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Pre-Feasibility Study Housing Construction Company

Small and Medium Enterprises Development Authority


Government of Pakistan
www.smeda.org.pk
HEAD OFFICE 6 Floor LDA Plaza Egerton Road, Lahore Tel (042)111 111 456, Fax: (042) 36304926-7 helpdesk@smeda.org.pk
th

REGIONAL OFFICE PUNJAB 8th Floor LDA Plaza, Egerton Road, Lahore. Tel: (042) 111 111 456, Fax: (042) 36370474 helpdesk.punjab@smeda.org.pk

REGIONAL OFFICE SINDH

REGIONAL OFFICE KHYBER PAKTUNKHWA

REGIONAL OFFICE BALOCHISTAN

5TH Floor, Bahria Complex II, M.T. Khan Road, Karachi. Tel: (021) 111-111-456 Fax: (021) 5610572 helpdesk.sindh@smeda.org.pk

Ground Floor State Life Building The Mall, Peshawar. Tel: (091)111 111 456, 9213046-7 Fax: (091) 286908 helpdesk.NWFP@smeda.org.pk

Bungalow No. 15-A Chamn Housing Scheme Airport Road, Quetta. Tel: (081) 2831623, 2831702 Fax: (081) 2831922 helpdesk.balochistan@smeda.org.pk

April, 2011

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EXECUTIVE SUMMARY ________________________________________________________ 2 INTRODUCTION TO SMEDA ____________________________________________________ 3 PURPOSE OF THE DOCUMENT _________________________________________________ 3 CRUCIAL FACTORS & STEPS IN DECISION MAKING FOR INVESTMENT __________ 4 PROJECT PROFILE ____________________________________________________________ 4 5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9 OPPORTUNITY RATIONALE _____________________________________________________ 4 PROJECT BRIEF ______________________________________________________________ 7 MARKET ENTRY TIMING _______________________________________________________ 7 PROPOSED BUSINESS LEGAL STATUS _____________________________________________ 7 PROJECT CAPACITY AND RATIONALE _____________________________________________ 7 PROJECT INVESTMENT_________________________________________________________ 7 PROPOSED LOCATION _________________________________________________________ 8 KEY SUCCESS FACTORS/PRACTICAL TIPS FOR SUCCESS _______________________________ 8 STRATEGIC RECOMMENDATIONS ________________________________________________ 8

SECTOR & INDUSTRY ANALYSIS _______________________________________________ 8 6.1 6.2 6.2.1 6.2.2 6.3 SECTOR CHARACTERISTICS _____________________________________________________ 8 SUB SECTOR INFORMATION _____________________________________________________ 9 Sub sector Performance____________________________________________________ 10 Government Policy Direction _______________________________________________ 10 LEGAL ISSUES REGARDING HOUSING INDUSTRY ___________________________________ 11

MARKET INFORMATION______________________________________________________ 11 7.1 7.2 MARKET POTENTIAL _________________________________________________________ 11 TARGET CUSTOMERS ________________________________________________________ 12

TRADE STATISTICS _________________________________________________________________ 12 8 PRODUCTION PROCESS_______________________________________________________ 13 8.1 8.2 8.3 8.4 8.5 9 PRODUCTION PROCESS FLOW __________________________________________________ 13 RAW MATERIAL REQUIREMENT ________________________________________________ 14 MACHINERY REQUIREMENT ___________________________________________________ 14 PRODUCT/PROJECT STANDARDS AND COMPLIANCE ISSUES ___________________________ 14 RECOMMENDED HOUSE LAYOUT _______________________________________________ 14

LAND & BUILDING REQUIREMENT ____________________________________________ 17 9.1 9.2 COVERED AREA REQUIREMENT ________________________________________________ 17 RENT COST ________________________________________________________________ 17

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9.3 9.4 9.5 10 11

RECOMMENDED MODE _______________________________________________________ 17 UTILITIES REQUIREMENT _____________________________________________________ 17 SUITABLE LOCATION ________________________________________________________ 17

HUMAN RESOURCE REQUIREMENT ___________________________________________ 17 FINANCIAL ANALYSIS ________________________________________________________ 18 11.1 11.2 11.3 11.4 11.5 PROJECT COSTS _____________________________________________________________ 18 PROJECTED INCOME STATEMENT _______________________________________________ 19 PROJECTED BALANCE SHEET __________________________________________________ 20 PROJECTED CASH FLOW STATEMENT ____________________________________________ 21 REVENUES AND COST OF SALES ________________________________________________ 22

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KEY ASSUMPTIONS ___________________________________________________________ 25

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DISCLAIMER
The purpose and scope of this information memorandum is to introduce the subject matter and provide a general idea and information on the said area. All the material included in this document is based on data/information gathered from various sources and is based on certain assumptions. Although, due care and diligence has been taken to compile this document, the contained information may vary due to any change in any of the concerned factors, and the actual results may differ substantially from the presented information. SMEDA does not assume any liability for any financial or other loss resulting from this memorandum in consequence of undertaking this activity. The prospective user of this memorandum is encouraged to carry out additional diligence and gather any information he/she feels necessary for making an informed decision. For more information on services offered by SMEDA, please contact our website: www.smeda.org.pk

DOCUMENT CONTROL
Document No. Prepared by Approved by Issue Date Revised Date PREF-80 SMEDA-Punjab Provincial Chief Punjab February, 2005 April, 2011

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EXECUTIVE SUMMARY

The proposed Housing Construction business involves construction of residential houses in key areas of Lahore. The project will focus on modern design and superior quality material used for building. This pre-feasibility study proposes construction of houses covering an area of 5 Marla (1,125 sq. ft), 7 Marla (1,575 sq. ft) and 10 Marla (2,250 sq. ft) in Johar Town, Wapda Town, NFC, Multan Road, Ferozepur Road and Valencia Housing Society. Housing construction not only improves the living standards of the public but also contributes towards the overall economic growth. The construction sector is linked with more than 40 industries and thus has multiple effects on the economy. Moreover, given the situation of Pakistan - a continuous growth in population and a huge housing shortage faced by most cities, the demand for houses is highly unlikely to slow down. There is a rapid growth in urbanization and the continuous struggle towards better quality of life. Consequentially, as a first step towards higher standards of living, the housing sector experiences growth. The total project cost is estimated at Rs. 13.894 million. The project is financed through 50% debt and 50% equity. The Projects NPV is around Rs. 120.657 million, with an IRR of 57% and payback period of 4.13 years. The legal business status of this project is proposed as Sole Proprietorship. The project will start up by constructing 2 units of 5 marla houses and 1 unit of 7 marla house in the first year and will increase the number of units in the upcoming years. Selection of good location and purchase of land at competitive price will be the key success factor in timely selling of houses and maximising profit of the construction company.

