PROJECT PROPOSAL

FOR
APARTMENT DEVELOPMENT

PROJECT TO BE IMPLEMENTED IN ADDIS ABABA

PROMOTERS- EDEN KINFE GIRMATSION
JUN, 2021
FINFINE, ETHIOPIA
Table of Contents
Executive Summary........................................................................................................ ..... 4
[Link]........................................................................................................ .. 5
1.1.2Pro j ect Just i f i cat i on.......................................................................... ..................... 6
1.2.2Object ive of the Pro j ect............................................................... ......................... 7
1.3.2The Economic Sign i f i cance of the Pro j ect.................................................. ....... 8
1.4.2Locat i on, Infrastructure and l and................................................ ........................ 9
1.4.1.2Locat i on......................................................................................... .................. 9
1.4.2.2Land Use Plan................................................................................ .............. 11
1.5.2Location Map of the Area...................................................................................12
2. THE MARKET STUDY...................................................................................... ........ 13
. 2.1.2Genera l cons i derat i ons...................................................................................... . 13
2.2.2Macro Economic Performance and the Contribution of Apartment Sector
to the Eth i op i an Economy........................................................................................ ..... 14
[Link] Macroeconomic Performance.................................................................... 14
[Link] Contribution of the Apartment Sector............................. ........................... 15
[Link] The Legal Environment for Apartment Development................. ............. 15
A. Apartment as a legal Term and a Concept.......................................................15
B. Regulatory Experience.................................................................. ..................... 16
C. the Ethiopian Law............................................................................................... 17
2.3.2 Demand and Supp l y Ana l yes i s............................................... ............................ 21
[Link] Demand Determination............................................................. .................. 21
[Link] Demand and Supp l y Gap................................................... ........................ 23
2. 3.3.2 Market Prospects....................................................................... .................. 26
[Link] Target Customers................................................................... ..................... 26
2. 3. 3.5.2 Marketing Strategy.................................................................................. .... 26
[Link] P icing....................................................................................... ............................ 27
[Link] Terms of payment......................................................................... ............... 27
3. PROJECT AND TECHNICAL DESCRIPTION...................................................... 28
3.1.2 Descript i on of the Project / Product Mix........................................................... 28
3.2.2Project tasks and Office......................................................... ............................ 29
3.3.2Construct i on Work and Technology............................................ ..................... 29
3.3.1.2Construct i on Inputs...................................................................................... 29
3.3.2.2Construct i on Process............................................................. ..................... 30
3.3.3.2Construct i on Process F l ow..................................................................... .... 30
3.3.4.2Machineries and Equipments................................................................. .... 30
3.4.2 Utilities........................................................................................................... ........ 30
3.5.2 Project Implementation....................................................................................... 31
4. ORGANIZATIONAL STRUCTURE....................................................... .................. 32
4.1.2Organization and Management.................................................................. ....... 32
4.2.2Man Power............................................................................... ............................ 32
4.3.2Organizationa lStructure..................................................................................... 33
5. FINANCIAL REQUIRMENT AND ANALYSIS..................................... .................. 35
5.1.2Tota l Investment Cost................................................................................. ........ 35
5.1.1.2Land, Bu il d i ng & Construct i on Cost..................................... ..................... 36
5.1.2.2Machineries and Equipments................................................................ .... 37
5.1.3.2Veh i cles....................................................................................... .................. 37
5.1.4.2Of ice Equ i pments....................................................................................... . 37
5.1.5.2In i t i a l Working Cap i ta l................................................................................. . 37
5.1.6.2Pre-service Expenses......................................................... ........................ 38
5.2.2Operat i ng Expense................................................................. ............................ 38
5.3.2F i nancia l Ana l ys i s and Statements.................................................................. . 38
5.3.1.2Under l ying Assumpt i on............................................................. .................. 38
5.3.2.2Sources of Fund................................................................................ ........... 39
5.3.3.2Bank Loan Repayment Schedu l e....................................................... ....... 39
5.3.4.2Depreciation Schedule................................................................................40
5.3.5.2Revenue Pro j ect i on............................................................. ........................ 40
5.3.6.2Ba l ance sheet ( ___ _ __ _ ________ _ __ ).................................. ................. 40
5.3.7.2F i nancia l Statement......................................................................... ........... 41
5.3.8.2F i nancia l Ana l ys i s................................................................... ..................... 42
6. ENVIRONMENTAL IMPACT ASSESSMENT..................................... .................. 44
3 Executive Summary

Project Name Apartment development

2 . Nationality Ethiopian

3. Project Owner Eden Kinfe

4. Project location Addis Ababa , Nifas Silk lafto Sub-City

5. Project Composition Residential Apartment200 m and 400m house and other

related house

6. Primeses Required land 800 m Already owned by the promoters.

7. Total Investment Cost Br 6,000,000 of which 30% equivalent to 1,800,000financed by the

owners’ equity and the rest 70%equivalent to 4,200,000 financed
through bank loan

8. Employment Opportunity 0 individuals permanently and 50 labors and contract workers will
be employed on temporary bases.

