Internship Project

On
“Financial Modeling and Analysis of 50 Flats Housing
Project in Gurgaon, Haryana IN”

A Summer Internship Project Report submitted in partial fulfillment of the requirements

for the award of the degree of

Post Graduate Diploma in Management

Submitted by
S ANEESH KUMAR
Roll No: 2101004

Under the Guidance of

Dr. ABHAY SRIVASTAVA

IPE, Hyderabad

Institute of Public Enterprise

Hyderabad, Telangana, India-500101
2021-2023

1
 Institute of Public Enterprise
Hyderabad, Telangana, India -500101

Declaration

I hereby declare that the work presented in the project entitled “A Report on Financial Modelling and
Analysis of 50 Flats Housing Project in Gurgaon, Haryana IN”, is a Summer Internship Project Report
submitted in partial fulfilment of the requirements for the award of the degree of Post Graduate Diploma in
Management is an authentic record of my work carried out during a period from 16th May 2022 to 6th June
2022 under the supervision of Dr, Abhay Srivastava, mentor and faculty Institute of Public Enterprise,
Hyderabad.

The matter presented in this project work has not been submitted by anyone or by me for the award of any
other degree of this or any other Institute/University.

S Aneesh Kumar
2101004

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 Mentor Certificate

This is to certify that the above statement made by the candidate is true to the best of our knowledge and belief.

Dr. Abhay Srivastava,

Place: Hyderabad Dept. of Operations

Date: 29thAugust 2022 IPE, Hyderabad

3
 ACKNOWLEDGMENTS

It is a great pleasure for me to express my respect and deep sense of gratitude to my mentor and guide Dr.
Abhay Srivastava, Professor, Institute of IPE, for his wisdom, vision, expertise, guidance, enthusiastic
involvement and persistent encouragement during the planning and development of this research work. I also
gratefully acknowledge his painstaking efforts in thoroughly going through and improving the manuscripts
without which this work could not have been completed. I am highly obliged to Prof. S. Sreenivasa Murthy,
Director, IPE, and Dean of Academic and Chairman Placements, IPE, and Dr.C,V Sunil Kumar, Coordinator
of PGDM , IPE for providing all the facilities, help and encouragement for carrying out the project work. I am
obliged to my parents S.Nagender and S.Santhoshini for their moral support, love, encouragement, and
blessings to complete this task.

I also would like to express my deep and sincerely thanks to my industry mentors Aneesh S Kumar and
Kritika Verma for their constructive suggestions, support, and encouragement.

I would also like to thank I would also like to extend my special thanks to Professor AS Kalyan Kumar
faculty and SIP Coordinator, IPE and other staff members of IPE, Hyderabad, for their timely help and
cooperation extended throughout the course of Summer Internship Programme.

Finally, I am indebted and grateful to the Almighty for helping me in this endeavor.

S Aneesh Kumar
2101004

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 Executive summary

The objective of this report is to highlight the financial analysis and feasibility of this project.
With the help of Vardhan consulting Engineers (VCE), I have work on the analysis and
study of feasibility of the real Estate project in the Gurugram, Haryana as real estate has
proved to be real engine growth. Over the years the real estate sector in india has emerged as
a big engine for economic growth, as it second largest employer next only to agriculture.
India‘s global competitiveness remains constrained and is adversely affected by lack of
infrastructure, which is critical for improved productivity across all sectors of the economy.
However, achieving the investment targeted for the Eleventh Plan presents many distinct
challenges. These relate not only to scarcity of financial resources but also to lack of capacity
within the government to implement these ambitious programmers.

In India, government budgetary resources are increasingly constrained in financing

infrastructure projects. In this scenario, Public Private Partnerships (PPP) has emerged as a
viable option for financing infrastructure needs. The trends in PPP financing highlight several
issues with implications for financing the large-scale PPP program envisaged by Indian
government. PPPs have relied heavily on commercial banks for their debt financing, and it is
unclear how sustainable this dependence will be. Long-term financing exposes the banks to
the risk of asset liability mismatch. An active bond market can increase the flow of long-term
funds and reduce reliance on banks. Public Private Partnerships in India face barriers posed
by the absence of a sufficiently sophisticated financial sector, fiscal barriers, red tape and
procedural inefficiencies that have contributed to project delays and discouraged private
investors, and constraints arising from the absence of adequate infrastructure regulation that
aggravates risks and uncertainties for investors. Haryana has lined up many projects for
private investment under the Public Private Partnership mode.

Techvardhan Infra Pvt Ltd. Company is planning to construct a project of Residential

Building. The Flats and offices will be constructed on the private land. Around 4000 sq. feet
land will be utilized for the proposed project.

PROJECT COST: Cost of the proposed project would be Rs. 8 Cr.

In this internship “Project finance – Modelling and Analysis”, I have worked from home as
physical internship is not possible due to pandemic COVID-19 lockdown. The project title of
my internship is Financial Modelling and Analysis of 50 Flats Housing Project in Gurgaon,
Haryana IN. I have prepared the financial model of 50 Flats Housing Project in Gurgaon,
Haryana.
The objective of this is to study and analyze the financial viability of the project by Revenue
model, Equity IRR, Min DSCR, Avg DSCR, project IRR and process flow of this venture.
By this model, bank can check the weather loan should be provided or not to Client. Bank
also checks the credit worthiness and future benefit from it.
9
 Table of contents
Cover page 1
Declaration 2
Mentor Certificate 3
Acknowledgements 4
Certificate of Completion 5
Certificate of Completion-Company 6
Executive Summary 7
List of Maps 9
List of Tables 9
List of Figures 9
Abbreviations 10
Chapter 1: Introduction to Real Estate 12
1.1 Overview of Real Estate in India 13
1.2 Infrastructure development in Gurugram 15
Chapter 2: project financing 16
2.1 Project finance – primer and uses 17
2.2 Parties involved and transaction flow 17
2.3 Advantages and Disadvantages 18
2.4 Real estate project finance- definition and industry terms 19
2.5 Real estate development timeline 20
Chapter 3: Project description 22
3.1 Type and location of project 23
3.2 Selection of proposed site 23
3.3 Raw material Requirements 23
3.4 Availability of water and power 23
3.5 Generation of waste and its treatment 24
3.6 Site analysis 24
3.7 Project planning brief 25
3.8 Proposed infrastructure 25
Chapter 4: Project schedule and financial model 28
4.1 Project schedule 29
4.2 Project cost assumptions 29
4.3 preparation of financial model 31
Chapter 5: Results and feasibility study 35
5.1 Financial feasibility analysis 36
Chapter 6: conclusion 40
bibliography 42

