Monday, September 30, 2019

How to Choose Building Materials and Estimate their Cost and Quantities for House Construction?

Building material is any material which is used for the construction purposes. Building materials can be categorized into two sources, natural and synthetic. In order to construct a good quality house in the amount you have budgeted, a thorough understanding of the quality parameters, cost and quantities of these building materials are required.

The cost of construction depends majorly on the following factors:
  1. Architectural Design opted (like Open Top, Sloped Roofs, terraces with add-on features etc.,)
  2. Structural Design (depends upon type of strata available for foundation and numbers of floors / configurations (basement, stilt,G+2 etc.)
  3. Specification of Building materials selected (Quality/Brand of materials used for painting, flooring, woodwork, Bathroom, Electrical etc.)
  4. Exterior Finish chosen (i.e. front elevation design, stone cladding, facade, etc.)
  5. Peripheral external developments (such as compound wall, driveway, landscape, hardscape, Gate etc,).

The other minor cost head would be cost of liaison, charges for construction permits & building approvals.

The Construction cost can be broadly split into Labor and Material Cost. The extremely increasing construction trends are considered the driving force behind this fast upraise of total building construction costs. Taking this trend, the material manufactures have raised the prices of materials considerably in last decade or so.

Before planning for a bungalow/individual construction unit, one must be aware of the quantities and cost of building materials as they constitute around 55-60% of the total construction cost of a house. While taking a personal round of the nearby market, one should also avail services of construction turnkey solution providers and then take a judicious decision before the start of the construction.

Refer the info graphic attached in the article to get the building material consumption and their costs for a 1000 Sqft budget house construction. The material quantities can be extrapolated based on the built up area of construction you are planning for.




The Major raw material, intermediately and finished construction materials contributing major pie to overall material cost are:

1. Reinforcing Bars(Rebars) / Steel:

Reinforcement steel is the most important structural material in construction. Steel is used in RCC (Reinforcement cement concrete). Generally rebars available in the market are manufactured through Thermo mechanical treatment (TMT). Rebars comes in different grades (i.e, Fe415, Fe500, etc.,). Fe500 is generally recommended by structural designer for structural requirement fulfillment.

The approximate Steel consumption per sq.ft built up area (BUA) is 4 kg (for low rise construction i.e., less than 4 floors of construction). Steel contributes the most among all individual materials, about 25% of total material cost. So, a price rise of Rs.5 per kg can make big difference in the total cost of construction.

2. Cement:

Cement is an important construction material and when mixed with materials like sand, aggregates (stone chips), and water, it binds them together. It is used in concrete, in brick masonry work, in tiling, and in plaster works.

Good quality cement should feel smooth when rubbed between fingers. If a small quantity of cement is thrown into a bucket of water it should sink and not float. Cement should always be kept free from moisture. Its storage should have finished floor raised to at least 300mm above ground level and should have airtight storage. Use of cement older than 2 months should be avoided as cement loses strength with increase in its shelf life.

OPC 53 grade is generally used for concrete works and blended cement (PPC & PSC) for masonry, tiling and plaster works.

The approximate cement consumption per Sq.ft built up area (bua) is 0.4 bags. Cement as a construction material contributes about 16% of total material cost.

3. Sand:

Sand is used mainly in Concrete, Masonry, Plaster and Flooring. Good sand should be well graded i.e., particle size ranging from 10mm to 0.150 mm for concrete and masonry works, and 5mm to 0.150 for plaster. It should be free from slit/clay and organic matter.

Natural Sand (also called River Sand) is obtained from River Beds. Due to environmental impacts and stringent laws by the government, Natural sand is slowly and gradually being replaced by Crushed sand (for concrete and masonry works) & Plaster sand (for plaster works). Crushed Sand and Plaster Sand are manufactured from Quarry Stone using latest production technology.

Sand consumption per sq.ft built up area (bua) is 1.8 cft and contributes about 12% of total material cost for building construction.

4. Aggregate:

Crushed rocks are used as coarse aggregates and are generally used in making concrete. Coarse aggregates are normally available in two fractions 20mm and 10mm for concrete making.

Aggregates should be clean, dense & hard. The aggregate should be neither flaky nor elongated. Flaky and Elongated aggregates decrease the strength of the concrete and demands more cement. Aggregates should be stored properly and different fractions must not be intermixed. Both these aggregate fractions should be used invariably.