9. Social and Economic Benefit Provide better house, employment opportunities, generation of
income, stimulates town economy and benefits local people.
1. INTRODUCTION
Broadly defined, Apartment refers to land and everything made permanently apart thereof, and the nature and extent of
one’s interest there in (EncartaReference Library, 2006). Apartment may be acquired, owned and conveyed (or
transferred) by any legal entity as determined and defined by law. This entity may
take the form of individuals, businesses and nonprofit corporations.
The Apartment market, on the other hand, is the market that encompasses all
transactions, which involve dealings in rights or interests in land and buildings (UN
ECE REAG, 2000). A dealing here is used to refer to the transfer of a right
temporarily or permanently from one part to another in return for a consideration,
usually [Link] one sub-sector of construction sector, the Apartment sector in Ethiopia
increasing in dynamic rate. However, the sector has many obstacles, including the
high cost of construction materials, the slow and limited supply of serviced plots,
and delays in the implementation of the lease system in plot allocation.
More investment in this area is required to meet the high demand. In this regard,
the Government of Ethiopia has conducive investment policies and regulations to
attract the private sectors involvement in the economic development through the
various investment and business endeavors including Apartment development.
To this effect, the owners of the Apartment company,Eden Kinfe interested to
invest in their existing land in, Addis Ababa. This pre-feasibility study project study
is undertaken to check the market, technical and financial feasibility of this project.
The output of the study is very encouraging for the owner to establish the project in
06 kebele area.
The owners of the project have great interest and determination to commence the
project. Hence, they expect to get the necessary support from the regional and
town administration to realize the project.
[Link] Justification
Housing is one of the basic human requirements, as every family needs a roof.
Providing shelter to every family has become a major issue as a result of rapid
urbanization and higher population growth.
In Ethiopia the demand for houses in urban areas especially in Addis Ababa is
very high. As one methods of getting houses, Apartment becomes common in past
few decades.
The Apartment sub-sector has made very significant contribution to the Growth of
Domestic Product (GDP) of the country during the ten years. Because of the
efforts made, construction value added has shown growth trends over the last five
years. The construction of residential and non-residential Apartment property grew
at an average rate of 13.6% per annum over the last five years under review.
Hence, construction stimulated economic growth and generated employment
[Link] property (residential and commercial) market in Ethiopia remained under
developed for several years but the relatively good performance of the macro-
economy in the last five years has stimulated unprecedented investment growth in
the property sector. Despite, positive track records, the sector are still constrained
by a number of barriers detrimental to its growth.
To meet the gap, residential houses/buildings are under construction both in the
main city of Addis Ababa, surrounding area and regional cities throughout the
country, stimulated by the initiative of the government and the sharp rise in
demand and disposable income of the society.
In addition to the above facts, the following points taken by the owner as a project
justification behind investment for the envisioned Apartment investment;
  High economic growth and Investment activities in Addis Ababa and surrounding area.
 High population in Addis Ababa and surrounding area, which is potential market for the envisioned project.
Owner interest to invest in the area
 Location importance of the project area to capital city and South Westernpart of the nation.
 Expansion of infrastructural development in the town

The government of Ethiopia promising five-year growth and transformation
development plan (2010/11-2014/15), the will bring prosperity to its citizens
with collaboration with private sector investment actions.
 The regional government (Oromia) conducive investment packages for
development and poverty reduction.
1.2. Objective of the Project
The main objective of this project is to construct a high quality and comfortable
residential buildings with are son able price.
In relation to the above main objective, the project has the following specific
objectives;
To develop the area to be comfortable for residential purpose.
To create socio-economic benefits for the local community
To consult the construction sector specially in design and supervision
[Link] Economic Significance of the Project
The envisaged project deemed to add to the economic development of the nation
in general and district/region/area in specific with following ways:

7
[Link] Quality House and Service
By constructing and selling best residential villas G+1 and G+2, the project will
contribute for the shortage of homes in the nation. Besides, the consultancy
service will provide quality service to its customers.
[Link] of Revenue
As public policy of any nation, the government collects different forms of taxes
from different business organizations and individuals. Among the different forms of
taxes, business income taxes, payroll income tax and VAT are collected from
undertaking business activities. Therefore, the building will serve as sources of
revenue for the town as well as for the region.
3. Employment opportunity
One of the problems that our country faced is unemployment. Therefore, the
current objective of the government is working on tackling the problem of
unemployment and fostering the development process either through creating self
employment or employment in other organization. Hence, this Company will hire
70 permanent and temporary people.
Besides, in construction period many jobs will be created for local people.
4 .Benefit For The Local Co unity
As a corporate responsibility the company will engage in different development
activities on the surrounding areas. This will better worth the community and
contribute for the development of the nation.
5 .Stimulate the Town Economy Activity

8
The Apartment sector by its nature has multi positive externality in the town. It will
encourage the economic movement of local economy. There will be economic
relationship and transactions among different actors.
1.4. Location, Infrastructure and land
[Link]
The planned project will placed in Nifas silk sub cicty . The area is located around
8 kms away from the capital city of Ethiopia Addis Ababa and it is the way to
south-West Part of the nation.
The project area is very convenient for residential purpose. It is surrounding by
different residential and very near to the main asphalt road to north-west part of
Ethiopia. In general, the project area is bounded by main asphalt road to the north,
village road to the East and West and resident to the South.
Infrastructural Assessment
[Link]: - The main asphalted road which has been serving to
connect Addis Ababa to western parts of the nation is bounded with the project.
B ..Power and Water Supply: - The town has electric power and water lines
have been extended to the project area with adequate supply capacity.
Moreover, there is ample underground water potential as observed in
neighboring villages.
[Link] Socio – economic services: - These include education & health
services, transport facilities, financial institutions government offices etc….
Regarding the fulfillment of these ones since the area is recently allocated
for such a purpose; so far, these have been developed there.
The main reasons behind the selection of this location are:
 Its proximity and strategically located to the central and largest market of
the nation (Addis Ababa) for residential real estate.
 Relatively advanced development in infrastructure (Power, Water,
Telephone internet, road etc.
 Accessibility of skilled labor force
 Conducive investment policy and governance
 Environmentally very fit for residential purpose.

