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5 steps to buy a house, for first-time home buyers

Finance is one of the most important determinants, when it comes to buying a house and most of the other considerations revolve around this.

As a property purchase is often a once-in-a-lifetime decision, it is essential to evaluate your funds accordingly. To buy a house, one nowadays has to utilise their savings and also opt for a home loan. T

he process of taking a loan has also become simpler, with a majority of people opting for it. Nevertheless, there are some basic principles that one can follow, to plan your finances for buying a house this year.

1. Pay off all your existing debts

You can never assess your net worth, if you are debt-laden. Any partial payment towards this debt, will show up poorly in your credit ratings and this may affect the home loan process.

Paying off your debts completely, will help you move ahead in the direction of home buying. Besides relieving one’s tension, it can help you to properly allocate money for your basic needs and for your big real estate purchase.

 

2. Invest in multiple assets

One should learn about the different financial instruments available in the market. This can help you to invest your money wisely and use the returns, to fund the purchase of your home.

Financial experts always stress on having a mix of different asset classes in one’s portfolio, as this will help you during big-ticket purchases, like property.

“Before making the decision to buy a house, one needs to ensure that the current asset allocation is not skewed towards a risky asset class like equities.

If that is the case, one needs to shift a chunk of those assets to less risky ones that are also liquid. Mutual funds can be a great avenue for such temporary parking of funds,”

 

3. Track your spending

Real estate is an expensive investment. However, with modern buyers being exposed to global standards, they refuse to settle for anything but the best.

In such a scenario, every penny counts. Experts suggest that an individual’s monthly budget should be based on the 50/30/20 thumb rule, where one spends 50 per cent on basic necessities, including groceries, utilities, medical expenses, etc., 30 per cent for indulging yourself and your family, while the remaining 20 per cent should be saved.

This 20 per cent will help you in your down payment, getting home loans and also in case of any other emergency.

“After following the real estate market for the last three months, for buying our own apartment, we found something better than what we were looking for.

So, we are trying to channel our funds in this direction. Buying a house requires a huge amount of self-control, to avoid spending money on other temptations and instead, develop a habit of saving money for buying an apartment,” says Vihaan Verma, a house hunter from Delhi, who intends to buy an apartment this year.

 

4. Standing instructions for automatic transfer of money

Initiate standing instructions at your bank, for transferring money from your salary account to your savings account, every month.

This will keep you in check and you will only spend what is left after savings. Going forward, when you take a home loan, you can follow the same method, so that monthly EMIs are taken care of, right at the beginning and you avoid getting into any financial mess.

 

5. Maintaining a balance between rent and EMIs

Proper planning is especially important, when one plans to buy a house while also living in a rented accommodation. This will entail an outgo of EMI, as well as the rent for your current house.

“Once you avail of a home loan, the EMI starts immediately. This can become a burden, when you are paying it along with the rent for your current house.

You have to maintain a proper balance, between the EMI and the rent, so that once you get the possession of the new house, you can increase the EMI amount and move into your dream home. In 2019,

there is hope of a reduction in the Goods and Services Tax (GST) for real estate, as well as further reductions in the repo rate, which will directly reduce the pressure of repayment on buyers. In the meantime,  buying a ready-to-move-in property can be a viable option, as this will enable you to avoid the rental outgo and the GST,” advises Harvinder Sikka, MD of the Sikka Group.

 

Fund allocation, for buying a dream home

  • Plan the monthly budget using the 50/30/20 thumb rule, where you spend 50 per cent on basics, 30 per cent on luxury and the remaining 20 per cent towards savings.
  • Change your asset allocation predominantly from risky assets to liquid assets, so that when you zero-in on a property, you can immediately proceed and not let go of an opportunity because of unavailability of funds.

 

Source: ANURADHA RAMAMIRTHAM

Passengers killed in Ethiopian Airlines crash came from 35 countries, airline says

Grief and sorrow know no borders, but Sunday’s Ethiopian Airline crash is truly an international tragedy.