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INTRODUCTION TO SMEDA

The Small and Medium Enterprises Development Authority (SMEDA) was established with the objective to provide fresh impetus to the economy through the launch of an aggressive SME support program. Since its inception in October 1998, SMEDA had adopted a sectoral SME development approach. A few priority sectors were selected on the criterion of SME presence. In depth research was conducted and comprehensive development plans were formulated after identification of impediments and retardants. The all-encompassing sectoral development strategy involved recommending changes in the regulatory environment by taking into consideration other important aspects including finance, marketing, technology and human resource development. SMEDA has so far successfully formulated strategies for industries such as horticulture, including export of fruits and vegetables, marble and granite, gems and jewellery, marine fisheries, leather and footwear, textiles, surgical instruments, transport and dairy. Whereas the task of SME development at a broader scale still requires more coverage and enhanced reach in terms of SMEDAs areas of operation. Along with the sectoral focus a broad spectrum of business development services is also offered to the SMEs by SMEDA. These services include identification of viable business opportunities for potential SME investors. In order to facilitate these investors, SMEDA provides business guidance through its help desk services as well as development of project specific documents. These documents consist of information required to make well-researched investment decisions. Pre-feasibility studies and business plan development are some of the services provided to enhance the capacity of individual SMEs to exploit viable business opportunities in a better way. This document is in the continuation of this effort to enable potential investors to make well-informed investment decisions.

PURPOSE OF THE DOCUMENT

The objective of the pre-feasibility study is primarily to facilitate potential entrepreneurs to facilitate investment and provide an overview about housing construction business. The project pre-feasibility may form the basis of an important investment decision and in order to serve this objective, the document covers various aspects of housing construction business concept development, start-up, purchase of land, construction of houses, marketing, finance and business management. The document also provides sectoral information, brief on government policies and international scenario, which have some bearing on the project itself. This particular pre-feasibility is regarding Housing Construction Company which comes under Construction sector.

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CRUCIAL FACTORS & STEPS IN DECISION MAKING FOR INVESTMENT

Housing construction plays a significant role in the economic growth of our Country, as a source of jobs and capital investment, as a secure investment for individual and family savings, and as an essential contributor to personal happiness. So before making any investment decision, it is advisable to evaluate the associated risk factors by taking into consideration certain key elements. These may include availability of resources, industry knowledge, and specific managerial and technical skill set. The development of a vibrant housing industry is based on ample supply of affordable land, with easy access to transportation and efficient distribution of necessities such as energy and water. Additionally, one of the demand drivers is the desire of many families to modernize, enlarge or otherwise renovate their homes. This has been an important part of the housing culture for decades. Financial institutions are an important partner in the housing sector. To broaden the consumer base for home ownership, especially among low income families, banks and financial institutions play a vital role. For the housing industry, abundant work force is essential. An added advantage for Pakistani housing industry is that skilled labour is available at fairly affordable rates.

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5.1

PROJECT PROFILE
Opportunity Rationale

Housing is the basic and fundamental human need, yet millions are caught in the struggle to have a roof over their head. Pakistan is faced with a chronic shortage of housing against a backdrop of a rapidly rising population. Most recent estimates identify a national shortage of 7.9 million houses. By contrast, the current government is committed to building just 1 million houses. Other estimates paint a similar picture, the Punjab province with a population of 82 million is said to be facing a shortage of 5 million houses. By some accounts, nationally there is an incremental demand for 700,000 units a year against the annual construction of 150,000 units.1 The demand and supply gap is resulting into serious repercussions for the society as it has changed more than half of Pakistan urban land into squatter settlements and is eating away the agricultural land of the country. The need of the hour is to exploit the hidden potentials of the housing sector. It is a two prong strategy to fight against poverty and raise the standards of public living. As in the first place this strategy provides public with houses and in the second, revive the industrial sector. Housing and construction are well recognized to generate maximum

Pakistan Real Estate Report Q1 2010 BMI (http://www.reportlinker.com/p0169829/Pakistan-Real-Estate-ReportQ1-2010.html)

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employment opportunities, being labour-intensive and an important source of employment for the less skilled. Construction is linked with more than 40 other industries and contributes to the overall economic revival and growth. Its multiple effects on the economy have the robust potential to generate industrial activities, develop small and medium enterprises (SMEs) self-employment opportunities, business, commerce and trade activities and at the same time encouraging utilization of indigenous natural and man-made resources. It will create social cohesion and environmental improvements. Chart 1: Construction IndustryA Growth Engine for a Host of Industries & Services

If all these factors are taken into account then the construction and real estate sector emerges as major contributor to the economy. Therefore, it is imperative to develop this industry to utilize the real estate and housing industry potential for the economic development of the country and certainly it has the necessary potential to become the engine of change and progress for the economy of Pakistan.

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Chart 2: Public & Private Sector Stakeholders in Pakistans Construction Industry

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5.2

Project Brief

The project under consideration will be for construction of residential houses of 5 Marla (1,125 sq. ft.), 7 Marla (1,575 sq. ft.) and 10 Marla (2,250 sq. ft.) within the proposed locations. The proposed sites for the construction are Johar Town, Wapda Town and Valencia Housing Society. 5.3 Market Entry Timing

Construction is not greatly dependent on any particular time period, but, as per industry norm, the ideal time for housing construction is from May till June and from September till November. These months are selected only to avoid the rainy season (July and August) which may cause delays in the process. Where as, in December, January and February the labour migrates to the rural areas for crop harvesting. During this season the labour is paid more in rural areas which causes shortage of labour and consequent rise in the daily labour wages. 5.4 Proposed Business Legal Status

The proposed legal structure of the business entity is either sole proprietorship or partnership. Although selection totally depends upon the choice of the entrepreneur but this financial feasibility is based on a Sole Proprietorship. 5.5 Project Capacity and Rationale

The proposed project size is simultaneous construction of two houses at nearby locations. This will provide the minimum feasible size for the project and minimum capital outlay for project initiation. 5.6 Project Investment

The total cost of the project is Rs.13.894 million. Table 5-1 Project Costs 1,307,000 12,586,740 13,893,740

Capital Investment Working Capital Requirement Total Investment

The proposed pre-feasibility is based on the assumption of 50% debt and 50% equity. However this composition of debt and equity can be changed as per the requirement of the investor. Table 5-2 Project Financing 50% 50%
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Debt Equity Total project Investment

6,946,870 6,946,870 13,893,740

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Table 5-3

Viability 57% 120,656,976 4.13

IRR NPV @ 19% Pay Back Period (year) 5.7 Proposed Location

The proposed locations for the construction of houses are as follows: Johar Town WAPDA Town Valencia Town 5.8 Key Success Factors/Practical Tips for Success

The key success factors for housing Construction Company are careful selection of construction site and a good architecture. The investment in good construction material and efficient use of labour are also critical factors. In short, over all quality pays off in the long run. 5.9 Strategic Recommendations The construction industry is only profitable if the projects are completed on time. Quality of materials used ensures quality of houses built. Superior quality is the best competitive advantage these days. Careful selection of residential area counts towards selling price and timely sales. Investment focus should be on good architectural design. A good design is likely to catch the buyers eye.

