Project Proposal for the

construction of Mixed use Building

Project to be implemented in AMHARA Region
NORTH SHOA Zone KEWETE WEREDA
ABAY ATIR kebele
Promoter: - Ergech, Yitebit and Their Friends PLC
Phone: 0913204303

March, 2015 E.C

Abay Atir, Ethiopia
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 Table of Contents

Executive Summary ................................................................................................. 1

1. Introduction........................................................................................................ 2
1.1. General Background ......................................................................................................... 2
1.2. Objective of the project .................................................................................................... 3
1.3. Project description ............................................................................................................ 3
1.4. Target customers .............................................................................................................. 4
1.5. Project Rationale .............................................................................................................. 4
1.6. The significance of the project ......................................................................................... 5
1.7. Project Location ............................................................................................................... 6
2. Market Study, Plant Capacity and Production Program .............................. 9
2.1. Market Study .................................................................................................................... 9
2.1.1. Present Demand and Supply ..................................................................................... 9
2.1.3. Pricing and Distribution ............................................................................................ 9
2.2. Plant Capacity ................................................................................................................ 10
2.3. Production Program........................................................................................................ 10
3. Raw Materials and Utilities ............................................................................ 11
3.1. Availability and Source of Raw materials...................................................................... 11
3.2. Annual Requirement and Cost of Raw Materials and Utilities ...................................... 11
4. Technology and Engineering .......................................................................... 12
4.1. Technical Study .............................................................................................................. 12
4.2. Land Use Plan ................................................................................................................ 12
4.3. Construction work and Technology ............................................................................... 13
4.3.1. Construction schedule .................................................................................................... 14
4.4. Machinery and Equipment ............................................................................................. 14
4.5. Utilities ........................................................................................................................... 15
4.6. Project implementation .................................................................................................. 16
4.7. Civil Engineering Cost ................................................................................................... 16
5. Human Resource and Training Requirement .............................................. 17
5.1. Human Resource ............................................................................................................ 17
5.2. Training Requirement .................................................................................................... 17
6. Financial Analysis ............................................................................................ 18
6.1. Underlying Assumption ................................................................................................. 18
6.2. Investment ...................................................................................................................... 18
6.3. Financial Evaluation ....................................................................................................... 19
7. Economic and Social Benefit and Justification ............................................. 21

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 Executive Summary

Executive Summary

1. Project name: Mixed use Building

2. Project Type: Multipurpose service business building

3. Nationality: Ethiopian

4. Project Owner: Ergech, Yitebit and Their Friends PLC

5. Project location: Amhara region North shoa zone kewet wereda Abay atir kebele

6. Project composition: multipurpose Building (G+3) used for diverse

business centers like banking & insurance, super market, shops, restaurant,
café, beauty salon, Pharmacy, bed rooms and offices.

7. Premises Required: 700 m2

8. Total investment Cost: 14,000,000 ETB is required from this amount

30% or 4,200,000 ETB from owner equity and the rest 70% from bank loan.

9. Employment opportunity: 26 individuals on permanent 80 on casual basis

Social and Economic Benefit: provide better Building service, employment
opportunities, generation of income and benefits for the local people.

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 1. Introduction
1.1. General Background
The current fast and dynamic economic growth of Ethiopia especially in urban area necessitates
equivalent growth of building and construction sector. The sector should expand rapidly
to support the overall economic development sustainable. In the building sector of the
economy, the multi- purpose in the one becoming rapidly expanding in urban areas of
the nation since dynamic economic development of urban economy requires the

construction of these buildings in towns to support the growing of business service

