Case Study on Feasibility Analysis of Real Estate Project

Developed By L&T Institute of Project Management, Vadodara

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1. Background - Indian Real Estate Sector

The Indian real estate is playing an essential part in Indian economy and plays an imperative role both
in terms of employment opportunities as well as in the development of the countrys infrastructure
base. Indian real estate market is also expected to generate over 17 million employment opportunities
across the country by 20251 along with annual revenues of US$ 180 billion by 20202. However the
Indian real estate sector remains in the grip of a downturn owing to slow purchases from homebuyers
and low absorption across all asset classes (barring the commercial office and warehousing segments
which have witnessed considerable traction in recent times), leaving developers struggling with unsold
inventory.
Indian Real Estate sector comprises of four sectors3 in terms of Housing, Retail, Hospitality and
Commercial out of which Housing commands large share with respect to remaining three
subsectors. By and large Indian real estate sector used to be quite unorganized sector until last decade
but due to favourable policy by Government of India and economic reforms in the form of FDI (Foreign
Direct Investment) along with emphasis of Infrastructure status have helped in creating long-term
sustainable opportunities both for investors and developers. Indian real estate sector is also facing
several challenges apart from ongoing economic slowdown like lack of clear land titles, absence of
title insurance, absence of industry status, lack of proper finance and investors, shortage of skilled
manpower, rising material costs and rigorous approval and procedural process.

2. Overview of L&T Realty4

L&T Realty is the real-estate development arm of Larsen & Toubro Limited. L&T is a major Indian
multinational in technology, engineering, construction, manufacturing and financial services, with
global operations. Its products and systems are marketed in over 30 countries worldwide. A strong,
customerfocused approach and the constant quest for top-class quality have enabled L&T to attain
and sustain leadership in its major lines of business for over seven decades. Backed by the parent
companys rich experience of over 75 years in the construction industry, L&T Realty has made an
extremely successful foray into the real-estate industry following the philosophies, ethics and work
approach that have been behind its sustained growth. It has redefined the real-estate Industry in India

Source: http://indiamicrofinance.com
Source: http://indiamicrofinance.com
3
Source: ASA & Associates A brief report on Real Estate sector in
India 4 Source: https://www.lntrealty.com/
2

with its transparency, customer-focused approach and continuous quest for world-class quality. L&T
Realty has an impressive presence across Western India, Southern India and Chandigarh with many
residential, commercial and retail projects. The company is committed to creating landmarks of
excellence. This is reflected in its business parks built to support uninterrupted work 24x7, the under
construction Transit Oriented Development (Indias largest), in Navi Mumbai - Seawoods Grand
Central, and its much-coveted residential buildings and complexes. The company believes that
progress must be achieved in harmony with the environment, and is deeply committed to
environmental protection and community welfare. Each project is a mission to fulfil customer
expectations and a promise to set new standards of delivery and satisfaction.

3. Feasibility Analysis of Real Estate Project

Feasibility analysis can mean different things to different people. Lets first define the term feasibility.
The word feasibility is derived from feasible, which simply means capable of being done or
accomplished. And feasibility studies aim to logically find the strengths and weaknesses of a proposed
project, opportunities and the resources required to carry through, and ultimately the prospects for
success. A feasibility study aims to objectively and rationally uncover the strengths and weaknesses
of an existing business or proposed venture, opportunities and threats present in the environment, the
resources required to carry through, and ultimately the prospects for success. In its simplest terms,
the two criteria to judge feasibility are cost required and value to be attained.
There can be various types of feasibility studies Technical, Economic, Legal, Operational and
Scheduling. It is represented by the acronym TELOS4.

When we talk about the feasibility analysis of a real estate project, we mostly talk about economic
feasibility or financial feasibility. It is not so that we ignore the other factors in a real estate feasibility
study. Most often we incorporate all of them in the economic feasibility. The final result of a real estate
feasibility analysis is inclusive of technical, legal, operational and scheduling feasibility studies.

Source: Feasibility Analysis Study being used for Real Estate Projects

4. Understanding of Project Feasibility Analysis for Real Estate Project

Project feasibility analysis is a multi-step exercise. As the analysis progresses, the real estate
developer or sponsor will gradually acquire more information that will help determine whether or not
to proceed further. The following four activities may be performed sequentially, although more often
than not, they are done simultaneously:
1. Market analysis;
2. Site selection and analysis;
3. Competitive market analysis; and
4. Financial feasibility analysis.
4.1 Market Analysis
The qualitative and quantitative data gathered through market analysis serves to identity any untapped
market opportunities, refine the target market, confirm the features that will most likely attract the target
market, and develop a market strategy. These and other reasons for conducting a market analysis are
shown in Table-1.
Table 1: Reasons for Conducting a Market Analysis
Reason

Key Considerations

To define the market

What is the market area for the project?