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6.1

SECTOR & INDUSTRY ANALYSIS


Sector Characteristics

The construction sector in Pakistan today is still at low ebb. During the year 2008-2009, there was 13.88 per cent decline in domestic demand for cement, compared with the last fiscal year; this decline can be attributed to the slow down in construction activities. Pakistans per capita consumption is 131 kg of cement, as compared to Indias 135 kg. This per capita consumption is substantially below the world average of 270 kg and the regional average of over 400 kg in Asia and over 600 kg in the Middle East. However, this shows slight improvement compared with 117 kg per capita consumption of Pakistan in 2005.2 With public spending on the decline and most projects being funded under loans from international agencies, the fate of construction sector seems to be hanging in
2

http://jang.com.pk/thenews/oct2009-weekly/busrev-26-10-2009/p3.htm

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the balance. There exists a large unfilled vacuum in the market and much needs to be done before this vacuum can be filled. 6.2 Sub sector Information3

The countrys housing situation is aggravating each passing day. Our bourgeoning population, its stunning 1.73 annual growth rate and strong inward migration (rural-urban migration) trends are compounding the problem. The decrease in the average household size or the nuclear family notion is also gaining popularity in the urban centres. It is also resulting into more houses for small number of people. There are nearly 21.7 million houses in the country against the population of 163.76 million and the required number of housing units for the population is 25.83 million. Thus we are falling short of nearly 8 million. This is huge number if seen against the backdrop of the housing units being built annually. The bulk of existing 21.7 million houses consist of 67 percent rural houses, while kuccha and semi pukka houses account for the 39 and 40 percent of total housing stock respectively. In the same vein the room density for India and Pakistan is nearly 3.5 persons per room while it is 1.3, 1.1 and 0.5 in the case of Turkey, China and USA respectively. At present the urban housing demand stands at 8 percent per annum. In addition to this rural- urban migration is also gaining momentum. Although Urban- rural population migration is a global phenomenon and mega cities are facing the challenges caused by the deluge of the rural migrants and Pakistan is no exception to this rule. Only Karachi is attracting more than 250,000 to 300,000 people annually. This is adding to already tightly crowded population and scarce resources of the cities and in case of Karachi it deprives nearly1/3rd of population of the potable water. As cities are already over populated, so, these peoples are inhibiting in the squatter settlement or shanties called katchi abadis in the local jargon. According to the reports there are nearly 539 squatter settlements across Karachi and nearly 49 percent of the city population lives in these squatter settlements. At present the number of housing units being constructed is only 300,000 which is really a fraction of the gigantic demand. According to a recent press release by the Ministry of Housing and Works, around 8 million more housing units are needed in the country, currently about 300,000 housing units are being constructed against an annual demand of 650,000 units, with the backlog of 6.50 million houses, continuing to increase.4 The household size is 6.6 persons and the occupancy per room is 3.3 persons. It is estimated that to make up the backlog and to meet the shortfall in the next 20 years, the overall housing production has to be raised to 500,000 housing units annually. The construction sector registered a growth rate of -10.8 percent against last year's growth of 3.9 percent and 24.3% of 2006-07. Housing and construction has been identified as one of the major drivers of growth and the government has taken various

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Economic Survey of Pakistan, An overview of housing in Pakistan The News Jan 13, 2009 Board of Investment press release August 19, 2009 (http://www.pakboi.gov.pk/Press/PDF/August_2009/19August,%202009.pdf)

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budgetary and non-budgetary measures to boost this sector which has responded positively despite higher input prices. 6.2.1 Sub sector Performance5 The construction industry recorded a decline of 10.8 percent in FY09 the largest fall in 37 years.6 Construction industry constitutes around 2.1 percent of GDP. The drag by construction sector to the growth of GDP and industry in FY09 was significant at -0.3 and -1.0 percentage points respectively. Construction industry in FY09 had to put up with sharp increase in building material prices during the first eight months of the current year, significant cut in disbursement of PSDP funds and dearth of financing facilities which caused the construction activities to shrink significantly. Not surprisingly, almost all other indicators of construction growth also paint a gloomy picture. The weakening construction activity is a source of disquiet especially from the perspective of employment generation among unskilled labour force and ultimately for poverty alleviation. Almost 3.3 million people were employed in construction sector in FY08 and the number for rural areas (2.2 million) is twice that of urban areas (1.1 million). Moreover, construction sector is also strongly associated with the growth in a number of manufacturing industries including cement, metals, glass, paints, etc. However, there are some hopes of a recovery in construction activities in FY10 keeping in view the decline in building material prices. The expectation of this recovery is further supported by higher PSDP allocations in the FY10 budget, expected initiation of power projects and reconstruction activity in Swat, as well as the impact of the recent easing of monetary policy. A performance indicator of the construction industry was domestic cement dispatches, which fell from 22.4 million tonnes in FY08 to 19.4 million tonnes in FY09. Iron and steel production declined from 8.238 million tonnes in FY08 to 5.975 million tonnes in FY09. Import of iron and steel dropped from 2.22 million tonnes to 2.04 million tonnes. Foreign direct investment in this sector took a deep plunge, going down from $193.2 million to $130.4 million. 6.2.2 Government Policy Direction Construction industry alone provides impetus to over 40 other industries. As the Government of Pakistan aims at alleviating poverty and improving revenue collection, a focused attention to this industry can help in achieving both the objectives. On the one hand it has the potential to offer new job opportunities and, on the other hand, enhance revenue collection from other industries. Realizing this fact the Government of Pakistan has took a number of measures for reviving the housing and construction sector, which has been declared a priority industry. The government has announced various incentives in the National Housing Policy for providing affordable housing for the poor. A rapid growth in housing finance will significantly contribute to the economy in the form of additional employment and support a variety of allied industries.
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State Bank of Pakistan Annual Report 2008-09 Economic Survey 2008-09

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These measures include; the improvement in the availability of housing finance by encouraging commercial banks to extend housing loans, the reduction in interest rates from 17-18% to 7.5 to 8.5%, streamlining of the legal frame work for loan recovery of financial institutions, and the enhancement of bank exposure to housing finance from 5% to 10% of net advances. The maximum housing loans per party limit has been increased from Rs.5 million to Rs.10.0 million and the maximum debt-equity increased from 70:30 to 85:15. The maximum loan tenure for housing finance has been increased from 15 to 20 years and the maximum limit of lending for HBFC has been increased from Rs.20 million to Rs.50 million. In the fiscal area, the measures taken include the enhancement of Tax credits on borrowing under housing loans from financial institutions from Rs.100,000/- or 25% of the income of the mortgager, to Rs.500,000/- or 40% of the income of the mortgager, whichever is less. The limit of property income for withholding tax has been raised from Rs.100,000/- to Rs.200,000/-. The rate of withholding tax on property income has been reduced from 7.5% to 5%. CED on wires and cables has been withdrawn and excise duty on cement has been reduced by 25% to lessen the cost of construction7. 6.3 Legal Issues Regarding Housing Industry

Following government departments are involved in the Housing Industry. Lahore Development Authority (For more info please visit http://www.lda.gop.pk ). WAPDA Town housing Society

