Addis Ababa University (AAU)

Ethiopian Institute of Architecture Building

Construction and City Development (EIABC)

Fourth Year BSc. In Urban Planning and Design

Course Title: Real estate development

Assignment 02

Name ID NO.
Henery Alemayehu………………………..UGR/2923/12
Jibril Idris………………………………….UGR/2923/12

Section: A
Submission date: 27/12/2022
 Fourth Year BSc. in Urban Planning and Design
Course Title: Real estate development
Individual Assignment: Real estate development process and principles

REAL ESTATE DEVELOPMENT

Introduction
Real estate is property consisting of land and the buildings on it, along with its natural resources such as
crops, minerals or water; immovable property of this nature; an interest vested in this, an item of real
property, buildings or housing in general. Also: the business of real estate; the profession of buying, selling,
or renting land, buildings, or housing.
Real estate development is the continual reconfiguration of the built environment to meet society’s needs.
This means just finishing of physical construction of a building is only a single phase of development. It has
to be reconfigured/ reorganized. Reconfiguration or rearrangement should be continued. Accordingly,
roads, sewerage systems, houses, office buildings, factories etc. should be built, managed and thereby
required space should be generated for the various social needs and wants. Someone must initiate and
then manage the creation, maintenance, and eventual re-creation of the spaces in which we live, work, and
play. Although the definition of real estate development remains simple, the process grows more and more
complex as municipalities, financial markets, and consumer tastes evolve. The need for development is
constant as population increases, technologies evolve, and tastes continue to change.
Developments of real estate often requires multiple agreements negotiated by multiple players. The
developer works with public sector officials on approvals, zoning changes, exactions, building codes, and
the provision of infrastructure. Community and special-interest groups play increasingly important roles.
The time needed to conduct public outreach, negotiate with the public sector, and obtain financing must
thus be factored into the equation when evaluating a potential project. Only after these functions are
organized can the team of designers, engineers, and construction workers begin the physical development.
The project is completed with the leasing or selling of the space to users. This final phase requires the
expertise of marketing professionals, graphic artists, salespeople, website developers, and other
specialists. The developer tries to ensure that every element in the process is properly executed on
schedule and within budget.
Today, development requires more knowledge than ever about the specifics of prospective markets,
patterns of urban growth, neighborhood associations, traffic patterns, legal requirements, local regulations,
contracts, building design, site development, construction techniques, environmental issues, infrastructure,
financing, risk control, and time management. Ever-increasing complexities in each arena have led to
increased specialization within the development team. As more affiliated professionals work with
developers, the size of the team has expanded and the roles of some members have changed. As
development has become more complex, it has generated the need for better-educated developers.

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 Fourth Year BSc. in Urban Planning and Design
Course Title: Real estate development
Individual Assignment: Real estate development process and principles

REAL ESTATE DEVELOPMENT PROCESS

Real estate development is the process of bringing built space to fruition. It starts with an idea and ends
when consumers—tenants or owner-occupants—occupy the physical space put in place by the
development team. Each real estate project is in essence a separate business entity employing the three
factors of production—land, labor, and capital—to create a product. To transform an idea into reality, these
factors are coordinated by entrepreneurial management and delivered by teams. Value is created by
providing space to meet the needs of society.
Real estate development is a multistep process that can be complicated, lengthy and risky. It can take
years to bring a project from the initial planning stage through construction to final completion, and there
are plenty of obstacles that can pop up along the way. The real estate development is not a single or a
simple activity. It is a long-term process. Also, it is a continuing process. It is a number of activities. It has
three main processes such as,
(a) A process of “idea generation”
(b) A process of “physical construction” and
(c) A process of “use of the built property”
At its most basic, Real Estate Development is the business of facilitating the construction or reconstruction
of buildings. This usually involves finding a piece of land, deciding what should be built on it, and then
arranging and coordinating everything necessary to complete the project: financing, choosing and
supervising the architect, contractor, sales or leasing agent, etc.
Real estate development is a creative and extremely complex, partially logical and partially intuitive. It can’t
be taught fully. Application of common sense, contingency approaches etc. are more important. In most
cases, the real estate developer is an entrepreneur, and takes significant financial risk to purchase the land
and develop the property, only making money if at the end of the day the market values the finished
property (by purchasing or renting it) for more than all the costs involved in developing it There is a
sequence of steps to follow from the first conceive a need of a real estate in a mind to the time of
completion of the physical construction and until commence of ongoing asset management diagram.
Different phases in a real estate development project
The above three major phases can be realized by means of many phases. Each phase consists of some
important activities. Following eight phases include all the activities under the above three major phases.
Coming up with an idea: This idea may arise due to an issue/problem/a need or a want of individuals,
firms or government.
Refining the idea: By refining the initial idea it makes more realistic. The first idea is mostly very vague.
And also, the idea is probably a need. There may have different way to fulfil the need. By refining the idea,
suitable actual need will be identified.

