Land Development

As pressure on the existing infrastructure and housing stock increases in both residential and holiday locations, there is an increasing number of new development projects. These often involve several years of detailed planning applications and negotiations with the authorities, before the project is granted final planning consent, whereupon there is a potential for uplift in the value of the land for development. These delays inevitably curtail the number of otherwise excellent developments reaching fruition and thereby perpetuate the shortage of housing stock they are designed to eradicate.

One of the major reasons behind this problem is the unwillingness of lending institutions to fund the planning period. Hence the Developer is left with significant adverse cash flow or, if he is able to borrow, punitive interest charges.

As a result, several projects have been floated whereby the individual investor has the opportunity to purchase an interest in the land at a rate slightly above its green field value, but significantly below its value on full planning permission being granted.

This allows the purchasers to benefit from the potentially high capital growth and the Developer to obtain finance to bring the project to completion.

There is clearly a risk in any such real estate development that the anticipated planning cannot be obtained or may be delayed. Investors in these type of developments should also take in to account that should planning be obtained, the pace of sales of land parcels and/or any properties will be goverened by the market conditions at that time.

There are also many potential pitfalls in the path of both purchaser and developer alike in the varied legislation that exists in the various jurisdictions where the property is sited and where it is sold.