3.1 Investors on board?

Case study of a 35 storied residential building in Mumbai having saleable carpet area 125,730 sq ft and a target completion in 43 months. Investor’s contribution of Rs.100 Crores (RS.1 bn) for 3 years to be deployed mainly towards cost of construction. 

The purpose of this case study is convincing the Investor who is interested in profitability & ROI (Return on Investment) and analyse relevant data to determine the financial viability of the project.

Sharing herewith the effective project report template for potential investors.

Few benefits:

• For Investors: Well described project report improves understanding of profitability ratio, risks associated with approvals, design, timelines, costing and unit sale price. 
• For project owners: Well defined reports brings credibility with option of working with interesting partners and possibility of early project commencement.

PROJECT REPORT:

Win-win Proposal is for equity partnership and profit sharing on a pro-rata basis.

Present scenario: Land in possession with clear title, design development is in progress with required architects and consultants on board. 

1. Organization details: 

• ABC group was established in 1995 wherein Commenced work as a contractor and then became developer in 2003.
• Since 2003, the firm has been instrumental in developing residential, commercial, retail and office buildings in and around Mumbai metropolitan region. 
• Till 2020 completed 65 projects and delivered around 21 mm sqft of developments.
• From 2007, associated with financial institutions like banks, NBFC for debt and now inclined towards creating an equity based partnership with investors.
• 10 Ongoing projects are at Mahim, Santacruz, Kandivali, Miraroad, Matunga, Kanjurmarg, Thane, Badlapur and Navi Mumbai (2). 
• There are 12 upcoming projects in and around Mumbai region are in different stages of development (3 submitted for approval, 2 are at the design stage, 3 land acquisition and 4 are under discussion for redevelopment work). 
• Total staff strength in an organization is 241, spread across 10 verticals at head office 68 and around 173 at project level.

2. Project Details:

• Name of the Project : ABC Heights
• Residential Project of 35 storied buildings having built up area of around 210,000 sqft, saleable carpet area of 125,730 sqft.
• Address: Chembur refinery road, Wadala East, Mumbai-37 (Near New Cuffe Parade)

• Project Team
• Developer: M/s ABC group of companies, Mumbai  
• Liaisoning Architects: M/s LA Architects, Mumbai. 
• Design Architects: M/s DEF Architecture firm, Mumbai  
• Structural consultant: M/s GHI consultants, Mumbai 
• MEP Consultant: M/s JKL services, Mumbai
• Parking Consultant: M/s MNO parkings, Delhi

3. Location map and surrounding infrastructure

4. Residential Product Mix: 

Three types of units 1, 1.5 & 2 BHK. Per floor 6 Units.  Marble flooring in Living room, Plumbing & Electrical fitting and fixtures from reputed brands, Kitchen cabinets. Car parking, club house, swimming pool, multipurpose hall, Games room, Children’s play area, Half basketball court, gymnasium. 

Indicative plan :

5. Timelines: 

• Total project duration of 43 months
• Schedule: Structural works: 22 months (Aluminium formwork), Finishing & Services works in 12 months after structural works.

Tentative schedule:

6. Execution Methodology: 

• Structural design peer review by M/s PQR structural services, Mumbai
• Use of aluminium formwork for faster and quality works
• In house project management team
• Subcontractors will be appointed for structural work (RCC plus civil finishes) and Plumbing, Electrical, Fire fighting works. 
• Materials supplied by developers are RMC, Steel, Granite/Marble, fittings & fixtures
• Manufacturing and installation work will be awarded to third parties for passenger lifts, parking lifts and parking systems.

7. Sales & Marketing Strategies:

• Project Launch: March 2019 after receipt of RERA certificate
• Marketing strategies: Extensive Use of digital platforms interlinking sales strategies.

• Sales strategies:
  • Considering average sale price of Rs. 35,000 per sqft. Year Wise sale targets are as below for total cash inflow of Rs. 440 crores (Rs.4.4 bn)

Only around 30% of sales are targeted till completion of structural works. 

Cash inflow from sales is not on priority due to funding from Investors, hence sale number target and relative sale price strategy is to make people aware of the project and improve profitability towards the completion of project. 

8. Cashflow:

Cash Inflow: Through Sales Rs 440 Crores (4.4 bn)

Cash Outflow: Land cost (Rs. 120 crores (Rs.1.2 bn) Approval expenses, construction cost (material purchase + Contractors, Consultants on board), (Rs. 80 Crores (Rs.800mm) Legal, Finance, Administrative & management cost Marketing cost and contingency (Rs. 40 crores (Rs. 400 mm)).

Profit of Rs,200 Cr. (2 bn) over investment of Rs.220 Cr. (2.2bn)

So for total cash outflow of Rs.240 Crores (Rs.2.4 bn) which includes, Land cost (Rs.120 crores (Rs.1.2 bn) by project owner as an investment), Rs.120 crores (Rs.1.2 bn) of expenses will be through, Investor’s contribution (Rs.100 crores (Rs.1 bn)) & sales (Rs.20 crores (Rs. 200 mm)).

9. Funding Requirements:

• In 3 stages for Total requirements = Rs. 100 Crores (1 bn)

1. For Authorities and construction mobilization purposes. Rs. 30 Crores (Rs300 mm) initially. 
2. For Construction purpose Rs. 50 Crores (Rs, 500mm) after 6 months 
3. For Authorities and construction expenses Rs. 20 Crores (Rs. 200 mm) after 12 month,

Conclusion:

Well structured project report is helpful for not only bringing investors on board but also for the following, 

1. Transparent data improves quality of professionalism
2. Availability of detailed data leads to quick decisions
3. Creates positive attitude during multiple interactions
4. Accelerates due diligence process
5. Enhances timelines for Project commencement

Related Reading

3.2 Cash Outflow: Rs. 240 Crores (Rs.2.4bn)

Professionalism: Teamwork

Cash outflow of the 35 storied residential  project in Mumbai

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