FACULTY OF THE BUILT ENVIRONMENT

DEPARTMENT OF LAUD

PROPERTY DEVELOPMENT AND ESTATE MANAGEMENT

NAME OF COURSE Principles of Property Development

LECTURER Dr. B Chigara

COURSE CODE BLP 1101

NAME ALLEN DUBE

STUDENT NUMBER N0196094X

DUE DATE 31-07-2019

CONTACT DETAILS 0778714269/[email protected]

ASSIGNMENT NUMBER 2

QUESTION

Discuss the impact of economic, technological and institutional factors on real property
development in urban area of your choice in Zimbabwe.
Real estate development, or property development, is a business process, encompassing activities
that range from the renovation and re-lease of existing buildings to the purchase of raw land and
the sale of developed land or parcels to others. Real estate developers are the people and companies
who coordinate all of these activities, converting ideas from paper to real property. [Frej, Anne B
& Peiser, Richard B, 2003 p.3] Economic, technological and institutional do influence real
development in the City of Bulawayo in various ways.
Economic factors have an overbearing influence on real property development in the city
Bulawayo. These factors are namely interest rates, GDP growth, unemployment, income growth,
exchange rates, the prices of key raw materials and manufacturing activity.
Investopedia.com defines interest rates as the amount a lender charges for the use of assets
expressed as a percentage of the principal. Generally, when the interest rate is lower, people are
more likely to borrow money, as doing so will cost them less than at another time. Conversely,
when the interest rate is higher, borrowing becomes more expensive and slows. This principle
applies to loans that come in the form of mortgages. In periods of low interest rates, more houses
are often built as demand rises, and development companies are able to borrow money at a cheaper
rate to finance the construction. In Bulawayo development of real estate has been constrained by
these aforementioned interest rates as they have remained high and unavailable. This is because
prospective home buyers presently do not have adequate financial resources to purchase houses
for cash and options for mortgages are limited and extremely expensive where available.
GDP growth and property development are complementarily related; GDP will have a positive
effect upon development of real property that reflects the growing economy. Real estate is a kind
of important mortgaged property, when housing prices are increased, the value of the mortgaged
property is also increased. Thus it will influence the amount of wealth controlled by people and
residents own lending abilities. It will also cause them to change their lending plan and credit
demands, as a result real estate developers will also increase the development and investment. In
the city of Bulawayo this was observed in 2010-2012 when the economy was booming with GDP
growth figures of >8% on an annual basis, there were developments in residential areas such as
Mbundane as resident’s income increased as hence appetite for housing increased.
Related to economic growth is unemployment. When unemployment is rising, fewer people will
be able to afford a house. But, even the fear of unemployment may discourage people from entering
the property market. Currently unemployment is at all-time high in Bulawayo, with most people
in the informal sector. Hence since they are not in formal employment and without fixed income
streams they do not have access to financial instruments such as mortgages offered by banks. As
a result, residential housing development has been comatose.
An increase in the income of residents will also have a great impact to development of property
(Li, 2008). Housing is durable, and as with other consumer goods has an intrinsic value. Income
increases result in stimulation for people to improve their living conditions or climb the property
ladder and thus drive demand for homes, thus putting greater strain on the available space or
properties. Additionally, developing further properties as an investment becomes a more rational
choice for more affluent residents.

