REAL OPTIONS VALUATION FOR RESIDENTIAL REAL ESTATE DEVELOPMENT PROJECTS

The context of real estate investment has been an active field of research in the las decades. The traditional valuation methods like discounted cash flow (DCF) method has some weakness to correct valuation of such investment projects. So, since three decades ago a new approach called real options valuation (ROV) has been used for those projects which has inherent uncertainties. The purpose of this paper is to exhibit a summary of current literature surrounding real option-based valuation methodology for real estate property development projects beside applying this theory to an empirical case study of a yet-to-be-exercised residential real estate development project in Victoria, Australia, with 12 step binomial process. The results suggest that in this case, the development should be delayed/deferred, since it is probabilistically expected that the economic environment may reveal to be more favourable in the future that at present

کلیدواژه ها:

binomial model ، real options valuation ، real estate development