Milestone Steps to Property Development in Kenya

As a potential property investor, knowledge of the development process will becomes a plus as you set down resources to begin the development process. Developers follow a series of steps from the beginning to completion. The process may vary from one development to another, but essentially experts have recommended the following steps in an effort to achieving the best outcome;

Feasibility Study & Investment Appraisal

The first step of a development process is to do a feasibility study analysis and an investment appraisal. You need a feasibility study to assess the practicality of investing in your real estate project. This will inform you on whether your proposed development is viable or not. The feasibility study will highlight any potential problems or risks that you may face as you develop your real estate project. You will be informed on the issues that might hinder your development project like suitability of the site, and government or statutory legislations on development.
Real Estate Investment Appraisal is used to develop an opinion of value for your property to ascertain its feasibility and manage investment risks. You will be able to assess which investment is likely to produce the highest return in case of a situation where there are competing investment options. Property investment analysis will therefore provide a methodology for making decisions about the prospects and future returns of an investment opportunity.

Pre-Purchase

The pre-purchase process involves looking for a piece of land that has potential for development. In other cases, this could as well involve an existing property that you want to refurbish. Finding the right development site with the right location is a very important aspect of the development process. This is because the site location and the zoning will determine the type and specification of structures that can be constructed on the site.
You need to have a team of consultants who can advise you on the project’s viability. These could include a project manager who coordinates the whole process. You should also make sure that you have your finances in place, or have a clear structure for financing the purchase.

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Pre-Construction

This stage involves Concept Design of the proposed project, detailed design of the same, Cost and Budget appraisal, and tendering to obtain quotes from builders, including obtaining financing for the construction phase of the project. During pre-construction stage, your team of hired professionals shall also be engaged in acquiring necessary design approvals from relevant statutory and local authority. This is also the stage at which approval for financial deficit for the development by the financing entity, or final arrangements made or rope in capital funding into the project in the case of private equity funded projects.

Construction

The construction stage is where the erection of proposed development takes place. This could last several months depending on the size of the project. Regular site visits should be done at this stage to ensure that quality is achieved to its level best. A close working relationship should be maintained with the Project Management team to ensure that the project is completed on time, quality specifications, and set cost budget.
In this phase, the developer spends maximum negative cash-flow in the whole property development process. Differences in timing of the works compared to the planned schedule can considerably affect the project cash flow timings which in turn impact positively or negatively on the financing costs of the development process.

Completion & Commission

Upon completion, your project is either leased or disposed as sales units. Depending on your investment strategy, once your project is completed, your property agents should work with you to market your project to potential buyers. However, if you are planning to hold your investment in order to gain rental income, your investment consultants should assist you in finding the right Property Managing agent and tenants to minimise on vacancy, and maximise occupancy rate and rental yield.