To solve this conundrum, Greeks created their own funding system called antiparochi, in which developers saved themselves the cost of buying land by giving landowners a share of the constructed units when they were completed. “The best translation of the term is probably ‘flats for land,’ or as some people say, ‘quid pro quo,’” says Panos Dragonas, an architect and professor at Greece’s University of Patras. “The system saw landowners hand over their property, and in return get, say, two to five apartments back in the completed building to live in, or rent or sell. It was a bottom-up system of housing development not created by any law change by the government, though the state did offer motives for construction by granting tax breaks.”
I'm surprised to see that this arrangement is mentioned as novel/quaint.
This kind of deal is extremely pervasive here in Brazil, and I suppose in the rest of the world as well: developers don't acquire residential lots with cash; rather they build up an apartment building and pay the original land owner(s) with apartment units. This is so common I assumed it was a worldwide "thing".
Where I live it's more extreme. Construction materials are sourced from different suppliers, and they are given apartments instead of cash. A developer can get started with around an apartment worth of capital. He'll leverage 2-3x through a bank to pay for workers and various. Then raise money before building from some want-to-be homeowners. The pre-construction sale gets you a cheaper price. So he gets 2-3x his capital, whatever he raised from future owners, and free construction materials. If he plays his cards correctly and do sell all of the building, he can 4-5x his money in a 3 years period.
I had a relative in this kinda business and most of his job was "building connections" and "deal striking".
Interesting. What part of the world are you talking about?
I bet that, with so many moving parts, if there is the slightest problem the whole thing falls apart and unlucky buyers end up cash-strapped and with no apartments to show for it.
A lessor version of this happens in the US where previous phases of a development pay for later phases. A cash strapped developer may offer initial phases at especially low prices.
I think most people in the US find it more expedient to use cash for the land, rather than take in-kind compensation. Consider, for instance: where will you live while your apartment is under construction? And, can you actually trust the value that the developer touts, attached to the new apartment? Financing for this sort of up-front buyout will be readily available so there is no major barrier.
Credit is insanely available in the US. Developers can get a significant loan; which is a better deal than channeling your apartment through such a scheme (assuming selling is easy).
Right, this sort of scheme is a great way to get things done without a lot of formal banking & legal machinery. And it's pretty resilient: if building is interrupted by (say) political unrest, or there's an episode of hyperinflation in the middle, everyone understands the deal -- the landowner still gets his 2 flats when it's done.
> Consider, for instance: where will you live while your apartment is under construction?
It many parts of the world where this is practiced, there are strong familial ties and obligations. No one would think twice of living with a parent or sibling while the apartment was under construction.
>where will you live while your apartment is under construction?
Maybe my wording was confusing, but this kind of thing won't really happen. If someone in a large city owns a patch of land that is big enough and well-located enough to become an apartment complex, then that person(s) is usually wealthy enough to have other real estate already. Its seen as an investment, not as a more affordable way to own an apartment.
Ah. I had assumed that part of the Greek setup came from relatively small owners with an individual plot of land and a much smaller owner-occupied building on it. Perhaps this is expectation is in error!
I'm surprised to see that this arrangement is mentioned as novel/quaint.
This kind of deal is extremely pervasive here in Brazil, and I suppose in the rest of the world as well: developers don't acquire residential lots with cash; rather they build up an apartment building and pay the original land owner(s) with apartment units. This is so common I assumed it was a worldwide "thing".