Project Economics The graphical representation of the demand schedule is the demand curve. The quantity and price are inversely related; that is, Q goes up when P goes down. The curve slopes downward, going from northwest to southeast. This important property is called the law of downward-sloping demand.

1. ARC 4205
Project Economics (A2)
Level 4 Term 2, Fall 2022
Course Tutor: Rifat Bin Ali
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Economics is a social science that focuses on the production, distribution, and
consumption of goods and services, and analyzes the choices that individuals,
businesses, governments, and nations make to allocate resources.
A Project is an individual or collaborative enterprise that is carefully planned to
achieve a particular aim. Which is a combination of set objectives to be
accomplished within a fixed period.

4. Course Outline:
Topic 1: Explanation of Project Economics: (Lecture 1, 2)
• Definition of Project Economics
• Managing an architectural design project by a consultant
• Time schedule for the architectural consulting service for any storied building
Topic 2: Economic Aspects of Project Economics: (Lecture 3, 4)
• What is architectural project
• How is economic feasibility calculated
• What are the major purposes of construction of an architectural project
• How is the profit and loss of architectural project calculate
• Depreciation
• Breakeven point
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5. Topic 3: Basic Components of Formal Physical Plan (Lecture 5, 6, 7)
• Components of physical plan, Analysis of major physical patterns
• Development of implementation strategy
• Determining the cost and benefits of physical plan
• Determining the cost effectiveness of the physical plan
• Scheduling and staging the physical plan
• Managing the implementation of physical plan
• Monitoring and evaluating the physical plan
Topic 4: Land Market and Housing Market: (Lecture 8, 9)
• Urban housing and services- Dhaka
• Land market Dhaka
• Housing market Dhaka
• Urban Housing initiatives
• Urban governance: service delivery matters
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6. Topic 5: Budgeting, Expenditure, Revenue and Impact Analysis (Lecture 10,
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• Budgeting
• Estimation of expenditure and revenues,
• Expenditure, Revenue-Taxes, Price, Fee, Impact analysis
Concluding Class: Review and discussion on the entire course
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7. Project Economics:
Project Economics is the subject that deals with the economic aspects of various projects. When this
subject is intended to be taught to architects, naturally they are taught the economics of various
architectural projects.
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8. As a subject of study Architecture is concerned with the design of built forms.
The objectives of this design is to create built forms use for men.
This is ensured through a method known as construction.
Naturally Project Economics for the architects would deal with the economy of various
activities.
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9. These can include the followings:
1. Selection of Site
2. Selection of appropriate projects
3. Preparation of drawings and construction documents
4. Construction of built-form as per drawings
5. Commissioning of the building
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10. The economic viability of a project depends upon the differences between the cost of the
project and the gain or return from it.
The more will be the gain and the less will be the cost, the more viable will be the project.
With excellent designs, a project may become a failure if it is not economically viable.
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11. Quite often it is believed that an architect has no responsibility beyond the preparation of
the architectural design of the built form. In such cases, the client used to take decisions on
site selection, the type of built form to be built, and the budget and approached the
architect for the design.
The architect with inadequate knowledge of Economics or more precisely project economics
used to finish his responsibility by doing the design.
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12. In the recent decades it has been observed all over the
world that many built form with excellent
architectural designs have failed simply because its
economic viability was not examined.
In such cases the blame for the failure of the building
to have economic success came upon the architects.
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Centre Point, London

