- Assume 70m2 to cater for stairs and circulation space.

-Say there are 4 houses in each floor. =4x70=280m2

-1 acre is approximately 4046m2
35% of 4046m2=1,416.1m2
-1416.1/280=5.06
-Provide approximately 5 blocks in each acre.280x5=1,400m2
-Take four floors, 1400x4=5,600m2 in 1 acre. 9 acres = 9x5,600=50,400m2
Gym will occupy approximately 200m2. Provide for gym in every 3 blocks. 5x9/3=15
Therefore, 15x200=3000 m2
-Total built up area = 50,400m2+3000 m2=53,400 m2
-IQSK rates for constructing a private dwelling house for middle class is 38,500.
-Therefore, total cost of building is 53,400x38,500=2,055,900,000 Kenya shillings.
-Cost of swimming pool according to IQSK journal=32,600. Provide say 3 swimming
pools=32,600x3=97,800
Total construction cost=2,055,997,800 Kenya Shillings
Total cost of construction
Expenses
-Professional fees @ 15% of construction cost=15% of 2,055,997,800=308,399,670
-Approval for drawings @ 2%=41,119,956
-VAT @ 16%=328,959,648
-Cost of external works @ 12%=246,719,736
-Operating costs @ 4%=82,239,912
-Cost land already covered by client
-Therefore, the total cost of construction is 3,063,436,722 Kenya shillings

Financial appraisal
Notes
-Rent in South C for a two bedroomed house is between 45,000 and 50,000 from neighbourhood
analysis. Charge 45,000 to attract tenants.
-Each block has 16 houses. There are 5 blocks in each acre. There are 9 acres. So, the number of
units are 16x5x9=720.
-The rate of occupancy is as follows; First year 100 houses are occupied. During second year 200
units are occupied. Third year 350 units are occupied. Fourth year 480 units are occupied. During
the fifth year, 580 units have been rented out. In the sixth year, 650 units have been rented out.
From the seventh year onwards the apartments have been fully occupied hence the cash-flow is
constant.
-Expenses are 30% of the total gross income. They include taxes, operation and maintenance
costs.

Payback period

Cash Net cash Cumulative

Year Expenses
inflows inflows cash inflows
0 0 0 0 -3063436722
1 54000000 -16200000 37800000 -3025636722
2 108000000 -32400000 75600000 -2950036722
 3 189000000 -56700000 132300000 -2817736722
4 259200000 -77760000 181440000 -2636296722
5 313200000 -93960000 219240000 -2417056722
6 351000000 -105300000 245700000 -2171356722
7 388800000 -116640000 272160000 -1899196722
8 388800000 -116640000 272160000 -1627036722
9 388800000 -116640000 272160000 -1354876722
10 388800000 -116640000 272160000 -1082716722
11 388800000 -116640000 272160000 -810556722
12 388800000 -116640000 272160000 -538396722
13 388800000 -116640000 272160000 -266236722
14 388800000 -116640000 272160000 5923278
15 388800000 -116640000 272160000 278083278

Therefore, payback period

=13+(266236722/272160000)=13.98
=13 years 11 months

Net present value

-Assume a discount rate factor of 10%.
Present value= future value/(1+r)ᶺt
t = time
r = discount rate
-Present value factor= future value/(1+r)ᶺt
-Cash-flows used are obtained from the cash-flows used to determine payback period.
-The present value has been done up to and including the tenth year.

(1+r)ᶺt = 1+(10/100)ᶺt = 1.1ᶺt

Cumulative
Net cash Discount Present present
year inflows rate values value
1 37800000 1.1 34363636.36 34363636.36
2 75600000 1.21 62479338.84 96842975.2
3 132300000 1.331 99398948.16 196241923.4
4 181440000 1.4641 123925961.3 320167884.7
5 219240000 1.61051 136130790.9 456298675.6
6 245700000 1.771561 138691244.6 594989920.2
7 272160000 1.948717 139661113.5 734651033.6
8 272160000 2.143589 126964649.2 861615682.8
9 272160000 2.357948 115422412.3 977038095.1
10 272160000 2.593742 104929464.1 1081967559
Net present value is 1,081,967,559