The Business of Building: Full report

The Business of Building: Full report

Features construction business

Construction, from the point of view of private investors, is characterized with respect to most other industries in that success (or failure) of a given real estate development begins and ends with the construction and sale of the same enterprise.2 bhk apartments in trichy 2 bhk Flats for sale in trichy

Any other industrial branch involves investment in assets closely linked to the maintenance over time of a particular production line. Thus, those who invest in a food production facility cannot stop making food products without incurring huge losses associated with capital tied by unprofitable plant.

By contrast, in the construction industry each work itself becomes a single production line that starts with investing in the field and the associated project and finally closed the day we sold the last functional unit.

Similarly, the success of a particular real estate product will not guarantee equal outcomes for another enterprise of the same features, yet run by the same manager in a similar property, strongly depending on the results of various factors, among which may be mentioned:

- The location

- The characteristics of the market you are targeting,

- The existence of credit and attractive interest rates,

- The political and macroeconomic context and magnitude of the associated risk aversion,

- The way the public perceives the strengths and weaknesses of the enterprise.

As a matter of approach and in order to define the roles in a real estate project refers to the following scheme where focus on the roles played by each of the participants:

Scheme Participants of Renovations

Developer

It is a person, or group of associated persons, making the investment and development of a certain Entrepreneurship covering their design, construction and marketing. In the case of public works the developer is the State; in the case of corporate headquarters of a large company the developer may be the same company. Within the private work preliminary to define two categories of developers:

Stable Developers: are those who throughout the years have maintained their presence through the generation of several ventures, concentrating most of its business in the construction of real estate projects. In this category one can mention RAGHSA and BKS, among others.

Occasional Developers: are those whose "core business" is not the building but make the decision to address a very specific project under market conditions motivated by the possibility of making a good business in a favorable economic context (egg, a group of small associated investors to build an apartment building).

Another example is the occasional developer aforementioned companies facing building their own buildings (Resold, Telecom, Group Fort bat, etc...).

The development of entrepreneurship requires the generation of areas responsible for design, construction, management and marketing venture, in addition to administrative, financial and legal structure.

In the context of the previous scheme, all the above areas belonging to the unique structure of the Developer are the administrative and financial sectors, all the remaining areas.

Project

The project is responsible for Architecture according to the guidelines established by the Developer, after analysis of the commercial viability of Entrepreneurship. In this first stage, the firm exchanged proposals with the Developer and Real Estate Consultants, in order to define the distinctive features of the project considering the market segment that will target and the marketing conditions. For the technical definition of the project, the Study of Architecture will involve a study of Structural Engineering, Facilities advisors, etc...

The same study Architecture prepares preliminary budgets as you progress through the project definition work proposing deadlines; from which the developer performs the relevant financial evaluations in flows to consider throughout the construction and marketing of Entrepreneurship.

Construction

The construction of the actual work that engages a construction company (or several contractors according to the type of contract chosen by the Developer) who previously was awarded the competitive bidding for implementing the project. For the construction of the work, the Construction Company employs labor (own or outsourced), purchase materials (concrete, brick, cement, etc...) And equipment (furniture, elevators, carpentry, etc...) And contracts for services (facilities, painting, health and safety, project structure, etc...)

Legal Structure

The legal area is usually outsourced to one or more studies dealing with the drafting of contracts, tickets, deeds, etc.., and solves issues inherent to the area along the development of Entrepreneurship.

Construction Management

The Construction Management Client technically represents the work and is responsible for it to be executed in full compliance with the contract specifications of the project. Such direction may be exercised both by the same study that implemented the project as a Studio or Professional oblivious to that. During the nineties in some enterprises Management Mode of Construction and Project 2 was adopted.

Merchandising

The marketing area usually focuses on one or more Developments whose participation is reflected in the definition of requirements Entrepreneurship during the first stage of the project, and later seized of all items related to the promotion and sale of Entrepreneurship in different instances marketing.

Scheme Participants Renovations used as the basis for defining the industry players admitted to various modifications over time: in several cases has been unified with the Developer role of the Construction or with the Housing that of Project Management, or Architecture Studio Developer with. In addition, the emergence of new forms of financing works 3, such as the financial trust, gave authority to roles as trust or, trustee and beneficiary.

- >> Sale and financing of private work

There are three basic methods of sale:

1-A. Fixed price sale: used in periods without inflation or predictable variations thereof, is setting a selling price in the time of the operation. The amount is considered fixed and is independent of the value of the rate that could disqualifies the buyer in the event that this recourse to credit to enter the well. This interest rate

Will reflect only the credit risk and the value of money over time without considering other variables associated with any changes in prices of inputs involved in the work.

1-B. Fixed indexed Sale price: when there is uncertainty about the behavior of inflation in the short and medium term, the developer stops absorbing this risk and it is transferred to the buyer by the addition of a rate component that adjusts unpaid direct debit balances or indirectly for inflation.

1-C. Retail cost: supported by at least two variants:

a. System consortium: the organizer of the enterprise sells the land (with a percentage of profit with respect to its cost) a group of persons in whose name the deed and who become joint owners of the land. The consortium signed a contract turn to a study of architecture, one with a construction and, eventually, another with a management. Through these contracts the homeowners agree to pay the costs of the whole construction including materials, labor and professional fees. Each condominium owner shall have the right, at the end of the work, on one or more units of the enterprise.

b. Ticketing system: different system consortia that a conveyance of the land, i.e. does not occur, is the owner of the land which hires professionals and the company and not the buyers of the units who, however, receive a ticket purchase - Sales units purchased, which will be titled later.

Regarding the financing of works, there are three basic procedures:

. 1 Like Capital: entrepreneurship is financed wholly or partly with equity entrepreneur group.

