cost impact of rera - credai u.p _increase in home... · cost impact of rera ... planning for...

CostImpactofRERAPresenta(onatECGCIndore17thDecember2016

ForPrivateCircula/ononly

Presented By: Shantilal Kataria President, CREDAI Pune Metro & CA Vinit Vyankatesh Deo CMD, Posiview Consulting Partners Group

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Cri1calPointsofRERAProvision Impact

Is RERA applicable in States whichhaveno(fiedRules

No.RERAwillbeapplicablewhenCentralGovernmentno(fiesSec3oftheAct

Is RERA applicable for OngoingProjects

RERAAct–YesRERARules-Yes

Have Rules gives some relaxa(onforOngoingProjects

ThefinalCentralRuleshavegivenrelaxa(onfor:-Submissionofamendedplans-Givingrevisedpossessiondate- Deposi(ng balance amounts aTer deduc(ng land and construc(on cost in SeparateAccount

What is the expected date ofimplementa(onofRERA

Latestby1stMay2017

WillRERAleadtocostincrease Yes.ByApproximatelyRs100–150perSqFt

What shouldStateCREDAIdowithStateGovernment

-  CompareStateRuleswithCentral&OtherStateRulesespeciallyMaharashtra-  Make representa(ons to State Government for amending the Rules in case they

havebeenno(fied-  Makerepresenta(ontoStateGovernmentwithsugges(onsforrulesincasenotyet

no(fied

Prepara(onsunderRERA -  Read&StudyRERAAct,RulesandmodelAgreementcarefully-  ChangecurrentdraTagreementskeepinginmindRERAAct&Rules-  Staff,Brokeretc,training(par(cularlysitestaff)-  Ifpossible,startSeparateProjectwiseaccoun(ng-  Iden(fyRERAConsultant,Engineer,Architect&CAastheirserviceswillberequired

whenRERAisac(vated-  IfProject isnearingcomple(on, tryandgetComple(onCer(ficateandgetoutof

RERA 2

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PlanningforImpactonCost

Provision Impact

Plan submission for ProjectRegistra(on

Costofallconsultantswillhavetobe incurredupfrontasRegistra(onwithAuthoritywillrequiredetailedplans

SaleofProjectaTerRegistra(on(NOPRELAUNCH)

CapitalofPromoter is likely toget locked for the1-2years fromLandAcquisi(ontoLaunchofProjectaTersanc(onandregistra(onwithRERAuthority

En(re Project to be sanc(oned atstart

Change in Layout will require permission of 2/3rd allodees ; hencePromotersmayhavetopayallpremiumsandchargesupfrontandgetfulllayoutsanc(oned

Deposit of 70% collec(on fromallodeesintoSeparateAccount

Capital can be withdrawn in propor(on to comple(on of the ProjectandhencewillgetlockedupevenaTerlaunch

Insurance Title Insurance, Project Insurance and any other Insurance asmay beprescribedbytheAuthoritywilladdtothecostoftheProject

Comple(onwithin(me Since there may be penal(es for delayed possession, Developer willhavetoinvestinnewtechnology,bedercontractorsetc.

5YearWarranty Promoterwillhave to rec(fyalldefectsupto5years frompossessionfreeofcost

CompliancewiththeAct Promoter will have to employ qualified internal team to monitorcomplianceunder theAct aswell as appoint experiencedConsultantsforreviewasthepenaltyfordefaultsishuge

KeyProvisionswhichwillimpactCostofProject

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ProjectSaleableArea 1LakhSqFt

LandAcquisi(on&ApprovalPeriod 1Year

Construc(onPeriod 2Years

SellingRate Rs4,000perSqT

InterestonUnsecuredLoans 18%

InterestonBankFinance 15%

LandCostonSaleableArea Rs.1,000perSqFt

Construc(onCostonSaleableArea Rs2,000perSqFt

ApprovalCostonSaleableArea Rs100perSqT

BasicAssump1ons

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1. Investment in Land Cost

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ProjectSaleableArea 1LakhSqFt