When the Nairobi, Kenya-bound plane went down shortly after taking off from Addis Ababa, it killed 157 people, seven of them crew members and one a security official, an airline spokeswoman said.
The passengers were from 35 nations, the airline says.
“Among the most affected, as you may expect, is Kenya, which had about 32 passengers on board,” said James Macharia, Kenya’s transport minister.
Here are the nationalities of the passengers and security official, according to the airline, which has not yet reported the crew members’ home countries:
Kenya — 32
Canada — 18
Ethiopia — 9
China — 8
Italy — 8
USA — 8
France — 7
UK — 7
Egypt — 6
Germany — 5
India — 4
Slovakia — 4
Austria — 3
Russia — 3
Sweden — 3
Israel — 2
Morocco — 2
Poland — 2
Spain — 2
Belgium — 1
Djibouti — 1
Indonesia — 1
Ireland — 1
Mozambique –1
Norway — 1
Rwanda — 1
Saudi Arabia– 1
Sudan — 1
Somalia — 1
Serbia — 1
Togo — 1
Uganda — 1
Yemen — 1
Nepal — 1
Nigeria — 1
Source: CNN Africa

Fire-resistant homes the next line of defense against climate change

It is impossible to build a fully fireproof home, but researchers are now focused on making homes at least fire resistant.

They have to, because climate change is increasing the intensity of wildfires around the world, putting billions of dollars’ worth of real estate literally in the line of fire.

Wildfires destroyed more U.S. homes and buildings last year than at any other point in recorded history, and the eight most destructive years for wildfires ever have been in the last 13 years.

“There is no reason to think they are going to get better,” said Roy Wright, CEO of the Insurance Institute for Business and Home Safety. “You look at this kind of impact — the variations in the climate we have had, we are far more susceptible to the size and intensity of fires.”

Roughly 14,000 homes burned to the ground in just two of the enormous California wildfires last year. Wildfire damage to residential and commercial property in California alone last year totaled nearly $19 billion, according to CoreLogic.

The rainy season in California is getting shorter and the droughts more prolonged, meaning there is simply more combustible material and a greater chance of wildfires.

CNBC: Test house on fire
Test house at the Insurance Institute for Business and Home Safety.

But it is not just California. Wright points to increasingly intense wildfires recently in Colorado, Texas, Florida, Tennessee and South Carolina. All of those states have huge homebuilding industries.

“There are steps that we can take so that the impact of that fire is narrowed, it doesn’t spread as far, and it impacts far fewer structures,” said Wright.

Wright’s insurance institute built two test homes at its facility in Richburg, South Carolina, one a typical structure, the other using fire-resistant materials and landscaping.

Using large fans and ember generators, it showed how quickly one house erupted in flames, while the other did not. Though a wildfire’s wall of flame might look most destructive, 90 percent of fires are ignited by flying embers, some the size of a human hand.

“Fire resistance means you’ve incorporated building materials and design features that will get the ember exposure, will get the fire exposure, but would resist it,” said Daniel Gorham, research engineer with the institute.

Landscaping is key

The siding on the fire-resistant home was a fiber cement composite, rather than typical wood shingles or planks. This composite is offered in different colors and designs that look just like wood.

Landscaping was also key. The typical home had mulch, the fire-resistant home, rocks. The fire resistant home also had all its plantings at least 5 feet from the siding and the siding was raised 6 inches off the ground.

“We have noncombustible landscaping. In this case, we have rock mulch from zero to 5 feet away from the building. We also have the ornamental vegetation outside of that 5-foot zone, and spaced strategically,” said Gorham.

Satellites have captured embers flying up to 7 miles from a wildfire. These start secondary fires. The embers can land in gutters and siding and smolder for up to 12 hours before they ignite.

Using metal instead of vinyl gutters mitigates fire risk: vinyl can melt and drop fire onto the side of the house — metal will not.

CNBC: Test house at the Insurance Institute for Business and Home Safety
Test house at the Insurance Institute for Business and Home Safety.

Windows and doors also need fortification in the line of fire.

“We have a dual-paned, tempered glass window, and we have a fiberglass door. Dual-paned is important because if we do get a fire here, single-paned glass would break, and then we have a window break, we now have a breach in the opening and that’s when flames and embers can get into the home,” said Gorham.

