Real Estate Development And Civil Servants Residential Houses Construction Essay

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This project proposal is focusing on real estate development, by construction of low - cost houses for Tanzania civil servants. According to Tanzania Building Agency report of 2009, more than 70% of Tanzania civil servants fail to build their own houses throughout their life. With approximated 800,000 permanent employed civil servants, Tanzania has a ratio of 0.01 on number of houses to the number of civil servants.

This project intends to permanently solve this housing crisis for Tanzania civil servants and assist the government efforts of providing better life to the public servants. It targets all civil servants in all 127 Tanzania districts, and it will start its execution in Kibaha - Pwani. It will continue its implementation by using the net profits generated in one area until it reaches all the remaining districts.

Within the next ten years, the project intends to increase the rate of civil servants who own manage to build their own house before retirement from less than 10% to 70%. The project intends to use Tshs. 995,000, 000/= in its implementation within the next five years as phase one (PHASE I). The second phase (PHASE II) will come after intensive evaluations by which will involve donors, community, government, and internal experts to assess the tangible results of the project to the society (target group). It is the goal of BREC (the company which will implement the project) to build 25,000 low - cost houses per year. The project will involve different stakeholders in realizing these goals; these are TBA, NHC, Private Real Estate Developers, PO-PSM, NSSF, PPF, LAPF, and PSPF.

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The company, BREC have enormous fifteen years experiences, and with have vast numbers of experienced staffs with state-of-art knowledge and skills in real estate sector. Within the last five years, it has engaged in successful residential housing projects in Dar es Salaam, Arusha, Mwanza, Mtwara, Singida and Kigoma.

The cost of core low - cost house inclusive of land is projected to range from Tshs. 12, 000,000/- to 15,000,000/-. Civil servants will pay at least 25% of the total cost of the house (inclusive of infrastructures) at the beginning. Then, they will be required to pay in monthly basis 1.25% of the remaining amount so as to complete the whole cost within five years.

It is projected that, it will generate net profits of Tshs. 135,000,000/- within five years which is a great achievement for PHASE I. And this is apart from corporate tax to be paid to the government (projected to reach Tshs 300,000,000), increase employments, improve infrastructures and assist the government efforts of providing better life to Tanzanians.

INTRODUCTION

Brief overview of the project proposal document

This project proposal begins with giving data summary of the intended project, project rationale where issues like background analysis; national policies; and approach for the project will be analyzed. It goes further by giving scientific discos' on project appraisal and sensitivity analysis. Then explanation on project implementation plan will be highlighted, where operational understanding of activity plan, resource plan will be put into light. Also on project implementation plan, issues of project monitoring and evaluation will be analyzed in details. The next stage will be on project risks analysis where project risks rationale, typical sources of risks and its countermeasures on tackling those possible risks will be analyzed.

Project proposal operational understanding

The project proposal will base on real estate development. It will focus on construction of low - cost houses for civil servants in Tanzania. On the ground, as cited by Nnunduma (2009) less than 10% of Tanzania civil servants manage to build their own houses during employment, 20% build their houses after receiving their pension funds, and 70% becomes victims of households as they can't afford to build their own houses throughout their life time. For many years until now no significant way out has been taken either directly by the government, private sectors, or indirectly by civil servants themselves to enable them to solve housing problems. This low cost house project proposal is aiming at enduringly solving civil servants accommodation difficulties. The method of selling those constructed houses will be on loan bases to civil servants. In long - term strategies, this project will focus on cooperating with other real estate developers in Tanzania to implement low cost accommodation projects for civil servants.

BASIC DATA SUMMARY

Company name

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The company which will implement this project proposal is known as, BUPILIPILI REAL ESTATE CORPORATION (BREC). It is located at Bupilipili Tower, 15th floor, 56 Sokoine Street - Dar es Salaam, Tanzania.

Contact name and post

The person who will be contacted for the project progress will be Eng. Bupilipili, Daudi.S who is The Chief Executive Officer (CEO) of the said company, BREC.

Project name

The project name is REAL ESTATE DEVELOPMENT FOR CIVIL SERVANT RESIDENTIAL HOUSES.

Project location

The project will be executed in Kibaha - Pwani.

Project summary

Problem statement

According to Nnunduma (2009), Tanzania is considered to have approximated 800,000 permanent employed civil servants. It has been noted that, the ratio of houses to the number of civil servants was approximate 0.01 to which is extreme low. For several years, Tanzania civil servants have been victims of households because of failure of owning their own houses. Due to their low wages and banks' high interest rates (20 - 24 %) many civil servants built a house when they receive a retirement portion instead of investing to business to accommodate their life after retirement form civil services. Also as cited by Seleki (2001), lack of appropriate policies on housing development has contributed to housing problems for civil servants.

