PENGEMBANGAN REALESTAT

REAL ESTATE DEVELOPMENT

AHMAD SAIFUDIN MUTAQI, IAI
DEPARTEMEN ARSITEKTUR
UNIVERSITAS ISLAM INDONESIA

2016
 DISCRIPTION OF R.E.D.
Course of Real Estate Development discusses the
development planning principles based on sustainable
real estate. And recognize the practice of housing and
residential development by formal enterprise developers.
Theoretical study emphasizes the understanding of the
principles of real estate development, property
marketing, product introductions, especially residential
property formal and proper development. Studies
directed to the practice and comprehensive know more
about the development of small-scale residential
property (landed housing), ranging from aspects of
marketing, product properties, legal and finance to be
able to make a pre-feasibility study.
 COURSES
1. Introduction to Real Estate Development
2. Introduction to Property Business and Management
3. Introduction to Realestate Marketing
4. Real Estate Investment
5. Property Product and Location
6. Land Use Feasibility Analysis
7. HIGHEST AND BEST USE ANALISYS (workshop)
8. Property Development
9. Marketing Strategy
10. Real Estate Finance
11. Financial Analysis
12. Financial Feasibility
13. Feasibility Study
14. PRE-FESEABILITY STUDY (workshop)
 CHAPTER 1
INTRODUCTION TO REAL ESTATE
DEVELOPMENT
 Introduction to Real Estate Development

1. The Nature of Real Estate Development

LAND
REAL ESTATE
Earth’s surface to the center of the
earth and air space above the Land plus permanent
land, including the trees and water man-made additions

ASSET
Real Property +
Value + REAL PROPERTY
Development
and Real estate plus
maintenance system “bundle of legal rights”
 LAND
1. PHYSICAL CHARACTERISTIC
a. CONTOUR
b. SHAPE
2. LEGAL STATUS
a. PRIVATE
b. GOVERMENT
c. TRADITIONAL OWNERSHIP
3. LAND VALUE
a. HERITAGE VALUES
b. ECONOMICAL VALUES
 REAL ESATE
1. LAND WITH THE CHARACTERISTIC OF
LOCATION
2. MAN MADE OVER THE LAND
a. PUBLC VS PRIVATE
b. SETLEMENT, SOCIAL, COMMERCIAL, WORSHIP
c. SCALE (INDIVIDUAL, NEIGHBORHOOD, URBAN)
 REAL PROPERTY
Real estate plus “bundle of legal rights” :
1. OWNERSHIP
a. SERTIVICATES
b. TRADITIONAL RIGHT LETTER (C; D; E)
2. PERMISSION
a. PERMISSION OF LAND USE
b. PERMISSION OF ENVIRONMENTAL IMPACT
c. PERMISSION OF BUILDING CONSTRUCTION
 Introduction to Real Estate Development

2. Sustainable Real Estate Development

PHYSICAL

SOCIAL ENVIRONMET MARKET

FINANCE
 PHYSICAL ASPECT
1. LAND SUITABLE AREA
2. PROPERTY FUNCTIONAL AND AESTHETIC
3. CONSTRUCTABLE BUILDING
 MARKETING ASPECT
1. DEMAD VS SUPLY
2. NEED VS WANT
3. MARKETABILITY
4. AFORDABILITY
 SOCIAL ASPECT
1. ACCEPTABILITY
2. BENIFICIALIBILITY
3. SOCIAL COST
 FINANCIAL ASPECT
1. COSTABILITY
2. RENTABILITY
3. SALEABILITY
4. PROFITABILITY
5. FEASIBILITY ECONOMI
 ENVIRONMETAL ASPECT
1. GREEN DESIGN
a. GREEN ARCHITECTURE
b. GREEN BUILDING INDEX
c. GREEN BUILDING REGULATION
2. ENVIRONMENTAL FRIENDLY BUILDING
3. SUSTAINABILITY DEVELOPMENT
 CHAPTER 2
INTRODUCTION TO PROPERTY
BUSSINES AND DEVELOPMENT
 Introduction to Property Business and Management

1. Manajemen Properti
BUILDING
MAINTENANCE

BUSINESS FOR BUILDING

SUSTAINABLE SECURITY &
PROPERTY HEALTHY
 BUILDING MAINTENANCE
• In the context of this study it mean to hold,
keep sustain or preserve the building or
structure to an acceptable standard.
• The primary objective of all maintenance
procedures is to avoid as far as practicable the
need to repair or replace the structure,
fitting, services, equipment or furnishing
which collectively make up the total
environment of any building.
 BUILDING HEALTHY & SECURITY
• HEALTHY:
 No persistent, toxic or bioaccumulative chemicals
 No carcinogens, mutagens or teratogens
 No ozone depleting chemicals
 Low VOC’s
 No hazardous waste characteristics
 No combination cleaner / disinfectants
• SECURUTY:
 System CCTV
 Watchdog / Guard
 BUSINESS FOR SUSTAINABLE PROPERTY

