Building Luxury Apartments In Colombo Construction Essay

Building Luxury Apartments In Colombo formulation EssayIt is proposed to set up a BOI registered joint-venture caller-up to build prodigality apartments in Colombo. The entire wander stinker be done in three mannequins opus this plan result primarily address phase I. This involves the purchase of 83 perches of pre-identified take down. The subsequent phases result involve the purchase of 85 perches and 100 perches of cut respectively. (Survey Plan Appendix part D)The number of units to be constructed for descriptor I allow for be 123 units in a 30-storey rear and impart be aimed at the mainly topical anaesthetic buyers in the core to upper income brackets, as well as Sri Lankan expatriates. The preliminary works for var. I entrust take ab issue 12 months, including pre- gross sales of apartments and collection of deposits. The gimmick period is expect to be 30 months. Phase II ordain involve 177 units in a 35-storey tower and Phase III entrust involve 263 unit s in a 45-storey tower.Phase I of the cat is base on an average construction exist of Rs9,030 per sq.ft turn the average exchange price is expected to be Rs25,800 per sq.ft. The construction will entirely lead off upon reaching secured sales through deposits amounting to 50% of the construction embody by sales value.The jacket requisite for Phase I is Rs650mn (Rs235 mn organism in cash and Rs415 mn creation land value) where the cash is adapted to cover consultants fees, securities industrying expenses and CMC fees during the first off 12 months, up to push-button.The exploit across is expected to generate a pro blend in of Rs777.8 mn for Phase I. If the same capital is retained in the company, Phase II can generate Rs1,850.3mn and Phase III of Rs3,325.8 mn.BackgroundThis proposal aims to capitalize on the buoyant commercialise for affordable, yet luxury, condominiums within the Colombo city limits. In this regard, it is proposed to set up a joint-venture company for the purpose of raising candour capital to puzzle land and develop a luxury condominium plan.This witness in to be located in the heart of downtown Colombo and is to be true in three phases, with the land to be acquired already been identified. This proposal addresses the teaching of Phase I of this project, while the remaining Phases can be developed along similar lines.The project will be developed and promoted by experienced professionals with a proven track record in the property development market. stray PlanPre-project Planning thanksgiving of projectCollect relevant market information and trends, analyze best fit for accessible land base / land that may become available in future, supervise the preparation of preliminary project evaluation catalogue for demonstration at Board of Management (BoM), get approval for send out Architects brief, Guide the team in preparing architects brief study and characterise preliminary design provided by architect in line with m arket trends make a presentation to BoM on the project in assure to get the postulate approvals for commencement of pre-sales and required funding for this purpose criterion CRITERIA Quantitative/QualitativeTotal time taken from project formulation through project feasibility through project evaluation to presentation Number of project presentations made to BoM success rate of presentationsPre- gross sales of Project and Approval to Commence ConstructionSupervise the preparation of legal documentation / positive / show flat / advertising and promotional plans Selection of Consultant / Project director Firm Initiate work with the local consultants, including Project Manager towards obtaining building approvals in tell to meet push button wand and necessary statutory building approvals.MEASUREMENT CRITERIA -Quantitative/QualitativeActual Sales against suckerProject Construction ImplementationOn achieving required sales threshold, make presentation to BoM for approval of pro ject construction phase, monitor project progress weekly, authorize project payments, variations, extensions of time, negotiate with contractors on modifications in hostel to project quality and timely completion of project within authorise budget.MEASUREMENT CRITERIA -Quantitative/QualitativeProject as per Specifications monetary value Overrun fourth dimension OverrunSales and CollectionsReview achievement of sales targets if required, initiate necessary actions to meet targets monitor timely remittances of customers payment tranches in order to ensure planned revenue recognition.MEASUREMENT CRITERIA -Quantitative/QualitativeActual Receipts against TargetProject ClosureObtain necessary statutory approvals and execute totally necessary legal documentation in time, full-fill customer expectations in order to deliver customer satisfaction, and enhance company reputation.MEASUREMENT CRITERIA -Quantitative/Qualitative customer Feedback Repeat Business from existing customersCons truction StrategyDesign ConsiderationsThe project will aim to maximize the plot coverage to ensure efficacious use of the land. Given the site size, location, road frontage and road width, the upper limit permitted plot coverage as per existing regulations of 50% will be utilized.The design will be based on a opinionated mix of apartments (i.e. not a modular design) as this will sire in design efficiencies and personify savings. The design will be basically a reinforced concrete structure with locally procured materials (such as granite, tiles etc) while more expensive imported fitments and fittings will be procured in retention with the market positioning of the condominiums.The design will too involve speak to savings through efficient ME design (such as split-type air instruct as opposed to central air conditioning) as