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Map no. 1 Gurugram city layout

Table no. 1 Raw material Requirement

Table no. 2 Details of existing land use
Table no. 3 Details of existing social infrastructure
Table no. 4 Details of land use breakup
Table no. 5 Details of dwelling units
Table no. 6 Project implementation schedule
Table no. 7 Project details
Table no. 8 CAPEX cost Estimation
Table no. 9 OPEX cost Estimates
Table no. 10 Revenue parameters estimates
Table no. 11 Other assumptions
Table no. 12 Revenue (net projected)
Table no. 13 Finflow statement
Table no. 14 Debt/ repayment schedule

Figure no. 1 Market growth forecast

Figure no. 2 Parties involved in Project Finance
Figure no. 3 Development timeline of Real Estate
Project Finance
Figure no. 4 Solid waste management
Figure no. 5 Distribution of project cost (CAPEX
Figure no. 6 Distribution of Operating Expenses (OPEX
Figure no. 7 Total operating expenses growth (2023-2032)
Figure no. 8 Revenue growth (2023-2032)

11
 Abbreviations

GDP Gross Domestic Product

CAGR Compound Annual Growth Rate
REIT Real Estate Investment Trust
AIF Alternate Investment Fund
PMAY Pradhan Mantra Awas Yojana
DTCP The Directorate Of Town And Country
Planning
RERA Real Estate Regulation & Development Act
CRED The Confederation Of Real Estate Developers
AI Association Of India
NCR National Capital Region
NH National Highway
CAPE Capital Expenditure
X
SPV Special Purpose Vehicle
O&M Operation & Maintenance
D&B Design & Building
GMC Gurugram Municipal Corporation
DHBV Dakshin Haryana Bijli Vitran Nigam
N
IRR Internal Rate Of Return
DSCR Debt Service Coverage Ratio

12
 Residential plotted building

Area (approx. 4000

sq. metre)

Map .1 Gurugram city layout

13
 CHAPTER-1:
INTRODUCTION TO REAL
ESTATE

14
 1.1 Overview of real estate in India:

The real estate industry is one of the most well-known on a worldwide scale. The real estate
industry is divided into four subsectors: housing, retail, hotel, and commercial. This sector's
expansion is largely supported by the expansion of the business environment and the need for
office space, as well as urban and semi-urban housing. Across terms of direct, indirect, and
induced impacts in all sectors of the economy, the construction industry ranks third among
the 14 key industries. The Indian real estate sector is predicted to grow to a market size of
US$ 1 trillion by 2030, up from US$ 120 billion in 2017, and to contribute 13% of the
country's GDP by 2025. Retail, hotel, and commercial real estate are also expanding rapidly,
supplying much-needed infrastructure for India's growing needs.
With increased demand for commercial and residential spaces, the Indian real estate
market has seen rapid expansion in recent years. Residential property demand has grown as a
result of growing urbanisation and rising household income. India is one of the top ten
fastest-rising housing markets in the world. The residential category accounts for 80% of the
real estate industry.

fig. 1 Market Growth Forecast

The Indian construction industry is estimated to grow at a CAGR of 6% between 2019 and
2024. The infrastructure industry is critical to the growth and development of the Indian
economy. Infrastructure services account for over 9% of India's GDP. It includes the building
of power plants, bridges, dams, highways, and urban infrastructure development, all of which
serve as the foundation and support for other service sectors.

Investments/Developments:

● Indian enterprises, both public and private, announced projects totaling $1.99 trillion
in the fiscal quarter ending March 2019, 16% less than in the previous quarter and
46% less than in the previous year.

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 ● In 2016, the infrastructure sector in India saw 33 agreements, with 17 involving
USD3.49 billion, compared to 31 deals involving USD2.98 billion in 2015-16, with
the bulk of deals driven by the electricity, highways, and renewable sectors. In
addition, in April 2017, Malaysian and Indian corporations inked agreements for
infrastructure projects totaling USD 3.86 billion to be implemented in India.
● By 2022, India would require USD 646 billion in infrastructure investment, 70% of
which will be required in the electricity, roads, and transportation sectors.
● The first REIT, created earlier this year by global investment giant Blackstone and
real estate business Embassy Group, raised Rs 4,750 crore (US$ 679.64 million).
● In January 2019, Ascendas paid US$ 35.70 million for Chennai's Pallavaram IT Park

● Godrej Properties has bought the iconic RK Studios property in suburban Chembur.

● New home releases in India's top seven cities are predicted to climb 32% year on year
to 193,600 units by the end of 2018.
● Embassy Office Parks stated in September 2018 that it will fund around Rs 52 billion
(US$ 775.66 million) through India's first Real Estate Investment Trust (REIT) IPO.

Government Initiatives:

● The Government of India, in collaboration with the governments of the individual

states, has launched a number of measures to promote growth in the industry. The
Smart City Project, which aims to develop 100 smart cities, represents an excellent
potential for real estate corporations. Some of the other notable government initiatives
are listed below:
● The Union Cabinet has authorised the establishment of a Rs 25,000 crore (US$ 3.58
billion) alternative investment fund to resuscitate around 1,600 delayed housing
projects across the country's key cities (AIF).
● Blackstone reaches a 12-billion-dollar investment milestone in India.