• Public Facility and Club House

• Sport Facility
• Jogging Track
• Recreational Swimming Pool
• Others
 Introduction to Property Business and Management

2. Professional Property Manager

Typical duties expected of a property manager include finding/evicting and generally dealing with tenants and
coordinating with the owner's wishes. Such arrangements may require the property manager to collect rents,
and pay necessary expenses and taxes, making periodic reports to the owner, or the owner may simply
delegate specific tasks and deal with others directly.

A property manager may arrange for a wide variety of services, as may be requested by the owner of the
property, for a fee. Where a dwelling (vacation home, second home) is only periodically occupied, the property
manager might arrange for heightened security monitoring, house-sitting, storage and shipping of goods, and
other local sub-contracting necessary to make the property comfortable when the owner is in residence
(utilities, systems operating, supplies and staff on hand, etc.). Property management can also include
commercial properties where the property manager may operate the business, as well as managing the
property. Some jurisdictions may require a property manager to be licensed for the profession.

The property manager has a primary responsibility to the landlord and a secondary responsibility to the
tenant. The relationship the property manager has with the landlord and with the tenant are crucial in forming
the expectations of both parties to the lease since both parties will seek and expect certain rights and benefits
out of it.
 Introduction to Property Business and Management

3. Property Management Economics

• business cycle • operating costs
• comparative income & • comparable
expense analysis • reserve funds
• five-year forecast • optimum rents
• management plan • technical oversupply
• neighborhood analysis • market analysis
• economic oversupply • operating budget
• property analysis
• gross rental income
 CHAPTER 3
INTRODUCTION TO REAL ESTATE
MARKETING
Introduction to Realestate Marketing
1. MARKET STUDY (RESEARCH), collecting all
relevant data pertaining to the product or
service, may indicate that a product or service
can be sold.
a. Colecting Data
b. Regional and Urban Analysis
c. Neighborhood Analysis
d. Site Analysis
e. Demand Analysis
f. Suply Analysis
 MARKET STUDY (RESEARCH)
a. COLLECTING PRIMARY DATA AND SECONDARY DATA
1) PRIMARY DATA are developed directly by the market
researcher (conducting survey or personal observation)
2) SECONDARY DATA are gathered from existing sources (census
figure and trade association data)

Market study ends with the creation of an absorption

schedule that show the time required for the market to
absorb the expected supply of the particular type of space
to be offered in the near future, as well as the expected
price range for that space
 MARKET STUDY (RESEARCH)
b. REGIONAL AND URBAN ANALYSIS
1) Regional economic activity
2) Economic based analysis
3) Population and income analysis
4) Transportation networks
5) Growth and development patterns

c. NEIGHBORHOOD ANALYSIS
1) Local economic activity
2) Transportation flows
3) Neighborhood competition
4) Future competition
5) Demographic characteristic
 MARKET STUDY (RESEARCH)
d. SITE ANALYSIS
1) Zoning and building codes
2) Utilities
3) Access
4) Size and shape
5) Topography

The market study provides all the data necessary

to allow the real estate analysis to make an
informed investment decision about a specific of
project.
 MARKET STUDY (RESEARCH)
e. DEMAND ANALYSIS
1) New jobs
2) Demographic
3) Trend analysis
f. SUPPLY ANALYSIS
1) Vacancy rates and rental levels
2) Starts and building
3) City service
4) Community planning
5) Construction cost and financing
 Introduction to Realestate Marketing
2. MARKET ANALYSIS (FEASIBILITY STUDY), once
having obtained as much market data as
possible, the marketing specialist analyzes
the data and interprets the results to
determine whether the proposed product or
service can be sold successfully.
a. Basic Principles
b. Before Tax cashflow
c. After Tax Discounted cashflow
 MARKET ANALYSIS (FS)
a. BASIC PRINCIPLES
1) Market analysis (economic studies) nearly always involve
computing likely rates of return on investment for a
particular product. A market study may indicate that a
product or service can be sold, but the market analysis
may indicate that the sales is not feasible because it will
not return a satisfactory profit.
2) The economic study the analysis then uses these data for
making projection to determine if the proposed project
appears to be available investment. Based on these
studies, the investment decision can be to reject the
project, accept it, or modify it.
 MARKET ANALYSIS (FS)
b. BEFORE TAX CASH FLOW
1. Gross possible rents
2. Vacancy and collection loss
3. Operating expenses
4. Net operating income
5. Debt service

c. AFTER TAX DISCOUNTED CASH FLOW

1. Depreciation
2. Tax liability

PRESENT VALUE JUSTIFIED INVESTMENT PRICE

YIELD OR INTERNAL RATE OF RETURN
INVEST DO NOT INVEST DECISION
Introduction to Realestate Marketing