[Link] Use Plan

The organization has already a land, which is estimated to be a total of 800 m
required to construct residential buildings. Land use plan indicated in table below.
Table Land Utilization Plan
[Link] MARKET STUDY
The market study for the project has considered major factors that affects
Apartment sector in Ethiopia. Besides, the study compiled primary and secondary
sources studied by different organizations.
2.1. General considerations
Investment and property development play an important role in any emerging
markets or economies. Property generally comprises residential houses and
commercial Apartment property developed for rental business and sale. The
property investment market in Ethiopia remained under developed for several
years. As a consequence, the supply of residential houses and non-residential
Apartment that can be used for residence, office space, shopping malls and
catering services in the urban centers of the country is disproportionately low to
cope with the growing demand in the country spinning from the average growth in
GDP of 5.5 SN Descriptionpercent over Measurement Quantitythe Required Totallast
ten years and population Land in m 2
Required
increase. The relatively Land in m2
good 1 House Aperformance of the macro-economy (real growth in GDP, low inflation rate
1.13Villa (G+0)and growth in investment and export M2sector) has 20stimulated 180 600.00
unprecedented 2
1.23Service room (Ground) M 15 100 200.00
investment growth in the property
2
sector over 1. Green area, Spacing and Parkingthe last five M years. The 15growth of 120 200.00
Total Building (G+0) Compound area M investment 50in the
2
400property 100.00
market over 2theHouse Blast five years is consistent with the -
2.1kVilla (G+1) global experience suggesting that M 2
15 140 investment in the
residential and commercial 2
2.2kVilla (G+1) M 15 140
property (real estate) is greatly influenced by the performance of
2
2.3kService room (Ground) the M 15 30
2.4kGreen area, Spacing and Parkingmacroeconomic M2conditions. 15In general, 30a stable macroeconomic
Total Building (G+1) Compound area M2condition 15leads to 200
economic 5 Village Green area, Guard House, and M2business growth and develops investors’
confidence. Children, play ground, parking and This certainly
Waste Accumulation spurs large demand in the property market for office space, shopping
malls, 6 Village Internal road & spacing M2
catering services, apartment and residential houses. Following
growing demand +Total 8,00.00
trends, and with the expectation of high return on their investment capital, large

