Project Proposal for the construction of Mixed use Building

Project to Be implemented in Oromia Region west Arsi Zone Arsi negele

town

Promoter:- wr/ _________________________

May 27, 2013

Addis Ababa
Executive Summary
1. Project name: Mixed use Building
2. project Type : Multipurpose service business building
3. Nationality: Ethiopian
4. Project Owner: wr/ _________________
5. Project location: oromia region West Arsi zone Arsi negele town
6. Project composition: multipurpose Building (G+3) used for diverse
business centers like banking & insurance, super market, shopes,
restaurant, café, beauty salon, Pharmacy, bed rooms and offices.
7. Primeses Required: 360 m2
8. Total investment Cost: 5,000,000 ETB is required from this
amount 30% or 1,584,480.5 ETB from owner equity and the rest
70% from bank loan.
9. Employment opportunity: 26 individuals on permanent 80 on
casual basis
10. Social and Economic Benefit: provide better Building service,
employment opportunities, generation of income and benefits for
the local people.
 1. Introduction
1.1. General Background
The current fast and dynamic economic growth of Ethiopia especially in
urban area necessitates equivalent growth of building and construction
sector. The sector should expand rapidly to support the overall economic
development sustainable.
In the building sector of the economy, the multi- purpose in the one
becoming rapidly expanding in urban areas of the nation since dynamic
economic development of urban economy requires the construction of
these buildings in towns to support the growing of business service
sectors like supermarkets, Beauty salon, shops, offices cinemas,
Computer Center, Cafeterias, restaurant, assembly hall, guest house and
other activities. In this regard, mixed used building expands in the all
parts of the country.
Investment and property development play an important role in any
emerging markets or economies. Property generally comprises residervial
houses and commercial real estate property (mainly mixed us building)
developed for rental business and sale. The property investment market
in Ethiopia remained under developed for several years. As a
consequence, the supply of residential houses and non-residential real
estate that can be used for residence, office space, shopping malls and
catering services in the urban centers of the country is
disproportionately low to cope with the growing demand in the country
spinning from the average growth in GDP of 5.5 percent over the last ten
years and population increase. The relatively good performance of the
macro-economy (real growth in GDP, low inflation rate and growth in
investment and export sector) has stimulated unprecedented investment
growth in the property sector over the last five years. The growth of
investment in the property market over the last five years in consistent
with the global experience suggesting that investment in the residential
and commercial property (real estate) is greatly influenced by the
performance of the macroeconomic conditions. In general, a stable
macroeconomic condition leads to economic and business growth and
develops investors’ confidence. This certainly spurs large demand in the
property market for office space, shopping malls, catering services,
apartment and residential houses. Following growing demand trends,
and with the expectation of high return on their investment capital, large
number of land developers pooled their financial resources and invested
in the property market.
To this effect, the owner of the envisioned Mixed Use Building W/r
____________ who has been living for long time in this town, planned to
construct in Arsi Negele town and undertaken this project study to check
the market, technical and financial feasibility of this project. The
promoter is very ambitious and committed to realize the project. Hence,
she expects to get the necessary support from the city administration to
make the project to be operational.
Looking at the past trends and permits issues by the Government to the
construction of real estate properties including the mixed use building in
the major urban areas of the country specially in Addis Ababa one can
easily conclude that the momentum is more likely to continue.
Besides, the government polices and incentives for the private sector
investment are very promising that motivates the promoter to engaged in
mixed use building business.

1.2. objective of the project

The major goal of this project is to contribute towards the growth of the
trade sector in Arsi Negele town. Its specific objectives include the
following.
 To construct and develop modern shops, offices, and restaurant,
bedroom & cafeteria facilities that enable to provide standard services
to visitors.
 To undertake trading and other refuted business activities that enable
to generate a reasonable to the invested capital.
 To develop modern business centre that would provide services of
international standard in order to attract foreign visitors and thereby
contribute to wards the generation of hard currency for the country.
 To create employment opportunities for the population in the town
and
 Contribute towards the beautification of the town through the
construction of modern building infrastructure and facilities.

1.3. Project description

The long-term goal of the project is become the best choice in Arsi negele
and its surrounding areas by creating a differentiated experience
capitalizing on personal service. The proposed project will have a total
area of 300m2, designed to reader a multipurpose giving business, which
will in turn plays significant role towards solving shortage of business
center in Arsi negele town.
The historical nature of the town as business unique location in one of
the most attractive parts of the occurrence of the town along the along
the Ethiopian Rift Valley lakes laid a fertile ground for future promising
growth of the town. The owner plans the project to render banking and
insurance, shopping facility, bank and cafeteria services to create high
quality class to satisfy the interest of customers in the town. Based on
environmental and other considerations, the entrepreneur has
determined the type and size of the building which is already determined
by the site; conceptual planning and preliminary analysis have been
carried out by analysts.
In order to attract its clients to the service, the project will develop high
standard shop & banking rooms and office of best choices and will also
save best quality restaurant and café, national and international dish
and various types of soft drinks.

