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Article
Publication date: 2 August 2013

Jianfu Shen and Frederik Pretorius

The purpose of this paper is to construct option pricing models for real estate development by considering and incorporating institutional arrangements, direct interactions and…

2116

Abstract

Purpose

The purpose of this paper is to construct option pricing models for real estate development by considering and incorporating institutional arrangements, direct interactions and financial constraints in the model. It extends the application of real option theory from the framework borrowed from financial option pricing, and considers the case where a development company has restrictions from outside environment and financial constraint. It explores the effects of these additional practical factors on real asset project value and development timing. This paper makes contributions to bridge the theoretical models and practical applications.

Design/methodology/approach

Real estate development is modelled in the binomial option pricing framework with the considerations of time‐to‐build, foregone rent if delaying, institutional environment and capital budgeting. The investment timings are derived from the models and sensitivity analysis is conducted to explore the effects of these factors.

Findings

Apart from the factors in traditional option pricing theory, this paper confirms that the contractual covenants, positive synergies between properties and financial status of the firm, which enhance or restrict real flexibility embedded in the development land, influence project value and investment timing. Numerical examples illustrate the effects of these factors. It is argued that the valuation of real options should place emphasis on industry‐specific characteristics and start from the perspective of the firm rather than individual options.

Practical implications

The models constructed in this paper and the results can be directly used in the practical real estate development.

Originality/value

This paper incorporates many practical factors in real estate development which are not investigated in previous studies. It values the option project from the firm perspective rather than project perspective as previous studies. It also shows the effects of institutional arrangement and firm factors on project value and development timing.

Details

Journal of Property Investment & Finance, vol. 31 no. 5
Type: Research Article
ISSN: 1463-578X

Keywords

Article
Publication date: 14 April 2014

Nicholas Addai Boamah

– The purpose of this paper is to examine the system of development controls in the Offinso South municipality. It investigates the challenges to the development control regime.

Abstract

Purpose

The purpose of this paper is to examine the system of development controls in the Offinso South municipality. It investigates the challenges to the development control regime.

Design/methodology/approach

The paper reviews the land use regulation system in the municipality. The municipality was clustered into four for data collection. Eight neighbourhoods (two from each cluster) were selected from the municipality for the study. In all, 15 properties were sampled via purposive sampling techniques from each of the selected neighbourhoods for data gathering. Self-administered questionnaires were relied on to gather data from the 120 respondents. The property owners were the unit of enquiry.

Findings

The paper finds that socio-cultural factors, delays in the planning approval process, negative public perceptions about the planning process and planning officials, lack of official support to developers in curing identified defects in their proposed developments, and unrealistic building regulations are partly responsible for the large-scale violations of development controls in the municipality.

Practical implications

It is noted that the planning authority should focus more on strategies that will facilitate voluntary compliance and less on enforcement. It also notes the need for a review of the building regulations and the purging of the planning system from negative public perceptions and processing delays.

Originality/value

The paper identifies the constraints on the Ghanaian development controls regime.

Details

Property Management, vol. 32 no. 2
Type: Research Article
ISSN: 0263-7472

Keywords

Article
Publication date: 1 April 1986

Cedric Pugh

It was not until the late 1960s that housing attracted much attention from academic social scientists. Since that time the literature has expanded widely and diversified…

