TENANT SCREENING REPORT SERVICES How Tenant Screening Reports Work
Realty education
1. Introduction :
• Mankind has been raising structures for more than 8000
years now. Some of the best developments have taken
place more than 2000 years ago . Public Buildings in
Rome & Pyramids in Egypt meant for spectacle or
aggrandizement . They were mostly financed by State
funds.
• Modern Real Estate Industry broadly comprises
developments undertaken for sake of selling / leasing
etc.
2. Introduction 2
• Modern urban development i.e. allocation of land for habitable
purposes / master planning / development of layouts etc. evolved
after Industrial Revolution lead to the requirement of a large number
of persons to live together.
• In India this Industry emerged post independence with influx of a
huge population in Delhi neighborhoods.
• Basic design rules / allocation of land for various elements like
roads / green spaces / building byelaws etc have emerged out of
human experience .
• Now the governments world wide have formalized guidelines /
enacted laws for development of Real Estate & Regulation of
developed & upcoming estates.
3. Laws & Regulation 1
1. Laws which have enabled formation of Boards &
Bodies which :
– Develop master plans
– Regulate growth of Urban areas . Agencies like DDA /
GMADA etc.
– Municipal Bodies which provide basic amenities like waste
management / water & sewage etc.
In Punjab we have : Punjab Regional & Town planning Act /
Punjab Municipal Act
4. Laws & Regulation 2
2. Then we have laws which regulate Developers and
Design Rules
3. Laws regulating relationships between Developers &
their Customers
We have Punjab Apartment & Property Regulation Act &
Punjab Apartment Ownership Act.
5. What do we do in this industry
• We create & sell products like Houses / Retail stores /
Offices / Schools /Hospitals / Community Halls / Hotels /
Spaces for Factories etc. and their many variations.
• Let us take a case of Developing a Township. It
encompasses most products like Residential /
Commercial / institutional etc.
6. Feasibility 1
• It is the assessment whether development of the
product at a particular location is a profitable
option.
• Key Considerations :
– Adequate availability of land & its cost.
– Compliance with the Regulations and cost of
compliance
– Cost of execution.
– Expected revenues. Very accurate assessment of
salability and prices
– Profitability
7. Feasibility 2
• Any smart developer would be constantly making these
assessments mentally on any opportunities which
present before him.
• While freezing feasibility a good developer must prepare
a cash flow plan wherein he will list expenses and
collection over the entire tenure of project. He will need
to tie up funds for financing the gaps. He has various
options of raising funds. Developed land can be
mortgaged to raise funds at a reasonable rate.
• As the project progresses , the finance team will
constantly monitor cash flows & profitability. Any laxity in
monitoring will lead to failure without fail.
8. Land
• A good developer will have very good knowledge of land prices /
land laws State Revenue act etc. He will have a good team to
execute purchase deals with landlords whose number may run up to
500 for 150 acres parcel. Land is expensive and landholdings are
small and the best land for development is generally controlled by
very smart businessmen who demand top prices.
• He will have financial tie ups in advance because land has to be
paid for upfront mostly.
• Normally Commercial banks do not finance purchase of agricultural
land. So the developer has to fund purchase through internal
accruals or he may consider alternate means like JV with foreign
investors / tie up with PE firms or Collaboration agreements with
landlords wherein he promises part of the developed land in lieu of
land contributed by landlords.
9. Design 1
• When the developer enters into the final stages of land consolidation , he
starts developing the layout of the proposed project. Layout is planning of
saleable products like plots etc. on the plan of land parcel which shall be
developed.
• Normally very skilled town planners are involved in designing. There
challenge is to make least congested plan without compromising the
efficiency. i.e. if the rules allow up to 50% of the total land parcel as a
saleable area, the designer has to achieve that number and simultaneously
keep the plan very attractive to buyers. Buyers like plans which have more
land dedicated to roads and open spaces.
• Simultaneously, the designers would need to prepare plans for infrastructure
like Roads / Sewage / Storm Water / Electricity etc.
• If the Developer proposes to raise commercial / residential buildings, then
the designers would need to prepare building plans for the same in addition
to layout plans for the township for approval.
10. Sanctions
• Once the land is consolidated and plans are prepared , the developer get
the plans approved by the Regulators. It is a very fine skill because the
regulators would always chose more spaces dedicated to non saleable
items like parks / roads / utilities like Sewage treatment plants while the
interest of developer lies in maintaining the efficiency.
• The sanctioned layout plans would give the no. of saleable units, areas, FSI
etc. and is very comprehensive. Sanctioned building plans would give exact
design and specifications of buildings to be raised.
• The developer would need to pay various govt. fees like CLU / License fee /
External Development Charges / building fees etc.
• Simultaneously the Developer would get Pollution / Environment / Forest /
Ground water extraction / Height clearances etc. from various departments.
11. Construction
• A very accurate assessment of construction cost is must
for assuring that projected profits hold good.
• In most cases , inaccurate cost assessment / unrealistic
execution schedules / careless selection of vendors / bad
cash flow tie ups / poor project management lead to
extreme delays and escalation of costs. The project
becomes a losing proposition.
• Mostly construction is financed through collections from
customers / Bank loans and lately Contractors are also
there who would execute construction in lieu of portion of
developed property.
12. Sales
• The Regulators, in order to protect the interests of customers do not let
Developers launch the project till the Developers have received license for
the same which is given at the end of sanctions process.
• Once license is granted , it is assured that the land parcels are in place , the
layouts are approved , building plans are passed, the developers have given
Financial guarantees towards per chance failure to deliver.
• While fixing the prices , a developer has to keep in minds his costs / prices
at which the similar products are selling in the market and ideally some
margin for the early investors also.
• He has to draft Sale agreements based on his delivery schedule / payment
collection schedule and he has to safeguard himself against unknown
eventualities like change in laws / natural calamities etc. which may lead to
totally different circumstances. The agreement has to comply with fair trade
practices laws etc.
• A good sales scheme should offer more than just the product advertised. A
financial tie is must because most customers cannot pay for the product
through their own resources.