3. MARKETING PLAN, the final step,

following the market research and
market analysis and project specific
feasibility study
a. Basic Principles
b. Element of Marketing Plan
 MARKETING PLAN
a. BASIC PRINCIPLES
 MARKETING PLAN or MARKETING STRATEGY may
be an elaborate blueprint for the sale of product
over a period of years.
 The raw material for the marketing plan comes
largely from the markets analysis or feasibility
study, which drew heavily from the market study.
 MARKETING PLAN
b. ELEMENT OF A MARKETING PLAN
1) Defining the goal
2) Plan strictly profit maximization
3) Identification of buyers/tenant
4) List of marketing techniques
 CHAPTER 4
REAL ESTATE INVESMENT
 Real Estate Investment
A. Real Estate Economics:
1. Operating decisions
2. Financial decisions
3. Reversion decisions
4. Taxations
a. tax planning,
b. income taxation,
c. wealth
 Real Estate Investment
B. Real Estate Invesment Process
1. Identifying investor objectives, goals and
constraints.
2. Analyze investment climate and market
conditions
3. Develop financial analysis
4. Apply decision-making criteria
5. Investment decision
 Real Estate Investment Process
1. Identifying investor:
a. Objectives
b. Goals
c. Constrains
 Real Estate Investment Process
2. Investment Climate & Market Condition
a. Market Environment
b. Legal Environment
c. Financing Environment
d. Tax Environment
 Real Estate Investment Process
3. Decision-making criteria:
a. Rule-of-thumb techniques
1) Gross Income Multiplier
2) Overall Capitalization Rate
3) Equity Dividend Rate
b. Traditional appraisal methods
1) Cost Approach
2) Sales Comparison Approach
3) Traditional Income Approach
c. Discounted Cash Flow (DCF) models
 Real Estate Investment Process
4. Risk Clasify fo Decision Making
a. Business risk
b. Liquidity risk
c. Default risk
d. Market risk
e. Interest rate risk
f. Financial risk
g. Purchasing power risk
 CHAPTER 5
PROPERTU PRODUCT AND
LOCATION
 Property Product and Location
1. Property Producs
2. Property Residential
3. Location Analysis
 Property Product
Property Producs:
1. Residential Estate
2. Commercial Estate (office, hotel, shopping center, etc)
3. Mixed Use Development (MXD): office, apartment,
condominium, shopping mall, entertainment center,
amusement center, etc.
4. Industrial Estate (manufacturing, assembling, warehouse)
5. Special purpose estate: sport estate, recreation estate,
airport and integrated terminal, etc.
6. Agribusiness estate: conservation forest, agro estate, farm
estate, etc.
 Property Residential
Properti Residential
1. Landed Housing vs Vertical Housing
2. Low Cost Housing
3. Public Facility (commercial property)
4. Social Facility
5. Infrastructure
6. Utilities
 Location Analysis
Location Analysis:
1. Use Site to be Determine
2. Site Use to be Determine
3. Highest Best Use Analysis
 Location Analysis
marketability
• Use Site to be Determine
Estimate capture Estimate
Start (observation)
penetration absorption

Refine market Preliminary

Market analysis (market financial feasibility
segmentation) before tax

Quantify demand
Identify demand Financial feasibility
or supply within
sector after tax
trade area

Site selection Establish trade

(alternate) area
 Location Analysis
• Site Use to be Determine
Marketability
Quantify demand
capture or
Market analysis or supply in trade
penetration
area
absorption