LandCostperSqFtonSaleableArea Rs1,000persqT

PreRERA:FinancingbywayofInvestor/Pre-LaunchSale

Rs500lacs(50%)

PostRERA:Financingthroughowncontribu(onorUnsecuredLoan(assumedrate18%)Rs500Lacsx18%=Rs0.90CrsCostperSqFt=Rs90Lacs/1LakhSqT

Rs90perSqT

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2. All Approvals before RERA Registration

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ProjectSaleableArea 1LakhSqFt

ApprovalcostPerSqT Rs100

TotalApprovalCost Rs100Lacs

Pre-RERA:ApprovalCostupfront–Rs50Lacs(50%)ApprovalATer1Year–Rs50Lacs(50%)

Nil

Post-RERA:100%ApprovalCostupfrontInvestmentofRs50Lacslockedinfor1extrayearRs50Lacsx18%x1yr=Rs9LacsCostperSqFt=Rs9Lacs/1lakhSqT

Rs9perSqFt

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3. RERA Registration Cost

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ProjectSaleableArea 1LakhSqFt

Registra(onFeePerSqTforResiden(alProject Rs1

PRERERA Nil

PostRERA Rs1perSqFt

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4. Insurance Cost: Land & Building

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ProjectSaleableArea 1LakhSqFt

TotalCostoftheProjectLandCostperSqFt:Rs1000Construc(onCostperSqT:Rs2000TotalCostRs3000

Rs30Crs

PreRERA:FinancingbywayofInvestor/Pre-LaunchSale

Nil

PostRERA:0.20%ofLand+Construc(onCostRs6LacsCostperSqFt=Rs6Lacs/1LakhsqT

Rs6perSqT

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4. Insurance Cost: Land & Building

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ProjectSaleableArea 1LakhSqFt

TotalCostoftheProjectLandCostperSqFt:Rs1000Construc(onCostperSqT:Rs2000TotalCostRs3000

Rs30Crs

PreRERA:FinancingbywayofInvestor/Pre-LaunchSale

Nil

PostRERA:0.20%ofLand+Construc(onCostRs6LacsCostperSqFt=Rs6Lacs/1LakhsqT

Rs6perSqT

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5. Defect Liability: Material & Labour

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ProjectSaleableArea 1LakhSqFt

Costof“Finishing*”materialthatmayneedrepairs/replacement–Rs500persqT Rs5Crs

PreRERA: Nil

PostRERA:a)FreeofCostMaterialRepairs/Replacementfor5years–2%Rs5Crsx2%=Rs10Lacsb)MaintenanceTeam(Supervisor&fewmasons/plumbersforallsites)-Rs30,000permothx12monthsx3years=Rs10.80LacsTotal(Labour+Material)=Rs20.80LacsCostperSqFt=Rs20.80Lacs/1lakh

Rs21perSqT

*Waterproofing,Doors,Tiles,ElectricalWorks,Pain(ng,Windowsetc.

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Summary of Cost Increase due to RERA

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Sr.No. ItemofCost IncreaseRsperSqFt

1 InterestonLandInvestment 90

2 InterestonApprovalcost 9

3 Registra(onCost 1

4 InsuranceCost 6

5 DefectLiabilityCost 21

Total 127

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Food For Thought: Is this Cost Increase on Account of RERA?

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?  70%MoneyLockedinSeparateAccount?  IncreaseinInventorycostduetoCustomerPreference

forcompletedinventory?  Developerhastofirstspendmoneyandthenwithdraw

fromAccount?  BederQualityManpower,Suppliers,Contractors,

Consultants

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Times of India – Property Times 17th Dec 2016 Why RERA will lead to increase in Home Prices

13

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PlanningforConstruc(onCost

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v  Cost is worked out on purchase of Material done by the developer

v  Work executed through labour contractor

v  Parking consideration:- §  7 Floor- Stilt Level Parking §  12 Floor – Stilt &Podium

Parking v  Service Tax component on labour

cost is not considered (We get 100% set-off )

v  Cost is based on the certain specifications

v  Material &Labour rates are as on June-16

v  Sizeoftheprojectsis1,00,000sT.Saleable,125units.

v  Saleableareacalcula(on–Carpet+35%

v  Planning–8Flatsperfloorareconsidered

v  Costisinclusiveofs(ltparkingonly(Otherextraparkingworkedoutseparately)

v  Founda(onhardstratametat1.5m.(min.required)

v  ForP+7/12conven(onalRCC/Masonryisconsidered.