11
number of Land Developers pooled their financial resources and invested in the
property market.
Looking at the past trends and permits issued by the Government to the
construction of Apartment properties in the major urban areas of the country, one
can easily conclude that the momentum is more likely to continue.
2.2. Macro Economic Performance and the Contribution
of Apartment Sector to the Ethiopian Economy
[Link] Performance
Review of trends in macroeconomic performance over the period covering 1995/96
to 2006/07 depicts that; the country’s economy has registered encouraging results
despite its volatility due to heavy dependence on agricultural sector contribution,
which depends on the vagaries of nature. During the period , real GDP growth
averaged 5.5 percent. This is consistent with the preceding years achievements of
6 percent GDP average growth per annum over the period [Link]
negative real Gross Domestic Product (GDP) growth rate of 3.3 percent in 2002/03
was followed by a strong positive record of 11.9 percent, 10.6 percent, 9.9 percent
and 10.1percent growth rates in the subsequent four years, 2003/04 to 2006/07,
respectively, due to mainly the good weather condition resulting in pamper
agricultural harvest and improved performance of the industrial and service sectors
of the economy. The stumpy GDP growth of negative 4.2 percent in 1997/97 and
negative 3.3 percent in 2002/03 was mainly caused by the severe drought that
affected agricultural harvest. With agriculture employing more than 85% of the
population and accounting for nearly half of GDP, Ethiopia’s economic
performance is largely determined by what happens in the agricultural sector. Over
the period under review changes in GDP and agricultural output have been closely
l
inked and erratic. The volatility in GDP growth is a direct result of the economy’s
extreme dependence on rain fed agriculture. GDP growth is highest in years with
good rains (1995/96, 2000/01, 2003/04-2006/07).
Over the same period, the growth in GDP has resulted in significant improvement
in per capita income. This is more evident by comparing growth rate of GDP with
population growth over same period. When the figure of 5.5 percent average GDP
growth rate achieved is compared with the average population growth rate of 2.75
percent per annum over same period, the recorded growth of real GDP implies an
average annual per capita income growth rate of 2.65 percent per annum.
2.2.2. Contribution of the Apartment Sector
During the period, the Apartment sub-sector has made very significant contribution
to the Growth of Domestic Product (GDP) of the country. The Apartment industry
contribution to the gross domestic product at constant factor cost averaged 7
percent per annum over the period. The 7 percent average contribution of
Apartment to GDP is very significant and consistent with trends in growth in
investment on Apartment development in the country.
2.2.3. The Legal Environment for Apartment Development
A. Apartments a legal Term and a Concept
Ap
artments a term originates in the common law, which in broad terms has
a meaning of land and everything made permanently a part thereof and the
nature and extent of one’s interest therein. At common law, if the owner of
the property built on the land does not own the land, the term “real estate” is
l
egally inapplicable. The Federal Constitution of Ethiopia provides that land,
urban or rural, shall not be subject to sale or other means of
[Link] there is a constitutional prohibition for private ownership
1
of urban or rural land, which automatically works against the establishment
of Apartments a legal concept of right in them.
1
Art.40(3), The Constitution of The Federal Democratic Republic of Ethiopia
Nevertheless, there are a number of individuals or group engaged in the
business of construction of residential or commercial buildings known by the
name of or calling themselves “Apartment ” firms. Such firms may also
engage in the simple buying and sale of such property without making some
improvement on the property acquired through such transaction. It does not,
however, include those engaged in the Apartment brokerage business,
whatever the size of investment made on land relating to construction of
residential or commercial or commercial buildings,
[Link] Experience
Apartment business in Ethiopia is at a very low level of development
compared to many other countries found at a more or less similar stage of
economic development. In Ethiopia, this mainly owes to the fact that it is a
business with less than a decade history. By the same token, the law
governing the business and its financing aspect are much less
underdeveloped. For instance, in the People’s Republic of China, laws
regulate this sector and directives issued for banks; and no special law is in
place to govern Apartment finance. In practice finance is crucially needed to
finance property development and personal housing consumption. In
countries like China, the growth of property development loans outpaced
the growth of total lending of financial institutions markedly.
Mature Apartment financial market provides various intermediaries financing
products. These include the issuance of public stock, corporate bond, equity
financing and Apartment trust. A mature Apartment finance market is
featured by secondary market of asset securitization. This improves liquidity
of Apartment assets and provides means for stabilizing financing sources
for the Apartment sector.
Underdeveloped Apartment finance market is featured by other than
consumer s’ contribution in the form of advance payment or otherwise, a
very high reliance on the banking finance. Such loan is mainly used for the
purpose of land acquisition, Apartment property development and house
sales. In such countries commercial banks oversimplify examination
formalities and lose sight of certain risks .As the business has developed for
just few years some problems are prone to be concealed .The difficulty in
obtaining individual credit information has created the problem of monitoring
credit standing and debt servicing capability.
C. The Ethiopian Law
The Ethiopian Law provides no definition for Apartment applicable for all
such business under all circumstances throughout the federal state. It is in
only under one subsidiary legislation, i.e. the Addis Ababa City Government
Regulations Issued to Provide Land For Apartment Regulations
No.20/[Link] is true that a substantial portion of the total Apartment business is situated
in Addis Ababa. However the relevance of this legal definition holds little
relevance for the purpose of the case at hand for the following reasons.
Firstly; it is relevant only for the purpose of providing land to investors in
Addis Ababa and is not applicable to such business in other national states.
Secondly it is only binding in regulating the relationship between the
Administration and the investor and not necessarily binding on other
administrative agencies, such as the monetary regulator (the NBE).
The cited Regulation defines “Apartment Developer” as one who builds 50
houses and above. House is not defined in the Regulation and it is not clear
as to whether small houses irrespective of the amount of capital required
building them.
 Legally, the word ‘real- property’ is never used except in connection with
land. In its strict sense, it denotes only a particular class of interest in land,
real is synonymous with free hold property and it does not include leasehold
interest.
In all types of free hold estates, it is impossible to say in advance at exactly
what moment they will come to an end. The word ‘estate,’ is said to have
its origin in the fact that in feudal times a man status was determined by his
ownership of land; that ownership came to be called his status or estate.
3Ownership of land, the maximum right of which is exhibited by alienation, is
constitutionally prohibited in Ethiopia. 2Under no circumstance shall
4proprietary right over land shall extend to ownership right in Ethiopia.
Having noted the above, the use of the term ‘real-estate’ to traders engaged
in construction and sale and lease of buildings appears to be legally
inappropriate and a legal misnomer in its strict sense.
Among the numerous credit facilities of banks, there is what is commonly
termed as ‘Apartment credit’, composed of loans secured by land and
buildings. Proc.272/2002 allows a lease holder to subject the lease hold for
a surety. Hence, even though the lease holder is a mere possessor by a
5lease contract, any financing agreement remains valid as long as;
The parties are capable of contracting ;
They give free and sustainable consent;
The objective of financing is sufficiently defined ;and is
possible and lawful; and
2 Ibid.P.265
3 Ibid.P.218
4 The Constitution of the FDRE(1995),Art.40(3).
5 Art.13
  The contract is made in the prescribed form.
As land acquired for the said purpose is said to be under lease Agreement,
it becomes important to have a legal understanding of the various aspects
of lease as a legal term.
6
Demand For Residence And Non-Residence Housing In Addis Ababa
Demand A housing survey made by the Addis Ababa City Administration Housing
Agency estimates the current demand for residential housing units in Addis
Ababa at 300,000 housing units. The survey reveals that 300,000 dwellers
of the City do not have defined shelter. The demand by the business
community for shopping, office space and other catering businesses is also
very significant with considerable backlog of unmet shop seekers
registration by the Agency for the Administration of Rental houses. The
Agency had registered 13,966 shop space seekers until November 2003.
Total requirement of space was 698,300 square meters.
The City Administration’s study of the housing needs in Addis Ababa further
elaborates, that it is absolutely necessary to construct 468,668 houses over
six years (2004-2009) to cope with the demand for housing. This indicates
that it is necessary to construct 78, 000 houses per annum over the plan
period. This presents enormous opportunities to Apartment developers who
invest on residential and non-residential building construction in Addis
Ababa.+The market survey made by the consultants of the proposed shows that
there is wide opportunity for investment in Apartment in Addis Ababa. The
6 Civil Code(1960),Arts.
findings are consistent with the Addis Ababa City Administration housing
survey studies. Several factors can be cited for this optimism in Apartment
development, the following are however very important:
 Persistent growth in GDP and stable macroeconomic environment,
which stimulates demand for Apartment property (office space,
shopping mall and catering services);
 Expansion of the existing banking and insurance industry with
opening of new Branches at different locations of the city;
 Emerging new Banks in the pipeline that have acquired licenses and
those that are under the process to acquire;
 Proliferation of private colleges, primary and secondary schools;
 Increase in the number of foreign investors starting business in
Ethiopia; and
 Improved performance registered in the tourism sector in terms of
annual increase in the number of tourists that arrive in the country for
leisure
[Link] and Supply Analysis
[Link] Determination
7 The demand is determined based on the Space Absorption (SA) model. The
SA Index is defined as a measure of the intensity of the absorption or take
Ethiopian Banker Association, Real Estate Development in Ethiopia and role of Banks,
July 2007