Coarse aggregate (chips/gravel) consumption per sq.ft built up area (bua) is 1.35 cft. Aggregate as a construction material contributes about 8% of total material cost.

5. Bricks:

Bricks, in old days, were commonly made of clay and were known as burnt clay bricks. Now a days, bricks are made of other materials such as fly ash. But clay bricks are still widely used in low rise residential constructions today. Bricks are used for masonry wall construction. Other substitute materials to bricks are Concrete solid/hollow blocks, Autoclaves Aerated Concrete (AAC) Blocks and Cellular light weight concrete CLC Blocks.

The clay bricks should have uniform size, uniform copper color, plain (without undulated surfaces), rectangular surfaces with parallel sides and sharp straight edges. Well burnt brick should give a metallic sound when struck with other brick. Good bricks should not exceed +/- 3 mm tolerances in length and +/- 1.5 mm tolerances in width and height. Water absorption should not exceed 20% by weight.

Bricks approximately cost Rs.7000 per 1000 units (Nos). Bricks contribute to about 5% of total material cost and are consumed approximately at 1.45 brick per sqft of built up area (BUA).

6. Tiles:

Ceramic tiles are generally made from red or white clay fired in a kiln. They are finished with a durable glaze which carries the color and design. Ceramic tiles are manufactured for both wall and floor, having varying degrees of wear resistance and water absorption. High strength and Low water absorption ceramic floor tiles are commonly known as Vitrified tiles. Tiles prices vary according to their types and quality.

Tile should be easy to clean, strong, sturdy and stain resistant. Tiles in wet area like bathroom should be of anti-skid floor type.

Tiles consumption per sq.ft built up area (BUA) is 1.3 sq.ft. Tiles contribute about 8.0% of total material cost.

7. Paints:

Paints can be broadly classified into water based or solvent based. They come in thousands of shades and gives multiples finishes like Matt, satin and glossy finish. Certain Paints also have washables, anti-algae/fungal, crack bridging properties.

When selecting an interior paint, try choosing water-based paint instead of oil-based gloss paint. Water-based paints have less odor than conventional oil-based paints.They are much easier to clean up and are durable.

When selecting an external paint look for waterproofing, anti-algae, and dirt pick resistance properties.

Paints (Internal- Emulsion and external grade) consumption per sq.ft built up area (BUA) is 0.18 liter (0.14 liter for internal painting and 0.4 for external painting).

Paints contribute about 4.1% of total material cost.

The Finishers (Bricks, Tiles, and Paints) collectively contribute 16.5% of total material cost.


8. Fittings Category:

Window, Door, CP Fittings, Sanitary wares, Plumbing and Electrical fittings when combined contribute to 23% of total material cost considering budget brands. Top brand options may increase this category cost to 30 – 35% of the total cost of construction. Fittings can be selected based on one’s requirements and choice. In branded fittings quality should not be a concern.


Conclusion:

Other than estimating the cost and quantities of construction materials, one should also have knowledge of current labor cost in local markets. This is because the labor component constitutes to 40-45% of the total cost of construction of a house. An unskilled labor charges Rs. 350 to 400 per day whereas skilled labor such as mason, carpenter, painter, electrician etc., charges between Rs. 800 to 1000 per day. The total cost of construction (including both design, material and labor) per square feet may vary anywhere between Rs.1250 and Rs.2500 per square feet depending on the specifications of the building materials you choose for you house.

Now that you have the total cost of construction, you can start sourcing the funds required for the project. Your source might be personal savings or loan from banks/ friends. Although this sounds like a naive step, lack of resources during construction might sometime over shoot the budget. Contractors will charge for De / Re-Mobilization. Some of the construction materials like Cement etc., might expire/loose its strength if the project is delayed by long. So sourcing the funding before the start of the project is just as important step as any other. A detailed cash flow for purchasing construction materials has been shown in the info-graphic to ensure smooth construction flow with time.



This is a guest post by Vinod Kumar Singh

Monday, September 23, 2019

Looking to construct your own house on a given piece of land? Pay attention to stages of construction and the cost part of it.

