When you talk about property development business, loads of entrepreneurs will back off because they know that it is a business that involves huge startup capital. Beyond every reasonable doubt, one of the most profitable, creative and interesting aspects of the real estate industry in south africa is property development.
As a matter of fact, developers are major players when it comes to determining the prices of properties. Although this type of business venture can be risky, but in other to make it big in the industry as a property developer, you just have to take calculated risks.
Some factors that are major concerns in the property development business are cost increase as a result of inflation, currency devaluation and economic challenges. Unforeseen delays on the part of government agencies, litigation and also delays from contractors can lead to substantial cost increase especially if the project is heavily dependent on bank loans.
If perhaps during this period there is a change in the supply and demand dynamics of the property sector, the project can be affected negatively. Below is a sample property development company business plan template that will help you successfully write yours with little or no stress.
Property development industry is a many-sided business that covers all activities ranging from acquiring raw land to selling or renting or leasing of fully finished and furnished properties. Developers are responsible for turning ideas into real properties; i.e. they acquire land, they finance real estate deals, they engage in building projects and they sell, rent, lease and manage properties on behalf of their clients.
In 2016, the investment volume in South Africa’s real estate saw a 55.2 percent increase, in spite of economic challenges, weak currency and political uncertainty. The South African listed property industry has risen nearly 9 percent in the first nine months of the year, about double in equities achieved which was 4.82 percent. At 7%, South Africa’s real estate market continues to demonstrate maturity and ongoing resilience.
The South African property sector is valued at R5.8 trillion, according to the latest Property Sector Charter Council’s (PSCC) report. New research shows 75 percent of global real estate investment takes place in highly transparent markets with South Africa ranking 25th out of 109 markets.
Property Divisions in the Pretoria region enjoyed a 49 percent increase in turnover and a 42 percent increase in unit sales. Foreign buyers only make up around 5 percent of new homeowners in South Africa.
Just like all other investment vehicles, there are potential down sides that you need to look out for as a property developer. One of the major risks in property development is a sudden down turn in the economy. Property development could take a period of two to three years from conception to completion depending on the size of the project and the cash flow.
As a matter of fact, some projects can even take much longer than that. Because of the time involved in developing properties from start to finish, loads of unanticipated things could crop up.
The property development cum real estate industry is highly regulated in South Africa and anyone who aspires to start a property development company must apply and obtain a license before they can legally operate in the industry.
Lastly, as a property developer, it is very important to be creative, to be able to use your ideas to meet the rapidly changing needs of the society when it comes to properties.
Lucas Polokwane® Property Development Company is a South African based property development company. Our head office will be located in a centrally located office facility in the heart of Cape Town – Western Cape Province. We chose Western Cape because reports show that the Western Cape will continue to outperform all other areas of the country, remaining the top performing major metro housing market in SA. House price inflation in the region has risen by over 10.35 percent, with no indication of it slowing down.
Although our Head Office will be located in Cape Town, but we will open our branch offices in major cities in South Africa within our first five years of operation. Lucas Polokwane® Property Development Company will engage in property development projects for a wide range of clients. We will work towards becoming one of the largest property development companies in South Africa.
We are quite aware that property development requires huge a capital base, which is why we have perfect plans for steady flow of cash from private investors who are interested in working with us. We can confidently say that we have a robust financial standing and we are ready to take on any opportunity that comes our way in the real estate industry.
As part of our plans to make our customers our number one priority and to become one of the leading property development companies in South Africa, we have perfected plans to adopt international best practices. Lucas Polokwane® Property Development Company has perfected plans that will help us to become a specialist in turning slums into beautiful cities and turning dilapidated buildings into master pieces, and that hopefully will be our brand and signature.
Lucas Polokwane® Property Development Company will at all times demonstrate her commitment to sustainability, both individually and as a firm, by actively participating in our communities and integrating sustainable business practices wherever possible. We will ensure that we hold ourselves accountable to the highest standards by meeting our client’s needs precisely and completely.
Lucas Polokwane® Property Development Company is owned by Lucas Polokwane and his immediate family members. Lucas Polokwane has a Degree in Building Engineering from the University of Cape Town and he has successfully acquired over a decade of experience prior to starting his own company.
Other investors with the same investment ideology whose names cannot be mentioned here for obvious reasons are going to be part of the business especially as it relates to pooling cash together for property acquisition, renovation and beautification.
Lucas Polokwane® Property Development Company is going to offer varieties of services within the scope of the property development industry in South Africa. Our intention of starting our property development company is to favorably compete with leading players in the real estate industry both in Western Cape and in the whole of South Africa.
Our business offerings are listed below;
Our Business Structure
Our company’s structure is not entirely different from what is obtainable in the real estate industry. As a matter of fact, we have created a structure that will allow for easy growth for all our employees and also, we have created platforms that will enable us attract some of the best hands in the industry.
We are quite aware that the success of any business lies in the foundation on which the business is built on, this is why we have decided to build our property development company on the right business foundation. We will ensure that we only hire people that are qualified, honest, hardworking, customer centric and are ready to work to help us build a prosperous business that will benefit all our stakeholders.
