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Pre-Feasibility Study Housing Construction Company

Small and Medium Enterprise Development Authority


Government of Pakistan
www.smeda.org.pk
HEAD OFFICE 6th Floor LDA Plaza Egerton Road, Lahore Tel 111 111 456, Fax: 6304926-7 Website www.smeda.org.pk Helpdesk@smeda.org.pk
REGIONAL OFFICE PUNJAB REGIONAL OFFICE SINDH REGIONAL OFFICE NWFP Ground Floor State Life Building The Mall, Peshawar. Tel: (091) 9213046-47 Fax: (091) 286908 helpdesk-pew@smeda.org.pk REGIONAL OFFICE BALOCHISTAN

8th Floor LDA Plaza Egerton Road, Lahore Tel 111 111 456, Fax: 6304926-7 Website www.smeda.org.pk
helpdesk@smeda.org.pk

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

Bungalow No. 15-A Chaman Housing Scheme Airport Road, Quetta. Tel: (081) 831623, 831702 Fax: (081) 831922 helpdesk-qta@smeda.org.pk

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1 2 3 4

INTRODUCTION TO SMEDA ____________________________________________________ 2 PURPOSE OF THE DOCUMENT _________________________________________________ 2 CRUCIAL FACTORS & STEPS IN DECISION MAKING FOR INVESTMENT __________ 3 PROJECT PROFILE ____________________________________________________________ 3 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 OPPORTUNITY RATIONALE _____________________________________________________ 3 PROJECT BRIEF ______________________________________________________________ 4 MARKET ENTRY TIMING _______________________________________________________ 4 PROPOSED BUSINESS LEGAL STATUS _____________________________________________ 4 PROJECT CAPACITY AND RATIONALE _____________________________________________ 4 PROJECT INVESTMENT _________________________________________________________ 4 PROPOSED LOCATION _________________________________________________________ 5 KEY SUCCESS FACTORS/PRACTICAL TIPS FOR SUCCESS _______________________________ 5 STRATEGIC RECOMMENDATIONS ________________________________________________ 5

SECTOR & INDUSTRY ANALYSIS _______________________________________________ 5 5.1 5.2 5.2.1 5.3 SECTOR CHARACTERISTICS _____________________________________________________ 5 SUB SECTOR INFORMATION _____________________________________________________ 5 Government Policy Direction ________________________________________________ 6 LEGAL ISSUES REGARDING HOUSING INDUSTRY ____________________________________ 7

MARKET INFORMATION_______________________________________________________ 7 6.1 6.2 6.3 MARKET POTENTIAL __________________________________________________________ 7 TARGET CUSTOMERS _________________________________________________________ 8 TRADE STATISTICS ___________________________________________________________ 8

PRODUCTION PROCESS________________________________________________________ 8 7.1 7.2 7.3 7.4 7.5 PRODUCTION PROCESS FLOW ___________________________________________________ 9 RAW MATERIAL REQUIREMENT _________________________________________________ 9 MACHINERY REQUIREMENT ____________________________________________________ 9 PRODUCT/PROJECT STANDARDS AND COMPLIANCE ISSUES ____________________________ 9 RECOMMENDED HOUSE LAYOUT _______________________________________________ 10

LAND & BUILDING REQUIREMENT ____________________________________________ 12 8.1 8.2 8.3 8.4 COVERED AREA REQUIREMENT ________________________________________________ 12 RENT COST ________________________________________________________________ 12 RECOMMENDED MODE _______________________________________________________ 12 UTILITIES REQUIREMENT _____________________________________________________ 12

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8.5 9 10

SUITABLE LOCATION_________________________________________________________ 12

HUMAN RESOURCE REQUIREMENT ___________________________________________ 12 FINANCIAL ANALYSIS ________________________________________________________ 13 10.1 10.2 10.3 10.4 10.5 PROJECT COSTS _____________________________________________________________ 13 PROJECTED INCOME STATEMENT _______________________________________________ 14 PROJECTED BALANCE SHEET __________________________________________________ 15 PROJECTED CASH FLOW STATEMENT ____________________________________________ 16 COST OF SALES _____________________________________________________________ 17

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KEY ASSUMPTIONS ___________________________________________________________ 18

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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. Revision Prepared by Issue Date Revision Date Issued by PREF-80 2 SMEDA-Punjab February 2005 December , 2006 Library Officer

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INTRODUCTION TO SMEDA

The Small and Medium Enterprise 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 sectors including, fruits and vegetables, marble and granite, gems and jewelry, 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, production, 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 and Real Estate sector.