● Puravankara Ltd, a real estate business, is to invest around Rs 850 crore (US$ 121.6
million) over the next four years in the development of three ultra-luxury hotels
Bangalore, Chennai, and Mumbai residential developments
● 1.12 crore dwellings have been sanctioned in urban areas under the Pradhan Mantri
Awas Yojana (Urban) [PMAY (U)], producing 1.20 crore employment.
● The real estate industry is governed by multiple laws and rules, and it draws a wide
range of behavioral patterns that represent anti-competitive behaviors (Competition
Policy and Competition Law), anti-consumer practices, unfair trade practices, and
other regulatory difficulties. The Central Government has adopted a slew of
legislation under the Central and Concurrent Lists of the Constitution that are either
directly or indirectly related to the Real Estate business. The research also takes a
close look at the legislation issued by the Central Government in order to uncover
restrictions or practices that discourage competition in the industry. The report also

16
 examines the Centre's policies, creating an environment conducive to increased
involvement and investment in the Real Estate industry.

Central Policies, Laws, Draft Bills & Model Provisions:

● 2007 National Urban Housing and Habitat Policy

● Proposed National Rural Housing and Habitat Policy

● Partnership Guidelines for Affordable Housing Policy

● Unify Foreign Direct Investment Policy (Effective April 1, 2011). (Ministry of

Commerce and Industry)
● Monetary Policy for Real Estate Lending and Bank Lending to Home Buyers

● Financial Policy (Service Tax - Finance Act, 2010 etc).

● Section 35AD of the Income Tax Act of 1961 (as amended by Finance Act, 2011)

● Rent Control Legislation Model, 1992

● 2011 Model Residential Tenancy Bill

● 2011 Draft Real Estate (Development Regulation) Bill

1.2 Real estate (infrastructure) in Gurugram

With commercial and residential construction activity buzzing in Gurugram, Sonepat,

Faridabad, and Panchkula, real estate emerged as the most popular industry for investors in
Haryana in 2010, according to an Assocham study.

Contrary to the national trend, real estate in Gurugram is driving a comeback of investor
enthusiasm in the National Capital Region. According to analysts, stringent enforcement of
the law is one of the main reasons for this buoyancy, which has ended a five-year dry period.
The resurgence of buyer confidence may cause residential and commercial property values in
Gurugram to rise by 10% to 20%.

The introduction of the Real Estate (Regulation and Development) Act, 2016 is presently
having a favourable impact on the Gurugram market (RERA). In the last two months,
development of 20,000 new units in Millennium City has begun, bringing in Rs 3 lakh billion
in real estate investments. "Previously, developers would take money from investors and
redirect it to other ventures." Prior to 2014, such methods were common. The next few years
will be even more exciting for purchasers since builders are under pressure to finish projects
over the next three years in order to meet Prime Minister Narendra Modi's goal of 'housing
for everyone by 2022.'

With the Dwarka Expressway construction delays largely addressed, demand will rise even
more. Prashant Solomon, managing director of Chintels India and treasurer of CREDAI, an
apex body of private real estate developers' associations, comments on the effects of this: "It
is good news for the area as developers have invested over Rs 60,000 crore in residential and
commercial projects along the 150-metre-wide roadway, but had been struggling to sell

17
projects due to lack of proper connectivity." Around 1.5 lakh property purchasers have been
inconvenienced for more than a decade as a result of the delay. We are optimistic about the
road's completion because the NHAI currently owns all of the land needed to complete it.

The regions in Gurugram where the Southern Peripheral Road and the Northern Peripheral
Road (as the Dwarka Expressway is often called) intersect at NH-8 are real estate investment
destinations (sectors 99-112 and 37D, sectors 58-63, 68, 78-81, 84, and 85-86). Anarock
Property Consultants data shows that the weighted average price for homes introduced
between January and May of 2019 is Rs 4,900 per sq.ft. From January to May 2019, around
8,500 new units were introduced in Gurugram, accounting for roughly 51% of total supply in
the NCR.

CHAPTER-2
PROJECT FINANCE

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 2.1 Project Finance – A Primer

Project finance is the financial examination of a project's whole life cycle. A cost-benefit
analysis is commonly performed to examine if the economic advantages of a project
outweigh the economic expenses. The study is especially crucial for long-term CAPEX
growth initiatives. The first phase in the study is to define the financial structure, which will
be a combination of debt and equity to finance the project. Then, identify and assess the
project's economic advantages, and determine if the benefits outweigh the expenses.

Why Do Sponsors Use Project Finance?

A sponsor (the company that needs funds to support initiatives) has two options for financing
a new project:
⮚ The new endeavour is funded through the financial sheet (corporate financing)

⮚ The new project is integrated into a newly formed economic entity, the SPV, and is
funded off-balance-sheet (project financing)

2.2 Parties involved and transaction flow in project finance

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 fig. 2 Parties involved in Project Finance

● SPONSORS

Sponsors are often the parent company's equity share capital holders who want to seek
project financing. An SPV can also be floated by two or more organisations. This
phenomenon occurs when two companies produce synergy for one another or are
expected to gain mutually from the underlying SPV. They are the SPV's equity
suppliers. Before launching an SPV, they must get approval from the parent
company's shareholders via a shareholder's agreement (SHA).

● FINANCIAL INSTITUTIONS/BANKS
A single lender or a group of financial institutions might be involved. They are the
holders of senior debt and have priority over any loan provided by the sponsors (if
any). The loan is absolutely secured by the SPV's cash flows and assets. As a result,
enough due diligence is undertaken prior to the granting of any loan.

● SPECIAL PURPOSE VEHICLE (SPV)

It is a distinct legal entity established by the project's sponsors. The project financing
secured is only intended for this SPV. The SPV operates as a corporate veil between
the lenders and the parent firm, avoiding credit seepage and property attachment
between the two parties.