As a matter of fact, profit-sharing arrangement will be made available to all our senior management staff and it will be based on their performance for a period of five years or more depending how fast we meet our set target.
Lucas Polokwane® Property Development Company is fully aware of the modus operandi in the property development line of business, hence adequate provision and competitive packages have been prepared for independent sales agents. Our marketing department will be responsible for managing this aspect of our business structure.
Below is the business structure we will build Lucas Polokwane® Property Development Company on;
Chief Executive Officer – CEO (President):
Project Manager
Company’s Lawyer/Secretary
Admin and HR Manager
Construction Engineers
Marketing and Sales Executive/Business Developer
Accountant
Front Desk/Customer’s Service Officer
The fact that property development is a very rewarding business in South Africa does not mean that there are no challenges in the industry. Starting a property development business in South Africa comes with its own fair share of challenges as you would have to abide by the law and also compete with entrepreneurs in the real estate business value chain.
In order to compete favorably in the property development industry, we have been able to hire the services of HR consultants to help us conduct critical SWOT analysis for us. Here is a summary of the result of the SWOT analysis that was conducted on behalf of Lucas Polokwane® Property Development Company.
Some of the strengths that we will be bringing to the table in the industry is our robust relations with property owners and properties investment moguls in the whole of South Africa; our access to funding and our team of experts who have cut their teeth in the property development line of business; our commission structure and relationship with freelance real estate agents in Cape Town – Western Cape and other province in South Africa will also count towards our advantage.
As a newbie in the property development line of business, we may have challenges competing with big time property developers in South Africa; that perhaps is part of our weakness.
The opportunities in the property development industry especially in Cape Town – Western Cape is massive considering the fact that reports show that the Western Cape will continue to outperform all other areas of the country, remaining the top performing major metro housing market in S.A. We are ready to take advantage of any opportunity that comes our way.
Some of the threats that we are likely going to face as a property development company operating in South Africa are unfavorable government policies, and global economic downturn; global economic downturn usually affects spending power and the real estate industry is known to encounter decline in sales and profits during this period. There is hardly anything we could do as regards these threats other than to be optimistic that things will continue to work for our good.
A notable trend in the property development industry in South Africa shows that the biggest group of home buyers are millennials; in fact, buyers who are 36 years old and younger continue to purchase homes at a higher rate than other age groups.
The market trend in the property development sector is that there are no fixed profit projections when engaging in a property development deal.
The profit you stand to gain depends on loads of factors amongst which are your attention to details, ability to turn a slum into an edifice and knowing exactly when to seal a property development deal. If you are able to get all the above stated factors right as a property development company, your gains will always be far more than your loss.
Another obvious trend that is common with property development companies in South Africa is that there is also an increased demand for luxury cluster homes in areas like Hyde Park, Atholl, and Morningside. In Gauteng, luxury homes that move away from the noise and congestion of traffic have become popular. High-end buyers are also opting for homes that are still opulent, yet offer more security and convenience.
This explains some of their big sales including the sale of a R33 million French style house in Constantia Upper Cape Town, and a R35 million property in Zimbali.
One thing is certain for every property development company; if they are hardworking, creative and proactive, they will always generate enough income to meet all their overhead and operational cost, keep their business going without struggle and make reasonable profits from all business deals that they are involved in.
As a property development company, our target market cuts across property owners of different class and people from all walks of life. We are coming into the property development industry with a business concept that will enable us work with people of different financial capabilities.
As a matter of fact, our target market is the whole of South Africa and we have put plans in place to recruit freelance agents to represent our business interest wherever they are located in South Africa. Below is a list of the people and organizations that we have specifically designed our services for;
The property development industry is a highly competitive industry. Clients will only hire your services if they know that you can help them remodel their homes to fit into the picture of the ideal home they have in mind.
We are quite aware that to be highly competitive in the property development industry means that you should be able to deliver consistent quality property development jobs and you should be able to meet the expectations of your clients at all times.
Lucas Polokwane® Property Development Company might be a new property development company, but the owner of the business is a guru in the industry and has what it takes to grow a business from scratch to become a top brand within the shortest time possible.
Aside from our robust experience and expertise of our team, we have a very strong online presence that will enable us attract clients from all across South Africa.
Lastly, our employees will be well taken care of, and their welfare package will be among the best within our category in the industry. It will enable them to be more than willing to build the business with us and help deliver our set goals and achieve all our business objectives. We will also engage freelance marketing agents on a commission level to help us market our services.
Lucas Polokwane® Property Development Company is established with the aim of maximizing profits in the property development industry. Although we are a property development company, but part of our work force are also licensed real estate agents hence we intend generating additional income from diverse means in the real estate agency.
We have successfully built a vibrant real estate network that covers the whole of South Africa so as to help us build a profitable business. Below are the sources we intend exploring to generate income for Lucas Polokwane® Property Development Company;
It is a known fact that as long as there are property owners in South Africa, there will always be need to for them to remodel their properties from time to time to conform with the trends in the neighborhood or city.
