3. Is there a Crisis on the Horizon or is it already
Here!
4. The Demand Keeps Growing!
1. In 2008 the projected demand for new affordable housing
was 65,000 units per year for the next 10 years.
2. In the 3rd Q of 2009 the projected demand rose to 1.2
million units over the next 10 years, almost double the prior
projection (120,000 units).
3. In the 1st Q of 2010 the latest projection is 2.62 million
units by 2020, again doubling the prior projection (262,000
units).
5. 1) How is the growing demand going to be met?
2) Currently almost all of the construction activity is
Commercial, one time, lump sum contracts!
3) Where is the production home building company with an on
going construction process of even flow deliverables?
7. Saudi Arabia Housing
A new real estate mortgage company is to receive a large
slice of funding from the state's Public Investment Fund (PIF).
Around 20 per cent of the two billion Saudi riyals ($533
million) capital being used to start the firm is being put up by
PIF – its largest-ever investment in a mortgage company,
reports the Saudi Gazette.
Further investors are being sought for the new company,
which is being set up by the Islamic Corporation for the
Development of the Private Sector (ICD), a member of the
Islamic Development Bank.
The investment deadline is the end of this month, after
which time the new real estate lender will establish offices in
Jeddah, Dammam and Riyadh.
8. Saudi Arabia Housing
Last week, Mohammed Al-Jasser, governor of the Saudi
Arabian Monetary Agency, told Arab News that a new
mortgage law, which will make it easier for people on lower
incomes to be approved for property loans, is set to be
introduced within the next few months.
Data is from a Cityscape Intelligence article Jan 2010.
9. Saudi Arabia Housing Demand
Real estate investments in Saudi Arabia will reach 484 billion
Saudi riyals ($129 billion) by 2013, it has been forecast.
According to Fahad Al-Sultan, secretary general of the
Council of Saudi Chambers, the statistics mean that real
estate is now the second most important sector for Saudi
Arabia after the oil market, reports Arab News.
"It has 92 related active industries linked to one another in
the sector. It contributes about SR55 billion to the national
gross domestic product of the Kingdom," he said. Mr. Sultan
added that the gross national profit made by the real estate
sector in Saudi Arabia had risen by 50 per cent between
1999 and 2008.
10. Saudi Arabia Housing Demand
He forecast further growth, noting that an additional 2.62
million homes need to be built in the state by 2020. That's
262,000 per year, for the next ten years.
Last month, Saudi Arabia re-introduced a five per cent levy
on steel and cement imports in a bid to address an
oversupply of the two materials in the domestic market.
Data is from a Cityscape Intelligence article Jan 2010.
11. Company Overview/ Business Plan
The standard construction proforma in the U.S., is projecting
or forcasting, ahead 1 to 5 years. The top five residential
builders in the U.S., all use a similar proforma and produce a
combined total of 200,000 plus units each year. The top five
construction companies have been in business 40 to 60
years, and are still in business to date.
Construction activity, cycles approximately every ten
years, from slow to moderate to a high level of total units
delivered. The 5 year projection is for location and potential
land acqusition, at the 3 year stage, planning and
infrastructure are beginning, and finally at the 1 year stage
vertical construction is scheduled to begin.
12. Top Five US Construction Companies
Builders Completed Unit total for 2005
D. R. Horton 51,383
Pulte Homes 45,630
Lennar Corp. 42,359
Centex Corp. ` 37,022
KB Home 31,009
Combined Total: 207,403
13. Company Overview/ Business Plan
The initial number of projected units will vary, based on the
construction company's size, financial backing, marketing/
sales strategy and consumer demand. The initial proforma,
starts with an annual target of deliverables, based on an
average construction cycle time.
For example, start the process at the beginning of the year,
cycle time will be 4 month's (start to finish), and the release
rate will be 2 starts per day, based on a 5 day work week, and
4 weeks per month. At this rate, I can acheive 8 construction
cycles in a 12 month period. This will produce 350 completed
units, and 170 under construction, in the 12 month
projection ( 2 x 5 x 4 x 8 ).
14. Next Slide Brief
Spreedsheet is showing:
First Year Projections
Varied Number of Starts per Week
Construction Cycle Time- 4 and 7 month
Duration
Ending Total: Starts and Deliverables for
the First Year
15. Month 1 St Wk 3 St Wk 5 St Wk 10 St Wk 25 St Wk
January 5 15 25 50 125
Feburary 4 12 20 40 100
March 4 12 20 40 100
April 4 12 20 40 100
May 5 15 25 50 125
June 4 12 20 40 100
July 5 15 25 50 125
August 4 12 20 40 100
September 4 12 20 40 100
October 5 15 25 50 125
November 4 12 20 40 100
December 4 12 20 40 100
1st Year Projections
Total Starts: 52 156 260 520 1300
Deliverables
4 month cycle 35 105 175 350 875
Deliverables
7 month cycle 21 63 105 210 525
Start Up/ Year One
18. Construction Company Strategy
All units are pre-sold, a rule for most companies, is not to
have more than 10% of all units under construction as
inventory.
Example: If there are 10 units under contract you will release
1 additional unit to be constructed as a inventory or spec
unit.
This is done to capture sales of potential customers who may
not have the desire or time, to go through the entire
construction process.
19. Total Market Research/ Strategic Market Analysis
TMR- is performed to determine areas for development and
improvement, and the types of residential and commercial
needs, in a given geographical area.
SMA- is performed to determine the product selection and
price range of potential buyers, and the type of product that
will suit a given geographical area.
20. Major Focus is on Providing Affordable Housing
1) 88 to 92 percent of home buyers are in the starter or
affordable housing price range- $ 95,000.00 to $ 130,000.00
(SR 356,250.00 to SR 487,500)
2) 6 to 8 percent of home buyers are in the step up or step
down price range- $ 150,000.00 to 325,000.00
(SR 562,500.00 to SR 1,218,750.00)
3) 2 percent are in the high end or custom home price range-
$ 400,000.00 and up
(SR 1,500,000.00 to SR 50,000,000.00)
