Amit Majithia

An interview with Amit Majithia: Lack of land is the 'greatest hurdle' to reaching 300,000 homes a year

Avamore Capital recently passed its £100m lending milestone since launching in 2016.


In an interview with Development Finance Today, Amit Majithia, principal at Avamore (pictured above), talks about hybrid products, recruitment issues in the industry and the underserved areas of the market.

Avamore recently created a finish and exit product. Do you expect to see more hybrid offerings being introduced in the specialist finance industry?

Yes, absolutely. The current property market has generated a number of challenges for developers and, for us at Avamore, it has meant that we have identified an opportunity to innovate and create a new product. It seems likely that other lenders will also be looking at the market with a view to taking the same approach, especially as we have seen yet another extension to the Brexit deadline.

In addition, we are seeing more and more lenders moving into the ‘value add’ space in order to differentiate themselves. I suspect that post-Brexit clarity is likely to generate new products as the market will shift once again. It is difficult to pinpoint exactly what hybrid offerings may come out in a post-Brexit era, but I am fairly confident that lenders will adjust around the new demands presented to them.

In an increasingly competitive market, how do you intend to continue the growth of Avamore?

Avamore is at a crucial growth stage at the moment. We have just passed our £100m mark and we plan to continue expanding. Since we launched back in 2016, we have always taken a sustainable and credit-focused approach to transactions and this will not change.

While the market is becoming increasingly competitive, we will always rely on our deep relationships and our innovative approach to transactions to carry us through. We know what borrowers and brokers value most — speed, efficiency and transparency — and, by holding on to these principles, we feel confident that we will be able to remain a strong player in the market. 

How difficult is it currently to recruit experienced people in the bridging and development market, and what is causing this issue?

Recruitment is a hot topic in the property market at the moment. We recently appointed Philip Gould as our senior underwriter and it has been great having him on board because of his in-depth bridging and development experience. For Avamore specifically, it is important that anyone we bring on in a senior position has a solid understanding of both types of lending, which is not always easy to find. Furthermore, while we are a lender, the underlying asset class is real estate and so hiring someone with a thorough knowledge of property- and construction-related issues is crucial for us.

Having said that, more lenders are moving into the development lending space and so we expect that people will receive broader training in their existing positions before they look for opportunities elsewhere. In addition, we are increasingly seeing a good number of candidates from other sectors, such as surveying, who want to move into the lending space, which will in time broaden the pool of suitable candidates. I suspect, therefore, that in around 12–18 months, we will see significantly more experienced individuals seeking new opportunities in the market.

More generally, Avamore is a relatively small team of 12 people and we are looking to grow organically rather than adopting a stringent hiring strategy. We all work together closely, so it is important for us that we find employees who will maintain the firm’s ethos, and this means that it may take us a little longer to hire. Having said that, when we do make appointments, we can be confident that we have made the right choice to carry the business forward.

What one thing would you like to change about the property development industry?

From an underwriting perspective, I think greater clarity and consistency is needed in the property development industry. Inevitably it varies from lender to lender in terms of what they need to see from the borrower, and this understandably creates confusion. For us, we try to mirror the assessments which developers should make themselves and we produce guides and FAQs to create greater transparency around what is expected of the borrower. It is, unfortunately, not feasible to create an industry standard, but something similar might be helpful for all lenders and borrowers.

What areas of the development market do you believe are underserved and why?

There is huge potential in modular building at the moment, but there still are not many developers in the market who are ready to get comfortable with the processes. Particularly at a time when we are experiencing Brexit uncertainty, there are some great benefits, especially if the manufacturing can be done locally. In an ideal scenario, modular building can produce great quality homes and help boost local economics.

From a lending perspective, modular builds are also difficult to fund. For us, we need to get comfortable with each individual circumstance and gain an understanding of the manufacturer’s background, capabilities and financial strength. Essentially, as with any project, we need to know that any money we lend goes to a stable manufacturer who will guarantee delivery.

On the whole, I think modular building has huge potential, but the opportunity has not been fully explored by lenders or traditional developers. This is an area that Avamore is actively looking at, however, we have not found the perfect scenario just yet.

What do you think is the biggest hurdle to reaching the government’s 300,000 homes a year target?

The greatest hurdle to reaching the government’s 300,000 homes a year target is around land. There simply is not enough land available to developers, who are ready and waiting to build. We believe that too much land is held by national housebuilders who will drip feed sites on to the market in order to maintain price levels. This is leading to lots of undeveloped land banks and is restricting the rate at which SMEs can move on to their next projects.

Furthermore, Brexit is causing GDVs to fall and developers to increase their profit margins, which means that land values need to soften in order to make schemes viable. While there may be a few land owners who are looking for a quick sale, those that have low holding costs will keep the price high and maintain the land until the market readjusts and so developers are not finding the right opportunities, particularly in today’s market conditions.

As a wider point, the planning process remains a major hurdle. It is widely agreed that processes are slow and planning departments are fragmented and lack transparency. Increased efficiencies within planning departments would make a huge difference to the progress of applications and contribute to a significant increase in the housing pipeline.

If you didn’t work in finance, what would you be doing?

I have a private pilot’s licence and so if I wasn’t in finance, I’d definitely be up in the air!

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