Showing posts with label Ownership. Show all posts
Showing posts with label Ownership. Show all posts

Construction of a Real Estate Project

In this post, we will try to bring forth the details of next part of the Value ChainConstruction.

Once a person has cleared his ownership title & has arranged for his finance requirements, the next step is to actually start the construction of the anticipated property. Though it appears the most cliché and straightforward part of the value chain, but there are ‘n’ number of issues involved in this seemingly simple part too. Researches at many world-class respected Universities have revealed that this phase involves the maximum wastage – both in terms of time & money.

Figure 1: A breakup of the time involved in any real estate project over the construction period

Let’s start analyzing this phase with the help of a step-by-step flowchart of the activities involved in it: 

Figure 2: Construction flowchart

As is apparent from the above flowchart that construction phase is not that simple as it seems to be at the first sight. Due to multiple sub-phases, the amount of delays and wastes increases exponentially in this level.

The construction phase provides a lot of opportunity to improve the supply chain inefficiencies and reduce the project cost to a large extent. The multiple iterations incurred at the design phase can be reduced if there is a specialized agency to take care of it. Again, the raw-material supplies and labor requirements after the Design Phase, if handled appropriately can help the contractor finish off the work more efficiently at a lower cost and lower budget.


There are several real-estate moghuls in the market and they sure do implement several measures in order to keep a check on the issues that we discussed above. But there is definitely something missing in their efforts due to which this sector is still unable to be efficient. We suggest some of the following measures which may prove to be useful:
  • The design phase should be outsourced instead of being in-house. This is because the expertise of the building contractor is to construct, not to design. Having a specialized design agency will remove the redundant steps in this phase and come up with better and more efficient designs. Although many of the construction works being carried out these days uses this approach only, but still major chunk doesn't. 
  • Supply chain in the construction phase can be improved to a large extent if the procurement system can be tightened. The world is moving towards just-in-time (JIT) technique where only that much raw material is procured at a time as is required. But still this is absent in the real estate domain. Contractors still go for bulk purchases due to which a lot of wastage happens.

PS: There is lot to the above discussion which can be helpful for RealT apart from the above 2 points. In India, apart from the lack of ownership and proper financing, this phase requires maximum attention and through RealT Horizon, we will try to bring some of those aspects in the front.

---- Thanks for reading RealT Horizon :) ----

Ownership - Holding a Real Estate Asset

Continuing from where I left my last post - Understanding the reality in RealT – Generic Real Estate Value Chain, let me take you further by trying to elucidate the first component of the value chain – Ownership.

So what is the meaning of Ownership?

Just going by the literal gist, ownership implies having a hold or right on something. Just as any other commodity always has someone to claim for it, so is the case with real estate properties. Of course here it comes with some complications due to the nature of this business. In Real Estate, this function – Ownership holds a much more significant stature due the to the following reasons:

  • The first reason, time horizon, is important as some of these investments span across generations. In such a case, an unclear ownership can result in blunders in future.
  • Involvement of ‘unreported money’: Owners prefer not to disclose their true identity and goes for complex ownership structures. This is due to the nature of this business because there is a requirement of humongous capital for property projects.
  • Property taxes, though not very obvious, are also responsible for ownership problems. Reason is simple, to save taxes!

Rights of Ownership

So what does having an ownership title on a property mean? It means that if you have that title, you have the right to:
  • Use the property
  • Delegate the ownership title to anybody
  • To enjoy the monetary/other benefits derived from the property
  • To sell/lease the property

Types of Ownership

Ownership can be categorized in 2 ways – Holding Pattern (Structure) & Tenure.

By Structure                                                                
There is a single holder of the property and he/she holds all the rights mentioned above.
A form of co-tenancy where the title is shared by 2 or more holders, in EQUAL proportion. In this type of ownership, the interest of one partner is automatically transferred to other upon former’s death. Generally common for spouses.
Tenancy in common
A co-tenancy wherein the proportions NEED NOT BE EQUAL. Unlike the above case, here the ownership is not automatically transferred to the other partial partners.

By Tenure
Complete rights to the owner forever.
Right to possess and use the property with compliance to the pre-specified terms of use.
Right to possess free interest in real estate after the expiration of a Life estate,
Estate for years or Leasehold.
Life Estate
Complete rights ONLY till the owner’s death.
Estate for years
Complete rights ONLY for a specified term.

Alarming state in India!

Although I couldn’t find very vivid stats on this but what I found out was enough to raise few eyebrows. Nearly 90% of properties in India don’t have a clear title! Let’s see what impact it has.

Impacts of Unclear Titles

  • Scarcity of land – resulting in increased prices
  • Inefficient legal practices
  • Increase in the use of black money
  • Increased insurance complications
  • Frauds


  • Fast track courts
  • Computerization of land records
  • Audits on existing properties
  • Stricter land rules
  • Education to investors

Note: The above mentioned information is a just an indicator of what is 'Ownership' in RealT Sector and what relevance does it hold in creating a new Horizon! Hope this was useful :)

 - - - - -  Thanks for reading J   - - - - -

Related Posts Plugin for WordPress, Blogger...