What is the size of the target market segment?
What are the financial resources (income and assets) of the potential
residents?

To

estimate

marketability of project

the

Is the location appropriate for a seniors-oriented development?

What is the impact of current and prospective competitors?
What are the real estate trends for the area?
Does the neighborhood possess the amenities required by the prospective
residents?

Table 1: Reasons for Conducting a Market Analysis

Reason
To create the product

Key Considerations
What are the market preferences relating to design features; unit types
and sizes; pricing; and financial, tenure and management structures?
What amenities will prospective residents require to be offered in the
project?

To identify and assess

What form of personal care services will prospective residents require?

the need for personal,

What form of health and/or medical care services will prospective

health and medical

services

To
substantiate the
project

To assist with marketing

efforts

residents require?
How extensive are the personal, health and medical care needs of the
prospective residents?
How can services best be delivered?

What degree of quantitative evidence will satisfy partners, investors,

lenders and regulatory authorities?

What marketing strategy or theme will assist to reach the target market?

Many large, well-established development companies conduct market analysis both before and after
site selection. Market analysis before site selection can help identify gaps in a given market area that
could present future development opportunities. Market analysis after site selection focuses on
refining the target market, finalizing the project concept and securing financing. For most developers
and sponsors, however, market analysis takes place before a site has been selected, as the initial
process of defining the target market and completing the market analysis will ultimately drive the
choice of a particular site.
4.2 Site Selection and Analysis
The process described above assumes that the developer or sponsor does not yet own a parcel of land
and is, instead, exploring alternative sites located in neighbourhoods with population characteristics that
match the chosen target market profile and proposed development concept. If the market analysis
suggests sufficient demand to support a feasible project, the next step is to explore in detail the viability
of the proposed development site.

When selecting a site, the preferences, needs and demands of the target market must be carefully
balanced against the realities of cost and other site-specific conditions and constraints. These include
location, proximity to services and amenities, and the character of the surrounding neighbourhood.
Developers and sponsors also need to consider whether neighbourhood residents will support the
project or express opposition, an issue discussed in more detail in Volume 3: Planning the Project.
Unfortunately, the best-located sites and those that offer the greatest development opportunity are
often priced to reflect their preferential status in the marketplace. Hence, narrowing the search down
to a particular site requires a number of trade-offs.
4.3 Competitive Market Analysis
Analyzing the competitions market positioning provides insights into local market preferences can
help to identify unmet needs. It involves studying the profile of older people living in other seniors
developments in the market area and noting whether the housing is appropriate to their needs with
respect to financial, social, recreational, service and lifestyle factors. Properly analyzing the
competition is a time-consuming process, but it is essential.
Essential to a comprehensive description of the market and to identifying gaps in the market is a
macro-level understanding of the socio-demographic characteristics of the population. The competing
projects should be recorded by:

Municipal address;

Sponsorship;

Year of opening;

Building condition;

Number and type of units;

Tenure;

Costs (rental rates or purchase price);

Services and amenity offerings; and

Type of project (independent, assisted living or supportive housing).

This data can generally be obtained through brochures, websites and other promotional materials. The
insights gained will assist in future product positioning. For example, information on the number of
projects in the area and the year in which they opened will help indicate how familiar the market is with
different housing forms targeted to older residents. Information on the number and type of units will help
to confirm if supply meets or exceeds demand. Data on tenure, cost, and service and amenity offerings
will indicate which market segments are currently being served and which are not.

The next step is to focus on a narrower range of projects for more in-depth examination. Three to five
projects serving the same target market should be examined in detail with respect to:

Unit sizes;

Vacancy rates;

Waiting lists;

Building features and attributes;

Service offerings and activities (basic and optional upgrades);

Pricing and rate structure;

Optional service take-up;

Resident demographics and socio-economic profile;

Marketing and promotional activities; and

Position in the seniors housing industry spectrum (for example, assisted living or
supportive housing).

This information will reveal which market is being served, the level of demand and the primary market
for each project. Research on the history of competitors projects will disclose whether changes have
been made over time and why, thereby helping to identify evolving market preferences and gaps.
Problems encountered by these projects, indicated by high vacancy rates, may also serve as a lesson
in design features, marketing image and unit mix.
Identifying projects that have not yet opened but are well into the planning and development phase is
another critical task. Another developer or sponsor may be in the midst of an active marketing and
promotional campaign for a new project about to open in the same market area. Find out when the
project is scheduled to open, the unit profile, the pricing strategy and other project attributes. Some of
this information may be gleaned from municipal and provincial government sources or industry
associations, especially for projects that receive operating subsidies. Other information on new and
pending completion can often be obtained from local market housing analysts, planning and
development consultants, and real estate agents. Information about projects that are still at the
concept stage may be available through informal networks.
Information on current and planned projects can generally be obtained from municipal planning
authorities, local developer or builder associations, trade associations and seniors associations, as
well as by word-of-mouth in the neighbourhood.
The information on current and planned projects targeting the same primary market and market segment
and offering similar services and amenities should be analyzed for:

The number of households within target age and income profile of the proposed project
currently residing in competing projects;

Average vacancy and turnover rates within these projects; and

The number of other units that will be in operation and drawing from the same market
segment as the proposed project when it opens.

