See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/327164298

Real Estate Project Investment Strategy in Context to Market Timing and

Developer Experience

Conference Paper · November 2017

CITATIONS READS

0 1,025

2 authors:

Jigar Pandya Dr. Vikram M Patel

Pandit Deendayal energy University Adani Institute of Infrastructure Engineering
8 PUBLICATIONS   3 CITATIONS    30 PUBLICATIONS   44 CITATIONS   

SEE PROFILE SEE PROFILE

Some of the authors of this publication are also working on these related projects:

Critical Factors affecting Real Estate View project

Senior Citizens Housing Research View project

All content following this page was uploaded by Jigar Pandya on 15 March 2020.

The user has requested enhancement of the downloaded file.

 Real estate project investment strategy in context to market
timing and developer experience

Author Details

Author 1 Name: JIGAR V. PANDYA

Department: CIVIL ENGINEERING
University/Institution/Organization: Research scholar, KADI SARVA
VISHWAVIDHYLAYA (KSV University)
Town/City: GANDHINAGAR
Country: INDIA

Author 2 Name: Dr. VIKRAM PATEL

Department: CIVIL & INFRASTRUCTURE ENGINEERING
University/Institution/Organization: ADANI INSTITUTE OF INFRASTRUCTURE
ENGINEERING
Town/City: AHMEDABAD
Country: INDIA

Corresponding author: JIGAR PANDYA

Corresponding Author’s Email: [email protected]
Alternate Email: [email protected]
Structured Abstract
Real estate projects are difficult to time due to skewness in supply and demand. Real estate
developers time their projects. There are multitude of factors which affect choice of project
while choosing a location. Role of government planning body is critical as they decide on
building byelaws such as setback, margins, shape and area of the land parcels allotted to the
land owners using micro-planning tool; town planning scheme model. Early returns on
investment (esseence of time) is of utmost priority for every real estate developer (builder)
since the returns are to be invested in a new project (land) in an exapanding market when land
values are on a rise.

The study investigates a 15 year time cycle (2001 to 2016) in city of Ahmedabad with stratified
sample data of more than 200 completed Real estate projects (residential and commercial) and
inquires into the timing of project announcement in reference to the phases of market cycle;
recovery, expansion, hypersupply and recession. A multiple linear regression analysis of the
projects reveal interesting trend on conrasting decision making adopted by experienced
developers as compared to new/amateur real estate developers.

Key findings include; contarary to a popular belief a higher FAR does not impact project
decision of location nor timing. Experienced real estate developers are likely to develop land
located farther away from Slums. High percentage of developers are likely to announce projects
with larger land area in market conditions of expansion and hypersupply, away from slums and
in relatively developed neighborhoods. In the phases of recession, real estate developers tend
to announce projects on poor locations, especially on land parcels with low yield value. The
visibly intense market has deep rooted strategy of collective ethos that critically affects decision
making on an investment and varying risk appetite of developers.

Keywords: Real estate; timing; location; developers; Ahmedabad

 Real estate project investment strategy in context to market
timing and developer experience

1. Introduction
Real estate markets are capital driven, opportunist and highly complex to dissect. The visibly
intense market has deep rooted strategy of collective ethos that critically affects decision
making on an investment either a success or a failure. Early returns on investment (essence of
time) are of utmost priority for every real estate developer (builder) since the returns are to be
invested in a new project (land) in an expanding market when land values are on a rise.

This research makes in inquiry on critical factors responsible for Real estate development
decisions by real estate developers especially in context of land parcel location and its
attributes. It is an effort to understand the modus operandi and the psyche of real estate
developers operating in city of Ahmedabad, Gujarat. After summarizing the literature review,
a research gap was identified, where there is no conclusive research done on aspects of location,
timing and perception of real estate developers/builders, especially in the Indian construction
sector scenario that delves into the decision making based on spatial (location) factors. Real
Estate industry functions irrationally in Indian cities as real estate developers often get stuck in
legal hassles since the country does not have any land title insurance policy framework. This
has a huge bearing on the real estate urban land supply. Urban land supply is streamlined
through the Urban Planning bodies regulated by the State Governments. Each State has their
Town Planning Department and a State Act under which Urban Development Bodies are
constituted.