While the cost to real estate from wildfires is rising, the cost to build and landscape a fireproof home is actually the same or slightly less than the cost of a typical home. The savings is in the cement siding, cheaper than wood materials. That offsets cost increases in gutters and vents.

In the institute’s experiment, with equal amounts of embers blowing on them, the fire-resistant home did not burn at all, while the typical home, which was connected to it, was fully engulfed.

“This work that we do here in the lab, this is real. I think all too often, we can watch something on TV, we can listen to it and go, ‘That’s interesting, but it won’t happen to me.’ But it does. It invades a family’s life,” said Wright.

Wright is a former FEMA official and native Californian. His parents lost their home in California’s Camp fire last year, the worst in the state’s history.

“I’ve always led my team saying, ‘Make sure we know the names of those people,’ but when that fire came through Paradise — and you get the text message from your mom that says, ‘Our home is gone. Where do I start?’ … the nature of how destructive it is hits home,” said Wright.

Source: CNBC

WHY INDIAN REAL ESTATE NEEDS WOMEN

While real estate has traditionally been a male-dominated business, the participation of women is gradually increasing. We get an expert’s view on why this is essential and how it will, in fact, be beneficial to the entire industry

A lot of research and discussion, have gone into the topic of gender diversity and the role of women in senior positions in companies.

More often than not, most of the results pegged that companies with a higher percentage of women in leadership positions, tend to perform better than those with low women representation at senior positions, on a wide range of performance metrics.

The real estate industry, which has largely been male dominated with very few women in leadership positions, is slowly acknowledging this fact and is seeing a positive change.

Not surprisingly though, as most of the large firms dealing with property are family-run businesses, the reins of the business were eventually passed on to the sons of the family.

The construction business, because of the nature of the industry, with long hours on site, having to deal with contractors and workers, again became traditionally male-dominated.

Consequently, the investment side also took a natural progression to being male-dominated.

Women’s participation in the real estate industry

Over the years, the Indian real estate sector has grown significantly. With the sector getting more organised, there has been increased international penetration into the Indian markets and increased service offerings.

In this scenario, limiting the sector to only one segment of the population, also limits the available resources and talent base that is needed to take the sector forward.

The expansion of companies and the need for talent, prompted the inclusion of more women into the sector.

Currently, while we do find that women feature strongly at the entry-level and administrative positions in the industry, their numbers dwindle as we go up the ladder.

Those who make it to the leadership position, are clearly outliers – ambitious, talented and hungry for growth.

One of the most important factors, for the growing number of women in companies, is an inclusive workplace culture, where both, men and women, have the environment to succeed.

Firms that value diversity and embrace high ethical standards, thus, providing opportunities for women to take on broader roles, will attract more female talent and eventually, have a larger talent base to pick from.

 

Being a woman in the real estate industry: An advantage?

With the real estate industry growing by leaps and bounds, today, if I look around me in my current organisation (Colliers International India), the opposite may hold true.

There are more women than men, in the division responsible for selling homes. Being a woman in the real estate industry may, at times, be an advantage, as well.

With qualities of empathy and persistence present in the DNA of most women, client relationships are honed to a larger extent. Women tend to be more nurturing, more sensitive and more patient towards client’s needs.

Another aspect that women tend to bring into the business, is a more balanced and dispassionate outlook.

Women, typically, are good at balancing work and family and hence, are better at multitasking, which is a critical aspect in real estate, owing to the nature of the business.

Women, in various segments of the sector, are able to bring in a unique combination of compassion, assertiveness, focus and determination.

Qualified and educated women are able to balance out and provide the necessary synergies required to take the business forward.

 

The road ahead

Some women do opt-out prematurely, which could also be one of the reasons for their miniscule number at senior positions, not only in real estate, but in other businesses, as well.

Nevertheless, visibility of women in leadership roles, examples of which are mushrooming now, have nurtured the art of balancing  work and family and in turn, are helping and motivating  the younger, ambitious ones.