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 Fourth Year BSc. in Urban Planning and Design
Course Title: Real estate development
Individual Assignment: Real estate development process and principles

Testing its feasibility: Test the feasibility is needed to realize the idea. Once the initial idea is refined, you
will know the actual need. Then it is needed to know whether it is possible to realize within the practical
constrains.
Negotiating contracts with needed stakeholders of the project: Negotiations with professionals, public
agencies, bankers, service providers etc.
Making a commitment of stake-holders: Agreements are signed, loans are disbursed, permissions are
given and work is officially begun.
Constructing the project: Actions are taken place, materials are purchased and supplies, workers are in
action at the site and supervision of work is done.
Completing and opening It is physically appeared, services are provided, COC is obtained, and ready for
occupation and functions.
Managing the new property: continuation of uses and maximize the satisfaction of users. Ensuring
uninterrupted functions of the property.
This is a process, not a set of isolated activities. Therefore, each activity has relationships with the other
activities. The success of an activity depends on the success of the other activities and vice versa. As a
whole, it seems that the real estate development project is highly straight forward. At every stage, the
developer should consider all the remaining stages of the development process. The impact of a single
decision on the whole project is colossal. Specially, it should be remembered that in most cases mistakes
of real estate cannot be revised or the cost of revision/ correction of a mistake is very high. For instance, if
the decision of location is wrong, it cannot be corrected. If the design of the building is wrong, the alteration
cost is very high, so the development process is in the nature of interdisciplinary.
In this process; land, labor, capital, management, entrepreneurship etc. are usually needed in order to
transfer an idea into a reality.
1. Land: a plot of land, physical materials/ transportation of materials /necessary infrastructure
services/ sewerage system and proper accessibility etc. can be considered under the land in
broader sense.
2. Labor: required skilled labor, unskilled labor, services of professionals and none professionals etc.
can be considered as the labor in general.
3. Management: overall management: human recourse management, financial management,
marketing management, production management, information management, time management
etc.
4. Entrepreneurship: One, who bears the risk, creates an idea and struggle to realize the idea.
Anyone who is supposed to be responsible for legality, insurance, approvals, tests, and
experiments etc.?
5. Capital: all sources of finance. Media of acquiring all the above inputs. This may be by means of
own money/savings, different sources of loan, equity capital, donation of funds or material or land
or services and so on.

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 Fourth Year BSc. in Urban Planning and Design
Course Title: Real estate development
Individual Assignment: Real estate development process and principles

It needs a team of experts to complete a development. Whatever the effort put into a development, it is
worth only if the final product is usable, functionable, and adoptable to satisfy the different and
changing needs and wants of different users of the property. Therefore, the idea of acquiring a
particular property should be refined and confirmed having properly done “need analysis”.
Completion of the project should be properly monitored not allowing any deviation from the expected
needs and wants but having necessary alteration according to altered needs and wants if any in order to
maximize the users’ satisfaction. The development team is responsible to select the right input (bricks and
mortar) to realize the expected needs and wants. It seems that the “completion” of the development is not
met by the completion of physical construction alone. Actual completion means that the physically
constructed structure becomes a property only if it is fit for the continuous use for the beneficiaries’
satisfaction. Therefore, it is clear that the real estate development is linked with the real estate
management.
Real Estate Development Principles
Successful Real Estate development is tied to the effective management of risk before, during and after the
development of your project. The more risk you assume, the less likely you are to succeed.
Here are five key principles to help you mitigate risk and ensure the success of real estate development:
1. Understand every aspect of the project’s feasibility.
2. Financing – be sure your pro forma includes a best-, worst- and likely-case scenario in being able
to finance your project now and years down the road.
3. Ensure your design and construction documentation and implementation are well planned and well
executed.
4. Marketing and Leasing – make sure you have the makings of a well-developed marketing plan to
populate your development. Your project’s success is dependent on attracting and retaining long-
term tenancies.
5. Management – your development’s success is directly attributed to management. Without a good
Property Management program, your development will struggle. Satisfied tenants ensure long term
development success.

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 Fourth Year BSc. in Urban Planning and Design
Course Title: Real estate development
Individual Assignment: Real estate development process and principles

References

Real estate development, 5th Edition

Real estate development principles, book by Thomas

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