Internship Project

On
“Financial Modeling and Analysis of 50 Flats Housing
Project in Gurgaon, Haryana INDIA”

A Summer Internship Project Report submitted in partial

fulfillment of the requirements for the award of the degree of
Post Graduate Diploma in Management
Submitted
by
P. Bala Sai Saroj Ram
Roll No: 2201194

Under the Guidance of

Dr. Mohsin Khan
IPE, Hyderabad

Institute of Public Enterprise

Hyderabad, Telangana, India-500101
(2022-2024)
 Declaration

I hereby declare that the work presented in the project titled "A Report on Financial
Modelling and Analysis of 50 Flats Housing Project in Gurgaon, Haryana IN", is a
Summer Internship Project Report submitted in partial fulfillment of the requirements
for the award of the degree of Post Graduate Diploma in Management, is an authentic
record of my work carried out during a period from 15th June 2022 to 15th August 2023
under the supervision of Dr. Mohsin Khan, mentor and faculty.

The information contained in this project work has not been submitted for the granting
of any other degree by this or any other Institute/University or by anyone else.

P. Bala Sai Saroj Ram

2201194
 ACKNOWLEDGMENT

It gives me great pleasure to express my admiration and gratitude to Dr. Mohsin Khan,
Asst Professor, Institute of Public Enterprise, for his wisdom, vision, expertise,
guidance, enthusiastic participation, and constant encouragement throughout the
planning and development of this research work. I'd also like to thank him for his
persistent efforts in going over and correcting the papers, which made this endeavor
feasible. Prof. S. Sreenivas Murthy, Director, IPE, and Dean of Academics and
Chairman Placements, IPE, as well as Dr. Y. Rama Krishna, Coordinator of PGDM,
IPE, for providing all the facilities, assistance, and encouragement required to
accomplish the research. I’d also like to offer my heartfelt gratitude to I am obliged to
my parents Sreenivas and Kusuma for their moral support, love, encouragement, and
blessings to complete this task.

I also would like to express my deep and sincere thanks to my industry mentor Kritika
Verma for their constructive suggestions, support, and encouragement.

I would also like to express my gratitude to Prof. A.S Kalyan Kumar, faculty and
SIP Coordinator, IPE, and other IPE, Hyderabad staff members for their prompt
assistance and cooperation throughout the Summer Internship Program.

Finally, I am indebted and grateful to the Almighty for helping me in this endeavor.

P. Bala Sai Saroj Ram

2201194
 Table of Contents

Chapter No Contents Page No

I Introduction 13

II Objective of the study 19

III Theoretical framework 26

IV Data Interpretation 32

V Feasibility Analysis 40

VI Conclusion & Bibliography 47

CHAPTER I

12
Introduction:

Executive summary

This report's objective is to emphasize the project's financial analysis and viability. I have
worked on the analysis and assessment of the viability of the real estate project in Gurugram,
Haryana, with the assistance of Vardhan Consulting Engineers (VCE). Since real estate has
shown to be a true development engine. With agriculture being India's second largest
employment, the real estate business has evolved to be a key engine of economic growth.
India's lack of infrastructure, which is essential for increased productivity across all sectors of
the economy, negatively impacts its ability to compete on a global scale.

The Eleventh Plan's goal investment, however, presents a few unique obstacles. These are
related to both a lack of financial resources and a lack of government capacity to carry out
these ambitious programs. In India, funding for infrastructure projects is increasingly limited
by the government's budget. Public-private partnerships (PPPs) have become a feasible
alternative in this situation for funding infrastructure requirements.

The developments in PPP finance draw attention to a few problems that have repercussions
for funding the extensive PPP program that the Indian government has in mind. It is uncertain
how long PPPs will be able to sustain their heavy reliance on commercial banks for debt
funding. Banks are subject to the risk of asset-liability mismatch when they finance long-term
projects. A thriving bond market can boost long-term capital flows and lessen reliance on
banks. Several factors impede public-private partnerships in India, including a lack of a
sufficiently developed financial sector, fiscal constraints, bureaucratic red tape, and
procedural inefficiencies that have caused project delays and turned away private investors,
as well as limitations caused by a lack of an adequate infrastructure regulatory framework,
which increases risks and uncertainties for investors.

Many projects in Haryana have been slated for private investment using the Public Private
Partnership model. The company Techvardhan Infra Pvt Ltd. intends to build a residential
building project. The flats and offices will be built on private property. The planned project
will occupy about 4000 square feet of land.

Project Cost: The project as proposed would cost Rs. 8 Cr.

The goal of this is to research and evaluate the project's financial viability using its revenue
model, equity IRR, minimum DSCR, average DSCR, project IRR, and process flow. By
using this model, the bank can determine whether to grant a client a loan. The credit
worthiness and potential benefits are also examined by the bank.

13
 Real Estate in India- Overview

The real estate industry is one of the most well-known on a global scale. The four subsectors
of the real estate industry are housing, retail, hotel, and commercial real estate. The expansion
of the business environment, as well as the necessity for office space and urban and semi-
urban living, are driving the growth of this industry. In terms of direct, indirect, and induced
effects on all sectors of the economy, the construction industry ranks third among the 14
major industries. The Indian real estate sector is anticipated to grow to $1 trillion by 2030, up
from $1.2 trillion in 2017, and to contribute 13% of the country's GDP by 2025.
Retail, hospitality, and commercial real estate are also rapidly expanding, providing the
much-needed infrastructure for India's growing needs.

The Indian real estate market has expanded quickly in recent years, owing to increased demand for
commercial and residential properties. Rising urbanization and rising household income have increased
the demand for residential property. India is one of the top ten fastest-growing housing markets in the
world. Residential real estate accounts for 80% of the industry.

Market Expected Growth Between 2019 and 2024, the Indian construction sector is expected to increase at a
CAGR of 6%. The infrastructure business is crucial to the Indian economy's growth and development. Over 9%
of India's GDP is accounted for by infrastructure services. It comprises the construction of power plants, bridges,
dams, highways, and the development of urban infrastructure, all of which serve as the foundation and support for
other service sectors.

