Property developers could save £126,000 by using modular construction
Property developers can save over £100,000 by building homes through modular construction rather than the traditional route, research has shown.
Real estate debt advisory specialists Sirius Property Finance has revealed that modular construction could save developers £126,000 more per development when it comes to the interest paid on the amount borrowed, largely because they are quicker to build.
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On average, the estimated annual interest on development finance sits at approximately five per cent per annum, which equates to around 0.42 per cent per month.
Sirius Property Finance calculated the benefit. For a loan amount of £5m over one year, property developers opting for the traditional route to build would see £252,000 paid in interest over just 12 months.
Meanwhile, those choosing a modular build could see construction completed 30 to 50 per cent more quickly than a traditionally built development.
By cutting construction time by 30 per cent, developers could see an interest saving of £75,600 in a single year, or £9,000 per month. And by reducing the time in half, the money saved reaches £126,000 per year or £21,000 per month.
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“Modular builds provide a real opportunity for property developers to maximise their profit margins due to the significantly shorter build timeframes they provide,” said Nicholas Christofi, managing director of Sirius Property Finance.
“The quicker a project is completed, the sooner it can reach the market and generate the income required to repay any loans taken.
“With demand for housing higher than it’s ever been, developers are also under extreme pressure to deliver and this speed often results in homes reaching the market that aren’t quite up to standard.
“Modular building is the solution to these current problems, not only allowing homes to reach the market at a far quicker pace but also providing a far greater, more consistent level of quality control in the process.”
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Several peer-to-peer lending property lending platforms, such as Assetz Capital, JustUs and CrowdProperty, fund the offsite construction of greener, sustainable housebuilding.
Earlier this month, Assetz Capital chief executive Stuart Law said that alternative lenders need to fund the construction of factory-built eco homes to address the housing crisis.