BasicAssump1onsforProjectCostAnalysis

*SOURCE:-DilipMiRal,dilip@miRalbrothers.com,MiRalGroup,Pune

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BasicRates:MajorMaterials

Cement Rs.275/-perbag

Steel Rs.40/-perkg

CLCBlocks(600X200X150) Rs.52/-perNo.

4”RedBricks Rs.5.50perNo.

CrushSand Rs.3150/-perbrass

RiverSand Rs.6000/-perbrass

Metal½”,¾” Rs.2600/-perbrass

Gypsum-25kg Rs.185/-perbag.

BasicRates:MajorMaterials

WoodenDoorFrame Rs.4000/-perNo.

Alum.Window(3Track)3/4”series Rs.225/-persT.

VitrifiedTiles Rs.55/-persT.

GreenMarble Rs.40/-persT.

ToiletTile Rs.50/-persT.

KitchenOda Rs.1800/-perrT.

CheckeredTile Rs.40/-persT.

SkinDoorShuder Rs.150/-persT.

*SOURCE:-DilipMiRal,dilip@miRalbrothers.com,MiRalGroup,Pune

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BuildingCostP+7

8Flats/Floor

P+128Flats/Floor

1 Plinth+RCC 427 487

2 Masonry,Plaster/Texture 206 176

3 GypsumPlaster/Pudyforceiling 20 51

4 Doors 30 77

5 AluminumWindow+Doors 25 31

6 Railing+Fabrica(on 16 167 Waterproofing 26 218 Flooring 110 154

9 EntranceLobby+StairTiling 10 21

10 KitchenOda 20 21

BuildingCostP+7

8Flats/Floor

P+128Flats/Floor

11 Pain(ng 48 54

12 Plumbing,Sanita(on 80 92

13 ElectricalWorks 90 93

14 LiT 40 40

15 FireFigh(ng 11 8

16 GarbageChutes 0 ----

17 PipeGasSystem 0 12

18 SolarSystem 12 17

19 Misc. 12 20

Bldg.CostperSqX 1163 1391

A.BuildingCost

*SOURCE:-DilipMiRal,dilip@miRalbrothers.com,MiRalGroup,Pune

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DevelopmentCost

P+78Flats/Floor

P+128Flats/Floor

1 Plotdevelopment 2 22 TemporaryStructures 18 18

3 Compoundwall 20 20

4 Landscape 10 205 ElectricSubsta(on 35 356 WaterSupply+WTP 24 247 Sanita(on+STP 19 198 Road 15 23

9 GasBank+GarbageDisposal 4 4

10 Miscellaneous 17 17

TotalDevelopmentCostPerSqX 164 182

B.DevelopmentCost

*SOURCE:-DilipMiRal,dilip@miRalbrothers.com,MiRalGroup,Pune

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Escala1onCostP+7

8Flats/Floor18Months

P+128Flats/Floor24Months

In1stYear 38 38In2ndYear 55 110

Escala1on 93 148

%Escala1on 6.90% 9.30%

C.Escala1onCosts

*SOURCE:-DilipMiRal,dilip@miRalbrothers.com,MiRalGroup,Pune

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Descrip1on P+78flats/floor

P+128Flats/Floor

A Building 1,163 1,391

B DevelopmentWork 164 182

Podium Parking - 105

Club House 38 38

Consultants Fees 40 40

C Escala(onCost 93 148

Total Construction Cost 1,498 1,904Marke(ng/(5%onRs4000) 200 200

Admin(2,50%onRs4000) 100 100

Total Project Cost 1,798 2104

*SOURCE:-DilipMiRal,dilip@miRalbrothers.com,MiRalGroup,Pune

C.TotalCost(A+B+C)

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Thank You

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