Paper by:

Amit Pokhrel

M.Sc. Urban design and Conservation

Khwopa Engineering College,Bhaktapur

Identify the project cost together with maintainence and operation cost of any newly built

complex (such as World Trade Centre, City mall, Kathmandu mall or any other complex) as well

as the revenue generation. Also, identify the sources of funding for construction, revenue

generation at present and condition of lease (if any) before forecasting the project return?

Abstract:

Investment decisions are at the core of any development strategy. Economic growth and welfare

depends on productive capital, infrastructure, human capital, knowledge, total factor productivity

and the quality of institutions. All of these development ingredients imply - to some extent -

taking the hard decision to sink economic resources now, in the hope of future benefits, betting

on the distant and uncertain future horizon. The economic returns from investing in trade

development or shopping mall infrastructures or in roads will be enjoyed by society after a

relatively short time span following project completion. The source of income is by the revenue

generation which can be gained by leasing and by giving rent to the business sectors. Investing in

trade, business and development is helpful for the cities economy.

Investing in primary education means betting on the future generation and involves a period of

over twenty years before getting a result in terms of increased human capital. Preserving our

environment may require decision-makers to look into the very long term, as the current climate

change debate shows. Every time an investment decision has to be taken, one form or another of

weighting costs against benefits is involved, and some form of calculation over time is needed to

compare the former with the latter when they accrue in different years. Private companies and

the public sector at national, regional or local level make these calculations every day. Gradually,

a consensus has emerged about the basic principles of how to compare costs and benefits for

investment appraisal.

The paper reviews models and practices in financing the development and operation of the urban

infrastructure in developing countries and sheds lights on the Kathmandu challenges and

opportunities with preliminary reform suggestions. The main findings include: (i) cities need

more resources to cope with urbanization; (ii) Revenue opportunities include income tax

surcharge, business tax, property and property transfer tax, and capital gain tax; but also

development fee or betterment tax to extract private benefits for financing infrastructure. (iii)

Diversifying infrastructure financing instruments by using ring-fenced project financing,

municipal enterprises, or public-private partnerships could expand the funds available for

infrastructure development. (iv) Debt financing in form of borrowing or bond issuance are

among the most immediate options for the Kathmandu valley cities. .

Key words: Investment, costs and benefits, revenue generation, lease, rent, Financing

1. Introduction

Rapid urbanization is the most substantial growth trend in the developing world in

today’s century. Rural urban migration and the inherent growth of the cities and particular

expansion of the larger cities are driven by socio-economic factors. Good plans for

developing the urban infrastructure include a vision and broad understanding of the needs

and priorities in both recurrent and capital spending, that can be translated into budgets.

Cities often formulate capital improvement plans with specific priority projects and

actions.

In this rapid urbanization, the pattern of urban growth in Nepal is quite astonishing in the

form of physical infrastructure development. The pattern of developing the land by

infrastructures is the commonest rule around the world, but in Nepal in today’s context

the pattern of development is on the LDO and BOT model. Lease development and

operate and Built operate and transfer is the succesful model in Nepal. There are many

structures newly built in the form of shopping mall, complexes and super structure for

trade, business and development. There are many such cases found in Kathmandu valley

that, public lands are given in lease for shopping complex, trade centres development and

other physical infrastructure development from the BOT model and is quite success in

Nepal. This is the basic idea of Build-Operate-Transfer (BOT).

The local budget is the most traditional and common source for financing local services

and physical infrastructure development in both the developed and developing world.

Operating services and managing the built assests has four critical interlinks with the

local infrastructure planning. The first and most obvious among is Operating and

Maintainence. Because the operation of a new infrastructure includes costs, sometimes

quite substantial. Operation expenses could amount annually about 5 to 7% (or as per the

contract lease document and ranges from 5 to 15%). The second interlink is accounting.

The third, the proper operation requires systems and procedures for operation and

maintainence i.e. technical and managerial capacities for timely repair and refurbishment

of the asests. Finally money paid to cover unnecessary costs of services reduces the

current budgets of the firm or organizations, hence reduces the operation surplus and the

funds for future investment.

The case taken to study is of the United World Trade Centre. United Builders Pvt. Ltd.

made an agreement with Tribhuwan University to construct a business complex, the

United World Trade Center (UWTC), making it an important project under the BOT

model. The concession period for the UWTC is 30 years. And the lease agreement

between United Builders Pvt.Ltd and Tribhuwan University was deal in NRS 500 Million

as a land lease in FBOT model for 30 years. Similarly the Kathmandu mall was also a

form of BOT model which was been signed for 30 years as a lease contract from Citizen’s investment fund with the concerned parties.

