ASSIGNMENT An offer has been given by a Charitable Trust to develop and build a facility on a 10,000 sq.m.

of plot in a prime locality of Pune where 000 sq.m. of area will be used by the trust for housing, health facilities for senior citi!ens . 000 sq.m. will be given free to developer as a cost of development. Cost of land is "s. 10,000# sq.m. $pecifications of flooring% 10& 'ranite (0& )ota stone 0& *osaic cement tiles ".C.C +ramed structure Aluminium sliding windows , Class A. "est $pecifications as used for Class A. constructions. -iscuss the financial viability of the pro.ect and the financial planning of the pro.ect. -eveloper would li/e to have minimum 10& of net profit on his investment. -eveloper can invest only "s. 10 la/hs as his own funds and can raise not more than "s. 0 la/hs as ban/ loan.

ABSTRACT: This Pro.ect "eport is about managing finance in developing and building a construction facility in a land of area 10,000 sq m. Then above mentioned construction pro.ect is divided in two no. of stages%1 -eveloping facility on a ,000 sq.m. for a charitable trust comprising of

housing and health facilities. -eveloping ,000 sq.m. of area as a cost of development

$ucceeding report highlights the financial viability of the construction pro.ect. 23tracting profit from the pro.ect through financial planning is the main feature of this pro.ect report. INTRODUCTION: +inancial management is dealing with the procurement of funds to meet financial needs. +inance and capital are seen as a considerable problem for cooperative, the sources being the members and loans from ban/s or other institutions and individuals. The sources of capital available to any firm are quite numerous but as noted public limited companies have the greatest variety of sources available for their use and the single person enterprise. The capital structure of any firm is related to the form of the enterprise, its ob.ectives, and the cost of capital. The cost of capital is sub.ect to and governed by many variables, which often operate independently of each other. The firm must consider these influence and their effects on the cost of the individual types of capital to determine the most suitable capital structure.

Cash budgeting will play an important role in any type of construction pro.ect also capital revenue, finance resource mobili!ation, cost accounting4 management accounting will give proper planning of inflow as well as outflow resources in pro.ect. Construction Pro.ect is a mission, underta/en to create a unique facility, product or service within the specified scope, quality, time and costs. Pro.ect can also be defined as organisation and performance of resources such as men, money, machinery, materials, space and technology into logical sequence of activities. +inance management in a construction pro.ect is mainly related with planning various activities in the pro.ect right from the start to the end of the pro.ect. A developer must be fully aware about all the /ey financial aspects of construction. 5e must be able to control financial flows in an orderly manner for reaping the results in form of profits. Profit from the pro.ect can be harvested by considering, implementing and following the points stated as under%1 a6 "educing the cost of construction. b6 *inimising any /ind of wastage whether in term of material or in the form of people time. c6 Planning the activities prior they actually start at the site. d6 $cheduling tas/s. e6 Planning and controlling the pro.ect. f6 Arranging finances at right time when requires. g6 Closely monitoring the e3penses of the pro.ect.

Although the main aim of a developer is to earn profit from the pro.ect by it should be remembered that profit should not be earned at the cost of quality, durability and aesthetics values of construction.

FINANCIAL VIABILITY OF PROJECT *ost construction pro.ects start with a need to have a new facility long before designers start designs and drawing of the pro.ects and certainly before field construction wor/ can commence. 2lements of this phase include% 1 Conceptual analysis. 1 Technical and feasibility studies and 1 2nvironmental impact reports. 5ere the pro.ect is divided in two stages first developing 7 building facility for a charitable trust and using ,000 sq. m area of land free as a cost of production.

STAGE 1: Development n! B"#l!#n$ o% C& '#t (le T'")t To develop a commercial site 10,000sqmt and in that ,000 m 8 developed area will be used by the owner and the balance ,000 m 8 area will be utili!ed by the developer to get bac/ investment and a profit on his investment. The cost of land is "s. 10,000# m8 -eveloper is going to get ,000sqmt at the rate of 10,000# m 8, which will give him an asset of 000 3 10000 9 0000000 :"s crore6

-eveloper will get the area to develop for the trust is 000 square meter at the rate of 10000# m8. ;ithin this area total construction area will be 0 &. Thus developer has to develop the total area is 000 < 0.0 9 (8 0 m 8.

'enerally construction rate is varying with area to area. ;e can assume the construction cost at this prime locality is = 0 "s# ft8 i.e. =000# m8.