1.4. Project Rationale

Internationally the economic growth this country is experiencing, the
good governance created and even if the town is in its nascent stage of
development these project are the first in kind in the town are feasible
and would be a model development in promoting and attracting different
urban investments.
In order to respond to the created environment the town is in need of
major, basic and feasible urban projects to be developed.
The existing promising investment opportunities, the demands of service
needs along with relatively sound investment support made by the
government in such kinds of feasible projects, compelled the project
promoter to initiate the multipurpose oriented business project to be
established. Despite the promising business opportunities of the town,
the trend on such kinds of investment found to minimal. Since there is
no such kind of modern tourist facilities and business station in the
town to accommodate the existing demand of these services in the town
and the surrounding areas. The mismatch between the demand for and
supply of such kind of services in easily observed in the town.
Therefore, the existing shortage or absence in the supply of these
services, along with its commercial and administrative access, better
location and infrastructure access, escalating trend of urbanization and
business activities, thus it is with such reason that this project is
identified and proposed and assumed to be more profitable.
In general, the country’s decentralized state based economy, privatized
and free market economy; good governance creates a favorable
environment for the development of investment for private investors.

1.5. the significance of the project

The envisaged project deemed to add to the economic development of the
nation in general and zone and town in specific with following ways:

A. Source of Revenue
As public policy of any nation, the government collects different forms of
taxes from different business organizations and individuals. Among the
different forms of taxes, business income taxes, payroll income tax and
VAT are collected from undertaking business activities. Therefore, the
building will serve as sources of revenue for the town as well as for the
region.

B. Employment opportunity
One of the problems that our country faced is unemployment. Therefore,
the current objective of the government is working on tackling the
problem of unemployment and fostering the development process either
through creating self employment or employment in other organization.
Hence, this project will hire 26 individuals and more than eighty
individual during construction.

C. Sources of social service

In addition to serving as a source of employment and income for the
region, the project renders social services for different group of people.
Hence, it Is also provide the following services;
 Serve as a source of mental satisfaction for the different users,
 Since, the center encompasses different recreational areas; it will
divert the attention of the users from different evil deeds.
 It deemed to minimize the demand for shops and other bundles of
services in the area.
Furthermore, it serves as the pilot experience and ground for other
investor to enter in to such kinds of urban development. It also
contributes on the efforts made on as a character given building for
physical development pattern of the townscape.

1.6. Project Location

As aforementioned on the introductory part the envisioned project is
intended to be located in West Arsi zone Arsi Negele town at about 225
km from Addis Ababa to the south. West Arsi zone is located
approximately at a distance of 250 km from finfine. It is located in the
Rift Valley Region. The zone extends from 6012’29’’ to 7o42’55’’ latitude
and 38004’04’’ to 39056’08’’ longitude. It shares boundary line with East
shewa zone to north, SNNPRS to the west, Arsi zone to the northeast,
guji to the south and bale Zone to the East. Most part of the zone has
elevation of ranging from 1500 to over 2300m. shashemene town is the
administrative centre of the zone.
Arsi Negelle town is one of the west Arsi zone political administrations.
The town has a longitude and latitude of 7 o21’N 38o42’E/7.35oN 38.7oE
and an elevation of 2043 meters above sea level. It is the administrative
center of Arsi Negele woreda. The town is selected because of
geographical proximity of the town for rift valley lakes like langano, shala
and Abijata. Nagele Arsi has had electrical power since the 1950s, as well
as telephone and posta service by 1967. The town’s economic catchment
extends beyond the woreda attracting peasants from kofele, shashemene
and Kore woredas who trade cereal and potatoes for cattle and seeds at
the weekly market.
 2. The market Study
2.1. market Analysis
There are a number of factors which affects the demand of standardized
mixed use building. Of these factors, the most important to have
influence is population growth and the level of income. The currently
expanding coffee processing industry in the town and around the town
has been inviting skilled and unskilled labor forces to the town; in
addition, the number of both government and non government offices
has been increasing. Above all the increase in the number of population
of the town increases for the provision of different services. Nowadays,
most of the private business organizations need their own small-medium
offices in order to give their services and provide their products, and they
prefer the place that found in the center of the town or close to the road.
As clearly indicated in the introductory part of this proposal. Arsi negele
in the dynamically growing town of West Arsi zone. Though the market
demand gap for mixed use building in Arsi negele is not clearly
understand there is wider gap for such demand as many merchants,
organizations are flouring to the town every day. From prior business
experiences, the demand of mixed use building in arsi negele is very high
and hence the demand and the supply gap is very wide.

