Why Real Estate Companies Charge “Development Fee”
“What is development fee and why must I pay it”
We’ve had many clients ask us this question over the years. After paying a large sum of money for a plot of land, clients are often hesitant to pay extra for development.
Some Clients simply refuse to pay the development fee because they believe it to be another avenue for the real estate developer to profit.
However, this is a wrong perception. So what is Development Fee?
The development fee is the fee a real estate developer takes to oversee the estate development project’s entirety, from pre-construction (e.g., the design and entitlement processes).
Why is development fee important and what is it used to do?
Roads and drainage
While the government is responsible for the construction of roads and drainage, corruption makes this a slow and inefficient process that could take years to complete. Unfortunately, when it is done, you might have spent a lot of money on car maintenance and dealt with severe cases of flooding. Estate developers aim to prevent this as much as possible by ensuring roads and drainage are constructed before the estate is operational.
Driving and walking at night in Nigeria is a dangerous affair no matter how secure the area is. The dim and sparsely lit streets set the scene for criminal activities and ghastly car accidents. Most drivers rely on muscle memory and their car headlights (if they work) as they navigate through pot-holed and badly tarred roads. Pedestrians equally feel unsafe walking on the streets as they know danger could be lurking in a nearby corner.
Street lights are a crucial component of infrastructure in urban areas; providing safety and security for residents and businesses.
Access to Water
Borehole drilling costs range from N250,000 to N600,000, depending on many factors such as location and borehole drilling technique. Most estates sell up to 100 plots, and after factoring in the expense of digging a central borehole and laying pipes to each home, the development fee set aside for providing clean water may be as low as N50,000 per plot. The client will save up to N550,000 as a result of this.
Other amenities that can be included in the development fee include
- Estate Supermarket to ease the burden of shopping for household items.
- Estate Playground for Children
A well-organized estate offers peace and tranquility to its residents, and while it will cost you more in the short term, the peace you gain will be priceless in the long run.
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