Developing and building in Japan

By 22nd December 2007 April 22nd, 2019 Property

By Kal Bragg, joint president of Niseko Alpine Developments [Nisade].

Anyone considering building, developing or renovating in Niseko must be acutely aware of the pitfalls and differences between Japan and their ‘home’ country. Many underlying considerations need to be taken into account to achieve the project efficiency Japan is renowned for.

Product and design expectations need to be flexible, and with more inevitable ‘unknowns’ arising, professional on-ground management is essential to ensure design style is localised for snow conditions, and project viability attained.

Investment returns need to be analysed carefully, and, just as anywhere else in the world, the risk versus return ratio needs careful review.

Japanese v Western Construction Viewpoints
Starting with the contractual relationship between client and architect, newcomers to Japanese construction need to be aware of the actual role of the architect. Typically, and contractually, the architect acts as the participant responsible for design, authority approvals and on-site supervision. While Japanese architects are generally diligent in carrying out out the design and approvals, careful scrutiny of their on-site management role is paramount, as the final build quality stems from on site diligence.

The struggle between western design and Japanese construction becomes evident where items mass-produced in Japan (kitchens, whole bathrooms, joinery, etc.) need to be custom made to suit western design. If not managed properly, over-detailing can double, or even triple, cost. Developers and renovators alike can be caught out in these areas. Costs can also easily over-run on items Westerners considers standard – like downlights, timber, baths and tiles – which tend to be surprisingly expensive in Japan.

The tendency in Japan is to do the construction work the Japanese way, then deal with inconsistencies or mistakes later. Westerners, on the other hand, generally go to greater lengths to understand the work prior to starting, to try to reducing later re-work. Anyone undertaking construction work must appreciate this critical difference.

Joint Venturing
Aside from council development guidelines, investors purchasing land with the idea of doing their own development need to research the specific local community requirements under the Real Estate Law and Hotel / Fire Laws. As a general rule of thumb, any development of two or more apartments requires the developer / land owner / investor to have a Japanese Real Estate License. This cannot be a partial ownership either – say a land owner contributes the land and the developer contributes the construction; it must be 100% owned by the Real Estate License holder. This can be rather unnerving for the land owner, who essentially has to hand over land title to a licenced real estate entity to develop it.

Insurance Challenges
Earthquake insurance and professional indemnity are important and normal insurances required on any site. Both are very difficult to obtain in Japan. Construction insurance is generally managed by the builder, but commonly earthquake insurance is not included. It is possible to insure construction against earthquakes, but full coverage is extraordinarily high. Professional indemnity is also available, though not easily. Again, it is not the norm in Japan. Most architects and managers do not take out such policies, and anyone new to construction in Japan needs to be aware of these important (and risk impacting) differences.

Community and Development Control
The general community is a powerful factor in regulation of development controls. To date they have implemented guidelines which local developers have been bound to follow, even though they are not strictly enshrined in law. This is a very positive outcome for local groups , compared with elsewhere in the world, where local councils tend to be the supreme controlling entity.

The way Western developers treat and manage the community can make or break a Niseko development. Forming an alliance with the community and gaining trust takes time. But even then, developers cannot expect automatic acceptance, even where they obey the local laws.

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