December 20

Apartment
Developer

2010
OROT Project

Linear Programming Modeling to maximize the value of an apartment

developer through the optimal mix of different types of flats, subject to
the area & local law constraints

Submitted to:

Professor Lakshmikanthan
By:

Srikanth Konduri (10FN 109)

Saurabh Thadani (10FN 102)

Nikhil Gupta (10FN 121)

Tushar Gupta (10FN 115)
Srivatsan Rangarajan (10FN 110)
Varun Joshi (10FN 117)

Operations Research & Optimization Techniques

Project: Portfolio based problem

Table of Contents
Table of Figures ............................................................................................................................................. 2
Apartment developer.................................................................................................................................... 3
1.1 Problem Description ........................................................................................................................... 3
1.2 Findings of Market Study .................................................................................................................... 3
1.3 Portfolio Constraints ........................................................................................................................... 3
1.4 Local law constraints ........................................................................................................................... 4
1.5 Additional information........................................................................................................................ 4
1.6 Formulation of the model ................................................................................................................... 4
1.7 Objective Function .............................................................................................................................. 4
1.8 Constraints .......................................................................................................................................... 4
1.9 Additional Precautionary Constraints ................................................................................................. 5
1.10 Using Excel Solver to obtain the optimum solution.......................................................................... 5

Table of Figures
Figure 1 - Solver Constraints ......................................................................................................................... 6
Figure 2: Excel Conditions with solution ....................................................................................................... 7

Apartment Developer

Page 2

Operations Research & Optimization Techniques

Project: Portfolio based problem

Apartment developer
1.1 Problem Description
Pragati real estate developer is planning a new apartment complex. Three types of units can be built: onebedroom apartments, two-bedroom apartments, and three-bedroom apartments.
Each one-bedroom apartment requires 600 square feet; each two-bedroom apartment requires 800 square
feet; and each three-bedroom apartment requires 1,200 square feet.
The developer has already agreed to lease 13 one-bedroom units and 21 two-bedroom units to a local
rental agency that is a silent partner in this endeavor.
The developer wants to maximize the rent collection from his apartment.

1.2 Findings of Market Study

Market studies show that one-bedrooms are rented for `.6000/- per month, two-bedrooms for `.8500/- per
month, and three-bedrooms for `.12000/- per month.

1.3 Portfolio Constraints

The developer wants to keep a mix of apartment types in the complex. He believes that the number of
One - bedroom apartments should be between 15% and 50% of the total number of apartments.
Similarly, two - bedroom apartments should make up 10% to 50% of the total number of apartments,
And Three-bedroom apartments should make up 0% to 25% of the total number of apartments.
Apartment Developer

Page 3

Operations Research & Optimization Techniques

Project: Portfolio based problem

1.4 Local law constraints

Hyderabad Municipality laws do not allow the developer to build more 8 floors in this particular building
location, and restrict the building to a maximum of 67,000 square feet.
An apartment floor can have space constituted by houses not more than 87%. (rest of the space allocated
for site seeing & elevator lift purpose)
Entire basement should be used for parking & other purposes.
An elevator lift is required if there are more than 3 floors and for every 3 apartments in a floor.
An elevator lift is also required if the no. of floors is only 3, for every 5 apartments.

1.5 Additional information

Assume that the silent partner will pay the market rate for its apartments.
Annual operating cost for the elevator lift is `.600/- per lift per month (after including the continuous
maintenance of power backup) and the cost for basic green & clean requirements is `.1000/- per month.

1.6 Formulation of the model

Let x1, x2, and x3 denote the number of 1-bedroom apartments constructed, the number of 2-bedroom
apartments constructed, and the number of 3- bedroom apartments constructed.
Total No. of apartments (T) = (x1) + (x2) + (x3) .... (1)
Total Sq. ft. occupied (TS) = (600*x1) + (800*x2) + (1200*x3) ...... (2)
% of 1-bedroom apartments (p1) = (x1*100) / (T) ....... (3)
% of 1-bedroom apartments (p2) = (x2*100) / (T) ....... (4)
% of 1-bedroom apartments (p3) = (x3*100) / (T) ....... (5)

1.7 Objective Function

Maximize the total apartment rent collection (AR)
(AR) = (6000*x1) + (8500*x2) + (12000*x3) ......... (6)

1.8 Constraints
Floors<=8 (N), Apartment to Floor Ratio<=12 (O) ... (7)
(TS) <= 67000 .. (8)

Apartment Developer

Page 4

Operations Research & Optimization Techniques

Project: Portfolio based problem

(x1) >= 13; (x2) >= 21.. (9)

15% <= (p1) <= 50% ... (10)
10% <= (p2) <= 50% ... (11)
0% <= (p3) <= 25% ..... (12)
Parking Space >=8710 (13% 0f 67000) .(13)
N*O= x1 + x2 + x3 . (14)

1.9 Additional Precautionary Constraints

As the No. of apartments to be obtained has to be an integer, we need to incorporate additional constraints
for making modeling it to be an integer programming.
(x1) = integer; (x2) = integer; (x3) = integer ... (13)

1.10 Using Excel Solver to obtain the optimum solution

The attached excel contains the model using the above objective function, constraints along with the
solution obtained by the solver.

The below screenshot summarizes the constraints & overall results:

Apartment Developer

Page 5

Operations Research & Optimization Techniques

Project: Portfolio based problem

Figure 1 - Solver Constraints

Apartment Developer

Page 6

Operations Research & Optimization Techniques

Project: Portfolio based problem

Figure 2: Excel Conditions with solution

Apartment Developer

Page 7