How can developers reduce cost of housing projects?
Published on 99acres.com on 1-Sep-2016
Link- https://www.99acres.com/articles/how-can-developers-reduce-cost-of-housing-projects.html
How can Developers reduce costs of the project?
In the recent wake of events our Union minister Mr. Nitin Gadkari has advised developers lobby to reduce their construction costs. He advised to avail dollar loans, use of precast technology and use of waste materials.
Well a normal person would usually want to know how the above could be useful for them and industry on the whole. Allow me to elaborate on these.
Foreign Currency Loans
An Indian company can avail loans in foreign currency from banks via Foreign Currency Convertible Bond (FCCB) and external commercial borrowings (ECB), Foreign Currency Loans.
A foreign currency convertible bond (FCCB) is a type of convertible bond issued in a currency different than the issuer's domestic currency. In other words, the money being raised by the issuing company is in the form of a foreign currency. A convertible bond is a mix between a debt and equity instrument.
An external commercial borrowing (ECB) is an instrument used in India to facilitate the access to foreign money by Indian corporations and PSUs (public sector undertakings). ECBs include commercial bank loans, buyers' credit, suppliers' credit, securitised instruments, credit from official export credit agencies and commercial borrowings from the private sector window of multilateral financial institutions. The money raised through ECB is cheaper as its given near LIBOR interest rates and Indian companies can repay a part of their existing expensive loans from that, ultimately reducing cost of interest.
The foreign currency denominated loans in India are granted out of the pool of foreign currency funds of the Bank in FCNR (B) Deposit accounts as permitted by Reserve Bank of India. These loans are commonly known as FCNR (B) Loans.
Pre Cast Technology
Pre-cast technology refers to the use of innovative and pre cast concrete construction methods. Precast concrete is a construction product produced by casting concrete in a reusable mold, which is then cured in a controlled environment, transported to the construction site and lifted into place. As compared to the standard concrete is poured into site-specific forms and cured on site.
There are many benefits over regular construction methods i.e. Accuracy production guaranteed by factory environment, load-bearing walls substitute fram or skeleton structures leading to reduction of costs, High grade in factory completed embeds allowing reduction in production and assembly time, earthquake resistance to higher degrees, easy to handle.
Pre fabricated elements can be stored and delivered as per the work flow on the construction site.
Use of waste materials i.e. bringing in use of recycled materials like flyash, bagasse, rubber wood, coconut plyboard, and construction debris leads to substantial cost reductions. The use of waste/recycled products in construction is also a new trend, which is picking up nowadays.
By adopting these two measures, developers can reduce cost of construction and borrowing significantly. With a few more measures in place, the benefits can be passed on to the buyers in order to auger housing sales and give a thrust to the realty market.
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By
Dipakk Vadehra
Co-Founder & Director
Connexions Abroad-ISO 9001:2008 Real Estate Co.
+91 981 004 5532