Comparing these numbers with the data collected through the earlier market analysis will identify the size
of the market (the total number of qualified households) for the project.
Throughout the analysis, use the following assumptions to ensure that risks are conservatively estimated:

People who already live in one form of housing in the seniors housing industry spectrum,
such as assisted living accommodation, will not generally move to the same form of
housing offered by another assisted living provider and should, therefore, be subtracted
from the pool of prospective residents.

Residents living in a different form of housing in the seniors housing industry spectrum
may be attracted to the proposed development, provided their current accommodation
represents an earlier stage along the spectrum. For example, residents of assisted living
accommodation are unlikely to move back into a newly constructed independent living or
active lifestyle development, but those in mainstream housing may be attracted to
independent living accommodation aimed at the seniors market.

All competing projects in the planning and development stages that are not yet completed
will be occupied first, at a market rate of 95 % occupancy, so that the pool of qualified
households will be further reduced.

Turnover in existing projects will be replaced by the prospective market pool at the current
turnover rate, estimated at 10 %.

For the last two calculations, assume between 70 %and 80 %of residents will come from
the primary market area, and the rest from elsewhere.

4.4 Financial Feasibility Analysis

Financial feasibility analysis uses information from each of the previous steps to evaluate whether a
project can be delivered within a price range the target market can afford over the period of time it will
take to plan, develop, construct and fully occupy the building or sell off all of the units. This can be
determined only by a detailed comparison of costs and revenues using a tool known as a financial pro
forma.

4.4.1 Project Costs

It is important to differentiate between the hard costs and soft costs, and among fixed, variable and
discretionary costs.

Hard costs are directly attributable to the construction and finishing process and include
labour, materials, appliances, furniture and equipment. They may also include the
purchase price of the land and the value of any external improvements made to the
property, such as site servicing and landscaping.

Soft costs are those incurred in the planning and design of the project and include
architectural and engineering fees, legal fees, permit fees, environmental assessments,
and advertising and promotion expenses.

Fixed costs are those that do not depend on the number of units constructed. The costs
associated with a real estate appraisal or the completion of a Phase 1 Environmental
Site Assessment would be considered fixed costs, since they would be the same
regardless of the number of units proposed.

Variable costs change based on the overall scale of development. Development

charges would be an example of a variable soft cost, as the total fee payable to the
municipality is usually based on the number of units constructed.

Discretionary costs can be decreased, eliminated or postponed without affecting the

accomplishment of essential objectives, especially in the short term. An important
example in residential development is the cost of advertising and marketing.

One of the most difficult decisions faced by most beginning developers and sponsors is deciding on the
optimal size of a project, the correct mix of units, the range of services and amenities to offer and the
size of the marketing budget. No less challenging is determining what impact these decisions will have
on construction costs, personnel costs and other operating expenses.
In most cases, developers or housing providers create high and low scenarios to establish a range of
costs and to help project future expenditures over the first two or three years of operation. In all cases,
cost estimates should be as detailed as possible and properly account for inflation and escalation, which
can occur over time and as the project is occupied.
4.4.2 Project Revenues
The revenue sources associated with most seniors projects are limited and include entrance fees, selling
prices and rents; service fees; and non-operating revenues, such as interest income and bequests. The

