Real estate development can be defined as the process of creating a property with the aim of making it valuable for users. Development can be undertaken through different types of finance, including equity capital, loans, and donations. The definition of real estate development is a helpful tool to guide the developer’s actions and ensure the desired results. The development process can only be successful if it benefits users and is in line with their needs.
Involvement of various stakeholders
The involvement of various stakeholders in real estate development is a critical part of the process. It involves the involvement of senior executives, who can have a direct impact on the outcome of the project. They also have the power to influence other parties in the process. Therefore, the creation of a “Stakeholder Engagement Plan” is a critical deliverable for the project.
Stakeholders are those people or groups that have a vested interest in the project. Stakeholders can include elected officials, heads of businesses, clergy, and other community figures. The involvement of these groups varies depending on the type of project and the circumstances of each business.
Influence of economic cycles
The influence of economic cycles on real estate development can be studied from different angles. It is important to take into account the construction industry, the monetary forces, and the role of government policies. If a theory is not inclusive of all of these factors, then it is incomplete. Moreover, no theory can explain the effect of the cyclical changes without accounting for these factors.
Various theories have shown that real estate can play a large role in the main business cycles. Henry George, for instance, believed that land speculations are the main cause of business cycles. While he recognized that other factors also contribute, George claimed that land plays a vital role in triggering business cycles. Land speculations tend to increase the price of real estate, thereby raising the Bill Bhangal cost of doing business.
Impact of population disparity
While African American homebuyers are making significant gains since the Civil Rights Act, they are still disproportionately priced out of homes in neighborhoods with a majority non-Hispanic population. These disparities are a result of persistent residential segregation, which negatively impacts their economic mobility and access to homeownership. This segregation limits their ability to accumulate wealth and build equity.
Racial segregation, exclusionary zoning, and poor infrastructure have contributed to the disparities that persist today. For example, many predominantly black neighborhoods have turned into “heat islands” with fewer trees and more parking lots. These conditions negatively affect health and educational achievement. Elevated temperatures are linked to reduced short-term cognitive performance, poor working memory, and lower educational attainment.
Impact of interest rates
With interest rates on the rise, real estate developers are at risk of fewer sales and lower cash returns. Rising interest rates also mean a greater cost to purchase investment properties, which can lead to less capital available to invest in real estate. However, this problem can be mitigated with strong rent growth. According to Freddie Mac, multifamily rents will outpace inflation in most metro markets by 2022.
A rising interest rate will increase the cost of financing and building projects, which means that fewer new units will be developed, which may lead to lower prices for existing units. Rising interest rates will also affect the pipeline of development, which means that some projects may not get built. Many real estate industry experts have seen acquisitions delayed or canceled due to rising interest rates. Some lenders are also being more conservative with their lending policies, which may hinder development in certain neighborhoods.