4912

Abstract

It was not until the late 1960s that housing attracted much attention from academic social scientists. Since that time the literature has expanded widely and diversified, establishing housing with a specialised status in economics, sociology, politics, and in related subjects. As we would expect, the new literature covers a technical, statistical, theoretical, ideological, and historical range. Housing studies have not been conceived and interpreted in a monolithic way, with generally accepted concepts and principles, or with uniformly fixed and precise methodological approaches. Instead, some studies have been derived selectively from diverse bases in conventional theories in economics or sociology, or politics. Others have their origins in less conventional social theory, including neo‐Marxist theory which has had a wider intellectual following in the modern democracies since the mid‐1970s. With all this diversity, and in a context where ideological positions compete, housing studies have consequently left in their wake some significant controversies and some gaps in evaluative perspective. In short, the new housing intellectuals have written from personal commitments to particular cognitive, theoretical, ideological, and national positions and experiences. This present piece of writing takes up the two main themes which have emerged in the recent literature. These themes are first, questions relating to building and developing housing theory, and, second, the issue of how we are to conceptualise housing and relate it to policy studies. We shall be arguing that the two themes are closely related: in order to create a useful housing theory we must have awareness and understanding of housing practice and the nature of housing.

Details

International Journal of Social Economics, vol. 13 no. 4/5
Type: Research Article
ISSN: 0306-8293

Case study
Publication date: 1 January 2011

Ismail Omar and Fauziah Raji

Property development, the built environment and privatisation.

Abstract

Subject area

Property development, the built environment and privatisation.

Study level/applicability

Undergraduate and MA level property development courses, modules covering privatisation within undergraduate, MBA and MA level management programmes.

Case overview

Property development is complex and diverse. It involves many agents with diverse roles, strategies and actions that affect the return. In a way, privatisation reduces government's financial burdens and offers ease of procedures to agents. This case study investigates privatisation of property development projects by a local authority in Kuala Lumpur, Malaysia. In particular, the study focuses on modes of privatisation (MOP) and the extent to which it affects the return of the projects. The MOP studied are the land swap, land lease and the joint venture development on 15 selected privatisation projects.

Expected learning outcomes

Students are expected to be able to understand the MOP for land development projects using Malaysia as an example; evaluate the strengths and weaknesses of these MOP; assess the benefits and impacts to the local Malaysian authority, landowners and land developers of MOP; and apply suitable MOP to alternative development projects.

Supplementary materials

Teaching note.

Details

Emerald Emerging Markets Case Studies, vol. 1 no. 1
Type: Case Study
ISSN: 2045-0621

Keywords

Article
Publication date: 1 May 2006

Eric C.K. Ho

The purpose of paper is to investigate the institutional features of the leasehold system of Hong Kong, which is predicated on the freedom of contract as an institutional…

1653

Abstract

Purpose

The purpose of paper is to investigate the institutional features of the leasehold system of Hong Kong, which is predicated on the freedom of contract as an institutional arrangement for land management and planning that promotes sustainable development.

Design/methodology/approach

The approach is analytical, using concepts of property rights informed by Coasian neo‐institutional economics and the ideas of Yu et al. on the Schumpeterian process in innovation.

Findings

It was demonstrated that the post‐contractual imposition of statutory planning control on the leasehold land management system in Hong Kong has adversely affected and adaptability of the leasehold system in achieving sustainability.

Research limitations/implications

This paper encourages a reinterpretation of statutory zoning in areas with a leasehold system and the reception of the land lease as a basis for innovations that help promote sustainable development.

Practical implications

This paper warns against legislative activism in planning controls as that can destroy or erode the basis for innovations that help promote sustainable development.

Originality/value

Using the idea of innovations of Yu et al. and Lai and Lorne, this paper further develops Lai theory of “planning by contract” as an alternative to “planning by edict”.

Details

Property Management, vol. 24 no. 3
Type: Research Article
ISSN: 0263-7472

Keywords

Article
Publication date: 16 February 2015

Achamyeleh Gashu Adam

The rapid urban population growth in Ethiopia is causing an increasing demand for urban land, which primarily tends to be supplied by expropriation of peri-urban land. The process…

1120

Abstract

Purpose

The rapid urban population growth in Ethiopia is causing an increasing demand for urban land, which primarily tends to be supplied by expropriation of peri-urban land. The process of urban development in Ethiopia is largely criticized for forced displacement and disruption of the peri-urban local community. Thus, the purpose of this paper is to introduce how Ethiopia’s urban development system could be built on the participatory and inclusive approaches of land acquisition.