2.2. the Demand-Supply Gap

Arsi negele town is situated in very centre of Ethiopian Areke production
area which is highly known for its alcoholic content and special flavor.
These days Arsi negele Areke is brand name like South African wine. Arsi
negele town is also a major business center and commercial route that
attracts thousands of business travelers. These are also the most
important groups of potential customers that include both the local and
foreign tourists and the modern business community who choose
services that range from economic to high class standards. These groups
would also choose a healthy comfortable climate that combines a more
traditional type with that of modern shops, offices, bedrooms restaurants
and cafeterias. Even though when compared with similar zonal towns in
the region Arsi Negele seems to have no developed mixed use building,
the existing supply is far behind the growing demand for standard
service. Hence, the project will solve the serous demand problem in the
town.
Over the last decade, there has been a significant growth in the number
of local and international trades across the country. This increase is
mainly associated with the stimulation of economic activist and partly
due to an increase in the flow of international and local traders in to the
town. Since Arsi negele is an important commercial center in addition
there is a significant increase in business activates and hence increasing
the number of traders to the town. Even though there is a lack of
quantitative estimates that number of traders to the town. Even though
there is a lack of quantitative estimates that depict the actual demand
and also the annual growth rate Hotel facilities and urban commercial
facilities are scarce in the city. So far in the town there is no development
of such kind standard building and it is the first of its kind in the town
and will promote other investors from the town and the surrounding
areas. They are mostly villa type premises modified as show rooms and
sailing posits. As a result there is a large gap between the developed and
that of the supply for modern bed rooms; Bank and cafeteria
accommodation hence this project would not face any problem of
demand scarcity for it business centre and it would provide good service
to customers.

2.3. Current supply of Mixed use building

Commercial building/office sector has shown a dynamic change in the
past few years. The reason for this could be rapid economic growth and a
supporting public infrastructural development. Other factors relevant in
the specific case of commercial buildings are the large increases in
national and international businesses, particularly firms in the services
sector.
The business of multipurpose buildings in Arsi negele in booming highly
due to the recent rapid growth experienced in Ethiopia. As a result, a
good number of local and international organizational are coming in
place. Government offices which used to operate in limited spaces all
over the city are also concentrating on leasing new and modern
buildings. Increasing numbers of international organization and NGOs
which in the past had typically converted residences into office space are
now moving towards renting whole floors or even multiple floors in
modern city-center commercial buildings.

2.4. Future market or Demand of commercial Building rental

The demand for office space is a derived demand because firms rent
space as an input to the production of services or goods they provide to
businesses and households in the local regional or national economy.
Following our survey of office space users in Arsi negele are mainly firms
providing banking, cafeteria and restaurants, bed room, supermarkets
service, computer Center Crevice. The different customers for commercial
buildings also include shops and offices that are currently renting out to
provide their goods and services.
Future demand for office space is actually driven from growth in number
of offices in the city which in turn is influenced by the macro-economic
growth in the country. Following the government five year growth and
transformation plan (GTP), the Ethiopian economy is expected to
increase by 11% for base case scenario and 14% under the optimistic
case scenario.
Assuming that demand for office space is directly related to the growth in
the economy, the forecast for office space demand is shown in the
following table;

Table: Office Space Demand Forecast

Office space demand Office space demand under
under base case economic high case economic
Years Growth Growth
2010/2011 9,916,543 11,304,859
2011/2012 11,007,363 12,057,416
2012/2013 12,218,173 12,953,878
2013/2014 13,562,173 13,963,577
2014/2015 15,054,011 14,554,534
2015/2016 16,709,952 14,987,431
Source: G Two estimation based on GTP’s forecasted Ethiopian Economic
Growth

2.5. Target customers

The target customers of this envisaged project include:-
1. business Community
2. Nearby business organization
3. the government bureau
4. small accounts(SOHO) SME
5. Nongovernmental organizations
 2.6. marketing promotion and strategy
In order to penetrate and gain considerable market share, one of the
major marketing strategies for the project is consistently rendering
quality service to its tenants. Due emphasis must be placed on improving
quality of service and facilities. The major marketing strategies to
promote the project and gain considerable market share include:
 Advertising through different means focusing on the existing
service and facilities
 Promote in association to the key location and nearby business
 Working on sustained promotional work.
 Working on public relations to reach and influence key personas
and organization with a capacity of making decision.
 Keeping the quality of its service/ facilities and consistently
improving with changing situations.
 Seasonal discount pricing different others customer centric
marketing strategies will be used by the company.