● THE HOST GOVERNMENT

The government of the home nation in which the SPV is located. The SPV must be
formed in compliance with the norms and regulations of the government. It also
frequently serves as a guardian angel by giving different tax breaks, subsidies, and
refunds.

● OFFERS TAKERS
An off-take agreement binds off-takers to acquire a specific minimum quantity of
produce from the selling party. An off-take agreement is often used in the mining,
construction, and other large-scale industries. The vendor (SPV) incurs significant
capital investment. An off-take agreement assures the seller that there will be a market
when the transaction is completed.

● SUPPLIERS AND CONTRACTORS

As with any construction project, suppliers and contractors are required for contract
execution. They are the primary raw material providers. They also carry out critical
services including design and build (D&B), operations and maintenance (O&M), and
so on.

2.3 Advantages and disadvantages of Project Finance

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ADVANTAGES OF PROJECT FINANCE

o Effective debt allocation

Project financing permits sponsors to obtain debt in excess of the parent's capability. This
borrowing may be evaluated in its own right and is unaffected by the creditworthiness of its
sponsors. As a result, more advantageous and flexible lending conditions may be arranged
based purely on the value and potential of the project under consideration.

o Risk Management
As previously stated, the separation of the legal identities of the parents and SPV is what
genuinely distinguishes project finance. This provides significant diversity and risk dilution.
The parent company's stockholders are unaffected by changes in the project's fate. The
sponsors' liability is restricted to the amount of stock supplied. Furthermore, the danger is
minimised when numerous businesses are involved. Several companies may create a joint
venture to form a single SPV. As a result, spreading the same amount of risk over a greater
number of participants minimises each party's exposure.

o Economies of scale
When more than one parent creates an SPV, economies of scale are highly possible. Two
modern companies will only agree to collaborate towards a common aim if they see a major
advantage from the collaboration. Especially in the manufacturing and construction
industries, one entity might greatly gain at the expense of another. For example, an extraction
business and a mine owner may agree to work together to sell extracted material. Vertical
synergies will be utilised. Both entities will be able to attain size and profitability that they
would not have been able to accomplish in their solo capacities. They will also have more
bargaining power with both vendors and purchasers.

DISADVANTAGES OF PROJECT FINANCE

o Complexity
Project financing is a step up from a normal credit transaction. It is built on a series of
contracts between several parties, each of which included lengthy discussions. If adequate
judgement is not used, it may be difficult to keep track of the movement of monies among the
parties involved. In addition, all transactions are routed through an imagined entity (SPV). As
a result, it is critical to have specialised personnel that constantly monitor the flow of
transactions.

o Documentation and compliance

Setting up an SPV confronts opposition at every turn. Before giving even a single dollar of
credit, banks and financial institutions do extensive due diligence and screening. This is
mostly due to the fact that an SPV has its own legal position. The bank can only make
recovery against the SPV's assets and cash flows. As a result, they must be double certain
about the future Prospects and the viability of the operational plans All of these inspections
are time-consuming and costly. Clearly, the SPV and its sponsors must suffer the weight of
this agonising process.
A project finance endeavour also raises the government's suspicions. When it comes to
approving the formation of an SPV, the government is particularly cautious. This is due to the
fact that various parallel groups have been known to avoid taxes, bypass money, and

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participate in extreme neglect of legislation. A potential SPV must thus be patient and adhere
with all requirements specified in order to gain its confidence.

o Constant expert support

Complex transactions and various stakeholders are involved in project finance. As a result,
hiring specialists and experts is unavoidable. The expense of establishing a dynamic model
for obtaining credit and conducting business is enormous. Consider this cost to be the
extravagant and exorbitant fees paid to investment bankers and other experts who make
project financing possible.

2.4 Real Estate Project Finance

What is Real Estate Project Finance?

Project finance is the long-term financing of an independent capital investment, such as a

project with identifiable cash flows and assets. A famous example is real estate project
financing. Mining, oil and gas, and building and construction are further instances of project
financing.
Cash flows from real estate project funding should be sufficient to cover operational
expenditures and support loan repayments. Typically, the financing is made up of debt and
equity that is matched to the asset's lifetime.

Terms and Definitions in the Real Estate Project Finance Industry

To create a financial model, we must first comprehend the key concepts and terminologies
used in real estate project finance:

✔ Loan to value (LTV): The amount of debt financing provided by a lender as a

proportion of the property's market value.
✔ Loan to cost (LTC): The amount of debt finance provided by a lender as a proportion
of the development's cost.
✔ Net operational income (NOI) is the difference between gross rental revenue and
operating expenditures (property taxes, insurance, maintenance, etc.).
✔ Cap rate: NOI divided by property value given as a percentage.

✔ Amortization period: The number of months or years it takes to repay a loan's

principle.
✔ Term: The length of time that a mortgage loan's interest rate is agreed upon.

✔ General partner (GP): An unlimited liability partnership owner, generally a

management who actively engages in the business.
✔ Restricted partner (RP): A passive investor with limited abilities dependent on their
investment in the project.
✔ Land loan: Financing used to purchase land with no return on investment. Long-term
value will be significantly lower than that of an income-producing property.

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 ✔ Floor space ratio (FSR): Used to calculate building size and restrict the density of
development on a parcel of land.
✔ Gross building area (GBA): The total amount of space in a building from wall to
wall.
✔ Gross leasable area (GLA): The total amount of enclosed living space.

✔ Gross site area: A site's two-dimensional measurements based on its property

boundaries.
✔ Deductions: A fraction of the gross site area that cannot be developed, such as public
access spaces, roads, lanes, and so on.
✔ Net site area: The whole area less any deductions.

✔ Max GBA: The maximum gross building area determined using the FSR.

✔ Construction GBA: Gross building area calculated from construction blueprints.

✔ Saleable area: The gross building area after construction, less all shared areas and
other non-saleable parts.

