FINANCING DECISIONS AND THEIR EFFECTS ON PROPERTY DEVELOPMENT

Abstract

The real estate field has undergone significant changes over the years, in terms of the scale and complexity of development. Projects involving greater expertise and finance have in recent years led to widespread interest towards greater sophistication in the management of these developments, especially in the area of financial management. The realisation of tax benefits has induced many developers to introduce proportionally more debt through the various available financing types. In addressing such a situation, the main issues to be considered then would be the ratio of debt to equity, its timing and the amount of each financing type to be utilised in the course of development. This dissertation sought to establish some guidelines and principles of financial management pertaining to real estate. The writings capture the theoretical view point on capital structure. As current techniques adopted by local developers for financial evaluation proved inadequate, the derivation of an optimal financing mix is presented in resolving such a problem.