14
Investments/Developments:

i. In the March 2019 quarter, Indian firms, both public and private, announced projects
totaling $1.99 trillion, a 16% decrease from the previous quarter and a 46% decrease
from the previous year.

ii. In 2016, the infrastructure sector in India saw 33 agreements, with 17 totaling USD3.49
billion, compared to 31 transactions worth USD2.98 billion in 2015-16, with the
energy, motorways, and renewable sectors driving most deals. Furthermore, Malaysian,
and Indian firms signed agreements in April 2017 for infrastructure projects totaling
USD 3.86 billion to be undertaken in India.

iii. By 2022, India would require USD 646 billion in infrastructure investment, with
power, motorways, and urban infrastructure accounting for 70% of the total.

iv. The First REIT, which was established earlier this year by global investment firm
Blackstone and real estate behemoth Embassy Group, raised Rs 4,750 crore (US$
679.64 million).

v. In January 2019, Ascendas purchased US$ 35.70 million for Chennai's Pallavaram IT
Park. Godrej Properties has purchased the iconic RK Studios property in Chembur,
Mumbai.

vi. By the end of 2018, new home launches in India's top seven cities are expected to
increase 32% year on year to 193,600 units.

vii. In September 2018, Embassy Office Parks announced that it would raise Rs 52 billion
(US$ 775.66 million) through India's first Real Estate Investment Trust (REIT) IPO.

Government Initiatives:

 The Government of India has launched a few efforts to foster development in the sector, in
partnership with the governments of states. The Smart City Project, which aspires to build 100
smart cities, represents a great opportunity for real estate companies.

 The Union Cabinet has approved the establishment of a Rs 25,000 crore (US$ 3.58 billion)
alternative investment fund (AIF) to revitalize over 1,600 stalled housing projects in the country's
main cities.

 Blackstone reaches a 12-billion-dollar investment milestone in India.

 Puravankara Ltd, a real estate developer, intends to invest approximately Rs 850 crore (US$
121.6 million) over the next four years in the construction of three ultra-luxury residential
complexes in Bangalore, Chennai, and Mumbai.

 The Pradhan Mantri Awas Yojana (Urban) [PMAY (U)] has approved 1.12 crore urban
houses, creating 1.20 crore jobs.

15
The real estate sector is governed by a few rules and regulations, which result in a slew of
behavioral patterns exhibiting anti-competitive conduct (Competition Policy and Competition
Law), anti-consumer behavior, unfair trade practices, and other regulatory challenges. In
accordance with the Central and concurrent list of constitutional provisions relating to the
real estate property sector, the Central Government has passed many legislations. The
research also examines the Central's legislation in depth to see which rules or practices
restrict corporate competitiveness. In addition, the research examines the Center's policies,
providing a framework for strengthening real estate industry engagement and financial
support.

Before a real estate project can begin, it must secure approximately 52 permits, and the
duration between conception and the commencement of construction might range from 2 to 3
years, depending on the state. There is no single point of contact for clearance, the approval
procedure is not time-limited and can take up to two years, and online filing is not an option.
All these elements combine to make any potential developer's business proposal complicated
and time- consuming.

Because real estate is a state matter, the central government's intervention is crucial. Constant
policy help in the form of policies, model laws, and guidance notes has also accelerated real
estate activity.

Central Policies, Laws, Draft Bills & Model Provisions:

1) National Urban Housing & Habitat Policy, 2007

2) Draft National Rural Housing & Habitat Policy

3) Guidelines for Affordable Housing Policy in Partnership

4) Consolidate Foreign Direct Investment Policy, (Ministry of Commerce and Industry)

5) Monetary Policy for Lending to the Real Estate sector &Lending by Banks to home buyers

6) Fiscal Policy

7) Section 35AD under the Income Tax Act, 1961

8) Model Rent Control Legislation, 1992

9) Draft Model Residential Tenancy Bill, 2011 10) Draft Real Estate (Regulation of
Development) Bill, 2011

16
Real estate (infrastructure) in Gurugram

According to an Assocham Study, real estate emerged as the most favored industry for
investors in Haryana in 2010, with commercial and residential development activities
humming in Gurugram, Sonipat, Faridabad, and Panchkula.

Real estate in Gurugram is reviving investor interest in the National Capital Region, defying
national trends. One of the primary causes of this buoyancy, which has reversed a five-year
dry spell, according to observers, is the stringent enforcement of the law.

Residential and commercial property prices in Gurugram may rise by 10% to 20% as buyer
confidence returns.

The Real Estate (Regulation and Development) Act of 2016 is now impacting the Gurugram
real estate market (RERA). Over the last two months, Millennium City has seen the
construction of 20,000 new units begin, bringing in investments totaling Rs 3 lakh crore to
the real estate industry. "Previously, developers would accept money from investors and use
it for other businesses; prior to 2014, such practices were common.".

The Dwarka Expressway construction delays are nearly resolved, increasing demand.
Prashant Solomon, managing director of Chantel's India and treasurer of CREDAI, the
umbrella organization for private real estate developer organizations, weighs in: It is
especially helpful to the area because developers have invested over Rs 60,000 crore in
residential and commercial structures along the 150-metre-wide roadway but have been
unable to sell them due to insufficient connectivity. Because of the delay, about 1.5 lakh
property buyers have been inconvenienced for more than ten years.

The Gurugram neighborhoods where the Southern Peripheral Road and the Northern
Peripheral Road (also known as the Dwarka Expressway) converge at NH-8 are appealing for
real estate investment (sectors 99-112, 37D, 58-63, 68, 78-81, 84, and 85-86). According to
Anarock Property Consultants, the weighted average price for homes released between
January and May of 2019 is Rs 4,900 per square foot. Between January and May 2019,
around 8,500 new units were released in Gurugram, accounting for more than 51% of total
supply in the NCR.