2.5 Real Estate Project Finance – Development Timeline

When developing a real estate project financing model, we need to understand the
development process and timetable. A real estate development project has various stages:
At each stage of the real estate project financing life cycle, several forms of funding are
utilized.

For example, a corporation may employ stock to fund transaction finding. This is because
there is a large risk in the early phases of a project, making it difficult to acquire bank funds.
Later stages, such as rezoning and pre-development, are typically financed using a
combination of loans and equity.

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fig.3 Development timeline of Real Estate Project Finance

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 CHAPTER-3
PROJECT
DESCRIPTION

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 3.1 Type and location of Project

TYPE OF PROJECT:
The proposed project is the building of a High Rise Residential Building with a total area of
roughly 90000 sq. ft. and a built-up area of 45000 sq. ft. in Gurugram, Haryana. The structure
comprises eight levels. Each level includes six apartments.
PROJECT LOCATION:
The proposed project location is near the Dwarka Expressway in the Pushpanjali Farms
neighborhood. The proposed project's general location is seen on Map No. 1.

3.2 Selection of proposed site

In this region, all physical infrastructure facilities such as water supply trunk lines, drainage,
and storm drains are designed. As a result, all projected infrastructure facilities will be
available, as will city-level infrastructure facilities

3.3 Raw material Requirements

Construction materials i.e. cement, steel, wire, sand, aggregate, bricks etc. will be procured
from the local market as per requirements. Approximate Quantities are mentioned below
table:

Sr. No. Material Quantity(Approx.)

Cement 68512 bags (28 kg)

1
Steel 176535 kg
2
Sand 245890 CFT
3
Aggregate 107812 CFT
4
Aerated Concrete Blocks 6061090 NO.
5

Table no. 1 Raw material Requirement

3.4 Availability of water and power

• WATER NECESSITY AND SOURCE: GMC water supply is the primary source of water. GMC
water mains will supply treated water. The quality of drinking water is comparable to that of water
given to other residents. GMC maintains the water quality by doing the appropriate treatment.
Because GMC provides treated drinking water through the mains, there is no need for additional
water treatment to make it drinkable. The total water consumption during construction is 8.0 KLD.

• POWER REQUIREMENTS AND SOURCE: During construction, the total power need will be 500
KVA, using DHBVN as the source. During the operational phase, the total power need for flats, lifts,
and pumps will be 1250 KVA, using DHBVN as the source.

26
 3.5 Generation of waste and its treatment
During the construction phase, about 2.2 KLD of domestic waste water will be created, which will be
discharged of through GMC sewers and processed at the closest Sewage Treatment Plant. One of the
most important aspects in the region is solid waste management. The city of Gurugram has a door-to-
door solid trash collection system. This will also be given at the relocation site. Wet and dry waste
separation will also be implemented.

3.6 Site analysis

✔ Connectivity: The proposed project is the building of a High Rise Residential Building
with a total area of roughly 90000 sq. ft. and a built-up area of 45000 sq. ft. in Gurugram,
Haryana.
✔ Road Connectivity State Highway - 20 km is approximately 3.0 km southwest of the
proposed project location.
✔ Rail: The area is well served by the railway. Gurugram Railway Station is around 10.0
kilometers from the planned building location.
✔ Communication: Telephone, internet, and mobile connectivity are available at the site.

✔ Land use and ownership: The Residential Building will be built on Private Land.

✔ Current land use pattern: Land is not used for agriculture. Within a 10-kilometer
radius, there is no National Park or wildlife refuge. The following table provides
information on existing land use:
✔ Soil classification: Soil testing will be performed for the proposed project. At ground
level, blackish salty clay with sand particles of exceptional flexibility.

Sr.no. Particulars Distance

Around 10 km
Nearest river
1 (Badshahpur river)
Around 10 km
Nearest railway station
2 (Gurugram Railway Station)
Around 30 km
National park or reserves forest
3 (near new delhi)
Indira Gandhi National
Nearest Airport Airport (IGI) 32.1 Km
4
North-East
Highway (SH-13) 0.1 Km
Nearest highway
5 East
Table 2: Details of existing land use

Sr. Particulars Distance

no.
Hospitals Within 10 km
1
Colleges

27
 2
School
3
Temple
4
Table 3: Details of exisitng social infrastructure

3.7 Project planning brief

⮚ PLANNING CONCEPT: The proposed project is the building of a High Rise

Residential Building with a total area of roughly 90000 sq. ft. and a built-up area of
45000 sq. ft. in Gurugram, Haryana.
⮚ PROJECTION OF POPULATION During the building time, 100 workers will be
needed every day. After the building is finished, around 500 people will be
permanently stationed there (including visitors)
⮚ LAND USE MANAGEMENT Green Belt area must be built at plot border, road for
the proposed project. The green belt development plant is in its early stages, and a
letter will be issued soon. An supplementary attachment has a detailed plan layout.
The following table provides a detailed breakdown of land use:

Sr. no. Particulars

Plot/ Land area
1
Built up area
2
FSI area
3
Parking area
4
Table 4: Details of land use breakup

3.8 Proposed infrastructure

● Residential Area: Proposed project is the construction project of High Rise

Residential Building having total area is around 90000 sq. ft with 45000 sq. ft of built
up area in Gurugram, Haryana.

No of Tower Particulars
1 Basement b1 Parking
Ground floor Security office
1st floor 6 (3bhk)
2nd to 8th floor 42 (3bhk)
Total 50 ( 3bhk) flats
Table 5: Details of dwelling
units

28
● Green belt: A Green Belt area will be constructed at the plot boundary and along the
road side for the proposed project.

● Social infrabriculture:

✔ ON-SITE FACILITIES

✔ Plot in Common

✔ Provision of Water

✔ Electricity Availability

● Connectivity: The proposed project site is easily accessible by road, rail, and air.

● Drinking water source: GMC is the primary source of water supply.

