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Capital can be withdrawn in propor(on to comple(on of the ProjectandhencewillgetlockedupevenaTerlaunch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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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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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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Registra(onFeePerSqTforResiden(alProject Rs1

PRERERA Nil

PostRERA Rs1perSqFt

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4. Insurance Cost: Land & Building

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TotalCostoftheProjectLandCostperSqFt:Rs1000Construc(onCostperSqT:Rs2000TotalCostRs3000

Rs30Crs


Nil

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

Rs6perSqT

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4. Insurance Cost: Land & Building

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TotalCostoftheProjectLandCostperSqFt:Rs1000Construc(onCostperSqT:Rs2000TotalCostRs3000

Rs30Crs


Nil

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

Rs6perSqT

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5. Defect Liability: Material & Labour

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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

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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,[email protected],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.


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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


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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


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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


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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


C.TotalCost(A+B+C)

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Thank You

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The contents of this document are privileged and confiden(al and not for public circula(on. This document is forgeneral informa(onofourclientsandothers towhom it is specificallyprovided.The informa(oncontained in thisdocument isderived frompublic sources,whichwebelieve tobe reliablebutwhich,without further inves(ga(on,cannotbewarrantedastotheiraccuracy,completenessorcorrectnessandwearenotobligatedtoupdateoramendthesame.Theinforma(oncontainedinthisdocumentisnotintendedtobenorshouldberegardedaslegaladviceand no one should act on such informa(on without appropriate professional advice. Posiview accepts noresponsibilityforanylossarisingfromanyac(ontakenornottakenbyanyoneusingthismaterial.

Disclaimer

Shan(lalKatariakatariashan([email protected]+919689899144

[email protected]+918975761062

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