Returns on Chinese residential development projects : a practical investment evaluation procedure developed for the analysis of Chinese residential development projects based on modern financial economic norms
Thesis (S.M.)--Massachusetts Institute of Technology, Dept. of Urban Studies and Planning, 2003.
| Main Author: | |
|---|---|
| Other Authors: | |
| Format: | Thesis |
| Language: | eng |
| Published: |
Massachusetts Institute of Technology
2006
|
| Subjects: | |
| Online Access: | http://hdl.handle.net/1721.1/29770 |
| _version_ | 1811084564412497920 |
|---|---|
| author | Wang, Qian, 1967 June 15- |
| author2 | David Geltner. |
| author_facet | David Geltner. Wang, Qian, 1967 June 15- |
| author_sort | Wang, Qian, 1967 June 15- |
| collection | MIT |
| description | Thesis (S.M.)--Massachusetts Institute of Technology, Dept. of Urban Studies and Planning, 2003. |
| first_indexed | 2024-09-23T12:53:11Z |
| format | Thesis |
| id | mit-1721.1/29770 |
| institution | Massachusetts Institute of Technology |
| language | eng |
| last_indexed | 2024-09-23T12:53:11Z |
| publishDate | 2006 |
| publisher | Massachusetts Institute of Technology |
| record_format | dspace |
| spelling | mit-1721.1/297702019-04-12T20:21:30Z Returns on Chinese residential development projects : a practical investment evaluation procedure developed for the analysis of Chinese residential development projects based on modern financial economic norms Wang, Qian, 1967 June 15- David Geltner. Massachusetts Institute of Technology. Dept. of Urban Studies and Planning. Massachusetts Institute of Technology. Dept. of Urban Studies and Planning. Urban Studies and Planning. Thesis (S.M.)--Massachusetts Institute of Technology, Dept. of Urban Studies and Planning, 2003. Includes bibliographical references (leaf 61). Since late 1990s, Chinese real estate has been experiencing rapid growth, especially in the commercial housing sector. This phenomenon is mainly supported by China's housing privatization policy implemented in the mid-1990s and its strong GDP growth for the past 15 years. Chinese citizens are now able to purchase their housing units directly from the market with financing offers from major domestic banks. These days, real estate development-residential development in particular-is perceived in China as one of the proven vehicles "to get rich overnight." An increasing number of companies, including some large international real estate developers, are participating in the Chinese real estate development market. New players entering the market have been escalating the competition, which requires real estate developers to be highly objective and practical when evaluating their residential real estate development investments. After describing and criticizing the current methods of calculating residential real estate development returns in China, I argue in this thesis that, based on modern financial economic norms, a practical investment evaluation procedure can be developed for analyzing Chinese residential development projects. The new procedure is a practical application of a fundamental principle in finance: the NPV investment decision rule. This rule requires that, in order to make sound investment decisions, investors should maximize the NPV across all mutually exclusive alternatives and never choose an alternative in which NPV<0. The new real estate development investment evaluation procedure encompasses four steps: (1) projecting cash flows; (2) calculating the present value of the stabilized property; (3) calculating the present value of total development costs; and (4) calculating the expected return on development investment, or calculating the maximum land purchase price. I use the Hainan Luxury Vacation Home Development in Haiikou, Hainan, China, as case study to demonstrate the fundamental differences between current practices and the proposed procedure. My intention is to thoroughly clarify how applying the NPV rule takes into account some of the unique features of real estate development investments, such as time-to-build, intensive use of debt financing, and phased risk regimes. In the final part of the study, I conclude that current practices of real estate development return calculation fail to reflect these unique features of development investments. With the application of the NPV rule, the proposed financial procedure makes real estate development evaluation analysis more practical. The new procedure is a simple yet powerful financial analytical tool that enables developers to comprehensively exam the expected return on their development investments. I also recommend that, because the procedure is based on fundamental principles of modern finance, it should become the standard way of evaluating real estate development investments. by Qian Wang. S.M. 2006-03-24T16:23:50Z 2006-03-24T16:23:50Z 2003 2003 Thesis http://hdl.handle.net/1721.1/29770 54754985 eng M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission. http://dspace.mit.edu/handle/1721.1/7582 61 leaves 2565313 bytes 2565120 bytes application/pdf application/pdf application/pdf a-cc--- Massachusetts Institute of Technology |
| spellingShingle | Urban Studies and Planning. Wang, Qian, 1967 June 15- Returns on Chinese residential development projects : a practical investment evaluation procedure developed for the analysis of Chinese residential development projects based on modern financial economic norms |
| title | Returns on Chinese residential development projects : a practical investment evaluation procedure developed for the analysis of Chinese residential development projects based on modern financial economic norms |
| title_full | Returns on Chinese residential development projects : a practical investment evaluation procedure developed for the analysis of Chinese residential development projects based on modern financial economic norms |
| title_fullStr | Returns on Chinese residential development projects : a practical investment evaluation procedure developed for the analysis of Chinese residential development projects based on modern financial economic norms |
| title_full_unstemmed | Returns on Chinese residential development projects : a practical investment evaluation procedure developed for the analysis of Chinese residential development projects based on modern financial economic norms |
| title_short | Returns on Chinese residential development projects : a practical investment evaluation procedure developed for the analysis of Chinese residential development projects based on modern financial economic norms |
| title_sort | returns on chinese residential development projects a practical investment evaluation procedure developed for the analysis of chinese residential development projects based on modern financial economic norms |
| topic | Urban Studies and Planning. |
| url | http://hdl.handle.net/1721.1/29770 |
| work_keys_str_mv | AT wangqian1967june15 returnsonchineseresidentialdevelopmentprojectsapracticalinvestmentevaluationproceduredevelopedfortheanalysisofchineseresidentialdevelopmentprojectsbasedonmodernfinancialeconomicnorms |