Final Feasibility Study Real Estate February 2022

lO MoA RcP SD| 87 59 5 3
Downloaded by mesfin eshete (mes315303@gmail.com)

FEASIBILITY STUDY REPORT 2022
FEASIBILITY STUDY
FOR THE DEVELOPMENT OF MIXED USE BUILDING
PROJECT PROMOTERS ABC REAL-ESTATE DEVELOPMENT SERVICE PLC
N/S/LAFTO SUB-CITY; WOREDA-12, H.N-NEW
CONTACT PERSON MELKNEW CHANE LEGESSE (GM)
PREP. BY: BIMAS CONSULTING SE RVICES PLC
TEL:+251-911-547-774/+251-936-690-978
Email:bimasconsult@gmail.com
FEBRUARY, 2022
ADDIS ABABA, ETHIOPIA
MIXED USE BUILDING PROJECT Page 1

TABLE OF CONTENTS
I. 3
II. BACKGROUND ..5
III. 8
IV. TECHNICAL STU .20
24
27
VII. ANNEXS 0

I. EXECUTIVE SUMMARY
1.1 Project Overview
Thisdays as well known, Due to the growing economic and business activity of the capital city Addis
natural and heritage tourism, the tourist arrival
to the country is growing fast in recent years. The growth trend of the rentable apartment house is low
compared to the inflow of tourists as well as shortage of residential housing units in the city. Viewing
the above facts, the project promoters have reviewed the business performance and demand for
rentable mixed use commercial building and identified that there is unsatisfied need in the sector to
meet the demands of the public at required standards in the country.
Thus, the envisaged project has an enthusiasm to participate in the development activity of the country
by taking part on the real estate development sector by investing on multi-purpose business building
which is believed to be one of the coun personal
income and improving the lives of local society.
1.2 Project Objective
The general objective of the project is reducing the guest house and commercial space problems and
establishing multi-purpose building development, which will serve a mixed settlement of people of
different economic background in Addis Ababa city. The project constructs multi-purpose building
having five (B+G+7) stories; out of which, the Ground and st Floor
1 will be used for rentable
commercial space area and 2 nd to 6th Floors are going to comprises a total of 10 rentable apartment
housing units with 3 (three) bed room facilities.
1.3 Required Investment Capital
The total investment cost of the project is estimated at Birr 71.38 million. From the total investment
cost, ETB 55.88 million is assumed to be equity contribution and ETB 15,500,000 is expected from
external financer as bank term loan.
1.4 Project Location:
The envisaged real estate project is located in Addis Ababa City Administration, N/S/Lafto Sub-city,
Woreda-01, specifically on the way from Garmen Sq. to Lebu Mebrathail with in the vicinity where all
infrastructures are readily available.
1.5 Marketing Arrangements
The target market is the population of high, middle and low economic group. In marketing, the key to
success is the quality of the service facility avail in nearby. Recent market trends show the alarming
increase of Apartment housing units and business spaces demand. Most Research works are indicating that
there was backlog of such facility in the city.

1.6 Organization and Management

In any organization precise and accurate human resource development and management are crucial factors
for the targeted project and it will consider well organized performance in all aspects.
1.7 Financial Study
Based on the projected profit and loss statement; the project will generate a positive net profit of as well as
positive net cash flow considered throughout its life time; which will be considerably shows the business
financial viability. In addition, positive financial performances are manifested in the balance sheet.
Profitability
Based on the projected profit and loss statement; the project will generate a positive net profit all over
its life span. Accordingly, forecasted net profit after tax will be ETB 3.93 million during 1 s t year; 5.09 million
by yea-2 and reaches Birr 15.24 million during its 10 th year of operations.
Liquidity
The projected liquidity analysis of envisaged investment shows that the business will indicate positive net cash
inflow of ETB 3.58 at Yr-0. Then after, it will generate a positive net cash flow of significant amount
throughout its life time; which will be considerably shows the investment financial viability.
Balance sheet
The implication of positive financial performances reflected in cash flow statement are manifested in
the net increase of projected balance sheet, which shows about Birr 71.38 Million at the beginning of
the operation year will rise to Birr 102.67 Million at the end of year-10.
Measurements of Project Return
While conducting financial analysis of the underlying project, the investment cost and income statement
projection are used to calculate the pay-back period. Accordingly, the total investment cost incurred on
such project development will be fully recovered within 4 years of its operation at full utilization of
available resources and will have the NPV of 5.37 million and IRR after tax Calculated on the
projection is 17%, which shows all parameters are attractive and acceptable.
1.8 SOCIO-ECONOMIC JUSTIFICATION
The project will have several socio-economic benefits; such as: Increment of healthy & independent
lifestyle, Aesthetic quality of life, Promote healthy social community, Employment generation,
Beatification of Urban design and Creating Opportunities to skill transfer about environmentally
friendly construction development.
1.9 CONCLUSION
The project is financially viable and moreover socio-economically warranted. Therefore, the
establishment of the project under consideration is justified and worth financing due to its financial
viability and social desirability.