2.7. competition
there are different forms of competition that may face the envisaged
mixed use building. These are price and non price based competition.
Moreover, there are different competitors that will compete with the
project either directly or indirectly. But the mixed use building under
discussion has diversified marketing strategies that could enable it cope
up with the different competitors in the market. Moreover it will
frequently conduct competitors research which focuses on, the strength
and the weaknesses, the different competitors’ strategies, the techniques
they use in rendering the service, their customer handling methods, and
others. Generally the project has many other projects all over Ethiopia
which compete with it.
 2.8. the project facilities and Services plan
In order to provide mixed use business center building services of a high
standard, it has been planned to construct and develop the
infrastructure and facilities that would viable to meet the requirements of
an international standard business center. Accordingly, various
buildings and facilities will be constructed phase by phase starting with
the most needed ones that are essential to commence the operation of its
business activities. With the completion of construction, the building will
provide a combined service such as shops, bedroom, restaurant and café
service as well as modern business center that primarily serve its guests
and major clients.

The plan is that the ground will be partitioned in to different rooms:

Building Description UOM Unit price in
Birr
Ground Supermarket, Pharmacy, Banking & M2
Insurance
1st floor Beauty salon, shop, Computer Center, M2
Cafeteria & Restaurant
2 floor Different governmental, NGO & other offices
nd
M2
3rd floor Bedrooms service M2
Parking Service Car
Total
Since the project will be engaged in mixed building the main sources of
its annual revenue would be from the rental of building spaces such as
shops, offices, and banking, café & restaurant bedrooms. Therefore, the
sources of revenue have been classified in to one category namely the
rental of banking & supermarket, offices, shops, bedrooms restaurant
and café based on these classifications. Based on the market price of
similar mixed use building in the area, the envisioned buildings set the
following fair price (Before VAT) for its service, hence when the building
construction fully get operational it is assumed to generate a yearly
income of ETB 2,675,000.
 3. Technical Study
3.1. description of the project Service/ Product mix
the envisioned mixed purpose building will provide different rental
services to the different customer groups for different purpose. The
building will have basement, ground and eight floors. The purpose of the
building explained as follows;
 the ground floor, first floor and second floor designed for different
business centers like banks, supermarket, beauty salon(man and
women), Computer center, pharmacy, internet café, boutiques,
different shops and other business activities,
 The third floor designed for bed room services.
Besides, the buildings will have enough parking facility for its customers
and green area in its compound.

3.2. land Use Plan

The total land required for the envisioned project is estimated to be
360m2 . the total area for the construction of the building will be 180m2,
as revealed below.

Table land utilization Plan

SN Description Land M2
Ground 1st 2nd 3rd
floor floor Floor
1 Building (G+3)
1.1 Basement 180
1.2 Ground 180
1.3 First floor 180
1.4 Second Floor 180
1.5 Third Floor 180
Parking & Green area 180
Total 360

3.3. Construction work and Technology

3.3.1. Construction schedule
The construction project is proposed to be started on august 2014, and
is expected to be finished on januare 2016. as seen in the abbreviated
construction schedule above, a majority of the schedule’s time is made
up of five major activities; Concrete, building Enclosur, masonry,
mechanical &HVAC and Electical install. Concrete activities include
processes such as placing foundations and slab on deck. The Building
Enclosure Phase includes erecting the scaffolding that will allow for
exterior sheathing installation and bricklaying.
Mechanical and Electrical install coincide with each other due to the
need for coordination between the two divisions. There are several
periods of construction during the schedule in which there are multiple
construction activities occurring at the same time.
The construction site must be organized accordingly as these processes
take place. As with any construction project, the goal of the scheduale
was to complete all construction activities before the required Date of
completion.
This date of completion is practical based on the time of year in which
the building will be completed. The team allowed a two week contingency
for any setbacks. Typically, winter construction tends to cause
unforeseen delays that negatively impact a construction project. These
conditions can and will almost undoubtedly impact the project schedule
by causing unforeseen delays and project inefficiency.
 3.3.2. Architectural Design & Layout
Although functional spaces for the project were laid out in
significant detail, the rest of the building had designated spaces but n set
layouts. It was at the discretion of the project promoter to devise typical
layouts for the non-detailed commercial and office spaces. To make sure
that the building’s layouts were practical, the project owner researched
typical architectural layouts for laboratory and executive office spaces.
The walls and partitions throughout the floor were congruent with
the structural frame and column locations.

