The decision to involve private developers in the servicing of erven has led to an increase in the price of erven and has resulted in the Municipality of Swakopmund losing potential income of more than N$525 million over the past decade.
It has become painful clear that a decision made by the previous Swakopmund Council, to allow private developers to develop large tracts of land, has cost the municipality more than half a billion dollars in lost revenue.
The prices of erven demanded by private developers have also created affordability problems, and sidelining the needs of low-income earners while prioritising profits.
This conundrum came to light at a Council meeting held on 24 April, where a proposal was tabled by the management committee to the effect that “Council should seriously consider adopting a total moratorium on the development of large tracts of land” by private developers.
The moratorium would include all applications previously submitted to Council for any of the undeveloped blocks of land earmarked for township development. The controversial decision to allow private developers to service the erven was taken by the previous council,“… although the potential loss of income was pointed out to Council”, it was noted.
“However at a later stage the previous Council did realise that it would be better if Council continued to develop land themselves…” and following the election of a new Council it was decided by April 2010 that “all applicants be informed that Council will not consider the alienation of more block erven until the blocks allocated to developers north of Extension 9 and Tamariskia have proven to be successful.”
Again in July 2010 Council resolved to “take all the necessary steps to develop any blocks, which are not sold.”
On the basis of that decision Council then developed 120 erven on Block 7, north of Tamariskia, without the involvement of any private developers. These erven were eventually sold at an average purchase price of N$746/m² and generated close on N$60 million for the municipality.
There are very few blocks of prime residential land left for residential development and it was argued last week that if Council goes ahead to develop the remaining Block 15 without the involvement of any private developers, the municipality would “generate an income of N$153.3 million (plus N$65 million through the sale of the land), being N$218.31 million, compared to a potential N$590.2 million, which is now only being shared by 12 developers, Council included.”
In the municipality's own assessment of the losses it suffered as a result of the decision to outsource the development of erven, it found that if Council had developed all blocks availed to the private developers, Council would have generated “income from Blocks 1 to 15 totalling N$590.2 million” (based on a market-related selling price of N$667/square metre, minus the upset price of N$222m², which already includes a 25% profit margin).
It was further noted that the income from the development of land would have been sufficient to finance the formalisation of the DRC settlement. However, following a number of earlier resolutions, which sanctioned the sale of the undeveloped erven, Council ended up developing only two of the 15 blocks that were available, Blocks 1 and 7, to the north of Tamariskia, which were handed back to Council by Rössing Uranium.
Council noted that the only other block available for development by the municipality is Block 15, which is considered one of the last prime sites for residential development. It is estimated that Council could still generate N$153 million from the servicing and sale of these erven.
This does not mean that private developers will be totally excluded from developing land: “Council will still be approached for land for major projects, such as schools and hospitals,” but such proposals must “be tested in public,” it was recommended.
It was further recommended that “in future, a standard response be issued to all applicants for land in excess of 5 000m², for especially township development, informing them that there is no land available…”
It has become painful clear that a decision made by the previous Swakopmund Council, to allow private developers to develop large tracts of land, has cost the municipality more than half a billion dollars in lost revenue.
The prices of erven demanded by private developers have also created affordability problems, and sidelining the needs of low-income earners while prioritising profits.
This conundrum came to light at a Council meeting held on 24 April, where a proposal was tabled by the management committee to the effect that “Council should seriously consider adopting a total moratorium on the development of large tracts of land” by private developers.
The moratorium would include all applications previously submitted to Council for any of the undeveloped blocks of land earmarked for township development. The controversial decision to allow private developers to service the erven was taken by the previous council,“… although the potential loss of income was pointed out to Council”, it was noted.
“However at a later stage the previous Council did realise that it would be better if Council continued to develop land themselves…” and following the election of a new Council it was decided by April 2010 that “all applicants be informed that Council will not consider the alienation of more block erven until the blocks allocated to developers north of Extension 9 and Tamariskia have proven to be successful.”
Again in July 2010 Council resolved to “take all the necessary steps to develop any blocks, which are not sold.”
On the basis of that decision Council then developed 120 erven on Block 7, north of Tamariskia, without the involvement of any private developers. These erven were eventually sold at an average purchase price of N$746/m² and generated close on N$60 million for the municipality.
There are very few blocks of prime residential land left for residential development and it was argued last week that if Council goes ahead to develop the remaining Block 15 without the involvement of any private developers, the municipality would “generate an income of N$153.3 million (plus N$65 million through the sale of the land), being N$218.31 million, compared to a potential N$590.2 million, which is now only being shared by 12 developers, Council included.”
In the municipality's own assessment of the losses it suffered as a result of the decision to outsource the development of erven, it found that if Council had developed all blocks availed to the private developers, Council would have generated “income from Blocks 1 to 15 totalling N$590.2 million” (based on a market-related selling price of N$667/square metre, minus the upset price of N$222m², which already includes a 25% profit margin).
It was further noted that the income from the development of land would have been sufficient to finance the formalisation of the DRC settlement. However, following a number of earlier resolutions, which sanctioned the sale of the undeveloped erven, Council ended up developing only two of the 15 blocks that were available, Blocks 1 and 7, to the north of Tamariskia, which were handed back to Council by Rössing Uranium.
Council noted that the only other block available for development by the municipality is Block 15, which is considered one of the last prime sites for residential development. It is estimated that Council could still generate N$153 million from the servicing and sale of these erven.
This does not mean that private developers will be totally excluded from developing land: “Council will still be approached for land for major projects, such as schools and hospitals,” but such proposals must “be tested in public,” it was recommended.
It was further recommended that “in future, a standard response be issued to all applicants for land in excess of 5 000m², for especially township development, informing them that there is no land available…”
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