If you are looking to buy a home for either investment or personal use, then knowing who the developer of the project is would be the best way to safeguard your money. The developer is the bearer of the vision and is the final decision maker in any project. A developer could be a company, an individual, an organization or even the government. Whether a project gets finished or not rests majorly with the project’s developer. When you think about it, the success or failure of your investment squarely lies with the developer.
With this in mind, as an investor, you definitely want to have a responsible, experienced & well intentioned person steering your investment. I have met many Kenyans who have fallen into the hands of unscrupulous developers and their tears reflect a common trend among us, most investors rarely question the developer thoroughly. What is worse is that despite everyone else in the industry being regulated, developers don’t seem to have anyone regulate them. Yet they are the most crucial party in any project. In this blog, I will be giving you the characteristics of what to look out for in a good developer so that you can protect your hard earned money.
What does a developer do?
Before we discuss what you need to look for in a good developer, let us first understand their responsibilities. Knowing what a developer is expected to do in a project will assist you in holding them to account.
1. Vision Bearer
The developer bears the vision of the project. Real estate is becoming increasingly competitive and the era of doing copy and paste projects is long gone. Any serious developer is led by a vision; it is the WHY of the project. Whether its building affordable housing for students, doing a mixed-use project to serve urban families or an exclusive gated community for the ultra-wealthy.
2. Mobilizes Capital
Mobilizing resources for the project is the most important responsibility held by a developer. It could either make or break the project. Once they have set a vision, the developer moves to assemble the capital stack for the development. Capital comes in two major forms; debt or equity. Debt includes commercial loans, bonds, bridge loans etc. Equity on the other hand includes pre-sales, REITs and onboarding equity partners in the project. The goal is to come up with a stack that will enable the project to get delivered in record time.
3. Assembles the Project team
A project team is composed of all the professionals needed from planning to handover of the project. It includes the architect, engineer, quantity surveyor, project manager and contractor. These people are in charge of every step of the project and are crucial to the quality and delivery timelines of the development.
4. Makes the final decision
Each and every decision in the project must go through the developer. Whether it’s a change of layout or finishes, they bear the final say on these decisions. Even technical decisions by the engineer or architect must be approved by the developer as he is the “owner” of the project. The success of the project is dependent on the quality of decisions made by the developer.
5. Hands over the project
Upon successful completion, the developer is tasked with handing over the project to the occupants. It is often the best part of the project as investors are presented with their units. The responsibility of the developer could end here but many are preferring to continue with managing the development.
Qualities of a good developer
1. Good Track Record
One of the signs of a good developer is that they have a noteworthy track record in terms of project delivery. At the very minimum, your developer should complete the units they promised to after signing the sales agreement. As a buyer, always do your research about the developer’s past project and note the following;
- How many projects have they delivered ____________?
- What was the time of delivery ____________?
- Did they keep within budget ____________?
- How do past projects compare with the one you are buying into ___________?
2. Long experience
Experience is another crucial factor because it alludes to how long they have been in business. While it is not the only litmus test, a developer who has been in business for a long time is definitely doing something right to remain in business. It sorts of indicates that they know what they are doing but you must also be careful to not let this fool you. I am not saying that new developers don’t deliver, but their risk of failing in a project is much higher than for experienced ones.
Bad developers in Kenya are known to change the names of their companies every so often to mask their criminality. Hence seeing a developer who has been in the game for 10+ years gives you some form of confidence. Below are the questions you need to ask regarding experience;
- How many years have they been in operation____________?
- Have they been actively doing projects throughout the entire period ______________?
- Are there any name changes or rebranding _____________? (if yes, ask why)
- Do you see any gaps in their project journey __________? (if they did their last project 5 years ago, ask why. Often times it could be a sign that they did not perform well on it or did not manage it professionally)
3. Partnerships
With capital becoming scarce, most developers are opting to partner in their projects. Sometimes, it is also a strategy used by experienced developers to mentor newer developers in the game. For instance, seeing a company with 30 years-experience partner with a new company. Regardless of the reason, a development with multiple developers has got higher chances of delivery but also presents a risk of disputes. In the case of partnerships, always ask yourself the following questions;
- Have these developers partnered on any other project before _____________?
- What is the individual performance in terms of delivery ______________?
- What form of experience does each developer bring to the project ____________? (A mixed use development for instance might bring together residential & commercial developers. Each coming with their own strengths in the projects)
4. Works with registered professionals
A good developer MUST work with registered professionals. In fact, if you notice the project is using unregistered developers, don’t bother buying into it. The quality of what you get as the final product depends on how good the professionals are. If a developer hires a quack engineer and the building ends up collapsing, then your money could go down the drain. Most professionals are registered under a regulatory body, so you can just check with them if the said professional is a member. Questions to ask in terms of the professionals;
- Are they registered under professional bodies ________________?
- How many years of experience do they have _______________?
- What are some projects they have done before ___________? (e.g., has the architect done a similar project before)
Reputable professionals are a good way to market the project for developers. So if your developer is using a good firm, they will be the first to let you know. Moreover, good professionals don’t want to be associated with a dubious project and they often do their due-diligence on the developer before they agree to work on a project together.
5. Visit previous developments
I have said this time and again, NEVER be afraid to ask hard questions if it involves your money. If you are committing KES 10 million on a project, fuel your vehicle and go around the developer’s previous projects asking current owners about the experience. If they have done 7 projects, go to at least 5 of them and severely interrogate them. Some of the questions you should ask include;
- How long did the project delivery take _______________? (If you notice a trend in delayed timelines, don’t expect anything different from the developer in the new project)
- Were there any delays ______________?
- Did you pay any extra charges apart from the agreed sale price ____________?
- What is the current service charge in the project ____________?
- How well is the development holding up in terms of quality_____________? (Constant maintenance issues might be a sign of a developer taking shortcuts)
- How much have unit prices appreciated since they bought ____________?
At the end of it all you should have a good idea of how the developer relates to investors. If they were unreasonable and got into disagreements in most of their developments, then you are in for the same treatment. If they mismanaged money in 5 out of 7 projects, chances are they will do the same to yours.
6. Award Winning developer
This is an added mark of a good developer. If they have received awards marking their excellence in the industry, then this serves as a testament of their work. Most of the reputable developers I know of have won multiple awards. An award often shows that a neutral party did their background check on the developer and so them as qualified to receive it.
7. How well do their projects gain in value?
A good project in my books is one that is delivered within the agreed timeframe, on budget and appreciates in value overtime. Many people hold a big chunk of their net worth in property, so knowing that the value of your house will go up is always a good thing. The role of a developer is also to identify fast growing opportunities and capitalize on them. If the units in their previous projects are going for way less than they were bought for, then they have failed at this. You want to buy into a project whose future market value in the secondary market will go up.
The real estate industry is a well-knitted space and developers who do terrible projects are often known and people will shy away from buying into their projects. So if you end up buying into such a project, then chances of you selling it on the secondary market are low.
8. Member of an organization (KPDA)
If the developer is a member of the Kenya Property Developers Association, then it is a sign that they value some form of oversight and capacity building. As I said earlier, developers are not formally regulated under any act, however, they decided to self-regulate under KPDA. The association offers trainings and some checks to its members who are developers. If your developer is a member, it is a sign that they value being under an authority and are less likely to be cons. Such organizations only attract serious people and they act as a filter to weed out jokers.