In state of Gujarat, Urban bodies and town planning activities are regulated by the Gujarat
Town Planning and Urban Development Act, (GTPUD Act, 1976) under which Urban
Development Authorities (UDAs) and Area Development Authorities (ADAs) are constituted.
The role of these bodies is to provide serviced urban land (usually equipped with paved road
network, streetlights, drainage, water supply and electricity services) as a platform for the real
estate developers to built housing, commerce and social amenities. This is achieved by a land
pooling and readjustment micro planning mechanism called the ‘town planning scheme’ (TPS).
Real Estate developers also are dependant on the UDAs and ADAs, to make market friendly
urban development plans (also known as Master Plans in other cities), which are compressive
with explicit land use zoning attached with calibrated F.A.R. (Floor Area Ratio also known as
F.S.I, Floor Space Index). However, the best contribution a TPS brings to the serviced urban
land is freedom from any easement rights that may exist on a land parcel as all final land plots
allotted after readjustment have an abutting road to it and a much needed clarity on land title
since every land owner having rights on the land is required to pay a betterment charge (value
improvement tax) on the final land plot, before it can be used for real estate or urban
development. The TPS mechanism also provides a smooth transition of agricultural land
located on the urban fringe which can be systematically used for real estate development
purposes.

2. Real Estate Operations

In the city of Ahmedabad, Real estate developers are aware of the fact that prime urban land
is a scarce resource, where growing population pressure is always triggering a need for
housing, commerce and social infrastructure. The established and proficient real estate
developers resort to land banking by which they acquire rural-agricultural land located at a
moderate distance from the urban fringe. They ardently hope that this land is included within
the perimeter of the upcoming Urban Development Plan and will be included in a land use
zone which can be readily used in future or real estate development. They await the
announcement of a TPS which will not only shoot up the land value but also allow them to
maximize their return on the available F.A.R. for real estate development. Their biggest
challenge is to manage buying agricultural land, get a clear marketable title and convert the
land for non-agricultural land use. Then there are other developers who are keen on buying
this marketable land as their intention is to readily invest by constructing real estate projects.
The capital risks are often hedged by making a soft sale (early or pre-sale before
construction) to a group of real estate investors/brokers/stakeholders who often park their
capital in ready possession built spaces who later outright sell it to an end user for the a
residence or commercial operations, depending on the occupancy use certificate.

3. Literature Review
Urban Planning in India is not specifically designed to suit real estate, and is more leaned
towards aspects of housing density, commercial activity and industrial zoning. The local city
planning bodies do not include real estate professionals as a part of their planning process and
public participation is limited. Political will and land hoarders pressure lobbies create sizable
impact. The most important factor in the case of Real Estate is location which affects the
value of returns. One of the research findings suggests that housing sector constitute about
80% of real estate in terms of value and 20% in terms of commercial use. Further on, there
are several building guidelines and standards in various cities and state but implementation
has been a major roadblock for both developers as well as the authorities. (Singh and Komal,
2009 14) This creates reliability issues in the market as property buyers have to rely on
existing and experienced real estate developers to ensure their property has least problems
pertaining to a clear title. In a research, it was concluded that experienced real estate
developers have a better reputation and brand among established and prospective property
buyers. (Radhia ‘et al’ 2013 10)

In a study it was critically pointed that Real estate developer should pay more attention
towards what the customers prefer, and not just reflecting on their experience when setting up
price for their new products. (Nasar & Manoj, 2003 11) This is especially true for Real Estate
markets where choosing a right project at a location becomes vital for its timely success. Real
estate developer will have a better reputation and brand if they can interpret what customer
need, act professionally, deliver their product on time, maintaining their quality, and support
the customers with good after-sales service will motivating agents to the real estate investors,
the developer’s guidance and advice based on the past experience and awareness of latest
market trends would be helpful for the investors to decide a better investment decision.
(Nasar & Manoj, 2003 11)

When it comes to implementing a project, past experience of real estate developers can help a
project with clear land title and efficient marketing strategy for a project. Another study done
in continent of Africa suggests that every business that aims at remaining relevant in the
market and maintaining their customers must always research on the changing market of
revised customer needs. Every buyer would want a house that suits his/ her specific needs.
Development of houses with the guidance of professions also has significant impact on the
number of houses sold in Nairobi. This could be attributed to the quality and the confidence
that clients have when buying a house bearing in mind that it was developed by professionals.
(Olick, 2013 12) Here the researcher/s clearly points at the proficiency of a real estate
developer which is acquired by qualification as well as past experience of similar projects
executed.
Real estate property buyers seldom evaluate the social returns on the property purchased. In
an interesting study done on measuring social value of project it was observed that
individuals buying a property had more at stake which included their lifestyle, social status,
activities and family all revolve around the neighbourhood and property they reside in.
(Watson ‘et al’ 2016 13). The study was done to measure SORI (Social Return on
Investment) typical post-occupancy research addresses the relationship between design and
individual building users, overlooking the importance of their social organization as a
community of building users which is fundamental to understanding what is happening in
occupied buildings. The tool- SROI measures outcomes in building users. It was concluded
that there was no accurate methodology to measure the social value of buildings, a mutual
interaction between physical building design, communities of building users and the
significance of building user group dynamics, and the tool –SROI is only capable of drawing
attention to the social value of buildings through the detailed qualitative and quantitative data
it collates, but it cannot specifically take into account the value produced by the sociality of
the building user community. (Watson ‘et al’ 201613) This evidence applies to residential,
commercial, hotel and recreational facilities. The study eventually concludes that level of
amenities provided by a real estate project is one of the best social returns a project can offer
to its end users.