Thus total cost of construction will be (8 0<=0009 8>= 0000 "s. :say "s ? crore6 As developer can invest only "s 10 la/hs from his own fund and loan of ma3imum "s 0 la/hs can be ta/en from ban/ there is a financial constraint in developing the above mentioned construction pro.ect. This total "s @0 Aa/hs is not at all sufficient to develop the proposed development therefore he is going to use the land which he got as a development cost for generate the amount. The developer can generate the amount by giving half of his share of land i.e. 8 00 sqm of land for rents to private authorities. -eveloper is going to get the rent of 000"s# m8#month, which will generate the amount for the year as 000 < 8 00 < 18 9 8(000000 "s. Thus the -eveloper is going to generate the total amount of "s ? Crores and brea/ even the cost of development of the charitable trust. Inte'e)t C l*"l t#on) As only "s 0 la/hs is been ta/en loan from ban/s on 1 & of interest for only this amount is sub.ected to the interest Total amount 1 "s. .000,000 years so

"ate of interest 1 1 &

Bears

18

Total4 interest amount to be paid 9 : ,000,000 3 1 3 8 6 # 100 9 1 ,00,000 $o total amount paid to the ban/ as interest is "s 1 la/hs This 1 Aa/hs is ta/en into account while wor/ing out the 2conomic +easibility study of the 5ousing $ociety in $tage 8. STAGE +: Development o% ,o")#n$ So*#et- on l n! $#ven %'ee ) *o)t o% Development As the developer has to earn profit by investing in the balance land of 8 00 sq. m area the best investment feasible is by building a housing society. $o /eeping in mind the financial constraint constructing, housing building in only half of the available land i.e. 8 00 sq. m of land in the first phase is the most suited economical option. As the land is located at prime location of Pune, so flat of the purposed residential building can be sold at higher prices earning a good profit margin for the developer. Also he can ta/e the boo/ing amount for the initial launch of pro.ect from customer and use it for launching the pro.ect. The residential building will be )#. )to'e- building to be built on a space on an area of 00 sq.m < 00sq.m. 'round floor of the building will be meant for two wheeler and four wheeler par/ing. The Proposed residential building will comprise of%1 S/No/ 1. 8. ?. ITEMS ? C5) +lats 8 C5) +lats Calcony 0UANTITY @ , one on each floor 18 , two on each floor @, one for each floor

(. . @. =.

Aobby $taircase Par/ing lot 'uard room

@, one for each floor 11111111111 At ground level 1 at ground level ad.acent to entrance gate

All ? C5) flats will be front facing and lin/ed with the other two no. 8 C5) flat via. a lobby. Calcony will be provided at all three no. ? C5) flats. +lats will be constructed and then will be fully furnished. +ully furnished flats will then be ready for selling to the costumers with ready to move option. As flats to be constructed are spacious, par/ing facilities along with security is also been provided so flat will going to attract the potential buyers easily. Posh location will also add to the amount on which flats can be selling. $o developing a residential building on a free of cost land and selling the flats of the building is a sure sort assurance of profit. $o this investment on this construction pro.ect is a totally win , win situation for the developer and positively promises the profit.

PROJECT SCOPE As it is a 5ousing pro.ect the specifications in general for the residential dwellings will be as follows. a6 $tructure% ".C.C. +ramed structure. As per design of Architect and 2ngineer. b6 "einforcement% The reinforcement used will be Anti Corrosive T*T $teel. c6 *asonry% All *asonry will be of Concrete Cloc/ and internal partition with first class wire cut bric/s.

d6 Plastering% Dnternal#23ternal plaster of walls will be e3ecuted with necessary admi3tures added to the Cement *ortar in order to minimi!e shrin/age crac/s. Dnternal walls will be neat finished and 23ternal walls will be $ponge finished. e6 +looring% 'ranite on +loor in Aiving "oom and remaining area *osaic cement tiles and )ota stone in Cathrooms and )itchen area. f6 +ramewor/% -oor frames of $al wood, *ain door of Tea/ ;ood with +rench polish, Dnternal -oors *arine +lush -oor with Eil paint. g6 ;indows % Aluminum sliding ;indows ? trac/ anodi!ed h6 Painting and Polishing% Dnternal ;alls will be painted with Eil Cound -istemper, 23ternal ;alls with Ape3 ;eather $hield paint. i6 )itchen% 'ranite platform with $tainless steel sin/ with drain board and Ceramic tiles on dado up to height of 0.@m above platform. .6 Plumbing% All plumbing in the Cathrooms # Toilets will be concealed and CPFC pipes will be used. All 23ternal piping and $;" pipes used will be of +inole3. /6 $anitary ware% All $anitary ware will be of $tandard range of 5ind ware or equivalent and fittings of Gaguar standard range. l6 ;ater $torage% Hnderground sump and overhead tan/. m6 2lectricals% All wires used will be +inole3 or equivalent with fi3tures of Crabtree or equivalent.

