Turnkey (or turn-key) project is a term typically used with reference to construction projects for which the developer undertakes the whole responsibility from design to completion so that the building is available to the buyer in a ready-to-use condition. Another way to define it is as a real estate development project characterized by the builder absorbing all risk until a specific point has been reached. This point is generally the culmination of the project or when the real estate construction is ready for occupancy. Thus, turn key property is purchased property that already contains furnishings or other objects when the buyer occupies it.
A lot of public housing projects owned by the government are turnkey projects. For these projects, a private developer takes up responsibility for all activities required to perform the projects. The activities include land purchases, plans, construction and permits. He then sells the completed structure to the housing authority.
Turnkey Project – Origin of the Term
This usage has its origins in the construction industry to refer to the day when a job is finished to the last detail and the owner just has to turn the key in the door to begin using the facility.
Benefits of a Turnkey Project or Contract
1) Owing to the fact that the contractor or developer owns the building till project completion, he will get paid only on project completion. So to get paid, he will be motivated to finish the job at the earliest, and efficiently.
2) As all constructions decisions are the headache of the builder or developer, inexperienced owners are saved from having to make decisions on complicated construction matters
3) As the owner need pay for the project only after it is completed, he has plenty of time to find investors and financing to make the payment.
A key disadvantage associated with a turnkey project is that owing to the lack of authority the owner has over construction and design decisions, the project may not be ideally suited to his requirements on completion.