Framework and the value drivers for real estate development: Applicability of theoretical models with special reference to Tanzania

The property development sector in Tanzania is not growing at the pace that is practically and economically justified. The intention of this work is to provide an understanding on the applicability of the Models/framework provided by Poorvu and Cruikshank,and Michael Porter in the real estate industry in Tanzania. Real estate is always a valuable commodity, but the use of the real estate, which directly affects its value, is subject to growth and improvement factors over which the owner of the property is not always able to exercise control. Under Poorvuís Model, the typical real estate practices in Tanzania were studied against four variables (i.e. properties, capital markets, players, and external environment) to gain insights into the act of real estate deal-making. Porterís four variables (i.e. demand factors, factors condition, firm strategy, structure and rivalry, and related and supporting industries) were used to provide a guideline on achieving competitiveness in the real estate sector in Tanzania. The understanding of the two Diamond Models could enhance attractiveness and hence growth of the sector, and could lead to more effective decision making concerning real estate interest for developers and investors. The study also provides useful information especially to foreign real estate developers and investors when thinking of Tanzania as the investment avenue for real estate development. Regarding Poorvuís Model the study finds out weak interdependent relationships between market players, capital market and the external environment in Tanzania. The real estate market is to a large extent uncoordinated and no clear dimensions on real estate investment process. This could be one of the reasons for the slow growth of the real estate sector in the country. Also the variables proposed by Porter seem not to work effectively in Tanzanian real estate development sector. Tanzanian real estate sector is still in its infancy stage where most of Porterís variables donít work. It is also revealed that, successful real estate deal making depends largely on the environment within which real estate operates and involves a multitude of choices in terms of how specific transaction elements are valued, prioritised, addressed and implemented within the four variables in the Diamond Models. The strengths and weaknesses of the two Models were discussed and the proposed framework and Model for the Tanzanian real estate development sector were proposed.