The aim here is to communicate to the key intellectual underpinings of investment project

evaluation, as widely practiced by international organizations, governments, private

sector, builder, financial actors and managerial team world-wide. The development of

infrastructure projects is a complex and resource-intensive process. It is possible,

however, to analyze all projects in terms of a common life-cycle which comprises a series

of stages. The stages are illustrated in diagram1.

Diagram 1: The Project Development Cycle

2. Financing oppurtunities

There are new financing instruments that have been tested in the developing world in the

last decades; including land-based financing and output based aids (OBA). Of these, the

land-based financing plays very substantial role in some countries (Bhutan, China, India,

Project Specification and Feasibility

Outline Design

Consent and Land acquisition

Detail Design

Construction

Handover

Procurement of

Contractor

Finance

Ethiopia, Nepal, Turkey, and the European transition economies), while OBA only

supplement the mainstream financing forms. Some of the techniques are listed here.

a. Land-based financing

The Land-based financing includes various instruments when land-related rights

or fiscal or regulatory power is transferred for funding public infrastructure; many

of these provide on-budget funds, others are more implemented in off-budget

arrangements like via municipal enterprises. The significance of land-based

financing arises from the fact that well performing developing countries boost

public and private investments in urban areas that in turn appreciate land value in

extreme scale (10 to 30 fold increase of land value is not uncommon). Most of

these benefits are realized by the private players with little or no financial benefit

for the public entities that played great role in land value appreciation. Thus,

value capture that is extracting a fair portion form the private benefits to the

public budget is an utmost important action the local governments should take in

developing countries

b. Leasing or Selling Land

The Chinese model: The astonishing development of Chinese megacities like

Shanghai offers one model when the state-owned land is leased out for private

development often for 99 years. The success of this model requires: a strategic

development plan with long-term vision of the city development; a corresponding

development program; the right of the cities to use land for development freely

that includes power for drastic removal of structures and people to clear the sights

for new development (virtually impossible to implement in many countries); and

a municipal enterprise like the Chengtou Corporation.

It is a development and investment company established by Shanghai local

government for managing the land-lease, borrowing against the lease revenues,

and investing the proceeds for developing basic infrastructure including

highways, bridges, water and sanitation, etc. The lease fee is estimated based on

demand and the future value of land after the development.

c. Selling public land

Selling public land has funded substantial development in many countries. Land-sale has

a great and double potential: first, it generates bulky one-time revenues for development;

second if well done, it accelerates adoption and implementation of large urban

development or modernization programs. This model works when the local

government owns sizable land for development or manages to transform

agricultural land to urban land development. Adequate urban development plan,

reliable asset management, and accounts on government owned land are key

preconditions for using land-sale strategically for infrastructure financing. But

land records are often vague or nonexistent in cities in the developing world.

Successful land-sales in the developing world include, Mumbai and Bangalore in

India and Alexandria and Cairo in Egypt. For instance, Cairo adopted a

development plan and then auctioned a desert land for new towns that generated

$3.1 bn.; and with this single transaction generated over 100 times larger amount

than the total (generally low) annual property tax collection of the country. These

cities can sell land, but face less liberal rights than China for moving the people,

for instance Mumbai has paid high compensation and had to pool public and

private land for implementing large development project.

d. Land pooling

Land pooling has been successfully tested in many Asian developing countries

including India, Nepal, and Bhutan. This model supports urban expansion and

development in areas with scattered private or public and private land ownership.

The primary objective is the same: urban development increase land values

manifold (20-30 fold is not uncommon); with that in mind the local government

adopts a detailed town-plan with streets, public spaces, commercial and

residential zones and then forms a development partnership with the incumbent

land owners.