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CRUCIAL FACTORS & STEPS IN DECISION MAKING FOR INVESTMENT

Housing can play a significant role in the economic growth of our country, as a source of jobs and capital investment, as a secure vehicle 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, academic knowledge, and specific managerial and technical skill set. The development of a vibrant housing industry is based on an ample supply of affordable land, with easy access to transportation and efficient distribution of necessities such as energy and water. On the other hand a demand driver may be the desire of many families to modernize, enlarge or otherwise renovate their homes. This has been an important part of the housing culture for many decades. Financial institutions are an important partner in the housing sector. To broaden the consumer base for home ownership, especially among lower income families, the financial sector is greatly assisted by banks and financial institutions. For the housing industry, a well trained work force is essential. An added advantage for Pakistani housing industry is that skilled labour is available at fairly cheap rate.

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4. 1
1

PROJECT PROFILE
Opportunity Rationale

Housing is one of the basic human requirements, as every family needs a roof. Providing shelter to every family has become a major issue as a result of rapid urbanization and higher population growth. On the other hand, the provision of house has not kept pace with the above phenomenon and resulted in the deterioration of living condition, increased health hazarded and rapid growth of slums and squatter settlements (Katchi Abadies). The improvement of slums and katchi abadies and provision of affordable housing to shelterless population will not only help alleviate the urban and rural poverty but also increase the productivity of the low income population through improved public health. The present Government is committed to give priority to housing sector and has demonstrated its commitment by allocating significant resources for its accelerated development, which would contribute to the economy in the form of additional employment and support 30 40 allied industries. The multiple effects of the housing and construction sector have the potential to create maximum employment opportunities besides generating industrial, commerce and trade activities.

Economic survey of Pakistan 2005-06

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4. 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 SOCEITY. 4. 3 Market Entry Timing

Though the construction work is not dependent on the time but, as per industry norm, the ideal timing for housing construction is from May to Jun and then from September to November. The reason is rainy season during July and August which causes delays in construction process. During December to February the labour is mostly migrated to rural areas for crop harvest. During harvest season labour is paid more in rural areas this causes shortage of labour and consequently rise in daily wages. 4. 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. 4. 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. 4. 6 Project Investment

The total cost of the project is Rs.6.903million. Table 4-1 Project Costs 303,400 6,600,000 6,903,400

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 4-2 Debt Equity Total project Investment
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Project Financing 50% 50% 3,451,700 3,451,700 6,903,400

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Table 4-3

Viability 116.94% 250,954 1.81

IRR NPV @25% Pay Back Period (year) 4. 7 Proposed Location

The proposed locations for the construction of houses are as follows Johar Town WAPDA Town Valencia Town 4. 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 very crucial. In short quality pays in the long run. 4. 9 Strategic Recommendations

The construction industry is only profitable if the projects are completed in 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 The investment in good architectural design is worth it. A good look is the first thing buyers would be looking for at the first place.

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5. 1

SECTOR & INDUSTRY ANALYSIS


Sector Characteristics

The construction sector in Pakistan today is still at low ebb. This can be judged from the fact that per capita consumption of cement in Pakistan is one of the lowest among the developing countries i.e. 70 kgs. 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 balance. This sector has a big vacuum in the market and a lot has to be done yet. 5. 2 Sub sector Information

According to the latest available census of 1998, the total number of housing units, throughout the country, was 19.3 million, 67.7 per cent housing was in rural areas and 32.3 per cent in urban areas. The overall housing stock comprised 39 per cent kucha houses, 40 per cent semi-pukka houses and 21 per cent pukka houses. The housing
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backlog, as estimated according to the 1998 census, was 4.3 million units. The annual additional requirement is estimated around 500,000 housing units whereas the annual production is estimated around 300,000 housing units resulting in a recurring backlog of 270,000 housing units annually. 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 usual privileges, concessions, exemptions and remissions have become applicable to this industry in accordance with the Board of Investment policy. (Pakistan & Gulf Economist). The construction sector registered a growth rate of 7.9 percent against a target of 5.4 percent and last year's growth of 3.1 percent. Housing and construction has been identified as one of the major drivers of growth and the government has taken various budgetary and non-budgetary measures to boost this sector which has responded positively despite higher input prices. 5.2.1 Government Policy Direction Construction industry alone provides impetus to over 42 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. 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

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has been withdrawn and excise duty on cement has been reduced by 25% to lessen the cost of construction2. 5. 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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6. 1

