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Land Use Planning: A Vital Tool for Real Estate Development

Land use planning is essential for sustainable real estate development. It considers how land should be used and developed, effectively. It determines the most suitable use of land and how infrastructure, zoning, transportation, and environmental impact will be managed. Efficient planning considers sales and absorption and the marketing, pricing and payment strategies that will maximise returns.

Land Use Planning Overview

The primary goal and principles of land use planning is to ensure that land is used efficiently, profitably, and sustainably. It involves identifying the most appropriate, highest, and best use for a particular piece of land based on its physical characteristics, environmental constraints, surrounding demographics and socioeconomic environment, and the needs of the existing and future community.  

There are various types of real estate development to consider, including residential, commercial, hospitality, entertainment, and industrial. Additional facilities can be reviewed and are often as diverse as the real estate development itself. Some developments offer basic facilities like swimming pools or playgrounds, while large-scale urban developments like Ecopark in Hung Yen or Vinhomes Grand Park in Ho Chi Minh City offer facilities like golf, shopping malls, schools, hospitals, and lakes. Given that the goal of urban and land use planning is to maximise economic, social, and environmental success while delivering a usable space, aspects like landscaping and infrastructure are also important. 

Land use planning supports sustainable development by providing a framework for the allocation of land and resources. By determining the type of real estate development, the scale, phasing, pricing, and sales strategies, land use planning ensures development is efficient, minimises environmental impacts, is financially feasible, and will ultimately deliver a successful community.

The Land Development Process

Developing land requires careful planning and execution to ensure that the project is financially feasible, profitable, and sustainable. 

Before ground can be broken or investment made, careful and informed planning is essential. Sound decisions are based on objective market metrics, development case studies and considered recommendations. Market analysis is key to understanding what type and size of development is suitable. Financial feasibility must also be determined by forecasting cash flows to determine which development types are the most viable, at the time they are delivered.

Phasing and staging allow value creation and correctly allocate revenues at different stages of the project, which are essential for the land development process. Projects can be divided into manageable phases that can be developed sequentially or concurrently, depending on market demand and financial capacity.

All potential ‘plays’ are identified before construction begins through scenario analysis. Modelling multiple scenarios delivers comprehensive longer-term views. 

As financial feasibility is paramount to successful development, sales are also an important part of the development process. With recent struggles to secure capital from traditional sources, many developers use sales to fund development. 

How Developers Can Optimise Their Development Plans

Objective land use planning informs the master planning process.   It will use market research, demographic overviews, and optimised financials to identify the highest and best use for land while considering potential risks and competitors. Case studies of successful residential land development projects can also provide insights into best practices and strategies for optimising development plans.

Conclusion

Land use planning is a critical tool for real estate development, ensuring that land is used to its greatest potential. Stakeholders looking to develop must make informed property decisions that consider market analysis, demographics, financial optimisation, and phasing to maximise returns and minimise risks. By working with experienced Advisors like Savills, developers can avoid development pitfalls, and optimise their returns, whilst minimising risk. 

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