3.3.3. Structural design

One of principle deliverables of our project is the structural design of the
building. The structural bays were coordinated wit the layout of the
building adjustments were made to the bays if specific layouts are
necessary. The frame was made up of a grid with repeating standard
structural bays. Included in the structural system are bay sizes, shape
and size of structural members, floor compositions and curtain walls.
These elements were established to resist gravity ad lateral loads as
appropriate.
The gravity load design was completed for two frames; one of structural
steel and one of reinforced concrete. The structural steel frame was
chosen for further design based on cost per square foot, local availability
of material and constructability considerations, such as erection and
fabrication. The steel system was then designed for lateral loading with
necessary adjustment being made to framing.
 3.3.4. Reinforced concrete
The project group prepared hand structural design calculations for a
typical bay of a reinforced concrete frame. In all reinforced concrete bay
designs, a superimposed dead load of 7.5 pounds per square foot was
assumed for mechanical equipment, floor coverings and ceilings.
Similarly, the design of the typical bay accounted for the use of different
commercial space, in which a live load of 125 pounds per square was
assumed. Loads were calculated based on the requirements of the
minimum Design loads for Buildings and other Structures.

3.3.5. Foundation Design

The design of a superstructure may be accurate, have considered all
possibilities and still fail because the substructure is incapable of
distributing the applied loads to the supporting soil.
Foundation design takes more into consideration than merely the loading
from the columns. While the main part of the project focused on the
structural frame and its alternate designs, a preliminary foundation plan
was designed based upon maximum load carried from the
superstructure through the columns. The foundation design conducted
by the project team consisted of the selection of foundation type,
determination of the bearing capacity and the design for typical interior
and exterior spread footings.

3.3.6. construction Plan and process

The project team developed a coordinated project schedule and
construction plans that would reflect the expectations for an actual
constructuoin project. The project schedule was developed using the
preliminary designs given to the project team.
Additionally, the group considered typical construction activities and
durations taken from similar construction projects as well as realistic
constraints on building development. For instance, it is necessary for the
structural frame to be completed before concrete can be placed for the
slab on deck. Hand drawn construction plans detailing site entrances
and storage areas were coordinated with the project schedule to give the
reader visualizations of the construction site set up through various
periods of the construction process.
The construction process for this project is normally a disjointed three
mages development by which the conceptualized need of the promoter of
this project is translated into a functional facility that will meet their
needs in terms of time, cost and quality.
Based on a general program of the project owners the consultant who is
going to be hired makes site studies, develops structural designs,
prepares drawings and specifications, determines quantities involved and
estimated the resultants costs. All these activities will be done in the first
phase of the project which is the design stage after the document are
produced by the designers have been received, and the works secured
the project is supposed to enter the tendering stage. At this stage
contractors study the project document analyze and subsequently
determine the construction methods, built up their unit rates and
submit their bids for the works. The promoter of this project intends to
compare the bids and award the contract for the lowest responsible
bidder. This, is of course, presupposes that the favorable proposal does
not exceed the allocated budget.
After the award is made and the contract signed between this project
owner and the contractor, the project constructor is expected to prepare
and submits a detailed construction program which includes material
schedule, manpower requirement and cash flow forecast.
After the award is made and the contract signed between this project
owner and the contractor, the project constructor is expected to prepare
and submits a detailed construction program which includes material
schedule, manpower requirement and cash flow forecast.

3.4. Utilities
A number of utilities world be put in place in order to ensure smooth
functioning of the project. These utilities include:
 Water Supply,
 Supplementary Electricity supply.
 Telephone line Internet Broadband
 Fuel, Oil and lubricant
 Drainage Facility

3.5. Project implementation

The project’s implementation is expected to take 24 months. The major
activities include Bank loan processing construction of the building,
cleaning the area around the building, Procurement of equipments and
start rendering services. The time schedule for the above matured major
activities is presented below:

Table: project Implementation schedule

SN Activities Date
1 Land request processing March – April, 2014
2 Land approval May, 2014
3 Bank loan processing June-July 2014
4 Site Development July 2014
5 Building and construction work August, 2014-December 2015
6 Preparation for service January, 2016
7 Service execution February, 2016
 4. Organizational Structure
4.1. Organization and management
The organizational structure should be in a way that the company able to
achieve its objectives as well as the satisfaction of standard requirement.
In addition to this, the structure should fit the dynamics of all customers
in the building ranging from small business to large tenants.

4.2. Man Power

The total manpower required for the building will be 26 persons. The
manpower list and the corresponding labor cost are shown in part five of
this document.