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7.1

MARKET INFORMATION
Market Potential

The construction industry of Pakistan underwent a miserable couple of years with a contraction of 10.8% in 2009. The market has suffered from the global economic downturn and fallout from political turmoil, which has provided a serious setback to the foreign investment and wider business activity in the country. However, as stated in the Pakistan Infrastructure Report 2010, the industry looks more optimistic, partly in view of the nascent recovery in the global economy and the decision taken by the IMF to increase the standby loan available to the country. This loan should not only bolster the foreign investor but also domestic confidence in the country. The report forecasts that the real construction sector growth in Pakistan in 2010 will move into positive territory at the rate of 0.5% for the year, before accelerating slightly to 2.2% in 2011 and 3.2% in 2012. A faster than expected recovery in the global economy and foreign investment would

Economic Survey of Pakistan 2004 11

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likely see Pakistan achieve faster growth in the construction sector, driven largely by a significant revival of private sector activity. As the current situation lies, there is a huge and growing demand for housing in Pakistan. The natural population increase alone adds more than three million people a year to the countrys population. Add to this the attrition of existing housing stock, and we have a demand for three good-sized cities a year to be accommodated. The supply side is abysmally low, particularly in the public sector. The gap has been met by private sector development. There is a huge shortage of housing in major urban centres like Lahore and people are looking forward for better living standard. Table 7-1 Housing Units by Tenure (In million)8 Urban 6.2 (100) 4.2 (67.6) 1.4 (23.2) 0.6 (9.2)

Census 1998 Tenure All Areas Rural All Types 19.3 13.1 (100) (100) Owned 15.6 11.4 (80.8) (87.1) Rented 1.7 0.3 (9.0) (2.3) Rent Free 2.0 1.4 (10.2) (10.6) Note: The figures in parenthesis are percent shares 7.2 Target Customers

The target customers are the general public of upper-middle income group. Trade Statistics A brief overview of major industry segments is as below. Table 7-2 Total Number of Construction Companies9 242 Numbers No limit 127 Numbers Upto Rs 100 million 900 Numbers

Category C-1 Project Cost Limit Category C-2 Project Limit Cost Category C-3

Source: Population and Housing Census 1998 Source: Pakistan Board of Investment 12

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Project Cost Limit Category C-4 Project Cost Limit Share in GDP (%age): Construction Housing GDP/GNP Real Growth Rates ( %age): Construction Housing Gross Fixed Capital Formation: Construction Housing Contribution to Employment: Total Employed Labor Force Construction Sector Share Foreign Direct Investment (Jul-2003.) Import of Construction Machinery Average turn over per year

Upto Rs 50 million 769 Numbers Upto Rs 20 million 3.5 6.0 6.24 5.28 Rs 13,532 million Rs 56,093 million 37.03 million 2.50 million US$ 21.1 million US$ 67.9 million Rs 250 billion

PRODUCTION PROCESS

This section will include the production details of the project, which includes the raw material required, product mix, production capacity, production proportion of each product etc. 8.1 Production Process Flow

The production process includes the following steps. Procurement of Land Architecture Design Materials Procurement Erection of Foundations Construction of Structure Installation of Electrical Wire Pipes Construction of roof. Plaster of cement Sewerage and water pipe installation Construction of floors and bathrooms
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Paints and electrification 8.2 Raw Material Requirement

Following raw materials will be used: Bricks Sand Crush Steel Mud Cement Floor Tiles Bath Room Fittings Cupboards Lighting accessories Sewerage and Water Supply Pipes Dadex Pipe 8.3 Machinery Requirement Steel Doors and Grills Wood Win board Chipboard Glass Varnish Paints Hardware Wires Misc. electrification equipment PVC Pipes

All the required machinery like Mixer, Lifts etc are available widely on rental basis. 8.4 Product/Project Standards and Compliance Issues

Please check with the relevant authorities (Like LDA for Johar Town and WAPDA Cooperative Housing Society for WAPDA Town) for more specific details about the Construction and Compliance issues. These Compliance Issues vary widely by location and by size of plot. Detailed requirements can be obtained from concerned authority upon request. 8.5 Recommended House Layout

For a 5 Marla house following layout is recommended, (front 25 feet X length 45 feet ) Ground Floor 2 bedrooms (11X12 ft) + attached bathrooms (5X6 ft) 1 kitchen (6X10 ft) A car porch (16X10 ft) 1 TV Lounge (13X10) 1 Drawing Room (11X13 ft)
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Vacant Space (5 ft on front and 5 ft at back) 1st Floor 2 bedrooms (11X12 ft) + attached bathrooms (5X6 ft) 1 store (6X8 ft) A stair room (10X10 ft) 1 TV Lounge (14X12 ft) 1 Living Room (7X10 ft) Terrace (5 Feet) Doors and Windows Windows 7 (5X6 ft) Windows 4 (2.5X2 ft) Front Door 1 (7X4 ft) Room Doors 13 (7X3 ft) Bathroom Doors 4 (7X2.25) For a 7 Marla house following layout is recommended, (front 28 feet X length 50 feet) Ground Floor 2 bedrooms (14X12 ft) + attached bathrooms (7X7 ft) 1 kitchen (15X6 ft) 1 Store (10X8) A car porch (16X10 ft) 1 TV Lounge (15X10) 1 Drawing Room (15X13 ft) Vacant Space (7 ft on front and 7 ft at back) 1st Floor 2 bedrooms (14X12 ft) + attached bathrooms (7X7 ft) 1 store (10X8 ft) 1 kitchen (15X7 ft) A stair room (10X10 ft) 1 TV Lounge (15X12 ft) 1 Living Room (10X14 ft) Terrace (5 Feet)
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Doors and Windows Windows 7 (5X6 ft) Windows 4 (2.5X3 ft) Front Door 1 (7X4 ft) Room Doors 13 (7X3 ft) Bathroom Doors 4 (7X2.25 ft) For a 10 Marla house following layout is recommended, (front 35 feet X length 65 feet) Ground Floor 2 bedrooms (14X14 ft) + attached bathrooms (7X8 ft) 1 kitchen (12X10 ft) 1 store (10X10 ft) A car porch (16X10 ft) 1 TV Lounge (14X16 ft) 1 Drawing Room (14X16 ft) Vacant Space (10 ft on front 7 ft at back and 5 ft Galley) 1st Floor 2 bedrooms (14X14 ft) + attached bathrooms (7X8 ft) 1 store (10X10 ft) 1 kitchen (12X10 ft) A stair room (10X10 ft) 1 TV Lounge (14X14 ft) 1 Living Room (12X12 ft) Tarries (5 Feet) Doors and Windows Windows 13 (6X6 ft) Windows 4 (2.5X3 ft) Front Door 1 (7X4 ft) Room Doors 15 (7X3 ft) Bathroom Doors 4 (7X2.25 ft)

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9
9.1

LAND & BUILDING REQUIREMENT


Covered Area Requirement

The required space for office is 400 Sq. Feet office 9.2 Rent Cost

The Rent Cost for office will be Rs. 15,000 per month. 9.3 Recommended Mode

It is recommended to rent an office on the preferred locations provided below. 9.4 Utilities Requirement

Electricity and two phone lines will be required in office. 9.5 Suitable Location

The office should be located near the construction sites for administrative purpose. The suitable location can be Faisal Town, Johar Town and Garden Town.

