D

FINANCIAL SCREENING OF RESIDENTIAL PROJECTS

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.

FLOW OF PRESENTATION Industry profile Company outlook financial screening Panchkula project Financial analysis Findings Suggestions references

Indian Real Estate-A Booming Industry Size of Indian Real Estate is currently USD 16 billion. Industry estimates indicate that the sector will Grow at CAGR of 30%(compound annual growth) To reach USD 50 billion by 2010 Demand for quality real estate in India is seeing unprecedented growth-demand supply gap exists across all segments of realty.

Demand Forecasting
2000
Demand in Sq Ft

1800 1600 1400 1200 1000 1 2 3 4 5 6 7 8 9 10 Financial Year

Fin_Year Estimated Demand Actual Demand

COMPANY OUTLOOK
OUR VISION To contribute significantly to building the new India and become the 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 legal requirements.

Introduction
The largest real estate development company in India In existence since 1946 Completed 224mn sq ft of development Focus area NCR (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

DLF BUSINESS MIX

Financial screening (introduction)

A financial screening is normally an estimation of future financial outcomes of a company. To estimate cash requirements & a decision is to be taken on how to enhance the sales. It is known as investment plan or annual projection of income &expenditure for a company.

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

PROCESS
IDENTIFYING LAND Availability of land Market survey Land acquisition( OP/ JV) Financials Management approval Apply for license Project launched Sales process Construction Handover to customers

IDENTIFYING LAND It may comprises reasonable prevailing land cost in the vicinity undisputed title with possible less no. of owners. A consolidator of repute having good relations with the farmers & local revenue departments in the vicinity with fair consolidation fee. Land chunk should also fulfill the criterion of frontage, approach roads and better connectivity.

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.

DECISION OF LAND (OP/ JV)

Its discretion after scrutinizing the prevailing market conditions, liquidity crunch, position of short term & long term debts, and other obligation which are invariably present in the system precariously, a preliminary agreement i.e. ATS (Agreement to Sell) is entered with landowners for the purchase of land. Then they acquire land on outright purchase or enter into a joint venture agreement with the owners.

Outright purchase process

To pay cash for the full purchase price. MEMORANDUM OF UNDERSTANDING AGREEMENT TO SELL DUE DILIGENCE REPORT REGISTRATION SECURITY ARRANGEMENTS MUTATION SAFE CUSTODY OF DOCUMENTS

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.

FINANCIALS (feasibility)
Feasibility:A Feasibility Study is a process which defines What exactly is the project? Is it possible? Is it practicable? Can it be done Feasibility analysis is iterative & continuous. It involves the following 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 funds estimating absorption rates developing cash flows schedules Evaluating the estimated cash flows in terms of acceptability of expected outcomes.

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

MANAGEMENT APPROVAL
Once this proposal is approved by management considering market potential, salability, holding cost, profitability, financials etc. we proceed towards acquisition of land.

APPLY FOR LICENSE

Further step towards the project completions is getting the license from concerned authority. Simultaneously other concerned persons of the system apply for different statutory approvals i.e. environmental, height clearance, electricity, water etc by keeping 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 letter 4. copy of registries( JAMABANDI) 5. copy of mutation 6. land details

SALES PROCESS
Marketing research Advertising Appointing sales organizer Assist customer to fill the form

CONSTRUCTION & HANDOVER TO CUSTOMER

Check with customer accounts relating to payments Communicate 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 to customers

PANCHKULA PROJECT
Panchkula project

Township Of 100 acres

Total land 120 acres

Group housing Of 20 acres

IRR MODEL

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)

Results & findings

1. It is maintaining product mix in which they have divided the plots in different categories as per the Huda norms which are as follows :EWS 21% NPNL 25% Commercial 4% Plotted 50% As per rule, different states follow the rules Of there respective govt.

2. It is also maintaining the ready reckoner for their ease of calculation. (link on excel) 3. It has maintained a statement of charges, for different zones. i.e. - For high zone (panchkula) License fee Residential plotted 4.3 lakh/ acre Residential group housing 5.4 lakh/acre

Infrastructure Development Charges Residential plotted RS 375/sqmt Residential group housing Rs 460/sqmt External Development charges

Residential plotted 26.6 lakh/acre Residential group housing 114.88 lakh/acre

4.For the approval of land, a proposal is made which is send 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 and figures, so that they can use it after 3 or 4 yrs also without any manipulation.

SUGGESTIONS
1. Infrastructure industry should have a better financial position signifying that the commercial banks and other financial institutions should provide the loans and 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 awardees 4. To improve the earnings of builders should be encouraged to produce costly as well as cheap flats, colonies for all types of consumers.

REFERENCES
www.google.com www. dlf. ac.in www.ibef.org/economy www.huda.ac.in www. Puda.ac.in