sectors like supermarkets, Beauty salon, shops, offices cinemas, Computer Center,
Cafeterias, restaurant, assembly hall, guest house and other activities. In this regard,
mixed used building expands in the all parts of the country. Investment and property
development play an important role in any emerging markets or economies. Property
generally comprises reside vial houses and commercial real estate property (mainly mixed us
building) 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 real estate 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 percent over the last ten years and population increase. The relatively good performance of
the macro-economy (real growth in GDP, low inflation rate and growth in investment and
export sector) has stimulated unprecedented investment growth in the property sector over
the last five years. The growth of investment in the property market over the last five years in
consistent with the global experience suggesting that economic and business growth and
develops investors’ confidence. This certainly spurs large demand in the property market
for office space, shopping malls, catering services, apartment and residential houses.
Following growing demand trends, and with the expectation of high return on their
investment capital, large number of land developers pooled their financial resources
and invested in the property market. To this effect, the owner of the envisioned
Mixed Use Building Ergech, Yitebit and Their Friends PLC who has been living for long
time in this town, planned to construct in abay atir and undertaken this project study to

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check the market, technical and financial feasibility of this project. The promoter is very
ambitious and committed to realize the project. Hence, she expects to get the
necessary support from the city administration to make the project to be operational.
Looking at the past trends and permits issues by the Government to the construction of real
estate properties including the mixed use building in the major urban areas of the
country especially in Addis Ababa one can easily conclude that the momentum is more likely to
continue. Besides, the government policies and incentives for the private sector investment are
very promising that motivates the promoter to engaged in mixed use building business

1.2. Objective of the project

The major goal of this project is to contribute towards the growth of the trade sector in Kewet
werda Abay Atir Kebele. Its specific objectives include the following.

 To construct and develop modern shops, offices, and restaurant, bedroom &
cafeteria facilities that enable to provide standard services to visitors.

 To undertake trading and other refuted business activities that enable to generate a
reasonable to the invested capital.

 To develop modern business center that would provide services of international standard in
order to attract foreign and local visitors and there by contribute towards the generation of
currency for the Kewet werda.

 To create employment opportunities for the population in the wereda and

 Contribute towards the beautification of the wereda through the construction of

modern building infrastructure and facilities.

 To develop abay atir kebele to become town.

1.3. Project description

The long-term goal of the project is become the best choice in Abay tir and its surrounding
areas by creating a differentiated experience capitalizing on personal service. The proposed
project will have a total area of 700m2, designed to reader a multipurpose giving business,

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which will in turn plays significant role towards solving shortage of business center in
kewet wereda. The historical nature of the kebele as business unique location in one of the most
attractive parts of the occurrence of the kebele along the along the north shoa zone laid a fertile
ground for future promising growth of the kebele . The owner plans the project to render banking
and insurance, shopping facility, bank and cafeteria services to create high quality class to satisfy
the interest of customers in the town. Based on environmental and other considerations, the
entrepreneur has determined the type and size of the building which is already
determined by the site; conceptual planning and preliminary analysis have been carried out by
analysts. In order to attract its clients to the service, the project will develop high standard shop
& banking rooms and office of best choices and will also save best quality restaurant and café,
national and international dish and various types of soft drinks.

1.4. Target customers

The target customers of this envisaged project include:-

1. Business Community

2. Nearby business organization

3. The government bureau

4. Small accounts(SOHO) SME

5. Nongovernmental organizations

6. Farmer

1.5. Project Rationale

Internationally the economic growth this country is experiencing, the good governance created
and even if the town is in its nascent stage of development these project are the first in kind in
the town are feasible and would be a model development in promoting and attracting
different urban investments. In order to respond to the created environment the town is in need
of major, basic and feasible urban projects to be developed. The existing promising
investment opportunities, the demands of service needs along with relatively sound

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investment support made by the government in such kinds of feasible projects,
compelled the project promoter to initiate the multipurpose oriented business project to be
established. Despite the promising business opportunities of the town, the trend on such kinds of
investment found to minimal. Since there is no such kind of modern tourist facilities and
business station in the town to accommodate the existing demand of these services in the town
and the surrounding areas. The mismatch between the demand for and supply of such kind of
services in easily observed in the town. Therefore, the existing shortage or absence in
the supply of these services, along with its commercial and administrative access, better
location and infrastructure access, escalating trend of urbanization and business activities, thus
it is with such reason that this project is identified and proposed and assumed to be
more profitable. In general, the country’s decentralized state based economy, privatized
and free market economy; good governance creates a favorable environment for the
development of investment for private investors.

