Developing property is not for the weak. It takes a lot of time, money, manual labour and a load of compliance requirements. Property development is a popular business venture in South Africa because of the vast amount of undeveloped land and the growing population’s need for housing.
Property development, a.k.a real estate development, is the process of taking a building or land to develop and raise its monetary value. Property development as a business has a number of features including building a new property, renovating an existing one or redesinging properties to serve a new purpose.
In this article, we answer some of the most pressing frequently asked questions around property development.
What is Rezoning a Property?
Rezoning is the process of changing the zoning classification of your property. By rezoning your property it enables you to have different land use rights and activities. This basically changes the rules of what can be built on the property.
What Does it Mean to Buy Property Off-plan?
Buying off-plan refers to the purchasing of a property that has not yet been built or is currently under construction. By purchasing a property off-plan it allows you to buy it at a lower cost because developers offer special discounts to early investors.
What are the Different Types of Property I Can Invest In?
There are many types of properties you can invest in. In South Africa, the most common types of properties include residential, commercial and industrial properties.
What are the Different Types of Property Ownership in South Africa?
There are various types of property ownership in South Africa. Some of the most popular include:
Full-title Ownership: This is when you own a property outright and have complete control over the land and any structures on it.
Sectional Ownership: This type of ownership is popular with people looking to purchase an apartment or townhouse. In sectional ownership, you would own a unit in a complex and share common property such as a swimming pool, clubhouse and other common areas.
Long-term Rental Ownership: Long-term rental is when you rent a residential or commercial property. While renting the property you have the right to occupy and use it as if you own it.
What are the Property Taxes in South Africa?
There are a number of taxes in South Africa associated with property ownership. These include municipal rates, property transfer duties and capital gains tax.
It’s always advisable to get a professional consultant to help you with the legal requirements that come with owning property.
What are the Financing Options for Property Investment in South Africa?
There are many ways to get the capital you need for property investment. Some examples include:
Department of Human Settlement Housing Projects
The Department of Human Settlement has various affordable housing programmes. These programmes are:
- First home finance programme
- Enhanced people’s housing process programme
- Social housing programme
Additionally, you can apply to banks for a loan. Most South African banks have offerings tailored for customers looking to invest in property.
Do You Have to Pay Transfer Fees for a New Development in South Africa?
In South Africa, you have to pay transfer duty on any existing property priced over R1 million. The transfer duty can increase with the cost of the house. Transfer duties don’t apply to the sale of newly built property developments.
What is Escrow?
Escrow is an arrangement where a third party (usually a bank), safeguards the funds of the buyer until all the terms of the agreement between the buyer and seller have been met and finalised.
What is a Sellers’ Market?
A sellers’ market occurs when there are few properties listed for sale but a lot of buyers are ready to purchase. When the supply is low, but demand is high, buyers usually compete with each other for a limited number of properties.
Should You Use an Estate Agent to Sell Your Property?
Yes, estate agents can be helpful in advising you on the market, handling viewings and setting up the sale of your property. Additionally, using an estate agent or estate agency will ensure that the sale of your property is handled by someone with experience and knowledge in the process.
When picking an estate agent, ensure they come from a trustworthy agency, and they have their Fidelity Fund Certificate (FFC) from the Property Practitioners Regulatory Authority.
These frequently asked questions and answers can help guide you on your property development journey.
For more information on investing in a property business, visit SME South Africa.