7
up of all the available property stock in a market at a point in time. The total
available stock is defined as the sum of vacant stocks (in the previous
period) with the new stocks ( in the current period). The formula given below
measures the net absorption or demand for space.
The SA Index = At X 100
V t -1 + Nt
At = Net absorption in current period t
VT-1= Vacant Stock in period t-1 (ie, previous period)
NT= New Stock that were completed in period t
The SA Index is intended to provide to an alternative way of examining the
demand in the market by analyzing the net absorption of space.
Although the above model is widely used in many countries to forecast
demand for Apartment property, it has been found difficult to apply it to
forecast the demand for housing in Addis Ababa due to absence of data.
There is no systematic compilation of data on housing supply, demand and
construction of new houses, demographic factors. Hence the application of
the model to forecast the demand is constrained by the absence of data.
Apartment development lending banks can use this model to determine the
demand for space at any point in time to assess the commercial viability of
lending to the property sector. However, the outcome of the analysis using
this model depends on the reliability of the data used to determine demand
for space at any geographical location. Therefore, the user should make
sure that the input data is reliable and accurate.
Therefore, the demand for housing in Addis Ababa has been forecasted on
the basis of past studies and trends in the country’s GDP. Generally growth
in the economy leads to high demand for Apartment property in any country.
GDP growth rate over the last three years averages 10% per annum in
Ethiopia, and the Government is committed to sustain the growth rate. A
growth rate of such magnitude would result in high demand for the property
market due to the fact that economic growth and demand for space have a
strong linkage. Thus a 10% annual growth rate in the demand for residential
and commercial Apartment space is anticipated. The Addis Ababa Housing
Administration Agency estimates a backlog of demand for residential and
non-residential housing units at 300,000 units and other studies at 468,668
units from 2004 - 2009. The Agency estimates the construction of 78, 000
units per annum to meet backlog of demand. There is a considerable
disparity between the two estimates. But the later appears more realistic
estimate, as it is very recent study based on the demographic factors,
existing housing stock and anticipated growth in the country’s GDP.
Experience on the other hand shows that there is a strong linkage between
GDP growth and demand for space (Residential and non-residential real
estate). The Ethiopian Government targets 10% annual GDP growth rate to
raise the country to middle income countries over 20years period. Annual
GDP growth rate of 10%, stimulates the demand for residential and non-
residential property space in the country and provides impetus to the growth
of investment in the housing sector. Conversely, a greater demand for
housing provides a very large economic stimulus to the broader economy.
Given its linkage to many sectors in the economy- including land markets,
construction and labour markets-housing finance is also key to economic
growth. 2 The availability of mortgage financing also stimulates the
construction of new houses and property. Housing construction is labour
intensive and thus provides significant employment opportunities. The
demand for residential and non-residential Apartment property is therefore
expected to grow at 10% per annum, consistently with GDP annual growth
rate. Considering the annual housing need estimates of 78,000 units by the
City Administration, to provide for the City’s population growth, relief of
overcrowding, replacement of dilapidated houses and space for office,
shopping etc, a 10% growth rate in the demand for residential and non-
residential housing units is anticipated that spin off from economic growth.
Therefore, the demand for housing (residential and non-residential) in Addis
Ababa is projected as follows:
Table-Demand for housing units (residential and non-residential) in Addis Ababa
Year Housing units
007(backlog) 468.668
008 85,800
009 94,380
010 103,818
011 114,200

2.3.2. Demand and Supply Gap

The demand for housing is expected to grow from 85,800 units by 2008
Fiscal year to 114,200 in 2011. Against this growth in housing demand, the
City Administration planned to construct 35,000 units every year to partially
Meet the demands. According to Addis Ababa Housing Administration
Agency, the number of housing units to be constructed by the Addis Ababa
Administration is as follows:
Table-Plan for condominium construction Year

Housing units
006/07 33,000
007/08 35,000
008/09 35000
009/10 35,000
Source: housing Administration Agency
Comparison of demand and supply of housing shows that despite the fact that the
Government is investing on condominium construction to provide shelter to middle
and low income urban population, there is still a large gap that must be filled by the
private sector such as land developers who are investing on commercial property
for profit. The table shows the excess demand that must be bridged by land
Developers and individuals and institutions.
Table-Demand and Supply for housing units (residential and non-residential) in
Addis Ababa
Year). Demand Supply Excess Demand that
(Housing units) Housing( units to be must be filled by
[Link] City units) private sector
Admin
2007 468.668(backlog) 33,000 435,668
2008 85,800 35,000 50,800
2009 94,380 35000 59,380
2010 103,818 35,000 68,818
2011 114,200 35,000 79,200

As can be observed, there is a considerable gap that needs private sector

Involvement to invest on Apartment properties to cope with the demand for
Residential and non-residential buildings in Addis Ababa.
Attempt is also made to convert the excess housing demand in Addis Ababa that
may be met by the private sector (residential and commercial property developers)
in to monetary terms. For this exercise certain assumptions have been made as
Follows:
 o Current Average construction cost (villa and High rise buildings) is Birr 3,800 per m;; and
o Average area of single housing unit is 60 m.
Using this assumption, the monetary value and debt finance requirement is
estimated as follows.
Table -Demand for housing units (residential and non-residential) in Addis Ababa
and Financial investment requirement

