REAL ESTATE ASSIGNMENT

MEMBERS – ANUBHA SINGHAL, RAYMON PRAKASH,

RICHA CHOUKSEY

1. Location Brief
1.1. Regional Overview
Greater Noida is located in the Gautam Budh Nagar district of Uttar Pradesh, located 28° 29' to
28°49' North latitude, and 77° 30‘ to 77° 51' East longitude. It comes under the purview of the
National Capital Region (NCR) of India. Gautam Budh Nagar is bound by Ghaziabad in the north,
Delhi in the west, Aligarh in the south, and Bulandhshahar district in the east. The district comprises
of 4 tehsils which are Noida, Dadri, Dhankaur, and Surajpur. The District is newly created in the year
1997 from portions of Bulandshaher and Ghaziabad districts.

Greater Noida is growing rapidly. It has become a hub of industrial development, with several
industries establishing units in the area. Industrial investment taking place in Greater Noida is now
over Rs. 10,000 crores1. The city has a privatized power distribution system, which ensures efficient
power supply. With a large number of automobile and automobile component manufacturers
located here, Greater Noida is increasingly being referred to as the ‘Detroit of India’. Industrial
majors such as Delphi Automotive Systems, Yamaha Motors, Honda Seil, and Moser Baer have
selected Noida as an industrial base. IIT Roorkee is developing an extension centre in the area.

The area is well connected, with two National Highways, NH-24 (Delhi-Lucknow), NH-58 (Delhi
Haridwar-Mana Pass). The Yamuna Expressway runs from Greater Noida to Agra, and an eight-lane,
25km long expressway connects Greater Noida directly to Delhi. It will also be served by proposed
Eastern Peripheral Expressway (Kundli-Ghaziabad-Noida-Palwal) of NCR. It is located close to Dadri
Railway Junction where the Eastern and Western Freight Corridors meet. A Metro Rail network is to
be developed between Noida and Greater Noida. A high-speed Metro Rail line is also proposed from
Greater Noida to Indira Gandhi International airport. Greater Noida falls in the Delhi Mumbai
Industrial Corridor (DMIC), and the Integrated Industrial Township at Greater Noida is proposed
under this project. The DMIC will connect Greater Noida with several other states in the country.

The proposed Stellar Gymkhana Club is to be set up at Pari Chowk in Greater Noida. Pari Chowk is a
bustling area and a significant landmark in Greater Noida. It is one of the oldest real estate hotspots
in the city and a well-known area. Several special incentives are provided to industries here,
including speedy clearances and approvals, and incentives to promote early commissioning of
projects. An effective single-table functioning guarantees project clearance within a month and an
empowered committee continuously monitors the progress of these projects.

The Stellar Gymkhana is an exclusive Club, promoted by Stellar Parks Pvt. Ltd. This urban retreat is to
be found nestled in 12-acres of a pure verdant stretch along the Greater Noida Expressway.

1
http://www.greaternoidaauthority.in/industrial
 Table 1 : Gautum Budh Nagar District Snapshot

SECTION QUANTITY/VALUE
Area  
Total Geographical Area 1442 Sq. km
Administration  
Tehsil 4
Revenue Villages 3
Land Use Pattern  
Total Area 71000 Hectare
Non-Agricultural Land 5301 Hectare
Population (Census
2011)  
Total Population 16,48,115
Men 8,90,214
Women 7,57,901

Table 2 : Status of power, water, wind and rainfall in the region.

