Local partnerships or direct operation: Which is better for the real estate developer?

When studying entry into any new real estate market, the real estate developer faces a strategic decision that may directly affect the success of the project and its future returns, which is choosing the appropriate business model.

While some developers prefer to rely on local partnerships to benefit from the expertise and relationships within the market, others choose direct operation to ensure full control over all project phases.

In the Syrian market in particular, the importance of this decision stands out due to the unique investment environment and the diversity of available real estate opportunities, making it essential to understand the advantages and challenges of each option before launching any new real estate development project.

What is meant by local partnership in real estate development projects?

A local partnership in real estate development projects means partnering with a local real estate developer as the main option representing this concept. In its broader sense in the real estate market, a local partnership may also include cooperation with local landowners and national financing entities to unify investment efforts.

This partnership includes:

• Partnership with a local real estate developer: This means alliances between external or major real estate development companies and local developers in the targeted area to benefit from their experience, relationships, and deep understanding of local market requirements and the area's specific regulations and laws.
• Partnership with landowners: Usually known as "land contribution" or "in-kind partnership," where one party provides the land and the other handles development and construction. This is a type of local real estate partnership but focuses on providing assets.
• Partnership with investment or financing entities: Classified as "financing partnerships" or "financial alliances," aiming to provide the necessary liquidity and financial support to implement the project (such as banks, real estate funds, or individual investors).

What are the advantages of local partnerships for real estate developers?

Local partnerships are a fundamental pillar for the success of real estate developers, as they ensure safe and sustainable entry into targeted markets. These alliances help maximize investment returns by leveraging the expertise and regional relationships of the real estate partner, including:

• Faster market understanding and investor behavior: The local partner has accurate data on demand volume, suitable prices, and the types of units preferred by buyers in that area.
• Benefit from local relationships and expertise: This provides immediate access to the best construction contractors, reliable suppliers, and qualified personnel to manage the project.
• Facilitating access to land and opportunities: The local developer has prior knowledge of prime land not publicly offered and strong connections with property owners in the area.
• Reducing legal procedure risks: The local partner ensures faster building permit issuance and avoids fines due to extensive experience with local regulations and laws.

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What are the potential challenges of local partnerships?

The main potential challenges of local partnerships are differences in corporate cultures and conflicts of interest between partners.

These challenges can be categorized as follows:

• Conflicting visions and objectives: Differences in priorities between partners regarding profit shares, execution quality, or the project timeline.
• Difficulty in decision-making: Slow procedures due to each party wanting to impose its control and management over daily operations.
• Risk and responsibility distribution: Legal disputes may arise when determining which party is responsible for losses or unexpected costs.
• Inequality in commitment: Differences in financial or technical capabilities between the partners, placing the implementation burden on one party.
• Reputation risks: The global developer may be negatively affected if the local partner commits legal violations or has failed previous projects.

What are the advantages of direct operation for the real estate developer in Syria?

• Full control over the project: Ensures the developer directly supervises the quality and specifications of construction and personally selects contractors and suppliers to guarantee actual implementation.
• Freedom to make strategic decisions: Allows the developer to quickly adapt and adjust sales or pricing plans to face rapid economic changes without complex partner approvals.
• Building an independent brand: Helps establish the developer's name and position in the Syrian market directly, enhancing the trust of local buyers and investors in the future.
• Retaining all investment returns: Ensures no sharing of profits from selling or leasing units with other parties, thus increasing the developer's net investment profits.

What benefits does the real estate developer gain by managing the project themselves?

By managing the project themselves, the real estate developer gains many advantages, most notably full control over implementation, the ability to make strategic decisions quickly, building an independent brand, and retaining all investment returns without sharing profits with partners. This model also provides greater flexibility to adapt to market changes and improve project management efficiency.

What are the challenges faced by the developer with direct operation?

The main challenges faced by the developer with direct operation are bearing all financial and legal risks alone without a partner to share the burdens.

These challenges can be summarized as follows:

• Individual financing burden: The developer is committed to securing all the liquidity and capital needed to cover project costs without external financial support.
• Difficulty dealing with bureaucracy: The developer alone faces the complexities of obtaining permits and government approvals, which may prolong the implementation period.
• Price fluctuation risks: The developer alone bears the differences in building material prices and inflation, which threatens the project's expected profit margin.
• Weak local relationships: The independent developer may sometimes lack a strong network of relationships with local suppliers and contractors compared to a local partner.
• Full legal responsibility: The developer alone is liable for any legal disputes with buyers, regulatory authorities, or workers.

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When is local partnership the best option for the real estate developer?

Local partnership is the best and most suitable option for the real estate developer in the following strategic cases:

• Entering new markets: When the developer wants to expand geographically into new countries or cities with different investment cultures.
• Complex legal environments: In markets with strict regulations and laws, or those requiring complex government permits that cannot be quickly obtained without a local partner.
• Lack of financial liquidity: When the project requires large capital exceeding the developer's individual financing capacity, making financial alliances a solution to distribute costs.
• Difficulty in acquisition: If the targeted real estate market imposes restrictions on foreign ownership of land, or local residents own the best prime locations.
• Large and integrated projects: In smart city projects or major residential complexes that require specialized technical expertise and highly qualified local contractors.
• Cases of economic instability: When investing in markets experiencing rapid exchange rate or inflation fluctuations, where the local partner has greater flexibility to hedge and manage risks.

When is direct operation more feasible for the real estate developer?

Direct operation is more feasible for the real estate developer in the following strategic cases:

• Deep market expertise: When the developer has full and historical knowledge of the targeted investment environment and consumer behavior.
• High financial solvency: Availability of cash flows and large capital covering all project stages without external financing.
• Desire for independence: The developer's keenness to make quick and flexible decisions away from the complexities of partner approvals and slow group management.
• Strong relationships: Having a direct and reliable network with contractors, suppliers, and government agencies responsible for permits.
• Protecting trade secrets: The developer's desire to preserve innovative building techniques, exclusive marketing plans, or unique business models.
• Standardized project preparation: When projects are repetitive or low-risk and do not require responsibility distribution or external expertise.

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How does Imtilak Real Estate help developers choose the right market entry model for Syria?

Imtilak Real Estate helps real estate developers and investors choose the most suitable entry model for the Syrian market by leveraging its regional experience of more than 14 years and providing an accurate analysis of the current real estate investment environment in Syria.

This assistance is achieved through a range of focused consulting and field services:

• Market data and indicator analysis: The company provides comprehensive feasibility studies on demand volume, targeted purchasing power, and price comparisons between developing areas (such as Marota City and Basilia City) and traditional areas.
• Identifying investment opportunities and alternatives: The company offers a diverse, legally and technically vetted portfolio of land and properties to suit developers seeking direct operation or profitable alliances.
• Risk assessment and balancing: The company assesses the developer's financial solvency to determine whether the "direct operation" model is safe for them, or if "local partnership" is better for distributing financial burdens and reducing risks of price fluctuations and inflation.
• Legal support and real estate documentation: The company provides consultations on the Syrian legislative framework, verifies the integrity of real estate records (green tapu), mechanisms for property transfer, and conditions for ownership by expatriates or companies, to avoid any loopholes when drafting partnership or direct purchase contracts.
• Providing a reliable local network: The company acts as a bridge connecting external developers with the best engineers, contractors, and local suppliers to ensure projects are implemented to the highest quality standards.
• Marketing management and after-sales services: For developers who choose the direct operation model, the company ensures their units are sold quickly through integrated real estate marketing and project management plans.

To learn about the best real estate development opportunities in Syria and choose the most suitable investment model, contact the Imtilak Real Estate team for a real estate consultation.