What you need to know:
- As a developer, you should be able to afford the design. It is one thing to ask an architect for a flamboyant design and another to afford it.
- With a good budget one is able to adjust their expenses without experiencing too much financial strain.
After consulting her contactor, Racheal Namuli acquired a loan from a bank to finish two floors on her three storeyed building.
Armed with Shs50m, Namuli bought tiles, cement, sand, grout, paint, undercoat and a few other materials.
When she delivered the materials, her contractor informed her that she had bought excess tiles, so she sold some.
However, later, the contractor confessed that he had miscalculated and they would need all the tiles after all.
He also requisitioned for kitchen sinks as well as prepaid power metres, which she estimated would cost a combined Shs5m.
With no more money to spend on materials, Namuli was forced to use offcut tiles for the rest of the areas, which greatly affected the structural design especially the aesthetics.
Nuru Ashaka, a seasoned property developer stresses that an unbudgeted or misbudgeted project as Namuli’s is destined to fail.
“Because I know it might be difficult to budget to the dot, what I do is make three different budgets for every project. From these I get the average and that is what I work with. As a project owner it is important that you have good communication with your contactor or project manager. They need to understand your tastes, preferences and vision for your project and then help you achieve that within your means,” Ashaka explains.
Budgeting in construction is crucial especially since costs of construction materials fluctuate upwards. With a good budget one is able to adjust their expenses without experiencing too much financial strain.
Joseph Oryang, a civil engineer at Century Investors Limited says every project should have a bill of quantities (BOQ) with a detailed description of the project, aspects of the work and quantity of the work, for instance the number of square metres of brick work and the cost of each square metre.
The bill of quantities, Oryang notes, makes an accurate assessment of the final cost of the project and needs to be as exhaustive as possible.
“Very often do people develop shallow BOQs and leave out a lot of things and make assumptions. When it comes to the actual work, the costs under the assumptions are often different from what had been projected. To get an accurate bill of quantities, you need to hire a quantity surveyor or engineer who is not only qualified but experienced in construction,” Oryang advises.
Drawing the initial budget
Technically, the initial budget is drawn simultaneously with the house design. As a developer, you have to feel comfortable that you are able to afford the design.
It is one thing to ask an architect for a flamboyant design and another to afford it. It is important to know the costing of the chosen design from the beginning.
If you feel the design is costly, it means certain things need to be changed and engineers look at how to cut down costs.
This has to be done in consultation with the architects. Even when the construction has taken off, it is important to remember that there are certain variables that can take place.
For instance, bricks could cost a little more than expected while the cost of materials such as cement and timber keep changing.
The cost for transportation of materials can also go up. In the course of the project, these and many other factors affect the cost.
There are so many things you assume but the reality is that there are things you cannot control especially material costs.
On few occassion one can discover that they actually overbudgeted and they have more money left.
The temptation is usually to upgrade the quality of materials which ultimately affects the original budget.
However, effective project management is about keeping within the initial budget. The only way this can happen is if there’s budgeting to realign as you go along.
Budgeting allows for consultations
Peter Musomba, the business manager at Hardware World Limited, says budgeting is a vital aspect no matter the project size, short or long term because it allows for consultation with experts who guide on using the right materials.
The budget will give you a good estimation of what you are supposed to use as far as materials and finances are concerned at different stages without buying much or less to prevent wastage and misallocation of materials, for example, from the foundation to the wall plate.
“For each stage, there is allocation of resources and this gives you the exact amount to use. In most cases, you buy what you need for a given stage.
For instance, when you are building the foundation in a damp place, sometimes you buy blocks first yet such blocks are not necessary in the preliminary stages where you instead need stone aggregate and a damp proof course (DPC) and other foundation materials,” Musomba explains.
A damp proof course is a thick black polythene bag used in the foundation to prevent the uptake of underground water to the upper section of the wall.
Budgeting also helps to forecast the span of the project. Within the budgeting process, after drawing the bill of quantities, you can tell the amount of materials to use within a specified time period.
This then determines the spending period, specifying the expenditure per stage.
Commercially, for property developers building arcades or apartments, you can even start receiving money from clients because the project is ending in a known period.
Budgeting helps you to know the source of financing without budgeting for what you expect to get, say from your salary.
If it is a business, Musomba argues that it should be doing well so that it allows for savings to allow financing of the construction project in question.
For project progress, budgeting helps to effectively audit the source of funding as well as the contractor.
For example, if you have forecasted what to use per stage in terms of materials and finances, you are able to audit and understand what you are supposed to have achieved after a specified period.
If the project fails at a given stage, you audit why and where the problem could be coming from.
“If you got the funds on time, could it be that the contractor was not effective? You are able to audit yourself in terms of effectiveness, which normally hinges on the side of the funder or contractor or both.
Sometimes the effectiveness could be audited in terms of weather.
In the construction industry, when it rains, construction rates are low because you do not expect people to work under rain because rain will wash away or dilute the cement,” Musomba explains.
Dealers can help
According to Musomba, hardware dealers visiting clueless developer’s sites to guide on materials to buy is a positive and negative situation.
For example, not all hardware dealers can afford to execute their material delivery roles at an honest level especially at budgeting. Some of them are profit or sales oriented and do not understand budgeting.
On the positive side, organised hardware shops have the responsibility of helping the client accordingly.
“However, they should work with contractors who understand the house design, format, material and land terrain and other site technical concerns to do the budgeting. Quantity surveyors could also give estimates,” Musomba says.
To avoid being stretched beyong your budget, Oryang advises that the initial budget be realistic.
“Property developers tend to estimate project costs. In the end, when the budget is being worked out, it needs to be broken down in details in a bill of quantities.
This enables you have a clear picture of how the costs are likely to be and this has to be at the beginning.
As you go on, you keep realigning to make sure it is within realistic costing of the bill of quantities,” Oryang advises.
As a site owner, it is also advisable to develop the design together with the engineer and architect because at the end of the day you are the one who has to live in it.
The job of the architect is to put your vision on print while the engineer brings it to life. It is the engineer guides them on the right materials that will be required and what they will cost.
“During construction, sometimes there is extravagance in using materials specially cement. To prevent this, find the right workmen because you are not an expert and do not understand most aspects. For example, the cement that goes on the floor is not the same that goes on the walls or the ring beam,” says Nuru Ashaka, a property developer.
For each stage, there is allocation of resources and this gives you the exact amount to use. In most cases, you buy what you need for a given stage.
"For instance, when you are building the foundation in a damp place, sometimes you buy blocks first yet such blocks are not necessary in the preliminary stages where you instead need stone aggregate and a damp proof course (DPC) and other foundation materials,” says Peter Musomba, the business manager at Hardware World Limited.