Residential Development in Kenya, Nairobi. Feasibility Study

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Project: Residential Development in Kenya, Nairobi.
Client: Mr. E.O.
Location: Syokimau, Mavoko Municipality, Mombassa Road.

MARCH 2010

EXECUTIVE SUMMARY
This is a project proposal for the construction of a middle class residential estate on a parcel of land situated at Syokimau in Mavoko Municipality.
The project has been conceived, designed and will be implemented by www.a4architect.com for Mr. E.Ol .

The estimated development cost for the project is KES 70,000,000.

The project completion period shall take 12 months from ground breaking to hand over.

Returns shall be in the range of KES 30,000,000.00 with gross profits falling in the range between 40 and 50 percent.

WWW.A4ARCHITECT.COM
A4architect is a dynamic property consulting company specializing in providing a one-stop service for the management and development of a variety of property development projects. It provides its clients, who may be property owners, developers or tenants, with the expertise to guide a project through the complex development process from concept through to building completion.
Depending on the requirements of their client, A4architect can provide a full or partial consulting service. The company’s involvement can vary from sourcing suitable sites, arranging local authority approvals, managing the professional team or providing a complete project management service.
The principals behind the firm have several years experience in designing and managing to completion several projects of various natures as part of design and implementation teams for leading Project Management firms in Kenya as well as the Government of the Republic of Kenya.

THE PROJECT
The project comprises the construction of residential units for at Syokimau on a subdivision measuring just about 0.5 acres.
The overall theme of the development would be one of maximizing on the plot use whilst maintaining reasonable individual privacy. The selection of the type and size of units to be erected as well as their layout has been done with the foregoing being foremost -A scenario where the property is developed for sale.

PHASED CONSTRUCTION
In order to ease the impact of the overall cost of the development it is proposed to carry out the construction in phases to be jointly agreed on with the client. There will be 5 blocks with each block housing 5 units so the phases can be organized in the basis of the blocks.Each of the phases shall be planned to deliver units that are complete and ready for occupation. This will facilitate pre-selling of some of the units prior to the end of construction. This would be achieved through pro-active networking with property managers and estates officers in large corporations. The foregoing will result in further cushioning of the net effect of the cost of financing the project.
In order to enable planning of major infrastructural requirements such as water storage and soil water disposal right from the outset, a master plan of the entire development shall be evolved. Thus the capacity of some of the facilities may initially exceed the needs of the accommodation provided, but this would be done with the full knowledge that the development will grow to fully utilize the facilities provided.
Auxiliary features would include paved driveways and parkings, extra water storage and planted landscaped gardens. The country ambience would further be enhanced by having strategically planted trees which would serve the added role of acting as wind breaks.

DEVELOPMENT BUDGET
The development budget is as follows:

25 No. three bedroom apartments in five blocks.
Cost of construction per unit=KES 2,500,000.
Total cost of construction for 25 units = KES 62,500,000

• The development budget includes professional fees

1.00 Building details
1.10 Type of houses :3 bedroom flats.
1.11 Number of blocks :5
1.12 Number of flats in each block :5
1.13 Gross floor area per Unit m2: 100
1.14 Building Cost per m2 :25,000
1.15 Building cost per unit :KES 2,500,000
1.16 Overall building cost :62,500,000.00

2.00 Construction cost
2.10 Preliminaries 1,562,500.00 2.5% of item 1.16
2.11 Building works 51,562,500.00
2.12 Infrastructure 9,375,000.00 15.00% of item 1.16

2.13 Subtotal – Construction cost 62,500,000.00
3.00 Incidental costs
3.10 Professional fees 6,200,000.00 10.00% of item 1.16

3.12 Land Cost- [0.5 acres] KES 7,500,000.00

OVERALL PROJECT COST 62,500,000.00 + 7,500,000= KES 70,000,000

SALES PROJECTIONS
1.10 3 bedroom flats
1.11 Projected sale price/unit 4,000,000.00
1.12 Overall sales revenue=25 X 4,000,000= 100,000,000.00
1.13 Gross anticipated profit =KES 100,000,000 – KES 70,000,000=KES 30,000,000.00
1.14 Gross profit margin 42.50%

LOCATION
Syokimau Estate is situated 15 minutes drive from Nairobi’s Central Business District along Mombassa Road. The estate is served by an all weather road with the site of the proposed construction being found 0.5 kilometers from the recently upgraded Mombassa Road.
The estate is connected to the mains water supply from the Mavoko Municipal Council and also has easily connected electricity supply.
The immediate locality consists of subdivisions each measuring an eighth an acre. Developments in this area are an almost equal mix of single family and multi family residences. The occupancy is also almost equally mixed with tenants and homeowners in fairly equal proportions. The majority of the buildings here are of reasonably well constructed and maintained. The site will be located in close proximity to the Great Wall apartments.

MARKET DESCRIPTION
Given the proximity of the site to Nairobi’s CBD as well as the good communication available, the site would realize good returns on a multi family residential development.
The planned development intends to maximize this potential by creating accommodation that is spacious whilst at the same time making optimum use of the space available.
At the moment, there are similar developments in this area, notably the Great Wall Apartments. Further, there is a shift in the trend of housing purchases with potential buyers preferring to purchase housing in smaller courts or estates rather than housing in large estates. This is partly fuelled by the rising insecurity and the need to form smaller more closely integrated neighborhood communities. The planned development would thus meet an existing need.

COMPETITION
In the locality of the planned development, there exist several properties which are either owned by the residents or are rental properties. The closest competition perhaps comes from the Great Wall Apartments. These are however not impressive in terms of the room sizes and number of bedrooms offered.