Real estate property prices vary in every macro markets due to spot values and
neighbourhood preferences. However, for a property buyer it becomes important to
investigate the percentage breakup of what constitutes the property price. In a study
conducted in city of Meru, Kenya, it was observed that income alone accounts for more than
70% of the changes in real estate property prices in the municipality other factors remaining
constant. Demand for real estates in Meru was found to second in importance in influencing
the prices of real estates. Demand alone contributed about 20% of the changes in prices.
Surprisingly, location of the property was found to be insignificant in influencing the prices
of real estate property. The study concluded that location as a factor does not play a big role
when one is considering purchasing real estate property within the core of a city, municipality
jurisdiction. (Messaha & Kgigi, 2011 15)

4. The Study
Real estate developers are often unable to accurately assess the best possible urban use for a
land parcel as its use is highly governed by their land purchase price and the available
building bye laws permits by which they can benefit from it. There are several cases of
projects where real estate developers have chosen to construct a commercial project only
because the abutting road width and building byelaws permitted such a development only
later to realize that market potential was best for a residential development. Conversely, there
have also been common observations where the Urban Planning bodies have gone wrong on
demarcating land use zones where developments and market forces have had precedence on
its optimum real estate use. There have been clear observations of unauthorized (illegal)
urban developments (housing as well as commercial) along with several authorized
developments lying unoccupied or incomplete due to demand & planning insights.

Gujarat Institute of Housing and Estate Developers (GIHED) is an independent body of

registered real estate developers in the State of Gujarat since 1980. It had about 720 active
registered real estate developers in city of Ahmedabad in year 2001. By year 2015 the
actively registered members grew to 2100 in the city of Ahmedabad, with over 4000
registrations including rest of the cities in the State.

4.1 Objective

The objective of the study was to evaluate the critical factors affecting decision making on
choice of project with respect to location and its attributes. The key questions were;
1. What physical elements of the location are crucial for making a decision on choice of
project viz Commercial or Residential for a real estate developer?
2. Are the planning regulations detrimental in choice of project or is the decision taken is
purely on basis market choice for a given location?
3. How real estate developers time their project announcements with respect to the
location of land, its attributes and the neighborhood character.

4.2 Critical Factors

To understand which factors influence the choice of the project, A survey of 60 established
(prominent and proficient) developers (members of GIHED) was conducted to shortlist the
most critical location aspects associated with a land parcel for real estate development
decision. Factors most critical included; Frontage length of the plot to its abutting road width,
Floor Area Ratio (FAR/FSI) assigned for the development zone, Size/Area of the land parcel,
Neighborhood character, and distance of the land parcel from a nearby slum area. The study
of these factors will be of huge benefit to the Urban Planning Bodies which will allow them
to make calculated improvements to their implementation strategy. Further on, a study of
these factors will also give market insights into the modus operandi of real estate developers
as a collective group to estimate how theese factors relate to each other and the amout of
impetus each one has on the choice of development decision. A brief discussion on each
factor considered for research is given below.

1. Road Frontage to Depth Ratio: The Road frontage and the depth of the land parcel
from the abutting road have always fetched higher value in real estate. It is an
accepted fact among real estate developers that a higher Frontage on the road will
give more visibility and access to their project and hence higher return on investment.

2. Abutting Road Width: As per the building byelaws (GDR) of Ahmedabad Urban
Development Authority (AUDA) and Ahmedabad Municipal Corporation (AMC)
there are restrictions on type of developments allowed on a land parcel depending on
its abutting road width. For example a hotel building is only allowed on land parcels
abutting on 18m road or wider. Similarly, a School is only permitted on abutting road
of 9m or narrower.

3. Floor Area Ration (F.A.R or F.S.I) Total built-up allowable on a Land parcel is
dependant on the Zone in which it is located as F.A.R is assigned by the Zone. F.A.R.
is the key to ROBU (Return on Built-up) for every real estate developer. Land parcels
are bought, sold and valued primarily on available F.A.R. on it. It gives a measure of
optimum profits that can be availed from a real estate project but not necessarily the
real value that can be derived from a choice of development.