With the sector moving towards maturity, we need to see more women taking on leadership roles in all segments of real estate development, as well as consultancy.

On this International Women’s Day, let’s celebrate the spirit of womanhood.

Source: Housingnews

Should you invest in a retirement home?

Retirement homes, earlier looked upon with disdain, are now gaining greater acceptance. Children of aged parents often, live away from their family.

They are happier to have their parents living in safe retirement homes, in the company of people of the same age group, and where many of their daily needs are taken care of.

The family’s original home can be sold off to generate cash to buy a smaller retirement home, and to fund the parents’ living expenses. However, the decision to buy a retirement home should be taken with due care. Here is what you need to know:

 

Choose the right developer for a retirement home

Invest with a developer who has prior experience of running such a complex. “Running a senior living complex involves both, hard and soft issues,” points out Vishal Gupta, managing director, Ashiana Housing.

“Developing the real estate and selling it is the easy part. The hard part is providing all the promised activities: a high standard of service and removing the myriad irritants in the residents’ lives.

This is where the challenge arises because there is not so much money to be made in the maintenance and service aspects of such a project,” Gupta adds.

Sometimes, builders rebrand their projects in remote areas that are not selling. “Such developers, who are not committed to the concept, may not be able to offer the high level of service and maintenance standards required in such a complex,” warns Gupta. Therefore, avoid developers who are undertaking one-off retirement projects.

Location of a retirement home

Most retirement homes are situated on the outskirts of cities or in remote locations. Land is cheaper there and hence, the developer can buy the vast tracts of land necessary for such a project.

Such areas also offer the necessary peace and quiet. However, make sure that the place is connected well to the city by a highway or some form of public transport.

This will make it easier for you to travel to the city whenever the need arises, and for your relatives to visit you. A large hospital should be situated within half an hour’s drive to take care of health-related emergencies.

Payment modes for retirement homes

The first and most common option is an outright purchase. The advantage of such an option is to be able to pass on the home to your children, though they may only be able to live there after they are 50 or 55.

You can also sell the home if you move out and take advantage of the accrued capital appreciation.

However, this is an expensive option and a large portion of your retirement savings could get locked up in the purchase of the house. This could lead to a cash crunch in later years.

Under the upfront deposit model, you pay 60-80% of the cost of the house. You live in the house for a certain period after which you move out. When you do so, the deposit is returned after deducting certain charges. Under this model, your upfront costs are lower.

So, you have more cash in hand to manage the day-to-day expenses. However, a premature exit before the specified time may be difficult.

The original house

Keeping the original house offers the flexibility to return, if you don’t happen to like living in a retirement home. However, as Vishal Dhawan, chief financial planner, Plan Ahead Wealth Advisors, points out,

“Sometimes, the decision to keep two homes means that you become asset rich but do not have enough money to meet your day-to-day expenses.”

 

refinanceyourhome

Four Necessary Questions To Ask Before Refinancing Your Home

Here are four more questions to ask yourself before you take the leap. Look them over to get a sense of whether or not refinancing is the right move for you.

What are the benefits of refinancing?

Most people would agree that it only makes sense to refinance your mortgage if there is some tangible benefit to doing so.

Before you start the refinancing process, it’s important to root out what your specific benefits will be, as well as how great the ultimate payoff to refinancing will be.

In general, there are three major benefits that people see from refinancing:

A lower monthly payment: Though interest rates are higher now than they’ve been in the recent past, they’re still relatively low from a historical perspective.

If you took out your mortgage prior to the financial crisis of 2008, you’ll likely still be able to refinance at a much lower interest rate, which will lower your monthly payment.

A different loan term:  Even if a lower interest rate is not an option, you can also lower your payment by spreading your current loan balance -which is presumably less than the original – over a longer term.

Alternatively, you have the option to shorten your loan term and pay it off faster. Though this will likely raise your monthly payment, if you have more income than you did when you first applied for the loan, it could be a shrewd move for your financial future.

Cashing out your home equity: With a cash-out refinance, you refinance your home for more money than you currently owe on the property. The excess is given to you in the form of funds to be used however you wish.