The Ahemdabad case: Ahmadabad, India offers a successful case, but there are

many smaller land-pooling schemes in Nepal and Bhutan too. The process starts

with adoption a town-plan and completion of a detailed valuation for fair

compensation of the owners. The government does not acquire land from the

owners/farmers, but still the town plan often manage to retain about 40-50 percent

of land for public places (roads, parks, schools, health, culture, and trunk

infrastructure). The scheme assigns an agreed small plot back to the initial

owners. Finally, the surplus land is sold in open market auctions and proceeds are

used for compensating the owners and financing infrastructure. The results are

very positive in terms of creating new liveable urban places and providing houses

for thousands of families; but the process is very lengthy and requires great

negotiating skills, political support, and strong legal, financial, and technical

expertise in the local governments.

e. Land development fee

Land development fee is a special one-time charge of the developers to cover the

cost of on-site or off-site infrastructure development. A huge office or shopping

complex requires high capacity trunk network connections, increases traffic

substantially, but also generates negative effects like air or water pollution, or

noise. Needless to say there are huge positive impacts too, including employment,

taxes, economic development in the area nearby, and increased land and real

estate value. Land development fees are charged for extracting public share from

private gains, for funding the required on- and off-site infrastructure. This is a

standard practice in the developed countries, since the basic premise is that user

should pay.

f. Property tax

Property tax is a natural way of extracting private gains for public benefits, and

public infrastructure has proven to increase value of the adjacent land and real-

estates substantially. It is crucially important for cities to revalue the real-estates

adjacent to the large public infrastructure development projects and collect higher

property tax after completion. Cities in developing countries often fail to benefit

from this opportunity.

g. Property transfer tax

Property transfer tax is another instrument to tap private benefit at the event of

transferring properties from one owner to another. This tax is easy to collect

because both the sellers and buyers want obtaining land titles and ready to pay a

fair transfer tax (often in the range of 1-3% of contracted land sale value. This tax

may not work in countries where land transactions are not properly registered.

Local governments in Pakistan collect more revenues from transfer tax than from

property tax (not a good policy). An excessive transfer tax may aim more

revenue, but in fact may discourage fair registering transfer transactions or true

price of the sold properties.

h. Capital gain tax

Capital gain tax on land and real-estate (improvements) is another good source for

local governments. This works well if the property transfers are well recorded.

This tax aims extracting private gains from real estate speculation and quick

gains. The tax base is the difference between the sales price and the initial

purchase/investment price of the property reduced by the verified subsequent

improvements made by the last owner. The capital gain tax (often in the range of

20 – 30 %) is typically levied if the property is divested within 10 years following

the purchase and maybe less or nil when the property is held over 10 years. This

tax could provide substantial revenues for the local governments, while taxes and

discourages speculative investments.

3. Methodology Adopted for Cost analysis and Revenue generation

There are different methodology for cost analysis and revenue generation. The methods

are adopted to know the initial project costs and varying cost factors which will make

immense affect on the source of revenue generation. The key determinants of initial

project cost are enlisted below:

a) Key determinants of initial cost

No two infrastructure projects will cost the same amount of money no matter

how similar they are. Apart from basic technical factors, the wide range of

economic and institutional conditions in different member states will itself always

lead to variations. Nevertheless, the fundamental project costs are based on the

actual cost of the land, materials, equipment and labour in the region where the

project is being procured. This section first focuses on the factors that determine

initial project costs and then examines some of the more important determinants

of cost changes over time. These basic costs will vary depending upon a number

of factors which are discussed below. Diagram 2 summarizes these factors.

The Project Specification

The specification defines the physical attributes of a project. For buildings, the

required function and expected occupancy rate will lead to a specification of

total floor space and floor plate size, height, internal and external appearance,

floor loadings, heating and lighting requirements etc. Generally, the more

detailed the specification and the larger the project, the more expensive it will

be.

Location

Location affects project costing via institutional factors and through geographical

realities. Institutional factors can affect initial project cost estimates in a number

of ways. Allowance for the costs involved in sustaining a long public

consultation exercise is an example. Where major projects are likely to be

strongly opposed on environmental grounds, more cost may have to be allowed

for environmental mitigation measures.

In geographical terms, construction and material costs, land costs and design

standards vary widely across the Nepal because of the varying distances from

suppliers, climate and weather conditions, and general market conditions. Even

within a country, variations will exist depending on whether a project is being

implemented in a peripheral or central area, or in an urban or rural context. Generally, the more remote a project is, the more expensive it will be because of

the cost of transporting construction materials and equipment to the site. In an

Urban location, land costs are usually much higher.

Form of Procurement/Contract

The form of procurement and contract used by the project sponsor can alter the estimated cost of a project. Cost savings may be made by means of lump sum

contracts although these are usually marginal in relation to the total project costs. DBFO contracts, which seek to transfer most of the risk of cost over-run from

project sponsor to contractor, may in some circumstances yield savings.

