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Published by: Meghna Goradia on Aug 20, 2012
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08/20/2012

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Financing Strategy for Project by developing MS Excel based Financial Model

Summer Internship Report 2012 Presented by – Meghna Goradia (P71063)

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© Salmon Leap

About Salmon Leap Associates (Bengaluru)………
•Consultant
•Project Finance •SEZ •Solar energy •Affordable housing Sector

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© Salmon Leap

Industrializing Indian Housing

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Demand Drivers & Supply Constraints

Urbanization Rising Income Level

Housing
Availability of Land Financial & Regulatory Constraints

Demand Drivers Supply Constraints

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Indicative Size & Potential
Urban Income Pyramid
Monthly household Income
` 80,000+

Offering & Market Potential
Price of Unit > ` 25 Lakh Potential Demand from ~2 mn Households with estimate Market Size of ~ ` 500,000 Cr. Over-supplied; Languishing demand Price of Unit : ` 10-25 Lakh Potential Demand from ~5 mn Households with estimate Market Size of ~ ` 900,000 Cr. Traditionally small developers; New Focus of many large developers Price of Unit : ` 3-10 Lakh

1% 0.7 mn 5% 3.4 mn 4% 2.7 mn

` 40,000 – 80,000

` 30,000 – 40,000

` 20,000 – 30,000

5% 3.4 mn
21 % 15.0 mn 31% 21.1 mn 33 % 22.4 mn

` 10,000 – 20,000

Potential Demand from ~21 mn Households with estimate Market Size of ~ ` 1,300,000 Cr. Under Served; Few entrants are ‘over sold’

` 5,000 – 10,000

< ` 5,000

Source | NHB Trends in Housing; CRIS Infac Report; Monitor Research

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Strategic Approach
Focused on the Budget Housing segment in the urban agglomeration space

Paradigm Shift

Move from building homes to “Manufacturing Homes”

Model is
Scalable Replicable Deployable across boundaries

…enabling reduced
Time Money Labor Material Risk

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The Technology

Modular precast concrete manufacturing

Delivering the world’s most advanced 3D monolithic precast concrete building system

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Advantages

Clients pay less interest on investment during construction phase Will generate early returns as the project is completed earlier Overall cost of the project 10 – 20% cheaper depending on project condition Less headaches coming from the friction generated by Time losses Delays Quality of work Supervision Respect of procedures Inspections Non conformity to the contract conditions NCR QA/QC general issues Problems encountered during the defect liability period are almost nil No more cracks on the elevations No more humidity migration to the inside of the building No more paint deterioration due to migrating humidity No more costs incurred for the reflections

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Work Assigned with respect to the Project

Potential Locations

hoMMaker Project

Finance strategy

Summer Internship Report

Recommendations

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Methodology
Exploring 5 target states Parameter Check (Land rates,Fsi,Site characteristics) Developing Suitability Model

Data collection(Architect uaral, financial, technological)

Identifying Sources of Funds for Project Development

Generating Potential Locations

Carrying out phasing

Financial model

Strategizing and Recommendations

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© Salmon Leap

Suitability Model
State City Locality(Only for major Andhra Pradesh Hyderabad Shamshabad

Factors influencing location

Site characteristics

Cities)

Avg. Price (per sq.feet) FSI Land Cost(per sq.feet)

612 2.5 244.8 900 30 343.44 1488.24 1999 Area is Suitable for homemaker

FSI

Construction Cost Profit Margin (%) Profit Net Cost (per sq. feet) Expected Cost

Land cost

Suitability

Limitation: Further analysis needs to be carried out on the locations in terms of the Market availability, Proximity to public amenities like bus stands, railway stations, etc to support the model.
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Sources of fund

Total Finance

Debt

Equity

Long term loans

Short term loans

Land owner

Venture Capital

Pseudo Equity

Angel Investors

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Finance Strategy

Architectural Design (Mould types & sizes) Financial Modelling (Excel Sheets) Technology (Green Precast) Phasing Strategizing for sustainability of hoMMaker

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Why Finance Modeling ??????

To explain the business(project) model
To show the path to profitability To quantify the investment requirement To achieve the self sustainability of the Project

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Financial model consists of...
Assumptions Basic assumptions

Architectural configuration
Financial assumptions Phasing of homemaker Expenditure and Revenue Funding Projections Equity Debt

Income Statement
Cash Flow

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Paradigm Shift

Move from Build to Manufacture

“We can’t solve problems by using the same kind of thinking we used when we created them”

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Thank you

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© Salmon Leap

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