10 HUMAN RESOURCE REQUIREMENT


Following Human Resource would be required initially for office and management work and rest labour will be hired accordingly as per the site requirements: Designation Accounts/Purchase Officer Diploma Engineer Office Boy Security Guard Number 1 1 1 1 Salaries / Month 15,000 20,000 7,000 8,000

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11 FINANCIAL ANALYSIS
11.1 Project Costs

Initial Investment
Capital Investment Machinery & equipment Furniture & fixtures Office equipment Pre-operating costs Total Capital Costs Working Capital Equipment spare part inventory Raw material inventory Upfront building rent Cash Total Working Capital Total Investment Initial Financing Debt Equity Rs. in actuals 1,000,000 210,000 87,000 10,000 1,307,000 Rs. in actuals 2,500 11,354,240 180,000 1,000,000 12,586,740 13,893,740 Rs. in actuals 6,946,870 6,946,870

Project Returns
Net Present Value Internal Rate of Return Payback Period (Yrs) EQUITY 81,645,978 79% 3.14
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PROJECT 120,656,976 57% 4.13

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11.2

Projected Income Statement


Year 1 9,250,000 6,125,000 15,375,000 Year 2 21,275,000 7,043,750 28,318,750 Year 3 30,582,813 16,200,625 46,783,438 Year 4 42,204,281 18,630,719 12,547,219 73,382,219 Year 5 48,534,923 32,137,990 28,858,603 109,531,516 Year 6 65,117,689 49,278,251 33,187,394 147,583,334 Year 7 96,281,154 56,669,989 38,165,503 191,116,646 Year 8 123,025,919 81,463,109 43,890,328 248,379,356 Year 9 155,627,788 93,682,575 75,710,816 325,021,179 Year 10 195,242,134 129,281,954 87,067,438 411,591,526

Income Statement
5 Marla House 7 Marla House 10 Marla House Revenue Cost of sales Land cost Material cost Labour cost Rent of mixer Utilities connection Electricity Chg. Total cost of sales Gross Profit General administration & selling expenses Administrative Salaries Printing & Stationary Consultancy Charges & Audit Fee Entertainment Office Rent Telephone Internet Insurance expense Professional fees (legal, audit, consultants, etc.) Depreciation expense Commission on Sale of House Amortization of pre-operating costs Subtotal Operating Income Other income (interest on cash) Earnings Before Interest & Taxes Interest expense on long term debt (Project Loan) Interest expense on long term debt (Working Capital Loan) Subtotal Earnings Before Tax Tax NET PROFIT/(LOSS) AFTER TAX

5,205,000 4,458,460 1,340,800 30,000 57,900 262,080 11,354,240 4,020,760 1,098 600,000 50,000 20,000 60,000 180,000 60,000 24,000 50,000 76,875 129,700 153,750 2,000 1,406,325 2,614,435 656,664 3,271,099 97,954 558,664 656,618 2,614,481 653,620 1,960,861

9,102,500 7,946,329 2,399,980 55,000 96,500 288,288 19,888,597 8,430,154 1,185 660,000 55,000 22,000 66,000 198,000 66,000 26,400 45,000 141,594 129,700 283,188 2,000 1,694,881 6,735,272 256,568 6,991,840 81,976 81,976 6,909,865 1,727,466 5,182,399

14,453,450 12,462,586 3,753,541 84,700 135,100 317,117 31,206,493 15,576,944 1,294 726,000 60,500 24,200 72,600 217,800 72,600 29,040 40,000 233,917 129,700 467,834 2,000 2,076,192 13,500,753 544,687 14,045,440 63,245 63,245 13,982,194 3,495,549 10,486,646

21,994,775 18,753,268 5,617,619 119,790 173,700 348,828 47,007,980 26,374,239 1,413 798,600 66,550 26,620 79,860 239,580 79,860 31,944 35,000 366,911 129,700 733,822 2,000 2,590,447 23,783,792 1,155,654 24,939,446 41,288 41,288 24,898,158 6,224,539 18,673,618

31,778,291 26,631,694 7,933,079 161,051 212,300 383,711 67,100,126 42,431,391 1,549 1,493,382 73,205 29,282 87,846 263,538 87,846 35,138 30,000 547,658 129,700 1,095,315 2,000 3,874,910 38,556,480 2,459,160 41,015,641 15,548 15,548 41,000,092 10,250,023 30,750,069

40,866,691 34,248,345 10,208,540 209,366 250,900 422,082 86,205,924 61,377,409 1,701 1,642,720 80,526 32,210 96,631 289,892 96,631 38,652 25,000 737,917 129,700 1,475,833 4,645,711 56,731,698 4,837,599 61,569,297 61,569,297 15,392,324 46,176,973

50,392,053 42,572,387 12,719,277 265,734 289,500 464,291 106,703,241 84,413,405 1,868 1,806,992 88,578 35,431 106,294 318,881 106,294 42,517 20,000 955,583 129,700 1,911,166 5,521,437 78,891,968 8,729,369 87,621,337 87,621,337 21,905,334 65,716,003

62,583,050 52,823,339 15,784,609 331,282 328,100 510,720 132,361,098 116,018,258 2,052 1,987,691 97,436 38,974 116,923 350,769 116,923 46,769 15,000 1,241,897 129,700 2,483,794 6,625,876 109,392,382 14,625,305 124,017,686 124,017,686 31,004,422 93,013,265

78,658,991 66,229,767 19,760,673 407,282 366,700 561,792 165,985,205 159,035,974 2,254 2,186,461 107,179 42,872 128,615 385,846 128,615 51,446 10,000 1,625,106 129,700 3,250,212 8,046,052 150,989,922 23,201,008 174,190,930 174,190,930 43,547,732 130,643,197

95,178,559 80,105,136 23,906,760 495,169 405,300 617,971 200,708,895 210,882,631 2,477 2,405,107 117,897 47,159 141,477 424,431 141,477 56,591 5,000 2,057,958 129,700 4,115,915 9,642,711 201,239,920 36,689,427 238,038,048 238,038,048 59,509,512 178,528,536

19 PREF-80/Apr, 2011/Rev 2

Pre Feasibility Study

Housing Construction Company

11.3

Projected Balance Sheet


Year 0 Assets Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Balance Sheet

Current assets Cash & Bank Accounts receivable Equipment spare part inventory Raw material inventory Pre-paid annual land lease Pre-paid building rent Pre-paid insurance Total Current Assets Fixed assets Machinery & equipment Furniture & fixtures Office equipment Total Fixed Assets Intangible assets Pre-operation costs Total Intangible Assets TOTAL ASSETS Liabilities & Shareholders' Equity Current liabilities Accounts payable Total Current Liabilities Other liabilities Deferred tax Long term debt (Project Loan) Long term debt (Working Capital Loan) Total Long Term Liabilities Shareholders' equity Paid-up capital Retained earnings Total Equity TOTAL CAPITAL AND LIABILITIES

