Construction Feasibility Report Assignment Sample

Introduction: Construction Feasibility Report

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There can be seen a huge demand for developing sustainable projects these days. In this project, a report from the point of view of a consultant was prepared. This report was about checking the feasibility of a selected area. The location of the area that was selected here is in "New South Wales". It can be seen that it is one of the busiest places in this area. In between this area, one piece of land is selected and one feasibility report of it was prepared to check the suitability of making a sustainable construction on the land. In this report, the various factors that decided the feasibility of construction on land were identified & analyzed for making the report.

Market Analysis & Valuation

The location 16A Honeysuckle Drive, Newcastle NSW is an extremely feasible land that provides all the amenities starting from markets, hotels, and restaurants that are required. The location 16A Honeysuckle Drive, Newcastle NSW is centered by a renowned university d NUSpace, The University of Newcastle which gives direct and easy access to education. Another attractive feature of the land is the MarketTown shopping center and the access to the supermarket which is extremely important (Li et al. 2020). A supermarket is a very basic need for any individual. Apart from the occurrence of the supermarket and a d university, the land of Honeysuckle also has features that include a playground d Honeysuckle Playground and Honeysuckle Park within some distance from the exact location of Honeysuckle Drive. It also has a civic park d Newcastle civic park for the citizens along with the Newcastle playground for the children. The location of NUSpace,

Figure 1: Cost of works

(Source: Self-created)

The University of Newcastle also contains several restaurants such as The Icon This, Kingfish Seafood, New Slang Coffee Brewers, and subway sandwich etc which is definitely an attractive feature for the analysis of any land. Having a restaurant or a supermarket along with many universities and schools increases the valuation of any land for its purpose or utilization. Besides these, the land of Honeysuckle has a Newcastle civic theater and a Newcastle Museum which is a family-oriented science and history museum. These features will also include a source of entertainment for the people residing in the mentioned location. Some premium hotels are also located in the particular location of 16A Honeysuckle Drive, Newcastle New South Wales as Orient Hotel and Rydges Newcastle which is a 4-star hotel which makes the valuation of the location extremely high (Bao et al. 2020). The most significant feature of land is the land price which helps in the selling of any property. This mentioned location of 16A Honeysuckle Drive, Newcastle in New South Wales is a land with reasonable price which makes it accessible to a lot of customers for buying and constructing purposes. The price of any land plays the most important role in generating the market valuation of any land.

Financial Arrangement

Construction finance is the means which enables a business to fund any building projects and transform the plans into reality. Usually, the whole property is sold or the rental income from the building is used for the investment purpose (Dhir et al. 2021). There are mainly two basic parts to financing a construction: Finance documentation and construction documentation.

SL No	Item Description	Cost ($)
1	Land Cost	365000
2	Legal Fees	1200
3	Construction permit	2243
4	Tax	400
5	Construction materials	1557500
6	Construction Labor	1691000
7	Construction overhead	222500
8	Contractor profit	489500
9	Fees	44500
10	Survey	44500
11	Project management	89000
12	Finishing	267000
Total	4774343

Table 1: Project cost estimate

(Source: Self-created)

There are several parties who are involved in the financed construction project that includes the borrower, the lender, contractors subcontractors, and even the architects and the structural investors. These also include the managers of the particular property and the quantity surveyors. For the purpose of a syndicated loan the parties involved are the agent and the security trustee along with the arranger and the hedging counterparty. Any lender for any kind of construction project has three basic concerns. The first one is the cost second one is the value and the third one is the step in rights. The lender will ensure to keep the overall cost of the development project within a specified budget. The incomplete property will be of lesser value than the complete project. For financing any project, the documents are negotiated between the lender and the borrower(Johnson et al. 2021) Facility or Loan agreement is decided among the lenders, SPV and the security trustee which includes the main purpose of the facility, the conditions related to the disbursement, the rate of interest, the amortization of the schedule, the conditions related to the payments, the security related issues, both the positive and the negative agreements, etc.Trust and retention account agreement where the project finance transactions are focussed on the cash flows to be generated from a project and hence all the project proceeds must be directed through a trusted account operating under the government framework accounting all the inflows and the outflows from the account.