MARKET INFORMATION
Market Potential

Construction industry in Pakistan has been in the developing stage. In fact two decades ago, the construction companies were better organized and played significant role in the country's development and progress. However during the last twenty years there has been considerable decline in the growth, ability and efficiency of the construction companies. Large and established companies have been replaced with small and medium size companies lacking in management, financial viability and necessary experience to takeup sizable prestigious projects of national importance whereas in the period of seventies, Pakistani companies executed large projects in Middle East and Gulf after obtaining these projects in International competition. The new housing policy (2001) by current government has proved to be a catalyst for sustainable growth in construction industry in recent years. Table 6-1 Housing Units by Tenure (In million)3 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

Economic Survey of Pakistan 2004 Source: Population and Housing Census 1998 7

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6. 2

Target Customers

The target customers are the general public of upper-middle income group. 6. 3 Trade Statistics

A brief overview of major industry segments is as below. Table 6-2 Total Number of Construction Companies4 242 Numbers No limit 127 Numbers Upto Rs 100 million 900 Numbers 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

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

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.

Source: Pakistan Board of Investment 8

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7. 1

Production Process Flow

The production process includes the following steps. 7. 2 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 Paints and electrification 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 7. 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. 7. 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
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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. 7. 5 Recommended House Layout

For a 5 Marla house following layout is recommended, (front 25 feet X length 45 feet ) Ground Floor 2 bedrooms (13X12 ft) + attached bathrooms (5X5 ft) 1 kitchen (6X8 ft) A car porch (15X10 ft) 1 TV Lounge (13X10 + 2X8 ft) 1 Drawing Room (11X13 ft) Vacant Space (5 ft on front and 5 ft at back) 1st Floor 2 bedrooms (13X12 ft) + attached bathrooms (5X5 ft) 1 store (6X8 ft) A stair room (10X10 ft) 1 TV Lounge (13X10 + 2X8 ft) 1 Living Room (7X13 ft) Tarries (5 Feet) Doors and Windows Windows 7 (4.5X4.5) Windows 4 (2X2) Front Door 1 (7X4) Room Doors 13 (7X3) 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 (11X12.5 ft) + attached bathrooms (7X7 ft) 1 kitchen (15X5 ft) 1 Store (10X7) A car porch (15X10 ft) 1 TV Lounge (17X10) 1 Drawing Room (15X13 ft)
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Vacant Space (7 ft on front and 7 ft at back) 1st Floor 2 bedrooms (11X12.5 ft) + attached bathrooms (7X7 ft) 1 store (10X7 ft) 1 kitchen (15X5 ft) A stair room (10X10 ft) 1 TV Lounge (17X10) 1 Living Room (10X13 ft) Tarries (5 Feet) Doors and Windows Windows 7 (4.5X4.5) Windows 4 (2X2) Front Door 1 (7X4) Room Doors 13 (7X3) Bathroom Doors 4 (7X2.25) For a 10 Marla house following layout is recommended, (front 35 feet X length 65 feet) Ground Floor 2 bedrooms (14X14 ft) + attached bathrooms (7X7 ft) 1 kitchen (15X10 ft) 1 store (14X10 ft) A car porch (15X10 ft) 1 TV Lounge (14X20 ft) 1 Drawing Room (20X15 ft) Vacant Space (10 ft on front and 7 ft at back 5 ft Galley) 1st Floor 2 bedrooms (14X14 ft) + attached bathrooms (7X7 ft) 1 store (14X10 ft) 1 kitchen (15X10 ft) A stair room (10X10 ft) 1 TV Lounge (14X20 ft) 1 Living Room (15X15 ft) Tarries (5 Feet) Doors and Windows
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Windows 13 (4.5X4.5) Windows 4 (2X2) Front Door 1 (7X4) Room Doors 15 (7X3) Bathroom Doors 4 (7X2.25)

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8. 1

LAND & BUILDING REQUIREMENT


Covered Area Requirement

The required space for office is 400 Sq. Feet office 8. 2 Rent Cost

The Rent Cost for office will be Rs. 12,000 per month. 8. 3 Recommended Mode

It is recommended to rent an office on the preferred. 8. 4 Utilities Requirement

Electricity and two phone lines will be required in office. 8. 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.

