PROPERTY

DEVELOPMENT
APPRAISAL
By ;
FATIN AZIZ
Lecturer,
Department of Estate Management,
Faculty of Architecture, Planning and Surveying,
Universiti Teknologi MARA, Shah Alam
 PROPERTY DEVELOPMENT
APPRAISAL

• 1.0 INTRODUCTION

• 2.0 LECTURE OBJECTIVES

At the end of the session, students will understand

about :
• the various steps in a property development
process
• stages in property development
• development cost items
• property development appraisal
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 PROPERTY DEVELOPMENT
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• 3.0 THE DEVELOPMENT PROCESS

• 1. Initiation/ Site Identification

• 2. Evaluation
• 3. Acquisition
• 4. Design and costing
• 5. Permission/ approval
• 6. Commitment
• 7. Implementation/ construction
• 8. Let/ manage/ dispose
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 PROPERTY DEVELOPMENT
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Stages in Property Development

• 3.1 Pre development stage

• Initiation, evaluation, design & costing and permission & approval

• 3.2 Development stage

• Implementation & construction

• 3.3 Post development stage

•
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Property management & long term investment
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• 4.0 STEPS IN DEVELOPMENT PROCESS

• 4.1 Initiation/ Site Identification

• Origin :-
• 4.1.1 Developer’s initiatives
• 4.1.2Landowner initiatives
• 4.1.3 Government initiatives
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 PROPERTY DEVELOPMENT
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• 4.2 Evaluation

• The most important stage of the development process as it guides the decision
making of the developer.

• Evaluation includes ; site investigation, market research, and the financial appraisal
of the proposed development.

• The purpose is to ensure that the cost of the development is reasonable and the
economic viability of the project can be attained.
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4.0 STEPS IN DEVELOPMENT PROCESS

• 4.2.1 Site investigation

• The steps that need to be undertaken are as follows :-
• site survey i.e. physical and boundary inspection and land surveying
• ground investigation i.e. soil test and EIA
• contamination i.e. pollution and toxic waste.
• services i.e. the availability of public services and connections
• legal investigation to verify legal conditions of site.
• financial investigation to ensure the site is suitable for financing.

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4.0 STEPS IN DEVELOPMENT PROCESS

• 4.2.2 Feasibility Study

• To determine whether a project is financially feasible,
• to identify and recommend choices of development and
• how the project should be implemented, priced and marketed
• Covers five perspective :-
• 1.Site/ locational feasibility
• 2.Economic feasibility
• 3.Market feasibility
• 4.Design feasibility
• 5.Financial feasibility
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4.0 STEPS IN DEVELOPMENT PROCESS

• 4.3 Acquisition
• May be undertaken using the following approaches :-
• Private treaty
• Formal tender
• Public auction
• Joint venture
• Compulsory acquisition

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4.0 STEPS IN DEVELOPMENT PROCESS

• 4.4 Design and Costing

• 1. Architect to provide the architectural and working drawings

• 2. Engineers to provide the structural and mechanical and electrical drawings

• 3. Quantity surveyors to provide costing and bill of quantities

• 4. Town planners to provide the layout plan of the overall development.

• 5. Project manager to provide the management strategy, network analysis

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 PROPERTY DEVELOPMENT
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4.0 STEPS IN DEVELOPMENT PROCESS

• 4.5 Development Permission & Approval

• Application and approval by Securities Commission

• Application and approval by for conversion and subdivision

• Application and approval for development order and building plans

• Application and approval for developer’s license and advertising permit

• Application and approval for bridging and end financing

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4.0 STEPS IN DEVELOPMENT PROCESS

• 4.6 Implementation and Construction

The second stage of development

Deals with the physical aspects of the development

Infrastructure and building construction.

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 PROPERTY DEVELOPMENT
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4.0 STEPS IN DEVELOPMENT PROCESS

• 4.6.1 The professional team

• Architects - monitor and supervise the
contractor to ensure the contractor keep to
the design and specifications.
• Engineers - monitor the structural, mechanical
and electrical aspects of the construction
Architects Engineers Quantity Surveyors
• Quantity surveyors - monitor, supervise
materials, quantities and costing in accordance
to the building contract and to approve
progress payments to contractors.
• Project manager - ensure the construction is
done according to the scheduled plan. Project Manager Real Estate Agent

• Real estate agent - promote the development

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in order to capture the market share.
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4.0 STEPS IN DEVELOPMENT PROCESS

• 4.6.2 Stages of construction

Site Preparation Land Surveying Infrastructural Works

Frame
Upper floors
Roof
Stairs
External Walls
Piling Works Foundation & sub structural Super Structure Works Windows, Doors
Internal Walls
Doors
(Source: BCIS)

Finishes & Fittings Services External Works 14

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4.0 STEPS IN DEVELOPMENT PROCESS

• 4.7 Sales and Promotion

• an essential and integral part of the development process. The disposal whether
through sale or letting

• should be planned and thought out during the evaluation process and implemented.

• based on the market research undertaken during the evaluation process

• developers policy and strategy

• to sell or to rent or both.

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5.0 DEVELOPMENT COST

• 5.0 DEVELOPMENT COST

• 5.1 Pre development stage Soil Investigation

Land Cost
Environmental Impact
Assessment (EIA)

Conversion Premiums
Planning Approval Fees

Subdivision Cost
Professional Fees

Subdivision cost for 16

approval of building plans Contribution to
technical department
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5.0 DEVELOPMENT COST

• 5.2 Development stage

The cost items are as follows :-
• Site preparation cost

Site clearance Cut & fill Demolition

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5.0 DEVELOPMENT COST
The cost items for development stage - continue :-
• Infrastructure works

Road and drains Electrical reticulation Electrical substation Water supply reticulation

Elevated water tank / Sewerage treatment ICT cabling and

Sewerage reticulation
reservoir plant (stp) switching

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Religious place of
Public halls
worship
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5.0 DEVELOPMENT COST

The cost items for development stage - continue :-

• Building construction cost

• Landscaping works
• Turfing cost
• Hardscape cost
• Playground fittings
• Professional fees
• Cost of bridging finance
• Marketing and promotional cost
• Project management cost
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• Contingencies
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5.0 DEVELOPMENT COST

• 5.3 Post development stage

• Property management cost

• Maintenance cost to rectify building defects during the defect liability period

• Outgoings
• insurance
• taxes
• professional fees
• security
• services 20
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6.0 TECHNIQUES IN PROPERTY DEVELOPMENT APPRAISAL

• 6.0 TECHNIQUES IN PROPERTY DEVELOPMENT APPRAISAL

• property development a costly investment
• relatively high risk investment.
• subject to a lot of factors and economic variables.

• 6.1 Methods of Financial Evaluation

• 7.1.1 Residual method

• 7.1.2 Cash flow method

• 7.1.3 Simulation method 21

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6.0 TECHNIQUES IN PROPERTY DEVELOPMENT APPRAISAL

• 6.2 Measure of Profitability

• Developer’s profit as a % of gross development value

• Developer’s profit as a % of total development cost

• Payback Period (Break-even analysis)

• Net Present Value (NPV)

• Internal Rate of Return (IRR)

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 PROPERTY DEVELOPMENT
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THANK YOU FOR

YOUR
ATTENTION