17
CHAPTER II

18
 Objective of the study:

Project Finance

'Project finance is the financial assessment of a venture's complete life cycle. A cost-benefit analysis is
routinely undertaken to see whether the financial benefits of a project outweigh the costs. The
investigation is especially important for long-term development CAPEX planning. The first stage of the
study is to write out the financial design, which is a mix of obligation and value that will be used to
support the project. Then, determine whether the venture's financial benefits outweigh its costs by
identifying and quantifying those benefits.

Purpose of Project Finance for Sponsors

A sponsor (an organisation in need of project finance) has two alternatives for supporting
new activities:

i. The balance sheet is used to fund the new business (corporate financing)

ii. The new project is part of the SPV, a newly formed company, and is financed off-balance-
sheet.

PARTIES INVOLVED AND TRANSACTION FLOW IN PROJECT FINANCE

19
 i. Sponsors:

The parent company's equity share capital holders who want to apply for project financing
are often the sponsors. To float an SPV, two or more entities may also work together. When
two organizations have a mutually beneficial relationship or can benefit from the underlying
SPV, this phenomenon might occur. They are the SPV's equity contributors. They must use a
shareholder's agreement to gain consent from the parent company's shareholders before
floating an SPV (SHA).

ii. Banks/Financial Institutions:

Either a single lender or a group of financial organizations could be the culprit. Since they
are the ones who have extended senior debt, they have priority over whatever debt that the
sponsors may have extended. The only assets and cash flows that are used to secure the loan
are those belonging to the SPV. As a result, adequate due diligence is carried out prior to the
granting of any credit.

iii. Special Purpose Vehicle (SPV):

It is a distinct legal entity that the project's backers have floated. The project financing that
was acquired is only intended for this SPV. Between the lenders and the parent company, the
SPV serves as a corporate veil to prevent the transfer of credit and the attachment of property.

iv. Host Government:

Host Government refers to the administration of the nation where the SPV is based.
According to the laws and regulations of the government, the SPV must be incorporated. It
frequently serves as a guardian angel by offering various tax breaks, refunds, and subsidies.

v. Off Takers:

Off-takers are compelled by an off-take agreement to purchase a certain minimum amount

of produce from the selling party. Off-take agreements are frequently utilized in mining,
construction, and other big sectors. The vendor (SPV) invests a large amount of funds. An
off-take agreement ensures the seller a market after the transaction is completed.

vi. Suppliers & Contractors:

As with any construction project, suppliers and contractors are required for contract
execution. They are the primary suppliers of raw materials. They also perform vital tasks
such as design and build (D&B), operations and maintenance (O&M).

20
 Advantages and disadvantages of Project Finance

Advantages of Project Finance

1. Effective Debt Allocation

The sponsors can raise more debt than the parent can through project financing. This
borrowing can be viewed as a separate transaction, unaffected by its sponsors'
creditworthiness. As a result, based totally on the value and potential of the project in
question, more favorable and flexible finance terms can be arranged.

2. Risk Management

The contrast between the legal identities of the parents and the SPV is what separates
project finance. This provides great diversity and reduces risk. The parent company's
investors are safeguarded from changes in the project's result. The maximum liability is the
amount of the sponsors' equity investment. Furthermore, when many businesses are involved,
the danger is reduced. Many firms regularly form joint ventures to form a single SPV. As a
result, when the same amount of risk is spread across a larger number of participants, each
party's exposure is reduced.

3. Economies of scale

An SPV that has been floated by many parents is more likely to benefit from economies
of scale. Only when there is an obvious benefit to the partnership can two modern businesses
agree to collaborate on a single goal. One firm might greatly benefit at the expense of
another, particularly in the manufacturing and construction sectors. Vertical synergies will be
used if a mine owner and an extraction company decide to collaborate to sell extracted
material. Both entities will achieve scale and revenues that they would not have been able to
achieve on their own. They will also be in a better bargaining position with both vendors and
customers.

Disadvantages of Project Finance

1. Complexity

A project finance transaction is more complex than a basic credit transaction. It is founded on several treaties
between numerous parties, each of which required extensive negotiations. It may be difficult to keep track of the
money transfer among the people involved if proper discretion is not employed. Furthermore, all transactions are
routed through a fictitious entity (SPV). As a result, it is necessary to have specialized resources constantly
monitoring the flow of transactions.

2. Compliance and Documentation

Every step of the way, setting up an SPV is challenging. Banks and other financial
institutions do thorough checks and due diligence before issuing even a small amount of
credit. This is

21
mostly owing to an SPV's unusual legal status. Only the assets and cash flows of the SPV are
susceptible to bank recovery. As a result, they must be doubly confident in the quality and
prospects of the operational strategies. These examinations involve a significant amount of
time and money. Of course, the SPV and its sponsors bear the brunt of this excruciating
procedure. The government is also interested in a project funding program. The government
takes great care while sanctioning the creation of an SPV. This is because many of the new
alternative groups have a history of avoiding taxes, manipulating money, and flagrantly
breaking the law. To acquire the confidence of the SPV, a potential SPV must be persistent
and follow all standards.

3. Constant Expert Assistance

Project financing involves several participants and complex transactions. Using the
knowledge of professionals is so required. A dynamic approach for acquiring financing and
running a business incurs considerable costs. Consider the luxurious and expensive fees
given to investment bankers and other professionals that enable project finance as this
expenditure.

Real Estate Project Finance

Long-term financing for independent capital investments or projects with clearly identifiable
assets and cash flows is known as project finance. Real estate project financing is a well-
known example. Project financing is also used in mining, oil and gas exploration, and
building and construction. The cash flows generated by real estate project financing should be
sufficient to cover both operational expenses and loan repayment. The financing is frequently
comprised of debt and equity that is timed to coincide with the asset's lifetime.

Real Estate Project Finance Industry Terms and Definitions

To develop a financial model, we must first understand the fundamental ideas and
terminology associated with real estate project finance:

1) Loan to value (LTV): The amount of debt financing provided by a lender as a

percentage of the property's market value.