size of the project, the rate at which it is occupied or the units sold (known as the absorption rate) and
market demand all affect revenues. Developers and housing providers should prepare several revenue
scenarios to cover both optimistic and pessimistic market predictions over the first few years of the
project.
4.4.3 Project Financial Pro Forma
In real estate, a pro forma is used to assemble all relevant financial information about a project. It is
separated into a capital budget and an operating budget.
The capital budget conveys the primary sources and uses of the funds that go into planning, designing
and constructing a project. The uses of the funds in a capital budget are expressed as costs and the
sources of funds are referred to as capital.
There are many different ways to raise capital to finance a real estate development; however, the two
common forms are equity and debt. In practical terms, equity refers to the amount of funds developers
or sponsors contribute to the project themselves. This could take the form of cash or, if land is already
owned, the value of the property contributed to the project. However, developers and housing providers
who do not have sufficient liquid funds to cover all costs secure financing to cover the difference between
the total cost of the project and the amount of equity that has been invested.
The operating budget (also called the operating cash flow statement) conveys the expenses and
revenues associated with the operation of a rental project or the sale of the units to owners. Rental
projects, such as retirement homes, incur expenses for utilities, staff salaries and other costs, and
generate income through rents and other fees collected from the tenants. Income can be calculated by
subtracting the cost of operating the project from the revenues collected through rents and the provision
of services.
For ownership projects, the process is more or less the same, although instead of a series of ongoing
expenses and revenues, the expenses are incurred during the construction period and sales phase, and
the revenues are incurred as a single lump-sum payment at closing. The key components of a typical
operating budget are illustrated in table 2.

Table 2: Key Components of Typical Operating Budget/Operating Cash Flow Statement

Operating
revenue

Total annual revenue expected from rents. Depending on the project, the rent may be
set by the provincial government.

+ Funding

Additional funding received. Most long-term care projects, for example, receive funding
from the provincial government or local health authority.

Operating
expenses

Costs incurred to receive rent from the property, such as utilities, insurance, property
taxes, maintenance and repairs, or capital reserves.

Debt service The annual total of payments necessary to pay off the mortgage.

= Net
operating
income

Income the project produces after expenses are paid (the bottom line). An income
analysis approach will exclude debt service costs from operating expenses; however,
in some cases operating expenses include debt service.

4.4.4 Project Feasibility Ratios

The operating cash flow statement will reveal if a proposal will generate a net income, but not if it will be
profitable. To understand the feasibility of a proposed real estate project, it is necessary to consider key
feasibility ratios, for example the return on investment, the return on equity and the debt coverage ratio,
as shown in table 3.

Table 3: Feasibility Ratios

on Used to evaluate the investors gain from an investment. This Net Operating Income
ratio must be used with caution in the beginning, since most of /
Investment
the initial investment of the project may be held by the
Total Cost of Project
(ROI)
mortgage lender.

Return

on A tool to evaluate the investors gain from a real estate

transaction.
Equity (ROE)

Return

Debt
Coverage
Ratio (DCR)

Net Operating Income /

Equity

The lenders primary tool for evaluating the project. It Net Operating Income /
represents the amount of annual cash flow available to meet
annual interest and principal payments on debt. The minimum Debt Service
DCR required varies according to prevailing local economic
and real estate market conditions.

Different scenarios, assuming different rates of occupancy, can be used to test the financial viability of
the proposed development concept under varying market conditions. Adjustments may be needed to
ensure that the proposed undertaking provides a healthy return on investment or return on equity. The
following questions can help in amending the operating cash flow statement if the initial project concept
is found to be unfeasible:

What compromises, in terms of unit mix, unit sizes, design features, amenities and
services, will reduce costs?

What impact would these compromises have on demand?

What services and amenities must be available on opening day, and what can be phased
in later?

Could the project be developed in two stages?

These issues are made slightly more complex by the nature of the product and the characteristics of the
market. A well-prepared project feasibility analysis can help answer many of these questions. However,
the final determination will always be a judgment call. The better the research, the more likely it is that
the risk will have been accurately assessed.
4.4.5 Project Lender Expectations
Financial feasibility analysis can generate useful information not only for the developer or sponsor of a
proposed undertaking but also for financial institutions, which expect to see detailed financial pro forma
statements on a project proposal before they offer a construction loan, a take-out mortgage, or mortgage
insurance. They want assurances that a project will generate sufficient cash flow to cover annual interest
and principal payments on the debt, both during the immediate rental or sales period and over the life of
the loan. Lenders and mortgage insurers will also be concerned with risk and measures taken to reduce
risk.

5. Case Study on Residential Cum Commercial Project Feasibility

5.1 Project Description in Brief6:
Proposed real estate project is L&T Realty's upcoming new residential cum commercial development
Project in one of the posh areas of Mumbai. Proposed residential cum commercial project is a perfect
reflection of environmentally thoughtful design and serene green surroundings. Project is having following
configuration. Project is having 20 years of life span including Design, Build, Finance, Sales and Operate.

Residential
Commercial
Parking
Parking/Lobby
Parking/Lobby
Parking

Level 13 - 34
Level 6 - 12
Level 2-5
Level 1
Ground
2 Basement

5.2 Project Working Flowchart

Proposed new residential cum commercial development Project is having following working
flowchart being predicted for smooth project execution from tendering to commissioning stage.

