REAL ESTATE FINANCE
2018/2019, Semester 1
School of Design and Environment (Real Estate)
Modular Credits: 4
The main aim of this module is to equip course participants with the basic principles for real estate financial analysis. A secondary objective is to provide course participants with an appreciation of the linkages between real estate, credit and capital markets. Students will specifically learn the financial tools necessary for evaluating lending and borrowing decisions and apply them to real estate investments. They will also be exposed to the institutional framework in Singapore such as the prevailing mortgage market conditions and CPF rules. In addition, students will study the more recent innovation in the field of real estate finance and investment.
Real estate investments for either owner-occupation or investment purposes are often capital intensive. In fact, real estate typically represents the largest portion of household wealth for many households in Singapore as well as in other parts of the world. Thus, it is important for participants in the real estate market to have a firm understanding of the workings of the real estate finance markets and the types of analyses that are relevant for making good investment decisions. The main aim of this module is to equip course participants with the basic principles for real estate financial analysis. A secondary objective is to provide course participants with an appreciation of the linkages between the markets for real estate, credit and capital. In this course, we will specifically learn the financial tools necessary for evaluating lending and borrowing decisions. We will then proceed to the application of these techniques in traditional forms of property financing. If time permits, we will study the more recent innovations in the field of real estate finance and investment.
The module starts with a review of the financial mathematics that is typically used for real estate computations. Participants will then apply this toolkit to a range of investment decisions. We first analyze mortgage markets in Singapore and the typical debt instruments used for financing residential properties. Here, we will focus on how the CPF financing scheme and the various institutional charges affect the individual investor’s financing decision. For completeness, we will also examine key financing issues from the lender’s perspective. The course then introduces real estate investment analysis as applied to income producing properties. In this context, we will also analyze development finance options in the Singapore capital market. If time permits, we will look into the more innovative structures that have been used to raise funds for real estate locally and in other countries.
Course Material and Readings
Lecture notes and problem sets define the scope of the topic area covered. These course materials will be made available via the IVLE platform and participants are requested to download the materials ahead of class. For detailed explanations of the concepts and materials presented in the module, the following readings are recommended.
For applications to real estate as well as mortgage/loan contract design issues, consult:
• Real Estate Finance and Investments, Brueggeman W.B. and Fisher J.D., 15th edition, McGraw Hill (2015). Main text.
For other readings, please review:
• Geltner et al, Commercial Real Estate Analysis and Investments, (2nd edition), Thomson
• Sirmans, C. F., Real Estate Finance, (2nd edition), McGraw Hill, (1989).
There will be one final examination as well as continuous assessment via tutorial participation and a team project. Teams will be formed based on rules to ensure an even distribution across disciplines and years. The final examination is open book and will carry 60% of the final grade. The team project will form 30% of the final grade while tutorial participation will be given a 10% weight. In general, problem sets are for the student’s benefit and will not be graded. There will be an exam review session at the last class meeting to discuss any outstanding issues.
Not for Real Estate students
Workload Components : A-B-C-D-E
A: no. of lecture hours per week
B: no. of tutorial hours per week
C: no. of lab hours per week
D: no. of hours for projects, assignments, fieldwork etc per week
E: no. of hours for preparatory work by a student per week