Site Characteristics

A site can be affected by soil and drainage conditions and access restrictions

which can affect the original cost estimates. The amount of excavation, piling

and foundation activities required are particularly affected by poor ground

conditions. Where there is uncertainty about ground conditions, accurate project

costing cannot be achieved unless a soil survey is undertaken. This may require

the sinking of boreholes to obtain soil samples at different levels beneath the

surface.

New Build or Improvements

Generally, the construction of new infrastructure is more expensive than

improvements to existing infrastructure, or the refurbishment of buildings. This is primarily because the “non-building” costs such as land purchase,

foundations, services provision etc. do not have to be included when simply

upgrading existing structures.

Tax Liabilities

An organization will be liable to pay tax on its purchases. Some organizations

and types of project are not liable to pay taxes, or else these can be reclaimed. Local government projects and infrastructure for public use are examples. Some

public or quasi-public sector companies, voluntary and private sector

organizations can be liable and these tax costs can have a significant impact on

gross construction costs.

Timescale

Generally, the longer a project takes, the greater the project costs will be. Project

timescales are dependent on the specification of a project. Usually, the larger a project is the longer it will take to implement. This is not always the case; if

substantial additional resources are used, project implementation can often be accelerated.

In some cases, work on a project may take a lot longer than expected because its

phasing is dependent upon other, linking projects or public finance programmes.

A project which involves non-continuous phases is usually more expensive than

one undertaken without interruption because of the additional costs involved in re-mobilizing plant and contractors.

Inflation

The longer the expected construction period, the more account will need to be

taken of expected inflationary price increases over time. This is particularly

important where a public authority’s expenditure programme is involved. Initial

cost estimates will need to allow for the value that will need to be paid at the time

the project actually goes ahead. Levels of inflation vary amongst member states

and can be as low as 1-2% or as high as 10% per annum.

Diagram 2: Key Determinants of Costs

4. Demand Analysis

Demand forecasting is an important step in the feasibility study of a project, as it allows us to

assess how much of a good or a service will be requested in the future, as well as the revenues

that can be expected from the sale of that good or service.

i. Demand forecasting techniques

Location Specification Tax

Liabilities

Site Original

Cost

Estimate

Time Scale

New Build or

Refurbishment

Inflation Form of

procurement

contract

Several techniques can be used for demand forecasting, depending on the data available,

the resources that can be dedicated to the estimates, and the sector involved. The

selection of the most appropriate techniques for estimating the actual demand and

forecasting the future ones with and without the project will depend on the nature of the

good or service, the characteristics of the market and the reliability of the available data.

Transparency in the main assumptions and in the parameters and values, as well as the

trends and coefficients used in the forecasting exercise, are matters of considerable

importance for the accuracy of the estimates. Furthermore, any uncertainty in the

prediction of future demand must be clearly stated.

The method applied for the forecasting must be clearly explained and details on how the

forecasts were prepared may help in understanding the consistency and realism of

forecasts. To identify the cost, investment and revenue generation, forecasting techniques

is most necessary.

5. Project Performance Indicators

A. The Net Present Value

The Net Present Value of a project is the sum of the discounted net flows of a

project. The NPV is a very concise performance indicator of an investment

project: it represents the present amount of the net benefits (i.e. benefits less

costs) flow generated by the investment expressed in one single value with the

same unit of measurement used in the accounting tables.

The Net Present Value of a project is defined as:

(Where St is the balance of cash flow at time t and at is the financial discount

factor chosen for discounting at time t.)

It is important to notice that the balance of costs and benefits in the early years of

a project is usually negative and it only becomes positive after some years. As at

decreases with time, negative values in the early years are weighted more than

the positive ones occurring in the later years of a project’s life.

The value of the discount rate and the choice of the time horizon are crucial for

the determination of the NPV of project. NPV is a very simple and precise

performance indicator. A positive NPV, NPV>0, means that the project generates

a net benefit (because the sum of the weighted flows of costs and benefits is

positive) and it is generally desirable either in financial terms or in economic

terms. When different options are considered, the ranking of the NPVs of the

alternatives indicates the best one.

There are cases in which the NPV of one alternative is not greater than the other

or for every i value. This is due to a phenomenon referred to as ‘switching’

Switching occurs when the NPV curves of two projects intersect one another.