13. Pruitt–Igoe
A large urban housing project first occupied in 1954 in the
U.S. city of St. Louis, Missouri.
The complex was designed by architect Minoru Yamasaki
Pruitt–Igoe initially cost $36 million,
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14. In such a context it was strongly felt that the architects should be given adequate
knowledge of economics to handle such projects, such that they can advise the clients
about the various options, possibilities, potentialities, and economic viability of the
With this objective the subject ‘PROJECT ECONOMICS’ has been introduced in the course
of curriculum of Architecture.
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15. Programming or doing the appropriate job at appropriate time is the essential precondition of
success of any project. We shall first endeavor to program an architectural project.
MANAGING AN ARCHITECTURAL DESIGN PROJECT BY A
CONSULTANT:
The individual architect or group of experts of relevant fields perform are assigned the job of
designing buildings, he or they are known as ‘Consultants’. Let the project ‘Preparing the
Architectural Design and Construction Documents of a Building’ be given to a consultant.
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16. Now the various jobs associated with such a project may be the
following:
• Procuring letter of intent from the client
• Procuring necessary information including visiting the site
• Preparing the preliminary architectural drawing
• Getting client’s approval
• Preparing final architectural drawing
• Preparation of first hand estimate of cost
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17. • Taking client’s approval for design and estimate
• Preparation of final architectural drawing
• Preparation of structural design and drawing
• Preparation of electrical and plumbing drawing
• Preparation of bill of quantity
• Preparation of final estimate of cost
• Preparation of other construction documents like tender documents etc.
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18. • The services to be performed by the consultant and the fees and mode of payment for
various jobs payable to the consultant are recorded in registered contract or deed.
• In one clause of this contract there is mention of the time period within which the
consultant needs to finish the entire job.
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19. In such a situation, for the project’s success, the consultant needs to perform the
jobs at the right time.
The easiest method for ensuring this task is ‘Time Schedule’. A sample time
schedule has been shown under here.
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22. TOPIC 02: ECONOMIC ASPECTS OF ARCHITECTURAL PROJECT
WHAT IS AN ARCHITECTURAL PROJECT?
An Architectural Project necessarily means the project concerning the design and construction of
of a built-from.
The jobs included in such a project are:
• Procuring or purchasing land,
• Finding out the appropriate type of built-from to be constructed,
• Preparing drawing, design, estimate and construction documents,
• Procuring finance,
• Construction of the built-form and
• Commissioning of the building.
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23. HOW IS ECONOMIC FEASIBILITY CALCULATED?
In any project the economic feasibility is found out on the basis of
(1) Cost of the project and
(2) Return from the project.
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24. If the cost is more than the return then it is not feasible. Then cost of the project can be
found out from the price of various materials and services required for the building. It is not
however possible to get any perfect idea about the return or income from the project. In
such case the probable return within certain period of time is calculated on the basis of
available information and projection.
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25. WHAT ARE THE MAJOR PURPOSES OF THE CONSTRUCTION OF AN
ARCHITECTURAL PROJECT?
An architectural project may be done for two purposes:
• Selling the building to others and
• Renting the building to probable users.
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26. In the first type buildings are constructed with the aim of selling and are sold either as a
whole or as components e.g. apartments.
In the second type various apartments, floors or its portions are rented to the users. In
renting, usually a considerable sum is collected as advance. This is known as “Selami”. Then
a monthly rent is fixed. In commercial building it depends upon number of bed room,
location of the building, type of finishing etc.
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27. HOW IS THE PROFIT AND LOSS OF AN ARCHITECTURAL PROJECT
CALCULATED ?
The profit calculations of an architectural project which will be sold after construction is done in
the following way.
Cost of the project:
• Cost of procuring or purchasing land,
• Cost for cleaning and preparing the land,
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28. • Cost for preparation of drawing, design, estimate and construction documents,
• Cost for the construction of the building,
• Cost for connection to utilities,
l.e. electricity, water, gas, telephone, internet etc.
Income from the project:
The one-time selling price.
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29. The profit calculations of an architectural project which will be rented
to users after construction is done in the following way:
The profit loss calculation of a building to be rented will be:
• Cost of procuring of purchasing land,
• Cost for cleaning and preparing the land,
• Cost preparation of drawing, design, estimate and construction documents,
• Cost for construction of the building,
• Cost for connection to utilities, i.e. electricity, water, gas, telephone internet.
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30. • + Cost for procuring rent-payers,
• + Maintenance cost for a period equaling the life span of the building.
Income through the life span of the building will be given by the
rent collected within its life span.
Return after the life span of the building:
• Proceeds from the sale of debris and
• Sale of land.
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31. If a building is constructed on safe and permanent land i.e. free from landslide, erosion etc.
the project seems generally feasible because after the end of the life span of the building, the
land can be sold at higher price.
It has been observed that in some cites the urban land is allocated to the users on the basis
of lease. Generally the lease is given for 99 years, after which the government takes back
the land.
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32. In such case,
The cost of the project will be the same as above.
The return however will be as follows:
• Income for a period of 99 years (i.e. leased period) and then
• Proceeds from the sale of debris.
In this case there will be no return from the sale of land.
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33. WHAT IS DEPRECIATION?
Depreciation is the diminishing value of a building with time. It is known to all that the price of a
new building will be more than on old one.
The rate at which the value decreases with time is known as depreciation.
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34. HOW IS DEPREICATION CALCULATED IN ARCHITECTURAL PROJECTS?
Let the life span of the building is 100 years.
Let the price of a building immediately after construction be X Taka,
After 100 years its price would reduce to zero, when only a little sum may be obtained by selling
selling the ruins or debris.
Let the selling price of debris be Y taka.
In such a case the depreciation of the building per year will be given by = (X Taka – Y Taka)/ 100
100 years = Z Taka per year.
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35. WHAT IS BREAK-EVEN POINT?
In Economics breakeven point is the time from which any project starts having neat profit.
For example, an industry has been constructed at a total cost of Taka 10 core, starting from
groundbreaking to commissioning and including the working capital.
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36. At this stage the industry is liable to pay the interest of the money spent so far. Say, this
installment of payment per month is x taka.
Also the industry has to spend money for procuring raw materials, maintenance cost,
utilities, and salaries for the employees etc. Let average cost of all these per month is Y taka.
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37. So, the industry’s total cost will be X + Y Taka.
The time when the industry will be able to make a return of more than X + Y taka per month,
it will be said to have achieved the breakeven point.
The industry is said to run on a loss before it achieves the breakeven point.
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