TEC,NICAL STUDIES The technical study is to determine the needs for material and human means necessary to achieve the ob.ectives. These ta/e account of the mar/et :availability of

raw material, there is a demand, customer requirement6, regulatory and standards1 related product and also the financial :amount to invest and returns e3pected6. The study focuses on two general areas% study of supply and the study of transformation. To carry out critical analysis of technical feasibility, there must be enough /nowledge of technical, economic and regulatory environment 1 Co)t o% *on)t'"*t#on

The cost of construction includes both the initial capital cost and the subsequent operation and maintenance costs. 2ach of these ma.or cost categories consists of a number of cost components. The capital cost for a construction pro.ect includes the e3penses related to the initial establishment of the facility%
:i6

Aand acquisition, including assembly, holding and improvement Planning and feasibility studies Architectural and engineering design Construction, including materials, equipment and labor +ield supervision of construction Construction financing and ta3es during construction

:ii6

:iii6

:iv6

:v6

:vi6

:vii6 Dnsurance

:viii6

2quipment and furnishings not included in construction

:i36

Dnspection and testing

The operation and maintenance cost in subsequent years over the pro.ect life cycle includes the following e3penses%
:i6

Aand rent, if applicable Eperating staff Aabor and material for maintenance and repairs Periodic renovations Dnsurance and ta3es +inancing costs

:ii6

:iii6

:iv6

:v6

:vi6

(vii) Htilities

The magnitude of each of these cost components depends on the nature, si!e and location of the pro.ect as well as the management organi!ation, among many considerations. The owner is interested in achieving the lowest possible overall pro.ect cost that is consistent with its investment ob.ectives.

Dt is important for design professionals and construction managers to reali!e that while the construction cost may be the single largest component of the capital cost, other cost components are not insignificant. +or e3ample, land acquisition costs are a ma.or e3penditure for building construction in high1density urban areas, and construction financing costs can reach the same order of magnitude as the construction cost in large pro.ects such as the construction of nuclear power plants.

10

Calculating the cost of construction is also helpful in the financial management and planning as it gives the idea that how much finance will probably will required for developing the pro.ect. Crea/1Hp of Cost of Construction for the 5ousing Pro.ect is listed in the table given below%1 S/ NO/ ITEMS TOTAL COST 2R)/1 (0,00,000 80,00,000 1@,00,000 80,00,000 80,00,000 @,00,000 @,00,000 (,00,000 @,00,000 @,00,000 1@,00,000 13453553555

1. Cost of ".C.C. 8. Cost of "einforcement ?. Cost of *asonry (. Cost of Plastering . Cost of +looring @. Cost of +ramewor/ =. Cost of Painting and Polishing 0. Cost of Plumbing >. Cost of $anitary ware 10. Cost of ;ater $torage 11. Cost of 2lectricals G' n! Tot l

2(1

M npo6e' 'e7"#'ement)8*o)t)

+or the e3ecution of such a pro.ect, the *anpower requirement is very high and hence the whole pro.ect needs to be analysed and phased out in order to obtain ma3imum output from the labour and planning the area of wor/ without much hindrance throughout the site, and easy flow of labour and material stac/ing accessible in order to reduce the wor/ force and in turn ma/e the pro.ect cost effective. Also the cost of labour force i.e. both s/illed and uns/illed has increased drastically since few years now. The main drawbac/ for the pro.ects which suffer on account of delay etc. is due to lac/ of *anpower which is in acute shortage. 5ence the planning needs to be done accordingly.

11

*anpower "equirement +or ".C.C 7 $tructural ;or/s MANPO9ER No/ TIME PERIOD COST

S/ NO/

1. 8. ?. (. .

*ason Carpenters Painters Clac/smiths *a!doors

1011 0110 0110 10 8018

0 months @ months months months 10 months

=,00,000 ,00,000 (,00,000 (,00,000 10,00,000

G' n! Tot l

:53553555

*anpower "equirement +or +inishing, Plumbing 7 2lectrical ;or/ MANPO9ER *ason 2lectricians Plumbers TIME PERIOD 0 months ? months ? months COST ,00,000 ?,00,000 8,00,000

S/ NO/ 1. 8. ?.