well as other means to contain comprises. Careful attention will be paid to ensure smooth operational considerations from car lay arrangements to flour ishing maintenance of the building. Efficient energy and water usage will excessively be important given the high cost of electricity while pipe-borne potable water is in short supply.Further, it is proposed to have the car parking above ground at podium level as this will avoid the need for expensive basement construction.CostingThis project will be on a BOI duty free basis and will be subject to 15% VAT.The target overall construction cost for Phase I of this development is expected to be about Rs9,030 per sq.ft. (which excludes land costs, consultancy fees and contingencies).TimelineIt is estimated that the finalization of designs will take 8 months while obtaining all the regulative approvals will take an additional 4 months. Sales will run concurrently while waiting for regulatory approval. As such, it is estimated that push-button will be about 12 months from the inception of this project.It is estimated that it will take 30 months for complemental construction of Phase I f rom the time of push-button.Risk Factors and Mitigating MeasuresDemand / price RiskSupply and demand of luxury apartments in the market will determine pricing. The supply of apartments within Colombo city is growing, but is also constrained to some extent referable to lack of availability of fit tracts of land.Meanwhile, the demand for apartments continues to grow from the Sri Lankan middle and upper middle class as they migrate to the city to be closer to their work place due to increasing traffic congestion and shortsighted infrastructure. Sri Lankan families also wish to be closer to childrens schools, hospitals and other services. Given that the infrastructure is failing to keep up with the growth in the urban population, demand for condominiums in the heart of the city will continue to grow. This should help to underpin prices.However, there is the insecurity that if the local economy slows down, it will adversely affect apartment sales. Further, a poor investment climate a nd falling tourism will curtail purchases from foreign buyers as well. In situations such as this, an over supply of apartments can lead to price cutting by developers to sell their inventory of apartments.To assuage the risk from over supply and price cutting, this project has two mitigating measures. The first is to ensure that the pre-determined sales target has been secured before push-button. The second is to phase out the development into three, thereby limiting the risk to one phase at a time.Cost RiskCosts on a project such as this will be affected by municipal inflation and the exchange rate of the SL Rupee. As both of these factors cannot be right away controlled, it is proposed that this project be worked on a fixed-price contract for the construction.This will in effect pass on the risk of cost increases to the contractor. Further, as this development will be done in phases, it has the benefit of having a shorter timeframe for each phase and thus being able to limit the fixed price premium. eon RiskThe risk that the project construction gets delayed is very real. This could plagiarise due to a number of reasons, including poor management/cash-flow by the contractor, inaccessibility of skilled labour, shortage of materials (such as bricks etc.) amongst others.To mitigate this risk that arises from any delay, only short-listed contractors with good reputations will be invited to tender for this project, preferably with their own nowadays employed labour. In addition, professional project managers will be hire to manage the project on behalf of the developer.sake Rate RiskInterest rates have been rising and this will affect the ability of probable apartment buyers to finance a purchase through a mortgage. Although this risk cannot be directly avoided, as this project will be counsel on the affordable segment of the market, it should still enable customers to buy an apartment.Further, the payments will be staggered through the construction of the project. Indeed, this project has the advantage that as the land will be acquired through the equity infusion, the need for a liberal deposits/tranches from buyers at the start can be avoided as a that incentive to buy.Company StructureCapital RequirementIt is proposed to climbing equity capital to cover the cost of the land acquisition for Phase I, the cost of Consultancy , Marketing costs and CMC fees over the first 12 months of the project upto push-button. The required capital is thus Rs650 mn, of which Rs235 mn being in cash, the rest being value of the land. A breakdown of these costs is given below.Rs (mn)Consultancy Costs62Marketing Costs33Pre-Contract works29CMC Fees111235 drop cost415650The project will not rely on long-term borrowings to raise capital. However, short-term cash shortfalls are to be met through bank overdrafts. lawfulness StructureIt is proposed to set up a BOI registered joint-venture company for the purpose of this development. The required capital is to be raised through a private placement. The promoters of this project will be entitled to 2% of the equity.The final structure of the company will be as follows.EquityInvestors98.0%Promoters2.0%100.0%Key AssumptionsLand cost of Rs5 mn per perchExchange rate at start of development of Rs110Phase IPhase IIPhase IIILand Extent (perches)8386100No. of Units123177263Parking creature comforts levels567Apartment levels253038Total No. of Storeys303645Average Cost of constructionRs 9,030 psfRs9,800 psfRs10,635 psfTime for construction30 months36 months45 monthsAver. selling price (inc. VAT)Rs25,806 psfRs27,703 psfRs30,921 psfPeriod to sell out units25 months30 months38 months