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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 proect and the financial planning of the proect.

-eveloper would li/e to have minimum 1& 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.

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ABSTRACT:

This Proect "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 proect is divided in

two no. of stages%

-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 proect. 23tracting profit

from the proect through financial planning is the main feature of this proect 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 obectives,

and the cost of capital. The cost of capital is subect 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.

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Cash budgeting will play an important role in any type of construction proect also

capital revenue, finance resource mobili!ation, cost accounting4 management accounting will

give proper planning of inflow as well as outflow resources in proect.

Construction Proect is a mission, underta/en to create a unique facility, product or

service within the specified scope, quality, time and costs. Proect 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 proect is mainly related with planning various

activities in the proect right from the start to the end of the proect. 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 proect can be harvested by considering, implementing and following the

points stated as under%

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 proect.

f6 Arranging finances at right time when requires.

g6 Closely monitoring the e3penses of the proect.

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Although the main aim of a developer is to earn profit from the proect 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 proects start with a need to have a new facility long before designers start

designs and drawing of the proects and certainly before field construction wor/ can

commence. 2lements of this phase include%

Conceptual analysis.

Technical and feasibility studies and

2nvironmental impact reports.

5ere the proect 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 m8developed area will be used

by the owner and the balance ,000 m8area 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# m8, which will give him an

asset of 000 3 10000 9 0000000 :"s crore6

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-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 &. Thus developer has to

develop the total area is 000 < 0. 9 (80 m8.

'enerally construction rate is varying with area to area. ;e can assume the

construction cost at this prime locality is =0 "s# ft8i.e. =000# m8.

Thus total cost of construction will be (80=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 proect. This total "s @0 a/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. 800

sqm of land for rents to private authorities. -eveloper is going to get the rent of 00"s#

m8#month, which will generate the amount for the year as 00 < 800 < 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 Cl*"lt#on)

As only "s 0 la/hs is been ta/en loan from ban/s on 1 & of interest for years so

only this amount is subected to the interest

Total amount "s. .000,000

"ate of interest 1 &

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Bears 8

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 a/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 ln! $#ven %'ee ) *o)t o% Development

As the developer has to earn profit by investing in the balance land of 800 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. 800 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 proect from customer and use it for launching the proect.

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%

S/No/ ITEMS 0UANTITY

1. ? 5) +lats @ , one on each floor

8. 8 5) +lats 18 , two on each floor

?. alcony @, one for each floor

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(. obby @, one for each floor

. $taircase

@. Par/ing lot At ground level

=. 'uard room 1 at ground level adacent to entrance gate

All ? 5) flats will be front facing and lin/ed with the other two no. 8 5) flat via. a

lobby. alcony will be provided at all three no. ? 5) 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 proect is a totally win win situation for the developer

and positively promises the profit.

PROJECT SCOPE

As it is a 5ousing proect 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 loc/ and internal partition with first class

wire cut bric/s.

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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 iving "oom and remaining area *osaic cement tiles

and )ota stone in athrooms 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 ound -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 athrooms # 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 obectives. These ta/e account of the mar/et :availability of

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raw material, there is a demand, customer requirement6, regulatory and standards

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

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 maor cost categories consists of a

number of cost components.

The capital cost for a construction proect includes the e3penses related to the initial

establishment of the facility%

:i6 and acquisition, including assembly, holding and improvement

:ii6 Planning and feasibility studies

:iii6 Architectural and engineering design

:iv6 Construction, including materials, equipment and labor

:v6 +ield supervision of construction

:vi6 Construction financing

:vii6 Dnsurance and ta3es during construction

:viii6 2quipment and furnishings not included in construction

:i36 Dnspection and testing

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The operation and maintenance cost in subsequent years over the proect life cycle

includes the following e3penses%

:i6 and rent, if applicable

:ii6 Eperating staff

:iii6 abor and material for maintenance and repairs

:iv6 Periodic renovations

:v6 Dnsurance and ta3es

:vi6 +inancing costs

(vii)Htilities

The magnitude of each of these cost components depends on the nature, si!e and

location of the proect as well as the management organi!ation, among many

considerations. The owner is interested in achieving the lowest possible overall proect

cost that is consistent with its investment obectives.

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 maor

e3penditure for building construction in highdensity urban areas, and construction

financing costs can reach the same order of magnitude as the construction cost in large

proects such as the construction of nuclear power plants.

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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 proect. rea/Hp of Cost of Construction for the 5ousing Proect is listed

in the table given below%

S/ NO/ ITEMS TOTAL COST

2R)/

1. Cost of ".C.C. (0,00,000

8. Cost of "einforcement 80,00,000

?. Cost of *asonry 1@,00,000

(. Cost of Plastering 80,00,000

. Cost of +looring 80,00,000

@. Cost of +ramewor/ @,00,000=. Cost of Painting and Polishing @,00,000

. Cost of Plumbing (,00,000

>. Cost of $anitary ware @,00,000

10. Cost of ;ater $torage @,00,000

11. Cost of 2lectricals 1@,00,000G'n! Totl 13453553555

2( Mnpo6e' 'e7"#'ement)8*o)t)

+or the e3ecution of such a proect, the *anpower requirement is very high and hence

the whole proect 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 proect 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 proects 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.

