16. July 2013 · Comments Off on Benefits and Limitations of Government Grants · Categories: Real Estate · Tags: , ,

Developers who deal with real estate investment receive money for their development projects. However, this does not come easily; in return they must demonstrate their ability to develop affordable housing in order to receive money for their projects. Here are some of the advantages of grants for real estate investment. First, there are no repayment options: this is because the grant amount is not repayable to anyone thus no repayment options. Secondly, meeting a community need: the developer creates affordable housing to the low income earners which activity is rewarding to the real estate developer. At the same time, the community benefits in the sense that they will be able to afford housing and thus improve their life style. On the other hand, there are limitations with this kind of financing. First, the funds from grant will have strings attached: this means that the agencies will require a developer to maintain the development or portion of the development, require ongoing reporting of the tenants in the affordable units and more to that the loss in rental income and the operating expenses.

Also, as a disadvantage is that it requires good coordination with other financiers. Real estate investment development requires several sources of funding to complete a project. The problem comes when one grant awarding agency conflicts with the other funding sources goals. This can make it difficult to complete a project.