Nurturing property investment by re‐engineered systems for land pricing by local authorities

Pages77-94
DOIhttps://doi.org/10.1108/14635780710720180
Publication Date13 February 2007
AuthorWilfred M. Matipa,Ronald Barham
SubjectProperty management & built environment
Nurturing property investment by
re-engineered systems for land
pricing by local authorities
Wilfred M. Matipa and Ronald Barham
University of Central Lancashire, Preston, UK
Abstract
Purpose – The research in this paper is aimed at re-engineering existing approaches to the analysis
of proposed developments in local authorities – from land pricing to planning permission – hence
reducing the loss of revenue in councils, and nurture property development.
Design/methodology/approach This paper is a case study of seven city councils on the
Copperbelt province of Zambia was conducted using the same template of questions.
Findings – The research found that councils had overly politicised management structure, static
appraisal methods, poor market data capture, analysis and use. Additionally, councils did not use
market data on property values; hence the existing analysis and appraisal systems are static and
ineffective.
Research limitations/implications – The paper shows that extracting current data from the
councils proved a severe limitation.
Practical implications – The paper shows that councils can: learn how overly politicised their
interdepartmental communication and data exchange is; enhance paper based systems of appraising
proposed developments by adding established methods of project appraisal that can ease the
collection, analysis and synthesis of construction business data used in the appraisal process; Employ,
and support qualified personnel with adequate resources necessary to perform their duties
professionally; make gradual improvements to existing systems within the cultural and political
atmosphere of the council; and appraise proposed developments using accepted business approaches;
just like private sector consultants do.
Originality/value – The research provides practical solutions that enhance professional appraisal
techniques in councils of most underdeveloped countries, hence setting the basis upon which market
driven strategies for nurturing property development can be made
Keywords Property, Investments, Local Authorities, Zambia
Paper type Research paper
Introduction
Mining has always been the main industrial activity of the Copperbelt province in
Zambia. The free-market oriented economic strategy pursued by the government in the
1990s has led to inter alia the privatisation and eventual break-up of the then Zambia
Consolidated Copper Mines (ZCCM) into separate business entities. This development
has resulted in a vibrant property market – especially residential on the Copperbelt
because most of the housing units held by the mining conglomerate were sold to sitting
tenants. Because of the sudden increase in the demand for professional services,
councils are failing to cope with the appraisal and analysis of development projects.
Some key indicators of the deficiencies in the property development process in local
authorities have been, but not limited to:
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1463-578X.htm
Nurturing
property
investment
77
Journal of Property Investment &
Finance
Vol. 25 No. 1, 2007
pp. 77-94
qEmerald Group Publishing Limited
1463-578X
DOI 10.1108/14635780710720180
.The mushrooming of illegal housing units – estimated at 80 percent of every
city’s housing stock (Mwimba, 2002).
.The generically poor city architecture.
.The poor record of collecting council tax and rates from property owners (Times
Reporter, 2004).
.Lengthy bureaucratic and/o r political systems that overpo wer technical
prudence in the planning application and land allocation process.
At times, factors such as general political, economic, and legal risks could abruptly
change ones’ business architecture; resulting in abandonment of property
development. However, much of the problem emanates from the outdated and
usually inadequate project analysis approaches used by local authorities to advise
property developers.
This research is aimed at identifying the weaknesses of the current practices,
proposing a re-engineered approach to the analysis and appraisal of proposed
construction developments by the local authorities. It uses seven cities in the
Copperbelt Province of Zambia, as case studies. The research suggests that
re-engineering existing systems is both necessary and possible, because proper project
analysis could on one hand help developers better determine the viability of their
proposals, and on the other, nurture property investment in cities.
Poor project analysis in councils: the problem
When the mines were privatised by the government in the 1990s, most local authorities
never anticipated a rapid increase in the demand for professional management of the
areas that had previously been run by the mining company. The municipality is the
only remaining authority that could provide professional planning and property
services in the city. However, the municipalities are failing to provide these services
adequately because of the sudden increase in demand resulting not only from the sale
of the housing units that belonged to the mining conglomerate (Pangaea Partners,
2000) but also increased rural to urban migration (Chakwe, 2004), increased
proliferation of squatter settlements, and an increasing unwillingness to pay for
services (Ntengwe, 2004). Additionally, a presidential decree of the late 1990s that
forced councils as well as parastatal organisations to sell their residential properties to
sitting tenants at undervalued prices, created a significant loss of revenue for the
councils (Kaswende, 2005). Various reports such as that by Madon et al. (2004) show a
worldwide trend where coun cils in underdeveloped nat ions are experiencing
difficulties in the collection of rates and council tax. In the Copperbelt, however, this
problem is compounded by:
.The overly politicised, static and bureaucratic planning system devoid of any
established project appraisal techniques.
.The insecurity associated with land tenure and title deeds for land in the mining
area (Hansungule et al., 1998; Smith, 2004).
.Poor construction cost and property value data capture, analysis and storage.
.Non-use of market data such as rental and capital values, inflation and interest
rates to appraise a project at its initial stages, as shown in Figure 1.
JPIF
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