5.3 Project Details5 (as per project bid document):

Source: L&T Realty Real Estate Project

Source: L&T Realty Real Estate Project

Table-4: Project Assumptions/Considerations8:

Timeline
Bid award

23-Apr-2015

Construction starts

01-Apr-2016

Construction completes

31-Mar-2020

Recreation ground work complete

31-Mar-2017

H1 means half year starting from

01-Apr-2016

Projection considered only upto

2035 (20 years)

Project Construction Costs

Area
Sqft
for 732178

Construction
Cost
Commercial Part
Construction Cost for Residential
Part
Construction Cost for Parking
Levels/Basement
Cost of
Infrastructure
Development

Rs /
sqft
3217

In Rs.

Rs. Cr

2,355,415,140

236

1708414 3432

5,863,277,725

586

860851

1200

1,033,021,080

103

602246

200

120,449,160

12

9,372,163,105

937

On
Area

Buildable

On
Parking
Basement Area
On Plot Area

(Contingencies on Const. Costs

included in given costs)
Consultants Cost
Architectural consultants fees

2440592 50

122,029,590

12.20

Landscape consultants fees

2440592 15

36,608,877

3.66

Structural & MEP consultants fees 2440592 20

48,811,836

4.88

Impact
Assessment
Environment & Traffic
Approval Fees

12,202,959

1.22

183,044,385

18.30

Fees

Approvals from MCGM including

sanctioning,
development
charges,
water,
sewerage,
electricity connection charges
deposits and OPE etc.

Source: L&T Realty Real Estate Project

- 2440592 5

2440592 75

On
Area
On Plot
(Land)
On
Area
On
Area

Buildable
Area
Buildable
Buildable

On Built Up Area

Other Fees/Charges
Project
Management, 3%
Administration and Supervision
Charges as % of project cost
Marketing Costs as % of
3%
construction cost during
construction period
Business
Development 2440592 8
Expenses (As per estimated
Actuals)

281,164,893

28.12

205,467,322

20.55

19,524,734

1.95

Contingency on costs other than

construction

4%

36,354,184

3.64

SPV Formation legal fees

0.25

1835908 350

642,567,744

64.26

1835908 10

18,359,078

1.84

660,926,822

66.09

Recreational Garden
Landscaping of the Recreational
Garden
Landscaping consultants Fees
Total

Other Project Assumptions

Escalation due to Inflation 6%
Rate of Interest for Loan 14%

Loading on carpet area to arrive at Saleable Area is assumed to be 40%

Financing : Debt 70% & Equity 30%

Surplus Revenue to be Re-invested

Loan Repayment commence from 31st Sept.19

Source: L&T Realty Real Estate Project

On
Area

Buildable

Commercial
Occupancy - 70 % to 85%
Lease Rental Rs.100/Sqft
Increase in Lease rental 20% per 3 years
Lease of Car Parking space Rs. 1000/Sqf
Residential
Base price Rs.25,000/Sqft
Floor Rise 2% in Multiples of 2 Floors
Price Escalations 15% in 2 years
Car parking space Rs.5L/No
Table-5: Revenue Forecast Statement9
Revenue Forecast Statement

Commercial
Occupancy
Lease Rentals Realisation (Monthly)

Area (Sq ft) /

factor

Rs /
sqft

In Rs.

In Rs. Cr.

85%
895893

100

76150944

7.62

Lease Rentals Realisation (Annually)

12

913811328.8

91.38

Lease Rentals Realisation (10 Year Cap)

10

9138113288

913.81

Lease Rentals Realisation (20 Year Cap)

20

18276226577

1827.62

456905664.4

45.69

2378000

0.24

Lease Deposit

Car Parking Space Lease (Monthly)

2378

1000

Car Parking Space Lease (Annually)

12

28536000

2.85

Car Parking Space Lease (10 Year Cap)

10

285360000

28.54

Car Parking Space Lease (20 Year Cap)

20

570720000

57.07

Commercial Development
Car Parking Lease

Rs per car park

Lease Rentals to Start at

Increase in Lease Rentals

Source: L&T Realty Real Estate Project

3000
1.4.2020

Every 3 Yrs

20%

Source: L&T Realty Real Estate Project

Moratorium

Project Taxes
Income Tax
Depreciation
St Line method
WDV method

( Conservative estimate )

