Long before the keys are handed over to an occupant, developments are documented and need to follow correct processes. Less than 50% of a project’s duration is the visible construction period on site as the majority of time is spent in planning, securing approvals, documentation and financing.
By Eamonn Ryan
Development planning to execution
There are a number of distinct steps that every property developer must follow to achieve the best possible outcome. The process is rarely completely linear but each needs to be done in parallel. It is consequently important for the developer to be flexible, to have problem-solving capability and to think on his or her feet. At any point plans can go awry.
The first step is to seek out a piece of land that has developmental potential to construct multiple dwellings. Once a potential site is located, the next step is to come up with a concept. What can be put on the site? How many units? What restrictions are there? At this stage it is wise to already have finance in place or at least understand one’s borrowing capacity and therefore the project’s viability. This step requires coordination of a team of industry professionals which includes an attorney, architect, surveyor, town planner and estate agent. Each one needs to give their honest assessment of the marketability of the completed product.
Jean-Luc Limacher, director of town and regional planning consultants Urban Dynamics, which was the town planner behind Cosmo City, explains the process, “You first of all identify growth areas within a municipal boundary as opposed to a rural area where you know there may be geotechnical, environmental and engineering issues and problems with bulk infrastructure. To make the latter work may be close to impossible. Most likely such a plot will be a farm portion which then needs to be subdivided through a township establishment process into individual erven which can be sold to a purchaser.”
Describing the challenges of a complete greenfields site, Sam Mhlaba, CEO of Montrose City Mega Development, relates some of the experiences of establishing a township at Montrose Mega City (developed on the same lines as Cosmo City) near Randfontein.
“It is a greenfields development on what had previously been farms. It provides subsidised housing: 100% subsidy (1 608 units in phase 1) and for military veterans (174 units), social housing (1 915 units), bonded units (1 225 units) and community rental units (680) – a total of 5 602 units,” says Mhlaba. Under government regulations, there are qualifying criteria for each category, such as a wage cap or provable military experience.
In a development as complex as this, the developer cannot afford to sit back and rely on the pace of government action, as momentum is vital. Mhlaba says SCM Property Developers took the initiative in bringing together all the parties – Transnet, Prasa, Departments of Education and Human Settlements, to ensure all the legs moved in a synchronised fashion.
“It was a journey that began in 2015 until we broke ground in November 2017. As the land was a farm, it had to be converted to a township for planning purposes. We acted as enabler of all the professionals and the myriad processes such as EIA, geotechnical, surveyor-general and more. For instance, in respect of the school we are entering into a partnership where we build a smart school that will align with education department goals,” says Mhlaba.
“To come up with the concept it is critical to understand what a mega project is and its objectives: a mega project as clearly defined by the Gauteng Department of Human Settlements as ‘an integrated development which is self-efficient and the beneficiaries can reside, work, shop and fully serviced socially and economically’.
“We then came up with the Montrose City Mega Development concept which includes residential, retail, commercial, industrial, commercial agricultural farming, renewable energy and revitalised passenger train station and goods station and all the components would then make it a smart city development. It includes mixed residential components (government subsidies housing units or low-cost housing, GAP housing, fully bonded units), commercial, retail, light and heavy industrial development.”
To ascertain what can be constructed on the identified portion of land requires preliminary assessment of the local council’s development and planning policies.
Limacher adds, “Mixed-use integrated developments are what are done these days, combining full-subsidy homes with partial ones, FLISPs (Finance-Linked Individual Subsidy Programme), rental properties and bonded homes, with communal facilities like schools and parks. Old style townships are not developed anymore – only viable and sustainable suburbs. You therefore need to ascertain that the development of the farm portion is supported by the municipal development framework which will indicate which land you can develop.
“At the same time market demand in the chosen area needs to be gauged; in other words, what type of dwelling would sell or lease well because, let’s face it, you want to design and build a project that has optimal marketability.”
Mhlaba suggests this can be done by gathering available information from various institutions like the Rand West City Local Municipality, provincial government and Statistics SA. “It is also important to hire independent professional companies to do demand studies research, in our case, in relation to the entire Montrose City Mega Development.”
Limacher says, “Your geotechnical report, bulk services and environmental checks are the initial steps in assessing a piece of land before any work commences. You look at the big issues – not the small ones,” he says. “If it passes all those tests, you move on to the feasibility study of the planned development. This involves looking at the potential market in a location and affordability of houses based on the going rate for homes locally. An ‘affordable project’ will aim at families earning around R20 000 a household.”
