For landowners, joint development of either a residential or commercial project works well

Owners of land and sites have several options before them to use their property lucratively. While those owning small sites often opt to build a house for their own use, others prefer to wait for capital appreciation and sell the plot at a later date for a tidy sum. The present realty situation has given rise to one more option that is proving to be very popular among large landowners - that of joint development.

As R Balaji, CEO, Propmart, puts it, "joint development of property can lift up the realty market in the city and it is heartening to see this kind of activity picking up especially in the central business district (CBD) and prime neighbourhoods like Koramangala and Bannerghatta Road."

What joint development means

In a joint development venture, the landowner enters into an agreement with a developer who will construct the building. The joint development of the property could be about a commercial or a residential building, depending on what the landowner wishes to use his land for.

This joint venture of property development works out well for both. While the developer gets the land easily, based on the percentage worked out, and can construct a building of his choice, the landowner on the other hand gets to continue owning a part of the built space. If it's a residential complex, the landowner stands to own his share of the number of apartments as agreed upon. He has the authority to sell the apartments at any rate he desires. In a commercial complex, he again benefits by owning some floor space in the building which he could rent out, lease, sell or use for personal benefit.

Residential or commercial?

According to Qasim Tanga, Director - Leasing & investments, AQ & Z Consulting, "An in-depth feasibility of the project, whether it is residential/commercial, will have to be undertaken based on several market drivers. These would primarily include demand & supply, target customer, average prevailing rentals, flat size for residential and floor plate size's for commercial, total cost of project, break even and finally return on investment (ROI). For family owned properties, advice from a reputed consulting firm can give immense clarity and bring about balanced expectations for both the joint development partners. The landlord should thoroughly assess the credibility of the developer and check if he has undertaken similar joint development projects before. "Most importantly, after evaluating both the qualitative (good will, reputation etc) and quantitative (joint development share, ROI, time frame of completion etc) parameters both the parties should share a feeling of trust and common objective, as this would ensure the smooth execution of the project."

Joint development good for landowners

"This is a very good time for landowners to go in for joint development with developers instead of leaving their land idle and waiting for appreciation," says Balaji. "And in a market like this, only the landlords stand to gain," he adds. This is because there is no risk involved for the landowner who only sells his land and gets ready-built space in return.

In a joint development venture, the share in the deal is based on the land value prevailing in the location. Also, the developer will assess the viability of the deal. Balaji explains that if a developer has to give more than 50 percent of the share to the landlord, he will mostly strike down the deal as unviable. But, if the project is in a premium location like Bannerghatta Road or the CBD, the builder will go in for the deal because of the profit he can make by selling the apartments or office space. Plus, the landowners too will not sell unless they get more than 45 percent of the share.

"Even those owning a 60x40 site can go in for a joint development venture with small developers who specialise in small property development," Balaji points out. "Owners of small plots could also opt to take a bank loan against the property and construct a building on their own which they could rent out, lease or sell when the market picks up," advises Tanga.

Some tips to help you decide if switching to another bank will work well for you
Many public sector banks have lowered their lending rates. The new eight percent rate is bound to be frozen at this level for a year. This is a lucrative deal for people contemplating to buy their own home as property prices have also corrected. To remain competitive in the market, it is predicted that other banks may soon follow suit.

Some borrowers seriously contemplate switching their banks when there are no signs of a rate cut. Is switching the lender a wise deal? Akash has taken a Rs 40 lakhs loan at a floating rate of 13 percent a year ago. The loan tenure is 10 years. Should he switch to a bank offering 10 percent floating rate? For Akash, balance transfer or switching to another lender seems to be the only way to benefit from the current lowering interest regime.

Ensure substantial EMI difference

Switching a lender for a 0.25 or 0.5 percent rate difference may not be a great idea. The actual benefit you get from switching the lender may not be substantial in terms of monthly EMI outflows.

Consider the outstanding principal amount is Rs 35 lakhs. At 13 percent floating rate, the borrower owes Rs 55,138 for a tenure of nine years. At 12.75 percent, the EMI due to the lender could be Rs 54,636. Considering other switching fees, the benefit of switching might be insignificant.

Factor in penalties

Most banks charge a prepayment penalty if the borrower decides to switch his lender. This amount could be as much as two percent if the borrower decides to refinance rather than repay the lender with his own savings. Two percent of an outstanding principal amount of Rs 35 lakhs means a penalty of Rs 70,000.

Switching comes with a fee

The new lender may charge a processing fee to take over the loan. It can be about 0.50 to one percent of the total loan amount. Apart from this you may incur some stamp duty and other expenses. Do not forget to takes these additional expenses into account when deciding on the merits of switching. Your new lender may also ask you to obtain a fresh set of NOCs, which may come at an additional cost.

Do your investigation

All lenders do not reduce their rates at the same time. If you switch to a lower rate and realise that your old lender had just reduced rates, your entire switching exercise might be a waste. Explore if the new lender has always systematically passed on rate cuts to his customers.

Do not switch frequently

Some people may be tempted to switch if their lenders hike their rates too often. However, switching lenders very often can only mean loss in the form of penalties and fees. Moving from a floating to a hybrid loan may not be a bad idea.

Balance transfer ideal in initial period

If you are at the fag end of your loan tenure, it makes little sense to switch. This is because a huge chunk of your EMI repayment goes towards the interest component in the initial years.

Buying real estate can be one of the biggest decisions in a person's life. Whether one buys a home or a business location, it is immensely valuable to know what to look for and what to avoid at all costs. So many rides on a new home because this is where you relax, have fun, sleep, eat; in short, it's the place central to your life.

When you are looking at a house or any space for that matter and considering whether to buy it, it helps to look at it with "Feng Shui eyes." From a Feng Shui perspective we can discern many kinds of properties where some possess intrinsic good fortune and benefits everyone who lives within the chi that is all pervasive and abundant.

Feng Shui lays down practical guidelines that enable one to select good property - property whose chi is not afflicted by hostile hills, whose luck is not blocked by harmful structures and whose yang energy is vibrant and strong. There are also Feng Shui formulae that enable one to custom design his or her luck. Not all Feng Shui afflictions can be cured, however a professional Feng Shui consultant should be able to tell you what you can expect from this location, such as good financial or business opportunities, prosperity and health.

Look at the terrain and what surrounds your property. Look at the way roads are laid out. Are any of the surrounding roads pointing directly at any part of your house? Next look for nearby natural water features and check the orientation of different units to the water. As a general rule water in front is always better than water behind.

Observe the design features of house facades and elevations and ascertain whether they appear threatening? House facing a field is excellent Feng Shui as this makes up what is known as "bright hall" effect bringing in benign chi which can settle and gather momentum before entering your home. Facing a river that flows past the home even at some distance is excellent Feng Shui and it's not surprising that homes and apartments located at water fronts always fetch a higher real estate value.

It is always best to look at potential property during the early morning hours and the best time would be during the hour of the dragon between 7am and 9am. You can also view property at the hours that correspond to your own animal sign as per Feng Shui astrology.

They are simple guidelines but if you can investigate at least these few matters you will not go far wrong. There are many things you can do to activate the Feng Shui luck of your home after you buy it. But before you commit to buy, it is really necessary to get certain things right. It's important to know that every house has "Feng Shui flaws" and that no house is perfect. However, you should be aware of what you are buying so that you are knowledgeable about what kinds of problems might be associated with the house. The good news is most Feng Shui flaws can be corrected.