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Manufacturing activity played a key role in the development of property in Bulawayo. This was
seen in the integration of manufacturing and residential areas. For instance, the manufacturing
areas in Bulawayo are Belmont and Kelvin North. In the 1980s when the Zimbabwean
manufacturing sector peaked, it was observed that there was massive development in the areas
surrounding these aforementioned manufacturing areas. These areas are namely Sizinda and
Mpopoma. Over and above that, as the population of people in Bulawayo increased, the demand
for goods and services increased, and hence shopping centres such as Bulawayo Centre and
Entumbane complex were developed.
The price of key raw materials such cement and steel has an impact on the development of property
development. In the case of new-builds, building costs may also have a significant effect on new
developments. Hence most individuals/companies may have managed to purchase land, but the
price of these materials have deterred them from making any meaningful development on this land.
This is evident in the city of Bulawayo where there are quite vast amounts of land held by
corporates in their land banks, and individuals as well, but however the high cost of development
is preventing them from developing.
Institutional factors such as legislation can also affect the development of real estate in a number
of ways. The strict requirement for planning permission for new house building may deter house
builders. Conversely, relaxation of regulations is likely to encourage building. For instance, in
Bulawayo, the local authority has strict regulations with regards to housing plans. As such these
regulations may deter individual landowners from getting their plans approved by the city council
as they need to have been drawn by a registered architect, and the cost of doing so may be
astronomical.
In Zimbabwe, ‘development’ is defined by the Regional Town and Country Planning Act (RTCP)
(1996 revised ed) as “the carrying out of building, engineering, mining or quarrying operations in,
on, over or under land,…The altering of the character of use of any land or building” As such a
developer should first get a development permit. The application for these licenses has tended to
be a very tedious process and as such most property development firms have been frustrated whilst
trying to acquire these permits. This is because government officials in some instances have
demanded bribes or “kickbacks” in return for these applications to be successful. As much property
development firms in some instances may decide to abandon their intended projects due to such
circumstances.
Institutionally the Government of Zimbabwe has set up developmental finance institutions such as
the Infrastructure Development Bank of Zimbabwe(IDBZ). Governments form development
banks to form part of their development aid or economic development initiatives. The IDBZ has
set about developing student accommodation throughout the country so as to ameliorate the crisis
of accommodation for students in tertiary education in Zimbabwe. In Bulawayo the IDBZ has
contributed by developing the NUST student’s accommodation project, just outside the tertiary
institution. Upon completion it is expected to assist students greatly in their quest for affordable
and quality accommodation.

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There are various technological factors that have had an effect on real estate development in the
city of Bulawayo. These factors entail, site conditions, constructability, duration and the
contractor/designers.
Site conditions have a huge effect on the success of any real estate development project. An
assessment of ground conditions in relation to construction projects typically includes
geology, hydrology, hydrogeology and soil conditions of a site and surrounding, along with
the contaminated land. A site investigation report will highlight any findings that may affect
the construction of the works and identify any health and safety concerns. Typically, for a
large real estate development project where an Environmental Impact Assessment (EIA) is
required, an assessment of the impacts on ground conditions is necessary. Hence if it discovered
in the EIA that the proposed site is not suitable, for instance, if the proposed project is on a wetland,
the Environmental Management Agency will not pass the EIA and such the project will not take
off. Site conditions have not had much of an influence on real estate development in the city of
Bulawayo.
The constructability is also called as buildability, which is a new term in construction industry.
But the concept of buildability has existed from past. The study of constructability showed that the
traditional separation of construction and the design process have resulted in less efficient
performance on the construction projects. In the city of Bulawayo, this was seen at the National
University of Science and Technology(NUST) in the construction of their ceremonial hall. This
was in the roof. The roof was complicated and the local contractors couldn’t do it. As such foreign
contractors had to be engaged at a cost.
Duration of the project also has a significant impact on the real estate development project. These
delays may occur prior to the implementation stage or prior. Prior to the actual construction local
Authorities may be very slow in processing development
applications. In the city of Bulawayo, this was seen during the construction of Bulawayo Centre
which missed its deadlines and hence the tenants couldn’t occupy it on time.
The contractors are arguably the most important people when it comes to a real estate development
project. Poor standards by the contractor with regards to the quality and workmanship pose
significant risks towards the successful completion of the project. In Bulawayo, in Mbundane the
structures built by Hawkflight were destroyed by thunderstorms. Hence the residents were left
without a place to live.
In a bombshell the economic, institutional and technological factors have had a significant impact
on the development of real estate in the city of Bulawayo. The economic factors are interest rates,
GDP growth, unemployment, income growth. The institutional factors are legislation. The
technological factors are site conditions, constructability, duration and the contractor/designers.
All these factors combined have had significant impact on the development of real estate in the
city of Bulawayo.

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References.
1. Frej, Anne B & Peiser, Richard B. Professional Real Estate Development, Second
Edition: The ULI Guide to the Business. Urban Land Institute, 2003. p. 3.
2. https://www.investopedia.com/articles/mortages-real-estate/11/factors-affecting-real-
estate-market.asp
3. https://www.investopedia.com/terms/i/interestrate.asp

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