Monitoring of construction projects on behalf of banks and investors
When lending to construction projects, in order to reduce banking risks, it is required to conduct a technical audit and subsequent monitoring of the project during its implementation (monitoring the implementation of construction and installation work on capital construction projects).
The monitoring of construction projects on behalf of banks becomes particularly relevant after the amendments to the Federal Law of December 30, 2004 N 214-FZ “On participation in shared construction of apartment buildings and other immovable property units and on amendments to some legislative acts of the Russian Federation.”
In accordance with the new version of this law, authorized banks that lending to construction projects are obliged to control the compliance of the details and amount of payments for contractors’ works paid by property developers with the content of confirmed documents submitted by them and which are the basis for these payments.
Our engineers can check the compliance of the content of the documents submitted by the developers with the real situation at the construction site.
Сost appraisal of unfinished facility
Most often, the cost of unfinished facility has to be estimated when buying or selling them, and in case of disputes arise between the participants of the construction.
Сost appraisal of unfinished facility starts from determination of the composition of the object, clarification of its legal status and identification of the right holders.
It is also necessary to find out the actual reason for freeze of construction. If the investor faces with financial difficulties, the object may be subject to encumbrances. Mistakes at the stage of engineering research, design or construction can significantly complicate the completion of an object and, consequently affect its cost. Newly discovered legal facts or changes in law can also badly effect works on the unfinished facility or make it impossible.
Because of the facts above analysis of the reasons and circumstances of construction freeze helps to take into account possible risks in valuation of unfinished facility.
Next, the technical parameters of the object should be determined. They include:
- physical parameters (length, width, height, area) of the facility and its structural elements;
- the degree of completeness of each structural element (foundation, walls, floors, engineering systems, equipment);
- wear and the possibility of using the elements of the facility during the resumption of the construction.
The vast experience of construction supervision, gained by the specialists of our company, allows us to determine the technical parameters of an unfinished facility with high accuracy.
After legal and technical analysis, the option of the best future use of unfinished facility is determined. Three main options are usually considered:
- to complete construction according to the initial design;
- to change the profile or technical and economic parameters of the facility using already done structures in a new project;
- to dismantle the facility and then construct a new one or use the land plot for another purpose.
If the latter option is chosen, only the land plot will have value for the new investor, and the cost of dismantling will reduce the cost of the plot.
After choosing the option for further use of the facility, it is necessary to choose an approach for its evaluation. In world practice, there are three main approaches to the real estate valuation:
- comparative approach;
- expense approach;
- profit approach.
Expense approach is usually used to complete construction according to the initial design or with little change.
If further use involves changes of the profile or technical and economic parameters of the facility or its demolition it is difficult to choose an approach that satisfies the interested parties (seller and buyer). The seller always wants to compensate for his expenses, and the buyer, due to the inability to use the constructed structure, focuses on future costs of dismantling or restructuring and future revenues from the project. In this case, both cost and profit approaches are used to take into account the interests of both parties, but preference is given to the profit approach, as it takes into account the current state of the object and the income from its future use.
