Residential project development in Patna begins as a concept, when the builder evaluates the market and decides on a suitable location-based on historic and projected demand for housing in that area of Patna. The place should either have more demand than supply or there should be a lot of infrastructure coming up there. Experience plays a big role at this stage – developers with insufficient experience tend to misjudge an area’s potential and suffer resulting losses. Though now, in Patna, it seems that any and every area has high demand though the segment may differ depending on the area.
Once the site is identified in a particular area of Patna, the builder needs to undertake a preliminary viability analysis (though we are not sure how many builders in Patna follow a process), which is ideally done through an outside agency. The agency will conduct a feasibility study based on how many households already exist in the area and how many will be required over the ensuing 2-3 years (which is the average period required for a mid-income residential project). The local property registration office in Patna (you really need to visit it to understand its functioning, no one and nothing seems to move here in right way) is the first port of call to get the information of existing households. The expected demand is invariably based on a certain degree of academic extrapolation. However, the location’s overall development profile will give enough control points to make sure a fair degree of accuracy.
Another aspect included in a viability study is the average income profile of the existing and expected population in that area of Patna. This aspect, which basically centers around how much potential property buyers would be able and willing to spend in the area, is very important to arrive at the most appropriate project profile. This, again, is where many inexperienced developers go wrong. They buy into uninformed opinions and guesswork about a location and launch projects with units whose price tags are not calibrated to the locality’s economic profile. Once the results of this miscalculation become clear, it is too late. Considering the cost of constructing larger and better-equipped flats, they cannot cut rates retrospectively without incurring heavy losses and marring their company image or great delays in delivery of the projects.
Competition analysis plays an important part in the feasibility study. In any area with enough real estate market potential, there are bound to be quite a few other developers in the fray in Patna. While analyzing the viability of a developer’s proposed project, the agency will have to assess how many competitors exist, what kind of projects they are launching and when these projects are likely to be completed. If too many other projects are scheduled for completion at the time when the developer intends to launch, the resulting glut will result in reduced demand and give rise to a pricing war.
Once the location and the type of project to be launched there are finalized, the developer scopes the area for available sites. Not all sites are equal even within a small location – some do not have sufficient ground water, while others may have geological flaws which would be very costly or impossible to correct. Some have existing access roads or potential for creation of such roads, while others lack roads and zoning regulations do not permit their creation. Yet others may be ideal but not for sale. Once a suitable site is selected, the developer enters into an option agreement or a contract of purchase or conversion deal in Patna for the selected site.
In a number of cases, developers have land banks in locations that they judged to hold potential for the future. Since such land may have been held for a number of years before actual use, such developers are at a distinct advantage.
If the feasibility study gives a general green signal, the developer will engage an architect to prepare the preliminary plans along with projected costs. These plans then need to be submitted to the planning authorities in Patna for clearance. This is invariably an extremely tedious and time-consuming process as a multitude of permits need to be obtained before the authorities give clearance. Here the “jugaad” technology comes into play. Your contacts and financial back up can save a lot of time in this process. In one word the business ethics are non existence in Patna’s planning authorities.
Once all permits are in place (lucky and powerful developer), the developer will have to raise capital in order to fund purchase of the site and the construction of the project. Established builders with good success records tend have significant cash reserves from previous projects and also have healthy investor pools. Their reliance on bank lending is therefore lower. Less established developers would depend a lot on their personal reserves, revenue generated by pre-sales and costly debt funding. Our preliminary experience in last 3 months in Patna makes us believe that the real estate private funds are lacking in Patna. At best there are pooled funds of few people mostly friends and relatives.
After funding is ensured, the developer can draft the final project plans and layouts and begin construction. Marketing of the project begins alongside. The marketing cost in Patna is really low. Two primary reasons are very small projects and the word of mouth spread. Sample flats are constructed first at most places around India to offer prospective buyers a visual of what their flat would look like but in Patna one may not get to see a sample flat even ( quiet possible). At this stage, the developer will also begin marketing the project aggressively, employing various avenues of promotion and advertising. Brokers are engaged to supplement the marketing efforts of the developer’s own direct sales staff. In Patna the main trend is direct sales of newly constructed flats by builders.