He add that it is important to undertake detailed analysis of the neighbourhood character, as maintaining the traditional nature of an area is an important consideration for local council and their town planning requirements and regulations. It’s also a good idea to consider any neighbours to the site and potential objections they might have to the project.
Ultimately the final decision to buy or not to buy your proposed site will come down to the number crunching of a pre-purchase feasibility assessment. This critical assessment should include timelines, all costs including consultants and construction as well as likely end sale values and the profit margin desired.
“When a municipality provides the bulk services, you have to provide a development contribution which can be as high as R70 000 a stand. If the municipality does not have the capacity to provide electricity and water, then again the development may not be viable,” says Limacher.
Thereafter, he explains, you look at the available geotechnical information, such as whether the proposed site is in a dolomitic area, which may require additional foundation work potentially meaning the costs of reticulation of stormwater and water services may be much more expensive. That doesn’t make it non-viable – if a prime location does not compensate for the geological disadvantage, says Limacher.
“Then there are environmental considerations. The municipal plan may reveal that the site is in a sensitive area requiring a 500m buffer for red species, again affecting the viability of the site if much of your land becomes unavailable.” If the development is deemed financially viable, it is then time to consider putting in an offer to buy the land at a price that will permit a commercial profit.
Succeeding steps include a town planning application that is submitted to the municipality, advertised and circulated to any affected parties such as municipal and provincial departments like roads departments, Eskom, Rand Water or companies with servitudes over the land such as Gautrain. Limacher notes that this is supposed to be completed within 60 days but rarely is. For this reason, Urban Dynamics typically puts the application personally into the hands of the individual concerned at various affected departments to ensure it does lie unopened in somebody’s in tray.
“That would take around 90 to 120 days, because in many cases it is a process of negotiation to address whatever concerns arise. That’s just normal procedure. The council then decides and in perhaps 70% of cases it is unopposed as we have proactively addressed all their concerns. Thereafter, the process is quicker.”
The council then issues preconditions of establishment containing the preconditions arising from affected parties, including road servitudes and land for schools or parks. The plan goes to a land surveyor who pegs the site, then the plan goes to the surveyor-general for approval and then a conveyancer opens a township register in the deeds office.
“Now your farm portion is known as, for example, Cosmo City Ext 12 with, say, 145 stands and it delineates what is each stand: perhaps a home, another park and yet another a school. The we can on-sell the various erven to a developer and building can commence. Before that can happen the services have to be connected to each stand, though because of time constraints a stand is usually sold ‘subject to’ services being installed and deposits are placed into a trust account,” says Limacher. These services include stormwater, roads, electricity, water and sewerage.
In the case of Montrose, Mhlaba outlines the process, “Once the demand studies are finalised then the next step is to put it on a layout plan through a registered town planner. In our specific case a layout plan needs to be submitted to the Rand West City Local Municipality for approval and supported by the following for approval. Other approvals include Environmental Impact Analysis and approval by GDARD, called record of decision (ROD); geotechnical investigation report; engineering reports which include electricity, water, sanitation, roads and storm water; general surveying plan and topographical survey.
“Upon receiving and assessing all the above then the Rand West City Local Municipality will approve the township,” he says.
Moving on site
“Once a township is approved the developer enters into an engineering service level agreement, then engineering design takes are submitted to council for approval. Once approved a project is enrolled at the department of labour and then works can commence,” says Mhlaba.
He notes that the appointment of professionals is based on a number of factors, including the track record of the specific professional; the relationship between the developer and the professional in other similar projects implemented; the financial proposal by the specific professional to the developer; the financial capacity of the specific professional; the technical capacity of the specific professional; and sometimes the empowerment or mentorship of a specific professional.
“The construction site is handed over to the appointed contractor, which commences work under the watchful eye of the resident engineer who ensures that the contractor is building what has been approved by the Rand West City Local Municipality. Upon completion, testing and approval of the engineering services installed by the contractor, then the Rand West City Local Municipality will accept such engineering services. Upon approval of the engineering services which is signed off by the Rand West City Local Municipality, the construction of top structures / buildings can commence and includes low cost housing, government subsidies, bonded units and retail,” says Mhlaba.
Limacher concludes, “At the end of the day, these procedures are there to protect future purchasers and ensure that a safe environment is created where people can live and work.”