PROPERTY DEVELOPMENT: GRIT AND GLORY

By Nkondo Mudenda MRICS, PrQs, PMAQS, CAIB(SA)

“……. When schemes are laid in advance it is surprising how often the circumstances fit in with them.”

Property development will be critical in the Zambian property market with the expected economic growth. In its 2020 Infrastructure Report, the World Bank highlights the critical role of infrastructure in supporting economic growth and poverty reduction. The report states that “strong economic growth is often accompanied by increased investment in infrastructure, as governments and private sector actors seek to meet the growing demand for goods and services.”. Property investment will rely heavily on property development for sourcing investment opportunities.

Securing project financing and attracting the right investors for the potential projects in this challenging development environment, demands familiarity with the process by which projects are analysed, financed, developed, marketed, managed, and indeed regulated. This article will discuss and assess the property development process.

Property development is essentially an integrated process revolving around a team concept that links the owner of the initial opportunity, the developer, the financier, and the end investor with the public and tenants they serve. Development projects often involve intricate planning, permitting, financing, construction, and marketing phases. Navigating these complexities without professional guidance can be overwhelming and lead to costly mistakes.

The property development process founds itself on the principle that all successful projects:

• Are compatible and complementary with the natural resources of their sites and with the surrounding land use. This simply means legal permissibility in terms of zoning regulations, building permits, and environmental permits.
• Are Physically Suitable for the sites with all the required amenities. It is crucial for site comprehensive assessments and ensuring the safe and successful development of the projects. These assessments include Geotechnical Survey, Traffic Impact Assessment, and Topographical Survey.
• Have typically met or exceeded the development objectives of their investors and owners. This includes financial gains and the quality of products and services desired by the tenants. This underscores the key point that, the projects are Financially Feasible.

The property requires reciprocity between the members of the development team, as well as the public and private sectors in which they operate characteristics of the market segments that will ultimately decide the feasibility of the process.

The process of developing an investment property, regardless of type, size, or location, requires setting in motion and accomplishing five distinct phases of activities:

1. Initiation and Conceptualisation
2. Project Feasibility synopsis together with an in-depth analysis
3. Commitment (Financial Close)
4. Design Development, and Construction
5. Management and Operation

In all the above there are inter-relationships between each of the phases and indeed the first three phases often repeat before moving onto the final two phases of the cycle. In some cases, too little effort goes into the conceptual planning and feasibility phases. Budgets are restricted, timing is short and often constraining and the perceived need to get started overrides determining in a careful, comprehensive manner of what needs to be done. What results is a product that fails to meet the expectations of its investors, performs poorly, is over-built or under-built for the market, and may threaten the financial credibility of its owners. Examples exist throughout the world of projects that pay insufficient attention to the construction and management/operation phases.

The Developer and Investor must therefore thoroughly understand the development process, know when and from whom to seek professional advice, and be able to integrate the skills of each member of the development team (Construction Project Manager, Architect, Quantity Surveyor, Engineers, Property Brokers, etc) effectively to produce a successful project. The need to engage the pertinent professionals at this early stage in the review process is vital, as the quality of the input directly reflects upon the project at completion. It is also important to understand and recognize that with development at the earliest concept stage, it is “function before form” being determined. The product is designed to allow the operation of a business or function to be performed within the space, not the space being designed, and then discussions are held about how one should fit into it.

Property development, although constrained by uncertainty regarding future conditions, governed by ever-shifting market segments, and subject to the increasingly higher expectations of all those involved, nevertheless frequently offers a challenging and exciting prospect. In developing a property, the Developer, and Investor create both business and real estate ventures. The development process links the five distinct, though evolving, phases that sequentially provide a blueprint for action. Each of the five phases deserves close attention if the product is to meet the challenges satisfactorily.

“………………. but with logic, science, and discipline, risk can be minimized”.

