International Journal For Multidisciplinary Research

E-ISSN: 2582-2160     Impact Factor: 9.24

A Widely Indexed Open Access Peer Reviewed Multidisciplinary Bi-monthly Scholarly International Journal

Call for Paper Volume 7, Issue 3 (May-June 2025) Submit your research before last 3 days of June to publish your research paper in the issue of May-June.

Enhancing Real Estate Project Feasibility Through Real Option Analysis

Author(s) Ms. kaviya V, Mrs Anisha J
Country India
Abstract Real estate development projects are often influenced by market uncertainty, long timelines, and changing economic conditions. Traditional evaluation methods, such as Discounted Cash Flow (DCF) analysis, assume fixed future cash flows and may not fully capture the value of strategic flexibility. In this study, a residential real estate project was first evaluated using DCF, which showed that immediate investment was not financially favourable. To better understand the potential for flexibility, a Real Option Analysis (ROA) was applied using a binomial tree framework, focusing on the option to defer investment by one year. This approach helps to assess whether waiting can improve project outcomes under uncertain conditions. Additionally, a limited sensitivity analysis was conducted to observe how factors, such as rental income growth and construction cost changes, could affect the results. Overall, the study highlights how applying ROA offers a more flexible and responsive way to evaluate real estate investments compared to static models
Keywords Real Estate, Real Option Analysis, Binomial Analysis, Project Feasibility.
Field Business Administration
Published In Volume 7, Issue 3, May-June 2025
Published On 2025-05-08
DOI https://doi.org/10.36948/ijfmr.2025.v07i03.43851
Short DOI https://doi.org/g9hskq

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