Design/methodology/approach

The study has employed questionnaire survey results, focus group discussion with panel of experts and previous research reports to examine the peri-urban situations and then to show why an alternative land development approach is needed to be introduced in the urban land development system of Ethiopia. Desk review on land readjustment was also made to explore best lessons from other countries applicable to the peri-urban contexts of Ethiopia.

Findings

This study has explored that land readjustment is potentially an appropriate land development tool to alleviate peri-urban land development limitations in Ethiopia.

Practical implications

Researchers, policy makers and government bodies that are interested in peri-urban land would appreciate and consider implementing the adapted land readjustment model as an alternative land development tool. Consequently, the local peri-urban landholders’ rights would be protected and maintained in the process of urbanization.

Originality/value

Although land readjustment has the potential to achieve participatory peri-urban land development, awareness of the method in the Ethiopian urban land development system is inadequate. This study contributes to fill this gap and create an insight into the basic conditions for the adaption of the tool.

Details

Property Management, vol. 33 no. 1
Type: Research Article
ISSN: 0263-7472

Keywords

Article
Publication date: 7 August 2017

Hefeng Wang, Yuan Cao, Xinxia Liu and Yantao Yang

Using Shanghai as an example, the purpose of this paper is to perform grade evaluation and zoning for different land use spaces by GIS by identifying the major restrictive factors…

Abstract

Purpose

Using Shanghai as an example, the purpose of this paper is to perform grade evaluation and zoning for different land use spaces by GIS by identifying the major restrictive factors in current socio-economic development.

Design/methodology/approach

Based on short plate theory, 11 major restrictive indicators that will restrict socio-economic development in Shanghai are identified, and urban land is divided into four subspaces and the restrictive grade evaluation of urban land subspace is achieved with GIS spatial analysis; then, land development zoning is processed according to the results of the evaluation.

Findings

In all, 11 major restrictive indicators that will restrict socio-economic development in Shanghai are identified. The restrictive grades of the agricultural production, urban construction and ecological protection subspaces are mainly common, weak and weaker, and the relatively strong restrictive grade of industrial development subspace is mainly concentrated in the more developed industrial districts (counties). The areas of the common and good regions of constructive development and ecological development zones account for 87.4 and 98.3 per cent of each total area, respectively, and urban land still has significant development potential in Shanghai.

Originality/value

This paper proposes various urban land space evaluations and zoning strategies based on restrictive indicators and perspectives, enriching the ideas and methods of urban land use evaluation.

Details

World Journal of Engineering, vol. 14 no. 4
Type: Research Article
ISSN: 1708-5284

Keywords

Article
Publication date: 20 July 2010

Terry V. Grissom, James N. Berry and Lay Cheng J. Lim

The purpose of this paper is to integrate land use and option pricing theories using case study analyses to compare a portfolio of uses comprising single and mixed‐use development

Abstract

Purpose

The purpose of this paper is to integrate land use and option pricing theories using case study analyses to compare a portfolio of uses comprising single and mixed‐use development on the same site and assess the effects on the risk‐return profile of potential development schemes. The integration of land use development based on highest and best use (HBU) is tested against a combination of uses on the selected sites at a point in time in the downswing of the real estate cycle.

Design/methodology/approach

The proposed methodology integrates the development valuation approach with option theory in which both consider the relationships of cost and value associated with alternative development options. The approach used in this paper addresses the broader consideration of project coordination inclusive of land use flexibility and opportunity costs endogenously associated with development strategies. By investigating the uncertainty of economic options specific to the development process, the methodology considers the significance of complementary components of strategic decisions and entrepreneurial effort within a return/risk management strategy.