1.6. The significance of the project

The envisaged project deemed to add to the economic development of the nation in general
and wereda and kebele in specific with following ways:

A. Source 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.

B. 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 project will hire 26 individuals
and more than eighty individual during construction.

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C. Sources of social service

In addition to serving as a source of employment and income for the region, the project renders
social services for different group of people. Hence, it is also providing the following services;

 Serve as a source of mental satisfaction for the different users,

 Since, the center encompasses different recreational areas; it will divert the attention of the
users from different evil deeds.

 It deemed to minimize the demand for shops and other bundles of services in the area.

Furthermore, it serves as the pilot experience and ground for other investor to enter in to
such kinds of urban development. It also contributes on the efforts made on as a character
given building for physical development pattern of the townscape.

1.7. Project Location

As aforementioned on the introductory part the envisioned project is intended to be located in
North Shoa Zone Kewet Werda Abay Atir Kebele at about 247km from Addis Ababa to
the north. North shoa zone is located approximately at a distance of 117 km from
Debrebirehan city and far from 27km from shewarobit city administration. The business of
multipurpose buildings in north shoa zone in booming highly due to the recent rapid growth
experienced in Ethiopia. As a result, a good number of local and international
organizational are coming in place. Government offices which used to operate in limited spaces
all over the city are also concentrating on leasing new and modern buildings. Increasing
numbers of international organization and NGOs which in the past had typically converted
residences into office space are now moving towards renting whole floors or even multiple
Floors in modern city-center commercial buildings.

Future demand for office space is actually driven from growth in number of offices
in the city which in turn is influenced by the macro-economic growth in the country. Following
the government five year growth and transformation plan (GTP), the Ethiopian economy
is expected to increase by 11% for base case scenario and 14% under the optimistic case

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scenario. Assuming that demand for office space is directly related to the growth in the economy,
the forecast for office space demand is shown in the following table;

In order to provide mixed use business center building services of a high standard, it has
been planned to construct and develop the infrastructure and facilities that would viable
to meet the requirements of an international standard business center. Accordingly,
various buildings and facilities will be constructed phase by phase starting with the most needed
ones that are essential to commence the operation of its business activities. With the completion
of construction, the building will provide a combined service such as shops, bedroom, restaurant
and café service as well as modern business center that primarily serve its guests and
major clients.

The plan is that the ground will be partitioned in to different rooms:

Building Discrption Uom Unit price in ETB

Ground Supermarket, M2 1,500,000
Pharmacy, Banking
&
Insurance

1st floor Beauty salon, shop, M2 1,000,000

Computer Center,
Cafeteria &
Restaurant

2nd floor Different M2 1,000,000

governmental, NGO
& other
offices

3rd floor Bedrooms service M2 1,500,000

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 Parking service Car 500,000
total 5,500,000

Since the project will be engaged in mixed building the main sources of its annual revenue would
be from the rental of building spaces such as shops, offices, and banking, café & restaurant
bedrooms. Therefore, the sources of revenue have been classified in to one category namely the
rental of banking & supermarket, offices, shops, bedrooms restaurant and café based
on these classifications. Based on the market price of similar mixed use building in the
area, the envisioned buildings set the following fair price (Before VAT) for its service, hence
when the building construction fully get operational it is assumed to generate a yearly income of
ETB 5,500,000.