NPV Project 1 NPV Project 1

Project 2

Project 2 i i

Diagram 3: Project ranking by NPV values Diagram 4: A case of switching

B. The Internal Rate of Return

The Internal Rate of Return (IRR) is defined as the discount rate that zeroes out

the net present value of flows of costs and benefits of an investment, that is to say

the discount rate of the equation below:

NPV (S) = Σ [St / (1+ IRRt)] = 0

The Internal Rate of Return is an indicator of the relative efficiency of an

investment, and should be used with caution. The relationship between NPV and

IRR is shown in the graph below.

NPV

NPV

IRR IRR IRR

i i

IRR

Diagram 5: The IRR Diagram 6: Multiple IRR’s

If the sign of the net benefits, benefits minus costs, changes in the different years of the project’s lifespan

(for example - + - + -) there may be multiple IRRs for a single project. In these cases the IRR decision

rule is impossible to implement.

C. Benefit-cost ratio (B/C)

The benefit-cost ratio is the present value of project benefits divided by the

present value of project costs:

B/C = PV (I)/PV (O)

Where, I is the inflows and O the outflows. If B/C >1 the project is suitable

because the benefits, measured by the Present Value of the total inflows, are

greater than the costs, measured by the Present Value of the total outflows.

Like the IRR, this ratio is independent of the size of the investment, but in

contrast to IRR it does not generate ambiguous cases and for this reason it can

complement the NPV in ranking projects where budget constraints apply. In

these cases the B/C ratio can be used to assess a project’s efficiency.

D. RISK ASSESSMENT

In project analysis it is necessary to forecast the future value of variables, with an

unavoidable degree of uncertainty. Uncertainty arises either because of factors

internal to the project (as, for example, the value of time savings, the timing of

the completion of the investment etc.) or because of factors external to the project

(for example, the future prices of inputs and outputs of the project).

Risk assessment, in the broad sense, requires:

- Sensitivity analysis;

- Probability distribution of critical variables;

- Risk analysis;

- Assessment of acceptable levels of risk;

- Risk prevention.

E. Risk prevention

The degree of risk is not always the same over the time horizon of the project

realization. It has been demonstrated by past experience, and it is generally

accepted in literature, that the riskiest phase of a project is the Start-up. At that

time most of the investment costs have been incurred but there may not yet be

any feedback from an operational point of view. When the investment enters into

the operations phase, the risk involved diminishes because the feedback becomes

increasingly evident.

6. CASE STUDIES

United World Trade Centre (UWTC) is one of the largest shopping complex’s in the

Kathmandu valley. The complex is spread over 5,596.11 Sq.m. area and built in a lease-

land owned by Trivhuwan University with total investment of Rs 500 million. The

complex provide a number of services like Departmental stores, Silver Jewellary shops,

Cyber cafe, Party Palace, Health clubs, Heated swimming pool, Clothes and Acessories

shops, Social event hall, including more than 50 shops with following services and

facilities with advertisement boards as hoarding boards at the roof top floor.

The services and facilities inside the UWTC, are: wide range of clothings, textile, gadget

shops like Monalisa exclusive textiles, John Player, Landmark, Converse, Fabulous,

Temptation, Bajra and Blay, Life, Glamour, Revive, Shringar, Grasshopper, Garlic cafe

& bar, Hot breads, Cafe de valley, United bowling and others Jewellary and costumes

shop with parking facilities.

The case taken to study is of the United World Trade Centre. United Builders Pvt. Ltd.

made an agreement with Tribhuwan University to construct a business complex, the

United World Trade Center (UWTC), making it an important project under the BOT

model. The concession period for the UWTC is 30 years. And the lease agreement

between United Builders Pvt.Ltd and Tribhuwan University was deal in NRS 500 Million

as a land lease in FBOT model for 30 years. The lease agreement was signed on 2063

B.S. between United Builders Pvt. Ltd and Tribhuwan University. The total investment

invest to build the UWTC was known to be NRS 10 Crore excluding lawyer and additive

cost. (Source: News paper/Gorkhapatra)

Professional real estate developers (United Builders Pvt. Ltd) or business persons have

mostly used bank and financial institutions as source for real estate loan. In fact, all the

respondents have borrowed loans from commercial banks. However, fifty percent of the

respondents have used funds from both the sources (combining either commercial and

development banks or commercial banks and finance companies).

7. Analysis of the Investment cost with O & M with Revenue generation

The total investment invest to build the UWTC was known to be NRS 10 Crore.