Aspect Status Significance for Stellar Gymkhana Club

Water 1. Greater Noida Authority is To ensure availability of water on a
availability responsible for water supply in daily basis, club will also have to dig a
the area. borewell. This would require
2. Proposed Ganga Water Project permission from Central Ground Water
bringing water from the Ganga Board.
to Greater Noida2.
3. Ground water level at 13.2m in
Gautam Budh Nagar;
groundwater level in Noida is
falling by 1 meter every year3.
Electricity 1. Greater Noida’s power is Power back up (generators) to be
availability distributed by Noida Power designed keeping emergency and
Company Limited (NPCL). essential services / equipment in mind.
2. Several solar power plants are
coming up in the area.
3. 12 new substations are being
built in the city.
4. 1,320 MW plant to be set up,
which will provide 24x7 power
supply in Greater Noida.
Wind flow 1. Wind speed varies from 0m/s to Should maximize natural ventilation.
7 m/s, rarely exceeding 11m/s.
2. Relative humidity ranges from
17% to 95%.
3. Greater Noida is located 200
meters above sea level.
Rainfall 1. Average annual rainfall: approx. Should estimate capacity of rainwater
700 mm. harvesting.

2
http://www.greaternoidaauthority.in/ganga
3
Ministry of Water Resources
 2. Monsoon season: June –
September

1.2. Demographic Profile of the District

Population growth: The total population of the Gautam Budh Nagar district is 16,74,714 (census
2011). Out of the total population in 2011, around 54% (8,90,214 people) are men and 46%
(7,57,901 people) are women. The growth of population in the district was nearly 40% during
between the years 2001–11. The district saw an urban decadal growth rate of 125.52% between
2001 and 20114. The population density of the district is 1,187 persons / sq. km 5.

The rapid population growth in Gautam Budh Nagar is attributed to the vast development that has
taken place in Noida and Greater Noida. These cities have become industrial hubs, with the
development of electronics, textile, engineering, IT, automobile and other industries. World class
infrastructure in these cities, coupled with excellent connectivity to Delhi is attracting several people
to the district.

Rural-urban population composition: Gautam Budh Nagar district has an urban population of
around 59% (9,88,081) and a rural population of around 41% (6,86,633 people) as per census 2011.
In the urban area, males constitute around 54% (5,33,564 people) of the population and women
constitute for around 46% (4,45,517 people) of the population. In the rural area, males constitute
around 53% (3,63,915 people) of the population and women constitute 47% (3,22,718 people) of the
population.

Sex Ratio: The sex ratio at the district level is 851 females per 1000 males (year 2011).

Literacy Rate: The literacy rate of Gautam Budh Nagar district is around 80%. Among male and
female this rate is 88% and 70% respectively. At the district level, the number of literates has
increased by about 12% from year 2001 to 2011. The male and female literates increased by 7% and
17% respectively during this period6.

2. Description of Site, Highest and Best use for this Project

Stellar Gymkhana Club has been incorporated in Greater Noida near Pari Chowk. The Stellar
Gymkhana is an exclusive Club, promoted by Stellar Parks Pvt. Ltd. This urban retreat is to be found
nestled in 12-acres of a pure verdant stretch along the Greater Noida Expressway.

Far away from the maddening cacophony of city crowds, The Stellar Gymkhana is a great place to
host corporate events – from small private functions to larger banquets. Rolling lawns, large indoor
venues and ample parking, not to mention the absolute absence of any pollution whatsoever, all
combine and contribute to making the simplest of your functions truly memorable.

2.1. Highest and Best Use

The Appraisal Institute defines highest and best use as follows: The reasonably probable and legal
use of vacant land or an improved property that is physically possible, appropriately supported,
financially feasible, and that results in the highest value.

4
http://censusindia.gov.in/2011-prov-results/paper2/data_files/UP/6-exe-summery-9-11.pdf
5
http://ncrpb.nic.in/pdf_files/Draft%20Revised%20Regional%20Plan%202021/06%20Chapter
%204%20Demgraphic%20Prof ile%20and%20Settlement%20Pattern-26%20july%202013.pdf
6
Census 2011
To get to the reasonably probable use with the highest value, appraiser must apply four tests to the
possible alternative uses:

1. Legally Permissible
Zoning, building codes, setback requirements, leases, deed restrictions, easements, and
environmental regulations can all limit land uses, which can be significant in some appraisals. Testing
for legal permissibility requires you to have a working knowledge of local zoning ordinances and how
to research deeds. It is a common error by some appraisers to assume that the current use is a legal
use. This is often not true.

