3. 1.0 Introduction
Real Estate - A piece of land, including the air above it and the ground below it, and
buildings or structures on it.
Modern term of land and anything affixed to it.
Types of Real Estate Investments
- Offices
- Retail
- Industrial
- Leased Residential
- Land
4. 2.0 Construction Procedures
2.1 Project Life Cycle
After fulfilment of life
Facility can be disposed.
Market demands or
perceived needs
Conceptual Planning and
Feasibility Study
Design and Engineering
Procurement and
Construction
Completion and Occupation
Certificate
Operation and Maintenance
Define the project
objectives and scope
Conceptualization,
preliminary designing and
Finance Procurement
Production of construction
plans and Specifications
Completion of
Construction
Client Acceptance of the
Facility
Fulfilment of useful life
5. 2.0 Construction procedures
2.2 Proper Project Delivery Strategy
The delivery strategy will depend on the
Nature of the project
DEVELOPER /CLIENT
PROJECT MANAGERS
ARCHITECTS
CLERK OF WORKS.TO BE
CONFIRMED AT TENDER STAGE
TO
M AIN CONTRACTOR
(QUANTITY
SURVEYOR)
STRUCTUAL
ENGINEER
MECHANICAL
ENGINEER
INTERIOR
DESIGN &
FINISHES
6. 3.0 The Need for a Project Manager??
The concept of independent project managers is fairly new in Kenya and is the
process of taking route.
Due to demanding nature of real estate development; projects need an
administrator and controller.
No project Manager – client becomes PM
Results
- Confusion
- Cost overruns
- Too long to complete
- Quality failure
- Misguided investment
- Ultimate disappointed client
7. 3.0 The Need for a Project Manager??
3.1 Obligations of a PM
Stage 1:- Inception
- Define the clients objectives
- Preparation of economic and viability briefs
- Advice on size and standard of structure
- Advice on project identification
- Advice on alternative projects
- Consider future occupancy requirements
- No plot ? – identification of perfect location
8. 3.0 The Need for a Project Manager??
Stage 2:- Feasibility Stage
- Preliminary cost studies
- Budget development
- Identify alternative designs and materials
- Finance procurement and modelling
- Risk analysis and mitigation strategy
9. 3.0 The Need for a Project Manager??
Stage 3:- Design
- Coordination of the design process
- Maintain set cost limits
- Plans Approvals Procurement
- Coordination of tender process
- Ensure overall adherence to standards and procedures
10. 3.0 The Need for a Project Manager??
Stage 4:- Post Contract Administration
- Construction commences
- Cost/budget control
- Valuations and variations management
- Progressive financial appraisal
- Contract management and referencing
- Consultants symbiosis
- Quality control and value engineering
- Interpersonal relations between project stakeholders
11. 4.0 Challenges in Real Estate Development
a. Construction levies not standardized
b. High lending rates from financial institutions
c. Unregulated industry
d. Land and housing laws at county level are not hospitable
e. Price variances on materials due to economic performance
f. Developers trying to evade proper procedures
g. Lengthy approval processes
h. Changes National construction laws and levying
i. Ethical issues by contractors
12. 5.0 Available Options in Real Estate
(a) Buy and Build
(b) Ready and off plan property
(c) Property Development
(d) Joint venture approach
13. 6.0 Financing in Real Estate Development
6.1 Sources of Financing
i. Bank Loans
ii. JV Partnerships
iii. Mortgage Financing
iv. Off Plan Financing
14. 6.0 Financing in Real Estate Development
6.2 Requirement for Any Project Financing
Proof of land ownership
Feasibility report (sample in appendix of presentation)
Approved Architectural and structural drawings
Priced Bills of Quantities
EIA approvals/certification
Implementation schedule
NCA certification
Developers profile and financial statement
Signed contract between contractor and developer (varies)
Consultants profiles and practicing licenses
Any other requirements – dictated by the terms sheet
15. 7.0 Sample Financing
Model
PROJECT COSTSDISTRIBUTION
ITEM COST DEVELOPERS
CONTRIBUTIONS
PRE-SALE
PROCEEDS
DEBT
FINANCIER
Construction up to
hand over of total
project 249,667,600.00 15,000,000.00 94,667,600.00 140,000,000.00
Land purchase 50,000,000.00 10,000,000.00 40,000,000.00
M arketing cost 7,410,000.00 7,410,000.00
Appraisal fees 1,822,573.00 1,822,573.00
Cost of finance 18,225,734.00 18,255,734.00
Preliminary 2,000,000.00 2,000,000.00
Professional &
M gmt. fees
16,228,394.00 16,228,394.00
TOTAL 345,354,302.00 70,716,701.00 94,667,600.00 180,000,000.0
PERCENTAGE 100% 20.48% 27.41% 52.12%
16. 7.0 Sample Financing
Model
capital project costs
- Land cost
- Construction cost
- Appraisal fee
- Cost of finance
- Professional fee
- Preliminary costs
- Statutory approvals
- management fee
- Marketing costs
PROFIT AND LOSS ACCOUNT FOR XXXX
ESTIMATED INCOME PROJECTIONS
PROJECT UNITS
Type Area(sq.) No. Total area Construction cost/M2
MAISONETTE
182.00
38X
6,916.00 36,100.00
38
6,916.00
PROJECTED INCOME
UNIT No. Average sale
price
Total Income
38 38
13,000,000.00 494,000,00
TOTAL 38 494,000,000
LOAN
182,257,348.00
PROJECT COSTS
NO. ITEM Cost Per Unit Total Cost
1 Construction
cost 6,570,200.00 249,667,60
2 Land
purchase 1,315,789.47 50,000,000
3 Appraisal fees
56,955.42 1,822,57
4 cost of
finance 569,554.21 18,225,734
5 Professional
fees 262,808.00 9,986,70
6 Preliminary
Costs 52,631.58 2,000,00
7 Management fee 2.5% cc
164,255.00 6,241,69
8 Marketing Cost 1.5 % sp
195,000.00 7,410,00
9 Total cost
9,187,193.69 345,354,302
10 Avrg Sale
Price 13,000,000.00 494,000,00
11 Net profit
3,812,806.31 148,645,697
% Net Returns on investment = 43
17. 8.0 Conclusions
With right guidance major capital gains can be realized in real estate
Real property has a ready market in this bubbling industry
Value appreciation with age
Financing framework is easy with proper routing
Collateral portfolio
Tangible investment – you have power to influence its performance