Site study (physical Trade area analysis Financial feasibility

liability) fixed (alternative uses) after tax

Preliminary highest Examination of Highest and best

and best use alternative uses use analysis
 CHAPTER 6
LAND USE FEASIBILITY
 Land Use Feasibility
1. The Land Used Decision Environment
2. The Feasibility Study
3. Role of the market Study
4. Site and Participant Relationship
5. Component of the Market Study
6. Role of Economic Study
The Land Used Decision Environment
1. LAND USED PLANNING CRITERIA
2. INFRASTRUCTURE SUPPORTING CRITERIA
3. BUILDING REGULATION
4. BUILDING CODE
5. PUBLIC FACILITIES
6. SOCIAL COMMON AREA
 The Feasibility Study
1. FINANCIAL RESOUCES
2. COST OF LAND ACQUISATION & DEVELOPMENT
3. COST OF INFRASTURCTURE & UTILITY
4. CONSTRUCTION COST & ENGINEERINGS
5. COST OF MARKETING MANAGEMENT
6. COST OF PROPERTY MANAGEMENT
7. RETURN ON EQUITY
8. NET PRESENT VALUE
9. PAYBACK PERIOD
 Role of the Market Study
1. PRIMARY DATA ACCESS (DIRECT
CONDUCTING)
2. SECONDARY DATA ACCESS (STATISTICAL)
a) REGIONAL & URBAN ANALYSIS
b) NEIGHBORHOOD ANALYSIS
c) SITE ANALYSIS
d) DEMAND ANALYSIS
e) SUPPLY ANALYSIS
 Site and Participant Relationship
1. LEGAL OWNERSHIP CRITERIA
2. PHYSICAL CHARACTERISTIC
3. LOCATIONAL CHARACTERISTIC
4. AMENITY CHARACTERISTIC
 CHAPTER 7
HIGHEST AND BEST USE ANALYSIS
 Highest Best Use Analysis
 The reasonable probable and legal use of
vacant land or an improved property that is
physically possible, appropriately supported, and
financially feasible and that results in the highest
value
 Four tests
• Legally permissable
• Physically possible
• Financially feasible
• Maximally productive
 HBU as though Vacant

1. Legal permissibility
• Analysis of zoning
• Probability of zoning change
• History of rezoning
• Comprehensive plan
• Environmental regulations
2. Physically possible
• Consider parcel size, shape, terrain, etc.
 HBU as though Vacant
(continued)
3. Financially feasible
• Of the uses that are legal and physically
possible, which are financially feasible
• For income producing uses
• Feasible if income greater than operating
expenses, debt service, required return to
equity
• Non-income producing uses
• Feasible if value greater than the amount
needed to develop and market property
 HBU as though Vacant
(continued)
4. Maximum productivity
• Analysis of financially feasible uses
• HBU is use that produces highest land residual
• Land residual analysis
• Value of proposed use (land and buildings)
less development cost (and profit) equals
land residual
• Overall value (Vo) - cost = land residual (VL)
• Quantity left over
 HBU as Improved

1. Identify renovations, rehabilitation,

conversion (re-use), change of use
2. Legal permissible
• Whether subject conforms to existing
regulations
• Evaluate existing improvements
3. Physically possible
• Existing use is
• Modifications possible
HBU as Improved (continued)
4. Financially feasible
• Continued market demand
• Are changes feasible?
5. Maximum productivity
• Are costs of any indicated changes justified?
• Which change allows greatest value (net after
cost)
• Usually conclude existing uses are HBU, unless
they no longer contribute value, and alternative
use of land has high enough vlaue to justify
demolition cost
 CHAPTER 8
PROPERTY DEVELOPMENT
AND PARTICIPANT
 Property Development
1. Creation of Space
2. It Begins with the Land
3. The Development Process
a. Creativity comes from many sources
b. Players
c. Different Risk Return Perspectives of
Participants
 Property Development
4. Real Estate Investor MOTIVATIONS
a. Pride in Ownership
b. Personal Control
c. Self-use and Occupancy
d. Estate Building
e. Security of Capital
f. High Operating Yield
g. Leverage
h. Tax Shelter
i. Capital Appreciation
j. Portfolio Diversification
Participants Of Property Development
• Developer (RE Project Manager)
• Consultant (RE Consultant Project Executive)
• Architec’s Engineer (Property Designers)
• Technical Consultant (outsource)
• Marketers (Agencies & Account Executive)
• Finance Institutions (outsource)
• Authorities (Regulators – Pusat & Daerah)
• Tenants / Users (Markets)
 Participants Of Development Process
DEVELOPER

ARCHITECT REAL ESTATE

CONSULTANT
RESEARCH
RESEARCH
ANALYSIS
FINANCING
PLANNING
ECONOMIC INSTITUTION
REAL ESTATE PLANNING
DESIGN
CONSULTANT
ARCHITECT’S
PROJECT EXECUTIVE
ENGINEERING COORDINATOR DEVELOPER
CONTROL
REAL ESTATE
PROJECT MANAGER LAWYER & TAX
LAWYER
SPECIFACATIONS
DEVELOPER
COST ESTIMATING X LEASING MAN

