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Values in Spatial Development
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Values in Spatial Development

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Decoupling Built assets from Land ownership

An idea under progress
Idea: Buy, Regenerate and (re)develop a low-cost, low-value parcel of land. Retain ownership of land through a leasehold(erfpacht) system and sell homes, shops, offices,etc. to end-users on cost-price.

Key Motivations

The land belongs to Nature and Ecology, the built environment may belong to humans. By decoupling land ownership from land-use, we can ensure security of ecological and social values.
Since the tenant does not need to buy the land, their initial investment is typically lower than if they were to purchase the land outright. This enables them to allocate more resources to develop the property or invest in their business.
The income generated from the leasehold is returned back to the land to increase the value of the area for the longer term.
To attract a community of people who believe in the idea of common good.

Case 1: Cosmos Hawaiian Village

Pros
Self-owned
Green
Great connectivity to the city
Prime real estate in 5-10 years
Access to metro station

Cons
Cannot build more than 0.5 fsi (Green-zone)
Legal issues
Possible blocking from private villas owned by residents
Near protected forest

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Project History

Cosmos Hawaiian Village is a dream project initiated by Suraj Parmar in mid 2000’s, an unprecedented vision for the city. Around 200 private independent houses are situated in what used to be the outskirts of the city of Thane, but now finds itself surrounded by high-rise construction. With only 50% of the land potential currently used, the other 50% is vacant due to either legal disputes with the original land-owning families, or the restriction of making denser housing because the land currently sits in the often limiting green-zone.
There is no clear indication of what is to be done with this land in the coming 5 years minimum. There are however two conventionally clear options, to develop housing or sell the land parcels.

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Status-Quo

One may argue that the city is declining in its biodiversity, green cover, and other social and ecological sustainability metrics. The current typology is an indicator of the same, a growing middle-class with high ambitions, a growing sense of private property and security, often mistrust between people, and lack of care for the environment.
For Cosmos Hawaiian, the home-owner association is a co-operative housing society. The home-owners own their respective pieces of land and built assets on them, and share the responsibility for the upkeep, maintenance and decision-making for the common infrastructure through the co-operative vehicle.

The Concept

With 50% of land (need to get the exact number) available for development, it is possible for the land-owners to test out an erfpacht system with a broader vision for the project.
The erfpacht system lies unused and unexplored in the city limits due to excessively exorbitant land prices and housing supply. In some cases, the preference for outright ownership of property might outweigh the benefits of long-term leasing arrangements. The leasehold system is used commonly in comparison to the erfpacht system as they have been locally adopted over the years.
Let’s take a look at this piece of land measuring :
m2
image.png
The per square meter land-value of the selected plot as is
0000000
0
rupees
Thus, the total value of the land
₹0
or
€0


Let me introduce you to Safehold. (and Haven Capital)
Safehold Inc. is a real estate investment trust (REIT) that focuses on ground leases. The company's goal is to provide long-term, inflation-protected income to its shareholders while also preserving capital. Safehold's portfolio consists of ground leases on commercial properties, primarily in major metropolitan areas throughout the United States. The company also offers financing solutions for ground lease transactions.
Safehold is a real estate investment trust (REIT) that generates revenue by owning and leasing land under long-term net leases. This allows Safehold to earn steady rental income without having to maintain or improve the buildings on the land. Additionally, Safehold can benefit from potential appreciation in the value of the land over time.
See how it works below.

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Enhanced returns
The importance of equity cannot be overstated as it represents ownership in a company and grants the potential for future profits. Furthermore, unlevered yield plays a crucial role in measuring a company's return on investment without considering any debt financing. Additionally, cash on cash returns are crucial in determining the amount of cash received relative to the amount of cash invested. Similarly, higher IRR's (internal rate of return) are equally important as they indicate a higher potential return on investment. Lastly, higher multiples are essential as they signal a higher valuation for a company, which can be highly appealing to potential investors.
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