Being part of the Egyptian market in the realestate, project management and construction fields, Al Wafrah has the knowledge and experience in the relevant market and always ready to provide our Clients with the right advice/choice about the type of project that provides the optimum profit with the most economical solutions. The same will go through the following process:
Property Development Feasibility Study
Regardless of whether this is your first property development project or your hundredth, the key to success is careful planning. Planning should be though a Business Plan which should involve the following steps:
- Legal requirements
- Pricing and sales forecasts
- Advertising campaigns
- Reduce risks
- Realizing the best possible profit that can be extract from a development site.
- Forecast the investment required and manage timelines.
To Forecast the investment, Al Wafrah will considers the following:
1- Land Purchase & Acquisition Costs
This includes all costs associated with acquiring the development property/site. For instance, Land value, stamp duty, legals (for example lawyers fees/conveyancing fees), rates and tax adjustments.
2- Finance Costs
Can come in two parts, for example, you may want to settle for the development site first and you, later on, you may decide to develop the site. In this scenario, you can get a retail loan first to settle for the land. Once you are ready with your development approval or planning permit, you can then get a construction loan.
Other fees that become part of finance costs include application fees (usually 1% of the loan amount (different banks charge different application fees and they can be negotiated), establishment fees, bank valuations, and legals. Some brokers may charge a raising fee for arranging the loan. All ongoing interest charges starting from the first bank drawdown are also part of finance costs
3- Professional Fees
These fees must include all fees charged by consultants and professionals. Not all consultants and professionals are used on every project. Professional fees vary depending upon the size of the project.
Some of the professionals required for property development are architects, building designer, civil engineer, Hydraulics Engineer, Structural engineer.
Councils charge for a lot of things. To start with there are two main application fees for residential property development – Development Approval or planning submission fees and building permit fees.
Depending upon what you are developing there could be fees for land subdivision, strata title, and rezoning. Councils also charge a council contribution fee also known as development contribution. These fees basically offset the extra load or new load on council infrastructure.
4- Utility Connection Fees
There is a fee involved when connecting utilities to a development site including water, electricity, drainage, stormwater, telecommunication, and gas
5- Construction Costs
Are calculated on the basis of the design or the size of the property that you are developing.
It is important that these figures are REAL when putting together a property development feasibility study, as they can also kill a deal if your figures are off or you can get caught out if you have the wrong fees.
6- Marketing Or Selling Costs
7- GST – Goods And Services Tax
When you do the accounting for a property development project, you usually file BAS (Business Activity Statement) monthly. This way you can claim your input tax credits monthly and it keeps your cash flow healthy. However, you have to pay the GST on the sales of the developed property or townhouses at the end of the project.
Like all developments, there are always cost overruns or challenges that are faced by developers. This is a percentage of construction costs that a developer allows for, usually ranging between 5-10%. This percentage is to cover costs that you don’t know about.
A classic example could be a delay in obtaining a building permit, which increases holding costs or a tribunal hearing required to deal with objections.
9- Income & Profit
After your development project is complete and your investment properties available for sale or rent, your profit/income is dependent upon your strategy to sell or hold them. These decisions are taken even before you get in the project, however, there's no hard and fast rule, should your financial position change by the time your developed product comes to market.