Year Demand for Housing units Area in square Construction Monetary value (in Debt Finance requirement
that is to be filledby Meter M2 cost/m(Birr) billion Birr) (in billion Birr)
private sector
2008 50,800 3,048,000 3800 11.6 8.1
2009 59,380 3,562,800 3800 13.5 9.5
2010 68,818 4,129,080 3800 15.7 11.0
2011 79,200 4,752,000 3800 18.1 12.7
The demand for housing converted in to monetary value is estimated at Birr 11.6
billion, and this rises to Birr 18.1 billion in 2011. This doesn’t include housing units
to be constructed by the government, as the financial outlay would obviously come
from government sources and beneficiaries from the scheme. What is depicted in
table 18, is that, only housing units that may be developed by land developers and
private sector. Assuming that, 30% of the investment outlay would be covered from
equity sources contributed by owners and 70% to be covered from long-term bank
credit facilities, the amount of loan that may be required from banks over the
period ranges from Birr 8.1 Billion to Birr 12.7 billion.
[Link] Prospects
Based on market study, the demand of residential Apartment in Addis Ababa and
surrounding area like Nif silk lafto Sub-city is very high. Therefore, the envisioned
project will be successful by entering in to this market in the town.
[Link] Customers
The target customers of the project are higher income and middle income earner
since the payment is finished with in long term time (10 years). Besides, for the
commercial centers different business community around area are taken as a
target market.
[Link] Strategy
To reach customers different marketing ways will be used. Among the different
marketing strategies and tools for promotion controlling the market:
 Printed and non printed forms of advertising,
 Sponsorship of key government activities and public support mechanism.
 Commissioning
 Long term payment mood
The project under discussion has diversified marketing strategies that could enable
it come up with the different competitors in the market. Moreover, customer
satisfaction at reasonable payment mood will be the key marketing strategy of the
house.
[Link]
Based on the market price of similar residential Apartment around Addis Ababa
8 and surround area, the envisioned project set
the price for its services as indicated below;

Product UOM Average price in Addis the company in Birr

Ababa in Price of
Birr
House A Unit 2,800,000.00 2,650,000.00
House B Unit 4,950,000.00 4,850,000.00
Commercial Centre M2 11,000 10,500.00
2.4.1. Terms of payment
The mode of the payment of the project will be 20% initially and within 10 years the
rest of payment without interest rate.
3. PROJECT AND TECHNICAL DESCRIPTION
3.1. Description of the Project / Product Mix
The project under consideration will be for construction of residential houses and
consulting in construction sector particularly in the area of design and supervision.
The project will have four types of residential houses, i.e, House A, House B, as
described as follow;
I. House A
In this product mix there will be a total of 15houses with a total area of 100 m2will
be constructed on the proposed project area. It consists of G+0Villa (180 m),
Ground Service rooms (50 m) and Green area, Spacing and Parking (170 m).
ii. House B
In this product mix there will be a total of 20 houses with a total area of 200 m2will
be constructed on the proposed project area. It consists of G+1 Villa (140 m),
Ground Service rooms (30 m) and Green area, Spacing and Parking (30 m).
The company also provides consultancy service for different customers mainly in
the area of design and supervision Besides, It will rent its construction machines
and equipment’s for business when the construction finished.
[Link] tasks and Office
The Project will design, construct and supervise by its staffs on separate
department. It will sub contracts works like Electrification, Sanitation, Paint,
Carpenter, Guard, Glass Work etc
The company will rent an office in Addis Ababa and will have one satellite office on
the project site.
[Link] Work and Technology
[Link] Inputs
The project will use the following inputs:
 Bricks/ Steel Doors and Grills
 Sand Wood
 Crush Win board
 Steel Chipboard
 Mud Glass
 Cement Varnish
 Floor Tiles Paints
 Bath Room Fittings Hardware
 Cupboards Wires
 Lighting accessories Misc. electrification equipment
 Sewerage and Water Supply Pipes PVC Pipes
 Dadex Pipe
[Link] Process
This section will include the production details of the project, which includes the
raw material required, product mix, production capacity, production proportion of
each product etc.
[Link] Process Flow
The production process includes the following steps.
 Approval of Land
 Architecture Design
 Materials Procurement
 Erection of Foundations
 Construction of Structure
 Installation of Electrical Wire Pipes
 Construction of roof.
 Plaster of cement
 Sewerage and water pipe installation
 Construction of floors and bathrooms
 Paints and electrification
  Requirement and cash flow forecast.
[Link] and Equipments
Most required machinery and equipments for the project will be rented. Basic
machinery and equipments will be purchased.
[Link]
A number of utilities would be put in place in order to ensure smooth functioning
of the project. These utilities include:
 Water Supply,
 Supplementary Electricity supply,
 Telephone line
 Fuel , oil and lubricant
 Paved Road Transportation,
 Drainage Facility
[Link] Implementation
The project's implementation is expected to take 30 months. The major activities
include Bank loan processing, construction of the building, cleaning the area
around the building, procurement of equipments and start rendering services.
29
4. ORGANIZATIONAL STRUCTURE
4.1. Organization and Management
The organizational structure should be in a way that the company able to achieve
its objectives as well as the satisfaction of standard requirement.
[Link] Power
The total manpower required for the company will be 70 persons. The manpower
list and the corresponding salary expense are shown in the table below.;
Table- Man power list, qualification and salary expenses