2) Loan to cost (LTC): The percentage of a development's cost that a lender will provide
in debt financing.

3) Net operating income (NOI): It is the difference between gross rental revenue and
operating expenses.

4) Cap rate: NOI is represented as a percentage of the property's value.

5) Amortization period: The number of periods necessary to complete a loan's principal

repayments.

6) Term: The agreed-upon term for a mortgage loan's interest rate.

7) General partner (GP): A manager who actively engages in the activities of a partnership.
22
 with unlimited liability.

8) Limited partner (LP): A passive investor with restricted capabilities due to the
amount invested in the project.

9) Land loan: Financing used to purchase land with no NOI. The long-term value will
be significantly lower than that of an income-generating property.

10) Floor space ratio (FSR): Used to establish building size and restrict the density of
development on a plot of land.

11) Gross building area (GBA): The total of all building spaces from floor to ceiling.

12) Gross leasable area (GLA): The total amount of enclosed habitable space.

13) Gross site area: A site's two-dimensional measurements based on its property lines.

14) Deductions: A percentage of the total site area that cannot be developed, such as
public access spaces, roads, lanes, and so on.

15) Net site area: The whole site area minus any deductions.

16) Max GBA: The gross building area as determined by the FSR.

17) Construction GBA: According to construction plans, the gross building area.

18) Saleable area: The gross building area based on construction, minus any common or
non-saleable areas.

23
 Real Estate Project Finance – Development Timeline

Building a real estate project financing model requires a comprehensive understanding of the
development process and timetable. A real estate development project has various stages:

Various sources of finance are used at each step of the real estate project financing life cycle.
For instance, a business might employ equity to finance transaction sourcing. It may be
challenging to acquire bank funding in the early stages of a project due to the considerable
risk involved. Projects are typically financed in the later stages with a combination of equity
and loans, such as rezoning and pre-development.

24
CHAPTER III

25
Theoretical Framework

Type and location of Project

Type of Project:

The proposed project is the construction of a high-rise residential building in Gurugram,

Haryana, with a total area of about 90000 square feet and a built-up area of 45000 square
feet. The building consists of eight floors. Each floor includes six flats.

Location of the Project:

The proposed project site is located near Dwarka Expressway in Pushpanjali farms.

Selection of proposed site:

In this region, all physical infrastructure facilities such as water supply trunk lines, drainage,
and storm drains are planned. As a result, all proposed infrastructure facilities are available.

Raw Material Requirements:

Construction supplies, such as cement, steel, wire, sand, aggregate, and bricks, will be
purchased from the local market as demanded. The following are the approximate quantities:

Sr. No. Material Quantity (Approx.)

Cement 68512 bags (28 kg)
1
Steel 176535 kg
2
Sand 245890 CFT
3
Aggregate 107812 CFT
4
Aerated Concrete Blocks 6061090 NO.
5

Availability of water and power:

 Water requirements and the source of it:

GMC water supply is the primary water source. GMC water mains will supply treated water.
The quality of the water is comparable to that of the water provided to other residents. GMC
maintains the water quality by doing the necessary treatment. There is no need to treat the
water further to make it usable because GMC provides treated drinking water via water
mains. Total water consumption during construction is 8.0 KLD.

26
  Power Requirements and its source:

The total amount of power required during construction will be 500 KVA, with DHBVN as
the supply. The total power required for flats, elevators, and pumps throughout the
operational phase will be 1250 KVA, with DHBVN as the source.

Generation of waste and its treatment

During the construction time, approximately 2.2 KLD of household wastewater will be
created, which will be released through GMC sewers and processed at the nearest sewage
treatment facility. Solid waste management is an important factor in the area. The entire city
of Gurugram has a door-to-door solid waste collection system in place. This will be available
at the relocation site as well. Wet and dry waste separation will also be practiced.

Site analysis

1) Connectivity: The proposed project is the building of a High-Rise Residential Building

with a total area of roughly 90000 sq. ft. and a built-up area of 45000 sq. ft. in
Gurugram, Haryana.

2) Road Connectivity State Highway, which is 20 kilometers (about 3.0 kilometers)

southwest of the proposed project location.

3) Rail: The railway serves the area effectively. Gurugram Railway Station is around 10.0
kilometers away from the proposed development site.

4) Communication: Phone, internet, and mobile connectivity are available at the area.

5) Land Use and Ownership: The Residential Building will be constructed on Private
Property.

6) Soil Classification: Soil testing will be performed for the proposed project. At ground
level, blackish salty clay with sand particles of exceptional flexibility.

DETAILS OF EXISTING LAND USE

Distance
Sr.no. Particulars
Nearest river Around 10 km
1 (Badshahpur river)
Nearest railway station Around 10 km
2 (Gurugram Railway Station)
National Park or reserves forest Around 30 km
3 (Near new
Delhi)
Nearest Airport Indira Gandhi National
4 Airport (IGI) 32.1 Km North-East

27
 Nearest highway Highway (SH-13) 0.1
5 Km East

28
 DETAILS OF EXISITNG SOCIAL INFRASTRUCTURE

Sr. no. Particulars Distance

Hospitals
1
Colleges
2 Within 10 km
School
3
Temple
4

Project Planning Brief:

1) Planning Concept: The proposed project is the construction of a high-rise residential building in
Gurugram, Haryana, with a total area of about 90000 square feet and 45000 square feet of built-up
area.

2) Population Projection: There would be a daily requirement of 100 workers throughout the
construction phase. 500 people will be permanently residing there after construction is finished
(including visitors).

3) Land use Planning: Green Belt land must be developed at the plot's road and boundary as part of
the proposed project. An initial letter will be submitted regarding the green belt development plant.
An additional attachment contains the detailed plan layout. The following table includes a detailed
land use breakdown:

DETAILS OF LAND USE BREAKUP

Sr. no. Particulars Area in sq. m

Plot/ Land area 90000
1
Built up area 45000
2
FSI area
3
Parking area 11000
4
Common Plot area
5

Proposed infrastructure:

1. Residential Area: The proposed project is the construction of a high-rise residential

building in Gurugram, Haryana, with a total area of about 90000 square feet and a
built- up area of 45000 square feet.