11,693,952 2,500 805,288 20,000 15,000 50,000 12,586,740

1,439,334 6,318,493 4,813 1,491,772 22,000 16,500 45,000 9,337,912

3,692,031 8,978,168 7,782 2,472,911 24,200 18,150 40,000 15,233,241

7,201,710 15,431,956 11,556 3,930,913 26,620 19,965 35,000 26,657,720

15,911,369 24,691,573 16,313 5,916,475 29,282 21,962 30,000 46,616,974

33,271,836 37,585,014 22,268 7,988,995 32,210 24,158 25,000 78,949,481

63,480,149 52,831,819 29,676 10,381,770 35,431 26,573 20,000 126,805,418

111,107,233 69,595,886 38,846 13,532,365 38,974 29,231 15,000 194,357,535

181,398,862 90,307,398 50,145 17,838,890 42,872 32,154 10,000 289,680,320

282,621,304 117,822,028 64,014 22,660,212 47,159 35,369 5,000 423,255,086

451,167,239 151,358,775 602,526,014

1,000,000 210,000 87,000 1,297,000

900,000 189,000 78,300 1,167,300

800,000 168,000 69,600 1,037,600

700,000 147,000 60,900 907,900

600,000 126,000 52,200 778,200

500,000 105,000 43,500 648,500

400,000 84,000 34,800 518,800

300,000 63,000 26,100 389,100

200,000 42,000 17,400 259,400

100,000 21,000 8,700 129,700

10,000 10,000 13,893,740

8,000 8,000 10,513,212

6,000 6,000 16,276,841

4,000 4,000 27,569,620

2,000 2,000 47,397,174

79,597,981

127,324,218

194,746,635

289,939,720

423,384,786

602,526,014

919,730 919,730

1,609,687 1,609,687

2,543,277 2,543,277

3,846,626 3,846,626

5,472,518 5,472,518

7,046,782 7,046,782

8,778,196 8,778,196

10,983,017 10,983,017

13,809,885 13,809,885

14,447,578 14,447,578

653,500 6,293,370 6,946,870

125,000 560,751 685,751

125,000 452,025 577,025

125,000 324,568 449,568

125,000 175,154 300,154

125,000 125,000

100,000 100,000

75,000 75,000

50,000 50,000

25,000 25,000

6,946,870 6,946,870 13,893,740

6,946,870 1,960,861 8,907,731 10,513,212

6,946,870 7,143,260 14,090,130 16,276,841

6,946,870 17,629,905 24,576,775 27,569,620

6,946,870 36,303,524 43,250,394 47,397,174

6,946,870 67,053,593 74,000,463 79,597,981

6,946,870 113,230,566 120,177,436 127,324,218

6,946,870 178,946,569 185,893,439 194,746,635

6,946,870 271,959,834 278,906,704 289,939,720

6,946,870 402,603,031 409,549,901 423,384,786

6,946,870 581,131,567 588,078,437 602,526,014

20 PREF-80/Apr, 2011/Rev 2

Pre Feasibility Study

Housing Construction Company

11.4

Projected Cash Flow Statement


Year 0 Year 1 1,960,861 129,700 2,000 125,000 (6,318,493) (2,313) (686,484) (1,500) 5,000 919,730 (3,866,499) Year 2 5,182,399 129,700 2,000 (2,659,675) (2,969) (981,138) (1,650) 5,000 689,957 2,363,623 Year 3 10,486,646 129,700 2,000 (6,453,789) (3,774) (1,458,002) (1,815) 5,000 933,590 3,639,557 Year 4 18,673,618 129,700 2,000 (9,259,617) (4,757) (1,985,562) (1,997) 5,000 1,303,349 8,861,735 Year 5 30,750,069 129,700 2,000 (12,893,441) (5,954) (2,072,520) (2,196) 5,000 1,625,891 17,538,550 Year 6 46,176,973 129,700 (25,000) (15,246,804) (7,408) (2,392,775) (2,416) 5,000 1,574,264 30,211,534 Year 7 65,716,003 129,700 (25,000) (16,764,068) (9,170) (3,150,595) (2,657) 5,000 1,731,414 47,630,627 Year 8 93,013,265 129,700 (25,000) (20,711,512) (11,299) (4,306,526) (2,923) 5,000 2,204,821 70,295,526 Year 9 130,643,197 129,700 (25,000) (27,514,630) (13,869) (4,821,321) (3,215) 5,000 2,826,868 101,226,729 Year 10 178,528,536 129,700 (25,000) (33,536,747) 64,014 22,660,212 35,369 5,000 637,693 168,498,777

Cash Flow Statement


Operating activities Net profit Add: depreciation expense amortization of pre-operating costs amortization of training costs Deferred income tax Accounts receivable Finished goods inventory Equipment inventory Raw material inventory Pre-paid building rent Advance insurance premium Accounts payable Other liabilities Cash provided by operations Financing activities Project Loan - principal repayment Working Capital Loan - principal repayment Add: land lease expense Land lease payment Additions to Project Loan Additions to Working Capital Loan Issuance of shares Purchase of (treasury) shares Cash provided by / (used for) financing activities Investing activities Capital expenditure Cash (used for) / provided by investing activities NET CASH

(2,500) (805,288) (15,000) (50,000)

(872,788)

(20,000) 653,500 6,293,370 6,946,870 13,873,740

(92,749) (6,293,370) 20,000 (22,000) (6,388,119)

(108,727) 22,000 (24,200) (110,927)

(127,457) 24,200 (26,620) (129,877)

(149,414) 26,620 (29,282) (152,076)

(175,154) 29,282 (32,210) (178,082)

32,210 (35,431) (3,221)

35,431 (38,974) (3,543)

38,974 (42,872) (3,897)

42,872 (47,159) (4,287)

47,159 47,159

(1,307,000) (1,307,000) 11,693,952

(10,254,618)

2,252,697

3,509,680

8,709,659

17,360,468

30,208,313

47,627,084

70,291,629

101,222,442

168,545,936

21 PREF-80/Apr, 2011/Rev 2

Pre Feasibility Study

Housing Construction Company

11.5

Revenues and Cost of Sales


Year - I 5,205,000 4,458,460 1,340,800 30,000 57,900 262,080 11,354,240 Year - II 9,102,500 7,946,329 2,399,980 55,000 96,500 288,288 19,888,597 Year - III 14,453,450 12,462,586 3,753,541 84,700 135,100 317,117 31,206,493 Projected Cost of Sales Year - IV Year - V 21,994,775 31,778,291 18,753,268 26,631,694 5,617,619 7,933,079 119,790 161,051 173,700 212,300 348,828 383,711 47,007,980 67,100,126 Year - VI 40,866,691 34,248,345 10,208,540 209,366 250,900 422,082 86,205,924 Year - VII 50,392,053 42,572,387 12,719,277 265,734 289,500 464,291 106,703,241 Year - VIII 62,583,050 52,823,339 15,784,609 331,282 328,100 510,720 132,361,098 Year - IX 78,658,991 66,229,767 19,760,673 407,282 366,700 561,792 165,985,205 Year - X 95,178,559 80,105,136 23,906,760 495,169 405,300 617,971 200,708,895

Operation Land cost Material cost Labour cost Rent of mixer Utilities connection Electricity Chg.

