This document on “Student Hotel” provides information about a proposed project which aims to provide affordable accommodation facilities to college and university students. The proposed hostel is ideally to be located in large cities of Pakistan due to high demand of hostels in these areas. This demand mainly originates from students, who come to study in these large cities from other cities and towns and need decent accommodation at affordable prices.
This “Pre-feasibility Document” provides details for setting up a ‘Student Hostel’ offering affordable accommodation facilities to the students who have to live away from their homes during their studies. A student hostel may be established in major cities of Pakistan such as Lahore, Karachi, Islamabad, Quetta, Rawalpindi, Peshawar, Multan, Bahawalpur, Hyderabad, Faisalabad, etc. This appears to be a potential investment for the investors looking for a business which offers high growth rate with good return on investment.
The proposed project is assumed to provide services for maximum of 45 students at any given time. Initially, during the first year of operations, the project is estimated to provide services at 55% of its total service capacity, which is equal to 25 students or 25 beds. The service capacity is assumed to increase at a rate of 15% per annum with a cap at 100% of total capacity; achieved during 5th year of operations.
The proposed project will be set up in a rented building having an area of 2,300 sq. ft. (10.22 Marla). This building will have two floors. The project requires a total investment of PKR 6.74 million. This includes capital investment of PKR 6.24 million and working capital of PKR 0.50 million. The project will be established using 100% equity financing. The Net Present Value (NPV) of project is PKR 16.84 million with an Internal Rate of Return (IRR) of 49% and a Payback period of 2.70 years. Further, the proposed project is expected to generate Gross Annual Revenues of PKR 7.39 million in 1st year after coming into operations, Gross Profit (GP) ratio ranging from 47% to 60% and Net Profit (NP) ratio ranging from 1% to 33% during the projection period of ten years. The proposed project will achieve its estimated breakeven point at capacity of 53% (24 beds) with gross revenue of PKR 7.07 million in a year.
The proposed project may also be established using leveraged financing. At 50% debt financing at a cost of KIBOR+3%, the proposed project provides Net Present Value (NPV) of PKR 18.27 million, Internal Rate of Return (IRR) of 48% and Payback period of 2.68 years. Further, this project is expected to generate Net Profit (NP) ratio ranging from 15% to 33% during the projection period of ten years. The proposed project will achieve its estimated breakeven point at capacity of 54% (24 beds) with breakeven revenue of PKR 7.15 million.
The project will generate direct employment opportunity for 6 to 8 persons. The legal business status of this project is proposed as ‘Sole proprietorship’.