P R O P E R T Y
Real Estate development - extention or improvement of property
The term «development» is defined as an activity aimed at developing and improving properties in order to enhance their value characteristics and raise the level of income they generate.
Development includes preparation of land, construction and engineering activities, and management operations through which the development project property acquires new qualitative characteristics that contribute to its increased value on the market.
In construction and investment practices, it is customary to distinguish between three types of development as follows:
Fee-development is a process where the developer is engaged as a contractor, and manages construction works for a contractual fee. In this case, the developer does not invest its own funds; therefore it is not a beneficiary and does not undertake any commercial risk.
Speculative development is a more complex, but also more profitable process, since in this case, the developer also acts as an investor, developing and implementing the project’s finance arrangements, that involve both equity and debt. The developer (initiator) underwrites all economic risks.
Build-to-suit is a popular method of construction, where a property is built or reworked according to the needs of a specific customer (tenant). In this case, the developer can be both the project contractor and investor.
As a business, development is first of all focused on gaining commercial effect, i.e. on both the developer’s and investor’s receiving target income resulting from the increased value of the property. We can say that the essence of development is to build a «new» property with better value characteristics than the value of the «old» property, along with expenses on its development or improvement. However, speaking about development performance, we should also note an indirect effect of development projects. This can manifest itself in the improved quality of living of people, in particular due to the creation of new infrastructure facilities or jobs, increased tax collection, or the improvement of districts they live in.
We offer you several relevant construction-related opportunities for investment :