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 2. Market Study, Plant Capacity and Production Program
2.1. Market Study
2.1.1. Present Demand and Supply

The Amhara Region encompasses the major tourist attraction centers of the country. The major
ones are shewarobit, kewet wereda abay atir town,. A number of domestic and foreign tourists
visit these sites every day. Kewet wereda is one of the most centers of attraction for both
domestic and local customer which is visited almost every day throughout the year. Of course,
there are more customers during the 4 season. At any rate, thousands of customer visit the every
year. If there were hotels and restaurants, many t customer could have made overnight stay near
the abay atir . They would have preferred to watch the fall at sunset or sunrise.. No hotel, no
restaurant, not even a shade, not even a food-stand. Not even an umbrella in other places, in
other countries, all sorts of tricks are made to make tourists stay longer and spend more.

2.1.2. Projected Demand

Tourism industry is one of the potential sectors of the country to generate foreign currency. Its

contribution towards export and GDP growth is increasing. For example in 1996 tourism has

contributed 19% and 1.2% to the country’s export and GDP growth, respectively.

2.1.3. Pricing and Distribution

Pricing of a cafe and restaurant services could be classified into main categories i.e. food, soft
drinks, beverage and bed rent. In this regard the daily average price by category of service is
given in table 2 bellow.


years in this document are in Ethiopian caledar.

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 Table 2
Average price of service by category

Type of Service Unit Price in Birr

Food 30 / meal / person
Beverage 10/bottle(excluding whisky)

Soft drink Water, 1000 bottle/day

Bed Rent 150/night/ person

2.2. Plant Capacity

Working days are assumed to be 365/year for food and beverage and 300/ year. The
attainable capacity and revenue of the proposed café and restaurant for each category of
service is estimated as follows.
Table 3
Capacity and Revenue of the Hotel and Restaurant by category
Of Service in 365 Days
Annual
Type of Service Quantity/day Capacity Revenue In Birr
Food 30 persons 10,950 328,500
Beverage 80 bottles 29,200 292,000
Soft drinks 100 bottles 30,000 4500,000
Bed night 10 beds 3,000 450,000
Total - - 2,070,500

2.3. Production Program

The service program of the Mixed use building proposed hotel and restaurant is assumed to
start at 80% in the first year and increases by 10% until 100% is reached in the second year.

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3. Raw Materials and Utilities
3.1. Availability and Source of Raw materials

Required raw materials for hotel and restaurant service include food items, beverages (hot
and cold), room clothing, detergents and the likes. All raw materials are available in the
domestic market.
3.2. Annual Requirement and Cost of Raw Materials and
Utilities

The cost of annual requirement of raw materials of the project is estimated as percentage of
the respective service revenue as indicated in table 4 bellow.
Table 4
Cost of raw materials as percentage of Revenue

Service Revenue Percentage Cost

Food 1,000,500 40 400,200
Beverages 1,000,000 60 600,000
Bed rent 500,000 10 50,000
Soft drink 30,000 20 300,000
Total 2,530,000 1,350,200

Utility cost of the project is estimated to be about Birr 30,000 per annum and cost of office
furniture is Birr 100,000.

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4. Technology and Engineering

4.1. Technical Study

A. Description Of The Project Service/ Product Mix

The envisioned mixed purpose building will provide different rental services to the
different customer groups for different purpose. The building will have basement, ground and
eight floors. The purpose of the building explained as follows;

 The ground floor, first floor and second floor designed for different business
centers like banks, supermarket, beauty salon(man and women), Computer center,
pharmacy, internet café, boutiques, different shops and other business activities,

 The third floor designed for bed room services. Besides, the buildings will have
enough parking facility for its customers and green area in its compound.

4.2. Land Use Plan

The total land required for the envisioned project is estimated to be 700m2. The total area for
the construction of the building will be 300m2, as revealed below.

