If there is money in real estate, let’s all become developers!
There’s a notion that has existed in Ghana for a long time now that real estate is a business that is open to everyone. Buy a piece of land, hire a mason, break ground and, voila, you are your very own real estate developer! All you need is a simple website with a few renderings and you are “into properties,” as they say.
While this may be viable for individual houses (assuming the owner, builder or buyer is conscious of the potential shortcomings of the final product), it is considerably less viable in multi-unit developments where owners effectively share a single structure with fractional ownership. A construction mistake in the floor above can affect you below and it is not always clear who is responsible. Must the builder fix it? Is your neighbor on the hook? While it’s your ceiling, it’s their floor. You can imagine the complications.
In one sense, being a developer means being a coordinator. It is the developer that hires the architect, selects each of the many consultants, like the structural consultant, the electrical engineer, the plumbing engineer, the mechanical consultant, and so on. That covers just the design. The developer then hires the contractor to execute the development, a quantity surveyor to run checks, and sometimes a project management consultant to oversee the contractor’s work.
Even if you have the experience and organizational skills to coordinate the many participants, how can you judge a plumbing consultant’s design if you aren’t experienced in plumbing design too? How can you determine whether the contractor is cutting corners on cement content (a key driver of civil structure costs) if you aren’t a civil engineer with years of on-site construction experience?
True real estate developers are multi-discipline engineering experts who rely on their own knowledge to assess the design recommendations of those they hire and their own experience to ensure proper execution and on-time delivery.
From land and legals to building design, marketing & sales to construction execution, financing to international procurement – real estate development is no easy business. And considering that your profits are locked away in the final few apartments left to sell at the end, it is a business where gratification is delayed.
As Ghana progresses, we will witness the gradual decline of the mom and pop developer. Buyers are becoming increasingly aware that not all developers are the same and they are already starting to demand more for their money. While the number of competitors in the market will drop, competition is not going to go down. It will instead concentrate behind a few brands that have managed to demonstrate long term value for money.
So the next time you hear someone get excited about a big opportunity in real estate, a chance to get in and out quick and make some serious cash, wisely exercise a healthy dose of skepticism. Building spaces where people can live, work and play is a rewarding profession, but you need to have the requisite experience for it to work out. The days of cowboy developers are most certainly numbered – so avoid the hat and boots.
Scot Murray is the Managing Director of Denya Developers. He and Ernest Hanson, the Managing Director of Beaufort Properties, will be writing a bi-weekly column on the property market in Accra. You can contact them at +233 268 315 111 or email@example.com