33.00 %
1.63 %
10%

Table-6: Phasing of Cost Over a project Duration10

Particulars/Heads

H10

H11 H12

31.3
.19

31.3
.20

31.3
.21

10% 15%

20% 15%

10% 10%

10%

10% 10%

10% 20%

15% 15%

30%

10% 10%

H1

H2

H3

H4

23.4
.15

1.9.
15

31.3
.16

30.9
.16

31.3
.17

31.3
.18

100%

10%

10%

100%

10%

100%

50%

HY
Ending

H5

H6

H7

H8

H9

Tender Conditions
Bid Security Payment

0%

Tender Premium
Commercial Plot
Construction Cost for
Commercial Part
Construction Cost for
Residential Part
Construction Cost for
Parking Lvls/Basement
Cost of Infrastructure
Development
Approvals & Sanctioning
Fees (MCGM etc)
Architectural Consultants
Fees
Landscape Consultants
Fees
Structural Consultants
Fee
TIA & EIA Consultant
Fees
Adm, supervision & PM
cost
Marketing cost
Business Development
Expenses
Recreational Garden
Plot

50% 50%

100%
100%

40% 30%

100%

50%

10%

10%

10%

0%

0%

10%

10%

10%

10%
50% 50%

100%
100%

50%

10%

10%

100%

50%

25%

25%

5%

10%

10%

100%

5%

100%
100%

Source: L&T Realty Real Estate Project

10%

100%

10%

10%

10%

10% 10%

10% 10%

10% 10%

5%

15% 10%

10% 15%

20% 20%

10%

5%

Landscaping of the
Recreational Garden

100%

Landscaping consultants
Fees

100%

50%
50%

50%

50%

10

Table- 7: Project Development Mix and Area Statement6

S.
No
A

Particulars

Area
(Sqm)

Plot and Built up area allowed.

Total Plot Area for Commercial
Tower

55,950
1,70,56
0
Total Area of Recreational Ground
Total Built Up Area Permissible for 2,26,51
Tower
0
B

Remarks

10.764

As given in Tender Document

(Sqft)

6,02,246
18,35,908

As given in Tender Document

24,38,154

As given in Tender Document

7,31,446

Greater than 50% required, as

30% per Zoning

Development Mix
Commercial Offices
67,953
1,58,55
7
0

17,06,708
0

70%
0%

As per Demand Assessment

As per Demand Assessment

Hotel

0%

As per Demand Assessment

Service Apartments

0%

As per Demand Assessment

67,953
0

7,31,446
0

10.764 As per Development Mix;

0% Not Applicable

68
68,021

731
7,32,178

0.1% Lift Wells, Stair Wells, etc

Constructible Area

5,102

54,913

7.5% For Commercial Buildings

3,401
59,450

36,609
6,39,924

5.0%

23,780

2,55,970

40% Loading of 40%

Residential Premium to Super

Premium
Retail

Factor

Area Statement Commercial Built

Up Area
Add Area for Balcony
Add area for Lift & Stair Well,
Lift Room
Total buildable area[1+2+3]
Less : Area of walls
Less : Area of Lift/Stair and
Building Lobby
Net Carpet Area [4356]

Subtract area of walls, lift/lobby

Add : Loading for Saleable Area

Source: L&T Realty Real Estate Project

Source: L&T Realty Real Estate Project

Total Saleable Area

Parking 2Wheelers (Nos)

Parking 4 Wheelers (Nos)

No of Floors
D

Area Statement Residential Built

Up Area
Add Area for Balcony
Add area for Lift & Stair Well,
Lift Room
Total buildable area[1+2+3]
Less :Area of walls
Less : Area of Lift/Stair Lobby
Net Carpet Area [4356]
Add : Loading for Saleable Area

Total Saleable Area

83,231

2 per 50 sq m of Carpet Area

(ISBT DCR)
10000 Average Floor Plate

2,378
7

1,58,55
7

17,06,708

159
1,58,71
6
19,839
5,555
1,33,16
3

1,707

53,265
1,86,42
8

2,663

Parking 4 Wheelers (Nos)

No of Floors

1,997
21

Source: L&T Realty Real Estate Project

4 per 50 sqm of Carpet Area (ISBT

DCR)

4,756

Parking 2Wheelers (Nos)

Area Statement Retail

Built Up Area Commercial
Development
Add Area for Balcony
Add area for Lift & Stair Well, Lift
Room
Total buildable area[1+2+3]
Area of walls
Area of Lift/Stair Lobby

8,95,893

17,08,414
2,13,552
59,794

10.764 As per Development Mix;

0% Not Applicable
0.1%
Constructable Area
12.5% For Residential
3.5%

14,33,361
5,73,345

Subtract area of walls, lift/lobby

40% Loading of 40%

20,06,706

4 per 200 sqm of Carpet Area

(ISBT DCR)
3 per 200sq m of Carpet Area
(ISBT DCR)
7500 Average Floor Plate

0
0

0
0
0
0

0
0
0
0

10.764 As per Development Mix;

0% Not Applicable
1.0%
Constructable Area
10.0% For Retail
20.0%

Net Leasable Area [4356]

Loading for Saleable Area
Gross Leasable Area
Net Leasable Area Anchors
Net Leasable Area Non Anchors

