Being a new property developer in South Africa can be daunting: You already know what business you want to grow, but where do you start? From getting your team together to turning a profit, there are a few things you can keep in mind to ensure smooth sailing.
A property developer, also known as a property practitioner, is a multifaceted entity that oversees many aspects of a real estate development project. Functions may include land acquisition, obtaining funding, managing construction or marketing of the final developed facility. Property developers, or individuals considering a path in property development, need to understand the compliance requirements and steps to take in their journey. With the right team and a clear understanding of what is necessary, you can become a property developer in no time.
Gather Your Team
Firstly, joining the industry means that you need a team that fulfils key roles in the development process. You will rely on them continuously, therefore, you need to ensure you can work well with them. Key members you need to identify are:
Town Planner: This individual provides insight into the planning process, especially about the planning commission.
Architect: This person is one of your first key members. You will work closely with them to make your vision a reality. They will also be responsible for managing the technical professionals such as the structural engineers and construction workers.
Attorney: An attorney is vital to ensure you are compliant with the law, as well as that all contractual agreements you enter into are reasonable and clear.
Quantity Surveyor: This individual is responsible for keeping track of the expenses and resources during the project. They will also be key in ensuring due diligence.
Estate Agent: The agent can assist early in the project by investigating the feasibility of the project. It is only towards the end of the project that they will be involved with the sales aspect of the development, but their function extends beyond this.
Tips for New Property Developers
According to Private Property, one of South Africa’s first property brands, there are a few tips that new property developers should keep in mind.
Tip 1: Start small as starting is the most important step.
Tip 2: Tackle one project at a time.
Tip 3: The best strategy to start with is to develop-to-sell. This way you can gain capital and experience.
Tip 4: Don’t be afraid to partner with a reputable developer and learn from them.
Tip 5: Leverage the knowledge and expertise of these reputable developers.
Strategies for New Property Developers
In the previous section, it mentioned that develop-to-sell was the best strategy for a first-time developer. But what other strategies can be considered?
Let’s take a look at them:
Develop to Sell
This strategy is when a property is developed with the goal of selling the entire development once off to have funds to push into the next project. This helps fund the next project and counts towards the developer’s portfolio of experience.
Develop to Hold
As the name might suggest, the strategy’s goal is to retain the development after the initial construction has been completed. The developer can use this to generate income through renting the space to individuals or entities. It is considered to be the strategy that is most cash-intensive.
Develop for a Hybrid Exit Strategy
The hybrid exit strategy strikes a balance between selling enough units or space of the original development to break even with the initial investment. The rest of the space is used to generate additional income as a rental property. Such funds are used for either receiving a fixed income or to fund the next venture.
Developing a Property for Commercial or Residential Use
Developing a property so it can be used for commercial, industrial or residential use is called township establishment. This process takes purchased land that was previously zoned for agricultural use and rezones it. The town planner will assist you with submitting the correct documents such as proposed layout plans, motivation memorandums, and specialist studies reports (Environmental Impact Assessments).
After this step is completed, the application is advertised to the public. Affected parties and community members can then raise their concerns. Once all these objections are addressed, the property is deemed ‘approved’ and construction can break ground.
New property developers will need the following documents in their application:
- Power of attorney or a resolution that gives authorisation to the individual signing on behalf of the developer if the developer is a juristic person.
- The property’s original title deed.
- A company Certificate.
- ID Copy of the developer(s).
- Conveyancing certificate.
- Zoning certificate.
- Flood-line certificate.
- Traffic impact assessment.
- Geo-technical report that looks at the soil.
- Environmental Impact Assessment (EIA).
- Heritage Impact Assessment (HIE)
- Topographic survey that assesses the contours before construction.
- Engineering services assessment.
- A layout plan by the architect.
- Planning Report and motivation memorandum as to why the development should be considered by the municipality.
- A general plan by the land surveyor.
Work with your team of specialists to obtain all these documents and submit them to the corresponding authorities. Once you have completed this, the development can be approved and construction can start.
