflation.

One needs to establish whether the average price for property rentals in the location one wishes to invest in will remain higher than the rate of inflation in the long term. If it does not, there is not much point in investing in that location.

Death and Taxes

Property taxes are yet another aspect that can negatively influence property investments. While buying a property with the intention of reselling it for a profit or renting it out, one should remember that profits arising from both the sale of a property and monthly rental income generated are taxable.

The yardstick here is not how much one earns from one’s property, but how much one manages to keep after the taxman has taken his cut.

It is very unwise to invest in a property without first consulting with one’s chartered accountant or an experienced real estate professional. While there is no way of avoiding property taxes, it is certainly possible to make the taxation scenario more realistic.

This calls for current knowledge of property taxation laws, which often change without warning. One needs to determine one’s post-taxation cash flow in order to know just how valuable one’s property investment will be in the long run.

Alpine Twin Bungalow ExteriorFate – Your Constant Silent Companion

Finally, there is also always an aspect of free-floating risk attached to property investments. For instance, buying a property with the intention of selling it at a profit afterwards always involves a degree of uncertainty and chance of loss.

One can judge the current appreciation value of a certain location with a fair degree of accuracy, but there is no way of anticipating all developments:

• The neighborhood may fall out of favor with buyers
• There may be unsuspected litigations attached to the property
• Though superficially sound, the property may be legally untenable because it has substandard construction or does not conform to required earthquake-resistance parameters
• The Government may decide to acquire the land the property stands on at the minimum rate for infrastructure development
• The investor may need to sell the property at a moment’s notice – and at a loss – to cover other urgent financial commitments
• There may be a natural calamity such as a flood, rendering the entire location unmarketable

To Summarize…

To minimize one’s risk while investing in real estate, one needs to know:

• Exactly how much profit will accrue from the property in a given time frame
• How much it will cost to make the property marketable
• How long it will take for it to attain its highest possible market value
• What the state of the market is now, and what it will be in the near and distant future
• What the possible losses could be with regards to all applicable variables
• If the potential profit of buying a property outweighs the various implied risks
• If the current cost justifies future earnings (via sale in the short term of rental income in the long term)
• If one is financially sound enough to buy the property now, or whether it would be more prudent to await improved financial circumstances