HUMAN RESOURCE REQUIREMENT


Number 1 1 1 1 2 1 Salaries / Month 55,000 18,000 22,000 15,000 4,500 5,000

Designation Manager Accounts Officer Diploma Engineer Drafts man Office Boy Security Guards

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10 FINANCIAL ANALYSIS
10. 1 Project Costs Cost 61,400 25,000 50,000 25,000 161,400 70,000 72,000 303,400 6,600,000 6,903,400

Office Equipment Furniture & Fixture Air Conditioner Computers Printer Sub Total Preliminary Expenses Preoperational Expenses Total Working Capital Required Total Project Cost

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10. 2

Projected Income Statement


PKR (ooo) Year - I Year - II 28,600 16,612 16,612 11,988 1,933 286 9,769 362 9,406 3,167 6,239 2,534 8,773 Year - III 56,108 29,334 29,334 26,774 2,120 561 24,092 266 23,827 8,214 15,612 8,773 24,386 Year - IV 88,759 42,284 42,284 46,475 2,327 888 43,261 169 43,092 14,957 28,135 24,386 52,520 Year - V 126,811 55,423 55,423 71,388 3,257 1,268 66,863 72 66,790 23,252 43,539 52,520 96,059 Year - VI 210,152 84,840 84,840 125,312 3,564 2,102 119,646 119,646 41,751 77,895 96,059 173,953 Year - VII 351,392 131,380 131,380 220,012 3,918 3,514 212,580 212,580 74,278 138,302 173,953 312,255 Year - VIII 456,809 158,703 158,703 298,106 4,308 4,568 289,230 289,230 101,105 188,124 312,255 500,380 Year - IX 792,890 257,624 257,624 535,266 4,737 7,929 522,600 522,600 182,785 339,815 500,380 840,195 Year - X 1,030,757 313,250 313,250 717,507 5,209 10,308 701,990 701,990 245,571 456,418 840,195 1,296,613

Sales/Revenue Cost of Sales: Add opening stock Operating expenses Less closing stock

17,000 10,900 10,900

Gross Profit Operating Expenses: Administrative Expenses Marketing Expenses Operating Profit Financial Charges Profit before Taxation
Taxation

6,100 1,765 170 4,166 459 3,707 1,172 2,534 2,534

Profit after Taxation Acc. Profit b/f Un-appropriated Profit c/f

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10. 3

Projected Balance Sheet

Year - 0 Tangible Fixed Assets Preliminary Expenses Current Assets: Cash in Hand / Bank 161 70 6,600 6,672 6,903 Owners Equity: Capital Accumulated Profit Long Term Loan Current Liabilities: Current Portion of Long Term Loan Tax provision Accounts Payable 3,452 3,452

Year - I 138 56 9,726 9,726 9,920 3,452 2,534 2071

Year - II 118 42 17,303 17,303 17,463 3,452 8,773 1381

Year - III 101 28 37,303 37,303 37,432 3,452 24,386 690

Year - IV 87 14 71,518 71,518 71,619 3,452 52,520 -

Year - V 76 122,686 122,686 122,762 3,452 96,059 -

Year - VI 66 219,091 219,091 219,156 3,452 173,953 -

Year - VII 57 389,928 389,928 389,985 3,452 312,255 -

Year - VIII 50 604,887 604,887 604,937 3,452 500,380 -

Year - IX 44 1,026,388 1,026,388 1,026,431 3,452 840,195 -

PKR (ooo) Year - X 38 1,545,598 1,545,598 1,545,636 3,452 1,296,613 -

6,903

690 1,172 1,863 9,920

690 3,167 3,858 17,463

690 8,214 8,905 37,432

690 14,957 15,647 71,619

23,252 23,252 122,762

41,751 41,751 219,156

74,278 74,278 389,985

101,105 101,105 604,937

182,785 182,785 1,026,431

245,571 245,571 1,545,636

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10. 4

Projected Cash Flow Statement


PKR (ooo) Year 0 Year 1 4,166 14
24

Year 2 9,769 14
20

Year 3 24,092 14
17

Year 4 43,261 14
14

Year 5 66,863 14
12

Year 6 119,646 10

Year 7 212,580 9

Year 8 289,230 7

Year 9 522,600 6

Year 10 701,990 5

Profit before Financial Charges & Taxation Amortization Depreciation Working Capital Change Cash form other Sources Owners Bank Finance Total Sources Fixed Assets Preliminary Expenses Preoperational Expenses Working Capital Re -Payment of Loan Tax
Cash Increase/(Decrease)

