Financial Screening of Residential Projects (2)

7/28/2019 Financial Screening of Residential Projects (2)

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D

L

F

FINANCIAL SCREENING OF

RESIDENTIAL PROJECTS


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Rationale of project

To study the financial screening process of

DLF.

To assess the financials of panchkula project.

To find out the effectiveness of the process.


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FLOW OF PRESENTATION

Industry profile

Company outlook

financial screening

Panchkula project

Financial analysis

Findings

Suggestions

references


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Size of Indian Real Estate is currently USD 16billion.

Industry estimates indicate that the sector will

Grow at CAGR of 30%(compound annualgrowth)

To reach USD 50 billion by 2010

Demand for quality real estate in India is

seeing unprecedented growth-demand supplygap exists across all segments of realty.

Indian Real Estate-A Booming Industry


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Demand Forecasting

1000

1200

1400

1600

1800

2000

1 2 3 4 5 6 7 8 9 10

Financial Year

DemandinSqFt

Fin_Year

Estimated Demand

Actual Demand


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COMPANY OUTLOOKOUR VISION

To contribute significantly to building the new India and becomethe worlds most valuable real estate company

OUR MISSION

To build world- class concepts with the highest standards of

professionalism, Ethics, quality and customer service

OUR VALUES

Sustained efforts to enhance customer value and quality.Ethical and professional service

Compliance and respect for all community environment and legalrequirements.


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Introduction

The largest real estate development company in India

In existence since 1946

Completed 224mn sq ft of development

Focus areaNCR (Delhi and Gurgaon) now in Chandigarh

Responsible for developing the Satellite town ship in Gurgaon

Current Land Base of 10,255 acres of land bank


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DLF BUSINESS MIX


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Financial screening (introduction)

A financial screening is normally an estimation offuture financial outcomes of a company.

To estimate cash requirements & a decision is to betaken on how to enhance the sales.

It is known as investment plan or annual projection

of income &expenditure for a company.


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OBJECTIVE

To determine whether a certain plan of action

is feasible

To forecast the cash flows that the investor

expects to prove a systematic framework


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PROCESS

IDENTIFYING LAND

Availability of land

Market survey

Land acquisition( OP/ JV)

FinancialsManagement approval

Apply for license

Project launched

Sales processConstruction

Handover to customers


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IDENTIFYING LAND

It may comprises reasonable prevailing landcost in the vicinity undisputed title withpossible less no. of owners.

A consolidator of repute having goodrelations with the farmers & local revenue

departments in the vicinity with fairconsolidation fee.

Land chunk should also fulfill the criterion offrontage, approach roads and betterconnectivity.


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AVAILABILITY

Involves a detailed assessment of the plot

with a focus on the lands development

potential and location.

In addition, they have a good working

relationship with major external property

consultants who provide information regarding

future development areas and availability.


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DECISION OF LAND (OP/ JV)

Its discretion after scrutinizing the prevailingmarket conditions, liquidity crunch, position ofshort term & long term debts, and other

obligation which are invariably present in thesystem precariously, a preliminary agreementi.e. ATS (Agreement to Sell) is entered withlandowners for the purchase of land. Then they

acquire land on outright purchase or enter into ajoint venture agreement with the owners.


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Outright purchase process

To pay cash for the full purchase price.

MEMORANDUM OF UNDERSTANDING

AGREEMENT TO SELLDUE DILIGENCE REPORT

REGISTRATION

SECURITY ARRANGEMENTS

MUTATION

SAFE CUSTODY OF DOCUMENTS


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Joint venture process

In JV model company shares profit with JV

partner against land offered. The model may

inherit different obligation from the company as

well as JV partner.


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FINANCIALS (feasibility)

Feasibility:A Feasibility Study is a process which defines Whatexactly is the project? Is it possible? Is it practicable? Can it bedone

Feasibility analysis is iterative & continuous. It involves thefollowing 8 steps:

assessing the physical & legal aspects of site

estimating demand for the space

analyzing competitive space

estimating costs of acquisition, construction or rehabilitation

estimating the costs & availability of borrowed fundsestimating absorption rates

developing cash flows schedules

Evaluating the estimated cash flows in terms of acceptabilityof expected outcomes.


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I R R MODEL

Multiple period return on investment

Calculates the average discount rate that

equates all future returns over the projected

holding period back to the present value of the

initial equity investment.

Should be used for capital allocation and initial

investment decisions


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MANAGEMENT APPROVAL

Once this proposal is approved by

management considering market potential,

salability, holding cost, profitability, financials

etc. we proceed towards acquisition of land.


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APPLY FOR LICENSE

Further step towards the project completions is getting the licensefrom concerned authority. Simultaneously other concerned

persons of the system apply for different statutory approvalsi.e. environmental, height clearance, electricity, water etc bykeeping stringent yardsticks before government departments

Documents to be submitted to government for approval of license:

1. charges paid to the government

2. layout plan

3. authorized letter4. copy of registries( JAMABANDI)

5. copy of mutation

6. land details


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SALES PROCESS

Marketing research

Advertising

Appointing sales organizer

Assist customer to fill the form


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CONSTRUCTION

& HANDOVER TO CUSTOMER

Check with customer accounts relating to paymentsCommunicate with customer

Verify the accounts of customer

Obtain NOC from customer account

Make 3 possession letters

1. signed by HOD

2. issued & signed by customer

3. signed by customer Forward 2 copies to site office

After verification site officer handover property tocustomers


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PANCHKULA PROJECT

Panchkula

project

Township

Of 100 acres

Total land

120 acres

Group housing

Of 20 acres


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)


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IRR MODEL


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Financial analysis

Developers Goal: To invest capital in projects

that generate after tax returns that exceed those

of alternative risk-adjusted investment.

Investors Goal: To buy property assets or

property securities for less than their intrinsic

value (the present value of a firms future free

cash flows)


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Results & findings


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1. It is maintaining product mix in which they havedivided the plots in different categories as per the

Huda norms which are as follows :-

EWS21%

NPNL25%

Commercial4%

Plotted50%

As per rule, different states follow the rules

Of there respective govt.


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2. It is also maintaining the ready reckoner for their ease

of calculation. (linkonexcel)

3. It has maintained a statement of charges, for differentzones. i.e.

- For high zone (panchkula)

License feeResidential plotted4.3 lakh/ acre

Residential group housing5.4 lakh/acre
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Infrastructure Development Charges

Residential plottedRS 375/sqmt

Residential group housingRs 460/sqmt

External Development charges

Residential plotted26.6 lakh/acre

Residential group housing114.88 lakh/acre


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4.For the approval of land, a proposal is made which issend to the management

which includes the following documents:-

Financials, Architecture brief etc.

5. For purchasing a land they need two documents :-Jamabandi and Mutation

6. It has also maintained a proper data base of facts andfigures, so that they can use it after 3 or 4 yrs alsowithout any manipulation.


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SUGGESTIONS

1. Infrastructure industry should have a better financialposition signifying that the commercial banks andother financial institutions should provide the loansand advances at a reasonable rate of interest for the

important purpose of working capital.2. The formalities as well as paper work should also be

minimized.

3. A special committee should be setup who may select

for awardees4. To improve the earnings of builders should beencouraged to produce costly as well as cheap flats,colonies for all types of consumers.


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REFERENCES

www.google.com

www. dlf. ac.in

www.ibef.org/economy

www.huda.ac.inwww. Puda.ac.in
http://www.huda.ac.in/http://www.huda.ac.in/