We are well positioned to take on the challenges that are synonymous to property development businesses in South Africa, and we are quite optimistic that we will meet out set target of generating enough profits from the first months of operation and grow the business beyond Cape Town to other Provinces in South Africa within record time.
We have been able to critically examine the property development line of business, we have analyzed our chances in the industry and we have been able to come up with the following sales forecast. The sales projections are based on information gathered on the field and some assumptions peculiar to similar startups in South Africa.
N.B: This projection was done based on what is obtainable in the industry and with the assumption that there won’t be any major economic meltdown and any major competitor offering the same services we do within the locations where we have a strong business presence. Please note that the above projection might be lower and at the same time it might be higher since some factors are beyond our control.
We are mindful of the fact that there are competitions in the property development market in South Africa, hence we have been able to hire some of the best business developers to handle our sales and marketing.
Our sales and marketing team will be recruited based on their vast experience in the industry and they will be trained on a regular basis so as to be equipped to meet their targets and the overall goal of the organization. The training is not restricted to only our full – time employees but would also extend to our freelance brokers.
Our goal is to become one of the leading property development companies in South Africa which is why we have mapped out strategies that will help us take advantage of the available market and grow to become a major force in the industry.
Lucas Polokwane® Property Development Company is set to make use of the following marketing and sales strategies;
We have been able to work with our consultants to help us map out publicity and advertising strategies that will help us walk our way into the heart of our target market. We are set to take the property development industry by storm which is why we have made provisions for effective publicity and advertisement of our company.
Below are the platforms we intend to leverage on to promote and advertise our property development business;
Part of our business strategy is to ensure that we work within the budget of our potential clients to help them develop or remodel their properties to meet their expectations. It is the practice in most parts of the world for properties to be valued by professionals based on the area the facility is located, the type of facility and other factors.
Since we are not directly in control of the pricing system in the real estate industry, we can only abide by what is obtainable when it comes to fixing a price for a property development contract. But one thing is certain, we will ensure that we deliver excellent jobs when have we are contracted to do so.
Lastly, we will ensure that we keep our fees below the average market rate for all of our clients by keeping our overhead low and by collecting payment in advance. In addition, we will also offer special discounted rates to our clients from time to time especially when they recommend clients to us.
At Lucas Polokwane® Property Development Company, our payment policy is all inclusive because we are quite aware that different people prefer different payment options as it suits them but at the same time, we will not accept payment by cash because of the volume of cash that will be involved in most of our transactions. Real estate deals usually involve huge amounts of money.
Here are the payment options that Lucas Polokwane® Property Development Company will make available to her clients;
In view of the above, we have chosen banking platforms that will help us achieve our aims without any hitches and we will also pay our freelance agents (real estate brokers) with same platforms. Our bank account numbers will be made available on our website and promotional materials to clients who may want to deposit cash or make online transfer for our services.
Any agent who intend paying with cash will be directed to deposit the money into our corporate account and then present their payment tellers to us.
From our market survey and feasibility studies, we have been able to come up with a detailed budget on achieving our aim of establishing a standard and highly competitive property development company in Cape Town – South Africa and here are the key areas where we will spend our startup capital;
Going by our research and feasibility studies, we will need about R2,200,000 (2.2 Million Rand) to set up a property development company in Cape Town – Western Cape.
In the property development business, the larger your capital base, the greater the opportunities you can access and the more profits you will make. Despite the fact that we have a working capital of 3 Million Rand, we have been able to create a business relationship with our banks so as to easily access loans when the need arises.
Generating Startup Capital for Lucas Polokwane® Property Development Company
Lucas Polokwane® Property Development Company is a business that will be owned and managed by Lucas Polokwane, his immediate family members and other business partners. They decided to restrict the sourcing of the startup capital for the business to just three major sources.
N.B: We have been able to generate about R200,000 (Personal savings R150,000 and soft loan from family members R50,000) and we are at the final stages of obtaining a loan facility of 2 million Rand from the bank. All the papers and documents have been duly signed and submitted, the loan has been approved and any moment from now our account will be credited.
The future of a business lies in the number of loyal customers they have, the capacity and competence of their employees, their investment strategy and the business structure. If all these factors are missing from a business, then it won’t be too long before the business closes shop.
One of our major goals of starting Lucas Polokwane® Property Development Company is to build a business that will survive off its own cash flow without the need for injecting finance from external sources once the business is officially running.
We know that one of the ways of gaining approval and winning customers over is to offer our developed properties and services a little bit cheaper than what is obtainable in the market and we are prepared to survive on lower profit margin for a while.
Lucas Polokwane® Property Development Company will make sure that the right foundation, structures and processes are put in place to ensure that our staff welfare are well taken of. Our company’s corporate culture is designed to drive our business to greater heights and training and re – training of our workforce is at the top burner.
We know that if that is put in place, we will be able to successfully hire and retain the best hands we can get in the industry; they will be more committed to help us build the business of our dreams.
Check List/Milestone