4.3. organizational Structure

The organizational structure of the project is designed by including all
the necessary personnel under the right division. At the top of the
organizational structure, there will be manager with the responsibility of
supervising the overall activity of the building. Depending up on the
nature of the center and the amount of work to be performs; there exist
auxiliary units under the general manager.
Employees under each unit will be supervised by the department head
that is accountable for the general manager. General manager is
appointed by owner.
 Owner

General
Manager

Building Marketing Technical and

Admin maintenance
manager

HRM and
finance IT, Electricity
and plumper

Cashie Purch
r aser

Fig: organization structure of the Building

As clearly shown in the organizational structure, the center organization
has one general manager and three main sections. Under the general
manager there are the, marketing Department, maintenance and
building administration department. Under building admin dept there
exist two sections i.e., HRM & finance and general service. Further sub
sections are also organized under technical and maintenance manager.
The following section deals with the duties and responsibilities of each
department.
A. The General Manager’s Duties and Responsibilities
 He/she will plan, organize, direct and control the overall activities of
the building.
 He/she will devise policies and strategies that will enable the center to
be profitable.
 He/she will incorporate modern technological innovation that will
facilitate the service delivery of the building to increase customer’s
satisfaction.
 He/she will plan, organize, direct and control the human and non-
human resources of the building so as to achieve the short and long
run objectives of the organization.

B. Building Administration Department

The building Administration Department of the multipurpose building
has two main sections (HRM and Finance and General Service section). It
has responsible for undertaking the following activities;
 Manage the human resources and control employee’s activity
 Well non human resources of the project, which include; effective
handling of the different resources of the building, and devise
strategies of controlling against fraud and damage.
 Will provide the right material or inventory to the center with right
price at the right time.
 Will plan, organize direct and control the financial transaction of
the building by using all the necessary documents.
 Accountant and casher that will collect money from the customers.
 Will develop sound financial control system by developing modern
financial control systems.
  Will prepare the annual financial statements and prepare
condensed reports for both the General manager and other
concerned government body.
 Follow the overall status of the business and provide maintenance
and repair services
C. The marketing Department
 Will handle the overall marketing activities of the organization
which include planning, organizing, directing, and controlling.
 Will develop the marketing strategies for future multipurpose
building development
 Will develop effective customer handling strategies.
 Execute the promotion methods.
D. Technical and maintenance manager
 Will handle the overall physical maintenance and related issues
 Will make sure electricity and back up is organized.
 Follow up security issues and educate tenants
 Works in collaboration with general service to make sure tenants
are well served

5. financial Requirement and Analysis

The financial resource is a prime resource for undertaking any activities.
Hence for implementing this mixed use building a total of 5,000,000 ETB
is required. From this 30% 1,584,480.5 birr will be covered by the
promoter of the project while the rest 70% will be covered through loan
from bank at the prevailing interest rate.
 Therefore the said amount of finance is needed for undertaking the
following.

5.1 fixed Investment

A. Land, Building & Construction
S.N Description of works Total Cost in birr
1 Building construction 3,060,990.00
2 Site Development 25,200.00
3 Design and supervision 120,000.00
4 1st Year land lease & (10%) down payment 26,239.5
Total 3,232,429.50

B. Building Machineries and Equipments

SN Description Measur Qty Unit cost Total cost in
ement in Birr Birr.
1 Generator Unit 1 120,000.00 120,000.00
2 Carpentry tool box Set 1 17,000.00 17,000.00
3 Electrician tools box Set 1 18,500.00 18,500.00
4 Plumber tools kit Set 1 12,300.00 12,300.00
5 Fire extinguisher Unit 10 6,000.00 60,000.00
(Security Equipment)
6 Total 227,800.00