0
0
0
0

0
0
0
0

Subtract area of walls, lift/lobby

40% Average Loading Factor

40%

Parking 2Wheelers (Nos)

Parking 4 Wheelers (Nos)

No of Floors

0
0

Parking Area Required

Basement/Podium
Total Parking for 2 Wheelers
Total Parking for 4 Wheelers
Area for Parking 2 wheelers

7,419
4,375
22,257

Area for parking 4 wheelers

49,984
Max Plinth Area
13,988
Max Area of basement
27,975
Space Required for Parking (Includes
Circulation)
79,975
No of floors required for Parking
6
Therefore 2 Basement plus 4 levels
of parking
G

60%

4 per 50 sqm of Carpet Area (ISBT

DCR)
2 per 50 sq m of Carpet Area
(ISBT DCR)
13988 Average Floor Plate

2,39,574
5,38,032
1,50,561
3,01,123
8,60,851

3 sqm per 2 wheeler

12.5 sqm per 4 wheeler, 50%
11.425 parking can be 10.35 sqm
0.25 0.25 Ground coverage
2 Twice the Plinth Area
1.6 Circulation area of 60%

Tower Configuration
Lvl 13
Residential
Commercial
Parking
Parking/Lobby
Parking/Lobby
Parking

Total Height
Total floors ( 2 basements + 37 floors)

34
Lvl 6
12
Lvl25
Lvl 1
Ground
2Basem
ent
133.2
37

Source: L&T Realty Real Estate Project

3.6 Average floor Height 3.6 m

Table-8: Project Cost and means of Finance Statement12

H1
Ending

H2

H3

H4

1.9.15
31.3.16 30.9.16 31.3.17

H5

H6

H7

31.3.18

H8

H9

31.3.19 0

H10

H11

H12 Total

31.3.20

31.3.21

Cost of Project
( 2015 prices)
Cost of
Construction
Commercial
Part

29%

24

24

24

35

47

35

24

24

236

Residential
Part

71%

59

59

59

59

59

117

88

88

586

Parking
Lvls/Basement

52

31

10

10

103

Infrastructure
Development

12

Landcaping of the
Recreational Garden

32

32

64

134

113

93

104

106

153

118

118

32

32

1001

18

Architectural
Consultants
Fees

12

Landscape
Consultants
Fees

Structural
Consultants
Fee

TIA & EIA

Consultant
Fees

Adm,
supervision
PM cost

28

SubTotal
Other Costs
Approvals &
Sanctioning Fees
(MCGM etc)

&

Source: L&T Realty Real Estate Project

Marketing cost

Bank Gurantee 1%
Fees ( Approx)

Business
Development
Expenses

17

10

10

10

103

Interest (
current prices)

10

13

16

20

24

11

12

13

129

Total
Capitalised
Costs

17

145

127

109

126

128

181

152

138

55

47

1234

Contingencies
on other costs
SubTotal

4%

21
10

Cost to be
written off
SPV
formation
SPV
annual
admn exp.,
etc
SubTotal

0.25
0.50 0.50 0.50 0.50 0.50

0.50 0.50

0.50 0.50

0.50 0.50 5.50

0.25 0.50 0.50 0.50 0.50 0.50

0.50 0.50

0.50 0.50

0.50 0.50 5.75

87

18

146

170

110 215

128 320

152 356

55

Equity

84

13

103

134

80

414

Debt

42

36

30

34

34

48

38

38

13

10

331

181

95

272

114 318

42

516 1538

128 320

152 356

55

526 2283

WC Margin
Total Costs

526 2283

Means of
Finance (
2015 prices)