29
 No of Tower Particulars
Tower 1 Basement b1 Parking
Ground floor Security office
1st floor 6 (3bhk)
2nd to 8th floor 42 (3bhk)
Total 50 ( 3bhk) flats

2. Green Belt: At the plot's edge and along the roadside, a Green Belt area must be built
for the proposed project.

3. Social Infrastructure:

Facilities within site

 Common Plot
 Water Supply
 Electricity Supply

4. Connectivity: The proposed project site has good access to the road, rail, and air
systems.

5. Drinking Water Source: GMC is the primary source of drinking water.

6. Sewage System:

i) Type of sewage system proposed: The interior roads of the constructed

property will have a consistent drainage system made of R.C.C. pipes of NP3
class installed. The sewage water will be disposed of in a sewage treatment
plant after being linked to a conventional sewer line.
ii) Sewage Disposal Point and its integration with city level sewage disposal
system: The sewage treatment plant will be the location of the dumping point
through GMC sewers.

7. Solid Waste Management: Solid waste management is a significant aspect in the area.
A door-to-door solid trash collection system is in place across Gurugram. This will
also be available at the relocation site. Separation of wet and dry waste will also be
employed.

8. Electrical Controls: The plant must be fully pre-wired or site-wired and contain all of
the power and control wiring necessary for fully autonomous operation. Circuit
breakers, motors, starters, and timers must all be part of the control system, which is
housed in a panel board designed to withstand the elements. Electrical metallic tube
must be used to run all wire. According to the National Electric Code Standards,
every wire must be the proper size. The service wires cannot have any splices made to
them. Providing and installing the necessary outside disconnects, switching devices,
alarm or control conduit, and wiring shall also be the contractor's responsibility.
Thermal magnetic air circuit breakers must provide short circuit protection for the
branch circuit. A single phase thermal magnetic air circuit breaker must be used to
safeguard all control circuits. Each blower motor must have a magnetic across-the-
line starter with overload heaters in each phase and a shared trip contact set to provide
positive protection against
30
31
 single phasing. Class "B" insulation must be used for the motor's insulation, and the
motor's design must ensure that the insulation's maximum permitted temperature is
not exceeded when the motor is operating at service factor load in a -5 to 45° C
ambient under full load conditions. Under typical VBELT loading conditions, all
motors must have anti-friction ball bearings with an average life of at least 100,000
hours. The mechanical and electrical system must be built to tolerate temperatures
between 0°C and 50°C.

9. Vehicle Parking Facilities: At the site of the proposed facility, adequate parking will
be provided for residents. For guests' convenience and to prevent traffic congestion at
the site, there must be sufficient parking facilities. However, in accordance with
HUDA Building Bye Laws, parking for plot owners shall be within their plot.

10. Power Requirements: Dakshin Haryana Bijli Vitran Nigam will supply the power
(DHBVN). During the operating phase, residential apartments, NPNL units, EWS
units, community halls, primary schools, nursery schools, retail spaces, clinics, beauty
salons, ATMs, community centres, and nursing homes will all generate rubbish. The
majority of the project's solid waste will be domestic rubbish, with a daily output rate
of around 5000 kg.

32
CHAPTER IV

33
Data Interpretation

Project Schedule

One of the most important factors in deciding whether a project will succeed is whether it can
be completed within the time limit specified. Timely execution decreases costs such as
interest and administrative fees while also assisting in the attainment of pre-determined goals.
For project implementation, numerous operations at various organizational levels inside the
company and among multiple external agencies must be coordinated.

PROJECT IMPLEMENTATION SCHEDULE

Sr. No. Particulars Duration of month

1 Basement works 3
2 Ground floor works 1
3 1st to 8th floor 4
4 Outer plaster works 3
5 Plumbing and sanitation 2
6 Electrification 2
7 Colour work 1
8 Drainage and water supply services 1
9 Street light and road services 1
10 Social infrastructure works 1
11 Allotment to beneficiaries 1
Total 20 months (1 year & 8
months)

Project cost Estimations

Industry Case Statement:

Financial modelling and analysis of 50 flats housing project in Gurgaon, Haryana IN

A plot of property next to Gurugram HR has been purchased by "Home Developers," who
intend to develop it into a residential structure with 50 flats measuring 900 square feet each.
They anticipate selling the apartments for Rs. 4000 per square foot. They are looking for a
12-year term loan from top commercial banks in India for a non-recourse debt (project
financing) with a 70:30 D/E ratio.

i. The expected capex for the project is Rs. 8 crores.

ii. The total project OpEx is expected to be Rs. 50 Lacs per annum.

34
Assumptions:

1. Project Details:

PROJECT DETAILS
Size in Sq. Ft 45000 80.10
Equity 30% 24.03
Debt 70% 56.07
Debt Service Resv (DSR) 1 yr

2. Project cost Estimates:

Project Cost (CapEx) TOTAL SQ FEET

Rate 45000 % of project cost
(Rs./sq.ft)
Land 720 32400000 40.45%

Flat construction cost 170 7650000 9.55%

Interior Decoration 130 5850000 7.30%

Furniture 180 8100000 10.11%
Fixtures 30 1350000 1.69%
Building Registration 10 450000 0.56%

Broker Fee 80 3600000 4.49%

Stamp Duty 230 10350000 12.92%
Fund Raising Fee 30 1350000 1.69%
Tranfer of Deed Fee 70 3150000 3.93%
Interest During Moratorium 60 2700000 3.37%
Loan and Documentation Fee 40 1800000 2.25%
CSR, HSE, Training 30 1350000 1.69%

Total Project Cost 80100000 100.00%

O & M Cost (Monthly Breakdown) (OpEx) RATE *45000

Building Maintainence 2.8 126000

Utilities (Electric + Water + Internet) 1.7 76500
Salary (Maid + Acountant) 2.4 108000
Plumber + Electrician + Misc etc 2.2 99000
Insurance 3 121500
Total O&M Cost (per year) 5035500