Priority needs

This low cost house project proposal is aiming to permanently solve the current accommodations problems for Tanzania civil servants. It will entirely focus on low cost houses construction and sell those buildings in loan bases. Also in long run, it will assist the government efforts of proving better life for civil servants, the results will be improve public services.

Project objectives

The project will provide safe households to civil servants in Tanzania by 70% within the next ten years. It will also provide consultancy services to housing projects for civil servants which are undertaken by the government.

Target group

The project is intended for all Tanzania civil servants in all 127 districts. It will start its executions in Kibaha - Pwani, and then extend its implementations in all the remaining districts in the country.

Project results

The project will build 25,000 low cost houses per year for Tanzania civil servants. Also the project will increase the rate from less than 10% of civil servants who manage to build their own houses during employment up to 70% within the duration of ten years.

Key project activities

The project key activities will be as follows:

Surveying the undeveloped land

Engineering final plans and specifications

Actual construction of the streets, utilities, houses and lots

Project budgets

The project from its initiation stage up to its final implementation plan (within five years) will cost Tshs. 995 million.

Project duration

This project intended duration will be for five years. After that, final evaluations will be conducted at the end of year five extensively to review the whole project so as it will sustainable for long run.

PROJECT RATIONALE

Background

Involvement

The project will involve different stakeholders in the housing development for assisting its implementations. These are:

Tanzania Building Agency for undertaking environmental impact assessment for government servants' buildings project.

National Housing Corporation for giving guidelines in the exact accommodation needs of civil servants.

Private Real Estate Developers (ABLA ESTATE DEVELOPERS & AGENCY CO. LTD, AFRICA PROPERTY LTD, CITY PROPERTIES LTD, GIMCO ESTATE AGENCY LTD, KNIGHT FRANK, and RUPIA INVESTMENT REALTORS) to coordinate the project efforts of civil servants accommodation.

Public Financial Pension Funds to give loans with affordable interest rates to civil servants. These are PPF, PSPF, NSSF and LAPF.

Experience

The company, BUPILIPILI REAL ESTATE CORPORATION (BREC), have enormous experiences in the real estate development sector. It has engaged in real estate sector for constructions of residential flats for rental in Dar es Salaam, Arusha, Mtwara, Kigoma, Mwanza, and Singida for the past ten years. The company have vast numbers of experienced staffs who are well equipped with knowledge and skills in real estate sector. These includes; 10 Valuers, 8 Quantity Surveyors, 20 Engineers, 8 Planners, 8 Architects and 20 other professional experts (HRM, PA, ICT, Accounts, and Procurement). The company CEO and 3 Heads of Directorates has 20 years vast experiences in real estate sector.

Consultation

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In the course of designing this project, numbers of stakeholders were consulted. These are National Housing Corporation (NHC), Bank M (T) Ltd, Contractors Registration Board, Tanzania Building Agency, PO-PSM, ERB, Public Financial Pensions Funds and TUCTA.

Participation

In executing the project, number of stakeholders will be involved. These are Bank M (T) Ltd, PO-PSM, TBA, NHC, TUCTA, and Independent Experts in real estate sectors for evaluation.

Policies or development strategy

This project is in line with Tanzania Development Vision 2025 and Ministry of land, house and human settlement visions.

Project approach

Goals

To achieve its core function, BREC through this project has set the following goals;

To achieve a decent accommodations to Tanzania civil servants by the year 2025.

To be a foremost consultancy services firm in real estate sector in East Africa by the year 2020.

Objectives

The company, BREC through this project is determined to achieve the following core objectives;

To provide safe households to Tanzania civil servants by 70% within the next 15 years.

To acquire 75% of the market share in consultancy services in real estate sector in East Africa within the next ten years.

To expand its operations in real estate sector development for civil servants residential houses from Tanzania up to East and Central Africa by year 2025 by acquiring joint venture with private real estate developers in those regions.

Results/outputs

The project will achieve the following results;

Build 25,000 low - cost houses for Tanzania civil servants per year.

Increase the rate of civil servants who manage to build their own houses before retirement from 10% to 70% within the next ten years.

Main activities

The project will run for the duration of five years, where after those years, an extensive evaluation will be conducted to major how far the project has achieved. The main activities within the next five years are;

Surveying the undeveloped land.

Engineering final plans and specifications.

Construction of streets, road networks and utilities (water, energy and telecommunication facilities).

Actual construction of houses and lots.

PROJECT APPRAISAL AND SENSITIVITY ANALYSIS

Project Appraisal

This section will assess in a well thought-out the case of project viability. It will give the exact analysis of whether to proceed with the project or not.

Operational necessity

Project appraisal is crucial for resources investment decisions as it has a long term effects on the project. It will give project stakeholders an inside overview on the viability of all aspects of the project.