4. Area of the Land Parcel: The total land area is critical to the development as there
are selective incentives and restrictions attached with it. For example a land parcel
below 500 M2 (meter Square) is not allowed any commercial development. Similarly,
a Land parcel below 2000 M2 does not require a common open space in its
development (10% area). Land parcels above 1 Acre (4200 M2) were under incentive
 of section 80 (I) B from 2005 to 2011 all over India. For the purpose of study Land
parcels above 600 M2 were considered as they provide both commercial as well as
residential choice of development. Similarly land parcels above 50,000 M 2 have been
ignored in the study sample as their spatial value is difficult to ascertain. (Primarily,
since real estate developers can choose to create their own value of space within the
land itself which will totally offset the measurement criteria selected for this study)

5. Neighborhood Character (level of service and amenities available): A simple way

to measure the availability of amenities and services such as transport, marketplace,
banking, hospitals, etc. is to measure the percentage of development in a surrounding
radius. As there is a lag of 2 to 3 years before a real estate project is available for
possession and use, many services can come up or can be gone due to market forces
and hence they cannot be individually measured. It is practical to believe that a
developed neighborhood in terms of total Built up vs. Open land available will have
higher services available in present and near future. For the purpose of this study,
neighborhoods were measured for existing development in 1 kilo-meter radius from
the edge of the land boundary at the time of project announcement.

6. Presence of Slums in the Vicinity: Slums and unauthorized developments do cause

nuisance and majority of developers and buyers want to stay away from such
settlements. This is a known fact. The question is how its presence affects the dependant
variables such as choice of project or timing of a project announcement which are
discussed below.

For successful completion and high yield on projects, real estate developers have to evaluate
each location on its merits and demerits for the above six factors. Three key attributes for
decision making were identified which require inquiry into the dependency of these factors.
A brief of these attributes is discussed below.

1. Experience (Rating) of a Developer: Real estate developers garner trust of their

buyers by series of projects executed over time displaying ethics concerning clear title
of land, timely possession, projects without litigations and indulge in transparent
capital transaction processes. Experienced developers settle down on their own modus
operandi showing consistency in project delivery to sustain and grow their brand
 value. In reference to project decisions and development strategy their decision
making is worthy of an enquiry as compared with new and upcoming real estate
developers who may compete in locations in their project vicinity. The study of this
dependence will give an insight on market sustenance and competitiveness.

2. Timing of the Project: Real estate market cycle is broadly divided into four quadrants;
viz; Recovery, Expansion, Hyper Supply and Recession. Market data suggests
decreasing demand and high prices are linked with Hyper-supply, while stable prices
and increasing demand in sales can justify a recovering to expanding real estate market.
How developers respond to location attributes, neighborhood and choice of projects in
different market conditions has a high impetus on overall project returns. In expansion
phase of a real estate project when demand is high, real estate developers tend to
announce their projects early and often park the early advance sales proceeds to new
land purchase and subsequent project announcements. Findings also suggest that in
recession and recovery phase, developers prefer to complete construction of previously
announced projects and refrain from buying new land as land values stabilize and
decline (correct) in some neighborhoods.

For the purpose of the study the six location factors were identified as dependent variables
while the three real estate developers factors; choice of project, rating (experience) and project
timing were identified as independent variables which influence the real estate project decision
making.

4.3 Data Collection

To understand the relation of choice of real estate project using location attributes, a
perimeter an area of about 900 km2. Falling within the Development plan of AUDA, 2011
was considered. Real estate projects were identified in different clusters; North, North West,
West, South West, South, East and central, within the 900 km2 of Ahmedaad city. The details
of neighborhoods and clusters is given in Table 1.0. The timeline for data collected was for
15 years (2001 to 2016) . where real estate developers have constructed projects. During this
timeline the real estate market cycle has witnessed all the phases of the market cycle;
recession, recovery, expansiion, and hypersupply. Further on, all the selected obseration
samples that were collected were part of either an active or previously implemented TPS. The
activiity of construction and real estate development was varied among different clusters.
Thus the numer of samples in the most active TPS* was more as ompared to less active TPS.
(* An activ TPS refers to a Town Planning Scheme where real estate developers are more
acive in announcement and development of projects, resulng into quick development of the
neighborhood and vicinity of the concerned TPS.)
Table 1.0
Location/ Neighborhood Cluster Number of Type of Project
Projects Residential Commercial
Chandkheda, Motera, Tragad,
Vaishnudevi Cluster 1 NORTH 21 14 7
Gota & Sola Cluster 2 NORTH WEST 16 11 5
Bopal & Ghuma, Bodakdev, Thaltej,
Shilaj, & Vastrapur Cluster 3 WEST 51 30 21
Prahladnagar, Makarba, Sheila &
Sarkhej Cluster 4 SOUTH WEST 40 24 16
Juhapura & Narol Cluster 5 SOUTH 16 10 6
Vastral & Nikol Cluster 6 EAST 30 22 8
Gulbai tekra, Navrangpura & University Cluster 7 CENTRAL 27 12 15
TOTAL 201 123 78