Table land utilization Plan

SN Description Land M2

Ground 1st 2nd 3rd floor

floor floor

1 Building (G+3)

1.1 Basement 300

1.2 Ground floor 300

1.3 1st floor 300

1.4 2nd floor 300

1.5 3rd floor 300

Parking , green area and service bed room 400

Total 700

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 4.3. Construction work and Technology
4.3.1. Construction schedule

The construction project is proposed to be started on august 2015, and is expected to be

finished on January 2017. As seen in the abbreviated construction schedule above, a majority
of the schedule’s time is made up of five major activities; Concrete, building
Enclosure, masonry, mechanical &HVAC and Electrical install. Concrete activities
include processes such as placing foundations and slab on deck. The Building Enclosure
Phase includes erecting the scaffolding that will allow for exterior sheathing installation and
bricklaying.

Mechanical and Electrical install coincide with each other due to the need for coordination
between the two divisions. There are several periods of construction during the schedule in
which there are multiple construction activities occurring at the same time.

The construction site must be organized accordingly as these processes take place. As
with any construction project, the goal of the schedule was to complete all construction
activities before the required Date of completion.

This date of completion is practical based on the time of year in which the building will be
completed. The team allowed a two week contingency for any setbacks. Typically, winter
construction tends to cause unforeseen delays that negatively impact a construction project.
These conditions can and will almost undoubtedly impact the project schedule by causing
unforeseen delays and project inefficiency.

4.4. Machinery and Equipment

Machinery and equipment required for a modern hotel and restaurant could broadly be classified
into four categories. These are;
 Bed room furniture,(includes beds, mattress, blankets, bed sheets, tables, chairs, cap
boards, etc)

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  Hotel furniture and equipments (tables ,chairs, glasses etc)
 Restaurant furniture and equipments ( tables, chairs, refrigerator, glasses, etc)
 Kitchen utensils ( forks, spoons, trays, dish, deep freezer, etc)
Estimated cost of such furniture and fixture for a traditional hotel and restaurant is estimated in
table 5 bellow.
Table 5
Estimated cost of furniture and fixture of the project

Cost center Quantity Cost in Birr

Bed room For 10 beds 20,000
Hotel For 10 tables 10,000
Restaurant For 10 tables 10,000
Hotel 40 chairs 8,000
Restaurant 40 chairs 8,000
Kitchen Sets 50,000
Total 106,000
Office Furniture 5,000

4.5. Utilities
1. A number of utilities world be put in place in order to ensure smooth functioning of the
project. These utilities include:

 Water Supply,

 Supplementary Electricity supply.

 Telephone line Internet Broadband

 Fuel, Oil and lubricant

 Drainage Facility

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 4.6. Project implementation
The project’s implementation is expected to take 24 months. The major activities include Bank
loan processing construction of the building, cleaning the area around the building, Procurement
of equipment’s and start rendering services. The time schedule for the above matured major
activities is presented below:

Sn Activities Date

1 Land request processing 30/07/2015

2 Land approval 30/08/2015

3 Bank loan processing 30/10/2015

4 Site Development 30/10/2015

5 Building and construction work 01/01/2016

6 Preparation for service 30/09/2016

7 Service execution 01/01/2017

4.7. Civil Engineering Cost

Mixed used building…………. will require about 700m2 of land, of which 300m2 is for the
construction of 10 self contend bed rooms and 200 m2 for hotel and restaurant. Assuming that
the hotel and restaurant, the investment cost for 10 bed rooms is about Birr 400,000 (Birr
2,000/m2) and for hotel and restaurant is Birr 5,500,000, (Birr 2,000/m2), Land lease will be Birr
50 /m sq. The plant will require additional Birr 100,000.00 for land preparation and park
decoration, which totals to about Birr 1,000, 000.00

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5. Human Resource and Training Requirement
5.1. Human Resource

The project will require about 26 employees as indicated in table 6 bellow with annual salary of
Birr 363,680.
Table 6
Human Resources Requirement
No of Monthly Salary / Annual Salary
Position employees person
Manager 1 3,000 36,000
Book Keeper 2 1,500 36,000
Cashier 2 1,600 19,200
Receptionist 3 2100 25,200
Waiter 9 7,200 86,400
Kook 1 1,500 18,000
Assistant cook 2 1600 19,200
Cleaner 3 3000 48,000
Guard 3 21,000 25,200
Total 26 - 313,200
Benefits (20%) - - 50,480
Total - - 363,680

5.2. Training Requirement

For mixed use building Hotel and Restaurant and other services trained manpower is available in
the market

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6. Financial Analysis
6.1. Underlying Assumption

The financial analysis of hotel and restaurant plant is based on the data provided in the preceding
chapters and the following assumptions.

