A model for financial evaluation of commercial property development in Sri Lanka

Abstract

lnvcstmcnt in commercial property development is an important component of investment portfolios of the government. individuals. many companies of different size. and lending institutions. Property development is a risky business. There are many areas for uncertainties. such as construction cost. time. unexpected competition. loss of key tenants. unexpected regulations so on (Rollo. 2(01). With the mistakes that can be made due to these uncertainties investment analysis is a complex and serious problem faced by such investors. usually requiring distinct approaches and proper tools according to the nature and complexity of the operations. There is a number of investment analysis methods and financial tools used in the industry. but each of them focuses on different factors and has its limitations (Rollo. 200 l: Ye S & Tiong R. L.K. 20(0). According to the nature of the property development business that is build & sold or build & hold. investor's objectives \\ ill determine Ole choice of the analysis tools. Investment analysis is more closely feinted to thc market behaviour because the objective of capital investment in the private sector is generally for profit maximization within a specific time frame rather than benefit-cost analy.sis and economic analy.sis.