Capitalisation: reflections and practice for project appraisal

Huston, Simon and Jadevicius, A (2015) Capitalisation: reflections and practice for project appraisal. International Journal Series in Multidisciplinary Research (IJSMR), 1 (2). pp. 26-42. ISSN 2455-2461

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Income capitalisation is a widely used in commercial property for valuation, development appraisal or for project feasibility analysis. As a decision-making tool, its technical and philosophical limitations are manifest but often overlooked. If bungled, capitalisation, can lead to ‘white elephant’ projects, investment losses or even corporate collapse. To help avoid such waste, the research reviews some technical issues and philosophical conundrums around capitalisation of property investments. Sound capitalisation practice scopes projects, considers capital market, geographic and institutional context and clarifies valuation base(s). Judicious market comparison, risk diagnostics and analytics filter out noise and render complex data to estimate yields or an appropriate discount rate. For a project feasibility analysis, supplementary salient concerns include wider strategic imperatives, indigenous land rights, stakeholder management, administrative probity and the inclusion of environmental or social spillovers.

Item Type: Article
Keywords: Capitalisation, feasibility analysis, market value, yields, cap rates, discount rates, white-elephant projects, externalities, rule of law, customary rights, consultation, public policy.
Divisions: Real Estate and Land Management
Depositing User: Marieke Guy
Date Deposited: 15 Jan 2019 15:23
Last Modified: 20 Oct 2022 14:13

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