Project appraisal methods

Social appraisal

The project will have great impact to the target group (Tanzania civil servants), community, and project stakeholders. It will provide safe households to Tanzania civil servants by 70% within the next 15 years, and generate approximated corporate tax to be paid to the government (projected to reach Tshs 300,000,000), increase employments, improve infrastructures and assist the government efforts of providing better life to Tanzanians.

Political appraisal

The project is compatible with Tanzania Development Vision 2025 which supports life improvements for citizens. Currently, Tanzania political environment is stable and encourages private investments in all sectors so as to boost the government efforts of attaining the best in implementing its development strategies.

Technical appraisal

The proposed project will use the state-of-the-art technologies in terms of construction equipments and those proven technologies in real estate industry. The project will be implemented as per schedule and requirements within five years. The company, BREC have more than ten years experiences in real estate sector with projects in residential houses projects in Dar es Salaam, Arusha, and Mwanza in the last two years. The leading project team (CEO, Director of Real Estate, Director of Consultancy and Project Manager) have 20 years vast experiences in real estate industry. If delayed for any reasons, the project will not attain its goals.

Environmental appraisal

The project will have positive impact towards environments. Through this project, infrastructures (roads, sewerage system, and drainage system) will be built across area and its surroundings areas. Also trees will be built across all areas of the project location so as to conserve land and keep in a good atmosphere all the located environments.

Economic and financial appraisal

Institutional appraisal

The project will be supported by different institutional so as to realize its goals. These are Bank M (T) Ltd, PO-PSM, TBA, NHC, TUCTA, and Independent Experts in real estate sectors for final evaluations. All these institutional operate within Tanzania legal frameworks and policy environments.

Sustainability and risks appraisal

The project will be sustainable within its period of implementation and beyond its life. There are some undue risks which if not tackled carefully will have impacts on the project success. On risk analysis, countermeasures have been analyzed so as to mitigate the possible project risks. Hence, the project benefits (increase the rate of civil servants who manage to build their own houses before retirement from 10% to 70%) will be sustainable in the long run and go beyond the life of the project.

Project Sensitivity analysis

PROJECT IMPLEMENTATION PLAN

Activity plan

Project activities

The following are project activities which the company, BREC intends to accomplish:

Project kick - off campaign (advertising and meeting with project stakeholders)

Surveying the undeveloped land

Engineering final plans and specifications

Site clearance

Construction of roads networks

Construction of drainage systems

Construction of sewerage systems

Construction of energy systems

Construction of telecommunications systems

Construction of multi - unit houses

Construction of high - rise complexes

In - house training

Management arrangement

Project personnel

The project will be executed by vast numbers of experienced personnel in real estate sector for the past ten years. The company, BREC is headed by CEO and three heads of Directorates (Director of Real Estate, Director of Consultancy Services and Director of Business Support). Also it has Project Management Office which is headed by Project Manager. The company has 10 Valuers, 8 Quantity Surveyors, 20 Engineers, 8 Planners, 8 Architects and 20 other professional experts to support the project (HRM, PA, ICT, Accounts, Marketing, and Procurement).

Communication mechanisms

The individuals throughout the project executions communicate through the following Organization chart.

Project timing and scheduling

The following table shows project activities chart with its respective durations:

S/No.

Activity

Durations (months)

Immediate Predecessors

A

Project advertising

60

-

B

Meeting with project stakeholders and In - house training

2

-

C

Surveying the undeveloped land

1

B

D

Engineering final plans and specifications

3

C

E

Site clearance

1

D

F

Construction of roads networks

1

E

G

Construction of drainage systems

1

E

H

Construction of sewerage systems

1

E

I

Construction of energy facilities

1

F,G,H

J

Construction of telecommunications systems

1

E

K

Construction of multi - unit houses

24

J

L

Construction of high - rise complexes

24

K

The activity scheduling according to the above project activities is shown in the following Gantt Chart in Annex 1.0

Resource plan

Projected Income

The project is projected to generate an amount of Tshs. 995,000,000/= within the period of period of five years. The following are summary of sources of income within five years: (in TZS' 000)

Bank M (T) Ltd ……………………………………………………………300,000/-

Owners' equity ……………… ……………………………………………30,000/-

Houses sales ……………………………………………………………545,000/-

Consultancy ……………………………………………………………100,000/-

Sales of depreciated items/properties/equipments ………………………... 20,000/-

For more detailed information, see the attached summary of projected income in the annexes.