C. Vehicle
SN Description UOM Qty Unit Cost Total cost in Remark
in Fr. Birr
1 Mini-Bus Unit 1 300,000.00 300,000.00 Duty Free
Total 300,000.00
 D. Office Equipments
SN Description Measurement Qty Unit cost Total cost
in birr in Birr
1 Managerial tables Unit 5.00 2,600.00 13,000.00
2 Managerial chairs Unit 5.00 1,950.00 9,750.00
3 Office table with chair Unit 7.00 1,350.00 9,450.00
4 Secretarial table with chairs Unit 1.00 1,450.00 1,450.00
5 Computer with chairs Unit 3.00 15,000.00 45,000.00
6 Shelf Unit 3,500.00 3,500.00
7 Filing cabinets Unit 1.00 1,500.00 1,500.00
8 Guest chairs Unit 1.00 900.00 4,500.00
9 Fax & Telephone machine Unit 5.00 1,300.00 1,300.00
10 Carpet and Curtain LS 1.00 23,000.00
Total 112,450.00
 5.2 Working Capital
5.2.1 Operating Expense at full Capacity2
a. salary Expense
SN Position No Qualification Monthly Annual
salary in salary in
Birr Birr
1 General manager 1 BA in management 300 36,000
2 Building admin 1 BA in Acct/Mgt 2500 30,000
3 Secretary 1 10+2 in secretariat science 900 10,800
4 HRM Officer 1 10+2 in HRM/Management 950 11,400
5 Technical and 1 Diploma in building 1500 18,000
maintenance manager maintenance
6 Finance head 1 BA in Accounting 2500 30,000
7 IT Technician 1 Diploma in computer 1150 13,800
science/IT
8 Marketer 1 Diploma in marketing 1150 13,800
9 Accountant 1 Diploma in accounting 1150 13,800
10 Guards/Security 4 Basic 500 24,000
11 General Service head 1 Diploma in Management 1500 18,000
12 Purchaser 1 Diploma in purchasing 1150 13,800
&Sup Mgt
13 Electrician 1 10+2 in general electricity 1000 12,000
14 Plumber 1 10+2 in general mechanic 1000 12,000
15 Casher 2 10+1 in bookkeeping 850 20,400
16 Cleaner 5 Unskilled 450 27,000
17 Maintenance officer 1 10+2 in General mechanic 1000 12,000
18 Driver 1 10 completed 850 10,200
Total 26 327,000
Benefit (20%) 65,400
Grand Total 392,400
5.2.2 Operating Expenses
SN List of Items Annual cost in birr Assumptions Used
1 Audit and legal fee 24,000.00 2000 br/per ,month
2 Stationery supplies 6,000.00 500 br/month
3 Promotional Cost 40,000.00 Lump sum annual cost
4 Property Insurance 84,009.00 1% of the building
5 Cleaning Supplies 10,800.00 900 br. Per month
6 Uniforms 1,670.00 180 per pes for 16 people
7 Water consumption 5,000.00 2500 m3 by 3.15 br
8 Electric consumption 6,000.00 20000KWH By Br.0.4736
9 Fuel 42,672.00 2032 lit per year by Br. 21
10 Oil & Iubricants 4,267.20 10% of fuel cost
11 Telephone & fax 18,000.00 1500 per month
12 Repair expense 72,018.00 2% of building cost
13 Miscellaneous costs 20,000.00 3000 per month
Total 334,436.20

5.2.3 Pre-service Expenses

SN Description Cost in birr
1 Project proposal 5,000.00
2 Licensing fee and others
Total 5,000.00

Summary of Total initial investment cost

SN Description Cost in Birr
1 Land, building & construction 3,232,429.50
2 Building machines & Equipments 227,800.00
3 Vehicle 300,000.00
4 Office Equipment 112,450.00
5 Total fixed investment cost 3,872,679.50
6 Salary expense 392,400.00
7 Operation Expense 334,436.20
8 Pre service Expense 5000.00
9 Total Working capital 731,836.00
10 Sub total 4,604,532.00
11 Contingency (10%) 460,453.20
Total initial investment capital 5,064,985.00
5.3 Financial analysis and Statements
5.3.1 Underlying Assumption
The financial analysis of the mixed use building is based on the data
provided in the preceding sections and the following assumptions.

A. construction and finance

construction period 2 Years
source of finance 30% equity and 70 loan
Bank interest rate 10%

B. depreciation
Building 10%
Building machincry and equipment 10%
Office Equipments 10%

5.3.2 sources of Fund

the source of fund to finance the project is planned to be from two sources. These are
promoter’s equty and bank loan. The loan is expected to be obtained from one of the
local lending institutions. Since the project is expected to take some times to repay all its
debts, the bank loan is assumed to obtain on long term credit basis. Taking the financial
position of the promoters into account, equity contribution and bank loan to finance the
total investment outlays of the project are assumbed to be 30% and 70% respectively.
Accordingly, the total financial requirement from the two sources will be;
SN Description Percentage share Amount
Owners Share 30% 1519495.5
Bank Loan 70% 3480504.5
Total 100% 5,000,000.00
 5.3.3 Bank loan Repayment Schedule
Year Principal Interest (10%) Total annual Remaining
Payment Payment in Balance
ETB
0 0 00 00 3545489.5
1 354548.95 354548.95 709097.9 3190940.55
2 354548.95 319094.005 673643.005 283691.6
3 354548.95 283639.16 63818.11 2481842.65
4 354548.95 248184.265 602733.215 2127293.7
5 354548.95 212729.37 567278.32 1772744.75
6 354548.95 177274.475 531823.425 1418195.8
7 354548.95 141819.58 496368.53 1063646.85
8 354548.95 106364.685 460913.635 709097.9
9 354548.95 70909.79 425458.74 354548.95
10 354548.95 35454.895 390003.845 0