Author: Sachin Gupta | Find me on Twitter

Planning to build your home on a piece of plot? What are the things that one needs to keep in mind before embarking on a year long journey of construction and dealing with multiple contractors, suppliers, etc? Surely, as an owner of the plot, you would have got multiple offers from architectural firms, contractors about the cost estimate. However, before even talking to these firms, one need to do his/her cost estimation.

Constructing one’s house is not easy because of the nature of the work. One needs to work/deal with professional firms such as architects, contractors and at the same time deal with labor. Therefore, you not only need to plan the stages of construction but also the costing part of it. Doing the cost analysis helps you in analyzing what you need to build and what you can postpone for future dates. For example, if your budget is limited, then in all likelihood, you may not go for modular kitchens, lavish bath fittings, etc.

Here we present the quick ‘to do’ list for you to arrive at a guesstimate of cost that you may incur during the construction of your dream house. This will help you in planning your construction stages as well as cost part of it.



Have any Questions?

Monday, September 16, 2019

What is the process of securing a home loan in India? What are the things I should check before opting for a home loan provider? And what are the various kinds of home loan schemes available in the Indian market?

Author: Sachin Gupta | Find me on Twitter 

In the previous post, we discussed about the dilemma of renting versus owning. However, after an in depth analysis of various elements described in the post, Sumit Sharma decided to go ahead with the purchase of the apartment. Now, the next step for him was to arrange for the mortgage loan to finance his purchase. Without a doubt, there are numerous lenders (mostly banks) in the market willing to lend money at competitive prices. Which lender (bank) to choose? What type of home loan to avail? And what are the things to remember during the loan process? These are some of the serious questions Sumit Sharma was confronted with. Lets Break It Down to smaller elements (L BID) and hope Sumit Sharma makes an informed decision based on the understanding of following elements:

Things to check during a mortgage loan process:
Interest Rates:
As per the RBI guidelines, home loan interest rates are linked to bank's base rate. Base rate tends to move up and down depending upon the interest rate movement in the economy. As a buyer, check the interest rates from various banks that are offering the similar mortgage loans. Usually premium charged by banks can be negotiated with the chosen bank; however, it depends on your credit history. Since, banks are in the business of lending money, therefore being a customer one must exercise the customer power and negotiate a best possible interest rate with the bank.

Processing fee:
Normally processing fees include statutory costs, third party charges, and additional finance charges. Because of problems involving loan fees and the potential abuse by some lenders of charging high fees to borrowers, a legislation requires lenders to show annual percentage rate (APR) being charged on the loan to the borrower. For example, if the fixed interest rate charged by a bank is 12% and processing fee is 2%, then normally APR would be 12.25%. Processing fee charges can also be negotiated with the bank.

Prepayment penalties:
Many borrowers mistakenly take for granted that a loan can be prepaid in part or in full anytime before the maturity date. This is not the case; if the mortgage note is silent on this matter, the borrower may have to negotiate the privilege of early repayment with the lender. However, many mortgages provide explicitly that the borrower can pay a prepayment penalty should the borrower desire to prepay the loan. Prepayment penalties are not included in APR.

Types of mortgage loan:
Fixed Rate Mortgages - Constant Amortization Mortgage Loan (CAM):
In this type of loan, the interest rate remains fixed during the tenure of the loan. Here, constant principal amount is amortized (reduced) in each installment. The user has to pay the sum of constant principal amount and interest that is charged on the principal. For example, on a loan of say 12 lacs rupees for 10 years at an interest rate of 12% per year, the constant principal amount that will be reduced every month is 12000 rupees (12lacs/120). In addition, for the first month, interest will be 12000 rupees. However, the interest charge will keep on reducing as the principal is amortized every month by constant amount. Therefore, in constant amortized mortgage loan (CAM), the monthly installment keeps on reducing.

Fixed Rate Mortgages - Constant Payment Mortgage Loan (CPM):
In this type of loan, the interest rate remains fixed during the tenure of loan. In this type of loan, monthly installments are constant. Here, principal amount reduced (amortized) in the starting months is less as compared to the principal amount in later months. However, the interest payment is more during the starting months and then reduces in later months. For example, on a loan of say 12 lacs rupees for 10 years at an interest rate of 12% per year, the monthly constant installment will be 17216.51 rupees.