35
3. Revenue Parameters Assumption:

Revenue Parameters UNITS(INR)

City Gurgaon,
Haryana
Size (Sq. ft) of one flat 900
rate/sq.ft 4000
sales price per flat 3600000
Avg. No of flats sold per year 5
Sales price Appreciation 8%

4. Other assumptions:

ASSUMPTIONS
Inflation 4.00% Debt rate 10.0% USD/INR 75.00
DDT 0.00% Moratorium 1 Yr Discount 10%
Tax 0 yrs Debt tenure 12 yrs Construction Time 1.8 yr
Holiday
Tax rate 25.00% Depreciation 7.00% MAT 18.5%

* Above assumptions are taken into consideration while preparing financial model

36
 Preparation of Financial Model

1. Net Projected Revenue:

year -> 1 2 3 4 5 6 7 8 9 10
no of units sold per year 5 5 5 5 5 5 5 5 5 5
rate per sq. Feet 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000
avg sale price per flat 3600000 3888000 4199040 4534963 4897760 5289581 5712748 6169767 6663349 7196417
gross sales 18 19.44 20.9952 22.67482 24.4888 26.44791 28.56374 30.84884 33.31674 35.98208
less commission fees 0.85 0.85 0.85 0.85 0.85 0.85 0.85 0.85 0.85 0.85
net projected revenues 17.15 18.59 20.1452 21.82482 23.6388 25.59791 27.71374 29.99884 32.46674 35.13208
(millions INR)

Revenue (net projected)

2. Fin Flows:

year -> Today cod 1 2 3 4 5 6 7 8 9 10

revenue collection 05-07- 02-07- 31-07- 31-07- 31-07- 31-07- 31-07- 31-07- 31-07- 31-07- 31-07- 31-07-
2022 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032

no of units sold per year 5 5 5 5 5 5 5 5 5 5

rate per sq. Feet 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000
Avg sale price per flat 360000 388800 419904 4534963. 489776 528958 571274 616976 666334 719641
0 0 0 2 0.3 1.1 7.6 7.4 8.8 6.7
gross sales 18 19.44 20.9952 22.67481 24.4888 26.4479 28.5637 30.8488 33.3167 35.9820
6 01 05 38 37 44 83
less commission fees 0.85 0.85 0.85 0.85 0.85 0.85 0.85 0.85 0.85 0.85

37
net projected revenues 17.15 18.59 20.1452 21.82481 23.6388 25.5979 27.7137 29.9988 32.4667 35.1320
( millions INR) 6 01 05 38 37 44 83

operating expenses
Building Maintenance 0.126 0.13104 0.13628 0.141732 0.14740 0.15329 0.15943 0.16580 0.17243 0.17933
16 864 22 83 02 74 97 73
Utilities (Electric + Water 0.0765 0.07956 0.08274 0.086052 0.08949 0.09307 0.09679 0.10066 0.10469 0.10888
+ Internet) 24 096 42 39 69 88 55 34
Salary (Maid + 0.108 0.11232 0.11681 0.121485 0.12634 0.13139 0.13665 0.14212 0.14780 0.15371
Accountant) 28 312 47 85 45 06 55 77
Plumber + Electrician + 0.099 0.10296 0.10707 0.111361 0.11581 0.12044 0.12526 0.13027 0.13548 0.14090
Misc etc 84 536 6 86 66 72 83 79
Insurance 0.1215 0.12636 0.13141 0.136670 0.14213 0.14782 0.15373 0.15988 0.16628 0.17293
44 976 78 33 63 57 11 24
Total O&M Cost (per year) 5.0355 5.23692 5.44639 5.664252 5.89082 6.12645 6.37151 6.62637 6.89142 7.16708
68 672 28 57 39 45 95 66

EBITDA 12.1145 13.3530 14.6988 16.16056 17.7479 19.4714 21.3422 23.3724 25.5753 27.9649
8 03 333 79 5 24 62 14 97

Non operating
expenses
Interest payment -5.61 -5.34 -5.06 -4.74 -4.39 -4.01 -3.58 -3.12 -2.61 -2.05

depreciation -0.5355 - - - - - - - - -
0.49801 0.46315 0.430733 0.40058 0.37254 0.34646 0.32221 0.29965 0.27868
5 4 174 19 11 32 08 61 01
total non-operating -6.14 -5.84 -5.52 -5.17 -4.79 -4.38 -3.93 -3.44 -2.91 -2.33
expenses

38
income before taxes 5.97 7.51 9.18 10.99 12.96 15.09 17.41 19.93 22.67 25.64
tax -1.49 -1.88 -2.29 -2.75 -3.24 -3.77 -4.35 -4.98 -5.67 -6.41
net income 4.48 5.63 6.88 8.24 9.72 11.32 13.06 14.95 17.00 19.23

Cash flow
Equity -24.03 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Net Income 6.27 7.57 8.98 10.50 12.16 13.96 15.91 18.02 20.32 22.82
Add back depreciation 0.5355 0.49801 0.46315 0.430733 0.40058 0.37254 0.34646 0.32221 0.29965 0.27868
5 4 174 19 11 32 08 61 01
Principal Payment (-) -2.62 -2.88 -3.17 -3.49 -3.84 -4.22 -4.65 -5.11 -5.62 -6.18
CSR (0.50 % of Net -0.34 -0.40 -0.47 -0.55 -0.63 -0.72 -0.81 -0.92 -1.03 -1.15
Income) (-)
Final Project Cashflow -24.03 3.85 4.78 5.80 6.90 8.09 9.39 10.79 12.32 13.97 15.76
(Equity)

DSCR 1.29 1.39 1.51 1.63 1.76 1.91 2.06 2.23 2.42 2.62

Final Project Cashflow -80.10 12.07 13.01 14.02 15.13 16.32 17.62 19.02 20.55 22.20 23.99

39
 3. Debt schedule or Repayment:

