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Main Challenges Faced by Property Developers

The world of property development is both exciting and lucrative when you get it right. One of the big drawbacks, however, is the amount of risk one must tolerate and endure if they want to make a success of the business. Risk isn’t the only big challenge of course, as you’ll see further below. Here are the main challenges that all property developers face in their work, pretty much wherever they are: 

1. Financing

The first port of call for many developers, of course, is the bank, but banks are not always willing or able to put up the financing needed to complete a project. Therefore, developers will tell you that they are always exploring non-bank funding options for your development project. This invariably means venture capitalists, equity firms and other investment institutions, as well as private individuals. 

2. Government Bureaucracy

In most cities, developing any kind of land with a brand-new property, or renovation of an existing or historic building or complex, takes time and patience as you navigate your way through the sea of red tape and regulation. Even in supposedly business- and development-friendly cities around the world, and here in Australia, developers are up against it. 

They have to ensure they’re developing for the right zoning requirements, that you meet all the necessary safety requirements, that all the materials are approved, that you have permits and all permissions you need to carry out the construction or renovation, that you have a traffic management plan and permit in place…the list goes on. Most regulations are there for good reason, but they make the process very difficult, and frequently more costly. 

3. Local Opposition

Believe it or not, when you’re trying to renovate an old building, or develop a piece of local land with new affordable or luxury housing, or something else, there is more than likely going to be at least some orchestrated opposition from the locals. For instance, the land you’ve acquired or trying to acquire may have been earmarked for a public park that people want, or it used to be a park or playground that you’re building on. 

Another thing people fear is “gentrification” where locals come out in force to oppose the construction of new and high-end housing in affordable or poor neighbourhoods because they’re afraid they’ll be priced out of the market in their own homes. 

4. Environmental Concerns

Another big source of opposition from both locals and government is connected to environmental concerns. Some of those might be genuine such as the construction of an office block casting a shadow over a school playground. There may also be concern about how development projects affect local flora and fauna. Governments typically require an environmental impact study before such plans can go ahead. 

5. Sticking to Budgets and Schedules

Once you’re past all of the bureaucratic and local hurdles, you then have to contend with an uncertain and fluctuating budget. You might have secured all the funding you needed early on, but one of the bureaucratic imbroglios you got into ended up delaying construction and adding to costs. Prices of raw materials can also go up because of international wars, trade embargos, supply chain problems and issues like the recent global pandemic. 

As a developer, sticking to a budget or coming in under budget on a project is a massive challenge. It serves as a huge point of credit and kudos to companies that can manage it regularly, and serves as a testament to their acumen, their market nouse, and their ability to get past obstacles effectively.

Business Daily Media