Fixed Rate Mortgages – Graduated Payment Mortgages (GPM):
Some individuals have less income in starting years of their careers; those individuals are not considered for loan. To overcome this effect, lenders have designed a mortgage loan that retains a fixed rate of interest but includes a series of stepped up payments that are lower in earlier years, thereby better matching borrower’s incomes, and then rising over time. These loans are known as graduated payment mortgages (GPMs)

Adjustable (Floating) Rate Mortgages (ARM):
These mortgages provide an alternative method of financing through which lenders and borrowers share the risk of interest rate changes. In this type of loan, since interest rates are adjustable, they are indexed to say wholesale price index (WPI) or other market interest rates. For example, someone who applied for ARM indexed to WPI in year 1 at 5% interest rate might be paying 12% interest rate in 2nd year because inflation has increased by 7%.

Hybrid Adjustable Rate Mortgages:
This is the most common type of mortgage loan used these days. Hybrid ARMs combines elements of fixed rate mortgages for periods of 3, 5, or 7 years, after which interest rates are reset and the loan becomes an ARM. Subsequent payments are usually reset every year for the remaining maturity period. For example, a 3/1 hybrid would mean a three year fixed rate after which the interest rate would become adjustable, tied to an index, and would be reset each year thereafter.

So friends, before going to a bank for home loan, take a look at this blog or even take a print because even if one saves or negotiates .25% on interest rates, processing fee, or prepayment penalties, then it’s worth the effort. Don’t overlook that :)



Have any Questions?
 

Monday, September 9, 2019

Using Tech in the Home - A Video Wall in your Home

Video walls can be an amazing addition to your home decor, as those in the world of business have known for a long time. This is because video walls have been utilized by business people for a long time but they are just starting to catch on in a home setting. Below we will discuss ways in which you can use a video wall in your home.

First, think of the game nights that you can have with a video wall in your home. You and your buddies can play video games on a screen that makes the action truly immersive and will make your game nights the most popular if not in your city then definitely in your neighborhood. Even if you are alone, your gaming experience will surely be at a higher level.

Next, movie night. Family movie nights watching the latest Hollywood blockbusters or even a more highbrow art-house film will be an experience like going to the cinema, with crisp visuals and immersive sound if you invest in speakers and perhaps surround sound. You won’t even need popcorn, as the wow factor of the screen size and visual presence will keep you interested.

Next, your home office. As we have said, those in the world of business have long used video walls. They can facilitate team working, as you and your team will be able to work on a project whilst tracking any changes and ideas on the screen in real time, and the interactive elements of a video can be utilized to improve your business's performance. Having one of these in your home office will also send out the right message to your business competitors.

Of course this is not an extensive list of ways in which you can use a video wall in your home. You probably have other ideas. After all it is your home, not ours!



What are the Real Estate and Property market Terms and Definitions in India?

Author: Sachin Gupta | Find me on Twitter

Looking to buy an apartment in a builder project or a piece of land, Or for that matter, looking to buy/lease office space property? We are sure you will come across many terms and definitions which are new to you and therefore comprehending them is essential to make sure that you are not overpaying.

Take for example, the distinction between carpet area, built-up area, and super area. Most of the builders in India will charge you on the basis of super area. However, in some locations, they may charge you on the basis on carpet area. But the prices will be adjusted accordingly. For example, some builders in Mumbai charges on the basis of carpet area of the property and therefore their base selling price is higher as compared to the builder who is charging you on the basis of super area. Super area is the entire area of the building which includes carpet area, lobbies and corridors, walls, lifts, staircases basements, and other atrium and utility areas. Carpet area is the actual usable area within the walls of the floor. Since, you will using the lobbies, corridors, lifts, and other common areas, therefore, a builder will take all of these into consideration before rolling out the final base price. Whether you pay by carpet area method or by super area, all the charges will be included in the final price.

Similarly, when you go to the local registrar office to register your property, there will be terms like circle rates or market value that will be used to arrive at stamp duty and registration charges. In the below document, one can find all the terms and definitions that are used in Indian real estate and property market.





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Monday, September 2, 2019

Can I time the real estate market?