Annual Operation and Maintenance Cost

Operation expenses could amount annually about 5 to 7% (or as per the contract lease

document and ranges from 5 to 15%).

The annual O & M cost of the UWTC is found to be NRS 50 Lakhs, from the 5% interest

rate on the successive year after completion of the newly building complex’s. Then after

successive years again, the price has been increased due to rise in market price in

material, labour cost, and in building component accessories. The O & M cost varies due

to change or increase in market price of the material, labour cost, additional cost and

overall maintenence and operation cost. The rise in market price is the biggest threat for a

developer/ investor to sustain his source of income , known as revenue generation to

controlled costs which will create adverse effect for such complexes to maintain it.

While estimating O & M costs, long term cost situations must be considered. Certain

expenses like major repair/maintenance of machinery, replacement of glass panes,

electric wiring, water supply pipes maintenence, sanitary fittings maintenence, colour,

painting furnish, railings maintenece, and including each and every thing which is

directly related to building works would not be encountered every year.

The operation and maintenence cost includes the following cost in successive years to

make a complex more fit and durable.

Operation Cost Maintenence Cost

Security guard operating cost Plants and Machinery maintenece cost

Fuel/generator cost Railing/ lift maintainence cost

Solid waste disposal cost Tiles/joint mortar maintainence cost

Floor cleaning cost Glass pane fitting maintainence cost

Manpower cost Re-construction cost including aluminium

works, glass fittings cost

Additive cost including lawyer charge(legal

advisor),

Watersupply pipe maintainence cost

Layman cost of water supply, electricity

and sanitary

Roof maintainence cost

Watersupply pipe operating cost, electricity

wire fitting cost, sanitary fitting cost

Underground parking maintainence cost

CCTV operating cost with manpower Hoarding board maintainence cost

CCTV material cost Colour/painting refurbishment and

maintainence cost

Water tank cost to the complex CCTV maintainence cost in maintaining

virus free, update of material

Hauling cost Metal & utensil cost including shutter

Labour cost Shutter partition by collapsing wall

maintainence cost

Transportation cost wall maintainence cost

colouring/painting cost extra maintainence cost including fire

hazards and other vulnerability

Plants/machinary operating cost

Source of Revenue generation

After operating the complex, the price for different shops are been categorized and vary

according to their sizes, usage and function: in the sense of allocating spaces used for

their purpose. The shops which are found in UWTC, they had a lease agreement again for

the rent purpose with the United Builders pvt.ltd for the source of revenue generation by

the concerned parties itself.

The economic returns from investing in trade development or shopping mall

infrastructures will be enjoyed by society after a relatively short time span following

project completion. Economic growth and welfare depends on productive capital,

infrastructure, human capital, knowledge, total factor productivity and the quality of

institutions.

Revenue opportunities include income tax surcharge, business tax, property and property

transfer tax, and capital gain tax; but also development fee or betterment tax to extract

private benefits for financing infrastructure. The source of revenue generation in United

World Trade Centre, Kathmandu; included from the different shops, social community

hall, party palace and other shopping place which is situated in the same building

complex with variation in range of money price for the shops within the UWTC.

In the United World Trade Centre, Kathmandu, there are more than 50 shops including

swimming pool, party palace, underground parking facilities, social event programme

hall and with other services and facilities. The number of services like departmental store

with more spaces allocated for it, Silver jewellary shops, cyber cafe, health club, heated

sauna, rent shops including wide range of clothing, textile, gadget shops like Monalisa

exclusive textiles, John Player, Landmark, Converse, Fabulous, Temptation, Bajra and

Blay, Life, Glamour, Revive, Shringar, Grasshopper, Eating and fast food shops like

Garlic cafe and bar, Hot breads, Cafe de valley, United bowling and other new rented

shops for clothings and accessories.

The source of revenue generation are from these shops, party palaces, parking lots and

from the other shops which are in the same complex as by lease rent agreement to the

concerned parties. There are variation among different shops to pay their rent to the

concerned parties. The source of revenue generation is also by the trade fair programme

which will be held in the same building complex per month. The source of maximum

income generation or revenue generation are done by fashion shows, organizing event

and function; and from that program, the amount of money is collected according to the

stall users and the whole event management group.