Revenue
surplus
reinvested.
Total Means

87

18

Source: L&T Realty Real Estate Project

146

170

110 215

Table-9: Project Interest Cost Calculation Statement13

H1
HY Ending
>>..
0

H6 H7

H8 H9

1.9. 31.3.1 30.9.1 31.3.1 0 31.3. 0

15
6
6
7
18

31.3. 0
19

H2

H3

H4

H
5

H1
0

H1 1

31.3 0
.2 0

H1
2

H1 3

31.3
.2 1

10 11

12

Tot
H1
H1
H1
H1
5
7
9
4
H16
H18
H20 al
31.3.
22

13

14 15

31.3.2
3
16

31.3.2
4
17

18

31.3.2
5
19

20

Residental
Debt at
beginning
of period

41 72

98 128

160 206

0 39

52

35

31 26

31 31

46 38

39 13

11

Total

41

72 98 128 160

206 243

39 52

63

Less :
Repayment
at end of
HY
10 306

Balance at
end of
period

41

5 7

9 11

14 17

17 29

39 52

64 83

98 113 119 109

14

12 10

12 13

18 15

16

Add :
Disbursme
nts
beginning
of HY

Interest

306

14% 78

0 0

72 98 128 160

0 243

206

0 63

0 39 52

306

306

78

Commercia
l
Debt at
beginning
of period
Add :
Disbursme
nts
beginning
of HY

123

96 82

68 55

41 27 14

123

Total

17

29 39

52 64

83 98

113 11 9 123 109

96 82

68 55

41 27 14

Source: L&T Realty Real Estate Project

Less :
Repayment
at end of
HY
10123

0 0

Balance at
end of
period

17

29 39

2 3

7 10

Interest

86

52 64

83 98

14 14

14 14

14 14

14 14

113 119 109 96

82 68

55 41

27 14

14 123

32

1 86

13

32

1 164

14 14

14 429

Total
Interest
Payment

13 16

Total
Repayment

20 24

243

11 12

0 77 14

14 14

14 14

13

Table-10: Project Revenue Forecast Statement14

Particulars/
Heads

H3

H4

H5

H6

H7

H8

H9 H10 H11

31.3.
18

31.3.
19

31.3.
20

H12 H13 H14

Unit
30.9. 31.3.
16
17

HY Ending

31.3.2
1

31.3.
22

H40 Tot
al
31.3.
35

Commercial
Occupancy
Average
Lease Rent
(Rs / Sq ft /
month)

0%

0%

0%

0%

0%

0%

0%

0%

40%

60% 70% 85% 85%

110

110

Source: L&T Realty Real Estate Project

110

110

228

0%

Car Parking
Rentals
Phasing
Lease
Deposits
Phasing

Lease
Rental
Revenue
Car Parking
Lease
Revenue

0%

0%

0%

0%

0%

0%

0%

20%

40% 60% 80% 85%

40%

60% 70% 85% 85%

%
0

24

35

41

0.29

0.57

24

36

42

51 105 2228

24

35

41

50 104

24

12

Rs
Cr
0.86 1.14 1

34

Rs
Cr

Sub Total

Lease
Deposits lying
with
Rs
Promoter
Cr
Yearly flows
of Lease
Deposits

Residential
Average
Apartment
Price

50 104 2194

Rs/
Sqf
t

27500 27500 27500 27500 31625 31625 31625 31625 36368.75 6368.75 36368.7
5

Source: L&T Realty Real Estate Project

104

0%

0%

10% 15% 15% 15% 15% 10%

10%

10%

0%

0%

10% 15% 15% 15% 15% 10%

10%

10%

552 952 952 952 952 730

730

730

6549

10

10

10

10

100

562 967 967 967 967 740

740

740

6649

562 967 967 967 967 764

776

782

6751

562 1529 2496 3463 4429 5217

6029 6811

8877

Sale of
100
Apartments %
Car Parking
Spaces
Apartment
Sales
Revenue
Car Parking
Sales
Revenue
Total
Residentail
Revenue

Gross
Revenues
(Resd +
Comm)
Cummulative
Revenues

100
%

Rs
Cr.
15

15 15

15

Rs
Cr

14

Source: L&T Realty Real Estate Project

Table-11: Project Profit & Loss Statement

Source: L&T Realty Real Estate Project

5.4 Project Feasibility Parameter Analysis

Based on Project details and information available in Table-4 to 11 following project feasibility parameters
can be derived.
Calculation Based on 2015 prices

Rs. Cr. (without Inflation)

Rs Cr (With Inflation)

Construction Cost

1001

1300

Other Costs

103

130

Interest (Current prices)

129

129

Tender Premium

1044

1044

Cost to be written off

WC margin

2283

2611

Equity & RE Revenues

414

464

Debt

331

429

Revenue Surplus

1538

1718

Total Means

2283

2611

Cost of Project

Total Costs

Means of Finance

Project Life

Realization after 10 Yrs

Realization after 20Yrs

NPV

Rs.185.90 crore

Rs.292 crore

Rs.302 crore

IRR

18.77%

20.4%

19.1%

MIRR

11.5%

14.1%

11.7%

Payback
Period

6.5 Years

Please submit analysis for the following:

I. Calculate project feasibility for L&T Realty based on different project scenarios (extremity
perspective, which is general phenomenon in real life situation) like
a. Most Adverse cost (15% more), revenue (15% less), occupancy (70%)
b. Adverse cost (10% more), revenue (10% less), occupancy (75%)
c. Moderate Adverse cost (5% more), revenue (5% less), occupancy (80%)
d. Minimum Favourable cost (5% less), revenue (5% more), occupancy (100%)

II.

How will you calculate and consider revenue mix from residential property sales and
commercial space lease/rental income and allied sources?