Findings

The stochastic model when compared to the real option model enhances strategic decisions and development project management by allowing the consideration of single/mixed‐use alternatives. The development process is facilitated by the research findings whereby alternative uses are tested to maximise the potential use of the site. The analyses consider optimal funding strategies in developing and investing for a range of use options on regeneration sites.

Practical implications

The significant insights apparent from the research is the quantification of the strategic specification of development as a productive process and an investment endeavour. The proposed model enables a comparison of a HBU based on a single development, a mixed‐use development or a combination of uses as the difference between the scenarios impacts on land value and profit measures, especially where these measures are calculated as distributive residuals.

Originality/value

The stochastic model developed in this paper provides a value‐added contribution to real estate literature by considering the complexity of the interrelationships between urban land economics, land use theory, valuation appraisal methodologies, portfolio analysis and option pricing as applied in the development of regeneration schemes.

Details

Journal of European Real Estate Research, vol. 3 no. 2
Type: Research Article
ISSN: 1753-9269

Keywords

Article
Publication date: 17 July 2007

Rashidat Adejoke Oladapo and Abiodun Olukayode Olotuah

The paper seeks to describe the historical development, current status, and operation of real estate law and policy in Nigeria in the context of global requirements for…

2100

Abstract

Purpose

The paper seeks to describe the historical development, current status, and operation of real estate law and policy in Nigeria in the context of global requirements for sustainable development.

Design/methodology/approach

The paper takes the form of a literature and legislative review. It examines the existing real estate law and policy (Land Use Act No. 6 of 1978) in Nigeria. The relevance of sustainable development to real estate laws and policy is highlighted. A brief comparative study of land issues in Nigeria and some developing nations is also included.

Findings

The existing real estate law and policy in Nigeria is inadequate to meet the aspirations for sustainable development.

Practical implications

The paper makes recommendations geared towards appropriate real estate laws and policies for sustainable development in Nigeria.

Originality/value

The paper contributes to the critique on the existing real estate laws and policies in Nigeria. Based on tenets of sustainable development, it offers useful guidance on future formulation of real estate law and policy, in particular community participation, setting of different time periods, and the targets that each period must realize.

Details

Structural Survey, vol. 25 no. 3/4
Type: Research Article
ISSN: 0263-080X

Keywords

Book part
Publication date: 29 March 2021

Ephraim K. Munshifwa, Chota M. Mwenya and Anthony Mushinge

As population grows, industries blossom and demand for space increases, cities become the centre point for myriads of challenges for urban administrators. This chapter…

Abstract

As population grows, industries blossom and demand for space increases, cities become the centre point for myriads of challenges for urban administrators. This chapter investigated challenges of urban development, land use changes and environmental impacts resulting from pressure on urban land. The study was primarily qualitative in nature and adopted a case study approach. The city of Ndola was selected for this purpose. Four institutions, namely, Zambia Environmental Management Agency (ZEMA), Water Resources Management Agency (WARMA), Kafubu Water and Sewerage Company (KWSC) and Ndola City Council (NCC), were used for data collection. At each institution, one official was purposively selected by management based on their knowledge and experience on the subject. The primary data were collected mainly through semi-structured questionnaires in face-to-face interviews. The chapter concludes that pressure for development land has resulted in increased demand for change of use, allocation and construction in environmentally vulnerable areas such as the Kafubu and Itawa River basins and their tributaries. This has further resulted in serious threats to the environment due to pollution of water sources from domestic and industrial waste. The chapter though argues that tools for overcoming these challenges are already provided for in the legislation, it is the implementation and effective coordination among agencies charged with planning, land allocation, water distribution and protection of the environment, such as ZEMA, WARMA, KWSC and NCC, which is lacking. Considering the foregoing, it is recommended that land and water administrative systems should be improved through among other things, effective consultation between various agencies involved in environmental management, zero tolerance to illegal land allocation and effective implementation of statutes.

Details

Sustainable Real Estate in the Developing World
Type: Book
ISBN: 978-1-83867-838-8

Keywords

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