Author: Sachin Gupta | Find me on Twitter

During the period of 2003 to 2008, property prices appreciated sharply. Land prices almost tripled in most parts of the country on account of faster jobs creation, urbanization, and rising income levels. Were these the only reasons for sharp appreciation? No, says the experts. According to them, real estate is a cyclical industry and at the beginning of the last decade, real estate prices were at their nadir. The coupling effect of sharp GDP growth and cyclical nature of real estate industry resulted in sharp appreciation of property prices from 2003 to 2008.

However, as the world financial crisis hit the world economy in September 2008, GDP growth of most emerging economies started to dwindle. India was no exception and government & RBI brought in policy measures. In fact, the advent of the global financial crisis in 2008 caused resurgence in Keynesian thought. Interest rates were lowered and government provided stimulus (total spending in the economy) to boost the economy. At one point of time, RBI’s repo rate came down to a low of 4.75% in April 2009.

The impact of financial crisis was severe on real estate market. Some of the large real estate developers started offering discount to the tune of 20% in 2008. The sector began to recover on account of government policy initiatives and lowering of repo rate. However, massive government spending and low interest rates during the period of 2009-2011 resulted in inflationary pressures. And the focus now shifted to tame inflation and thus interest rates started to go up and that resulted in decrease in investment by individuals and companies.

In last 2 years, real estate transactions including office space absorption and home sales have come down. The prices have stagnated in most micro markets.



With this in background, can you, the real estate investor really time the market? It’s highly unlikely; however, one can pay attention to the real estate investment strategies, demand drivers, and supply elements.

1. Real estate investment strategies




2. Demand drivers
Following are demand drivers for real estate sector
  • Industry
This is a no brainer; even my grand mom would say prices would appreciate more in cities/markets where there is all the likelihood of work or jobs creation or setting up of industries. Therefore, as an investor one should regularly visit the city development authority’s website and analyze the city’s master plan. A master plan would ideally comprise of the road map for city's development including the setting up of industries, educational institutes, recreational zones, and residential development. At the same time, pay attention to the news which highlight setting up of a particular industry in your region. For example, the driving industries in Gurgaon are Auto and IT and setting up of these industries in 80s and 90s have resulted in real estate boom in the city.
  • Population growth
Growth in population requires development of housing. Other societal changes such as rise in formation of nuclear families, movement of skilled workers from other parts of the country again require development of housing. Analyze the population growth in your city by following census reports along with indicators for urbanization.
  • Income levels
It’s true that setting up of an industry in your region would result in direct and indirect jobs creation which will lead to variety of real estate development. However, pay attention to what kind of industry is this? And what are the income levels of people in your region? For example, real estate prices in Gurgaon have appreciated more because of high income levels of people in the city as opposed to say Bhiwadi (primarily a manufacturing town) where income levels are low.


3. Supply elements
Following are supply elements that affect real estate sector:
  • Interest rates
As explained above, interest rates have direct impact on the supply of real estate. High interest rates bring down the overall supply. On the other hand, low interest rates encourage investment by both individuals and companies.
  • Land availability
Again one should look at the city’s master plan for availability of land. If land supply is limited, it is a good indicator that real estate prices will shoot up faster than expected. And if there is plenty of land available with the city development authority; it will mean price appreciation will be linear. For example, in Delhi, due to limited land parcels, property prices appreciated sharply. However, now, DDA has initiated the land pooling policy and has demarcated new land parcels. It is now expected that availability of this new land will put pressure on existing property prices in the city and city outskirts. Raising the FSI/FAR can also result in softening of property prices. Track those developments.
  • Physical and social infrastructure
One should also pay attention to the existing supply of physical and social infrastructure in the city. In certain cities such as Greater Noida, physical infrastructure is in excellent shape. But property prices have not appreciated sharply. This is because social infrastructure which includes industrial development is minimal.


Equilibrium
As long as supply and demand are in equilibrium, the returns from real estate investment will be linear. Therefore, as an investor, one should look for distortion in demand and supply curves. If demand is expected to be higher than the supply, it calls for investment in real estate to make windfall profits. If supply outdoes demand then it will yield low returns on your investment. 


Can I time the real estate market?
No, it’s not possible to gather data to time the real estate market. Instead, one should solely focus on 3 broad ideas as explained above and only then one should make a bet on real estate investment.

Did you follow these 3 principle ideas for real estate investment?




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