CONSTRUCTION FINANACE MANAGEMENT

CODE NCP 22
COURSE TITLE

POST GRADUATE PROGRAMME IN PROJECT MANAGEMENT (PGP PM)

SUBMITTED BY:

DHVAL R ABDAGIRI
REGISTRATION NO 211-09-31-9899-2134

CONSTRUCTION FINANACE MANAGEMENT

ASSIGNMENT
An offer has been given by charitable trust to develop and build a facility on a 10,0000/- sq.m. of plot in a prime locality of Pune where 5000 sq.m. of area will be used by the trust for housing, health facilities for senior citizens. 5000 sq.m. will be given free to developer as a cost of development. Cost of land is Rs. 10,000/- sq.m. Specification for flooring: 10% Granite 40% Kota stone 50% Mosaic cement tiles R.C.C. framed structure Aluminium sliding windows- Class A Rest specifications as used for Class A constructions. Discuss the financial viability of the project and the financial planning of the project. Developer would like to have minimum 18% net profit on his investment. Developer can invest only Rs.10 lakhs as his own funds and can raise not more than Rs. 50 lakhs as bank loan.

CONSTRUCTION FINANACE MANAGEMENT

1. PROJECT SCOPE/ SPECIFICATION: SCOPE OF WORK: An offer has been given by charitable trust to build a facility in a prime locality of Pune. The facility should be big housing health club, for the senior citizen people. The facility should have high quality specifications. RCC work & Pilling work (if required):

R.C.C. work in foundations like raft, strip, foundations, grillage and footings of R.C.C. columns etc. including bailing out water, formwork, compaction, curing and roughening the surface if special finish is to be provided. Ordinary Portland cement of 43 and 53 grade will be used for the construction of R.C.C. structure. Providing and fixing in position HYSD bar reinforcement of various diameters. Interior work:

Providing internal cement plaster 6 mm & 12mm thick in cement mortar with or without neeru finish to concrete surface in all positions including scaffolding and curing complete. Providing and laying Shahabad/ Kotah/ Tandur Stone, glazed tiles, marble Flooring and dado and skirting as per requirement and specification. Providing and applying white-wash/ approved colour and shade. Providing POP or Gypsum plaster as per requirement and specification provided in contract. Plumbing & sanitation work

Providing and laying GI/ CI/ P.V.C. pipe of specified diameter and class in toilets and for building plumbing work also laying pipes in trench and back filling the trench complete including excavation. Masonry work:

Providing Brick or Stone masonry in cement mortar at various places such as at plinth level (as per requirement), for internal & external walls, for compound walls etc.

CONSTRUCTION FINANACE MANAGEMENT

Infrastructure:

Excavation & back filling work for roadway & landscaping work in earth, soil of all sorts, sand, gravel or soft murum. Providing & fixing heavy duty inter duty inter locked concrete paving block as per requirement and specification.

2. TECHNICAL STUDIES: A. TECHNOLOGY: R.M.C.: Ready mix cement concrete (R.M.C.) is the fresh concrete mix, which is produced by weigh batching plant, under complete quality control and delivered duly mixed to the site of placement by truck mounted agitator or dumpers. We can achieve placement of hundreds of cubic meters of high quality concrete without any botheration. The main advantages of R.M.C. are: Good quality concrete of uniform consistency under controlled condition is produced. Faster concreting is possible Supervision and labour cost can be reduced. Wastage in cement handling is reduced.

PRECAST COMPONENTS: Factory made components of the building which are jointed to form the structure can be used. By this we can achieve controlled quality of final product, save space, increase in construction speed.

CONSTRUCTION FINANACE MANAGEMENT

3. FINANCIAL AND ECONOMICS EVALUATION: A.TOTAL INVESTMENT COST: The investment cost for the project is basically evaluated based on certain assumptions and the basic rates of the material and manpower existing on site. These basic assumptions are as per the guidelines/ by laws provided by the CPWD and local Municipal bodies. Primarily before starting any project a financial budget is prepare and is submitted along with the feasibility report for development proposed. In a Housing project like this it is required to know the basic by laws of Pune Municipal Corporation and the existing market rates/ prices of the basic material for the construction. Assumptions: 1. FSI in Pune prime locality is 1:1 2. 20% of the total area is for the Balconies and staircase etc. 3. Basic selling price for construction and finishing product in prime locality of Pune is 2200.00 per sft. 4. As per the specifications provided the basic cost of construction with manpower and material is 450.00 per sft. 5. Total project duration is 24 months. 6. Rate of interest of market is 12% per year. 7. Overhead charges are 20% over the total project estimated cost. Therefore, Total plot area given for development Area for balcony & staircase Total area inclusive of balcony & staircase. Total investment to be made by investor =1,29,120 X 450 =5,81,04,000.00 Total area of Charitable Trust Housing Net salable area =5000sqm. =10,000-5,000 =10,000 sqm. ie 1,07,600 sft. =2,000 sqm. ie 21,520 sft. =12,000 sqm. ie 1,29,120 sft

