Roughly 30 kilometers south of Central parts of Chennai, out of reach of the incessant sound of horns and the pollution, you get the feeling you have reached rural India. This is a stretch on Old Mahabalipuram Road with farmers seen dressed in Madras-checked dhotis resting outside their huts with goats wandering nearby. From this scene you just have to turn a corner and go through a gate to arrive at a gated community with luxurious housing and all amenities. This is the extent of growth seen in Chennai!
With developments of 28 large two-storey houses, wedged and compressed tightly these houses have the best of amenities, with covered driveways and car parks as well as departmental stores.
What does this development mean to the common man and developers?
These kind of development means scope for more and more Joint Ventures the reasons being:
As the scenario for property development in Chennai is changing more property owners are sensing that Joint ventures are a better way to develop property and make a profit rather than selling the existing land or investing the sale proceeds in a different plot of land. The value of the property thus invested is eroded in property capital gains tax, registration charges and stamp duty etc. However it is seen that hen people develop property using a developer the value is enhanced by atleast 50%.
There is more business to be gained through the Joint Venture Model and most of the growth in future is expected to come from this model.
When the property you live in becomes old and unfit for occupation it would make sense to demolish the existing building using the services of a developer and get a new building constructed in the same space. This new building would be able to provide apartments for an expanding family. When the family is expanding and the area currently occupied becomes insufficient for large families it makes sense to go in for newer and better spaces in the same premises.
If the property that you currently own does not have residual FSI, the option that you have would be to exchange the property with a flat of your choice in a new apartment of an established builder. In this case you may be able to save on stamp duty which would otherwise become applicable for purchase of your property in consideration of the apartment being sold or exchanged by you. You would also be spared the trouble of paying capital gains tax in this scenario.
In case you are owning a piece of land and holding the same in the hope that it will appreciate in the future, which may not happen within a target time period, you should also look into the prospects of giving the same to a developer for development. In this case you may develop the property / land by constructing a building (leased or rented) through a joint development model. In India especially, one finds it difficult to get finance from a bank on land, for personal need, or if one is considering further investment. But one is able to generate loans from a built up space very easily especially if it is property that is earning rent. One can use the money borrowed in such a way to buy another property where the return in the form of rental income or in the form of property appreciation is much higher than the interest one pays on borrowed money. The arbitrage opportunity available in such cases can be taken advantage of between the rate of interest one pays on borrowed funds and the returns gotten on the investment in property made helping one build a large property portfolio.
Why is it good to give your property to a developer and not do the development by yourself?
The development of any property, construction of multi-storey buildings and selling the apartments thus built requires time, effort and money. This is also a field where experience is required and one has to have some degree of mastery. Investment is required to carry out the task involved and one needs to have competent manpower to be able to enable the proposed development. With a network of reliable contractors and brand equity one can get the best selling price and terms from the purchasers of the flats / apartments.
Most people who own property so not have these qualifications or facilities and hence it is important to get the development work done by a professional builder of repute and one with the necessary experience. If the owner of the property decides to develop or build his own property he may face any number of issues which an amateur is bound to face and this is not advisable. He may end up making several mistakes which may prove to be costly. Hence it is advisable to employ the services of a developer and enter into an agreement with him after thoroughly looking at all the aspects of the development work.
Wisdom Properties 