Building Luxury Apartments In Colombo Construction Essay

It is proposed to put up a BOI registered joint-venture company to construct luxury flats in Colombo. The full undertaking can be done in three stages while this proposal will chiefly turn to Phase I. This involves the purchase of 83 perches of pre-identified land. The subsequent stages will affect the purchase of 85 perches and 100 perches of land severally. ( Survey Plan Appendix portion D )

The figure of units to be constructed for Phase I will be 123 units in a 30-storey tower and will be aimed at the chiefly local purchasers in the center to upper income brackets, every bit good as Sri Lankan expatriates. The preliminary plants for Phase I will take about 12 months, including pre-sales of flats and aggregation of sedimentations. The building period is expected to be 30 months. Phase II will affect 177 units in a 35-storey tower and Phase III will affect 263 units in a 45-storey tower.

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Phase I of the undertaking is based on an mean building cost of Rs9,030 per sq.ft while the mean merchandising monetary value is expected to be Rs25,800 per sq.ft. The building will merely get down upon making secured gross revenues through sedimentations amounting to 50 % of the building cost by gross revenues value.

The capital required for Phase I is Rs650mn ( Rs235 manganese being in hard currency and Rs415 manganese being land value ) where the hard currency is sufficient to cover advisers fees, selling disbursals and CMC fees during the first 12 months, up to “ push-button ” .

The undertaking is expected to bring forth a net income of Rs777.8 manganese for Phase I. If the same capital is retained in the company, Phase II can bring forth Rs1,850.3mn and Phase III of Rs3,325.8 manganese.

Background

This proposal aims to capitalise on the floaty market for low-cost, yet luxury, condominiums within the Colombo metropolis bounds. In this respect, it is proposed to put up a joint-venture company for the intent of raising equity capital to get land and develop a luxury condominium undertaking.

This undertaking in to be located in the bosom of downtown Colombo and is to be developed in three stages, with the land to be acquired already been identified. This proposal addresses the development of Phase I of this undertaking, while the staying Phases can be developed along similar lines.

The undertaking will be developed and promoted by experient professionals with a proved path record in the belongings development market.

Undertaking Plan

Pre-project Planning & A ; Approval of undertaking

Collect relevant market information and tendencies, analyze best tantrum for available land base / land that may go available in future, oversee the readying of preliminary undertaking rating papers for presentation at Board of Management ( BoM ) , get blessing for directing out Architect ‘s brief, Guide the squad in fixing designer ‘s brief ; survey and modify preliminary design provided by designer in line with market tendencies ; do a presentation to BoM on the undertaking – in order to acquire the needed blessings for beginning of pre-sales and necessary support for this intent

MEASUREMENT CRITERIA – Quantitative/Qualitative

Entire clip taken from undertaking conceptualisation through undertaking feasibleness through undertaking rating to presentation ; Number of undertaking presentations made to BoM ; success rate of presentations

Pre-Sales of Project and Approval to Commence Construction

Oversee the readying of legal certification / collateral / show level / advertisement and promotional programs ; Selection of Consultant / Project Manager Firm ; Initiate work with the local advisers, including Project Manager towards obtaining edifice blessings – in order to run into push button threshold and necessary statutory edifice blessings.

MEASUREMENT CRITERIA -Quantitative/Qualitative

Actual Gross saless against Target

Undertaking Construction Implementation

On accomplishing required gross revenues threshold, do presentation to BoM for blessing of undertaking building stage, proctor undertaking advancement hebdomadally, authorise undertaking payments, fluctuations, extensions of clip, negotiate with contractors on alterations – in order to guarantee quality and timely completion of undertaking within sanctioned budget.

MEASUREMENT CRITERIA -Quantitative/Qualitative

Undertaking as per Specifications ; Cost Overrun ; Time Overrun

Gross saless and Collections

Review accomplishment of gross revenues marks ; if required, initiate necessary actions to run into marks ; supervise timely remittals of clients ‘ payment tranches – in order to guarantee planned gross acknowledgment.

MEASUREMENT CRITERIA -Quantitative/Qualitative

Actual Receipts against Target

Undertaking Closing

Obtain necessary statutory blessings and put to death all necessary legal certification in clip, full-fill client outlooks – in order to present client satisfaction, and heighten company repute.

MEASUREMENT CRITERIA -Quantitative/Qualitative

Customer Feedback ; Repeat Business from bing clients

Construction Scheme

Design Considerations

The undertaking will take to maximise the secret plan coverage to guarantee efficient usage of the land. Given the site size, location, route frontage and route breadth, the upper limit permitted secret plan coverage as per bing ordinances of 50 % will be utilized.

The design will be based on a fixed mix of flats ( i.e. non a modular design ) as this will convey in design efficiencies and cost nest eggs. The design will be basically a strengthened concrete construction with locally procured stuffs ( such as granite, tiles etc ) while more expensive imported fitments and adjustments will be procured in maintaining with the market placement of the condominiums.

The design will besides affect cost nest eggs through efficient M & A ; E design ( such as split-type air conditioning as opposed to cardinal air conditioning ) every bit good as other agencies to incorporate costs. Careful attending will be paid to guarantee smooth operational considerations from auto parking agreements to easy care of the edifice. Efficient energy and H2O use will besides be of import given the high cost of electricity while pipe-borne drinkable H2O is in short supply.