SN Position No Qualification Monthlysalary inBr AnnualSalary in Br

1 General Manager 1 MSC/Construction management 8000 96,000
2 Operational Manager 1 BSC in Mechanical/Industrial Engineering 4000 48,000
3 Civil engineer 2 BSC in civil Engineering 3500 7,000
4 Senior engineer 1 BSC in civil Engineering with extensive exp 4500 54,000
5 Architect 2 BSC in Architecture 3500 84,000
6 Senior architect 1 BSC in Architecture with extensive exp 4500 54,000
7 Drafting 5 Diploma in drafting 1800 108,000
8 Human resource manager 1 BA in Management/Administration 3000 36,000
9 Forman 4 Diploma in Construction 1800 86,400
11 Head, Administration&Finance Dept. 1 BA in Mgt/Acct 3000 36,000
12 Personnel 1 BA in HRM 1800 21,600
13 Marketing/promotion expert 1 BA in Marketing 2500 30,000
14 Sales 6 Diploma in Sales Mgt 1500 108,000
15 Accountant 2 BA In Accounting 2500 60,000
16 Cashier 3 10+2 in Bookeeping 900 32,400
17 Secretary 2 Diploma in Secretarial science 900 21,600
18 Office assistant 3 10+2 /active assistant 950 34,200
19 Store keeper 3 Diploma in logistic mgt 1000 36,000
20 Purchaser 1 Diploma in supp. & Put. Mgt 1000 12,000

21 Guard/Security 4 Basic 500 24,000

22 Janitor 2 Unskilled 450 10,800
23 Driver 3 10 completed + certification 850 30,600
24 Machine operator 4 10 completed + certification 900 43,200
25 Daily Labor 16 Basic 161,070
Total 54 1,073,800
Grand Total 1,234,870

4.3. Organizational Structure

The organizational structure of the project is designed by including all the
Necessary personnel under the right division. At the top of the organizational
structure, there will be General Manager with the responsibility of supervising the
overall activity of the plant. Depending up on the nature of the center and the
amount of work to be performs; there exist auxiliary units under the general
manager. Employees under each unit will be supervised by the department head that is
accountable for the general manager. General Manager is appointed by owners.
Fig Organization Structure of the Project
[Link] REQUIRMENT AND ANALYSIS
[Link] Investment Cost
The total amount of money that is required to establish the envisaged
Apartment Project is estimated to be birr 6,000,000.00
Table Summary of total investment cost

SN Description Cost in Birr

1 Land, Building & Construction 4,350,957.98
2 Bld Machines & Equipments 765,000.00
3 Vehicles 165,000.00
4 Office Equipment 79,905.00
Total Fixed
Investment Cost 5,360,862.98
5 Pre service Expense 48,300.00
6 Initial working capital 390,633.00
Total 5,799,795.98
Contingency (10 %) 200,204.02
Total Initial Investment Capital 6,000,000.00
[Link], Building & Construction Cost

SN Description Total Land required in Unit Cost in Br Total cost in Br

M2
1 House A
1.1 Villa Ground 720 2,400.00 1,728,000.00
1.2 Service room (Ground) 360 1,000.00 360,000.00
1 Green area, Spacing and 360 180 64,800.00
Parking
Total 2,152,800.00
2 House B
2.1 G+1 504 2,400.00 1,209,600.00
2.2 Service room (Ground) 144 1,050.00 151,200.00
2.3 Green area, Spacing and 72 190 13,680.00
Parking
Total 1,374,480.00
5 Village Green area, Guard 750 200 150,000.00
House, Children, play
ground, parkingand Waste
Accumulation
Total 3,677,280.00

5.1.2. Machineries and Equipment

SN Description Measurement Qty Total cost in Br.

1 Generator Unit 1 45,000.00
2 Construction machineries LS 300,000.00

3 Construction tools LS 360,000.00

4 Worker Safety Equipments 60,000.00

Total 765,000.00

[Link]

SN Description Measurement Qty Total price in Br.

1 Mini-buses PCS 1 45,000.00
2 Automobiles PCS 1 45,000.00
3 Pick-up PCS 1 75,000.00
Total 165000
[Link] Equipments

SN Description Measurement Qty Unit cost in Total cost in

br. Br
1 Managerial Tables Unit 5 2,600.00 13,000.00
2 Managerial chairs Unit 5 1,900.00 9,500.00
3 Office table with Chair Unit 10 2,500.00 25,000.00
4 Secretarial table with chairs Unit 1 1,500.00 1,500.00
5 Computer with printer Unit 5 15,000.00 75,000.00
6 Laptop Computer Unit 3 13,500.00 40,500.00
7 Shelf Unit 2 4,500.00 9,000.00
8 Filing Cabinets Unit 3 1,500.00 4,500.00
9 Guest chairs Unit 5 800.00 4,000.00
10 Fax & Telephone Machine Unit 3 1,450.00 4,350.00
11 Assembly Set Unit 1 55,000.00
12 Carpet and LS 25,000.00
Curtain(Decoration)
Total 266,350

[Link] Working Capital

The initial working capital is estimated to be birr 1,302,110

[Link]-service Expenses
SN Description Cost in Br.
1 Project proposal 10,000.00
3 Licensing fee and others 1,000.00
Total 11,000.00

35
 [Link] Expense
SN List of Items Total cost Annual Assumptions Used
Cost in br.
1 Audit and Legal fee 42,000.00k3500 br per month
2 Stationery Supplies 4,200.00k800br/Month
3 Promotional cost 50,000.00kLump sum cost
4 Office Rent 240,000.00k20,000 br per month
5 Cleaning Supplies 8,400.00k700 Per month
6 Water consumption for office 3,600.00k300 M3 by 2 br
7 Electric consumption 1,250.00k2000KWH By 1.25 br
8 Telephone & fax 18,000.00k1500 per month
9 Fuel 150,000.00k7500 lit per year @20 br.
10 Oil & Lubricant 15,000.00k10% of cost of fuel
11 Miscellaneous Costs 48,000.00k4000 per month
Total 507,688.50

[Link] Analysis and Statements

[Link] Assumption
The financial analysis of the project is based on the data provided in the preceding
sections and the following assumptions.
[Link] and Finance