II. BACKGROUND INFORMATION

2.1 ESTABLISHMENT
2.2 PROJECT 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 and
sustainably to support the overall economic development.
In the building sector of the economy, the multi- purpose business trend is 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 the city to support the growing of business service
sectors like gust house hospitality services & other commercial activities. (i.e. supermarkets, Beauty
salon, shops, Computer Center, Cafeterias, restaurant, and other activities). In this regard, multi-
purpose commercial building expands throughout the country; and hence the envisaged project
promoters have developed an enthusiasm to participate in the development activity of the country by
taking their parts as a citizen, services
business both in the form of generating sustainable income for project owners and improving the lives of
local society through employment creation.
To this effect, the owner s of the envisioned Building had started the intended building construction
activities by investing from own equity finance and currently the construction project completion
also reached about 80%. However, currently the project has faced financial shortage to cover the
over-all project construction costs and limited to search for external options, hence, undertaken this
project study to submit for bank loan request in which the respective financing organ can understand
the market, technical and financial aspects of this project. The promoters are very ambitious and
committed to realize the project completion in earliest time schedule for which they it expects to get
the necessary support from the Financial sectors (Lending Bank) to make the project become
functional.
2.3 OBJECTIVES OF THE PROJECT

The major goal of this project is to contr ibute towards the growth of r eal-estate investment and
development sectors in the country. Its specific objectives include the following.
To construct and develop modern multi-purpose building with Apartment Housing Units, Banks,
Shops, restaurant & cafeteria facilities that enables to provide standard services to visitors.
To undertake trading and other refuted business activities in which promoters to become
advantageous to generate a reasonable return to the invested capital.

To develop modern fully furnished gust house & business center that would provide services
of international standard in order to attract foreign visitors and thereby contribute towards
the generation of hard currency for the country.
To create employment opportunities for the population in the city and
Contribute towards the beautification of the city through the construction of modern building
infrastructure and facilities.
Moreover, the long-term goal of the project is become the best choice in the city and its surrounding
areas by creating a differentiated experience capitalizing on personal service.
2.4 PROJECT RATIONALE
The rationales behind establishing the project are the existence of tourist flow to the country in
general and to Addis Ababa city in particular for the furnished guest house as-well-as the growing
business & trade operating environment with the growing middle income urban population for
hospitality service. The prevailing government investment policy also provides a favorable
environment for the fully functioning of such project that participated in services and hospitality
sectors. The highest share of customers for furnished guest house is domestic and international
tourists. The number of int travelers staying in Addis Ababa is increasing yearly.
On the other hand, 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 use oriented project to be established. Despite
the promising business opportunities of in the capital city, the trend on such kinds of investment found to
minimal. Since there is less such kind of modern business oriented facilities and service station in the
city to accommodate the existing demand of these services in the surrounding areas, the mismatch
between the demand for and supply of similar services are easily observable.
Therefore, the existing shortage or absence in the supply of these services, along with its hospitality and
administrative access, better location and infrastructure access, escalating trend of urbanization and
business activities, thus it is with such reason that the envisaged project is identified and proposed and
assumed to be more profitable. s decentralized state based economy, privatized
and free market economy; good governance creates a favorable environment for the development of
investment for private investors.
2.5 SIGNIFICANT OF THE PROJECT

The envisaged project deemed to add to the economic development of the nation in general and
Addis Ababa city in specific in the following ways:
2.5.1 Source of Revenue

Like 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 government.
2.5.2 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 has created job opportunities for more than 50 individual during construction phase and it
will hire 27 permanent employees after construction completed and starting services delivery.
2.5.3 Sources of social service

In addition to serving as a source of employment and income for the city administration, the project
renders social services for different group of people. Hence, it is also to 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 residential houses, shops, and other bundles of
services in the area.
Furthermore, it serves as an 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 city scape.
III. MARKET ANALYSIS

3.1 GENERAL OVERVIE

The Global Commercial Real Estate industry recovered from the difficult recessionary environment,
fueled by a global credit crunch and a notable contraction in lending, real estate transactions,
construction activity and property values. Booming commercial real estate activity in Asia offset
declines in other regions, and lower unemployment and higher disposable incomes in mature
economies helped revive commercial construction and real estate prices. In the next five years, industry
revenue forecast is to increase as expanding business and retail operations drives revenue growth.
Additionally, the global RE market will increasingly shift toward burgeoning countries where
consistent growth will be apparent. The overall global commercial real estate (CRE) market is
massive, incorporating more than half- a-dozen sub-industries that develop, manage, appraise, buy,
lease, sell and invest in properties across the multifamily residential, retail, office, accommodation
and hospitality and industrial markets. With such a range of activities spanning the real estate
spectrum, overall industry performance is largely based on business activity and the global economy.
During periods of economic growth, vacancy rates typically fall, and property values rise as demand
for real estate increases. Additionally, business expansion creates demand for additional office
buildings, retail centers, hotels, hospitals, apartment buildings, manufacturing plants and other
commercial spaces.
Therefore, this chapter will analyze the market in terms of demand Vs services, projected demand,
the existing gap, the construction plan or schedule, marketing strategy and tools, price determination
and strategy and project implementation plan.
3.2 MARKET POTENTIAL
The International Monetary Fund (IMF) ranks Ethiopia as among the five fastest growing economies
in a decade of high economic growth resulting in a decrease in the national poverty rate from 56
percent in 2000 to fewer than 30 percent in 2015 this is the second fastest rate of poverty reduction
on the continent. The Ministry of Urban Development, Housing and Construction received the 2020
UN Public Service Award for the Integrated Housing Development Program. With a population of
approximately 97 million people, Ethiopia is also the second most populous country in Africa and is
growing rapidly at 2.52 percent per year.
Despite having one of the lowest proportions of urban population in the world at only 19 percent,
Ethiopia is now one of the most rapidly urbanizing countries in the world. According to recent UN
estimates, the urban population of Ethiopia is expected to triple between 2020 and 2040, growing at
an average rate of 3.5 percent per year. The combination of high population and urban growth rates,