Ahmedabad has witnessed a rise in registered real estate developers from 720 to 2100 in a
span of 15 years, A stratified sample size of 201 real estate projects which were announced
and developed successfully (completed with occupancy certificate). 120 unique real estate
developers, measuring six location factors . Data on timing of the project, choice of project
and real estate developer expereince was separaely collected and collated with the sample.
The size or the area of land parcels were limited in the range of 600m2 to 50,000m2. The
reason for this selection was that land parcels smaller than 600m2 have restrictions on choice
of development including other development restricitons such as height of the building, thus
impacting the available FSI. Land parcels above 50,000m2 are difficult to measure as Road
frontage to road width ratio becomes less important since real estate developers choose to
create an internal enviromment in design to generate value. Due to this very reason all
township projects of 25 Acres were excluded in the study sample. In cases when there was
presence of more than one slum in the neighborhood of 1 sq. kms, the nearest one was taken
for measurement irrespective of its size as compared to the other slum from the nearest point
on the edge of the land parcel. In cases where two roads are abutting to a land parcel, the road
with wider road width is used for measurement. The percentage of development includes all
built-up including slums or any other unauthorized developments.
4.4 Project Finance resource allocaiton

Figure 1.0

Figure 1.0 shows how project timing and finance allocation affects the investment risk on a
real estate project for three type of typical real estate finance models. A solo developer model
represents a project in which real estate developer purchases land and constructs in the same
phase of a real estate market cycle. A joint venture project has two distinct partners where the
land owner does not sell his land but converts its value into equity and partners with a real
estate developers who constructs, markets and sells the property. Here the branded real estate
developer beneits by not requiring to invest in a real estate project. It has to be noted that all
JV projects were announced in the phases of recession and recovery, while all solo projects
were undertaken during the phases of expansion and recovery for the real estate market
cycle. Figure 1.0 shows the averaged project allocation curves for both solo and JV projects
as compared to a typical S curve for projects undertaken by general project contractors.

Among 201 project surveyed, data of 30 solo projects were analysed for resource allocation
to the percentage of project completion which were announced during the expansion and
hypersupply phase of the real estate maret cycle. The data also featured 14 joint venture
projects or which financial resource allocation data was collected. For solo projects ,an
averaged smoothened resource allocaiton curve suggests that about 60% of project finance
(land and construction cost) was invested in a project in 24% of project time cycle. The
project time cycle was adjusted to a 2 year timeline for all data of the projects analysed.
Figure 1.0 clearly indicates the nature of financial risk involved for solo projects is much
higher compared to JV projects which require them to recover early invetment. This
empahsises a need to understand the importance of location and timing as critical macro
factors affecting real estate project returns.

4.4 Variables and their attributes

For a stratified sample size of 201, a total of 9 variables were chosen for analysis. Among
these 9 a total of 6 independent variables and their denotations are; 1Frontage to depth ratio -
Fd, 2. Abutting Road Width - Rw , 3. Floor Space Index FSI -Fsi, 4. . Area of Land - Ar, 5.
Neighborhood (percentage of development- Built vs. Non Built//Open) -Nr, 6. Distance of
the Land Parcel from surrounding slum- Sl. Remaining 3 variables were seen as dependant or
predictor variables in the study; 1. Rating/Experience of the Developer –Dv, 2. Choice of
Project – Cp and 3. Timing of the Project Announcement – Pt.

The following table shows how dependent variables are classified and ranked for purpose of
analysis in order of precedence, hierarchy and Priority.
Table 2.0
Experience of Developer Experience and Expertise of Completed Projects Classification
Proficient More than 15 other projects 4
Experienced 11 to 15 Similar projects 3
Amateur 5 to 10 Similar projects 2
New Less than 4 similar projects 1
Timing of Project** Stage of the Market Cycle Classification
2008 to 2009 & 2012 to 2013 Hyper-supply 4
2006 to 2007 & 2010 to 2011 Expansion 3
2004 to 2005 Recovery 2
2014 to 2016 & 2001 to 2003 Recession 1
** Year and timing of market cycle have been collected through various market sources and real estate developer
responses for Ahmedabad real estate markets.