5.3.4 Depreciation Schedule

SN Description Original Depreciatio Depreciation per
Value in Birr n rate in % year in Birr
1 Construction and Building 3,232,429.00 10 323,242.95
2 Bldg. machines & Equipments 227,800.00 10 22,780.00
3 Vehicle 300,000.00 5 60,000.00
4 Office Equipment 112,450.00 10 11,245.00
Total 3,872,679.00 417,267.95
 5.4 Finanical Statement
5.4.1 Income loss/statement
Project revenue and production costs are listed and compared to see
whether the project generate profits or not. Starting from first year of the
project operation, the project will generate a reasonable amount of net
profit for the owners throughout its life period. Profit and loss statement
shows that the project will generate net profit of ETB 387842 in the first
year and increase to ETB 1147790 starting from the third year of the
project life and hence it is found to be profitable.

Mixed use Building profit/Loss Statement

Revenue Year 1 Year 2 Year 3 and
after
Rental Income 1,785,000.00 2,380,000.00 2,975,000.00

Expenses
Salary Expense 235,440.00 313,920.00 392,400.00
Operating Expenses 200,661.06 267,548.08 334,436.20
Deprecation Building 323,242.95 323,242.95 323,242.95
Deprecation Bld. 22,780.00 22,780.00 22,780.00
Machineries and Equip.
Deprecation of Vehicle 60,000.00 60,000.00 60,000.00
Deprecation office Equip 11,245.00 11,245.00 11,245.00
Interest Expense3 354,548.95 319,094.055 177,274.475
Lease payment4 4,819.05 4,819.5 4,819.05
Total Expense 1,230,939.05 1,339,031.25 133,5298.65
Profit before Tax 554,061.00 1,040,968.75 1,639,701.35
Tax (30%) 166,218.03 312,290.625 491,910.405
Net profit 387,842.07 728,678.125 1,147,790.945

5.4.2 Cash flow Statement

Year Year 0 Year 1 Year 2 Year 3 and
 after
Equity Capital 1,519,495.5
Loan principal 3,545,489.5
Net sale 1,785,000 2,380,000 2,975,000
Total Cash in flow 5,064,985 1785000 2380000 2,975,000
Cash payment
Salary Expense 0 235,440 313920 392,400
Investment 3,872,679.50 0 0 0
Pre operating Expense 5,000 0 0 0
Operating Cost 0 200,661.6 267,548.8 334,436.20
Loan repayment3 0 709,097.9 673,643 531,823
Lease payment 0 4,819.5 4,819.5 4,819.5
Tax payment 0 166,218.0 312,290.625 491,910.405
Total payment 3,877,679.5 1316237.3 1,572,221.925 1,755,389.105
Cash surplus/ deficit 1,187,305.5 468762.7 807778.075 1219611
Cumulative cash flow -332190 136572.7 944350.775 3919350.775

5.5 Financial analysis

i. Profitability
According to the projected income statement, the building will start
generating profit in the 2nd year of operation. Important ration such as
profit to total sales, net profit to equity (Return on equity) and net profit
plus interest on total investment (return on total investment) show as
increasing trend during the lifetime of the project. The income statement
and the other indicators of profitability show that the project is viable.

ii. Pay-Back perios

The investment cost and income statement projection are used to project
the pay-back period. The building’s total investment will be fully
recovered at the 5.2 year of operation.

6. Environmental impact of the project

The EIA of the project activities was determined by identifying the
environmental aspects and then undertaking an environmental risk
assessment to determine the significant environmental aspects. The
environmental impact assessment has included all phases of the project
namely construction phase and operational phase.
The building has both positive and negative impact
Positive impact of the project

The positive impact of the project is:-

 Generation of employment opportunity
 Source income for the government through business income tax
 Income generation for the promoter
 Being exemplary for other investors who want to engage in the
same business line.
Negative impact of the project
The project has the following negative imacts:
1. noise and Dust emission during Construction
There are some noises during the construction due to the
construction operation and the company will use construct the
construction during the day time. Again there is the emission of
dust which will be mitigated by sprinkling water on the service.

2. problem on workers on construction

During construction there are some problems that will materialize on
workers. These are: damage on operation by using machines,
construction materials and others. To mitigate such impact the company
will provide safety insurance and safety equipments.

3. swages during operation

During operation there are some wastes emitting from the mixed use
building. These are wastes from the latrine and will be mitigated by using
modern waste treatment technology.
4.
7.
8.