The processes involved in Real Estate Development in Nigeria:
Investing in real estate presents a highly profitable venture within a country such as Nigeria, which is characterized by its expanding economy and rising populace.
While it has been discovered that a large number of people in Nigeria own properties that are suitable for development, the lack of funds and knowledge has stopped them from making it happen – thus, escalating the demand for real estate developers, often referred to as property developers. These individuals are tasked with a host of responsibilities, ranging from offering detailed project blueprints to handling the entire construction project.
In this blog post, we will be discussing what real estate development is about, the duties of a real estate developer, how much a real estate developer earns, and the entire process of real estate development.
What is Real Estate Development?
Real estate development, also known as property development, encompasses all of the activities that are involved in developing buildings or land into a higher use value. The development process can be an exciting as well as daunting task owing to the risks involved, but with the right knowledge, skills, and adequate planning, it can be properly managed.
As previously mentioned, individuals or firms that specialize in the field of real estate development are property developers, who work on converting ideas from paper to real property. When real estate is built or renovated, property developers often take on the greatest risk and get the biggest returns. Generally, developers buy a piece of land, decide how to market it, create a building plan and design, get the appropriate funding, build the structures, and manage or sell them off.
At other times, they only undertake a portion of the process and then hand over the plans and permits to the builders to continue.
How Much do Real Estate Developers Make in Nigeria?
Determining the exact wage of a real estate developer can be challenging due to the absence of a fixed income structure. Succinctly put, the developer’s profit usually depends on factors such as project size, location, the risk involved, market conditions, and level of expertise.
Typically, a real estate developer earns a percentage of the profit made from a project. Although the percentage is often between 20% to 30%, it can vary a lot, sometimes being more or less than that.
Due to that, the developer must take into account potential risks and the various fees and taxes as they greatly impact the profitability of the project.
Processes Involved in Real Estate Development
The following are the processes or stages involved in real estate development from start to finish:
1. Market Analysis and Feasibility Study
The first stage of real estate development involves conducting a thorough market analysis and feasibility study to understand the current market trends and identify potential investment opportunities. At this stage, the developer analyzes the demographics and economic trends, and decides on a specific property type – residential, commercial, mixed-use – and how it aligns with the market demand.
The developer also conducts a feasibility study to evaluate the risks involved and the financial viability of the project, considering factors such as land cost, construction expenses, and potential return on investment (ROI).
2. Land Acquisition and Due Diligence
After the desired land is confirmed to be a feasible project, the next step is to purchase the land by negotiating with the landowners. The due diligence involves legal assessments, environmental studies, and site inspections to identify potential challenges and ensure compliance with regulations.
The developers must then obtain necessary permits and approvals for property development from relevant authorities. There are two distinct permits; land use permits and building permits. Obtaining these permits regulates the land use and the physical characteristics of the building. It is worth noting here that this stage can take a great deal of time if the proposed plan for the property does not meet certain requirements and safety standards.
3. Design phase
The design stage entails hiring architects, urban planners, engineers, and other professionals needed to create a detailed plan for the project. It is at this level, that the aesthetics, functionality, sustainability, and regulatory requirements get decided and worked on as they define the identity of the project.
The financing of a project is a very crucial phase of property development. The developer can explore various funding options, including from the sponsor, partnerships, investors, loans from financial institutions, and crowdfunding. A solid financial framework guarantees that the project will process as planned during construction.
Right after financing is construction, which is the time to swing into full action developing concepts from paper to reality. This phase involves the actual construction of the property by skilled builders, contractors, and laborers, who adhere to architectural plans and quality standards.
Given that this stage is the most expensive, it is essential to avoid costly errors and substandard work, which can cause the property to fail without warning and result in additional expenses. To control costs, adherence to timelines, and unexpected construction challenges, an effective project manager has to be put in place.
6. Marketing and Pre-Sales
During the construction phase, the developer can start making plans to market the project to attract potential buyers or tenants. This may mean creating promotional materials, setting up showrooms, or even organizing property tours. Pre-sales is a common strategy to generate revenue early in the process, which can be reinvested into the project.
7. Project Completion and Handover
Not only is this the end of the construction stage, it is also where safety inspections are carried out on the finished project and necessary adjustments are implemented to ensure it meets the highest standards. Additionally, legal documentation, including property titles and deeds, are prepared for the new owners or tenants, allowing for the commencement of the final stage of development.
Being the last stage of the entire process, the developer may decide to either put up the property for sale or take on the role of a property manager. By selling, you can make quick money while as a property manager, it would take some time before the money put into the project is realized. As a property manager, you handle the maintenance, collect rents, deal with tenants, and preserve the long-term worth of the property.
Nigerian real estate development is a challenging but worthwhile enterprise. Each stage, from conception to completion, necessitates careful planning, adherence to the law, and efficient management.