SALES PROJECTIONS
It is planned to start marketing the development for sale even as the construction begins. Consequently it is anticipated that by the time the first block is completed there shall be an inflow of funds that can either be utilized to start construction of the next phase.
The sale price for each unit has been set at KES 4,000,000.00. This is slightly higher than the KES 3,500,000.00 asking price for the Great Wall Apartments which has 2 bed roomed units. The price is however justified by the upgraded quality of the planned development in terms of finishes, design, number of bedrooms[3], size of the house and location.

EXECUTION OF THE PROJECT
A4architect will in this provide the client with a full design/build service. This shall include

1. Design and specification
Architectural, structural, mechanical and electrical drawings shall be prepared and necessary approvals sought.
During the various stages of the design, the client shall be kept fully informed and client approval sought prior to proceeding to the next stage. The engineering design shall be done by registered engineers under the guidance of A4architect. Detailed specifications shall be developed with close consultation with the client.

2. Project estimates
Subsequent to completion of the design, a firm estimate shall be done for the project

3. Preparation of tender and contract documents
After final design has been done and client approval obtained, tender documents shall be drawn up for the general and specialist contractors. The specialist contract documents shall be prepared with guidance from the relevant engineers.

4. Tendering
Selected contractors shall be invited to tender for the various work packages. We shall then analyze the tenders returned and forward our recommendation to the client.

5. Contract documentation
With the contractors have been selected, we shall draw up the required contract documents and enter into contract with the contractors on the client’s behalf.

6. Project management
Subsequent to the contracts being signed and mobilization to the site, we shall provide superintendence and project management. This will entail ensuring that the project is brought in on time and under budget by constant monitoring of operations on site and remedying any issues that may prevent timely completion or cause expenditure to exceed the budget.

7. Contract administration
We shall handle all matters relating to the various contracts including but not limited to stage payments, performance bonds, extensions of time and relationships between the various traded involved in the project’s execution.

8. Sales and marketing
In conjunction with an estate agency approved by the client, we shall produce a presentation package to be used in the sales and marketing of the units.

PROJECT TIMELINES
a) Design to Tender
The design to tender process will take a total of 2 months. This will include commissioning of all engineering design, preparation of bills of quantities and obtaining of all relevant approvals for the development.
b) Construction
Construction of the entire project is estimated to take a maximum of 10 months.

MARKETING AND SALES
Marketing of the properties is planned to start even before ground is broken for the start of the construction. This will serve the dual purpose of creating awareness of the availability of quality property for sale and to confirm the validity of the market intelligence.
A suitable estate agency will be commissioned after consultation with the client. The agency will be supplied with a virtual presentation kit that will include a walk through movie of the development. A prospectus of the development will also be made for distribution to potential purchasers.
In order to provide a more tangible feel of the development, a show unit will be built within eight weeks of commencement of the project. This will enable even the doubtful potential purchasers to appreciate the quality of the development.

FEES STRUCTURE
Overall fees charged shall be 10% of the final contract sum. The fees shall be spread over the various stages as follows:

Fees Due
A
Inception
Inception and client brief
Physical survey and information review
Sketch design and basic project proposal
5% of fees.
B
Design and design development
Final design and presentation with budget estimates
Final specifications
Engagement of consultants and preparation of electrical, structural and mechanical services
drawings
Development approvals
30% of fees.
C
Pre-tender process
Preparation of tender documents for general and specialist contractors
Identification of suppliers for client supplied items to be fixed by contractors
Shortlisting of general and specialist contractors
10% of fees.
D
Tender process
Tendering for general and specialist contractors
Tender analysis
Contract award by client on advice of Project Manager
15% of fees.
E
Project Administration
Co-ordination meetings conducted by Project Manager
Close control of work schedule
Monitoring of quality of works and ensuring compliance with specifications
15% of fees.
F
Project Accounting
Budget control
Certification of stage/progress payments
10% of fees.

G
Project closeout
Completion inspection with client
Preparation of final account in conjunction with general and specialist contractors
Preparation of schedule of making good defects
10% of fees.

H
Post contract administration
Final inspection after elapse of defects liability period
Confirmation of making good defects after retention period is over
5% of fees.
Total
100% of fees.

Notes on fees structure
1. Negotiations and any other work arising from the submission of application to the Local Authority or the submission of application to the local authority of the statutory bodies constitutes additional services to be charged for on a time basis.
2. Normalization of contract will be by the signing of both copies of a document mutually agreeable to both parties.
3. Fee notes which will be issued on completion of stage B, C & D respectively. Fee notes for stage (A), & (B) will be based on Project Estimates at those stages.
4. The payment from stages E to H will be based on the final project costs. These will be paid on a pro-rata basis as the project progresses and will be submitted immediately following the issue of certification of contractor stage payments.
5. In the event that the client selects a phased implementation of the project, fee notes for stages A, B and C shall be based on the estimated cost for the entire project while fee notes for subsequent phases shall be pro-rated to the value of the phase being implemented.
6. All fee notes will be processed, authorized and paid within ten calendar days of the fee note date.
7. Reports or opinions requiring formal client approval are to be discussed and approved within five working days of receipt of the request from the project managers by the client.
8. Disbursements resulting from the execution of the consultant’s duties including reproduction of drawings and documents, fax messages, traveling and food and accommodation expenses outside Nairobi etc. do not form part of this agreement and will be charged at cost.

Prepared By
Frank Gichuhi
www.a4architect.com
+254 721 410684
A4architect.

Francis Gichuhi (692 Posts)

Architect Francis Gichuhi . B.Arch. University of Nairobi. Registered Architect, Kenya. Member, Architectural Association of Kenya. Contacts. email info@a4architect.com. Telephone +254721410684


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