● Septic system:

✔ Sewage system type proposed: On the developed site's internal roadways,

regular drainage lines of NP3 class R.C.C. pipes will be placed. This will be
linked to the main sewer line, with the sewage water being disposed of in the
Sewage Treatment Plant.
✔ Sewage disposal point and its integration with the city level sewage
disposal system: The disposal point will be at the Sewage Treatment Plant
through GMC sewers.

● Solid waste management: One of the most important aspects in the region is solid
waste management. The city of Gurugram has a door-to-door solid trash collection
system. This will also be given at the relocation site. Wet and dry waste separation
will also be implemented. Figure 4.
Waste will be generated during the operating phase from residential
apartments, NPNL units, EWS units, a community hall, a primary school, a nursery
school, a retail area, a clinic, a beauty salon, an ATM, a community centre, and a
nursing facility. The solid waste created by the project will mostly be residential
garbage, with an expected daily volume of 5000 kg.

29
 Waste will be generated during the operating phase from residential
apartments, NPNL units, EWS units, a community hall, a primary school, a nursery
school, a retail area, a clinic, a beauty salon, an ATM, a community centre, and a
nursing facility. The solid waste created by the project will mostly be residential
garbage, with an expected daily volume of 5000 kg.

fig. 4 solid waste management

● Electrical controls: The plant must be totally prewired / site wired and contain all
power and control connections necessary for the plant to operate fully automatically.
Circuit breakers, motors, starters, and timers must all be contained in a weatherproof
cubicle style panel board. Electrical metallic tube must be used for all wiring. All
wiring must be sized in accordance with the National Electric Code. Splicing is not
authorised in service wires. It is also the contractor's obligation to supply and install
the needed outside disconnects, switching mechanisms, alarm or control conduit, and
wiring. Thermal magnetic air circuit breakers must safeguard the branch circuit
against short circuits. A single phase thermal magnetic air circuit breaker must
safeguard all control circuits. To ensure positive protection against single phasing,
each blower motor must have a magnetic across-the-line starter with overload heaters
in each phase and a common trip contact set. Motor insulation must be class 'B,' and
the design must ensure that the maximum permitted temperature for the insulation is
not exceeded while the motor works at service factor load in a -5 to 45° C ambient on
full load. Under standard V-BELT loading conditions, all motors must have anti-

friction ball bearings with an average life of at least 100,000 hours. The
mechanical/electrical system must be built to resist temperatures ranging from 0° C to
50° C.

● Vehicle parking facilities: Ample parking will be provided for residents at the
proposed project location. Visitors must also have appropriate parking so that they do
not disrupt traffic and may move freely around the venue. However, according to
HUDA Building Bye Laws, parking for plot owners will be within their plot.

● Power requirement: The power shall be supplied by Dakshin Haryana Bijli Vitran

30
Nigam (DHBVN).

31
 CHAPTER-4 :
PROJECT
SCHEDULE AND
FINANCIAL MODEL

4.1 Project Schedule

The implementation of a project within a predetermined time limit is critical to its success.
Timely implementation reduces costs such as interest and administrative overheads while
also assisting in the achievement of pre-determined targets. Coordination of diverse
operations at various levels of the company and among various outside agencies is required
for project implementation. We are providing the following project implementation
information here:

Sr.
Particulars Duration of month
No.
1 Basement works 3
2 Ground floor works 1
3 1st to 8th floor 4
4 Outer plaster works 3
5 Plumbing and sanitation 2

32
 6 Electrification 2
7 Colour work 1
8 Drainage and water supply services 1
9 Street light and road services 1
10 Social infrastructure works 1
11 Allotment to beneficiaries 1
20 months ( 1 year &
Total
8 months)
Table 6: project implementation schedule

4.2 Project cost Estimations

Industry Case Statement:

Financial modelling and analysis of 50 flats housing project in Gurgaon, Haryana IN

“Home Developers” has acquired a piece of land near Gurugram HR and wants to develop it
as a residential building having 50 flats of 900 sq. ft each. They : re expecting to sell the flats
at a rate of Rs. 4000 / sq.ft. They are seeking a non-recourse debt (project financing) with
70:30 as D/E ratio from leading commercial banks in India as a 12 years term loan.

Project Cost:
o The expected CapEx is Rs. 8 Crore.
o The expected OpEx is Rs. 50 Lacs / per annum for the whole project.

Assumptions:

⮚ Project details:
PROJECT DETAILS
Size in Sq. Ft 45000
Equity 30%
Debt 70%
Debt Service Resv (DSR) 1 yr

Table no. 7 Project Details

⮚ Project cost Estimates: Table no. 8 CAPEX cost Estimation

TOTAL SQ
FEET
Project Cost (CapEx) Rate 45000 % of project
(Rs./ cost
sq.ft)
Land 720 32400000 40.45%

33
 Flat construction cost 170 7650000 9.55%

Interior Decoration 130 5850000 7.30%

Furniture 180 8100000 10.11%
Fixtures 30 1350000 1.69%
Building Registration 10 450000 0.56%

Broker Fee 80 3600000 4.49%

Stamp Duty 230 10350000 12.92%
Fund Raising Fee 30 1350000 1.69%
Tranfer of Deed Fee 70 3150000 3.93%
Interest During Moratorium 60 2700000 3.37%
Loan and Documentation Fee 40 1800000 2.25%
CSR, HSE, Training 30 1350000 1.69%

Total Project Cost 80100000 100.00%

O & M Cost (Monthly Breakdown) (OpEx) RATE

*45000

Building Maintenance 2.8 126000

Utilities (Electric + Water + Internet) 1.7 76500
Salary (Maid + Accountant) 2.4 108000
Plumber + Electrician + Misc. etc 2.2 99000
Insurance 3 121500
Total O&M Cost (per year) 5035500

Table no. 9 OPEX cost Estimates

⮚ Revenue Parameters Assumptions:

Revenue Parameters UNITS(INR)

City
Gurgaon, Haryana
Size (Sq. ft) of one flat 900
Rate/sq.ft 4000
Sales price per flat 3600000
Avg. No of flats sold per year 5

34
 Sales price Appreciation 8%

Table no. 10 Revenue Parameters Estimates

⮚ Other Assumptions:

ASSUMPTIONS
Inflation 4.00% Debt rate 10.0% USD/INR 75.00
DDT 0.00% Moratorium 1 Yr Discount 10%
Tax 0 yrs Debt tenure 12 yrs Construction Time 1.8 yr
Holiday
Tax rate 25.00% Depreciation 7.00% MAT 18.5%

Table no. 11 Other Assumptions

All the assumptions are taken into consideration while preparing the
financial model.