coupled with a high prevalence of urban poverty has placed enormous strain on Ethiopian cities and
egard, there are many
factors to be considered as clearly discussed hereunder:
3.2.1 Rapid population growth in Urban Areas
The rate increase of urban population in Addis Ababa is 5.2% per annum. It is directly related to the
rural urban migration. The reasons behind the fatal attraction towards cities are the economic
opportunities as well as service the lack of different types of facilities in the rural areas, for instance
shopping Center, health center, communication and other related facilities. Hence, this increase in
population induces different needs.
3.2.2 Increased income and improved living standard
When there is increase in the income of people, their life style also changes. People want to live and
s in the proximity and for this, they are willing
to bear the cost of better building lots, need improved offices, commercial centers, better apartment
housing units and other facilities
3.2.3 High demand of site with pleasant environment
When economic growth appears then need of pleasant centers for their Residential Houses, Offices,
Shopping malls and other needs. Looking for these needs and the location of the site we found the
project to run its operation is suitable from any angle.
3.3 DEMAND ANALYSIS
3.3.1 Demand for Commercial/Business Centers
The demand of commercial/business center in Addis Ababa is increasing due to increase of

population density. Proper study is still to be done but anyone can felt that the purchasing power of
individuals is increasing due to increment in their earnings. Many business buildings have studied
the demanding needs of the individuals and creating the new scope of business except their
traditional one.
These examples show that the concept of business has been changed from traditional to modern due
to the change in living standard of the people and their concept to choose the latest technology. From
the past ten years of the study in Addis Ababa, we find establishment of mixed use Commercial
Center are increasing in geometric ratio due to the high demand. From the above data needs of
commercial center in core urban area is increasing which not only change the business concept but

also beautify the city. The concept of these centers is to provide all the necessar y things required for
users. Concerning to the project which is under consideration, it is designed keeping in mind that it
will serve probably the business hub for both the outsider and for people living in Addis Ababa.
A recent survey noted that in Addis Ababa alone, the demand for business operating areas was for
between 200,000 and 250,000 office space units to be supplied annually for 10 years to replace the
existing dilapidated stock as well as cater for new business formation. At the current rate of supply,
even with the progress of government owned as well as private building construction programmes,
this is unlikely to be met especially at the middle to lower income bands. DDDIPO has tried to
estimate the existing and future building space need of Addis Ababa by considering the following
conditions.
- Existing and future number of households and building units,

- Building shortage due to over crowdedness,
- Building shortage due to the back log effect
- Building units required to replace
In determining the demand on this approach the following assumptions are considered
- The population of Addis Ababa (urban) is forecasted to grow by 2.6% per annum
- An average of 4.4 persons per household is assumed to be maintained in next five years.
- Number of building units is assumed grow by 1.5% which is observed in the past years.
Based on the above methodology the number of business operators, number of building units
expected to exist and the deficit is shown in the next Table.
Table-1: Service and demand analysis based on the last 8 years
No. of Business No. of Building Building spaces

Year o perators unit Deficit
2013 64,496 44,126 20,370
2014 67,249 44,907 22,342
2015 70,089 45,702 24,387
2016 73,007 46,511 26,496
2017 75,997 47,334 28,661
2018 79,047 48,172 30,875
2019 82,446 49,024 33,422
2020 85,991 49,892 36,099
SOURCE: DDA RESOUR CE P OTENTIAL ASSESS MENT REPORT OCTOB ER, 2 0 20
3.3.2 Demand For Residential Housing Units In Ethiopia
According to a UN-Habitat report, the housing deficit is between 900,000 and 1,000,000 units in urban
areas, and an estimated 225,000 housing units a year are required to meet the Development Goals
18

2020, is putting considerable pressure on the demand for housing. It is estimated that only 30 percent of
tion, while the remaining 70 percent is in need of total
replacement.
A recent survey noted that in Addis Ababa alone, the demand was for between 400,000 and 550,000
housing units to be supplied annually for 10 years to replace the existing dilapidated stock as well as
cater for new household formation. At the current rate of supply, even with the progress of government
housing programs, this is unlikely to be met especially at the middle to lower income bands. The
Ethiopian real estate market is booming a
There are firsthand development of new homes and neighborhoods with amenities only previously
available in western countries.
Like many other African countries, Ethiopia has a great need for affordable housing delivery. Housing
finance markets are destined for growth at virtually all income levels, but particularly within the lower to
middle income ranges. Real estate developments have tended to focus on the high end of the market but
there is considerable unmet demand for less expensive homes for professionals and middle-income
households, to the extent that supply can be expanded for homes in the range of ETB 400,000
(US$19,295) to ETB 1,000,000 (US$48,239). A sector that warrants further development and exploration
Given relative tenure security, this
creates enormous potential for the development of housing microfinance products which are appropriate
for low income earners. Formal encouragement of self-build construction is required, especially through
regulatory reform around building standards and greater product innovation by banks .
3.3.3 Residential Housing Demand In Addis Ababa
Housing demand for Addis Ababa city is worked out based on a study conducted by DDPIPO, April
2007. According to this study currently there are about 72 housing cooperatives, with more than
1500 members, which are waiting for serviced land for residential house construction. On the other
hand the number of cooperatives and individuals which took title deed to construct a residential
house during the period last 5 years was about 1302 respectively. In addition to the demand for
house construction, there are high demands to rent residential houses from Rental Houses Agency
(RHA) and Kebele houses. The number of applicants on the waiting list for Condominium houses up
to 2007 E.C is more than 700,000, while applicants for renting from RHA and for Kebele houses
amount reached about 24,176.
3.4 SUPPLY ANALYSIS