G' n! Tot l 2*1

153553555

De)#$n !e7" *- n! lte'n t#ve) The pro.ect -esign is the main criteria on which the whole budget as well as the

end profit depends. $o the design of the structure always needs to be handled at the 12

highest priority and enough time given to the designer to ma/e use of all the ob.ectives to ma3imi!e the profit by using as much of the Permissible +.A.". possible. Also care needs to be ta/en during designing that the whole pro.ect should be very impressive and should be able to suit the conditions comfortably in order to find buyers very easily in terms of loo/s as well as funds both and apartments so designed should suit the requirements of the buyer. The -esign should be in such a manner that the buyers can also relate and be able to comfortably alter a few things in such a way so as to not disturb the structure or its elevations etc. 2!1 9o'; )*&e!"le on 7" 'te'l- ( )#) ;or/ing out the Tas/ 7 Time schedule of a pro.ect in preliminary stages is must for the accurate financial planning. *ain motive of a wor/ schedule is to brea/ down the construction activities to be carried out for a pro.ect in the form of various tas/s, stating the specific time to be consumed for the planned tas/s. +or this pro.ect a total time period of 8 years has been considered and all the construction activities will be carried out in this tenure. Pro.ect start date is fi3ed on 1 #01#1? and commissioning of pro.ect is scheduled on 1 #01#1 . $o Pro.ect activities is divided in to four quarterly phases namely Phase1D, Phase1DD, Phase1DDD 7 Phase1DF, each phase covers a period of 0 to ( months depending on the activities carried in the respective phase. Crea/1Hp of ;or/ $chedule is listed in the table given below%1 P,ASE<I S/ NO/ 1. ACTIVITIES ".C.C. +oundation START TIME 1 #01#1? FINIS, TIME 10#0(#1?

13

8. ?. (.

"einforcement ;or/ *asonry ;or/ Plastering

11#0(#1? 81#0@#1? 01#00#1?

80#0@#1? ?1#0=#1? 1 #>#1? = mont&)

Tot l T#me El p)e! P,ASE<II S/ NO/ ACTIVITIES 1. 8. ?. +looring +ramewor/ Painting and Polishing START TIME 1 #0>#1? 01#01#1( 1@#0?#1(

FINIS, TIME ?1#18#1? 1 #0?#1( 1 #0 #1( = mont&)

Tot l T#me El p)e! P,ASE<III S/ NO/ ACTIVITIES 1. 8. Plumbing $anitary ware START TIME 1@#0 #1( 1@#0=#1(

FINIS, TIME 1 #0=#1( 80#0>#1( > mont&)

Tot l T#me El p)e! P,ASE<IV S/ NO/ ACTIVITIES 1. 8. ;ater $torage 2lectricals START TIME 81#0>#1( 81#11#1(

FINIS, TIME 80#11#1( 1 #01#1 > mont&)

Tot l T#me El p)e!

? Note: All Tas/ durations are tentative and can be changed as per construction planning and site conditions.

FINANCIAL AND ECONOMICS EVALUATION FOR ,OUSING SOCIETY:

14

+inancial management is mainly concerned with management of funds i.e. management of monetary issues. There are two basic aspects of financial management vi! procurement of funds and an effective use of these funds.

1 Tot l Inve)tment) *o)t Primary step in financial planning of a pro.ect is to estimate total investment cost involved in the development of pro.ect. Dnvestment cost of pro.ect is the sum of following costs stated as under%1 Aand Cost 1 Dt involves the cost required to acquire the land on which construction of housing colony is to be carried out. "aw *aterial Cost 1 Dt comprises cost of raw material required for construction li/e cement, T*T bars for reinforcement, aluminum 7 wooden frames, tiles, electrics, sanitary wares etc. Construction Cost 1 All money spend for carrying construction activities add on to form this cost. *anpower Cost 1 Cost of recruiting s/illed and non1s/illed employees contribute to this type of cost.

S/ NO/ 1. 8. ?.

COST BREA@<UP Aand Cost "aw *aterial Cost Construction Cost

REMAR@S

INVOLVED COST

2R)/1 Iot Applicable As 0 Aand ;as +ree 1@,000,000 (,000,000 15

(. *an Power Cost G' n! Tot l

(,000,000 +>35553555

5ence the total investment for this 5ousing Colony Construction Pro.ect is two crore and forty la/hs i.e. "s 8(,000,000#

(1 P'oAe*t F#n n*#n$ %o' ,o")#n$ So*#etP'opo)e! C p#t l St'"*t"'e 8 Lo n 'e7"#'ement) Ene of the ma.or problems facing any business enterprise is that of obtaining finance and ascertaining the cost of pro.ect. +inance can be obtained from different sources and since finance arranged from different sources have different characteristics in terms of ris/, cost and control. $ources of finance depend upon the business structure. There are several sources of finance available for a construction pro.ect li/e%1 Aong Term +inance. *iddle Term +inance $hort Term +inance.

