Project evaluation for Developers # RoI (Return

on Investment)

Why to Evaluate?

Why to Evaluate?

To minimize > RISKTo maximize > RETURNSHaving in-depth knowledge about the project. Having a different perspective would make you take bird‘s view & strategize differently.

What to Evaluate?

Project investment Investment

 Type of Cost Cost 

Constant / Variable

Land acquisition  / Redevelopment structuring cost 

Land Zoning Total FSI including TDR Fungible FSI Compensation / corpus Temporary rental, logistics &

others Others

Constant Constant Constant Variable Variable

J V / Development Agreement cost 

Stamp duty & Registration

Constant

Legal Consultation 

Titles Agreements Disputes Others

All Constant except disputes

Project investment contd…Investment

 Type of Cost Cost 

Constant / Variable

Regulatory Cost(Approvals form Municipal / Development authority / Urban or Rural planning / others)

Approval IOD CC Partial OC & OC Others

All constant

Liaison / Administration costs

Title details Plans & Survey report Architectural NOC / Encumbrance clearance /

Others Documentation Others

All constant

Project investment contd…Investment

 Type of Cost Cost 

Constant / Variable

Corporate Loan

Additional Equity Loan interest for construction

duration

Constant Constant

Architectural & engineering consultation

Soil feasibility Land / Plot survey Layout & Planning Structural & material engineer Others

All constant

Construction cost

Raw material cost Labour cost

Constant Constant

Project investment contd…Investment

 Type of Cost Cost 

Constant / Variable

Project Maintenance cost

Site Security Electricity Water Other utility Others

All Variable

Human resource cost

Security Project team (Supervisor,

Accountant, admin and others) Others

All variable

Project investment contd…Investment

 Type of Cost Cost 

Constant / Variable

Marketing & sales cost Marketing & sales team Ads in print, outdoors, social

media and others Launch Engaging channel partners Others

All variable

Channel Partners Brokers / Agents Portals Social Media Others

Variable Constant Constant

Buffer cost

Setback / unpredicted events

Variable(10 – 15% of total project)

Project investment contd…Investment

 Type of Cost Cost 

Constant / Variable

Average Vacancy cost

Unsold / unleased inventory Variable (Approx. 5 – 10%)

Miscellaneous cost

Variable

Total  

‘X’

Feasibility tableThe total saleable area  

 

Total cost / investment as per project feasibility 

‘X’

Rate of estimated saleable area per sq. ft. /sq. mt. 

The total revenue for total saleable area 

3X / 4X …. 100X

The returns on project total cost  

(*) %

Conclusion:                                                              Feasible or Not feasible 

Evaluation

Valuation: 3X, 4X….100X!&

Duration: 5 years > 4 years >3 years > so on….

How to Evaluate?

How do you do it?

Via Customer / Investor, who is going to pay / invest in you!

But who is your customer / investor?

Two categories of Customers / investors

B2B B2CB2B-1 > PEs, VCs, Institutions /

Corporates / REITs, Bigger Developers, Individual

Investors & others

B2C-1 > Retail investors

B2B-2 > Brokers / Agents, portals and others

B2C-2 > End-users

Why / how they will buy / invest in you?

B2B 1: PEs, VCs, Institutions / Corporates / REITs, Bigger Developers, Individual Investors & others

The “returns” determines their investment

B2B 1: PEs, VCs, Institutions / Corporates / REITs, Bigger Developers, Individual Investors & others

Some factors would be• Location, location & location: Physical & social infrastructure, connectivity,

ambience (gated community / complexes / others), amenities and others • Legalities & approvals (RERA compliant)• Interest rates on loan / financing • Configuration (residential, commercial or others)• Financial structuring: Equity / Debt • Duration • Others

B2B 2: Channel Partners – Brokers / Agents, portals and others

How & why would they sell your project?