4.5 Correlation among variables

The correlation coefficient r measuring the strength and direction of a linear relationship
between multiple variables on a scatter-plot was used to establish relation among the
variables, where r value close to +0.7 establishes a strong positive correlation while a value
below or cose to -0.7 would conclude a strong negative correlation.

Table: 3.0
Correlation
Matrix x1(FD) x2(Rd) x3(FAR) x4(Ar) x5(Dev) x6(slm) Y1(R) Y2(Ty) Y3(Tm)
x1(FD) 1.00
x2(Rd) -0.07 1.00
x3(FAR) 0.19 0.08 1.00
x4(Ar) -0.12 -0.01 -0.53 1.00
x5(Dev) 0.13 -0.04 0.44 -0.32 1.00
x6(slm) -0.03 0.06 -0.15 0.09 -0.10 1.00
Y1(R) 0.06 0.12 -0.06 0.07 0.13 0.08 1.00
Y2(Tm) -0.06 0.02 0.01 -0.12 -0.14 -0.15 0.00 0.08 1.00

From the results of Table 3.0 it is can be preliminarily interpreted that;

1. For the stratified sample selected, FAR is negatively (moderately) correlated with the
area of the land parcel (0.53), which shows that real estate developers are more likely
to invest in larger area of land when available F.A.R is low and vice versa may choose
to develop a smaller size of land if the available F.A.R is high.
2. F.A.R is positively (moderately) related with percentage of development in the
neighborhood which strongly suggests that Urban Planning body (AUDA) considers
allocating higher F.A.R in developed areas as compared to distant underdeveloped
areas in their zoning policy. This holds true referring to their master planning
proposals.

The above interpretations are critical, considering the fact that size of land (Ar) and
percentage of development (Dev) have no significant correlation with each other which
expands the research problem to the fact that real estate developers are likely to club
(aggregate), contiguous (adjoining) land parcels to create a large size of land for planned
development approch. Similarly, developers can subdivide (Seggregate) smaller size of land
parcels to develop visible and access centric developments, abutting closer to transportaiton
routes.

4.6 Predicting Dependancy

Decision on choice of project is predominantly decided by possible buyers/demand for the
built units in the selected location. Timing of the project depends on availibility of finance
and market conditions. Decisions on timing and choice are often percieved differently by
every real estate developer as they have thire own understing on market dynamics and risk
taking confidence.

Table 2.0 shows independent variables on Experience of Developer and Timing of the project
announcement and their respective classificatoin. Understanding the classification is
important as it also provides insights into the herirachy and priorty of decision making in
context to location of the project. Every real estate developer goes through a learning curve in
terms of capital investment, its returns and market feedback. Real estate developers who have
been in the market for a decade or more witness all phases of a real estate market cycle and
are closer to reality on matters of buyer perception and speculation. With experiece they get
trained to take more accurate decision on timing and choice of the project. For the purpose of
this research, real estate developers were classified into four distinct categories based on their
expereince of past projects;Proficient, Experienced, Amateur and New.

Real estate developers often choose projects based on acquiring land values. City trend
suggests that real estate devlopers often resort to land banking buy acquiring land on the
urban fringe just before or at the onset of announcement of the micro-planning land pooling
tool (town planning scheme) adopted by the Ahmedabad Urban Development Authority. By
doing so they benefit for the serviced urban land values. There are also several cases of Land
being purchased within the city core for redevelopment as they eye a higher F.A.R. and
lucrative market in a well developed neighborhood.. If the land values are higher, commercial
development is often the first choice as it gives higher returns while lower land value land
parcels are often preferred for constructing mult-family housing such as apartments,
condominiums or sparwing villas with higher social and recreational amenities. The heirachy
of classification is based on land values and linked to potential development options.

Timing of project announcement is a critical aspect for every real estate developer as their
primitive strategy is to hedge risk to potential investors willing to make early investments as
they are aware of rising real estate values as the project gains construction momentum. This
phase is requires careful planning as investors may not be available in all market conditions.
Hypersupply and Expansion are best phases to make new project announcements as investors
often lap up real estate opportunities in upbead market conditions. On other hand phases of
Recession and recovery are often seen as period of project completion where real estate
values stagnage and demand shows substantial decrease. Classification of project timing is
therefore calibrated as Hypersupply being the best phase to make new project announcement
and recession being the worst solely based on potential early sales.