. 2 Credits long term is wholly or partly financed with loans from financial institutions. The high interest rates in times of industry activity coupled with the lack of credit in force since 2001 make this appeal to be closer to a real alternative financing theoretical enunciation.

. 3 Financial Trusts: Escrow is the assignment by a person or company (trust or) to another person or partnership (Trustee) of a particular good (land) in order that the works required for execution are performed there a particular enterprise. After completing this, your units may be transferred to the purchasers.

This results in higher operative assurances and benefits for all integral parts of the business, among which may be noted:

a) The settler and the trustee does not confuse their heritage or their property to the trust assets involved in entrepreneurship and that this constitutes a distinct heritage of involvement, so that in case the venture could not be realized, not produce the bankruptcy trustee or the only trustee and liquidate the assets of the trust for the creditors of the trust.

b) In respect of beneficiaries (those who contributed work or development money hoping to get a certain utility) and trustees (those purchasers of housing units as final recipients) have secured their loans being able to collect the affected assets exclusively for them.

c) The trustee is prohibited from acquiring any assets it manages and is required to account for their management.

d) To ensure continuity of the project there is the figure of the substitute trustee.

e) Absence of retroactive effect of the revocation of the domain by the trustee so they can not affect the rights acquired by third parties.

Finally, it can be stated other inherent variations to the concept of funding, such as the early redemption of bonds denominated State dollars (BODEN 2012), received by those who agreed to swap their fixed deadlines rescheduled, the application of resources of the administrators financing private housing construction, the establishment of investment funds that would allow the funding of the work and the final purchasers, changes in tax regulations for enterprises housing for middle and low, etc. sectors.

Regarding the involvement of BODEN 2012 for the construction of individual homes, the 15/05/03 the bidding process was closed; receiving 116 deals amounting to $ 27 million, being the Original quota established $ 150 million. With regard to the same defined operative housing projects, given the number of

Operations in the process of presentation, there was a 45 day extension to the deadline for receipt of tenders by the Ministry of Finance.

- >> How hires and manages the execution of a work?

The most common way of contracting work is by "Set Elevation" system whereby the execution of a work contract (or part of this such as plumbing, electrical, etc...) Where the builder is responsible for realizing the project and deliver the projected benefits and according to his purpose.

Within the same system a work can be contracted by "separate contracts" where several companies are hired, each responsible for a specific item (masonry, concrete, installation of air conditioning, painting, etc.).

The other option of hiring within the elevation adjustment scheme is the "turnkey" in which the execution of the entire work to a single firm is hired, which is responsible for the execution of all items of the same.

In our country, over the years the implementation of most of the work has depended (from the point of view of their project and technical realization) of three main characters: the Planner, Construction Management and Construction Company (or contractors of each item in the event that the work is done by separate contracts).

The project and construction management is usually the responsibility of an Architecture that is running the project and appoints its own professional to exercise the office of Director of Development.

In some instances, the Owner decides Entrepreneurship separate figures Planner and Construction Management of work, assigning them to two separate studies.

The responsibility of the Planner is to produce project documentation, according to the needs of the owner of the enterprise, respecting the regulations and restrictions imposed by official bodies.

The primary responsibility of the Project Manager is to ensure the

Faithful implementation of the project in the works after inspection and approval of the work performed in accordance with the applicable rules of the different control bodies (Municipality, Service Companies and Entities Regulators, etc.).

The execution of the work ensures a Construction Company whose responsibility is to build "turnkey", i.e. according to the specifications of the contractual project and taking care of every detail to deliver the unit to their owners in perfect working.

A variant of the above is the administration of the work of separate (usually by the Project Manager or a hired ad hoc administrator) contracts, i.e., without the existence of a construction company in charge of the work, but a different coordinator subcontracts work.

Resulting scheme arises from a sense of the times that elapse between the appointments of the Study by the Project to completion of a work. The stages of design and construction of a venture, as usual in the Argentine market, are distinct entities, namely the step of construction does not start until it is not defined the design stage, resulting in "dead time "between the two steps necessary to tender the works, evaluate budgets and generate project modifications to suit the amount of investment planned by the head of the enterprise.

As an example, assume that a venture project requires 90 days 40 days notice and award the work to 180 days for construction. According to the sequence mentioned in the previous paragraph, the total time would be 310 days and the resulting Gantt would be: On the other hand, in the scheme mentioned is that the investor bears the risk of higher costs to resolve between course in the instance of the project and the final cost of the work.

During the nineties, with the objective of minimizing the sum of the listed times and find a way to spread the risk of higher costs with those responsible for the development and implementation of the project began to be used in Argentina the Management system Work.

In this system, most used in North America, the responsibilities of the Project and Construction Management of the resources are unified. Thus, the takes responsibility for the Project Management and Implementation of Entrepreneurship ensuring a maximum price, assuming responsibility for any surplus of the price and sharing the benefits with the Purchaser obtained in the case of a lower final price than the agreed in the pattern budget.

Unlike the traditional form, in one occurs Management

Tasks overlap shortening the total time for the execution of Entrepreneurship. This can be seen in the following Gantt chart for the same period’s hypothesis posed earlier:

The deadlines were optimized in 60 days, i.e., improved by about 20% the original full term without changing the partial terms of each of the tasks.

Contracts are concluded between the Client and Subcontractors and payments (approval certificates by Green and Client) are issued in the name of each contractor, not counting Gerenciadora intervention in the payment process, ensuring direct payment to contractors.

However, despite the obvious advantages of this system, he never managed to win the traditional above-mentioned scheme. The possible reasons may be their low diffusion, few unsuccessful experiences, shaping the figure not being a construction company; you must have the financial backing that allows you to deal with any excess budget pattern and, finally, the erroneous assumption that it is a system for large-scale works.