Financial Analytics: Science and Experience

A method to determine the best way to finance development projects

Vol. 10, Iss. 11, NOVEMBER 2017

Received: 25 September 2017

Received in revised form: 25 October 2017

Accepted: 27 October 2017

Available online: 15 November 2017


JEL Classification: D40, G11, G31, G32, R31

Pages: 1257–1272

Kogan A.B. Novosibirsk State University of Economics and Management, Novosibirsk, Russian Federation

Subject The article studies the financial characteristics of investments in development projects for multi-family housing and the dependence of these parameters on the modes of market financing.
Objectives The article seeks to describe and test a methodology that shapes the relationship between the way in which market financing is achieved and the effectiveness of investment in multi-family housing, and evaluate the impact and choice of the best way of market financing.
Methods For the study, I used the discounted cash flow method and my own technique for assessing the effectiveness of diverse parameter investment, that includes the calculation of a new indicator, namely, a unit value increment rate index.
Results The article describes a methodology for determining the best method of market financing for a particular development project and certain state of the primary real estate market. The article presents two financial models of the development housing project, which describe the results of two modes of financing: through shared construction participation and real estate purchase and sale agreements.
Relevance The methodology is intended both for commercial companies and the authorities, for it helps assess the impact of legislative initiatives on the financial results of developers and the resulting prices of residential real estate.

Keywords: developer, investment, efficiency, optimal portfolio


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