PROPERTY: COLLECTIVE INVESTMENTS IN REAL ESTATE DEVELOPMENT


11 August, 2018 | Posted By: George Mouskides


   It is a rule of thumb that developments in the real estate sector are mainly undertaken by land development companies. It is not uncommon though for insurance companies or provident funds to take on this role from time to time.


  Following the 2013 economic crisis the companies undertaking such developments have been drastically reduced. Banks have also been distancing themselves from dishing out loans for such ventures.


  Taking the above factors into account the time seems right to sideline banks and approach collective investments to inject new funds into the field.


   Let us analyse how collective funds could be invested in the real estate sector.


  The sponsors of a development, (the managers of a prospective project), do all the groundwork, locate and commit the appropriate land, do the necessary studies and submit the required licensing applications.When a profitable proposal has matured. a number of investors, willing to inject the necessary funds to launch and complete the development, are approached. It is usually a small number of investors within the circle of the managers. They usually participate in many projects being handled by the managers.


Success


  It is understood that for such developments to be successful both the sponsors and their consultants must be experienced in the development of such projects. It might be helpful if one of the investors is a development company, armed with the technical expertise and experience.


  Most of the time these developments tend to be of a larger scale than those undertaken by developers on their own.


  Let us take as an example a specific development being planned for the Nicosia area, in a quiet residential area with easy access both to the city centre as well as the Nicosia-Limassol highway.


  The development will see the construction of about 100 flats in an enclosed, green area, with access limited only to residents and car-free as the parking places and amenities areas will be underground.


Quality living


  There will be greenery, central square, children’s play area, a pathway dedicated to jogging and walking, a big swimming pool, and all other modern amenities.


  These kinds of developments are sorely missed by Nicosians. Such projects seem to be the only solution to buyers looking for a more quality day-to-day living.


  Despite the luxury flats and all the offered services to residents, prices will be competitive and within budget for middle-class Nicosians.


  Investors should be comfortably able to hold on to their investment for about 5 years, until its completion, with an annual yield of more than 15% or exchange it with a flat or flats at a considerable discount.


  It is evident that all these shape favourable conditions for anyone wishing to invest in the real estate sector, without having to go through the demanding, costly and time-consuming bureaucracy procedures of bank funding and government permits in order to own a property. They will just invest an amount of money, something they’d have to do anyway, forget about it and reach their goal a few years later.


  Collective development also allows interested investors to be a part of larger-scale projects, something they could not have done on their own, with a much better profit margin.


Better yield


  It is also a better option for smaller-scale investors. Instead of buying a one-bedroom flat with an annual 4% rental yield and all the running around for repairs, paying taxes, tenants, etc., they can invest the same amount of cash and expect multiple profit margins without all the hassle.


  When entering such collective developments investors can feel secure as managers are approved, licensed and strictly monitored by the state. The business risk should always be taken into account by investors who must study and understand the project before committing.


  It is high time to utilise funds from collective investments in real estate for the benefit of investors and the evolution of the sector and the economy in general.