Projected expenditure

The project is projected to incur costs of amount of Tshs. 995,000,000/= within the period of five years. The following are summary of projected project expenses within the period of five years: (in TZS' 000)

1

Office Lease

5,000

2

Real Estate Purchasing

130,000

3

Office Furniture

9,000

4

Computer Hardware and Software

11,000

5

Business License and Permit

  6,000

6

Repayment of Bank M (T) Ltd loan

 270,000

7

Advertising

  26,000

8

Meeting with Stakeholders

  10,000

9

New Equipments

  38,000

10

Raw Materials

  65,000

11

General Business Insurance

  9,000

12

Equipments Lease Payments

 15,000

13

New Motor Vehicles

  14,000

14

Corporate Tax (30% of Gross Profits)

45,000

15

Motor Vehicle Insurance

  7,000

16

Staff Health Insurance

  18,000

17

Miscellaneous

  14,000

18

Maintenance Expenses

 24,5000

19

Salaries, Wages and Employees Benefits

  135,000

20

Utility Bills

  63,500

21

Operating Costs

  57,000

22

Legal and Consultancy Fees

  6,000

23

Evaluation Costs

  17,000

Note:

Bank M (T) Ltd loan after five years is projected to remain Tshs. 60,000,000/=

Financial assumptions for the project will be:

Corporate Tax …………………………….… 30%

Bank M (T) Ltd grace period ………………. 1 year

Government Tax exemption ……………….. 1 year

Bank M (T) Ltd interest rate ……………….. 10%

Rate of depreciation ………………………… 10%

Net Profits for the period of five years is projected to be Tshs. 135,000,000/=

For more detailed information on project expenses, see the attached projected expenses in the annexes.

Projected budget

The project budget………………

Projected financial report

Balance sheet

Income statement

Cash flow

Break - even analysis

Project monitoring and evaluation

Monitoring

The project monitoring will for daily basis by internal experts to countercheck the project progress. The company, BREC will develop specific performance benchmarks and measurable project outputs. It will focus on daily basis operations of the company where by The Company Managing Director in conjunction with Heads of Directorates, Section Managers and Project Manager will come together every day to monitor the project progress extensively so as every project activity is going in the right track according to project goals and objectives.

Evaluation

The project evaluation will be subdivided into two phases - mid term evaluation and final evaluation. The mid - term evaluation will take place at the end of year two. It will involve independent expert to be hired by the company and internal experts to assess whether the project is going in the right track by looking if it aligns with the project goals and objectives.

The final evaluation will take place at the end of year five. It will involve donors, community, government, and internal experts to assess the tangible results of the project to the society (target group). This evaluation will look on what the project and in what magnitude it has achieved. Its results will be used for policy recommendation to the government whether to reject or continue with the project after five years. Also final evaluation results will be used for the purpose of renewing the project after five years of its operations by whether renewing project goals or objectives.

All these two evaluations will incur costs for the company. See allocated budget for mid - term and final evaluations in the projected project expenses.

Methodology for payment scheme

The construction of these low - cost houses will be financed by Bank M (T) Ltd plus Owners' equity to assist the project investment. The cost of core low cost house inclusive of land will range from Tshs. 12,000,000/= to 15,000,000/=. The methodology that the company (BREC) will use to sell those houses to civil servant will enable them to pay at least 25% of the core house cost including infrastructures (water, road networks, energy and telecommunication) at the beginning. After the 25% initial payment of the building cost, residents will be compulsory required to pay monthly 1.25% of the remaining amount, so that full payment will be completed in a period of five years.

PROJECT RISK ANALYSIS

Rationale of project risks analysis

The project risk analysis will help to identify possible risks sources and put some critical countermeasures to deal with those risks that might avert or hinder the project outcomes to be delivered in time.

Typical source of project risks

Project development overruns

Bad weather

Delays in starting construction

Increased interest rate

Labour strikes

Natural hazards

Market risks (too few sales per month)

Budget /funding limits

Limited availability of skills

Measures to mitigate the project risks

CONCLUSIONS

This project which centred on building low - cost houses for Tanzania civil servants, seeks to realize patriotism in the public sector which in turn will strengthen our economy by taking all considerations of people lives. The government vision of promoting better life to its people who are in public sector will be realized only when the implementation of this project is put into effect, which will give better accommodation to civil servants. It fruits and enjoyments of its achievement will extend to all people associated with public civil servants.

The formulation of this project proposal has involved extensive consultations with numbers of stakeholders through interviews, meetings and workshops. These are National Housing Corporation (NHC), Bank M (T) Ltd, CRB, Tanzania Building Agency, PO-PSM, ERB, Public Financial Pensions Funds (NSSF, PSPF, LAPF & PPF) and TUCTA.

Through participatory process by all project stakeholders (BREC, Bank M (T) Ltd, PO-PSM, TBA, NHC, TUCTA, and Independent Experts for evaluation process), this project will accomplish its intended results. All project stakeholders have to give genuine commitment towards ensuring that, the project realise its goals.