CONSTRUCTION FINANCE MANAGEMENT

CONSTRUCTION OF A RESIDENTIAL BUILDING FOR A CHARITABLE TRUST

PROJECTS SCOPE/ SPECIFICATIONS
An offer has been given by Care and Concern a Charitable Trust for the old people, for the Construction of a residential building and health club for the senior citizens at Aundh, Pune to Ace Constructions. The Total area of the land is 10,000 sq.m, of which 5000 sq.m will be used by the charitable trust and the remaining 5000 sq.m will be given free of cost to the Ace Constructions as a cost of development. The duration of the project will be 24 months. There will be two societies constructed on each of the 5000 sq.m area of land. One for the charitable trust, which will have a Residential building of 6 floors and a health club for senior citizens named as Aashiyana and the other, will be used for constructing a 13 floor tower titled as Marigold. The total area of the land is 10000 sq.m which, when converted to sq.ft shall be 10,000 x 10.76 = 1, 07,600 sq.ft 30% will be added to the area to include the cost of lift, staircase and other facilities. Therefore, the super built-up area available for construction will be 139880 sq.ft, Cost of Land is 10,000/ sq.m . By converting it to per sq.ft we get the value of the land as 930/ sq.ft. Therefore, the total value of the project will be 69940 x 930 = Rs.6,50,44,200/-

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TECHNICAL STUDIES
COST OF CONSTRUCTION
The construction of both the societies will be handed by the Developer to the Contractor. These will Include R.C.C, finishing and all other facilities. While the specifications for the construction of both the residential units will be used as per Class A constructions, more facilities will be given to the tower unit. Hence, Aashiyana will be given to the contractor at the rate of Rs 250/sq.ft, while Marigold will be given at the rate of Rs 350/sq.ft. Hence, the cost of constructing Aashiyana will be 250 x 69940 = Rs1,74,85,000/And the cost of constructing Marigold will be 350 x 69940 = Rs 2,44,79,000/Therefore, the total cost of construction will be Rs 4,19,64,000 Rs 90/sq.ft is estimated as the cost of the architect and all other administrative expenses. I.e. is 90 x 139880 = 1,25,89,200/The sum of both these costs is estimated to be Rs.5,45,53,200

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MANPOWER REQUIREMENTS/ COSTS

There will be 1 Engineer, 2 supervisors, and a store keeper at the site. The salary for the Engineer will be 10,000/- per month. The salary for the both the Supervisors will be 3,000 each i.e. 6000 per month. The salary for the store keeper will be 4,000 per month. Besides these the other expense at the site is estimated to be 10,000 per month Therefore, the cost of staff and other expenses will be 30,000 per month. i.e. 24 x 30,000 = 7,20,000/-

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FINANCIAL AND ECONOMICS EVALUATION

TOTAL INVESTMENT COSTS
Rs. 10 lakhs will be invested by the Developer And Rs. 50 lakh will be raised by him through bank loan The interest per month on the loan will be 1.5% i.e. 1.5% of 50 lakh which is 75000/These will be Repaid by the Developer in 12 months after the commencement of the project, therefore the total cost of the loan will be 75000 x 12 = 9,00,000/-

PROJECT FINANCING PROPOSED

PROPOSED CAPITAL STRUCTURE/LOAN REQUIREMENTS Since the Revenue from the construction will come at a later stage. It is important for the Developer to have sufficient funds necessary to invest in the earlier stages of the project. From the 60 lakhs raised by the Developer, 1 lakh will be spent by him for Brouchers, visting cards, name board at site and all such initial expenses. The remaining amount will be kept by him for initial administrative expenses as well as to pay the contractors bill at the earlier stages of the project.

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CONCLUSIONS ON FINANCIAL FEASIBILITY OF PROJECT

The project is feasible as the Charitable Trust is getting the same Class A construction and facilities for its society as the Developer is giving to its own society. This project is also considered feasible from the Developers point of view as he is getting MORE THAN 18% back on his investment. It will be a bright opportunity

BIBLIOGRAPHY / REFERENCES
FINANCE FOR NON-FINANCE EXECUTIVES
BY PRASANNA CHANDRA

CONSTRUCTION FINANCE MANAGEMENT

THE LESSON BOOK COMPILED BY NICMAR