About the author:

Nkondo Mudenda

He is a Co-Founder and Commercial Director at Sadan Developments (an Infrastructure Development Company based in Lusaka). He is a Chartered Quantity Surveyor and a specialist in Property Finance & Development Management.

For any comments and responses, E-mail: nkondo@sadan-dev.com

By Nkondo Mudenda MRICS, PrQs, PMAQS, CAIB(SA) "…….

Palmridge Properties fails to issue title deeds to its clients

Some residents of Livingstone have complained bitterly after a Livingstone-based real estate company failed to issue them land title deeds after having completed their full payments for their purchased land.

The residents claim that they have been waiting for their deeds since September last year after making full payments.

But when contacted by the Zambian Business Times -ZBT-, Palmridge Properties defended itself by saying that the delay was due to a change of system process that was taking place at the Ministry of Lands as well as some issues that were being worked on by the Livingstone council.

Palmridge Properties Operations Manager Amos Chisha explained that the Ministry of Lands was last year changing its system during the last quarter and only managed to process a few title deeds. He also explained that the Livingstone council had some issues with companies that were sub-dividing, but mentioned that the matters have been resolved.

He explained that the title conveyance process is quite a tedious and lengthy process. He said changing of title requires one to mark off the property and that the process is only started when one is done with the payments. “So if you finish your payments today we give you a discharge letter, we give instructions to our lawyers to do a consent. Those consents are taken to the Ministry of Lands” said Chisha. He said this is to inform the state of the intention to change ownership of property from the current owner in this case Palm Ridge to the beneficiary.

He said the marking off of the land for those who completed payments has already begun and is in process.

He said it is on average not possible for someone to get his or her land title within a few months due to the lengthy processes. He noted that the completion of the process is dependent on when a particular client finished paying.

Chisha said the company is targeting to complete the title processes by the end of the first quarter of 2024. He has advised the clients not to anticipate problems and has assured them that the title processes are in progress.

He said the information with regards to palm properties and land is available at the Ministry of lands and the Livingstone Council. He has therefore challenged clients to visit the Livingstone Council and inquire if they have any doubts.

Some residents of Livingstone have complained bitterly

ERB in surplus of over K455 million

A recent report has revealed that the Energy Regulation Board (ERB) has accumulated a surplus of over K455 million.

According to the Auditor General’s report as of 31^st December 2022, ERB- recorded surplus revenue of collective K455, 875, 182 for financial years 2020, 2021, and 2022 respectively.

The surplus was attributed to the improvements in debt collection and the increase in licenses issued in the petroleum and renewable energy sectors. The report however has indicated that ERB recorded deficits of K1, 527,410 and K13, 089,571 in 2020 and 2021 respectively, and a surplus of K44,031,611 in 2022.

 The deficit in 2020 has been attributed to bad debts provisions made on agency fees whereas the deficit in 2021 was attributed to the increase in the provision for gratuity and service benefits. The surplus recorded in 2022 was mainly attributed to growth in the energy sector.

The report further showed that a review of the Statements of the financial Position for the period under review revealed an increase in receivables by K55,691,986 from K35,696,660 in 2020 to K91,388,646 in 2022. It also revealed an increase in payables by K17,650,809 from K21,260,735 in 2020 to K38,911,544 in 2022.

With regards to Weakness in Enforcement, section 4(u) of Part II of the Energy Regulation Act No. 12 of 2019 states, “The functions of the Energy Regulation Board are to — (u) impose an administrative penalty against a licensee for violation of license conditions under a license held by the licensee, or for failure to abide by the directives issued under this Act or any other relevant written law; among others.” Section 52(2) of Part VIII General Provisions states, “If a person, on whom an administrative penalty is imposed, by this section, fails to pay the penalty within the time ordered by the Energy Regulation Board, the Energy Regulation Board may recover the penalty by action in a court of competent jurisdiction.” Further, the Enforcement letters have a clause stating that the penalty should be paid within seven (7) days of the receipt of the letter.

