Challenges Faced in Real Estate Development

Introduction

The real estate development landscape is complex and ever changing. It is therefore important for developers to understand the unique challenges and opportunities in the real estate environment.

This article will highlight some of the challenges faced by real estate developers.

Understanding Real Estate Property Development Process

The real estate development process can be viewed in stages, from inception to completion.

1. It involves the inception of the development, this is where the developer will locate a suitable site and begin their initial plans on the development.

2. Once the developer has deemed the development to be feasible they will begin the planning approval process. In order to obtain planning approval, the developer will need to approach the local council with the planned development who will then approve the development.

3. Once they have obtained approval the construction can begin. This step is one of the most important steps as the end product will be the finished development.

4. Once the development has been completed the developer will begin leasing or selling the property/properties. The sale and leasing of properties can also be done in conjunction with the construction process.

Challenges Faced

Early Stage

One of the most prominent challenges facing developers today is the planning approval process. The process of obtaining planning approval can often be time consuming and costly. Developers are required to provide various plans and certificates in order to be granted approval.

Given that these documents are often drafted by professionals like architects, lawyers and engineers, and that planning occurs so early in the development process, planning can cost developers a significant amount of money. In addition to this, the procedures and regulations imposed on the planning process can contribute to a lengthy planning process that may take anywhere from a couple months to a couple years. It is therefore important to make cost and time allowances for planning approval.

It is also important to consider the impact of financing on the development process. Developers can access property development finance in a number of ways, from traditional development loans to flexible bridging loans. Sourcing the right financing can have an impact on the overall success of the development. With this in mind it is important for developers to consider which financing option is best for their development. For example, a bridging loan may be better for shorter, more time sensitive developments as they are quicker to obtain and have shorter terms.

On the other hand, a longer, larger project may require a specialist development facility or senior loan in order to reach maximum cost efficiency. With this in mind, a mortgage broker can offer an invaluable service to property developers. By leveraging on their industry knowledge and experience, mortgage brokers can ensure that their clients get the best facility for their specific development.

Construction Stage

During the construction stage there are a number of challenges that may arise. Given the complex nature of construction there are various ways in which the construction or a property can impact the overall cost/timeline of the project. Construction projects can be delayed for a number of reasons. For example, a bad storm can delay a project by halting work for a few days or weeks, this can have a significantly larger delay on the overall completion date of the project.

Furthermore, given the large number of professionals working on a project, poor communication can contribute to a delayed project. With this in mind it is important for developers to plan for potential delays in their project by allowing for contingencies in regards to cost and time.

Ways To Overcome These Challenges

While there are a number of challenges facing real estate developers today, there are various ways to mitigate these challenges. One such way is through the use of a mortgage broker.

Mortgage Broker

A mortgage broker can assist developers in ensuring they are sourcing the right finance for the needs of their project. This means developers can have peace of mind knowing they are not overpaying for their finance. Furthermore, mortgage brokers can leverage on their network of lenders to ensure that their clients are working with the lender(s) who are best suited to their project. Mortgage brokers are also able to assist by alleviating the pressure placed on the developer. There are a number of moving ways in which a development finance broker can assist by ensuring that the developer does not have to waste their time on a mortgage application.

Conclusion

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There are many challenges facing property developers, from planning approval to construction delays. Each challenge has a unique impact on the project timeline and cost. Developers should therefore consider using a mortgage broker to assist them with their mortgage application so their time and effort can be spent elsewhere.