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*anpower "equirement +or ".C.C 7 $tructural ;or/s

S/ NO/ MANPO9ER No/ TIME

PERIOD

COST

1. *ason 101 months =,00,000

8. Carpenters 10 @ months ,00,000

?. Painters 10 months (,00,000

(. lac/smiths months (,00,000

. *a!doors 808 10 months 10,00,000

G'n! Totl 53553555

*anpower "equirement +or +inishing, Plumbing 7 2lectrical ;or/

S/ NO/ MANPO9ER TIME PERIOD COST

1. *ason months ,00,000

8. 2lectricians ? months ?,00,000

?. Plumbers ? months 8,00,000

G'n! Totl 153553555

2* De)#$n !e7"*- n! lte'nt#ve)

The proect -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

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highest priority and enough time given to the designer to ma/e use of all the obectives

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 proect 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! 9o'; )*&e!"le on 7"'te'l- ()#)

;or/ing out the Tas/ 7 Time schedule of a proect 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 proect in the form of various tas/s,

stating the specific time to be consumed for the planned tas/s.

+or this proect a total time period of 8 years has been considered and all the

construction activities will be carried out in this tenure. Proect start date is fi3ed on

1#01#1? and commissioning of proect is scheduled on 1#01#1. $o Proect activities

is divided in to four quarterly phases namely PhaseD, PhaseDD, PhaseDDD 7 PhaseDF,

each phase covers a period of to ( months depending on the activities carried in the

respective phase. rea/Hp of ;or/ $chedule is listed in the table given below%

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8. "einforcement ;or/ 11#0(#1? 80#0@#1?

?. *asonry ;or/ 81#0@#1? ?1#0=#1?

(. Plastering 01#0#1? 1#>#1?

Totl T#me Elp)e! = mont&)

P,ASE#1? ?1#18#1?

8. +ramewor/ 01#01#1( 1#0?#1(

?. Painting and Polishing 1@#0?#1( 1#0#1(

Totl T#me Elp)e! = mont&)

P,ASE#1(

Totl T#me Elp)e! > mont&)

P,ASE#1( 80#11#1(

8. 2lectricals 81#11#1( 1#01#1

Totl T#me Elp)e! > mont&)

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

planning and site conditions.

FINANCIAL AND ECONOMICS EVALUATION FOR ,OUSING SOCIETY:

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(. *an Power Cost (,000,000G'n! Totl +>35553555

5ence the total investment for this 5ousing Colony Construction Proect is two crore

and forty la/hs i.e. "s 8(,000,000#

( P'oe*t F#nn*#n$ %o' ,o")#n$ So*#et-

P'opo)e! Cp#tl St'"*t"'e 8 Lon 'e7"#'ement)

Ene of the maor problems facing any business enterprise is that of obtaining finance

and ascertaining the cost of proect. +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 proect li/e%

ong Term +inance.

*iddle Term +inance

$hort Term +inance.

As in this Construction Proect there are some restrictions in the investment li/e%

-eveloper has already invested his own "s 10 la/hs in construction of the

Charitable trust and also an amount of "s0 la/hs which he has ta/en as a

ban/ loan. $o the complete finance for the housing proect i.e. "s Two Crores

and +orty a/hs is to be managed # procure. As the proect 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 proect are stated as under%

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*iddle Term +inance

oans from an/s Primary role of ban/s is to cater to the finance

requirement of a proect. Hsually ban/ charges 1 & of interest rate in

financing such type of construction proect.

$hort Term +inance

Advance +rom Customers As this Construction Proect 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 Cl*"lt#on)

As only "s 0 la/hs is been ta/en loan from ban/s on 1 & of interest for years so

only this amount is subected to the interest

Total amount "s. .000,000

"ate of interest 1 &

Bears 8

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

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

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Cash +low management basically deals with inflow and outflow of cash during a

particular time.

Juarterly rea/ Hp of Cash Eutflow

Juarterly rea/ Hp of Cash Dnflow

CONCLUSION

S/ NO/ P,ASES Amo"nt S#n;

1. Phase D (,00,000 +oundations ;or/

8. Phase DD ,000,000 +looring 7 +rame wor/

?. Phase DDD 10,00,000 Pipe +itting ;or/

(. Phase DF 8,800,000 2lectrical 7 +inishing wor/

. Cumulative Construction cost

for all ( phases

>35553555

@. Cumulative *an Power cost

for all ( phases

>35553555

=. Dnterest amount payable to

ban/

13553555

G'n! Totl +3553555

S/ NO/ P,ASES Amo"nt So"'*e

1. Phase D (,00,000 8 la/hs:an/6 K la/hs:own fund6 K 1

la/hs:lease amount6

8. Phase DD ,000,000 la/hs:own fund6 K 11 la/hs:lease

amount6 K 8& Customer Advance

?. Phase DDD 10,00,000 la/hs:an/6

(. Phase DF 8,800,000 88 la/hs:lease amount6. an/ oan +35553555 80 la/hs:6

@. Costumer advance +35553555

=. +lat selling amount 435553555

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B#(l#o$'p&-

1. Te3t oo/s from IDC*A".

8. +inancial *anagement, $econd 2dition, E3ford Publication by $rivastava *isra.

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