The best way to find out how much of a benefit you could get from refinancing is to talk to a lender. He or she can look at the details of your financial situation, as well as the current mortgage landscape, in order to help you determine whether or not refinancing is right for you.

Where is my break-even point?

In addition to focusing on what the benefits to refinancing will be, you also need to take a long, hard look at how long it will take you to see them come to fruition.

The reality is, refinancing isn’t free. Just like when you first took out your mortgage, you have to pay closing costs in order to receive your new loan. These fees can often add up to thousands of dollars.

With that in mind, it’s important to look at how long it will take you to break even on your refinance, or how long it will take you to recover the cost of those fees and truly start to see savings from your new loan.

To calculate your break-even point, divide the total sum of your closing costs by the amount that you are saving each month from the refinance.

The resulting number will correspond to the minimum number of months that you need to stay in the home in order to see a tangible benefit from refinancing.

However, you’ll want to make sure that you plan to stay in your home for much longer than that in order to really start to see the benefit of that savings.

 

How much equity do I have in my home?

For a refresher, equity is the percentage of your home that you own outright or the percentage of your home that is not currently mortgaged.

As you pay down your loan, your equity grows. When you go to refinance, you’ll likely face specific equity requirements.

Typically, lenders will expect that you retain at least 15%-20% equity in the property. (Though, it is possible to find lower options.) Lenders prefer that you maintain equity in the home because it means that you retain a stake in the property and have an incentive to keep making payments on your loan.

Finding how much equity you have in the property is easy. All you need to do is take the current value of the property – which you can find by having an appraisal done or having a real estate agent conduct a comparative market analysis – and subtract the amount you owe in your mortgage.

Does my old mortgage have a prepayment penalty?

Though it may seem unfair, sometimes mortgages come with penalties for paying off your loan early (and essentially denying the mortgage company the income they would have made off of your continued interest payments).

The exact penalty will vary by company, but according to a refinancing guideby the Federal Reserve Board, it usually ends up being one to six months worth of interest payments.

Your first step should be to read over the terms and conditions of your current loan to see if you’re subject to these penalties. Then, if so, to factor those fees into your cost calculations for your break-even point.

That will give you a clearer idea of whether or not refinancing makes fiscal sense for you at the moment.

Source: Forbes

Real estate investors require Buhari’s Assurance to the int’l community that Nigeria is open for business

Investors in the Nigerian real estate sector say President Muhammadu Buhari, as he starts the next four years of his presidency, should quickly assure the international community, including private, portfolio and institutional investors, that this time around, Nigeria is open for business
.
The investors recall that the Federal Government under Buhari has, in the last three and a half years, carried on with the burden of correcting the impression that it is anti-business and this sentiment has prevailed in some quarters of the business community.

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Reasons for this impression, according to the investors, are the unfavourable tax policies, the continued delay in signing the Petroleum Industry Bill (PIB) into law to attract private investment into the oil and gas sector, and seemingly punitive and anti-investor policies as reflected in some cases involving government agencies and companies.
“Buhari should reach out to the international community and let them know that Nigeria is open to business. He should set up (or retain) his cabinet very quickly to give clear indication of his intention to work speedily this time around,” Gbenga Olaniyan, CEO, Estate Links, said in an interview.
Buhari was quoted as saying that Nigerians should brace up for a tough time in the next four years and, according to Olaniyan, this sends a wrong signal to both local and foreign investors who may interpret that statement in various ways.
Femi Akintunde, CEO, Alpha Mead Group, agrees, saying “the country needs all the foreign investment it can get”.
“The money circulating in the economy now, which is self-generated, is grossly inadequate, more so as the country is more of a consuming than producing nation,” Akintunde said.
“We are not producing enough for local consumption not to talk of export. So, the more money we get from outside, the better for our economic development. We cannot afford to send a wrong signal to investors both local and foreign,” he said.
Government’s perceived anti-business stance has a lot of implications for the real estate sector, which has remained in recession long after the wider economy exited recession in the second quarter of 2017.
home
In spite of the role the sector can play in the growth of the economy through job creation and wealth generation, government is not giving adequate attention to the myriad of problems plaguing the sector, especially lack of long-term funds for developers as well as the Land Use Act.
“People will always need houses to live in, and moving to a better home or a better neighbourhood is normal aspiration of most people. So, there will always be demand – latent or active – for real estate.
However, the real estate sector will not thrive in isolation,” said a developer who did not want to be named.
“The Federal Government does not believe in private sector-led economy and therefore may not actively support and encourage wealth creation,” the developer said.
Source: Chuka Uroko

Buying with friends the future of housing?