4.7 NULL Hypothesis

The independent variables Frontage to depth Ratio (Fd), Floor Space Index (Far), Abutting
Road width (Rd), Area of Land parcel (Ar), Distance from Slum in meters (Slm) and
Percentage of Neighbourhood Development (Dev) have little or no impact on the dependant
variables; Rating/Experience of Developer (Dev) in past projects, Choice o Project (Cp) and
Timing of the Project Announcement (Tp)
Table: 4.0
Predicting Developer Experince Predicting Project Announcement
(MODEL 2) (MODEL 3)
Dependant Variable
Rating/Experience of Developer (R) in past Timing of the Project Announcement (Tp)
projects,
Independent Variables
1. Frontage to depth Ratio (Fd)
2. Floor Space Index (Far)
3. Area of Land parcel (Ar)
4. Distance from slum (Slm)
5. Abutting Road width (Rd)
6. Percentage of Neighborhood Development (Dev)

All data for the independent variables was collected as per the existing site conditions of
location and neighorhood. Dependant Variables are classified as per the priority and
heirarchy rank of what would be the best suitable option starting from best as 4 to 1 as worst
scenario. These classification/numbers were assigned by doing a detailed survey of the
existing and practicing real estate developers for which sample data was collected. (Table
1.0).

4.8 Analysis Results

TABLE 5.0

Regression Statistics
Multiple R 0.57
R Square 0.32 PREDICTING DEVELOPER EXPERIENCE
(MODEL 2)
Adjusted R Square 0.30
Standard Error 0.96
 Observations 201.00
Significance
ANOVA df SS MS F F
Regression 6.00 84.47 14.08 15.367 0.00
Residual 194.00 177.74 0.92
Total 200.00 262.22
Standard
Coefficients Error t Stat P-value Lower 95% Upper 95%
Intercept 0.10 0.45 0.22 0.829 -0.78 0.97
x1(Fd) 0.09 0.06 1.56 0.121 -0.02 0.20
x2(Rd) 0.01 0.00 3.24 0.001 0.00 0.02
x3(Far) 0.21 0.20 1.06 0.290 -0.18 0.59
x4(Ar) 0.00 0.00 -1.79 0.076 0.00 0.00
x5(Dev) 0.02 0.00 6.20 0.000 0.01 0.03
x6(slm) 0.00 0.00 1.95 0.052 0.00 0.00

Developer experience (model 1)

Table 5.0 shows the regression output for model 1. A negligible P value percentage
development (Dev) strongly asserts that proficient and experienced Real estate developers
are more likely to propose project in a neighbourhood where percentage of development is
more. Newer and amateur real estate developers are likely to propose projects on the city
outskirts or urban fringe. The finding is intriguing as cost of land acquisition (land value) is
higher in developed neighbourhoods compared to land on the urban fringe and away from the
central city core. This establishes a theory that new entrants into the real estate business take
higher risk in their rate of return by investing while ensuring a lesser capital risk. On the other
hand experienced and established developers prefer locations which are developed where the
risk of return in lesser with higher capital investments on such locations. The same theory
applies to abutting road width (Rd), where experienced and proficient developers invest in
land abutting to wider roads as compared to narrower roads primarily to have more visibility
of their brand value as well as have a wider options on choice of developments and returns. A
P value of 0.052 also indicates that proficient developers tend to propose their projects away
from slums as compared to new developers who are willing to take a higher risk of having
their investment closer to a slum development.
TABLE 6.0
Regression Statistics
Multiple R 0.28
R Square 0.08 PREDICTING PROJECT TIMING
Adjusted R Square 0.05 (MODEL 3)
Standard Error 0.89
Observations 201.00
 Significance
ANOVA df SS MS F F
Regression 6.00 12.93 2.15 2.715 0.01
Residual 194.00 153.98 0.79
Total 200.00 166.91
Standard Upper
Coefficients Error t Stat P-value Lower 95% 95%
Intercept 4.10 0.41 9.89 0.000 3.29 4.92
x1(Fd) -0.04 0.05 -0.83 0.410 -0.14 0.06
x2(Rd) 0.00 0.00 0.20 0.843 -0.01 0.01
x3(Far) -0.04 0.18 -0.20 0.839 -0.40 0.32
x4(Ar) 0.00 0.00 -2.24 0.026 0.00 0.00
x5(Dev) -0.01 0.00 -2.59 0.010 -0.01 0.00
x6(slm) 0.00 0.00 -2.26 0.025 0.00 0.00

Timing of project announcement (model 2)

