COURSE NAME:

Submitted
by
Group No: A2
Name of the students
Aakanksha Thete
Antony Attokaran
Rajgopal Balabhadruni
Sachin Kulkarni
Swetha R

15F101
15F110
15F140
15F142
15F156

Business plan: Reaping the benefits of Real Estate

Real estate is one of the best investment options as its returns are high
with relatively lesser risks. With the current state of the economy
investments in real estate is ideally suited as they provide a sense of
financial security as well. The business plan what we are suggesting is
both owning a piece of land and converting it into a Paying guest or
leasing a building and give percentage of profit as the owners cut. A PG
guarantees monthly cash flows which can either be taken directly as
monthly profits or can be used to pay the debt incurred during buying of
real estate.
The booming job and education
sectors in Bangalore have led to the mushrooming of paying guest
accommodations. Paying Guest or PG, as we know it, is increasingly
becoming popular among young professionals (18-26 years), especially in
metros. The concept of PG is not new but there is a greater appreciation of
this concept now. PG is a preferred option among young people who move
away from their native place either for higher studies or for an
employment

opportunity.

In

new

city,

finding

the

right

PG

accommodation can be challenging at times. Most PG accommodations

are running without license. It finds no mention in the list of trades
allowed in residential areas in the GDP. The paying guest (PG)
accommodation business is big in Bangalore but no one really has an idea
about how much money is involved in this largely unregulated sphere of
activity
.

Bangalore is the city where we want to start this service

first, since it has lots of potential. Currently there are many areas in the
city where we can start this. We plan to start it from Whitefield. The area
is also centrally located to many MNCs and has easy accessibility from
other parts of Bangalore. It is well connected area, which has seen
tremendous growth in past few years and provides a perfect ambience for
our business

Challenges

Running a paying guest accommodation requires the owner to

statutorily apply and obtain a Health Trade License under Schedule
10 of the Karnataka Municipal Corporation Act 1976 from the
jurisdictional Health Officer. The license fee is Rs.3000 and failure to
comply with the requirement can lead to the premises being
summarily closed or sealed.

Electricity and water are supposed to be supplied at commercial

rates and while levying property taxes they are supposed to be
treated as non-residential property, even the LPG cylinders used
should be of commercial standard.

Finding

the

best

location

and

investing

in

the

real

estate

opportunities which would have significant value appreciation in

future.

Creating a Brand out of PG services.

Providing best services to the PG accommodators, value for their

money

Reaching out to masses with effective communication possibly an

online site to advertise.

Maintaining good word of mouth as it is critical for the success of

the business.

Technical Feasibity
Why Choose Whitefield?
The IT/ITeS sector continues to be a dominant growth driver for
Bangalore, and some areas stand out from the rest as far as the impact
of this sector is concerned. Whitefield in the eastern part of Bangalore
is one such area. Whitefield was an early settlement in Bangalore and
remained a quaint little suburb till the 2000s, when Bangalores IT
boom reshaped Whitefield into a major suburb.

Whitefield is a

burgeoning micro-market which has turned into a self-sustaining area

over time. The growth story of this location was scripted in the early
2000s, when the IT boom of Bangalore reshaped Whitefield as a major
suburb. It is now one of the most sought-after real estate localities in
the country. Over the next 24 months, it will be excellently connected
to other key parts of the city by the Namma Metro. In addition to - and
perhaps because of - the significant IT influence in Whitefield, the
presence of good social infrastructure, rapidly developing physical
infrastructure and top-quality educational institutions in the vicinity
make Whitefield a highly desirable location in all respects. Developers
in this area offer quality housing across all verticals, with the supply
geared squarely at buyers from the IT and industrial sectors. Whitefield
has been seeing consistent annualized appreciation to the tune of 1114%, which has been even higher in the case of select projects with
superior specifications and amenities. This micro-market is also one of
the most preferred rental destinations for the cosmopolitan work force

in Bangalore, again because of its proximity to major IT centers and the

availability of educational institutions.

Expenses involved (Fixed and Variable)

A 2400 sq ft land would be available at a cost of around 10000000

As per the prevailing government rules, we can construct the

building up to 4 floors (ground plus 1)

In each floor six rooms of 300 sq feet can be fit in with common area
for passage

Each room would have basic amenities

1. Attached Bathroom
2. A TV
3. Fast and reliant Internet connection
4. Bike/car parking facility
5. Hot water facilities
6. Room cleaning
7. News paper

Initial Investment
1
2
3
4

Particulars
Number
Construction of the building 1
Television
24

4000000
480000(20000*24

Cot
Table

)
72000(1500*48)
60000(1250*48)

48
48

5
6
7
8

Chair
Geyser
Router
Water purifier

48
24
4
4

38400(800*48)
72000(3000*24)
2000(500*4)
4800(1200*4)

Variable cost per month

1
2
3
4
5
6
7
8
9

Breakfast expenses
Dinner Expenses
Cook
Internet connection
TV cable expense
Security Maintenance
Cleaners (Nos. 2)
News paper
General
electricity

44000
72000
12000
6000 (Entire building)
6000
5000
8000
2900
2000

10
11

expense
General Water expense
General maintenance

1000
2000

In the PG morning breakfast and dinner will be provided.

Breakfast would be charged Rs.30 and dinner at Rs. 50 which would

be deducted from the residents rent.

Rent per resident would be Rs. 6000

Expenses borne by the resident

1. Electricity chargers
2. Water Bill chargers
3. Safety deposit of 25000 which would be returned
accordingly at the time of leaving
4. Should get their own mattress

Financial Tabulations

Rent collection per month: 288000

Variable expense monthly: 160000

Net profit monthly: 128000

Yearly profit: 1536000

Total fixed costs: Approximately 15500000

To invest for the fixed costs involved bank loan can be taken. As bank
doesnt usually pay such corpus amount as loan to individuals, three
partners can be pooled in. An amount of 9000000 can be taken by the
three partners and the remaining sum needed has to self financed

The interest amount to be paid has to be given out from the profits
made by renting.

As you can see, the monthly profit of 128000 should be divided into
three partners. The burden of paying EMIs will cease to exist.

As months pass on, the prices are bound to inflate so would be the
prices of the rent.

Within 10 years the amount taken as debt will be paid. At this point
of time two options persist.
Option 1: The three partners can together decide and sell the
PG which would definitely tremendous returns. As per the
property rates prevalent in Bangalore, It takes 3 years to
double the investments. Within 10 years the piece of property
would fetch a minimum of 50000000. This money should be
divided into the three partners again.

Option 2: Continue the services provided at PG, the monthly

profit should be equally distributed
Here the initial 2000000 which was invested apart from the loan is
multiplied to an extent of 15000000 for each individual in a span of 10
years. Its around 650% return.

Conclusion
Although its not a novel idea but with the given tradeoff between risk and
return, this idea does provide a viable option as to better put ones
savings into a profitable venture. The similar model can be expanded to
other areas in Bangalore or even in other cities as well. Tier 1 and Tier 2
cities can be previewed as good investment options.