2. Physically Possible
Any use suggested as the highest and best use must be physically possible. This criterion is usually
the easiest to test. The proposed use must fit on the site, the soil must be solid enough to support
any improvements, and the topography must be adequate to allow the use.

3. Financially Feasible
A sensible person would only consider profitable uses of a property, which is the essence of the test
of financial feasibility. A parcel of raw land usually has more than one financially feasible use—such
as an office building or an industrial facility—if both of those uses are physically possible and legally
permitted.

4. Maximally Productive
Like financial feasibility, the maximum productivity criterion requires that the highest and best use
be profitable. The maximally productive use is the one alternative of all possible financially feasible
uses that produces the maximum benefit to the owner.
Table 3 : Highest and Best Use

ATTRIBUTE APPLICABILITY TO STELLAR GYMKHANA CLUB

Legally Land use provisions permit residential, mix use and institutional purposes,
Permissible therefore it is legally permissible to open a stellar gymkhana club near Pari
Chowk.
Physically It was physically possible to locate the club near Pari chowk.
Possible
Financially The surrounding area majorly consists of educational institutions and residential
Feasible apartments and moreover demographic profile of the area clearly indicates that
this premium club won’t be financially feasible.
Maximally Since the area has lot of educational institutions, businesses like cafes, pub,
Productive amusement parks, paying guest accommodations will generate more revenue.

3. Valuation Approaches and Methods

3.1. Market Approach
The market approach provides an indication of value by comparing the asset with identical or
comparable (that is similar) assets for which price information is available.

Market Approach Methods

1. Comparable Transactions Method - The comparable transactions method, also known as the
guideline transactions method, utilises information on transactions involving assets that are
the same or similar to the subject asset to arrive at an indication of value.
 2. Guideline Publicly Traded Comparable Method - The guideline publicly-traded method
utilises information on publicly-traded comparable that are the same or similar to the
subject asset to arrive at an indication of value.

3.2. Cost Approach

The cost approach provides an indication of value using the economic principle that a buyer will pay
no more for an asset than the cost to obtain an asset of equal utility, whether by purchase or by
construction, unless undue time, inconvenience, risk or other factors are involved. The approach
provides an indication of value by calculating the current replacement or reproduction cost of an
asset and making deductions for physical deterioration and all other relevant forms of obsolescence.

Cost Approach Methods

1. Replacement Cost Method - Replacement cost is the cost that is relevant to determining the
price that a participant would pay as it is based on replicating the utility of the asset, not the
exact physical properties of the asset. Usually replacement cost is adjusted for physical
deterioration and all relevant forms of obsolescence. After such adjustments, this can be
referred to as depreciated replacement cost.
2. Reproduction Cost Method - Reproduction cost is appropriate in circumstances when the
cost of a modern equivalent asset is greater than the cost of recreating a replica of the
subject asset, or the utility offered by the subject asset could only be provided by a replica
rather than a modern equivalent.
3. Summation Method - The summation method, also referred to as the underlying asset
method, is typically used for investment companies or other types of assets or entities for
which value is primarily a factor of the values of their holdings. The key steps in the
summation method is to value each of the component assets that are part of the subject
asset using the appropriate valuation approaches and methods, and then add the value of
the component assets together to reach the value of the subject asset.

3.3. Income Approach

The income approach provides an indication of value by converting future cash flow to a single
current value. Under the income approach, the value of an asset is determined by reference to the
value of income, cash flow or cost savings generated by the asset.

Income Approach Methods

Although there are many ways to implement the income approach, methods under the income
approach are effectively based on discounting future amounts of cash flow to present value. They
are variations of the Discounted Cash Flow (DCF) method and the concepts below apply in part or in
full to all income approach methods.