Table 6.0 shows regression output or model 2 indicating a strong relationship of project
timing to Area of the land parcel (Ar), Percentage of development (Dev) in the
neighbourhood and distance of land parcel from the slum (slm) is observed with timing of
project announcement with significant p values of 0.02, 0.01 and 0.02 respectively. There is
conclusive evidence that timing of project announcement has a strong relationship with area
of land parcel developed. Real estate developers show a strong trend of announcing projects
with higher land size in upbeat stages of hyper supply and expansion. In phases of recession
and recovery real estate developers choose to develop projects on smaller size of land.
Neighbourhoods which are more developed tend to have higher activity of development in
stages of hyper supply and expansion compared to neighbourhoods which are situated on
urban fringe and outskirts of the city. In phases of recession and recovery more projects are
proposed and announced closer to slums as compared to high activity away from slums in
upbeat market conditions of expansion and hyper-supply. As an economic trend land values
begin to rise in expansion and peak in Hyper-supply phase. Land values stabilize and correct
in phases of Recession and Recovery. There is no significant relation to abutting road width
(rd), F.A.R (Far) or frontage to depth (Fd) ratio in terms of project timing.

5. Conclusions & Recommendations

The Study concludes that proficient real estate developers are keen on proposing projects in
neighborhoods that are relatively more developed and choose to propose projects away from
the slums. AUDA and other UDAs can take up an initiative to include existing slum
redevelopment using the Town Planning Scheme mechanism in developed neighborhoods.
Such an approch will help rehabilitate the slums. The TPS can also consider developing a
neighborhood partially on urban fringe to encourge proficient and experienced developer to
take up projects. To arrest remote areas from developing at slower pace the AUDA should
plan its TPSs more efficiently after assessing its stakeholders and working closely with real
estate developers. The only danger in doing so is sudden rise in land values due to lobby
presssures which can be resolved with careful planning and execution of the TP Scheme
announcements.. A higher incentive scheme for real estate encourage real estate developers to
have projects not only closer to the slums but also get their help in rehabilitation through PPP
(Public Private Partnership) model.

Proficient and experienced real estate developers of Ahmedaad city prefer developing larger
land parcels and also choose to develop land parcels within a relatively developed
neighborhood. AUDA can use this finding to time their TPS in phases of expansion and
hypersupply targetting pockets which they wish should develop quickly to achieve harmany
and balance of urban life, housing and urban land economics.

References
1. Andy Krause and Christopher Bitter, Trends in Real Estate Valuation: Spatial
Econometrics, Land Values and Sustainability
2. Georgia Warren‐Myers The value of sustainability in real estate: a review from a
valuation perspective
3. Waldo L. Born and Stephen A. Pyhrr, Real Estate Valuation: The Effect of Market
and Property Cycles
4. Crosby Valuation Accuracy, Variation and Bias in the Context of Standards and
Expectations
5. Dale-Johnston D (1982), An Alternative Approach to Housing Market
Segmentation using Hedonic Price Data, Journal of Urban Economics, 11, 311-332
6. James C. Bonbright, (1937) Valuation of Property A Treatise on the Appraisal of
property for different Legal Purpose. McGraw-Hill Inc.
7. Sayali Sandhor, Ravindra Bapat, N.B. Chapalkar (1998) An analysis of behavior of
Real Estate in India – A case of Pune City –Real estate research in Asia - Past,
Present and the Future- Journal of the Asian Real Estate Society,Vol 1 Page 1 -16.
8. Ammani, P. and Rao, H. P. (Dec., 2015) Hyderabad residential Real Estate Market
– A strategic analysis. National Conference on Emerging Trends in Management
Research. Organized by Narsee Monjee Institute of Management Studies,
Hyderabad.
 9. Raden, Sudarso, et al (April 2013), Attributes Influencing Housing Product Value
and Price in Jakarta Metropolitan Region- AMER International Conference on
Quality of Life.
10. Nasar K.K & Dr. Manoj P.K. SS (March, 2003) Real Estate Development In India And The
Behavior of Investors to Invest In The Real Estate Market: An Empirical Investigation , SS
International Journal of Economics and Management, Volume 3, Issue 2
11. Risper Olick (2013) Relationship between housing liquidity and real estate market maturity
in Nairobi county, School of Business, University of Nairobi
12. Kelly J. Watson , James Evans ,et al (2016) Capturing the social value of buildings: The
promise of Social Return on Investment (SROI) – Elsevier, Building and Environment 103 -
289e301,
13. Vandana Singh and Komal (2009), Prospects & Problems of Real Estate in India,
International Research Journal of Finance and Economics Issue 24
14. Omboi Bernard Messah and Anderson .M. Kigige, (2011) Factors Influencing Real Estate
Property Prices; A Survey of Real Estates in Meru Municipality, Kenya, Journal of
Economics and Sustainable Development, Volume 2.
15. AUDA- Ahmedabad Urban Development Authority: Website resource –www.auda.org.in

View publication stats