On January 3, 2008, we finally started, after nearly a year of procrastination, we built the temporary hut and started our first building project. It has taken us well over a year and a half to come to this stage, half of it procrastination, the other half actual architectural drawing and approval.
Our site is located in Karachi DHA VI. We purchased this land back in 2002, and in the summer of 2006 asked our close architect friend to design out the building. They took about three months to do the architectural drawings, the structural drawings, and the soil sampling, the cost was about Rs. 150,000. Interestingly, the official architect was someone else (the person who's license is used) and they had an expired license. So it actually took some more time, and about another Rs. 20,000 to submit the drawings for approval.
Once submitted for approval at DHA, the drawings go through a 'yo-yo' process between, DHA, the Clifton Cantonment board, Military Estates Office, and back to CBC back to DHA. Anyway, this process took another three months and we finally got approval in Dec. 2006. Then we procrastinated, whether to build an office building or an shop plus four floors of apartments. And we procrastinated for about ten months.
The juggling thoughts, between building an apartment style building versus an office building were both financial and deciding on the long term utility of the building. For perspective, the current price of the land (200 sq. yds. commercial in DHA VI) is about Rs. 30 million. The construction cost for a residential apartment is about another Rs. 10 million, net, total cost of project is about Rs. 40 million. Now you can have two apartments per floor, each apartment selling for about Rs. 4 million. Each residential floor will net about Rs. 8 million, and you can get about Rs. 12 million for the ground and basement. Therefore, the total sellout price for a residential building is about Rs. 44 million. A total profit of about Rs. 4 million, really not worth the headache and the year it will take to develop and sellout.
Contemplating a office building has not much financial upside, it is more a utilization play. Having a comfortable office, a long term space for business meetings, a convenient location for work, etc...
We decided to move forward with an office building in the Sept/Oct of 2007.
The next two months were spent on interviewing and deciding on a contractor, locally termed "thaykaydaar." Now, these guys will give you rates with labor only or labor plus material. The material aspect is any and all types of material, and the rates are on a per square foot of construction. Wanting to gain experience in this business, we focused on only the 'labor only' approach.
For the labor only approach the contractor rates varied greatly, from Rs. 350 down to to Rs. 230.