Debt /Loan Repayment

Schedule
PARTICULARS VALUES UNITS
debt amount 56.07 million
(LOAN) INR
debt rate 10%
moratorium 1 Yr years
payment periods 12 years
one period for one YEAR
COD 44651
First quarter 31-03-
end 2023
DATE (EOQ) 02-07- 02-07- 01-07- 01-07- 01-07- 01-07- 30-06- 30-06- 30-06- 30-06- 29-06- 29-06-
2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033
PERIODS NO. - 1 2 3 4 5 6 7 8 9 10 11 12
->
opening 56.07 53.45 50.56 47.39 43.90 40.06 35.84 31.19 26.08 20.46 14.28 7.48
balance
total payment -8.23 -8.23 -8.23 -8.23 -8.23 -8.23 -8.23 -8.23 -8.23 -8.23 -8.23 -8.23
interest -5.61 -5.34 -5.06 -4.74 -4.39 -4.01 -3.58 -3.12 -2.61 -2.05 -1.43 -0.75
payment
principle -2.62 -2.88 -3.17 -3.49 -3.84 -4.22 -4.65 -5.11 -5.62 -6.18 -6.80 -7.48
payment
closing 53.45 50.56 47.39 43.90 40.06 35.84 31.19 26.08 20.46 14.28 7.48 0.00
balance

40
CHAPTER V

41
Financial feasibility analysis

It is vital to ascertain the viability of the intended investment idea before making an
investment decision. To decide whether an investment should be made or not, the viability of
the venture must be evaluated by considering a few different factors. So, one of the most
important steps is to conduct a feasibility analysis. A financial feasibility study should be
conducted before commencing the process of developing a business plan to determine the
venture's economic viability. It examines the startup expenses, anticipates earnings and cash
flows, and computes the return on investment.

Before beginning the process of creating a business plan, a financial feasibility study should
be carried out to ascertain the venture's economic viability. It analyses the startup costs,
forecasts the earnings and cash flows, and calculates the investment's return. Relevant criteria
must be chosen to evaluate the financial viability of investments.

Care must be taken when performing financial feasibility estimates, and the complexity of the
calculations is based on how many various factors must be considered. As the project
continues, the calculations' underlying assumptions may, and frequently do, alter,
necessitating an update to the study.

A financial feasibility study, or FFS, should evaluate a project's viability based on a key
determining factor: will the project or business have enough money to finish the project?
(And generate a profit). Whether a business can support itself, pay its employees, and, of
course, turn a profit, is one of its fundamental criteria. This evaluation can benefit from
financial research.

Considerable factors include:

1. Company Expenses

2. Revenues

3. Debt schedule/ repayment

4. Cash flow (money in, and money out).

5. DSCR

6. IRR

42
 1) Expenses:

Operating expenses include the costs incurred by the Authority in connection with carrying
out the project, as well as its proportionate part of capital costs. Due to the estimated 4%
inflation rate for the ten-year period between FY2021 and Budget 2030, total operating
expenses are expected to rise from roughly 5.03 million to 7.16 million Indian rupees.
Included in total capital expenses are the components depicted in the chart below.

Company expenses
2%
2% Land
Flat construction cost
2% 3% Interior Decoration
4%
Furniture
Fixtures
Building Registration Broker
13% 40%
Fee
Stamp Duty Fund Raising
Fee
4%
Transfer of Deed Fee
1% Interest During Moratorium
2% 10%

7% 10%

Distribution of project cost (CAPEX)

Operating Expenses
2%

Building Maintainence

24% 30% Utilities (Electric + Water + Internet)

Salary (Maid + Acountant)

Plumber + Electrician + Misc etc

26% 18% Insurance

43
 8
7.16
6.89
7
6.37 6.26
6.12
5.89
6 5.66
5.44
5.03 5.23
5

0
2022 2023 20242025 2026 2027 20282029 2030 2031

Total Operating Expenses in millions INR

2) Revenue:

From Year 2021 to Year 2030, it is anticipated that total operational revenues will rise from
roughly 17.15 million INR to 35.13 million INR, representing a compound annual growth
rate (CAGR) of almost 7.43%. Significantly contributing to this growth are the rising cost of
apartments and the return on deposits.

40
35 35.13
32.4
29.99
30 27.71
25.59
25 23.63
21.82
20 20.14
18.59
15 17.15
10
5
0

2023202420252026202720282029203020312032
Revenue (million INR)

Revenue growth (2023-2032)

44
 3) Debt/ Loan Repayment Schedule:

Because the project necessitates a larger investment, a special purpose vehicle must be
developed to disperse the risk. The Special Purpose Entity (SPE), sometimes known as a
Special Purpose Vehicle (SPV), is a common vehicle for financing infrastructure. It makes no
difference whether the project is being created by a private company, a governmental entity,
or a public-private partnership. Special purpose vehicles are produced for many infrastructure
projects.

A Special Purpose Vehicle (SPV) is a legal entity formed particularly for the project's
execution. This implies that the Special Purpose Vehicle (SPV), which may be backed by a
corporation or a government body, is legally distinct from these organizations. It has its own
balance sheet and profit and loss statement. These Special Purpose Vehicles (SPV) must
obtain loans from lenders based on their own assets and liabilities, not the parent
corporations. A nonrecourse loan is frequently accepted by the Special Purpose Vehicle
(SPV) Company. In the event of a default, investors may only recover the project's assets;
they may not seize the assets of the parent business, which may be involved in the project.
They require a commercial bank debt loan for 70% of the total capital expenses, or Rs. 56.01
million, to finish the project. The loan term, moratorium period, and other relevant factors
must be addressed when repaying a loan or debt.

To accurately estimate the total cash flow amount, a timetable for debt/loan repayment must
be prepared. Since the expected building time in this case is 1.8 years, a 1-year moratorium is
also considered. The first instalment will be paid starting on July 28, 2023, at a 10% interest
rate. Interest payments will be made annually. There are therefore a total of 12 payments that
must be made over the course of 12 years, with the principal amount earning a 10%
compound interest rate. Excel should be used to build the schedule in the model using the
interest payment (IPMT) and principal payment (PPMT) formulas.