Tax Implications

Tax implication basically refers to the impact that is related financially to a particular decision that can affect an organization's tax payment. In general, someone will owe property taxes to the local government where the land is located (Garg et al. 2022). The amount of taxes you will pay on a land tax varies from state to state. Contingent upon the worth of the property, someone can hope to pay anywhere from a couple of hundred bucks all the more every year. Someone likewise owes other kinds of duties, for example, state personal expense, contingent upon the land's utilization. Some of the factors that affect the tax on any particular land are mentioned below:

1. Location: The area of a property can impact its duty rate as a result of neighborhood local charges (Perry et al. 2022). Since property taxes are typically assessed at the county or municipal level, taxes can differ significantly from city to city or county to county.
2. Value of the house: The amount of taxes owed will be affected by a property's value. Typically, properties with a higher value are taxed at a higher rate than properties with a lower value.
3. Use of Land: The amount of taxes due will also be affected by a property's land use designation. Taxes on residential properties may be higher than those on commercial or industrial properties.
4. Ownership: The amount of taxes due can also be affected by the number of owners and type of ownership (Xi et al. 2021). A reassessment of the property and possibly a new tax rate are typically triggered by a change in ownership or ownership transfer.
5. Exemption for Homesteads: Some homeowners may be eligible for a homestead exemption or other tax credits based on state and local laws. These exceptions can lessen how much expenses are owed on a property.

Investment Analysis

There are some factors that decide the potential of having investment in an area. These factors determine whether a profit can be obtained from the project or not. These descriptions of these factors are as follows.

SL No	Year	Cost ($)	Initial Investment	NPV (Net Present Value)	Discount Rate (%)	Discounted Cash Flow ($)
1	1	1434564	4000000	774343	5%	1366251.43
2	2	1656558	5%	1502546.939
3	3	1683221	5%	1454029.586

Table 2: Investment Analysis

(Source: Self-created)

Interest Rates

It is one of the factors that is very much important for doing an investment in an area. It is known that the rate of interest changes according to the location of the project (Gupta et al. 2020). The more urban the area is the more interest rates can be obtained from the project. It can be seen that the lad is situated in an urban area. Moreover, the area around it has a good population. In addition to this, there are many urban facilities available in this area. All of these make this land a land having high demand. So, a good amount of interest can be obtained from here.

Economic growth

In addition to the above another factor that is very much important for this area is the potential for growing of this area in terms of the development of the economy of this area (Kaygusuz et al. 2022). From the statistics of the past few years, it can be noticed that the population growth of this area is good. It is because of the urban development of the area. Also, there are many new businesses & business hubs were established in this area. Altogether made this area that has the potential to grow in the near future.

Expectations

Here expectation refers to the expectation of large businesses for making investments in the area. It can be seen that before making investment people tend to look for the future profit that can be obtained from the area (Tang et al. 2019). This also depends on the potential of the area to grow in the future. From the current situation of the area, it can be noticed that this area is growing now, and also in the near future there is a good possibility that this area will be one of the most important places in NSW. So, it is feasible to make an investment in this project.

Figure 2: Actual Cost vs DCF

(Source: Self-created)

Technological Development

In the present technology is the thing that is given the most importance. The more one is equipped with technologies the more there is a chance of development of the area (Hargaden et al. 2019). This technology is mainly seen from the point of view of IT hubs present in the area. It can be noticed that there are a number of IT hubs present in the area making this area technologically efficient. This can attract investors for making investments in this project.

Miscellaneous factors

Other than the above factors there are some other factors are also there that decide the investment in a project. The first one among these is the depreciation of the property. It can be seen that depending on the location of an area the depreciation of the property depends. The more the rate of depreciation the less amount of investment is expected to be made in the area (Mwoma et al. 2019). The area that was considered here is newly developing so the rate of depreciation is very less for this area. Another important factor in this regard is the rate of inflation in the country. It can be seen that the condition of inflation in Australia is balanced now., so, there is less chance that this project will be affected by this factor.

The area has a good value in terms of its location. The house prices in this area have gone as high as $800k. Over the past few years, there can be seen a huge amount of growth in the prices of houses in this area.

Risk Analysis

There are some risks that were calculated in this project for checking out the feasibility of the project. These risks can be classified into some categories. These are as follows.

Technical Risk

The first risk in this regard is the technical risk. In this project, it can be seen the project is aimed to become sustainable. So, it is needed that technologies other than the usual technologies are used for making the project sustainable. Here, one risk that can be created is the employment of skilled people who have knowledge of sustainable work. Although, the availability of these people is less.

Logistical Risk

It is known that in sustainable project material that is used are different from the materials used in the usual project. So, not all sustainable materials are available near the site. As a result of this, it is needed that these materials are brought from outside. This creates a risk in managing the logistics of the project.