The report however indicated that amounts totaling K421, 450 charged as penalties regarding enforcement cases involving twenty-four (24) Licensees were not collected within the seven (7) days. It was further noted that there was no evidence availed to confirm that the affected Licensees were taken to court by the Board.

The report further noted that amounts totaling K498,955,555 were outstanding from three (3) entities in respect of license fees as of 31^st August 2023. It was noted that out of the K498, 955,555 that was outstanding, 99.8% was owed by ZESCO Ltd.

Under staff-related matters, the report revealed that amounts totaling K1,734,219 were paid as responsibility allowance to eleven (11) officers who were appointed to the Integrity Committee for fourteen (14) months between November 2019 and December 2020. A review of minutes further revealed that during the period under review, the Integrity Committee had six (6) meetings, and was also not clear as to why management decided to pay responsibility allowance instead of sitting allowances which were paid to other Committees, thereby making the payment questionable.

It was noted in the report that section 11 of the Management and Non-Represented Staff – Terms and Conditions of Service 2020 of the Energy Regulation Board, (Acting Appointment, Additional Responsibility, Promotion, and Demotion) states, “All acting appointments whether for convenience or promotions and additional responsibility should be made in writing by the Director General before commencement of such appointments.” Further, Section 11.2.1 Additional Responsibility states, “To meet operational requirements, employees may from time to time be assigned alternative functions in addition to their normal duties at equivalent or higher grades than their substantive grade, and that where an employee is assigned additional responsibility for a minimum of ten (10) calendar days, he/she shall be entitled to be paid an additional responsibility allowance at 25% of the employee’s substantive salary on a pro rata basis.”

A recent report has revealed that the

AIRTEL hands over 2 classroom blocks to support 400+ pupils

Airtel Zambia has continued making significant contributions to the education sector by working together to improve access to education for underprivileged children in Zambia. Their efforts have included providing educational materials, renovating school buildings, and offering scholarships to deserving students.

The latest contribution from Airtel, is the two classroom blocks that have been handed over to the Ministry of Education through the Zambia Open Community Schools (ZOCS)  in Sinyendeende village in Monze District of Southern Province. These blocks will provide much-needed space for over 400 pupils in the area, enabling them to learn in a safe and conducive environment.

Refurbished at a cost of over K320,000, Ministry of Education Permanent Secretary Joel Kamoko on receiving the classroom blocks said his Ministry and Government at large were always excited about partnerships that yielded great results to benefit the education sector.

Kamoko speaking through the Director of Primary Education, Mr. Kezala Mwale who represented the Permanent Secretary, said that the handover event demonstrated how much Airtel and ZOCS cared for orphans and vulnerable children by improving infrastructure in community schools in different parts of our country.

“As your Ministry of Education, such initiatives excite us as they respond to what our 8^th National Development Plan that regards education as a basic human right – key in development. not only does education empower people but it gives them the knowledge and skills to broaden their economic and social opportunities,” Kamoko said.

Airtel Managing Director, Hussam Baday who handed over the refurbished block said his company always believes in transforming the lives of the less privileged people in the various communities.

“While we believe that good quality education is the most important tool for social and economic development in Zambia, we also believe that the environment where learning is happening should be conducive and welcoming for the learners. This is why our commitment to partnering with the government and others is important so as we can work together to improve the educational standards in schools across the country, “ Baday said.

And ZOCS board Chairman Victor Koyi said his institution was proud to share that through the partnership with Airtel, they had either built classroom blocks from scratch or refurbished the existing infrastructure as what was being witnessed.

“Our mission remains that of brightening prospects of community school learners by empowering community schools, building partnerships, influencing policy, supporting learners and creating conducive learning environments,” Koyi added.

Some of the refurbishments done to the classroom blocks that host over 400 children include flooring, providing of windows and doors as well as plastering of all classrooms.

Airtel Zambia has continued making significant contributions