With house prices have risen over the last decade, many young people have found it tough to get on the property ladder. Some are choosing to co-buy with friends, but it is not without its risks.

Courtney McClure is buying a six-bedroom house with her husband Alex and another couple in south London.

The deal is almost complete and the group is excited to make the property in Sydenham, which has a large garden and big communal spaces, their own.

Pooling their resources with another couple has enabled them to buy in a “much more appealing” location with better transport links than if they had bought a place separately, Courtney says.

“We’re getting a lot more for our money,” adds Alex, a 32-year-old sound engineer.

But money should never be the sole motivation to buy with friends, Courtney says. “It’s such a big thing. You’re sharing your world. I think if you were just doing it for cost reasons, you probably wouldn’t enjoy it.”

Her view is echoed by Lucy Jordan who believes buying property with friends, or co-buying is “the answer”.

Not only is it a wise choice financially, it is also the “best option”, because “people are better off living in groups”, she says.

“People are trying to decide how best to make the most of their lives,” says Lucy, who currently lives in Harlesden, north London. For her this means buying a property in or near Dover, with her partner and four friends.

 

The group has not laid their eyes on any particular places, but Lucy says: “We’re all quite passionate about it. It’s definitely the way we’re going to go.”

Are more people doing this?

M&S Bank believes there has been an increase in people co-buying. Last year it launched a “mortgage for four”, following research it says showed that the “majority of millennials would take out a mortgage with two or more people to get a foot on the property ladder”.

“The option of becoming a mortgage-mate is particularly appealing to those already in a housemate arrangement, and our research shows that the concept has become increasingly popular with millennials,” Paul Stokes, head of products at M&S Bank, said.

Average UK house price graph

 

Mortgage brokers London & Country have detected a small increase in applications by groups of three or four, but spokesman David Hollingworth says this increase does not capture mortgages taken out by two friends, for example, and does not make clear if applicants have “parental backing”.

Though the phenomenon might be on the up, Alex McClure says when he and his co-buyers approached estate agents, “a lot of them seemed quite surprised – I think it’s still considered abnormal.”

Not all lenders offer group mortgages either. Nationwide, one of the UK’s largest mortgage lenders, for example, currently has a maximum of two people per mortgage.

What about the risks?

London & Country’s David Hollingworth warns that if one co-buyer wants to move on, this could create a situation where the “other co-buyers would either have to buy them out or if they can’t afford that, be faced with the prospect of selling the property”.

Even if four people’s names are on a mortgage, if one or more stop paying, the mortgage lender has the right to demand full repayments from whoever they can reach, he explains.

Sean Gilbert, a 40-year-old flooring contractor from Bedfordshire, says co-buying is “insanely risky”.

He now lives in his 16th rented property since leaving school but says house prices have been “artificially inflated” by the buy-to-let market, and he is “resigned to never owning”.

But he would never consider co-buying. “There are virtually zero legal safeguards if someone wants to up and leave, taking their capital with them.”

‘In it together’

Lucy Jordan, however, has “complete trust” in her group.

“We’re all incredibly close, and if something were to happen that would mean one of us would become financially insolvent, I would want to support them. We’re all in it together. I see us more as a family,” she says.

There are, however, some ways to formalise co-buyers’ obligations towards each other.

The McClures and their co-buyers have drawn up a deed of trust, which is a legal agreement used to specify how a property is held between its joint owners.

It sets out steps the group would take “if someone wants out”, Courtney explains.

“I don’t think anyone will have any hard feelings if someone is really honest and says, ‘I really hate this,’ and I think it’s better to do that and stay friends than put up with a terrible situation,” she adds.

