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Monday Feb 25, 2013

Property developer bemoans lack of municipal infrastructure

Many property developers face great difficulties because municipalities lack the infrastructure to service their projects, says property developer Bill Rawson.

"This trend is particularly evident in South Africa's fastgrowing cities, towns and even the country's villages," says Rawson.

"It can be extremely frustrating when in all good faith developers buy land already zoned for the type of project they favour, only to find later that they cannot go ahead until a new service installation has been more or less completed.

"The dead interest costs involved here have been known to put more than one developer out of business and, of course, in the end they also result in the developed units being far more expensive than initially intended."

Rawson says there is also a tendency by municipalities to charge fairly substantial fees for the upfront cost of providing services for new developments.

"This is usually calculated on the number o f units planned for the scheme - and there have been occasions when the services cost per unit have been higher than that of the land cost calculated on the same basis.

"In most cases, however, the developers are forced to pay for vacant land upfront, or to enter into joint venture agreements with the owners, but for the average investor vacant land is not a satisfactory investment channel.

"This is because the returns from the venture are realised far down the line.

"In the long term, certain speculators have done extremely well out of this type of development.

"However, for most people it is generally preferable to buy property from which immediate rental returns can be achieved," says Rawson.

Rawson Property Group Press Release

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