3.4.1 Supply for Business Center Building
The existing business centers and new building stock, particularly in Addis Ababa, is generally of
similar use, with many settlements congested and unplanned. Using the UN-HABITAT slum

definition, 80 percent of Addis Ababa is a slum with 70 percent of this comprising government as
well as private owned small size rental spaces. Only 30 percent of total business center building
stock is in fair and modern condition, while the remaining 70 percent is in need of total replacement
-million units in urban
areas, and about 250,000 business oriented building units are required in Addis Ababa alone every
year in order to meet the projected demand of 1.5 million new business operating spaces by 2025.
The government of Ethiopia recognizes the right of citizens to decent business running building and
commits itself to implement the policy issued regarding private sectors encouragement for
construction sector development, especially on mixed use buildings in line with the strategy to
enhance beautification of major cities in gener al and Addis Ababa city in particular.
This has not had an immediate effect in Addis Ababa. There is a backlog of 24,000 building spaces,
and it is expected to grow annually by 2,900 business building spaces. The huge gap between demand
and supply increases informal settlements and more than 200,000 people are running their business in
slums or sub-standard building. Many of these people are living in precarious sites, such as mountains,
stream sides, in hills and flood-plains, rendering a significant proportion of the inhabitants vulnerable to
natural hazards such as landslides and floods are another manifestation of the problem.
3.4.2 Supply for Residential Housing Units
The existing housing stock, particularly in Addis Ababa, is generally of poor quality, with many
settlements congested and unplanned. Using the UN-HABITAT slum definition, 60 percent of Addis
Ababa is a slum with 40 percent of this comprising government owned rental housing. Only
55 percent of total housing stock is in fair condition, while the remaining 45 percent is in need of
million
units in urban areas, and about 550,000 housing units are required in Addis Ababa alone every year
in order to meet the projected demand of 1.5 million new homes by 2025.
There are four categories of new residential developments taking place in the sector: (a)
government-initiated condominium buildings; (b) residential neighborhoods initiated by developers;
(c) owner-built housing dwellings; and (d) new home activity driven by housing cooperatives. In
addition, there are two other major categories of housing units in Addis Ababa: kebele -rental
housing (very old stock), mainly for those on low incomes, and informal settlements.
I. GOVERNMENT-BUILT CONDOMINIUMS
Since 2005 Ethiopia has been implementing the Integrated Housing Development Programme
(IHDP), an ambitious government-led low and middle income housing programme. This programme
was implemented in Addis Ababa and 55 other cities. The first phase of the IHDP has been
successful in many respects and has built 171,000 housing units. There were, however, a number of

unanticipated challenges facing the program. The most pressing is the affordability of the units for
low-income households, with the cost increases in the price of condominium houses deeming them
no longer an option for many low-income households. The inability to pay the monthly mortgage
and service payments forces many households to move out of their unit and rent it out rather than
risk losing it through bank foreclosure.
In order to address these challenges, a new and enhanced second phase of the IHDP was launched in
2011. This phase involved a new housing project in Addis Ababa divided into four different groups
based on payment arrangements: 10/90 (involving a 10 percent deposit and a 90 percent CBE
mortgage loan), 20/80 (80 percent LTV), 40/60 (60 percent LTV), and for housing associations, a
full up-front payment is required. The 10/90 scheme is designed for people in the lower income
bracket, in the ETB 1,200 (US$58) and less monthly income. This group is expected to save
ETB187 (US$9) every month. The 20/80 scheme is designed to incorporate those registered
previously, in 2005, and the new ones who earn more than the lower income bracket. The money
expected to be saved by this group varies according to the type of house. Starting from a studio
apartment, which entails ETB151 (US$7) monthly saving, the range goes up to ETB 685 (US$33).
The 40/60 scheme has special conditions for buyers from the Diaspora, so that they can pay in hard
currency. The saving var ies from ETB 1,033 (US$50) for one bedroom to ETB 2,453 (US$118) for
three bedrooms. Demand has increased since CBE agreed to provide mortgage financing to
prospective households. If city residents are able to save 40 percent of the total cost of the planned
house they will be eligible for the program that has the remaining 60 percent covered by the state
owned bank through a mortgage loan to be paid within 17 years.
More recently, the Ethiopian Ministry of Urban Development, Housing and Construction has
announced plans to construct 1.45 million houses in housing schemes between 2015 and 2020. Out
of the residential houses, 750,000 will be built in urban areas and 700,000 million in rural areas. This
construction project is in line with the GTP2 currently underway and will be erected in the housing
schemes of 10/90, 20/80 and 40/60. Out of the 150,000 ha of allocated land, 40 percent will be set
aside for the construction of houses, 30 percent for its infrastructure and the remaining 30 percent for
green areas.
II. RESIDENTIAL NEIGHBORHOODS INITIATED BY REAL ESTATE DEVELOPERS
There are approximately 50 private real estate companies operating in Ethiopia and they are almost
exclusively focused on high income groups.