For now though, the group of friends are excited to move in together – with one couple on each floor, and sharing the cost of any renovation and possibly childcare in a few years time.

Source: BBC News

 

What the failed Johannesburg project tells us about mega cities in Africa

Six years ago a major development was announced in South Africa. Billed as a game changer, it was meant to alter the urban footprint of Johannesburg, Africa’s richest city, forever.

The Modderfontein New City project was launched amid much fanfare, expectation and media hype.

Zendai, a Chinese developer, bought a 1600-hectare site north-east of Johannesburg for the development, which it quickly dubbed as the “New York of Africa”. Early plans showed it was to include 55,000 housing units, 1,468,000 m2 of office space and all the necessary amenities for urban life in the form of a single large-scale urban district. The cost estimate was set at R84 billion.

The developers believed that Modderfontein could function as a global business hub and would become Johannesburg’s main commercial center, replacing Sandton. The project would also change Johannesburg’s international profile by strengthening relations with Asian corporate interests.

But, despite the release of futuristic computer-generated images which led to significant publicity for the project, it was never built. Instead, the land was eventually sold off. Another developer has since begun construction on a much more scaled down project, in the form of a gated-community style housing development.

Modderfontein has faded away from the public consciousness. The story of why it failed has never been adequately told in the media.

Our research, which took place over the course of several years, sought to understand the factors which led to the project’s demise. We also wanted to find out how Modderfontein’s failure relates to the broader African urban context.

We found that the project was hindered by conflicting visions between the developer and the City of Johannesburg. Moreover, unexpectedly low demand for both housing and office space meant the original plan for the project was incompatible with the city’s real estate market.

The project’s trajectory also shows how African “edge-city” developments, which are generally elite-driven and marketed as “eco-friendly” or “smart”, can be influenced by a strong local government with the means and willingness to shape development.

Conflicting interests

Zendai’s aspirations to produce a high-end, mixed-used development did not fit with the City of Johannesburg’s approach. Rather than a luxurious global hub, the city wanted a more inclusive development – one which reflected the principles outlined in its 2014 Spatial Development Framework.

At the heart of the framework is the desire to reshape a trend that saw capital leave the old central business district for affluent Sandton at the dawn of democracy in 1994. This was accompanied by an upsurge in securitized suburbs further north towards Pretoria, the country’s capital city.

These spatial trends were incompatible with the ideals of South Africa’s new democratic government and its strategy to mitigate the effects of apartheid-era planning. During apartheid, black people were prohibited from living in more affluent areas, which were reserved for the minority white population. Instead, they were forced into sprawling “townships” on the periphery of cities, far from work and economic opportunities.

To this end, the city demanded that Zendai include at least 5 000 affordable homes in its plans. It also wanted to ensure that the development was compatible with and complemented Johannesburg’s public transport system. The city was willing to contribute funding for the necessary infrastructure and inclusive housing.

Yet Zendai remained steadfast in its commitment to its vision, eventually deciding against fully integrating the city’s wishes into its planning application. This saw the city draw-out the planning process.

Meanwhile, problems were mounting for Zendai. The owner, Dai Zhikang, was eventually forced to sell his stake in the project to the China Orient Asset Management Company. Rather than continuing with the project, the asset managers sold the land to the company behind the new housing development on the site.

Smart cities in Africa

Over the last decade, a variety of developments like Modderfontein, including Eko-Atlantic in Nigeria, New Cairo in Egypt, and Konza Technology City in Kenya, have been touted by both public and private sectors as panaceas for Africa’s urban problems. The thinking is that as the developments are disconnected from the existing urban landscape, they won’t be burdened by crime or informality. However, these projects can take badly needed resources away from the marginalized areas of the city.

To make them more palatable to domestic and international audiences, the developments are usually marketed as “smart” or “eco-friendly”.

But these developments can fail at the point of implementation. This is because, as speculative projects, they generally don’t recognize the need to fit in with the wishes of the local authorities or adapt to the existing city. In the case of Modderfontein, the city government had the capability to push back against the developers and, in the end, tried to shape the project to better fit Johannesburg’s urban realities.

