Developing property as asset
Real estate
By Vasu

BUYING property in India has always been a spare security measure. From individuals to family-held businesses, property was an investment undertaken after all other avenues were taken care of, and except for providing a base figure, not much research went into arriving at a final decision. The surplus stock was then let out and maintenance and upkeep were issues which led to either a constant tug-of-war or in case of discerning tenants their sole responsibility. In the last decade this mindset has undergone a drastic change. Whether individual owned or company held, property has become an asset requiring careful management. No longer do clients take the advice of any property consultant and pick up property in an area which the broker terms prime. Location is no longer everything. Detailed analysis are conducted to check out not only the intrinsic value but the long-term expected appreciation along with the facilities that are available. So in a sense property management is no longer buying and reselling but has become more of asset management with the agents

being asked to evaluate and help conduct feasibility studies. Property, today does not get picked up unless scrutinised vetted for the utilities it offers, says Anirudh, a developer in Gurgaon. The capability for expansion, back ups available and extra add-on features which the user may need, all determine the final choice. While this trend has caught on in the metros, places like Chandigarh, Mohali and Panchkula are way behind in developing property as assets, he adds. Except for the Mohali Stadium which has been handed over to professional managers, all commercial space here continues to be handled in the traditional method. A practice which

will prevent the entry of the big players, the MNCs who lead the property markets everywhere.

Today in the metros, real estate investment is an asset which is expected to yield good returns, and this is where asset managers come in. Property managed by professionals immediately becomes more acceptable as they maintain and uphold quality, says Arjun Arora, a consultant with an international property firm. Even the MNCs who lead the market view such properties as a better option. Carrying on a multipronged approach to reduce operational costs while enforcing international quality norms, such property becomes sought after. There have been incidences where large non-performing buildings belonging to corporate houses which were lying unused or under-utilised have been turned around after professional managers took over. The need for managers in the post-construction period arises because till then the requirements are mostly of the developer, whereas after completion it is the tenant who throws up the maximum requirements and the focus shifts to facility management.

Today superficially perfect buildings do not attract buyers. The entire area has to be part of an infrastructure net which ensures a regular supply of essentials like electricity, dedicated telecom networks, flawless cabling and other amenities. Clients today refuse to occupy poor quality space and owners have no option but to upgrade. Also, as per practices abroad, the trend has turned towards providing finished space where the clients can move in without having to undertake massive alterations, says Arjun.

Another area where changes are required is the fixing of rating norms for projects, says Arjun The current move to introduce safety checks and self-regulatory measures as outlined by the Real Estate Development Council (NAREDCO) is one such step which will place certain safeguards in terms of titles, quality of construction, sanction of plans, timely construction and post-development management. Initially such a rating will be applicable only to projects in Delhi, but subsequently the Delhi model can be used in other states. Ultimately all developers will need to get their projects rated and would have to fulfil the laid-down criteria before they get the final nod, he says.

Factors like clear land titles, proof of having substantial resources for completion of projects, maintenance of an account vide which the entire cost taken from the customer is not utilised in construction and development will determine the ratings given to a particular project. Besides, the developer will not be allowed to advertise or make public the offer unless all approvals and sanctions have been obtained from the local authorities. Post-property management, one-time payment of all external development charges are the other measures which the NAREDCO is talking about to ensure safety norms in the real estate sector. The rating organisation would then also monitor the progress of development, further safeguarding consumer interests. Though the system will be working on a voluntary basis initially, with customers obviously opting for approved projects, this method may become the norm.