Effectiveness Of Feasibility Study Analysis In Apartment Building Project

The construction projects present a unique situation where each project has different situation and parties. One of the important stages involved in a construction project is the preparation of the feasibility study. Feasibility study is conducted during the formulation phase of Project Cycle. This verifies whether the proposed project is well founded, and is likely to meet the needs of its intended target groups/beneficiaries. The study should design the project in full operational detail, taking account of all policies, and technical, economic, financial, institutional, management, environmental, socio-cultural, and gender-related aspects.

Construction is a complex field, costly and risky. In recent years, the construction industry in Vietnam is having a good reputation of rapid development. However, many large projects invested by private investors are still facing incorrect cash flow, missing indirect cost, less profitable or cost overruns, and feasibility study is not suitable according to economic environment.

To minimize these problems, client needs to improve their skills and abilities in dealing with project Financial Feasibility Study. Recessions and poor economic times have put pressure on the average company for better using effectiveness tools in this stage.

Mr. Truong Ngoc Dung made a case study about the Twenty Six Storey Apartment projects which was invested by Company ABC. The objectives of his study were to: (1) conduct an exploratory study on the factors and process used in financial feasibility study; (2) develop a framework for an effective financial feasibility for Apartment Building Project; and (3) conduct a case study to validate the effectiveness of the framework

Conclusions

The case in this report describes a practical implementation of the Feasibility Study stages in Apartment Building Project of Vietnam in general and Ho Chi Minh City in particularly, and obviously revealed the factors which can seriously affect the success of the project. In fact, Vietnam at present has enormous efforts to overcome policy and reduce the cumbersome procedures in investment, but investors still face a lot of problems (Financial Feasibility Study) which occur during project implementation.

In conclusion, the report may not only offer the effective method to make Feasibility Study in the first stages of project implementation, but also clear description that the major factors may affect the efficiency budget projects, that most projects in Vietnam are all experiencing: the problem of cost overrun, bankrupt and project costs incurred up compared to initial estimates.

Recommendations for further study

- This research was concentrated on finance like estimated cost, revenue and how to analyse project financial. However, other influence factors such as local politics, public relationship and strategy of the owners did not mention.

- It is recommended to make a Feasibility Study at difference stages such as design stage, construction stage and after operation and transfer stage for the main purpose of improving the projects later.

- Sensitivity Analysis is also needed to recognize the priority factors after calculating financial factors for the Apartment Building project. These factors are of big concern and have the ways to manage it.

- Mores projects have to be studied in order to get a better result and it is highly recommended to investigate the effectiveness of each strategy by quantitative data.

His thesis abstract is copied and posted.

Abstract

The Real Estate investment is one of the most dynamic, risky and challenging businesses because of their implementing time is very long with huge investment capital and various participating components. Furthermore, this field has poor skills for making Feasibility Study, with many major projects failing to finish on time and cost targets.

Feasibility Study of construction project used to get the alternatives of optimal land use that give the highest profits. Feasibility study analysis also gives information about value of investment and the benefits that investors will get. Define return of investment can be seen from feasibility study. Commonly, Net Present Value (NPV), Internal Rate of Return (IRR) and Benefit/Cost (B/C) are the values that used by investor to consider this project is feasible or not.

The purpose of this study to identify effectiveness methods, main major estimated factors that will be occurs in this stage. To effectively making the financial feasibility study in construction project, it is necessary for oriented path to identify important factors, then provide a suitable tool to measure their effects in each stage of Financial Feasibility Study life cycle and suggest the effective solution methods as minimized/maximized, shared, or accepted.