3,452 3,452 6,903 6903 161 70 72 6,600 6,903 6,600 6,600 6,600

4,203 72 4275 1,149 1,149 3,126 6,600 9,726 9,726

9,803 0 9803 -

24,123 0 24123 -

43,289 0 43289 -

66,888 0 66888 -

119,656 0 119656 -

212,588 0 212588 -

289,237 0 289237 -

522,606 0 522606 -

701,995 0 701995 -

Opening Balance Closing Balance

1,053 1,172 2,225 7,578 9,726 17,303 17,303

956 3,167 4,123 20,000 17,303 37,303 37,303

859 8,214 9,074 34,215 37,303 71,518 71,518

763 14,957 15,720 51,168 71,518 122,686 122,686

23,252 23,252 96,404 122,686 219,091 219,091

41,751 41,751 170,837 219,091 389,928 389,928

74,278 74,278 214,959 389,928 604,887 604,887

101,105 101,105 421,501 604,887 1,026,388 1,026,388

182,785 182,785 519,210 1,026,388 1,545,598 1,545,598

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10. 5

Cost of Sales
Rupees Year - I Year - II
9,218,750 5,023,335 2,085,875 119,000 164,736 16,611,696

Year - III
17,460,938 8,154,354 3,371,242 166,600 181,210 29,334,342

Year - IV
26,757,813 10,718,931 4,417,323 190,400 199,331 42,283,797

Year - V
36,560,059 13,047,476 5,382,105 214,200 219,264 55,423,103

Year - VI
58,822,632 18,072,544 7,442,086 261,800 241,190 84,840,252

Year - VII
94,795,227 25,492,698 10,493,133 333,200 265,309 131,379,567

Year - VIII
118,494,034 28,041,968 11,542,446 333,200 291,840 158,703,488

Year - IX
199,377,537 40,749,656 16,747,645 428,400 321,024 257,624,262

Year - X
249,221,921 44,824,622 18,422,410 428,400 353,126 313,250,479

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

5,600,000 3,570,799 1,484,000 95,200 149,760 10,899,759

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11 KEY ASSUMPTIONS
Table 11-1 Operating Assumptions 4 3 1 0 Rs. 4000000 5000000 7200000 30% 10 50% 50% 14% 5 2 5 1st Year construction (No. of houses) 5 Marla 7 Marla 10 Marla Table 11-2 Revenue Assumptions Sales prices 5 Marla 7 Marla 10 Marla Sales price growth rate Table 11-3 Financial Assumptions Project life (Years) Debt Equity Interest rate on long term debt Debt tenure (Years) No. of installments in a year Amortization (years) Table 11-4 Material Requirement Assumptions Estimated Requirement 20 / sq ft 1 Truck/ 167 Sq. ft 0.6 Cubic feet / sq ft 1.35 kg / sq ft 1 Bag / 3.07 sq ft 1 Trolley / 87 sq ft 2500 for 5 Marla; 3000 for 7 Marla and 5000 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 140 sq ft for 5 Marla; 140 sq ft for 7 Marla and 250 sq ft for 10 Marla House 12 sheets for 5 Marla House; 16 Sheets for 7 Marla and 18
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Materials Bricks Sand Crush Steel Cement Mud Tiles on roof Tiles (for front) Grills Glass Lamination

Pre Feasibility Study

Housing Construction Company

Chip Board Ply Wood

sheets for 10 Marla House 66 sheets for 5 Marla House; 74 Sheets for 7 Marla and 74 sheets for 10 Marla House 12 sheets for 5 Marla House; 17 Sheets for 7 Marla and 19 sheets for 10 Marla House 242 Sq ft for 5 Marla; 296 Sq ft for 7 Marla and 296 Sq ft for 10 Marla House Material cost Assumptions5 Material Rs 2400 1600 20 30 230 500 1800 150 150 30 425 35 450 50 80 15 1025 700 210 Price Unit Thousand Truck (350 cub ft) Cubic ft Kg Bag Trolley Thousand Sq ft Sq ft Sq ft Sq m Sq ft Sq m Sq ft Sq ft Sq Ft Sheet Sheet Sheet

Table 11-5

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 Wood Lamination Chipboard Ply

Prices provided by: Khokar & Sons, Main Walton Road, Lahore. 0300-8866904

19 PREF-80/Feb, 2005/Rev1

Pre Feasibility Study

Housing Construction Company

Table 11-6

Labour cost Assumptions Rate 125 9 9 17 35000 4500 3 Basis of Pricing Sq ft Sq ft Sq ft Sq ft 5 Marla house Month Sq ft Rs. 250,000 25% Rs. 25,000 10%

Category Civil work Electrification Sanitation Paint Carpenter Guard Glass Work Table 11-7 Expense Assumptions Land Price per Marla Land Price growth rate Fees for land Material, Labour growth rate

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