For developers of projects that have already been designed and approved, however, a market downturn creates a different set of issues altogether — and there may not be one clear solution.
The current market downturn can generally be attributed to buyers remaining on the sidelines amid economic uncertainty, in both the residential resale and presale markets. As such, it has become difficult for developers to secure the number of presales they need in order to get their construction financing and begin building out their projects.
For projects that are ready to go, pausing may not always be the best solution because they may have mortgages that need to be paid and delaying a project can result in additional interest and overall costs. In the current market, it’s also unclear where exactly the light at the end of the tunnel is (not to mention when it will arrive). Thus, for developers in this kind of position and who want to push through with their projects, many have turned to the solution of revising their projects to replace condos (or commercial space) with rental units, bypassing the need for presales.