IPMT (interest rate, period, number payments, PV, [FV], [Type])

PPMT (interest rate, period, number payments, PV, [FV], [Type])

For the debt of Rs. 56.01 million, interest at 10% interest rate for 12 years in 12 terms will be
42.68 million. This payment will be made from the profit earned from the project.

4) Cash Flow:

The cash flow forecasts illustrate how much money will be needed for initial costs and where
it will come from. The amount of equity capital is determined along with the amount and
source of all borrowed money and lease payments. The payback period is twelve years, as is
seen from the preceding fund flow statement. The money the corporation will get from
selling the apartments will be used to pay the interest and principal in twelve years.

45
 Because development will have just begun in 2020 and no income will be generated during
that time, the project's final cash flow will be negative for that year. Cash flow is positive
after construction is finished in 2021. This indicates that the project is financially feasible as
of 2022 because the bank will have cash available.

5) DSCR (Debt Service Coverage Ratio):

Divided by total debt service, net operating income represents the debt service coverage ratio
(DSCR). It is the amount of cash flow required to cover sinking fund obligations as well as
annual interest and principal payments on debt.

Min DSCR 1.30

Avg DSCR 1.88

Here’s how to interpret:

DSCR < 1: You have a cash flow problem. You don't make enough money to pay off all your debts.
DSCR = 1: You have exactly enough income flowing in to service your debt, but no extra cash reserve.
DSCR > 1: You have a good cash flow situation. The greater your DSCR, the more money you have available to pay

The total debt service (interest + principal) for the project in 2022 is 8.23, whereas the net
operational income (EBITDA - Tax) is 10.72. As a result, the DSCR for that year will be
1.30. This means that the corporation has a cash flow that is 130 percent larger than what is
needed to pay down debt in 2022. In 2023, 2024, and 2025, the company has 141%, 152%,
and 164% more incoming cash flow than is required to pay off debt, correspondingly. As net
operating income increases year after year, so does the DSCR.

6) Internal Rate of Return:

When considering whether to proceed with a project or investment, use the internal rate of
return as a guideline. According to the IRR rule, a project or investment should be pursued if
the internal rate of return exceeds the minimum needed rate of return, which is typically the
cost of capital. If the IRR is less than the cost of capital, it may be prudent to reject the
project or investment. The IRR is the percentage of return that results in a negative net
present value (NPV). The project is feasible if the IRR is greater than the interest rate at
which you may borrow. The IRR measures how effectively capital is employed in a business.

46
The Net Present Value (NPV) is the sum of the present values of each individual cash flow
(incoming and outgoing) in a series of cash flows. Furthermore, the Present Worth is the
discounted present value of a future financial asset or stream of cash payments.

The abbreviation IRR stands for time-adjusted earnings across the course of a project. This
rate converts the project's cash inflows and outflows into current numbers. Alternatively, the
stated discount rate reduces the cash flows' NPV to zero.

There is a distinction between Project IRR and Equity IRR when computing IRR. As the name
implies, there are differences in cash inflows between the project and equity IRRs. The project's
IRR represents the total return to all investors. The Project IRR would consider cash flows that
directly benefit the project. The equity IRR evaluates the returns to shareholders after the debt has
been paid off. Thus, the latter is based on equity holders' free cash flows.

Results:
Equity IRR – 20.95%
Project IRR – 12.22%

For this project, Project IRR (12.22%) is greater than discount rate (10%) and Equity IRR is
(20.95%). So, the project is feasible.

47
CHAPTER VI

48
Conclusion

Real estate development may be both profitable and exciting. It may also be difficult and
risky. Finally, the two primary goals of a developer and his or her lender are to limit risk and
maximize profit. To accomplish these goals, a direct and precise comparison between
prospective home buyers and the competition and potential competitors for those home
buyers is required. Without this knowledge, it is difficult for any developer to determine the
possible market they need to corner and the viability of a project.

According to residential development studies, project viability is difficult to predict. To

determine the project's feasibility, list the project promoters' inability to control factors that
have a significant influence on the project's cash flows. We would be able to do a sensitivity
analysis on this project after identifying those qualities. The study examines the financial
modeling and analysis of 50 flats in Gurugram, Haryana, India, a project where a non-
recourse loan is advantageous due to the huge amount of money needed. Using the applicable
assumptions and data that have been provided, a financial model is developed. The cash flow
statement, DSCR, and IRR are used to determine the financial viability of the project. The
calculating result is as follows:

The project's equity IRR is 20.95%, and the project's project IRR is 12.22%. The DSCR for 2022,
2023, 2024, and 2025 is 1.30, 1.41, 1.52, and 1.64, respectively. The minimal DSCR for the project
is 1.30, and the average DSCR ratio is 1.88.

Based on the facts above, it is possible to conclude that project development is beneficial,
considering the DSCR and Project IRR of the project. As a result, the bank will make the loan
because the project is financially viable.

49
 Bibliography

1) https://economictimes.indiatimes.com/wealth/personal-finance-news/real-estate-
getshighest-investment- inharyana/articleshow/8445499.cms?
utm_source=contentofinterest&utm_medium=te xt&ut m_campaign=cppst 2)
http://plannersweb.com/2013/12/pro-forma-101-how- much-money/ 3)
http://plannersweb.com/2013/12/proforma-101-getting-familiar- with-a-basic-tool-
of-realestate-analysis/ 4) Pimpri Chinchwad Branch of WIRC of ICAI and CREDAI
and Builders Association of Pimpri Chinwad on 22nd April, 2017
5) http://timesofindia.indiatimes.com/city/noida/7400cr-infra-plans-for-
GBNagar/articleshow/46449939.cms 6)
https://plus.google.com/+EntrepreneurIndiaNewDelhi 7)
https://www.linkedin.com/company/niir-project-consultancy-services 8)
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1269620455636/6907265-
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http://www.niua.org/db_main.asp

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