Construction period 30 months

Source of finance 30% equity and 70% loan
Tax Holiday Years
Bank interest rate 10 %
Land lease 8.4 br per year for 99 years
Lease payment period 10 years

[Link]

Vehicles 20%

36
Building Machinery and equipment 10%
Office Equipments
10%

[Link] of Fund
SN Description % share Amount

1 Owners Share 30% 1,800,000.00

2 Bank Loan 70% 4,200,000.00
Total 100% 6,000,000.00

[Link] Loan Repayment Schedule

Principal Interest Total Annual Remaining
Year
Payment (10%) Payment Balance
0 0 0 0 4,200,000
1 420,000 420,000 840,000 3,780,000
2 420,000 378,000 798,000 3,360,000
3 420,000 336,000 756,000 2,940,000
4 420,000 294,000 714,000 2,520,000
5 420,000 252,000 672,000 2,100,000
6 420,000 210,000 630,000 1,680,000
7 420,000 168,000 588,000 1,260,000
8 420,000 126,000 546,000 840,000
9 420,000 84,000 504,000 420,000
10 420,000 42,000 462,000 0

[Link] Projection
Description UOM Year 1 Year 2 Year 3-10

37
 House A House 20,140,000.00 9,063,000.00 9,063,000.00
House B House 9,700,000.00 4,365,000.00 4,365,000.00
House C House 7,680,000.00 3,456,000.00 3,456,000.00
Commercial Center M2 1,680,000.00 756,000.000 756,000.000
Rent of Construction 9 LS 750,000.00 750,000.00 750,000.00
machineries & Equipments
Consultancy service fee10 4,000,000.00 4,000,000.00 4,000,000.00
Total 4 ,950,000.00 22,390,000.00 22,390,000.00

[Link] sheet (Beginning of operation)

Asset
Current Asset Amount in Br
Cash 1,800,000
Inventory of inputs 390,633
Total Current Asset 2,190,633
Fixed Asset -
Land, Building and Construction 3,677,280
Bldg Machineries and Equipments 765,000
Vehicles 165,000
Office Equipment 79,905
Total fixed Asset 4,687,185
Total Asset 6,000,000
Liability -
Account payable 4,200,000
Owners Equity -
Capital 1,800,000
Total Liability & Owners’ Equity 6,000,000

[Link] Statement
[Link] Loss Statement, projected
Revenue Year 1 Year 2 Year 3-10

9
Revenue from renting of the existing machineries and equipments

10
Service fee from design and supervision for other company

38
 Sales 23,950,000 22,390,000 22,390,000
Expenses
Salary Expense 1,234,870 1,234,870 1,234,870
Operating Expenses11 1,538,450 698,450 698,450
Deprecation Bld. Machineries and Equip 355,000.00 355,000 355,000
Deprecation of Vehicles 190,000.00 190,000 190,000
Deprecation office Equip 26,635.00 26,635 26,635
Interest Expense 5,523,414.30k4,971,072.87 2,209,365.72 1 2
Lease Payment 2,977,793 2,977,793 2,977,793
Total Expense 11,846,16 10,453,821 7,692,114
Profit Before Tax 2,103,837 11,936,179 14,697,886
Tax(30% ) 4,409,366
Net Profit 2,103,837 11,936,179 10,288,520

[Link] Flow statement

Year Year 0 Year 1 Year 2 Year 3-10

Equity Capital 1,800,000
Loan principal 4,200,000
Net sale 0 43,950,000 22,390,000 22,390,000

11
Only 20% of promotional costs are employed

12
Average amount

39
 Total cash in flow 6,000,000 4 ,950,000 22,390,000 22,390,000
cash payment
Salary expense 1,234,870 1,234,870 1,234,870 1,234,870
Investment 4,200,000 0 0 0
Pre operating Expense 11,950 0 0 0
Operating cost 0 1,538,450 698,450 698,450
loan repayment 0 11,046,828.61 10,494,487.17 7,732,780.02 1 3
Lease payment 2,977,793 2,977,793 2,977,793 2,977,793
Tax payment 0 0 0 4,409,366
Total payment 5,494,157 15,797,942 15,405,600 17,053,259
Cash surplus / Deficit 4,411,762 27,152,058 6,984,400 5, 6,741
Cumulative cash flow 1,411,762 1,563,820 8,548,220 4 ,884,961

[Link] Analysis
[Link]

According to the projected income statement, the building will start generating
profit in the 1st year of operation. Important ratios such as profit to total sales, net
profit to equity (Return on equity) and net profit plus interest on total investment
(return on total investment) show an increasing trend during the lifetime of the
project.

The income statement and the other indicators of profitability show that the project
is viable.

ii. Pay-Back Period

The investment cost and income statement projection are used to project the pay-
back period. The building’s total investment will be fully recovered at the 8 year of
operation.
13
Average amount

40
 [Link] IMPACT ASSESSMENT

All projects in environmentally sensitive areas should be treated as equivalent

activities irrespective of the nature of the project.

41
The Apartments provided with a drainage system that carries all waste water to a
central point. The mitigation of the effects of the waste begins by bringing it to a
central point and collecting it in a pit of sufficient size to handle the amount of
waste generated. Such a pit should be lined appropriately to render it impervious
so that no used water escapes to the environment.

Generally, the Apartment operation including any other tourist network industries
are environmental friendly. As to Apartment service, due to the very nature of the
operation, the business itself requires keeping the environment tidy and beautiful.
Therefore, due to their vested interest Apartment operation has to keep the
environment friendly and attractive. The service is not going to have any danger to
resident of nearby and to the overall environment.

42