Environmental Risk

This project is aimed to be sustainable. Although it can be noticed that there are some potential areas that can create some environmental risks. The first one is the creation of pollution because of the transportation of materials from outside. Moreover, the generation of waste from the project is another environmental risk that is present in this project.

Management Risk

The area of the land of the selected area of this project is good. So, it is obvious the size of the project is also going to be large also. So, depending on this it can be said that there will be a large number of areas present in the project that will be needed to be controlled at the same time. So, there is a chance of inducing risk related to the management of the project.

Financial Risk

In addition to the above risks there are some financial risks are also present in this project. The main risk in this regard is the investment in this project. It can be seen that the policies of the government change very frequently. So, if the local government is one of the investors of this project then there is a chance of withdrawal of investment in the case of a change in the policy of the government.

Socio-political Risk

The political situation of the area is one of the major risks for this project. It can be seen changes in policies when one government changes. This project is going to be a long project having a good duration. So, in between if the government changes then there is a chance of withdrawal of the previous policies that ultimately will result in degrading the project.

Sustainability analysis

There are some areas that are maintained for making one project sustainable. These are the ones that are checked for finding out the feasibility of sustainable development in the area. The description of these areas is as follows.

Carbon Management

It is known that the main pollutant from a project is the generation of carbon. It is known that it is a byproduct of the waste that is generated from a project. So, for this project also there is a huge chance of the waste that will be generated from this project will generate carbon as its byproduct. So, it is needed to manage those generated carbon in order to make the project sustainable(Gasser et al. 2019). For this, it is needed to implement different measures that can reduce the content of carbon. Although this will add some extra cost to the project, still it is needed to be applied to this project.

Green Energy

It is known the source of generation of energy is one of the major sources of environmental pollution. Most of the buildings in this area used non-renewable sources of energy. So, there is so much pollution generated from these sources. To reduce this pollution it is needed to make energy generated from different renewable sources. The main source that can be used here is solar energy (Bordoloi et al. 2022). It can be seen that this area experiences a good amount of sunlight over the year & there is also the facility of placing solar panels on the land. All of these together make this area adopt the use of green energy.

Circular Economy

It is known that for making one project sustainable it is needed that the materials that are used in the project can be reused again (Craveiroa et al. 2019). This reduces the chances of generation of waste from the project as the materials are reused again. Although it can be seen that the usual materials cannot be reused. For this, it is needed to use a special type of materials that are used in sustainable construction. It is to be noted that using this type of material will add more cost to the project. Thus the cost of the project will be increased.

Environment Conservation

It can be seen that for each of the construction projects, there is some harm caused to the local environment (Weerakoon et al. 2021). From this, it can be said that it is needed to do the construction in such a way that makes the project affect the environment less. The main effect of the projects can be seen in the local population of animals. So, for this, it is needed to implement the measures that can help in conserving the species. It can be seen that there are some species of rodents & others whose population is becoming less are needed to conserve here.

Water Conservation

It is to be noted that water is one of the most assets of a project. For this, it is needed to be used wisely. It can be noticed that there are some measures that can be used to use water sustainably. One of the most important methods that can be used here is the use of “rainwater harvesting”. It refers to the storage of rainwater and using it after treatment. By the use of this method, water can be used efficiently.

Energy Efficiency

It is to be noted that energy is one of the main aspects of a project. There are many areas of a project where energy is used. In a building, there are many areas that consume energy. In most cases, it can be seen as a waste of energy or overuse of this energy. The only way out of this is to use the energy efficiently (Wu et al. 2020). The main method that can be used in this regard is to use a facade system on the external surface of the building so that natural lighting can be used efficiently. Moreover, the use of lights conforming to the LEED standards can also be used for this purpose.

Commitments toward Indigenous People

There are some commitments that are needed to be made to the local people before starting this project. These are the ones that are very much necessary for making the project sustainable. These are as follows.

The first thing in this regard is the commitment to sustainability. According to this commitment, the project is aimed to try to make the project affecting the environment as low as possible. In this way, the local atmosphere will be less affected by the construction

Another commitment of this project should be the development of the area (Puspita et al. 2020). The project should be like this in that after the completion of the project, it is able to generate enough revenue or develop the local area.

Conclusion

In this project, the analysis of the market was done with respect to the property that was selected here. Moreover, the possible financial arrangement of the project was also checked here. The different implications in terms of tax that can come from this project were also discussed here. The potential investment in this project was also discussed here. Moreover, the different risks that are associated with this project were also elaborated here. The different aspects of sustainability with respect to this project are present in this report. The different commitments that needed to be made to the local people before starting a project are also present here.

References

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