Source:  Ricardo Reboredo And Frances Brill, The Conversation

How to speed up your property transfer

Time is money – and transfer delays can be costly

In complex, protracted transactions like property sales, delays are not only frustrating, they can also be extremely costly and may even torpedo the deal completely. However, while some delays cannot be foreseen, it’s possible to exponentially reduce the risk by doing one’s homework and having all one’s ducks in a row from the onset.

This is according to Jill Lloyd, veteran agent and Area Specialist in Rondebosch and Claremont for Lew Geffen Sotheby’s International Realty, who says: “Essentially there are two primary types of delay; the first relating to the confirmation of the sale and those that occur once the sale has been confirmed and hold up the transfer.

“Property transactions are known to be lengthy processes with multiple steps and reams of documentation, and once the potential minefield of suspensive conditions and contractual obligations has been successfully navigated and the deal is finally done, many people breathe a sigh of relief. But the expected downhill cruise to transfer can still become an uphill battle if one isn’t careful.”

 

Lloyd explains how this can happen:

“One of the main reasons for delayed transfers is that the timeline is out of sync, especially when two or more deals are linked and money from one sale is needed to purchase the next property and so on. I once brokered a transaction with seven linked deals all dependent on the sale of a Rondebosch East home and we had to pull out all the stops to get the house sold in time.

“It is also very important for buyers to budget for the transfer costs of the new property they are buying or have an access bond in place on their current home, otherwise when the attorney calls for bond cancellation that bond account will be frozen and they will not be able to access the funds.”

She adds that not giving the required 90 days’ notice of cancellation of the existing bond can also cause delays as well as avoidable late cancellation fees.

“If a homeowner is seriously thinking about selling, they should give notice to the bank holding the bond. In doing so, they are not committing to selling, merely notifying the bank of the possibility and they can keep on renewing the cancellation if they don’t sell timeously or revoke the notification if they change their minds.”

Craig Guthrie, Partner at Guthrie Colananni Attorneys says: “One of the transferring attorney’s key roles is to coordinate and control all the role players involved in a transfer, including SARS (transfer duty), the municipality (Rates Clearance Certificate) and the bank.

In order to do this as seamlessly as possible, it is essential that both the buyer and seller submit all the necessary documentation in time, as per the legal requirements and without omissions. This is especially important if either party resides in another country or is otherwise difficult to contact for information and signatures.

 

Guthrie says that although hiccups and stumbling blocks can occur at any point of the transaction, they most commonly occur at the following stages:

  • Bond Approval
  • Bond Cancellation
  • The signing of transfer documents
  • Obtaining valid compliance certificates
  • Issues encountered at lodgements requiring the removal of notes by the Registrar of Deeds
  • Transfers which are unusual and more complex, such as estate transfers which require an endorsement of the Master of the High Court, which can cause a delay

Most of these delays can easily be avoided, through prompt co-operation with the transferring attorney and the paralegal handling their transfer or, if they are outside of South Africa, by giving a valid power of attorney to a person within South Africa who can sign the necessary documents and act on their behalf.

 

“It’s vital that the client is completely up front with the agent regarding their financial situation,” says Lloyd. “We can then facilitate and expedite the process by having our bond broker at ooba, South Africa’s largest mortgage originator, prequalify them and the thorough credit check will reveal any potential snags.

“This step is particularly important for buyers who are self-employed as banks are very strict about the documentation that they require for a bond application. At this stage I always advise all my clients to avoid making any expensive purchases that could negatively impact their affordability.”

 

Lloyd concludes: “Experienced estate agents will guide their clients every step of the way and as long as they are upfront with their realtors, there should not be too many problems to circumvent.

“I also recommend appointing an accomplished conveyancing attorney who is really on the ball. It is all very well allowing your best friend to handle the transfer, but you could end up being enemies if they make a complete hash of it and that happens more often than I like to remember!

“And, as the transferring attorney and agent work closely together behind the scenes to ensure a smooth transfer, it is always an advantage if they already have an established working relationship.”

 

Source: Private Property

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