In-house construction by developers can cut property prices by up to 25% for homebuyers
The rising cost of construction is a significant factor in determining property prices, making it increasingly difficult for developers to deliver affordable homes while maintaining profitability.
Developers who take control of the construction process — rather than relying on external contractors — can reduce property prices by as much as 25 per cent. This reduction is not a matter of cutting corners but reflects a more strategic, controlled approach to development that benefits both developers and end users.
Eliminating contractor markups reduces build costs
When developers depend on third-party contractors, they are subject to the additional costs that contractors add for their services, which include labour, material procurement, and project management fees. Such costs often escalate, pushing the final price of the property upward. Developers can avoid these markups when handling construction in-house, allowing for significant savings that are passed on to buyers.
Faster timelines reduce holding costs and exposure to market fluctuations
In-house construction also allows developers to shorten project timelines. With greater control over the construction process, developers can streamline schedules and avoid delays that often occur when coordinating with external contractors. External contractors may juggle multiple projects simultaneously, leading to resource constraints and delays. In contrast, an in-house team focused solely on one project can ensure that work is completed more efficiently and on schedule.
Construction speed has a direct impact on a developer's bottom line. By reducing construction timelines, developers can lower holding costs — the expenses incurred while waiting for a property to be completed and ready for sale. On top of that, faster delivery mitigates exposure to market fluctuations, as developers are not left holding properties for extended periods, during which prices may rise or fall. The result is greater financial predictability and stability in a volatile market.
Greater control over quality and materials
A significant advantage of in-house construction is the increased control over the quality of materials used and the standard of workmanship. When relying on third-party contractors, developers may have limited oversight over the choice of materials, leading to compromises in quality or unexpected costs due to the use of lower-grade materials. In-house teams provide developers with more flexibility to select the best materials within budget, ensuring that the final product meets the desired quality and durability standards.
Price stability despite market fluctuations
The real estate market is known for its volatility. Construction costs are subject to fluctuation, influenced by factors such as raw material prices and external economic events. Developers who rely on external contractors are often at the mercy of these market changes, as contractors adjust their fees to accommodate rising costs. Unpredictability makes it difficult for developers to maintain consistent pricing, which can affect both the sales price of properties and the developer's bottom line.
In-house construction means directly sourcing materials, negotiating prices with suppliers, and coordinating internal teams, locking in costs and maintaining stable pricing for the duration of the project. The ability to manage costs provides price stability, even when the market experiences unexpected shifts.
Building trust with buyers and investors
Transparency and control are key factors in fostering trust with homebuyers and investors. In-house construction allows developers to demonstrate their commitment to quality and project timelines. In addition, developers who handle construction in-house are able to build stronger relationships with buyers, who can have greater confidence in the process. Buyers know that the developer has direct control over the quality and delivery of the project, which is a significant advantage in a competitive market.
In-house construction is not just a cost-saving measure. It is an innovative approach that is reshaping the real estate development landscape, ensuring that both developers and buyers benefit from stronger financial outcomes and more sustainable growth.
The writer is Executive Director, TownX, a real estate developer in Dubai with a Dh4 billion project portfolio.
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