Experience is key
The last four challenging years experienced by the SA residential property development sector have revealed clearly the big differences between the experienced developers and those who are still relatively new to the game.
This comment was made by Shiraaz Hassan, commercial director of Asrin Property Developers, now in its 16th year of operating.
"It has been said," said Hassan, "that when the foundations for a new scheme have begun, over one-third of the work it entails has already been done. What this means is that the investigations, planning and the essential liaison processes with government parastatals, municipal authorities and interested and affected parties have been completed. It is a lack of thoroughness in these matters that has caused so many delays and resulted in so many of our colleagues' projects failing to be launched, even though they appeared to have potential."
The initial due diligence process, said Hassan, is especially important to the success of the entire scheme.
Experienced developers, he says, will spend considerable time and effort identifying the sites which genuinely offer multi-unit opportunities. Asrin, he said, carry out a thorough due diligence investigation and a market survey prior to any land acquisition.
"Once a potential site has been found we take trouble to ensure that it is not subject to restrictions, servitudes or conditions (such as a land claim) which might limit its effectiveness by conflicting with the development plan."
A market analysis, said Hassan, will help the developer to clarify where his target market lies, what the market can afford and what it will probably expect from the delivered product.
If the scheme does look feasible, he said, the appointed professional team will then play a vital role in advertising the developer's intentions and inviting comment or objections from neighbours or other affected parties, including the local or provincial authorities.
Engaging with such parties, said Hassan, is "absolutely essential" prior to the approval of the land use application.
"We all know," he said, "that it can be very difficult to please all involved – and it has to be accepted that in SA one often encounters a "NIMB" (not in my backyard) stance which resents any form of development in its area, especially if, as is often now the case in Cape Town, it involves a densification of a low density area.
"I&APs (interested and effected parties) have a tendency to raise ridiculous objections – and such objections can delay schemes for years, in the process making them less viable, or canvassing for the land owner to shelve the project. However, with the enactment of the new Spatial Planning Land Use Bill this year (in April), we anticipate speedy resolutions to the tedious adjudication processes involved. This Act will empower authorities and municipalities to determine township schemes and approve land use applications without the involvement of provincial government."
A project steering committee is formed by the developer to drive the rezoning process with his consultants. Here again, he said, experience is essential – inexperienced consultants can so easily cost the developer extra cash. Asrin, said Hassan, will make a point of liaising first with their preferred architect, urban and town planners and environmental consultants. It is usually the town planner and the environmental control officer who guides the architect and the developer to ensure that the design conforms to the scheme's zoning parameters and the developer's vision and plan.
Less experienced developers, he added, are often "hit" by poor project schedules and approvals, which impact on cash flows. The scheme is basically sound, but they have not really considered all rezoning conditions and aligning their cash flows with these. Here again, he said, experienced developers know in advance what they have to achieve to meet prior to exposing themselves financially.
Asrin, said Hassan, has a rollout programme for the next 24 to 36 months and in the year ahead is likely to deliver anything from 330 to 500 units – but, he says, it has to be recognised that the SA economy is feeling the effect of the global slowdown and its poor ±2,8% growth rate. We believe markets will adjust themselves and demand for the oversupplied property will increase within the next 12 – 18 months.
"Survival in the development world is important for the economy – and for job creation – but it is a real challenge and it will be only those firms capable of doing the thorough pre-project research and planning that I have outlined here which will come through."