B2B 2: Channel Partners – Brokers / Agents, portals and others

How & why would they sell your project? Factors would be• Brokerage • Locality • Image / status • Emotional gratification (Interpersonal / Family)• Welfare • Others

B2C 1: Retail investors

They think investment in terms of units (1 /2 /3 properties) & yield

B2C 1: Retail investors

Factors would be• Returns after 3/5/7 years • Buying price • Configuration (residential, commercial or

others)• Appreciation factors like infrastructure,

major development, connectivity, demographics and others• Finance / Loan convenience• Others

B2C 2: End-users

All above categories have to sell to this end-user eventually

B2C 2: End-users

Any business, field or sector is driven by their end-users. Though she may be a small or tiny person but together they decide the drift of the market.

The multibillion dollar companies decide their strategies, marketing, financing, operations and other parameters of business on this single ‘almost non-existence’ entity who has lever of fate of these giants but sadly unaware of its ‘ephemeral power’.

B2C 2: End-users

Factors would be• Location – Physical & social infrastructure, connectivity, ambience (gated community / complexes / others), amenities and others • Emotional gratification (peace of mind, security)• Purchase preference (performance / quality)• Pricing / Rate• Loan / Mortgage compliance • Social status & Demographics • Others

Typical percentage distribution of each category in a project

Category Percentage

PEs, VCs, Institutions / Corporates / REITs, Bigger Developers, Individual Investors & others

0 – 100

Brokers / Agents, portals and others 20 – 50

Retail investors 10 – 40 End-users 30 – 60

* It may vary according to the project

Influence on Returns with B2B 1Categories  Investment Duration Returns Influencing factor

PEs, VCs, Institutions / Corporates / REITs, Bigger Developers, Individual Investors & others  

‘X’ 0 – 2 YEARS

0 – 3 YEARS

5 X to 10 X

10 X to 20 X

Real estate financial advisor

Please note: this is only an example and assuming the project has taken 5 years to complete

Influence on Returns with B2B 2Categories  Investment Duration Returns Influencing factor

Channel Partners – Brokers / Agents, portals and others

‘X’ 0 – 5 YEARS 10 X to 40 X Marketing consultant / Networking

Please note: this is only an example and assuming the project has taken 5 years to complete

Influence on Returns with B2C 1Categories  Investment Duration Returns Influencing factor

Retail investors  ‘X’ 0 – 3 YEARS 10 X to 40 X Marketing consultant / Channel partners /

Networking

Please note: this is only an example and assuming the project has taken 5 years to complete

Influence on Returns with B2C 2Categories  Investment Duration Returns Influencing factor

End-users ‘X’ 0 – 5 YEARS 30 X to 70 X Marketing consultant

Please note: this is only an example and assuming the project has taken 5 years to complete

Influence on Returns in a nutshellCategories  Investment Duration Returns Influencing factor

PEs, VCs, Institutions / Corporates / REITs, Bigger Developers, Individual Investors & others  

‘X’ 0 – 2 YEARS

0 – 3 YEARS

5 X to 10 X

10 X to 20 X

Real estate financial advisor

Channel Partners – Brokers / Agents, portals and others

‘X’ 0 – 5 YEARS 10 X to 40 X Marketing consultant / Networking

Retail investors  ‘X’ 0 – 3 YEARS 10 X to 40 X Marketing consultant / Channel partners /

Networking

End-users ‘X’ 0 – 5 YEARS 30 X to 70 X Marketing consultant

Please note: this is only an example and assuming the project has taken 5 years to complete

Which is your target customers/category?

Categories  

Duration Result Focus on 

PEs, VCs, Institutions / Corporates / REITs, Bigger Developers, Individual Investors & others  (B2B 1)

0 – 2 YEARS

0 – 3 YEARS

10 X

20 X

1) B2C 2

2) B2C 1

3) B2B 2

4) B2B 1

Channel Partners – Brokers / Agents, portals and others (B2B 2)

0 – 5 YEARS 40 X

Retail investors (B2C 1)  0 – 3 YEARS 40 X

End-users (B2C 2) 0 – 5 YEARS 70 X

Focus on B2C 2 & B2C 1 categories to enhance your returns.

Contact us for Marketing Consultancy

+91 9702675975/ 022 28700790 / info@lejagah.com

A real estate portal serving developers as marketing consultant and training sales team