22 PREF-80/Apr, 2011/Rev 2

Pre Feasibility Study


Projected Revenue & Cost Schedule
Year - I Revenue (PKR): Revenue 5 Marla 7 Marla 10 Marla Year - II Year - III Year - IV Year - V Year - VI

Housing Construction Company

Year - VII

Year - VIII

Year - IX

Year - X

9,250,000 6,125,000 15,375,000 Year - I

21,275,000 7,043,750 28,318,750 Year - II

30,582,813 16,200,625 46,783,438 Year - III

42,204,281 18,630,719 12,547,219 73,382,219 Year - IV

48,534,923 32,137,990 28,858,603 109,531,516 Year - V

65,117,689 49,278,251 33,187,394 147,583,334 Year - VI

96,281,154 56,669,989 38,165,503 191,116,646 Year - VII

123,025,919 81,463,109 43,890,328 248,379,356 Year - VIII

155,627,788 93,682,575 75,710,816 325,021,179 Year - IX

195,242,134 129,281,954 87,067,438 411,591,526 Year - X

Cost (PKR): LAND Cost Designing Fee Submission Drawing Fees

5,100,000 60,000 45,000 5,205,000

8,100,000 100,000 75,000 8,275,000

11,700,000 140,000 105,000 11,945,000

16,200,000 190,000 135,000 16,525,000

21,300,000 240,000 165,000 21,705,000

24,900,000 280,000 195,000 25,375,000

27,900,000 320,000 225,000 28,445,000

31,500,000 360,000 255,000 32,115,000

36,000,000 410,000 285,000 36,695,000

39,600,000 450,000 315,000 40,365,000

Material Bricks Sand Crush Brick Ballast Steel Cement Mud Water Proofing & Heat Insulation Tiles on Roof Graphy Paint on Front Flooring Pipe Electric Wires Electric Fittings Grills Stair & Balcony Railing Aluminum Windows Gate Glass Paint Doors Room Cupboards Kitchen Cabinets Hardware fittings Bath room fittings

11% 2% 3% 1% 11% 16% 0% 3% 1% 2% 10% 6% 2% 2% 2% 3% 3% 1% 1% 5% 3% 5% 1% 2% 5%

476,000 100,000 114,000 29,700 510,000 697,000 17,000 122,950 35,280 85,000 431,360 280,000 109,225 85,000 76,800 115,000 120,000 61,425 28,800 220,000 147,420 216,000 66,500 90,000 224,000 4,458,460

773,500 160,000 186,000 47,700 834,000 1,139,000 27,000 193,950 57,330 135,000 679,455 455,000 172,925 135,000 128,000 185,000 200,000 102,375 48,000 360,000 245,700 360,000 91,000 140,000 368,000 7,223,935

1,100,750 230,000 264,000 68,400 1,182,000 1,615,000 39,000 281,400 81,585 195,000 986,768 647,500 250,300 195,000 179,200 265,000 280,000 143,325 67,200 510,000 343,980 504,000 145,250 205,000 520,000 10,299,658

1,504,500 315,000 372,000 90,900 1,584,000 2,167,500 54,000 372,300 111,510 270,000 1,385,018 885,000 341,150 290,000 249,600 375,000 390,000 191,100 93,600 700,000 447,930 676,000 241,500 290,000 692,000 14,089,608

1,938,000 410,000 486,000 116,100 2,010,000 2,754,000 71,000 479,650 143,640 355,000 1,842,485 1,140,000 445,675 395,000 320,000 495,000 500,000 238,875 120,000 900,000 551,880 848,000 367,500 390,000 872,000 18,189,805

2,265,250 480,000 564,000 136,800 2,358,000 3,230,000 83,000 567,100 167,895 415,000 2,149,798 1,332,500 523,050 455,000 371,200 575,000 580,000 279,825 139,200 1,050,000 650,160 992,000 421,750 455,000 1,024,000 21,265,528

2,562,750 540,000 636,000 154,800 2,682,000 3,672,000 93,000 638,100 189,945 465,000 2,397,893 1,507,500 586,750 505,000 422,400 645,000 660,000 320,775 158,400 1,190,000 748,440 1,136,000 446,250 505,000 1,168,000 24,031,003

2,890,000 610,000 714,000 175,500 3,030,000 4,148,000 105,000 725,550 214,200 525,000 2,705,205 1,700,000 664,125 565,000 473,600 725,000 740,000 361,725 177,600 1,340,000 846,720 1,280,000 500,500 570,000 1,320,000 27,106,725

3,293,750 695,000 822,000 198,000 3,432,000 4,700,500 120,000 816,450 244,125 600,000 3,103,455 1,937,500 754,975 660,000 544,000 835,000 850,000 409,500 204,000 1,530,000 950,670 1,452,000 596,750 655,000 1,492,000 30,896,675

3,621,000 765,000 900,000 218,700 3,780,000 5,176,500 132,000 903,900 268,380 660,000 3,410,768 2,130,000 832,350 720,000 595,200 915,000 930,000 450,450 223,200 1,680,000 1,048,950 1,596,000 651,000 720,000 1,644,000 33,972,398

23 PREF-80/Apr, 2011/Rev 2

Pre Feasibility Study


FLOORING House Bath & Kitchen Vacant Space & Porch

Housing Construction Company

235,730 140,750 54,880 431,360 280,000 280,000 37,125 34,300 37,800 109,225 85,000

372,900 218,875 87,680 679,455 455,000 455,000 59,625 53,900 59,400 172,925 135,000

540,045 320,563 126,160 986,768 647,500 647,500 85,500 78,400 86,400 250,300 195,000

782,870 416,388 185,760 1,385,018 885,000 885,000 117,000 105,350 118,800 341,150 290,000

1,055,670 535,775 251,040 1,842,485 1,140,000 1,140,000 151,875 137,200 156,600 445,675 395,000

1,222,815 637,463 289,520 2,149,798 1,332,500 1,332,500 177,750 161,700 183,600 523,050 455,000

1,359,985 715,588 322,320 2,397,893 1,507,500 1,507,500 200,250 181,300 205,200 586,750 505,000

1,527,130 817,275 360,800 2,705,205 1,700,000 1,700,000 226,125 205,800 232,200 664,125 565,000

1,769,955 913,100 420,400 3,103,455 1,937,500 1,937,500 257,625 232,750 264,600 754,975 660,000

1,937,100 1,014,788 458,880 3,410,768 2,130,000 2,130,000 283,500 257,250 291,600 832,350 720,000

PPRC & Sewage Pipes Electric Wires 3 x 29 7 x 29 7 x 44 Electric Fittings UTILITIES CONNECTION Electricity Water Gas Telephone LABOUR Civil works Electriction Sanitation Paint Carpenter Guard RENT Mixer

30,000 7,500 15,000 5,400 57,900 840,000 67,200 67,200 134,400 220,000 12,000 1,340,800 30,000

50,000 12,500 25,000 9,000 96,500 1,365,000 109,200 109,200 218,400 360,000 20,000 2,181,800 50,000