BROKER
SUPERVISION
CONTRACTORS AUTHORITIES MAJOR TENANT MINOR TENANT
 CHAPTER 9
MARKETING STRATEGY &
MARKETING PROGRAM
 Marketing Strategy & Program
1. Marketing Strategy
a. 4P Strategy
b. Financial Strategy
2. Marketing Program
a. Schedule of Marketing
b. Advertisement Program
 Marketing Strategy
1. 4P strategy:
a. Product of Property
b. Placement and distribution
c. Promotion and advertisement
d. Pricing and sales
2. Financial strategy:
a. Production Cost Strategy
b. Competitiveness Strategy
 Marketing Program
1. Schedule of Marketing
a. Time frame
b. Selling Product (Booking Fee & KPR)
2. Advertisement Program
a. Promotion and Media
b. Promo Tools
c. Agencies
 Chapter 10
REAL ESTATE FINANCING
 Real Estate Finance
1. What is the component of cost?
2. Master Budget
 Component of cost
1. Cost of land
a. Land’s acquisition
b. Land’s development
2. Cost of construction
3. Cost of money
4. Cost of social acceptance
5. Cost of marketing
6. Cost of legal
 Master Budget
• Land acquisition and legal permission
• Land development
• Infrastructure and utility
• Social facilities construction
• Property product construction
• Project management and marketing
• tax
 Chapter 11
FINANCIAL ANALYSIS
 Financial Analysis
1. Cost of production analysis
2. Cost of sale analysis
 Cost of Production Analysis
1. Cost of Land Suitable (rp/m2)
2. Cost of Land’s Parcel (rp/m2)
3. Cost of Building Construction (rp/m2)
 Cost of Sale Analysis
Marketing Management:
1. Cost of agencies fee
2. Cost of promotion
3. Cost of promo tools
4. Cost of Marketing (rp/m2)
 Chapter 12
FINANCIAL FEASIBILITY
 Financial Feasibility
1. Price List Criteria
2. Cost and Sale
3. Source of Finance and Budgeting
 Price List Criteria
1. Based on Production’s Cost
2. Based on Competitiveness
3. Based on Profitable Equity
4. Based on Available Liquidity
 Cost and Sale
1. Sale of Properties Product
2. Cost of Production
a. Cost of land and permission
b. Cost of infrastructure and utilities
c. Cost of facilities construction
d. Cost of building construction
e. Cost of marketing management
3. Surplus / Deficit
 Source of Finance and Budgeting
1. Source of Finance
a. Equity
b. Sale
c. Bridging Finance
2. Budgeting
a. Cost of Production
b. Cost of Money
c. Tax
3. Net profit after tax
 Chapter 13
FEASIBILITY STUDY
 Feasibility Study
• To be considered reliable feasibility
studies must be based on sound
research.
• Such research must clearly indicated
sensitivity of change in the political,
economical, social and other
environments
 Feasibility Study
• Feasibility studies must be clear and concise
and follow a logical sequenses :
1. Market research
2. The client’s needs
3. Site analysis
4. Profit study
5. Conclusions & recomendations
6. Illustrations & attachments (such as :
photographs & sketches, market maps,
valuation)
 Market Study
• Aim : To assess the potential of particular
geographic areas and sites with a view to long
term maximisation of profits.
• Methods :
 General assessment of large geographical area to
assess trends in population, spending, investment,
etc.
 Specific assessment for particular industry or tipe
of building.
 Specific site or sites assessed for optimising use
 Client’s Need
• Aim : to maximise the employment of the
client’s capital in long term.
• Method of assessing/ascertaining the client’s
needs will vary with the initiator,eg.
 Client seeking to employ capital
 Vendor of site forecasting needs of prospective
purchasers.
 Client owning site seeking to optimise its use
 Site Analysis
• As well as analysing sites for design
considerations it is important that feasibility
studies highlight encumbrances and other
limitations.
• Such evaluation should include:
 Legal evidence (zoning, FAR, site coverage, set
back, parking, etc)
 Valuer General’s Assessment
 Existing Conditions (road, neighbours etc)
 Exsisting Approval to develop or build and their
expiry dates
 Profit Study
• Costs Assumption or criteria
• Budgeted Cash Flow Schedule
• Profit Forecast Schedule
• Summary
• DCF
 Financial Feasibility Study
• Budget
• Legal aspects- mortgage etc
• Taxtation aspect
• Equity available
• Loan commitment
• Status of existing contracts
• Local capital available
• Investment (availability, rules and programme)
 Chapter 14. WORKSHOP
 Pre-Feasibility Study
 Site Selection and Property Product
 Master Budget
 Cost and Sales Projection
 Financial Resources
 Cashflow Projection
 Payback Period & Return On Equity
 Net Present Value