Initial funds required to start the construction of 2000 Sft

[Pratap]

Hello Friends,

I am planning start construction of a duplex building on my 30X45 plot of about 2000 Sft and simultaneously applying for a housing loan.
I would like to have your valuable inputs on how much own funds required initially to start the construction before the bank disbursal happen considering below points.

1. I am not going for bore well
2. Planning high quality construction
3. Looking for only Labour contract

please advise me at the earliest and thanks in advance.

Regards,
Pratap

[msn1270]

pratap

Keeping an average of Rs.2.5 Lakhs/square(100 sq.ft), your total cost of construction for 20 Squares comes to around Rs. 50 Lakhs.
Banks can provide up to 75 % of the estimated budget based on your earning capacity & credit score. You must be ready to shell
out rest of the amount. Also Banks doesn't give loans before starting your construction. Only after certain level they disburse the
first installment.

Bank takes processing time ranging from 60 to 150 days from the time of accepting your application. Also there are cases where your
application will be rejected by taking this much time (without giving any reason) and you have to approach another bank and you have
to spend similar amount of time.

Also be ready to shell out another 10-20% of escalation cost in addition to the estimated budget based on the change of designs, raw
material & Labor cost fluctuations, delays from the estimated time frame...etc. So approximately you need to keep a target of Rs. 60 Lakhs.

Hope you are OK with this ball park figure.

[Pratap]

Dear MSN,

Thanks for your reply! though your estimate looks little higher side Its good for me to be prepared for the worst.

Pratap

[Pratap]

Friends,

Please advise me on the requirement of initial cash in hand to start with the project.

[vsathishmybda]

Hi Pratap,

At the very outset, Congrats for starting to construct !!!

Coming to your query, based on my limited knowledge, taking into account approvals cost + bribes as well, you need to have minimum of 15lacs in hand as initial funds.

Banks give construction loan based on approved floor plan and usually the effective area considered by the banks in this case(based on approval plan) would be less.
This is because in the approved floor plan some prescribed area will be left as set-backs and the effective construction area will be less.
Also some banks do not immediately disburse money for laying foundation. They might disburse only after foundation is done.
Banks at max. give 80% of construction quote(as per approved plan) and remaining 20% is to be borne by us.
So the banks first expect us to put our share of 20% at every stage and verify by taking photos and via verification officers and based on that they will release 805 of the funds at every stage.
Also Banks do not give loans for some things like Solar water heater, overhead tanks, approvals, architect fees etc.
Also banks might take some time to disburse the amount owing to the verification process at every stage and till that time engineer/contractor may not wait, so small amounts of 1/2Lacs reserved at every stage would be necessary.

So its better if you have atleast 15lacs minimum(25% of overall total cost including escalation) in hand at the time of start of construction to be on safer side and not see sudden surprises during the initial construction phases.

These are my 2 cents.

Regards,
Sathish V

[pribaaji]

hi pratap,

To give you a rough idea, mine is a 34square house on a 30×40 site and i am constructing on labour contract at 27k/square which includes everything like earthwork,compound,stairs etc etc.I have spent approx. around 6.85lakhs upto the plinth beam including civil material and labour.This is just for your idea.

Regards,
Balaji.

[Pratap]

@Sathis,

how can we accumulate 25% of the construction cost in the beginning...? its practically difficult for people like me who depends on monthly salary! Anyhow thanks for your cautious advise.

@Balaji

Thanks for your practical advise.

Any more practical experiences friends?

Regards,
Pratap

[m_d1982]

@Pratap,

Your initial sum should suffice the construction till the plinth level. I my case the site was 30X50. The agreement with the Contractor was to give 10% of the overall cost to bring the construction to plinth level that is 4.1L.
The Bank will do the first disbursement once you reach the plinth level.

Step one - Is to get all the Building approval, Estimate etc
Step Two - Is to apply for Loan in one or two Banks with all documents.
in Parallel you can start construction with 10% Of the total cost, Bring the Construction to plinth level, By that time (~ 30 Days) you will also have you loan sanctioned (Subject to all documents available).
Apply for your first disbursement, It will take 1-2 weeks for the bank to disburse.
Keep 10% of cash in hand to make sure that the work happens in a continuous basis.

Wish you all the very best..

[Pratap]

Thanks Martin, Now I can breath easy.