Real estate development is unique as every project developed is equivalent to setting up a new business given the complexity and the financial investments which go into it. Land is the first and key raw material and also one of the highest risk components in the entire value chain. Residential Developers typically take decisions on land procurement basis the below criteria :
1) Location – Location is broadly defined by, connectivity, hard infra development, social infra development ( schools, hospitals, retail etc.), demand-supply dynamics, proximity to work places, landmarks around, success stories of other developers, sales boosters such as proximity to green spaces, water bodies, scenic locations etc.
Lands in close proximity to Public drains, graveyards, sewage treatment sites, HT lines, noisy airports, slums etc. are generally not preferred but due to the demand, developers do pick up such properties very often.
2) Nature of land – Developers look for lands which typically are easy to develop with the right soil conditions ( not rocky nor water logged), relatively flat topography ( lesser cutting and filling), no hinderances such as Nalas, public roads, HT lines passing through, lesser vegetation ( as Tree cutting permissions delay their approvals), environmentally non -sensitive lands, right elevation of the land ( low lying lands typically are prone to flooding during monsoon) and other similar criteria.
3) Shape of the land – This plays an important role in evaluating the best use of the land as the shape of the land determines the FSI that can be consumed, the impact of setbacks from the boundaries, Vastu and cost of construction to a large extent. Rectangular shaped lands are most conducive for efficient planning, however, given the haphazard development in most cities, one doesn’t really get to choose the shape of the property. From a vastu perspective, ‘Gomukhi’ lands are most preferred ( narrow entry and then it opens up) while ‘Shermukhi’ lands ( broad in front and narrow at the rear) are more preferred for commercial development.
4) Legal status of the land – Developers typically conduct a thorough legal due diligence of the land parcel before they acquire the same. This starts with digital survey of the boundaries of property, which is then superimposed with the boundaries shown in the revenue documents and title deeds schedules to check for encroachments. The title deeds and associated documents like Encumbrance certificates, RTCs, Supplementary agreements etc. are studied by lawyers to identify if there are any discrepancies in the ownership. Revenue documents are procured from the Government offices to cross-examine the narrative of the title deeds. Public notices are put up in prominent newspapers and physically on the property, court documents are scanned to check for any pending litigations, sub-registrar office documents are checked to identify if there are any prior agreements made by the same landowner to other parties etc. This process typically takes 2-3 months depending on the availability of the documents. This is the most critical stage of the land acquisition process as the highest risk in the development of a project lies in the legal status of the land. The lawyers provide a Title Opinion post the due diligence to the Developer and it is the obligation of the developer to upload the same on RERA for Homebuyers to verify.
These are some of the most prominent criteria Indian developers typically use to evaluate the viability of a land parcel at the time of procurement. If you enjoyed this article, do subscribe to this newsletter as we take you through all aspects of Real Estate Development and Homebuying.