CONSTRUCTION FINANACE MANAGEMENT

=5,000sqm. ie 53,800 sft. only. B. LOAN/ BORROWING: Total duration of the project Developer investment Total amount of interest as per market rate Loan from the bank Total amount of interest as per market of 15 months Total amount =Rs.69,90,000.00 (10,00,000.00+2,40,000.00+50,00,000.00+7,50,000.00) C. FINANCIAL PROPOSAL & NET INCOME: The financial pumping in to any project by any developer should be well thought of. Total amount after selling developing area This amount also including the cost of land Cost of land as per local rate Cost of land as per cost for development of Charitable trust project, = 11,83,60,000.00 =5000.00 sqm = 5000.00 X 10000.00 =5,00,00,000.00 =5000.00 sqm X 10.76 X 450.00 X 1.20 =2,90,52,000.00 Means the cost of land will be greater than the effective cost of land by developing the project. Calculation for net profit: Total amount after sale of property =11,83,60,000.00 Deductions: =50,00,000.00 =50,00,000 X 12% X 1.25(Year) =7,50,000.00 =24 Months =10,00,000.00 =10,00,000 X 12% X 2=2,40,000.00 Value of property for sale =Rs.11,83,60,000.00 Hence investment to this project will be about a total of Rs. 5,81,04,000.00

CONSTRUCTION FINANACE MANAGEMENT

Cost of construction of total project

=5,81,04,000.00

Deductions for the design charges and for the Pune municipal corporation will be about 10% on the Net cost of project. = 58,10,400.00

Over head charges over the total cost of construction 20% of net cost Deductions for the loans/ Borrowings Hence total deductions for the above The net income from the project =1,16,20,800.00 =69,90,000.00 =8,25,25,200.00 =3,58,34,800.00

4. CONSLUSION/ RECOMMENDATION ON FINANCIAL FEACIBILITY OF PROJECT: WORK PROGRESS MONITORING: The progress of work can generally occur in respect of interpretation of contract provisions. A mere, difference is not necessarily a dispute and becomes a dispute when mutual discussion fails to resolve it. Any kind of deviation or non-compliance of the work being executed according to specification, drawings etc. are forwarded to the contractor in the form of Non Product Notification (NPN) by the engineers. Contractor then investigates the matter and prepares a Non Conformance Report (NCR) stating: Reason for deficiency Remedial action required Action required to prevent recurrence (Date of completion is mentioned) Re-inspection report This NCR then forwarded to the engineers for closing. If engineers agree with the report they closed it else suggest contractor to do necessary changes and resubmit the same. In case of dispute of any kind whatsoever arises between the employer and the contractor in connection with, or arising out of, the contractor or the execution of the works, weather during the execution of the work or after

CONSTRUCTION FINANACE MANAGEMENT

completion and weather before or after repudiation or other termination of the contract, including any dispute as to any opinion, instruction, determination, certificate or valuation of engineers has to be referred in writing to the engineer, with a copy to employer. Engineer has to give notice of his decision regarding the same within 84 days after the day on which he received such reference. If either the contractor or the employer be dissatisfied with any decision of the engineer fails to give notice of his decision of the engineer, or if engineer fails to give notice of his decision on or before 84 days either the employer or the contractor be dissatisfied with any decision of the contractor may on or before the 17th day of the engineers decision or on or before the 17th day after the day on which the said period of 84 days expired, as the case may be, given notice to the other party, with a copy for information to the engineers, of his intention to refer to arbitration. Recommendations: A well planned and designed project, backed by the requisite construction details and specifications and handled by a dynamic management fully responsive to the construction agency is sure to be completed satisfactorily in proposed budget. The project authority should be geared to anticipate problems that are likely to arise and be ready with possible solutions. It should be in a position to provide the requisite information and documentation in addition to the materials working drawings that it is supposed to provide, expecting the contractor to provide the equipment, manpower and rest of material at required schedule. One of the essential ingredients of the contact, for a civil engineering project is the mechanism to settle the claims, dispute or difference between the parties. In order to avoid any disruptive effect on progress and quality of work it is imperative that the disputes are resolved expeditiously. 5. BIBLOGRAPHY/ REFERENCES: Construction finance management (NCP 29) - NICMAR

CONSTRUCTION FINANACE MANAGEMENT