All the things you need to know about development management model

The latest trend of national developers associating with regional players for construction projects sees a rise. The purpose of connecting national and local builders is to reduce financial risks and gain from each other’s experience. 

While real estate developers tie-up for project execution, they initiate Development Management Agreements (DMAs) for better outcomes. But what are DMAs? Let us understand it a little and know what real estate builders and the industry are trying to do.  

What is a development management model?

Development management is the process of dynamically managing real estate development on regional levels to achieve the local planning vision and objectives. Its introduction attempts to change the culture of project planning and execution from the previous process that may or may not have suffered delays for multiple reasons. 

Under RERA, the development management model is helping large real estate builders step in as development managers for regional players and landowners. This, in turn, is offering regional builders the revenue share and management fee or profit share. Reputed real estate developers like Godrej Properties and Tata housing have already taken the initiative of signing development management agreements (DMAs) with local builders. This partnership is likely to boost regional developments and address relevant distress.

Some governments have also asked RERA to call the parties involved as co-promoters since both will be sharing the revenues. However, introducing a development management model may make real estate builders rethink their rules to follow the ones being laid by RERA under this stringent partnership clause.

Benefits for parties involved

One of the prominent real estate developers recently said that consulting partners would act as an external monitoring agency for maintaining quality, costs and ensuring on-time project delivery. Besides, the development management model will allow local partners to access trained and skilled planners, project managers, and a better workforce in a short time. He further added that DMAs would help ensure better quality and on-time project delivery within a constrained budget.

The development management model has been proposed under RERA to benefit both the parties involved. While the big names will enjoy the asset-light model, the regional players or landowners will enjoy the reputation and perks of an association like better management and improved construction standards.

Benefits to the regional partners:

• Brand association
• Quality construction
• On-time project delivery
• Execution as per industry standards & laws

Benefits to the branded partners:

• Local market entry
• Region-specific experience
• Asset light business model
• Addressing local risks through regional partners

Future market for development management model

The trend is slowly picking up pace across major urban areas, wherein metro cities are already seeing a rise in partnerships. This alliance is likely to boost real estate sentiments at both regional and national levels. Many local and national players are eyeing these partnerships, especially in populated urban areas like metro cities. 

The development management model emerged, keeping in mind the need for quality and timely project construction and delivery. Customer protection under RERA is the base of these DMAs that may increase project management transparency. If any of the real estate developers refuse to comply with the set regulations, they may face the law causing distress, however, protecting consumers. As per RERA regulations, these partnerships are now termed as Co-developers and have to follow certain legal guidelines as set by the RERA. Earlier there were no legalities attached to these partnerships but post RERA, the DM manager cannot walk away if anything wrong happens.

However, the structuring of such an arrangement will impact the DM partnerships but will be beneficial for the homebuyers.

Disclaimer: The views expressed above are for informational purposes only based on industry reports and related news stories. PropertyPistol does not guarantee the accuracy, completeness, or reliability of the information and shall not be held responsible for any action taken based on the published information.