THE RISK PLANNING METHODOLOGICAL PRINCIPLES FOR HOUSING INVESTMENT
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Abstract
In many countries wordwide there is an urgent need to increase the housing level. However, a significant increase in this level is hindered by a number of factors. Among these factors, the significant risk of housing construction investing is essential. Reducing the riskiness of housing construction investing requires, among other things, the use of scientifically grounded risk planning methods in such investment. With taking this into account, the purpose of this work is to develop methodological principles for the housing investing risk planning. The study subjects were the patterns of forming the housing construction investing risks. The methodology of this study involved the use of systems analysis, economic and mathematical modeling, tools of decision theory, and technical and economic calculations. Among the results of the study, the formed input information array needed for planning the housing investing risks should be noted. This array includes the following main blocks: information on the available regulatory and legal support for housing construction; information on potential developers, intermediaries, and other entities investing in housing construction (particularly on the occurrence of risky events’ frequency and scale in their activities); information on potential investment objects (such as their preliminary estimated costs, consumer characteristics, construction terms); information on the concluding agreements’ conditions and procedure between the housing construction investment subjects. The indicator system for retrospective assessment in housing construction investing risk is proposed. In particular, the following indicators groups are included in this system: actual frequency indicators of risky events’ occurrence in the investment entities’ activity in the previous period(s); specific indicators of the risky events’ occurrence scale in the investment entities’ activities in the previous period(s); relative indicators of the risky events’ occurrence scale in the investment entities’ activities in the previous period(s). Also, this indicators system was supplemented by a number of generalizing indicators. The sequence of the risk planning process in housing construction investing for all the main participants of the process is proposed. For the investors particularly, this sequence contains the following sequential actions: a set of situations in which the construction object may appear is formed; the probability for each of these situations is estimated; the expected value of the economic benefit from the housing purchase in each situation is set; the mathematical expectation calculation of the value of economic benefits from the housing purchasing is made; the coefficient of variation is calculated according to the average linear deviation of economic benefits from the housing purchasing; the estimated market value of a residential real estate object is calculated taking into account the risk factor; the profitability index of the particular dwelling purchase operation is calculated. The practical implication of the developed methodological principles of the risk planning in housing construction investing in the practice of the construction subjects will increase the approved management decisions validity.
How to Cite
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investment project, investor, developer, evaluation, risk, indicator
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