Further, it is proposed to hold the auto parking above land at dais degree as this will avoid the demand for expensive cellar building.

Costing

This undertaking will be on a BOI responsibility free footing and will be capable to 15 % VAT.

The mark overall building cost for Phase I of this development is expected to be about Rs9,030 per sq.ft. ( which excludes land costs, consultancy fees and eventualities ) .

Timeline

It is estimated that the finalisation of designs will take 8 months while obtaining all the regulative blessings will take an extra 4 months. Gross saless will run at the same time while waiting for regulative blessing. As such, it is estimated that “ push-button ” will be about 12 months from the origin of this undertaking.

It is estimated that it will take 30 months for finishing building of Phase I from the clip of “ push-button ” .

Hazard Factors and Mitigating Measures

Demand / Pricing Risk

Supply and demand of luxury flats in the market will find pricing. The supply of flats within Colombo metropolis is turning, but is besides constrained to some extent due to miss of handiness of suited piece of lands of land.

Meanwhile, the demand for flats continues to turn from the Sri Lankan center and upper in-between category as they migrate to the metropolis to be closer to their work topographic point due to increasing traffic congestion and hapless substructure. Sri Lankan households besides wish to be closer to kids ‘s schools, infirmaries and other services. Given that the substructure is neglecting to maintain up with the growing in the urban population, demand for condominiums in the bosom of the metropolis will go on to turn. This should assist to underpin monetary values.

However, there is the hazard that if the local economic system slows down, it will adversely impact flat gross revenues. Further, a hapless investing clime and falling touristry will restrict purchases from abroad purchasers every bit good. In state of affairss such as this, an over supply of flats can take to monetary value film editing by developers to sell their stock list of flats.

To extenuate the hazard from over supply and monetary value film editing, this undertaking has two mitigating steps. The first is to guarantee that the pre-determined gross revenues mark has been secured before “ push-button ” . The 2nd is to phase out the development into three, thereby restricting the hazard to one stage at a clip.

Cost Hazard

Costss on a undertaking such as this will be affected by domestic rising prices and the exchange rate of the SL Rupee. As both of these factors can non be straight controlled, it is proposed that this undertaking be worked on a fixed-price contract for the building.

This will efficaciously go through on the hazard of cost additions to the contractor. Further, as this development will be done in stages, it has the benefit of holding a shorter timeframe for each stage and therefore being able to restrict the fixed monetary value premium.

Duration Hazard

The hazard that the undertaking building gets delayed is really existent. This could originate due to a figure of grounds, including hapless management/cash-flow by the contractor, inaccessibility of skilled labor, deficit of stuffs ( such as bricks etc. ) amongst others.

To extenuate this hazard that arises from any hold, merely short-listed contractors with good reputes will be invited to tender for this undertaking, sooner with their ain straight employed labor. In add-on, professional undertaking directors will be hired to pull off the undertaking on behalf of the developer.

Interest Rate Hazard

Interest rates have been lifting and this will impact the ability of possible flat purchasers to finance a purchase through a mortgage. Although this hazard can non be straight avoided, as this undertaking will be concentrating on the low-cost section of the market, it should still enable clients to purchase an flat.

Further, the payments will be staggered through the building of the undertaking. Indeed, this undertaking has the advantage that as the land will be acquired through the equity extract, the demand for a big deposits/tranches from purchasers at the start can be avoided as a farther inducement to purchase.

Company Structure

Capital Requirement

It is proposed to raise equity capital to cover the cost of the land acquisition for Phase I, the cost of Consultancy, Selling costs and CMC fees over the first 12 months of the undertaking upto “ push-button ” . The needed capital is therefore Rs650 manganese, of which Rs235 manganese being in hard currency, the remainder being value of the land. A dislocation of these costs is given below.

Rs ( manganese )

Consultancy Costss

62

Selling Costss

33

Pre-Contract plants

29

CMC Fees

111

235

Land cost

415

650

The undertaking will non trust on long-run adoptions to raise capital. However, short-run hard currency deficits are to be met through bank overdrafts.

Equity Structure

It is proposed to put up a BOI registered joint-venture company for the intent of this development. The needed capital is to be raised through a private arrangement. The boosters of this undertaking will be entitled to 2 % of the equity.

The concluding construction of the company will be as follows.

Equity

Investors

98.0 %

Promoters

2.0 %

100.0 %

Key Premises

Land cost of Rs5 mn per perch

Exchange rate at start of development of Rs110

Phase I

Phase II

Phase III

Land Extent ( perches )

83

86

100

No. of Unit of measurements

123

177

263

Parking & A ; Amenities degrees

5

6

7

Apartment degrees

25

30

38

Entire No. of Storeys

30

36

45

Average Cost of building

Rs 9,030 Popular Struggle Front

Rs9,800 Popular Struggle Front

Rs10,635 Popular Struggle Front

Time for building

30 months

36 months

45 months

Aver. merchandising monetary value ( inc. VAT )

Rs25,806 Popular Struggle Front

Rs27,703 Popular Struggle Front

Rs30,921 Popular Struggle Front

Period to sell out units

25 months

30 months

38 months

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