Ambassador Real estate is the leading real estate developer that constructing Residential
Apartments for Rental services as well as selling the housing units to demanding tenants.
Arab Contractors is considering developing an affordable housing project (comprising of 7. 9
and 12 floors) in Addis Ababa (April 2015).
Estate PLC has begun work on a US$150 million up market complex of
flats, offices, retail outlets and a hotel next to the city light rail (July, 2015).
In June 2013, Chinese Geo-Engineering Corporation started construction of a real estate
complex which will include 21 high-
completed by 2018.
III. OWNER-BUILT HOUSING CONSTRUCTION
Self-built housing was by far the most common type of housing delivery approach before the
introduction of the Integrated Housing Development Program. Though relatively limited now, this
building approach is still active in older residential neighborhoods. Costs for owner-built
construction are generally higher and this segment of the market tends to include the full range of
housing units from modest homes constructed over extended periods to large and luxurious homes
often built by razing or replacing older properties.
IV. HOME CONSTRUCTION BY HOUSING COOPERATIVES:
Cooperative housing developments, or ganized by groups that share a common employer or

membership, have been a long-standing feature of the residential real estate market. The city
administration has registered more than 500 housing cooperatives. The minimum membership in a
housing cooperative is 12 while the maximum is 24. Many cooperatives members are middle-
income, based on employer associations such as Ethiopian Airlines, Commercial Bank of Ethiopia
and/or other state-owned companies. In recent news, Ethiopian Airlines and CBE have invited nine
companies to bid to take over an employee housing project from a Chinese contractor. The project
entails the construction of 2,502 housing units in two phases on a 313,300 m² plot in the Bole
District.
3.5 DEMAND AND SUPPLY GAP

The government of Ethiopia recognizes the right of citizens to decent housing and commits itself to
implement international conventions and agreements, such as MDGs and the Habitat Agenda. This
has not had an immediate effect in Addis Ababa. There is a backlog of 475,000 houses, and it is
expected to grow annually by 50,000 houses. The huge gap between demand and supply increases

informal settlements and more than 750,000 people are living in slums or sub-standard housing.
Many of these people are living in precarious sites, such as mountains, stream sides, in hills and
flood-plains, rendering a significant proportion of the inhabitants vulnerable to natural hazards such
as landslides and floods are another manifestation of the housing problem.
Another challenge is related with housing quality. Most of the existing houses are built of wood and
mud, and a considerable number are lacking basic services such as water, access road, and sanitation
facilities. Over-crowdedness is also a critical problem. Lack of formal access and a huge demand for
housing has made informal settlements a main growth area in the city. An estimated 282,000 people
live in sub-standard housing, of which at least half lives in simple mud-houses or shacks.
Government houses are also another neglected area. All land, and 26 percent of the housing stock is
owned by the Government. Rent collection has been, and is, too low, and there are thus no funds
available for maintenance or replacement.
The housing program aims to replace the dilapidated and slum areas of the city with condominium houses.
Condominium houses have been constructed on vacant land, and the plan is for slum dwellers to move into
these houses. The old settlements will then be demolished and the site will be ready for another condominium
project. It is not clear how this project, mirrored nationally, will be funded, other than governmentally
subsidized loans to the poor residents (33% below poverty line), and international support.
In addition, the overall demand-supply gap for mixed use building in Addis Ababa is shown in the table
hereunder:
Table-2: Dd-Ss gap of Mixed use Business Oriented as well as Residential Building Units
Existing Business Unsatisfied

year No. of Building
Unit required Building Units market share
2022 97,879 53,225 44,654
2023 100,423 54,167 46,256
2024 103,034 55,126 47,909
2025 105,713 56,102 49,612
2026 108,462 57,095 51,367
2027 111,282 58,105 53,177
2028 114,175 59,134 55,042
2029 117,144 60,180 56,963
Source: DDA Resource potential assessment report, August, 2020/21.
3.6 TAR GET CU ST OMERS
The envisaged project targets three distinct customer segments. The largest segments that will
address and serve the resident of Addis Ababa city, Ethiopian Diaspora who is returning to Addis
Ababa City, Business Operators and new settlers in Addis Ababa City.
3.7 MARKETING STRATEGY & IMPLEMENTATION SUMMARY

The project will focus on the three previously mentioned market segments: Addis Ababa Resident,
Diaspora and new settlers of Addis Ababa City. In addition the target customers are usually who
looking for higher end facilities that foster a safe, enjoyable, and convenient. They are technology
savvy and have a desir e to have access to the technological amenities that we provide.
3.7.1 MARKETING STRATEGY

Marketing in a highly competitive housing industry depends on the recognition of excellence, as
well as a point of difference to display our units in an individualize light. The envisaged project will
build a reputation upon these components as the result of developing and providing a living
environment of unmatched proportion. It started with the commitment to customer satisfaction and
fulfilling their demands. Our commitment to quality and comfort includes safety and attentive
customer service. The aspect of our living developments that differentiates us from all other real
estate companies is our focus on maintaining the most advanced technological innovations on the
market for our tenants.
3.7.2 PRICING STRATEGY

We are competing with the large
firms who have similar complexes. Our price is competitive with these large firms while maintaining
the high level of quality and expert management. Our Price varies by unit from unit. However, the
business will follow the ongoing market pricing trends in order to maintain a competitive advantage .
Hence, allprices of services to be delivered by the company will be affordable and competitive with
respects to qualities undertaken for each service categories.
3.7.3 PROMOTION STRATEGY
For the envisaged multi-purpose building development, the first and most successful promotion will
come in the form of word of mouth. Since it about owning a real estate, it will be highly visible to
the public and this complex building will be in the upper echelon of quality and livability, word will
spread through the community about its unique appeal.
On the other hand, as the project is a new entrant into the market it requires intensive promotional
activity using different promotional tools. The major focus will be using the mass communication
via print ads in trade publications and on the Internet, direct mail campaigns and personal selling in
the local market. Personal selling provides the means to develop relationships within the local
community and generate high levels of corporate activity through the business community. Public
relations plays an important role in the marketing mix, presenting the housing units as well as business

centers as a supportive member of the community and participating in significant local events to assist in
developing ongoing cooperation, assures repeat business and good working relationships.
3.7.4 MARKETING TOOLS
3.7.4.1 U SE OF ESTATE MANA GEMENT CONSULTANTS

