Obstacles! Why can’t I get a property developer for my Land?
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Property Development
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5 years ago
Obstacles! Why can’t I get a property developer for my Land?
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The first question could actually be ‘should you collaborate with a property developer to build your property?’ We tackled that question earlier and you can check it out here
Let’s assume you decide that a joint venture agreement with a property developer is your best option. The next questions could be how do I find a property developer? What do property developers require to enter an agreement? How do I know the property developer can deliver? (Check out our due diligence checklist)
Property Developers love great Locations
In real estate, location is king! If your property is located in an area with high demand, getting a developer should be easier. Developers like to go where they are sure of making returns. Some of the popular locations that we get many requests for are Magodo, Gbagada, Ikeja GRA, Banana Island, Old Ikoyi, Lekki Phase 1 and Agungi.
Accessibility, good infrastructure, well established and developed neighbourhoods, high rents and property values all add to the mix of having a property in a great location. Not having a property in these areas does not mean you can’t find a developer.
How are people finding Property Developers now?
We found that most people get an agent to find a developer or they post their properties on some of the popular real estate websites like www.nigeriapropertycentre.com, or www.tolet.com.ng. Developers can also be found via word of mouth by asking other people who have used developers successfully.
Typically most agents will spread the information through their network. At times the information gets diluted and your offer is misrepresented.
The popular real estate websites are a great way to find developers, but because they are created with a focus on sales and rental of property you might not get the right visibility.
Our personal favourite, of course, is www.jvpulse.com, not just because we created it, but because it’s a specialised platform for property developers, landowners and joint ventures. It saves time and achieves the desired goal faster.
Proper Land Documentation is a must
Having proper and verifiable title documents is important. Property developers will shy away from properties without proper title. If you have used your property to secure a loan, this can also discourage a developer.
It does not totally rule you out for a joint venture, but it does make it a bit harder.
Do you know how to negotiate a joint venture deal?
Now that we have the basics, the next obstacle is the actual negotiations. If property owners and developers can’t agree on some terms of the joint venture agreement, a deal might not be possible.
Here are some of the common grey areas we encounter.
- Both parties disagree on the value of the land*** – We always recommend a valuation of the land by a trusted and experienced estate firm.
- Both parties cannot agree on the sharing formula or cash payouts**** – having a clear financial statement that shows the equity contribution of both parties helps to solve this problem
- The developer does not have a good portfolio of previous projects or can’t show proof of financial capacity****. Experience is critical to success, but strategic partnerships can also help to address the problem
- The landowner is not willing to submit title documents in trust for the duration of the JV or the developer cannot domicile funds for the construction of the property in a project account.
- The developer is unable or unwilling to provide a performance guarantee to the landlord
These are just a few of the sticky points. Finding solutions to these sticky points will require an experienced and skilful negotiator that can come up with a middle ground that’s acceptable to both parties.
We can negotiate/advice you on these details for free if you are a landowner who takes advantage of advertising your joint venture on our website, which is also free.
It’s critical to have thought through these potential obstacles before reaching out to enter into a joint venture. Having a clear direction ahead will save time and ensure you achieve your goals faster.