The real estate sector in Ghana over the years is experiencing a significant boom, driven by urbanization, population growth,
and a rising middle class. With a population exceeding 31 million and a stable political environment, Ghana has become an attractive destination for real estate investment. The demand for housing, commercial spaces, and infrastructure development is on the rise, creating opportunities for investors, developers, and clients alike. However, as much as this sector presents promising prospects, it requires caution. Developers, clients, and investors must venture into it with care, as there are common mistakes that can be detrimental to their success. This article addresses these mistakes, providing insights on how to avoid them and navigate the Ghanaian real estate market successfully.
Five common mistakes in the real estate industry and how to avoid them are as follows
1. Looking for the Cheapest Options
One common mistake made by clients in the Ghanaian real estate market is prioritizing cost over quality. While affordability is important, choosing the cheapest option can lead to compromising on crucial aspects such as location, construction quality, and amenities.
How to Avoid It
Clients should prioritize value for money over the cheapest option. This involves considering the long-term benefits and returns on investment. Conducting thorough research, comparing different properties, and consulting with real estate experts can help clients make informed decisions that align with their budget and quality expectations.
2. Building on Assumptions
Developers often make the mistake of building on assumptions rather than concrete market research and data. This can lead to projects that do not meet the needs or preferences of the target market, resulting in low occupancy rates or difficulty in selling.
How to Avoid It
Developers should conduct thorough market research to understand the demands and trends in the local real estate market before embarking on a project. This includes analysing market dynamics, studying consumer behaviour, and consulting with real estate professionals. By relying on data- driven insights rather than assumptions, developers can ensure that their projects are tailored to meet the needs of the target market, increasing the chances of success.
3. Overpromising and under delivering
Overpromising and under delivering is a common pitfall in the Ghanaian real estate market that developers should avoid. Making grand promises to buyers about the features, quality, or timeline of a project and then failing to deliver can lead to dissatisfaction among buyers and damage the developer’s reputation.
To avoid this mistake, developers should:
- Set Realistic Expectations: Developers should ensure that the promises they make to buyers are achievable and realistic. This includes setting realistic timelines for completion and making commitments based on actual capabilities and resources.
- Communicate Transparently: Transparent communication is key to managing expectations. Developers should provide regular updates to buyers about the progress of the project and any potential delays or changes to the original plan.
- Focus on Quality: Instead of making extravagant promises, developers should focus on delivering a high-quality product. This includes using quality materials, adhering to building standards, and ensuring that the finished project meets or exceeds the expectations of buyers
4. Trying to Build Without Involving Experts
One common mistake made by clients in the Ghanaian real estate market is attempting to oversee construction projects without involving experts such as architects, engineers, and project managers. This can lead to costly mistakes, delays, and substandard construction. Clients should engage professionals from the planning stage to ensure that their projects are executed efficiently and to the desired standards.
How to Avoid It
To avoid this mistake, clients should prioritize engaging professionals with the necessary expertise and experience in real estate development. This includes architects for designing the project, engineers for ensuring structural integrity, and project managers for overseeing the construction process. By involving experts from the outset, clients can benefit from their knowledge and ensure that their projects are completed successfully.
5. Underestimating Expenses
Underestimating expenses is a common mistake made by both clients and developers in real estate projects. This can lead to budget overruns, delays, and financial difficulties. To avoid this mistake, it is crucial for both parties to conduct thorough cost analysis and budgeting. Here are some steps to avoid underestimating expenses:
- Detailed Cost Analysis: Before starting a project, conduct a detailed cost analysis to identify all potential expenses, including construction costs, permits, fees, and contingencies.
- Consult Experts: Engage with architects, engineers, and quantity surveyors to get accurate cost estimates for the project.
- Contingency Planning: Include a contingency fund in the budget to account for unexpected expenses or changes in the project scope.
- Regular Monitoring: Monitor expenses throughout the project to ensure they are in line with the budget. Adjust the budget as necessary to avoid overruns.
5. Review and Learn: After completing a project, review the actual expenses against the budget to identify any areas where costs were underestimated. Use this information to improve cost estimation for future projects.
Investing Based on Assumptions
Investors in the Ghanaian real estate market often make the mistake of investing based on assumptions rather than thorough analysis. This can lead to investments in projects that do not yield the expected returns. To avoid this mistake, investors should conduct due diligence, including financial analysis, market research, and risk assessment, before investing in any real estate project. By thoroughly analysing the potential risks and returns of a project, investors can make decisions that are more informed and increase their chances of success in the Ghanaian real estate market.