At the first successive years, the rent of the space used by the concerned shops at UWTC

is found to be from NRS 62,500 to maximum NRS 1,25,000 per month. The price varies

because due to location(front, middle and back) as well as the space used by the rented

shops. In the consecutive years after 2 years from that period, due to increase in market

price in material cost and infrastructure construction cost, the lease-rent agreement

between shops owner and the concerned authorities has a new agreement and the spaces

used by the shops are paying from NRS 70,000 to maximum 1,50,000 NRS. (Also

depends upon how much spaces used by the rented shops for their space to introduce

their shops in lease-rent agreement between concerned shops and parties.)

The another source of revenue generation is by of hoarding boards in the roof top. The

alternative source of revenue generation can be generated by creating a helipad in the

roof top for emergency landings.

Therefore, the source of revenue generation per year by the UWTC from the rented

shops, parking lots,party palaces, heated swimming pool, cyber cafe, Silver jewellary,

social event program, fashion shows, trade fair and from other shops from UWTC, is

found to be (in current state) per year:

From the UWTC shopping complex, the data are found by observing and measurement

that a space used for functioning that shops are:

15*10 Sq.ft=150 Sq.ft=13.93 Sq.m

15*12 Sq.ft=180 Sq.ft=16.72 Sq.m

For the departmental store, heated swimming pool, cyber cafe, party palaces, hall for

socio-economic and fair, banking ATM’s and other purpose; has the same rate of 1

Sq.m=5025.125 NRS. (By calculating the minimum price rate of Rs. 70,000.00 to

maximum 1,50,000.00)

From the underground parking lots, the total revenue per month found to be

1,50,000.00 Rs. and per year, it comes out to be: 18,00,000.00 Rs.

From the departmental store, the total revenue per year, comes out to be:

90,00,000 Rs.

The complex is spread over 5,596.11 Sq.m. area, deducing the lift area, floor

passage, space of departmental store and other unused portion for shopping store,

the total area for space used for its functioning comes out to be 4,700 Sq.m.

Hence from the criteria as shown above, that 1 Sq.m=5025.125 Rs.; the space

used wholly in NRS is found to be per month is Rs. 23,61,8087.5 and yearly the

total revenue comes out to be: Rs. 28,341,7050.00

Hence the total source of revenue generation by the United World Trade Centre

per year comes out to be: o Parking lots= Rs. 18,00,000.00

o Departmental store= Rs. 90,00,000.00

o Space allocated by other shops in UWTC= Rs. 28,341,7050.00

Total source of revenue generation per year by United World Trade Centre,

Kathmandu is: Rs. 29,421,170,50.00 , hence calculating the data for 30 years

lease agreement, it comes out to be Rs. 8,8265,115,00.00, which shows a

clear evidence of benefit for the concerned parties by this kinds of land-lease

agreement under FBOT model.; which shows a clear view that PPP model is

a successful model in Nepal.

8. Conclusion

It is possible to define as PPP any project in which the investment (or part thereof) is contributed

by the private sector and where there is a regulatory contract between the private and public

sectors in terms of risk allocation for the provision of the infrastructure and/or the services. The

level of PPP complexity will differ according to the sector, the type of project and country, as a

function of the risk mitigation mechanisms and the use of project finance to fund the project. The

participation of the private sector in the provision of public assets and services assumes that,

whatever the contractual arrangement between the two parties, adequate returns on investment –

from a strictly financial perspective - must be allowed to occur. The case studies of United World

Trade Centre gives us a possible outcomes that, these kinds of land-lease agreement which is a

FBOT model under PPP circumstances, helps to forecast for the future. This kinds of project

work will be successful model for infrastructure development within the country to revive the

economy and to sustain these kinds of land-lease mechanisms to develop under LDO(Lease

development and operate) or FBOT model.

Hence, these process is a suitable method for income or revenue generation by land-lease

agreement between public and private bodies with agreement of maximum 30 years, to build any

kind of infrastructure development for the city and transfer by BOT model under LDO model.

This is a good examples to make a city economic revive in the sense, that this kinds of shopping

complex helps land prices rises in the market and helps in other physical infrastructure provision

to grow within the city. Hence The main findings include: (i) cities need more resources to cope

with urbanization; (ii) Revenue opportunities include income tax surcharge, business tax,

property and property transfer tax, and capital gain tax; but also development fee or betterment

tax to extract private benefits for financing infrastructure. (iii) Diversifying infrastructure

financing instruments by using ring-fenced project financing, municipal enterprises, or public-

private partnerships could expand the funds available for infrastructure development. (iv) Debt

financing in form of borrowing or bond issuance are among the most immediate options for the

Kathmandu valley cities. .

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