Preparation of Financial Model 4.3

● NET PROJECTED REVENUE:

YEAR 1 2 3 4 5 6 7 8 9
NO OF UNITS SOLD 5 5 5 5 5 5 5 5 5
PER YEAR
RATE PER SQ. FEET 40 400 400 4000 400 4000 4000 4000 4000
00 0 0 0
AVG SALE PRICE PER 36 388 419 4534 489 5289 5712 6169 6663
FLAT 00 800 904 963 776 581 748 767 349
00 0 0 0
0
GROSS SALES 18 19. 20.9 22.6 24.4 26.4 28.5 30.8 33.3
44 952 7482 888 4791 6374 4884 1674
LESS COMMISSION 0.8 0.8 0.85 0.85 0.85 0.85 0.85 0.85 0.85
FEES 5 5
NET PROJECTED 17. 18. 20.1 21.8 23.6 25.5 27.7 29.9 32.4
REVENUES( MILLI 15 59 452 2482 388 9791 1374 9884 6674
ONS INR)

● FIN FLOWS :

35
36
 Table no. 13 Fin Flows statement

● Debt schedule or Repayment

Table no. 14 Debt repayment schedule

37
CHAPTER-5
FINANCIAL
38
 FEASABILITY
ANALYSIS

5.1 Financial Feasibility Analysis

Before making an investment choice, it is vital to examine whether the proposed investment
concept is practical. The feasibility of an investment must be assessed in numerous ways in
order to determine whether or not the investment should be implemented. One of the most
important steps is thus to do a feasibility analysis.
Before preparing a business strategy, a financial feasibility study should be done to
establish the economic viability of a proposed operation. It detects initial expenses, forecasts
earnings and cash flows, and calculates the return on investment.
Relevant criteria must be used to analyse the financial viability of investments.
Financial feasibility estimates must be performed with caution, and the complexity of the
calculations is determined by the number of various factors that must be considered. The
assumptions employed in the calculations can and frequently will change as the project
continues, necessitating an update to the study.
A financial feasibility study, or FFS, should evaluate a project's viability based on a
key component: will the project or business have enough funds to execute the project? (and
generate a profit). One of a company's bottom lines is whether it can maintain itself, pay its
employees, and, of course, earn a profit. A financial analysis can aid in this evaluation

Consider the following elements:

⮚ Company Expenses

⮚ Revenues

⮚ Debt schedule/ repayment

39
 ⮚ Cash flow (money in, and money out).

⮚ DSCR

⮚ IRR

● Expenses:
Operating expenses comprise all expenses incurred by the Authority in connection with the
project's operation, as well as the Authority's share of capital expenditures. Total operational
expenditures for the ten-year period from FY2021 to Budget 2030 are expected to rise from
about 5.03 million INR to 7.16 million INR due to a 4% inflation rate. Total capital cost
comprises the things mentioned in the chart below

Fig. 5 Distribution of project cost (CAPEX)

Fig. 6 Distribution of Operating Expenses

(OPEX)

Fig. 7 total operating expenses growth (2023-2032)

40
● Revenue
Total operational revenues are expected to rise from roughly 17.15 million INR to 35.13
million INR during the ten-year period from 2021 to 2030, representing a compound annual
growth rate (CAGR) of approximately 7.43 percent. Increased flat prices and deposit interest
contribute greatly to this rise. You may find yearly revenue in table 13.
Fig. 8 Revenue growth (2023-2032)
● Debt/ Loan Repayment Schedule

Because the project requires a bigger quantity of investment cash, a special purpose entity
must be developed to distribute the risk. One of the most commonly utilized mechanisms in
infrastructure finance is the Special Purpose Vehicle (SPV) or Special Purpose Entity (SPE). It makes
no difference whether the project is being built by a private corporation, a governmental organization,
or a public-private collaboration. In most situations, specialized vehicles are developed for each
infrastructure project.
A Special Purpose Vehicle (SPV) is an entity formed only for the purpose of project
execution. This implies that the Special Purpose Vehicle (SPV) is legally distinct from the

commercial corporation or government agency that may be supporting it. It has its own balance sheet
and income statement. Lenders are intended to lend to these Special Purpose Vehicles (SPV) based on
their assets and liabilities, not the parent firm's assets and liabilities. The Special Purpose Vehicle
(SPV) Company usually accepts non-recourse finance. This implies that in the case of a default,
investors can only collect the project's assets and not the parent company's assets, which may be
involved in the project.
In this project, "Home Developers" must establish an SPV for non-recourse liability. To finish
the project, they need to get a commercial bank debt loan for 70% of the entire capital cost, which is
Rs. 56.01 million. For loan / debt repayment, required assumptions such as debt rate/ loan rate,
moratorium period, and loan length must be considered. To do so, develop a debt/loan payback
schedule so that the total cash flow amount may be estimated accurately.
In this project, "Home Developers" must build an SPV for non-recourse liability. To finish
4
3 32. 35.
0
3 25. 27. 29. 13
5
2 23. 4
0 17. 18. 20. 21.
2 59 71 99
51 82 63
0 15 59 14
5
2023202420252026202720282029203020312032
1
0 Revenue (million INR)

0
41
the project, they would need to get a commercial bank debt loan for 70% of the entire capital cost,
which is Rs. 56.01 million. For loan / debt repayment, required assumptions such as debt rate/loan
rate, moratorium period, and loan length must be considered. To do so, a debt/loan payback schedule
must be prepared so that the total cash flow amount may be estimated accurately.
To prepare the schedule in model, interest payment (IPMT) formula and principle payment
(PPMT) formula should be used in excel.
IPMT (interest rate, period, number payments, PV, [FV], [Type] ) PPMT (interest rate,
period, number payments, PV, [FV], [Type] )
According to table 14, the interest on a debt of Rs. 56.01 million at a 10% interest rate for 12
years in 12 terms will be Rs. 42.68 million. This payment will be made from the project's profits.