Estate management firms have extensive data bases on prospective house buyers both for first time
owners and repeat buyers who are constantly seeking prime properties. They can tap into their
respective data bases to interest prospective buyers looking for this type of development and will
readily provide such buyers with information about properties on off er.
3.7.4.2 SHOW OR SAMP LE HOUSE

The availability of a show unit greatly facilitates the marketing of the proposed development as this
gives the prospective buyer s the value proposition on offer. Pur chasers will find comfort in being
able to see the final product that they will be buying. In addition, a show house is likely to boost
sales and more importantly is a useful tool to achieve the targeted selling price.
The company will organize open days, preferably during weekends where prospective purchasers can
visit and through time of implementation, be shown the completed houses and receive comprehensive
information on the development. Such open days will also enable interested buyers to meet various
consultants attached to the project who they can ask questions regarding purchase price, financing
options available, legal issues and construction and technical matters
3.7.4.3 ADVERTISI NG
Exposure to this development will be ensured through engaging various media channels to target
prospective buyers. Advertisements in the property pages of the leading dailies and in property
magazines is a popular and effective tool worldwide and the project will use such marketing tools in its
tactical marketing strategy.
Other advertising materials will include:-
Brochures or fliers highlighting main features of the development;

Signboards and a billboard on the main appropriate Roads .
IV. TECHNICAL STUDY
4.1 LOCATION AND SITE
The suitability of the site for development and operation of the proposed Apartment house &
commercial building is an important consideration affecting the viability of the project. Factors such
as location, site topography, accessibility, visibility, ingress/egress, surrounding area characteristics,

ability to serve transient trade, proximity to business and tr ade centers, proximity to travel services
and the function of the area as the building have a positive impact on the proposed project.
4.2 PROJECT DESIGN AND INVESTMENT
4.2.1 Lan d, Build ing an d Civil Works
The total land acquired for the project is about 500 M 2 for which lease amount per M 2 is considered
at ETB 1,100 and or equivalent to ETB 22.0 million for total of 40 years period. Out of the total
lease value, about ETB 2.2 million has been considered as 10% advance payment during the initial
agreement with city administration. Furthermore, the built-up area of the building on 500 Mhas 2
comprises B + G+7 story complexes of apartment house and business center space areas with total
costs of building and civil works estimated at ETB 58.43 Mmillion by assuming construction cost of
ETB 12,985/M 2 at curr ent market value. Whereas, about 80% of construction cost is expected from
ETB 46.74 Million on executed building development and
remaining building cost 20% (ETB 13.5 million) will be sought from external financing as bank term
loan as depicted in the annex part.
4.2.2 Planned Allocation
The envisaged commercial building development project of mixed-use type will have different
construction targets and design allocations. These construction targets are including different types
of residential houses, rentable commercial areas and installment of infrastructures as detailed below:
Table-3: REVENUE PROJECTION FROM TOTAL LAND AREA OF 4,500 M2

Floor Are a
Accommodation Avg. Daily
Capacity (M2) Remar ks rent rate Annual /m2/mnth revenue
BASEMENT FLOOR AREA
Parking Spaces (Lots) (Revenue from Parking) 25 Cars 350 Br.15/Car 90,000 1,080,000
Warehouse/Storage Builtup area (Rent) 120 Br. 380/m2 30,000 360,000
Generator and Laundry Houses (Company Use) 10 N/A N/A N/A
Circulation, Wall, Rest Room & Others 20 N/A N/A N/A
SUB-TOTAL 500 120,000 1,440,000
GROUND FLOOR FOR RENT
Area For Banking & Other Services (Rent) Varies 425 Br. 650/m2 276,250
Shops and Other Business Services (Rent) Varies 3,315,000
Circulation, Wall, Stairs, Corridor & Others (15% ) N/A 75
SUB-TOTAL 500 276,250 3,315,000
1ST FLOOR SPACES FOR RENT
Rentable for Shopping Service (1st Floor) Varies 425 Br. 475/m2 180,625 2,167,500
Rentable for Restaurant & Cafteria (1st Floor) Varies
Circulation, Wall, Rest Room & Others (1 s tFlr) 75
SUB-TOTAL 500 180,625 2,167,500
2nd, 3rd, 4 ,5 & 6 FLOORs Apartments
t h t h t h
Apartment Rent (2nd-Floor) with 3-Bed Room 2 units 225*2=450 Br. 480/m2 261,000 3,132,000
Apartment Rent (3rd-Floor) with 3-Bed Room 2 units 225*2=450 Br. 460/m2 252,000 3,024,000
Apartment Rent (4th Floor) with 3-Bed Room 2 units 225*2=450 Br. 445/m2 245,250 2,943,000
Apartment Rent (5th-Floor) with 3-Bed Room 2 units 225*2=450 Br. 425/m2 236,250 2,835,000
Apartment Rent (6th-Floor) with 3-Bed Room 2 units 225*2=450 Br. 400/m2 225,000 2,700,000
Circulation, Wall, Stairs, Corridor & Others N/A 250
SUB-TOTAL 2500 1,219,500 14,634,000
Meeting Hall Rent (Assume 50% or 15 Event/Month 15/prn 300 Br. 120,000/Event 1,800,000 21,600,000
Office Space Allocation by the Company N/A 150 N/A N/A N/A