As in this Construction Pro.ect there are some restrictions in the investment li/e%1 -eveloper has already invested his own "s 10 la/hs in construction of the Charitable trust and also an amount of "s 0 la/hs which he has ta/en as a ban/ loan. $o the complete finance for the housing pro.ect i.e. "s Two Crores and +orty Aa/hs is to be managed # procure. As the pro.ect duration is of 8 years and developer see/s early and quic/ profit *iddle term and $hort Term +inance seems to be the feasible options. Types of finance considered for the Construction pro.ect are stated as under%1

16

*iddle Term +inance Aoans from Can/s 1 Primary role of ban/s is to cater to the finance requirement of a pro.ect. Hsually ban/ charges 1 & of interest rate in financing such type of construction pro.ect. $hort Term +inance Advance +rom Customers , As this Construction Pro.ect comprises a housing colony in which flats are to be constructed for selling to the costumer, money can be generated from the potential costumers in the form of advance down payment for boo/ing the flats.

Inte'e)t C l*"l t#on) As only "s 0 la/hs is been ta/en loan from ban/s on 1 & of interest for only this amount is sub.ected to the interest Total amount 1 "s. .000,000 years so

"ate of interest 1 1 & Bears 18

Total4 interest amount to be paid 9 : ,000,000 3 1 3 8 6 # 100 9 1 ,00,000 $o total amount paid to the ban/ as interest is "s 1 la/hs

*1 C )& Flo6 M n $ement %o' ,o")#n$ So*#et-

17

Cash +low management basically deals with inflow and outflow of cash during a particular time. Juarterly Crea/ Hp of Cash Eutflow

S/ NO/ 1. 8. ?. (. . @. =.

P,ASES Phase D Phase DD Phase DDD Phase DF Cumulative Construction cost

Amo"nt (,000,000 0,000,000 10,00,000 8,800,000 >35553555

S#n; +oundations ;or/ +looring 7 +rame wor/ Pipe +itting ;or/ 2lectrical 7 +inishing wor/

for all ( phases Cumulative *an Power cost >35553555 for all ( phases Dnterest amount payable to 13B553555 +B3B553555

ban/ G' n! Tot l

Juarterly Crea/ Hp of Cash Dnflow

S/ NO/ 1. 8. ?. (. . @. =.

P,ASES Phase D Phase DD Phase DDD Phase DF Can/ Aoan Costumer advance +lat selling amount CONCLUSION

Amo"nt (,000,000 0,000,000 10,00,000 8,800,000 +35553555 +35553555 :435553555

So"'*e 8 la/hs:Can/6 K

la/hs:own fund6 K 10

la/hs:lease amount6 la/hs:own fund6 K 11 la/hs:lease amount6 K 8 & Customer Advance la/hs:Can/6 88 la/hs:lease amount6 80 la/hs:6

18

As the total investment for this Construction Pro.ect is "s 8 crore flats amount of "s 1crore

la/hs and by selling the

la/hs has been earned so this pro.ect is fully financially feasible

and have potential to reap high profit for the developer. P'o%#t * l*"l t#on A6 Total cost of pro.ect 9 "s 8 , 00,000 C6 Total amount earned from the pro.ect 9 D K DD 9 ?@,000,000 $elling price of @ noLs of ? C5) flats 9 ?,000,000 3 @ 9 10,000,000. $elling price of 18 noLs of 8 C5) flats 9 1, 00,000 3 18 9 10,000,000# C6 Iet Profit 9 C ,A 9 ?@,000,00018 , 00,000 9 10, 00,000 -6 Profit Percentage 9 :C 3 1006 # A 9 :10, 00,000 3 1006# 8(,000,000 C >:/DB E o% P'o%#t E 'ne! RECOMMENDATION Particularly during periods of economic recession construction firms are e3ceedingly conscious of the problem of survival and see/ to predict, monitor and control costs and revenues with diligence far surpassing that employed during more buy1ant time. 5ence considering real estate value is going up it is recommended to ta/e up the pro.ect financial term in the pro.ect.

19

B#(l#o$' p&1. Te3t Coo/s from IDC*A". 8. +inancial *anagement, $econd 2dition, E3ford Publication by $rivastava *isra.

20