Three Most Important Things to look in Development Finance: Construction Project
Three Most Important Things to look in Development Finance, when you are working on your construction project
Developing Real Estate is a very profitable business for people who understand the Real Estate Market and have experience and skill sets to do that. Sometimes even some experienced professional also faces challenges in the business. We identified 3 most important things which developers shall look at before committing any project
1.Location: How to select the site?
It is the most cliché word in Real Estate, but it is the most important aspect of any development project. The location of development matters a lot to investors and first home buyers alike. In our experience a good location shall have following characteristics
- Connectivity to Road and Rail Network: The closer proximity will attract working population who would like to commute to their offices using public transport. It saves time and money for working professionals.
- School Zone (Primary, Secondary and College Zone): Each family would like to send their kids to schools which are good and closer to home. Most of the state aided school have well defined catchment areas. If a house is in good school zone, it will attract families who want to send their children in that school. It will also increase the rental value of property.
- Closeness to Childcare centres: Young Families have always got a big draw for homes closer to childcare centres
- Close to supermarket and shopping centers: Supermarket and Shopping centers are again a big draw for families as people like to live closer to amenities.
- Good Neighborhood: A big attraction for families. People desire a quiet and green neighborhood with parks and clubs nearby. Closeness to golf course is also good to have.
2.Fixed Price Contract and Reputed Builders: How to finalize the builder for your construction project ?
A lot of Developers realized the benefit of fixed price contract in last 2 years when the prices of commodities skyrocketed. Some developers who didn’t have fixed price contracts saw their costs escalated resulting in lesser profits and lot of headaches and tough negotiations. We recommend fixed price contracts with builders as builders know the quantity of goods at inception and they can book in advance with the suppliers. Some of the commodities/ goods like labor cost etc. are still variable but most of the good builders have got good work force and they can still absorb those for short period of time.
3.Project Planning and Execution: How to assign timeframe to the project?
Most of the successful developers do a meticulous planning. It starts with purchase of property. In our experience, developers buy a property with long settlement dates (mostly like 4-8 months). They pay 5-10 pct of the property value as deposit. During this time, they work on getting a resource consent and building consent. At the settlement time, they already have consents in place. They can take a construction loan from the day of settlement if they have consents in place. This reduces their time for construction and their funds are not tied up in the project. This also ensures that they require loan for a shorter time frame resulting in significant time savings.