● Cash flow

The cash flow predictions include the amount of money needed for starting and where it will come
from. The quantity of equity capital, as well as the amount and source of all borrowed money and
leases, is calculated.
The accompanying financial flow statement clearly illustrates that the payback time is twelve
years. The corporation may pay the interest and principle from the money generated by selling the
units in twelve years.
The ultimate project cash flow is negative for the year 2020 since development will only
begin in 2020, hence there will be no income throughout the construction phase. Cash flow is positive
when construction is completed in 2021. This means that beginning in 2022, the bank will have cash
on hand, demonstrating that the project is financially viable.

● DSCR (Debt Service Coverage Ratio)

The debt service coverage ratio (DSCR) is defined as net operating income divided by total debt
service. it is the amount of cash flow available to meet annual interest and principal payments on debt,
including sinking fund payments
Min DSCR 1.30
Avg DSCR 1.88

Here’s how to interpret:

• DSCR < 1: You have negative cash flow. You don’t have enough income to
service all of your debt.
• DSCR = 1: You have exactly enough cash coming in to service your debt, but
you don’t have additional cash cushion.
• DSCR > 1: You have positive cash flow. The higher you’re DSCR, the more
income you have to pay off your debt
In this project, Net operating income (EBITDA – Tax) is 10.72 and total debt service (interest+
principal) is 8.23 for the year 2022. So, the DSCR for that year will be 1.30. This means the business
has 130% more incoming cash flow than needed to cover debt payments for the year 2022. Similarly,
for remaining year business has 141%, 152%, and 164% more incoming cash flow than needed to
cover debt payments for the year 2023, 2024, and 2025 respectively. The DSCR increasing on each
year as the net operating income is increasing

● Internal Rate of Return

42
The internal rate of return rule is a guideline for determining if a project or investment is
worthwhile. The IRR rule asserts that if the internal rate of return on a project or investment
is greater than the minimum needed rate of return, often the cost of capital, then the project or
investment is considered successful.
A project or investment should be undertaken. In contrast, if the IRR on a project or
investment is less than the cost of capital, it may be prudent to reject it.
The IRR is the rate of return that results in a zero net present value (NPV). If the IRR
is more than the interest rate at which you can borrow, the project is viable. The IRR
measures how effectively money is employed in a firm.
The Net Present Value (NPV) of a sequence of cash flows is defined as the total of the
present values of the individual cash flows (both incoming and departing). And the Present
Value is defined as the current value of a future sum of money or stream of cash flows
discounted at a given rate.
The IRR is the time adjusted earnings throughout the project's life. It is this rate that
compares the project's present value of cash inflows to the project's present value of cash
outflows. In other words, the discount rate that is chosen causes the NPV of cash flows to be
zero.
There is a distinction between Project IRR and Equity IRR when calculating IRR. The
project and equity IRRs differ in terms of cash inflows, as the name implies. The project IRR
represents the returns to all project investors. The cash flows included for the Project IRR
would be those that directly benefit the project. The equity IRR evaluates the returns for the
company's shareholders after the debt has been paid off.

The result is a 20.95% equity IRR. IRR for the project is 12.22%.

The project IRR (12.22%) is better than the discount rate (10%) and the equity IRR (20.95%)
for this project. As a result, the project is doable.

43
 CHAPTER-6
CONCLUSIONS

Real estate development may be both thrilling and lucrative. It may also be challenging and
dangerous. Finally, the two primary objectives of a developer and his or her lender are to
minimize risk and increase profit. To achieve those objectives, a direct and accurate
comparison between potential house buyers and the existing and future competition for those
home buyers is required. It is impossible for any developer to identify the projected market
they need to target and the feasibility of a project without this knowledge.

Residential research indicates that predicting project viability is difficult. To assess the
feasibility of such a project, it is necessary to identify those aspects that project promoters
cannot control but have a significant impact on project cash flows. After evaluating those
characteristics, we will be able to do a sensitivity analysis on the project.
The paper includes financial modelling and analysis of 50 units in Gurugram, Haryana IN.

44
Non-recourse debt is advantageous for the project because it requires a large expenditure. A
financial model is created using the assumptions and data given. The cash flow statement,
DSCR, and IRR are used to establish the project's financial feasibility. The calculation's
calculation is as below

The project's equity IRR is 20.95%, while the project's project IRR is 12.22%. The DSCR for
2022, 2023, 2024, and 2025 is 1.30, 1.41, 1.52, and 1.64, respectively. The minimal DSCR
for the project is 1.30, while the average DSCR ratio is 1.88.

Based on the facts above, it is possible to infer that project development is advantageous,
taking into account the DSCR and Project IRR of the project. As a result, the bank will
undoubtedly provide the loan because the project is financially viable.

Bibliography:
1) https://economictimes.indiatimes.com/wealth/personal-finance-news/
real-estate-gets- highest-investment-in-
haryana/articleshow/8445499.cms?
utm_source=contentofinterest&utm_medium=text&ut
m_campaign=cppst
2) http://plannersweb.com/2013/12/pro-forma-101-how-much-money/
3) http://plannersweb.com/2013/12/proforma-101-getting-familiar-
with-a-basic-tool-of-real- estate-analysis/

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