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Land Development in Emerging Markets

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    Abstract

    One of the most important issues in emerging markets is the timing and intensity of land development decisions and how these decisions affect property values. In these markets, newly developed office space and residential units often account for a substantial proportion of the aggregate supply of similar types of developed properties. In this article I use a real option model to study the land development problem faced by a central planner. The optimal capital intensity, the value of land and the post-development rents and property values in these markets are strikingly lower than the corresponding values in the markets where the demand is perfectly elastic. Furthermore, the optimal capital intensity and the value of land are most sensitive to the market demand conditions in the emerging markets experiencing the fastest growth or greatest uncertainty, or at times when interest rates or construction costs are lowest.

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    File URL: http://www.umac.mo/fba/irer/papers/past/vol2_pdf/094-109LAND.pdf
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    Bibliographic Info

    Article provided by Asian Real Estate Society in its journal International Real Estate Research.

    Volume (Year): 2 (1999)
    Issue (Month): 1 ()
    Pages: 94-109

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    Handle: RePEc:ire:issued:v:02:n:01:1999:p:94-109

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    Postal: Asia Real Estate Society, 51 Monroe Street, Plaza E-6, Rockville, MD 20850, USA
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    Web page: http://www.asres.org/

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    Postal: Asian Real Estate Society, 51 Monroe Street, Plaza E-6, Rockville, MD 20850, USA
    Email:
    Web: http://www.asres.org/

    Related research

    Keywords: Land value; Capital intensity; Equilibrium; Emerging markets;

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    Cited by:
    1. Matthew J. Clayton & Bjorn N. Jorgensen & Kenneth A. Kavajecz, 1999. "On the Formation and Structure of International Exchanges," Tinbergen Institute Discussion Papers 99-079/2, Tinbergen Institute.
    2. repec:dgr:uvatin:2099079 is not listed on IDEAS

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