Circulation, Wall, Stairs, Corridor & Others (7th Flr) N/A 50 N/A N/A N/A
Sub-TOTAL 500 1,800,000 21,600,000
GRAND TOTAL OF REVENUE 3,596,375 43,156,500
4.3 OTHER FIXED INVESTMENTS

4.3.1 Machineries, Equipment and Furniture
Machineries, Furniture & fixtures that are going to be set up at the project include apartment guest
house & facility furniture. All furniture will be of top quality, beauty, and aesthetics, luxurious setup
including electro-mechanical installations with high quality standard at conference hall including
curtains and carpets has been estimated at ETB 1.95 million as detailed in the annex part.
4.3.2 Office Furniture and Equipment
The building rental business will have standard office spaces and equipment for employees that cost the
company for about ETB 717,805. The detailed cost of office equipment has shown in annexed table.
4.3.3 VEHICLES
The company needs vehicles in connection with services administration, smooth facilitation process
and performing marketing activities. Hence, cost of vehicles related to the underlying business
administration is assumed to be ETB 3.25 million.
4.3.4 Power Supply Generator
In order to overcome the power interruption and emergency occurrences due to normal electric
power faller, Generator is very important for building community. Hence, purchasing cost of power
supply generator is assumed to be ETB 1,250,000.
4.4 SERVICE CAPACITY PLAN AND ANNUAL SALES FORCAST
Although the construction phase is ongoing, the Company has planned to start renting of housing units
and building space rental at 80% capacity rate in the first year, and then increases by 10% each year. In
this regard, it has planned to rent out all units in 3 years, and then will increase by 7.5%, as detailed plan
is tabulated in the annex part.
Table-4: Proposed Service Capacity
Description year 1 year 2 year 3

Revenue @ Prorated Service Capacity of 80% 90% 100%
Revenue from Commercial Area Rent 4,386,000 5,043,900 5,800,485
Revenue from Apartment Rent 11,707,200 13,463,280 15,482,772
Revenue from Conference Hall Service 4,239,600 4,875,540 5,606,871

Revenue from Parking services 2,419,200 2,782,080 3,199,392

Total Revenue 22,752,000 26,164,800 30,089,520
[[
4.5 PROJECT IMPLEMENTATION PLAN

Since the construction of envisaged mixed use building has already reached at final completion phase, the
remaining phase implementation plan shall include:
1. Securing Bank loan facility until end of February, 2022 ,

2. Completion of Remaining Construction works within 3 months (March to May, 2022).
3. Procurement of Machineries and Equipment
4. Recruitment Process of Building Administrative staffs
5. Marketing and Sales activities for building spaces
6. Executing Service provision
Table-10: The Time frame of the project implementation plan
S.
2022
Type of Activity
N Feb Mar Apr May June July
1 Loan Processing &Disbursement
2 Completion of Construction
3 Procurement of Equipment
4 Recruitment Process
5 Marketing and Sales activities
6 Service Provision at Planned Capacity

V. ORGANIZATION AND MANAGEMENT
5.1 ORGANIZATIONAL STRUCTURE
Any business is established primarily with the objective of making a profit. It may be raising
something to sell or the business may be a service provider or the business may be manufacturing or
making something. Regardless of the product or service provided, every business owner needs to
decide the appropriate organizational structure. When starting a business, or when changing from
one organizational structure to another, it's appropriate that owners consider advantages and
disadvantages of each structure in meeting business and personal goals. In other words, the structure of
a business must be consistent with its strategy. Managers give structure to a center through job specialization,
organization, and establishment of patterns of authority and span of control.
Organizational set-up basically emanates from different business directions or vision. In the case, the
underlying project, it has the vision to grow and hold a significant market position in the business
and Tourism industr y. Thus,he t Organizational structure of the guest house and business center is
presented in the figure below.
FIGURE-1: PROPOS ED O RG ANIZATI ONAL STRUCTURE
5.2 MANAGEMENT
The General Manager (GM) is r esponsible for defining and interpreting the policies established by
top management. The manager follows the day-to-day management of a facility and its staff and has
commercial accountability for planning, organizing and directing all services. The overall operation
of the Apartment House & commercial building is directed and controlled by the operation &
Maintainace department. To perform these many duties effectively, the operation department is
divided into two specialized divisions namely; Rooms division & Maintainace division.

The primary responsibility of the marketing and promotion department is sales, or the selling of the
facilities and services to individuals and groups. The department sells rooms to potential clients
through advertising, attendance at association and conference meetings, and direct contacts. Besides,
dealing with Airliners, Travel and Tour operators and outdoor sales will also be the responsibilities
of this department. The Administration department develops, advises and implements policies
relating to the effective use of personnel within the facility. It is responsible for planning, directing,
and coordinating human resource management activities to maximize the strategic use of human
resources and maintain f unctions such as employee compensation, recruitment, personnel policies,
and regulatory compliance.
financial statements, and providing the managers of other departments with timely reports of
operating results (line functions). Other responsibilities, to be carried out include payroll preparation,
accounts receivable, and accounts payable (staff functions). Another dimension of the finance
control throughout the facility.
5.3 MANPOWER REQUIRMENT
The project has planned to employ about 27 permanent employees including management &
supervision personnel skilled & unskilled workers. The details of the required number of employ and
the remuneration are shown below.
TABLE-11: HUMAN RESOURCE REQUIRMENT AND COSTS
S.N. Description Qnt. Posit. Salary Mon. Slry Salary/Year