70,000 17,500 35,000 12,600 135,100 1,942,500 155,400 155,400 310,800 510,000 28,000 3,102,100 70,000

90,000 22,500 45,000 16,200 173,700 2,655,000 212,400 212,400 424,800 680,000 36,000 4,220,600 90,000

110,000 27,500 55,000 19,800 212,300 3,420,000 273,600 273,600 547,200 860,000 44,000 5,418,400 110,000

130,000 32,500 65,000 23,400 250,900 3,997,500 319,800 319,800 639,600 1,010,000 52,000 6,338,700 130,000

150,000 37,500 75,000 27,000 289,500 4,522,500 361,800 361,800 723,600 1,150,000 60,000 7,179,700 150,000

170,000 42,500 85,000 30,600 328,100 5,100,000 408,000 408,000 816,000 1,300,000 68,000 8,100,000 170,000

190,000 47,500 95,000 34,200 366,700 5,812,500 465,000 465,000 930,000 1,470,000 76,000 9,218,500 190,000

210,000 52,500 105,000 37,800 405,300 6,390,000 511,200 511,200 1,022,400 1,620,000 84,000 10,138,800 210,000

24 PREF-80/Apr, 2011/Rev 2

Pre Feasibility Study

Housing Construction Company

12 KEY ASSUMPTIONS
Table 12-1 Miscellaneous Assumptions 15% 10% 10% 925,000 875,000 825,000 Rs. 4,625,000/House 6,125,000/House 8,250,000/House Rs. 300,000/Marla 15,000/House 20,000/House 30,000/House Rs. 4,250/Thousand 2,500/Truck 30/Cubic ft 60/Kg 340/Bag 9/Cubic ft 1,000/Trolley 3,500/Thousand 50/Sq ft 160/Sq ft 250/Sq ft 325/Sq ft 60/Sq ft Lump sum Rs. 50/Sq ft 75/Sq ft 50/Sq ft
25 PREF-80/Apr, 2011/Rev 2

Growth Rate Sale Price Land Material, Labour etc. Sale Price / Marla - 5 Marla Sale Price / Marla - 7 Marla Sale Price / Marla - 10 Marla Sale Price 5 Marla 7 Marla 10 Marla Cost Land Fee Designing Fee (5-7 Marla) Designing Fee (10 Marla) Material Cost Bricks Sand Crush Steel Cement Brick Blast Mud Tiles on roof Water Proofing & Heat Insulation Grills including Labour Aluminium window including Labour Gate including Labour Glass Graphy Paint on Front Flooring Inside House (5 & 7 Marla) Inside House (10 Marla) Bath room & Kitchen

Pre Feasibility Study

Housing Construction Company

Car Porch & Open Areas Doors Room Cupboards Pipe PPRC & Sewage Pipes Electric wire 3 x 29 7 x 29 7 x 44 Electric switches & Appliances for 5 Electric switches & Appliances for 7 Electric switches & Appliances for 10 Paint cost (5 Marla) Paint cost (7 Marla) Paint cost (10 Marla) Utilities Expense Electricity Single Phase Three Phase Water Gas Telephone Rent Expense Mixer machine Labour Cost Civil work Electrification Sanitation Glass Aluminium Paint Guard Broker Commission Table 12-2 Operating Assumptions

40/Sq ft 135/Sq ft Lump sum Rs. 50/Sq Ft Rs. 1,125/Coil 2,450/Coil 5,400/Coil 25,000/House 35,000/House 70,000/House 70,000/house 80,000/house 120,000/house

10,000/Connection 15,000/ Connection 2,500/ Connection including one year 5,000/ Connection 1,800/ Connection 5,000/Day/lanter 150/Sq ft 12/Sq ft 12/Sq ft 60/Sq ft 250/Sq ft 8/Sq ft 8,000/Month 1.0% of Revenue

Annual construction (No. of houses) 5 marla 7 marla


26 PREF-80/Apr, 2011/Rev 2

3 2 1

Pre Feasibility Study

Housing Construction Company

10 marla Table 12-3 Revenue Assumptions Sales prices 5 Marla 7 Marla 10 Marla Sales price growth rate

0 Rs. 4,625,000 6,125,000 8,250,000 15%

Table 12-4

Financial Assumptions 10 50% 50% 16% 5 653,500 2 5

Project life (Years) Debt Equity Interest rate on long term debt Debt tenure (Years) Principal debt repayments per year No. of instalments in a year Amortization (years) Table 12-5 Bricks Sand Crush Steel Cement Mud Tiles on roof Tiles (for front) Grills Glass Lamination Material Requirement Assumptions Estimated Requirement

Materials

20 / sq ft 1 Truck/ 145 Sq. ft 1.45 Cubic feet / sq ft 0.75 kg / sq ft 1 Bag / 2.69 sq ft 1 Trolley / 87 sq ft 3150 for 5 Marla; 3780 for 7 Marla and 5400 for 10 Marla House 52.02 Sq m for 5 Marla; 59.83 Sq m for 7 Marla; & 65.03 Sq m for 10 Marla 160 sq ft for 5 Marla; 160 Sq ft for 7 Marla and 280 sq ft for 10 Marla 160 sq ft for 5 Marla; 160 sq ft for 7 Marla and 280 sq ft for 10 Marla House Rs. 84,250 for 5 Marla House; Rs. 114,000for 7 Marla and Rs. 184,000 for 10 Marla House

27 PREF-80/Apr, 2011/Rev 2

Pre Feasibility Study

Housing Construction Company

Table 12-6

Material cost Assumptions Material Rs 4,250 2500 30 60 340 1,000 3,500 160 325 60 750 50 50 50 135 1500 850 425 Price Unit Thousand Truck (350 cub ft) Cubic ft Kg Bag Trolley Thousand Sq ft Sq ft Sq ft Sq m Sq ft Sq ft Sq ft Sq ft Sheet Sheet Sheet

Bricks Sand Crush Steel Cement Mud Tiles Grills including labour Gate including labour Glass Tiles for Front Flooring : Covered area Bath rooms Others (Front, Back & Galli) Door Lamination Chipboard Ply Table 12-7 Category Civil work Electrification Sanitation Aluminium Guard Glass Work Labour cost Assumptions

Rate 150 12 12 250 8,000 60

Basis of Pricing Sq. ft Sq. ft Sq. ft Sq. ft Month Sq. ft

28 PREF-80/Apr, 2011/Rev 2

Pre Feasibility Study

Housing Construction Company

Table 12-8

Expense Assumptions Rs. 300,000 10% Rs. 15,000 10%

Land Price per Marla Land Price growth rate Fees for land Material, Labour growth rate

Table 12-9

Miscellaneous Assumptions Rs. 60,000 Rs. 50,000 Rs. 76,875 Rs. 60,000 Rs.180,000 Rs. 31,000 Rs. 10,000

Telephone Expense for the first year Printing & stationery Legal & professional charges Entertainment Office rent Depreciation Amortization of Preliminary expenses

29 PREF-80/Apr, 2011/Rev 2