1. Discounted Cash Flow (DCF) Method - Under the DCF method the forecasted cash flow is
discounted back to the valuation date, resulting in a present value of the asset. 50.3. In some
circumstances for long-lived or indefinite-lived assets, DCF may include a terminal value
which represents the value of the asset at the end of the explicit projection period. In other
circumstances, the value of an asset may be calculated solely using a terminal value with no
explicit projection period. This is sometimes referred to as an income capitalisation method.
 4. Land and Site Valuation
Sales comparison is the preferred method of land valuation, but other methods must often be used.
For example, if the subject property is a 90-year-old home in an area of similar older homes, there
may not have been a vacant land sale in many years. When market data is scarce, a variety of
alternative techniques can be used to estimate land value:

 Market Extraction
 Allocation
 Direct Capitalization: Land Residual Method
 Direct Capitalization: Ground Rent Capitalization
 Yield Capitalization: Subdivision Development Method (DCF Analysis)

4.1. Sales Comparison

The preferred method of land valuation is based on the analysis of historical prices paid for sites
similar to the subject by willing buyers and sellers in an open market. If an investigation of historical
market data shows that several vacant commercial sites on the subject property’s block sold for
$5.00 per square foot of usable area, then it would be reasonable to assume that the subject would
sell for a similar amount.

4.2. Market Extraction

Market Extraction is used to estimate land value when there are few or no comparable land sales in
the subject’s area or in competing areas. The Methodology requires you to research recent
comparable sales of improved properties in the subject’s area. You then develop an estimate of
reproduction cost for each sale property and subtract both the appropriate amount of depreciation
and the net value of the site improvements from the gross price. The remainder is the indicated
value of the lot. This method can be useful in appraisals in which the land and locational attributes of
comparable are very similar to the subject, but extraction of land value is less accurate when the
subject and comparable have very different attributes.

4.3. Allocation
Allocation is another technique used by appraisers when they need an opinion of land value but
cannot find any recent land sale comparable. The allocation method is a ratio technique in which
improved property sales and vacant land sales in an area that competes with the subject are
researched. A ratio of land value to property value is then established and applied to the subject’s
area. Some appraisers also support the ratio of land value to building value using assessor’s records.

Allocation is based on the theory that land value is a function of the entire property value. Also, the
subject and comparable properties must be improved to their highest and best use to prevent any
loss in value due to an inconsistent use. If the subject is improved to its highest and best use and a
comparable is not, the analysis can be skewed.

4.4. Direct Capitalization: Land Residual Method

To develop an estimate of land value, the land residual method partitions the income into income
attributable to the building and income attributable to the land. This technique is difficult to apply
because it requires data that can be almost impossible to find in many markets. You must know the
building value, the building capitalization rate, the net operating income of the property, and the
capitalization rate for the land. The land and capitalization rates are further complicated by
differences in the risk associated with some leases. After gross income is estimated and expenses are
subtracted, net operating income (IO) can be divided into land and building components. The overall
capitalization rate (RO) is the ratio of a property’s net operating income to the lump-sum value or
sale price, so this ratio can be used to estimate the income of a component if the component’s value
is known.

4.5. Direct Capitalization: Ground Rent Capitalization

Ground rent capitalization is simpler and much more commonly used than the land residual
technique. Comparable land sales with similar lease rates and terms are usually difficult to find, so
ground rent capitalization may be the only viable technique available to estimate the land value of
properties for which the lease income is the most significant attribute. This technique is useful in
many land lease situations and requires few subjective inputs.

4.6. Yield Capitalization: Subdivision Development Method (DCF Analysis)

Subdivision development analysis is based on a discounted cash flow model using the sales of
residential, commercial, or industrial lots as the cash flow and the absorption period as the holding
period. The value of development land is based on the number of lots that can be developed from it.
This technique is applicable in most markets but is complex and therefore used less often when
vacant land sales are common and plentiful. This technique requires a large number of calculations,
which makes it more cumbersome and less persuasive than direct sales comparison analysis. If
comparable sales or listings are available, most appraisers use them in sales comparison analysis
rather than apply the more complicated and subjective subdivision development technique.
Table 4 : Land Value

Area of Land (in acre) 12.00

Area of Land (in sq. m) 48,562.30
Rate of Commercial Land (per sq. ft)7 5,669.00
Rate of Commercial Land (per sq. m) 61,021.00
Total Value of Land 2,96,33,20,108.30

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