1 CEO/General Manager 1 45,000 45,000 540,000
2 Legal Advisor 1 20,000 20,000 240,000
3 Executive Secretary 1 10,250 10,250 123,000
4 Head, Ad min & Finance 1 27,800 27,800 333,600
5 Building Administrator 1 21,400 21,400 256,800
6 HR Officer 1 9,750 9,750 117,000
7 Cashier/Accountant 2 12,500 25,000 300,000
8 Procurement Officer 1 12,000 12,000 144,000
9 Sales Officer 2 7,500 15,000 180,000
10 Market Research Officer 1 14,000 14,000 168,000
11 Building Maint. & Plumbing Officers 2 7,500 15,000 180,000
12 Janitors 6 3,700 22,200 266,400
13 Electro Mechanical Officers 2 12,500 25,000 300,000
14 Security Officers 3 4,000 12,000 144,000
15 Employees @ Cenima Hall Facilities 2 7,500 15,000 180,000
Total 27 289,400 3,472,800
Emplo yee Benefit (15%) 27 43,410 520,920
Grand Total 27 332,810 3,993,720

VI. FINANCIAL ANALYSIS
6.1 BASIC ASSUMPTIONS FOR FINANCIAL ANALYSIS
6.1.1 PROJECT LIFE
The operational life of the project depends on maximum property holding period which has taken as 10
years and hence, the costs and benefits of the project are computed over 10 years.
6.1.2 DEPRECIATION EXPENSES
Based on the new Business Income Tax Proclamation set by Ethiopian Customs and Revenue Authority, the
Table-12: Fixed Assets Depreciation Rate
ITEM DEPRE. RATE

Buildings and Associated Civil Works 5%
Machinery and Equipment 15%
Vehicle, Generator and Security Items 15%
Office Furniture & Other Assets 15%
6.1.3 Other Financial Assumptions
The financial analysis of the envisaged project is based on the data presented in the previous chapters and
the following assumptions:-
78% equity
% loan
Loan Repa rom Rent of Business Spaces & Apartment Units
years
Interest Rate 15.5%
Exp .5%
Capital Gain tax ra

Business ..
Account Receivables

6.2 SO URCE O F FI NA NCE AN D AN NU AL REPAY MEN T
6.3 REVENUE PROJECTION
6.4 RESULT OF FINANCIAL PROJECTION
6.4.1 Total Investment Cost
6.4.2 Cash Flow
6.4.3 BALANCE SHEET
6.4.4 Measurements of Return and Pay-back period
.SOCIO-ECONOMIC JUSTIFICATION


Final Feasibility Study Real Estate February 2022

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Final Feasibility Study Real Estate February 2022

Uploaded by

Copyright:

Available Formats

lO MoA RcP SD| 87 59 5 3

Downloaded by mesfin eshete (mes315303@gmail.com)

FEASIBILITY STUDY REPORT 2022

FOR THE DEVELOPMENT OF MIXED USE BUILDING

PROJECT PROMOTERS ABC REAL-ESTATE DEVELOPMENT SERVICE PLC

N/S/LAFTO SUB-CITY; WOREDA-12, H.N-NEW

CONTACT PERSON MELKNEW CHANE LEGESSE (GM)

PREP. BY: BIMAS CONSULTING SE RVICES PLC

ADDIS ABABA, ETHIOPIA

MIXED USE BUILDING PROJECT Page 1

FEASIBILITY STUDY REPORT 2022

II. BACKGROUND ..5

IV. TECHNICAL STU .20

MIXED USE BUILDING PROJECT Page 2

FEASIBILITY STUDY REPORT 2022

1.1 Project Overview

1.2 Project Objective

1.3 Required Investment Capital

1.4 Project Location:

MIXED USE BUILDING PROJECT Page 3

FEASIBILITY STUDY REPORT 2022

1.6 Organization and Management

1.7 Financial Study

Measurements of Project Return

1.8 SOCIO-ECONOMIC JUSTIFICATION

MIXED USE BUILDING PROJECT Page 4

FEASIBILITY STUDY REPORT 2022

II. BACKGROUND INFORMATION

2.2 PROJECT BACKGROUND

2.3 OBJECTIVES OF THE PROJECT

MIXED USE BUILDING PROJECT Page 5

FEASIBILITY STUDY REPORT 2022

2.4 PROJECT RATIONALE

2.5 SIGNIFICANT OF THE PROJECT

2.5.1 Source of Revenue

MIXED USE BUILDING PROJECT Page 6

FEASIBILITY STUDY REPORT 2022

2.5.2 Employment opportunity

2.5.3 Sources of social service

Serve as a source of mental satisfaction for the different users,

III. MARKET ANALYSIS

MIXED USE BUILDING PROJECT Page 7

FEASIBILITY STUDY REPORT 2022

3.2 MARKET POTENTIAL

MIXED USE BUILDING PROJECT Page 8

FEASIBILITY STUDY REPORT 2022

3.2.1 Rapid population growth in Urban Areas

3.2.2 Increased income and improved living standard

3.2.3 High demand of site with pleasant environment

3.3 DEMAND ANALYSIS

3.3.1 Demand for Commercial/Business Centers

The demand of commercial/business center in Addis Ababa is increasing due to increase of

MIXED USE BUILDING PROJECT Page 9

FEASIBILITY STUDY REPORT 2022

- Existing and future number of households and building units,

Table-1: Service and demand analysis based on the last 8 years

No. of Business No. of Building Building spaces

3.3.2 Demand For Residential Housing Units In Ethiopia

MIXED USE BUILDING PROJECT Page 10

FEASIBILITY STUDY REPORT 2022

3.3.3 Residential Housing Demand In Addis Ababa

3.4 SUPPLY ANALYSIS

MIXED USE BUILDING PROJECT Page 11