A. Construction and Finance

Construction period 1 year

Source of finance 40% equity and 60% loan
Tax holidays 2 years
Bank interest rate 12%
Discount for cash flow 18%
Value of land Based on lease rate of ANRS
Spare Parts, Repair & Maintenance 3% of fixed investment

B. Depreciation

Building 5%
Machinery and equipment 10%
Office furniture 10%
Pre-production (amortization) 20%

6.2. Investment

The total investment cost of the project including working capital is estimated at Birr 14 million
as shown in table 7 below. The Owner shall contribute 40% of the finance in the form of equity
while the remaining 60% is to be financed by bank loan.

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 Table 7: Total initial investment
LC FC Total
Land 50,000 0 50,000
Building 5,500,000 5,500,000
Office equipment 100,000 100,000
Vehicles 0 0
machinery & equipment 1,500,000 1,500,000
Total Fixed Investment 6,150,000 0 6,150,000
Pre production 500,000 500,000
Total Initial Investment 6,6150,000 0 6,6150,000
Working capital 7,385,000 0 7,385,000
Total 14,000,0000 0 14,000,000

*Pre-production capital expenditure includes - all expenses for pre-investment studies,

consultancy fee during construction and expenses for company‘s establishment, project
administration expenses, commission expenses, preproduction marketing and interest expenses
during construction.
6.3. Financial Evaluation

I. Profitability
The financial projections made reveal that the project is economically viable and social desirable.
According to the income statement of the plant the project will generate profit beginning from
first year operation. Important ratios such as the percentage of net profit to equity (return on
equity) and net profit and interest on total investment (return on total investment) are 347% and
30% in the first year and are gradually increasing.

II. Breakeven Analysis

The break even point of the project is estimated by using income statement projection. The plant
breaks evens at 25.7% of capacity utilization.

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 III. Payback Period
The Initial investment of the project will be recovered before the end of the third year operation

IV. Simple Rate of Return

It is a ratio of net profit and interest to total capital invested for a single year at full capacity
utilization. Thus the simple rate of return of the project is about 28.1%

V. Internal Rate of Return and Net Present Value

Base on the cash fallow statement, the project is anticipated to have a net present value of Birr
907 thousands when discounted at 18% discounting factor where as its IRR is 25.6%.

VI. Sensitivity Analysis

An increase in costs of raw materials by 10% will not affect the profitability of the pant

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7. Economic and Social Benefit and Justification

Based on the foregoing presentation and analysis, we can learn that the proposed project
possesses wide range of benefits that complement the financial feasibility obtained earlier. In
general the envisaged project promotes the socio-economic goals and objectives stated in the
strategic plan of the Amhara National Regional State as well as promote tourisms of the country.
These benefits are listed as follows

A. Profit Generation

The project is found to be financially viable and earns on average a profit of birr 1.23 million per
year and birr 4.3 million within the project life. Such result induces the project promoters to
reinvest the profit which, therefore, increases the investment magnitude in the region.

B. Tax Revenue

In the project life under consideration, the region will collect about birr 864 thousands from
corporate tax payment alone (i.e. excluding income tax, sales tax and VAT). Such result create
additional fund for the regional government that will be used in expanding social and other basic
services in the region

C. Employment and Income Generation

The proposed project is expected to create employment opportunity to 26 citizens of the country.
This would be one of the commendable accomplishments of the project.

D. Pro Environment Project

The proposed production process is environment friendly.

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MIXED USE BUILDING AREA=300 m2

(G+3)

22