AMITY

UNIVERSITY
Building Construction - III
Module 1- Project feasibility techniques
Instructor : Ar. Prerna Sharma
Assistant Professor
Amity School of Architecture and Planning
YES NO
Content of lecture
• What is feasibility study?
• Why feasibility study?
• When to do feasibility study?
• Dimensions of feasibility study
✓ Project Brief
✓ Market analysis
✓ Technical analysis
✓ Financial analysis
✓ Economic analysis
✓ Ecological analysis
✓ Legal and administrative analysis
What is Feasibility Study
It is the viability of an idea

Analysis of all possible solutions to

a problem and a recommendation
on the best solution to use
Formal study to decide what type
of system can be developed in
best the needs of the organization

Process for determining the viability of

a proposed initiative or service and
providing a framework and direction
for its development and delivery
Project Feasibility Study

It is a document containing a detailed

description of the project, followed by a set
of different feasibility areas
Why Feasibility Study

Identifies a To find a cost Enhance the To find out the

valid reason effective solution success rate by probable market
to undertake from a business evaluating multiple for the products
the project perspective parameters

To find out the To determine the To show the contributions

opportunities and probable cost of the project can offer to the
threats for the operating the project society
project
Benefits Feasibility Study
Narrows
down the
business
alternatives

Aids decision-
Gives focus to
making on the Feasibility Study
project team
project

Enhances the
success rate
When to do Feasibility Study

Before submitting
the response to
Before the
the Proposal / Bid
initiation of the
/ Quotation /
Project
Tender Notice of
the project

While deciding to
make or buy the
product, services,
and results
When to do Feasibility Study

Reference: Code of Practice for Project Management for Construction and Development
Dimensions of Feasibility Study

Market Technical
Project Brief
analysis analysis

Financial Economic Ecological

analysis analysis analysis

Legal and
administrative
analysis
Project Brief

The formulation of the brief for the project is an interactive

process involving most members of the design team and
appropriate representatives of the client organization.

Role of Project Manager

To manage the process Obtaining client’s decisions Obtaining the client’s approval.
and resolving conflicts
Market Analysis

• Market research is the systematic

gathering, recording and analyzing of data
about problems relating to the marketing of
goods and services.

• Market research is the means to keep in

touch with the needs and wants of those
who buy these goods and services.
Marketing Questions
✓ What is the market
✓ Who are the competitors
✓ Who is the target audience
✓ What do customers want
✓ What do competitors offer
✓ What is your USP
✓ What do customers think you offer them
Methods of Market Research
Personal interview

Telephone interview
Field research
Postal surveys

Purchase survey
Methods

Internal sources- sales figures, accounting

records, customers’ comments and complaints,
sales representatives’ reports

Desk research Online research

Printed research
Financial Analysis
• Financial analysis is the process of evaluating businesses, projects, budgets, and
other finance-related transactions to determine their performance and suitability.
• Financial analysis is used to analyze whether an entity is stable, solvent, liquid, or
profitable enough to warrant a monetary investment.

Methods

Time value Payback Internal rate Benefit cost

of money period of return ratio
Financial Analysis- Time value of Money
The time value of money is a basic financial concept that holds that money in the
present is worth more than the same sum of money to be received in the future. It
is also called as Net Present Value (NPV).

How the Time Value of Money Works

1 Lac Now 1 Lac 10K 1 year later

Which pay option should you take?

Financial Analysis- Time value of Money

Where:
FV = the future value of money
PV = the present value
i = the interest rate or other return that can be earned on the money
t = the number of years to take into consideration
n = the number of compounding periods of interest per year

Lets say you have INR 5,000 and can expect to earn 5% interest on that sum each year
for the next two years. Assuming the interest is only compounded annually, the future
value of your 5,000 today can be calculated as follows:
FV = 5,000 x (1 + (5% / 1) ^ (1 x 2) = 5,512.50
Financial Analysis- Time value of Money
Financial Analysis- Payback Period
• The payback period is the cost of the investment divided by the
annual cash flow.
• The shorter the payback, the more desirable the investment. Conversely,
the longer the payback, the less desirable it is.

For example, if solar panels cost $5,000 to install and the savings are $100 each
month, it would take 4.2 years to reach the payback period.
Financial Analysis- Internal Rate of Return
The internal rate of return (IRR) rule is a guideline for deciding whether to proceed with a
project or investment. The internal rate of return is the interest percentage that company
has to achieve in order to break even on its investment in new capital.

10%

1 lac today 10,000 every year Rate of return

Financial Analysis- Internal Rate of Return

??
1 lac today Not consistent Rate of return
Not for ever Internal Rate of
return
Financial Analysis- Internal Rate of Return

You decide to construct a 10 Crore investment in 1 year to complete 2nd year cash flow starts
commercial project in 2020 2020

4th year completely sold out

Financial Analysis- Internal Rate of Return

Shortcomings

Does not take into

No contingencies Economies of scale
account the change
considered ignored
in cash flow
Technical Analysis
Technical feasibility is one of the first studies that must be conducted after a project has
been identified.

To ensure that the project is technically feasible in the sense that

all the inputs required to set up the project are available.
Purpose

To facilitate the most optimal formulation of the project in terms

of technology, size, location and so on.

Choose best alternative

Technical Analysis- Factors

Location Plant size Technology Machinery and

equipment

Environment Manpower
Infrastructure
impact
facilities
Economic Analysis
Project economic analysis aims to
ensure that scarce resources are
allocated efficiently, and investment
brings benefits to a country and
raises the welfare of its citizens
Ecological Analysis
Ecological analysis should be done particularly for those projects which have significant
ecological implications like power plants and irrigation schemes and environmental-
polluting industries

What is the likely damage caused

What is the cost of restoration measures

required
Ecological Analysis

What is the likely damage caused

Can it be restored

What is the cost of restoration measures

required
Legal and administrative analysis
• A measure of how well a solution can be implemented within existing legal/contractual
obligations.
• It includes study concerning contracts, liability, violations and legal approvals.

Copyrights or Legal requirements for Antitrust laws

patent laws financial reporting

Labor relations and Safety regulation National data and

regulations work laws