The Study And Practical Use Of The Real Estate Investment Strategies Model Based On Real Options

The current world economic situation is very volatile and under such situation thegovernment of China begins to adopt tough new property policy aimed at cooling the capital’s property market. The environment of property investment starts to become extremely complicated and unstable. The unstable and unpredictable new environment of real estate asks for the flexible strategies of the developers and provides opportunities for the economic growth for the real estate enterprises. However, the method NPV adoptedby the present property enterprises currently have ignored the value of the unpredictableand the flexible managerial values of the market. The Real Options Theory had been widely used in the fields of the value calculation, investment decision and dynamic management. The contribution of the Real Options theory is not only on the consideration of the unpredictability, managerial softness and the value of the strategical investment andalso makes up the drawbacks of the traditional methods which provides a new theoretical background and methods for the investors.This dissertation takes the investment decision strategies of the real estate project in an unpredictable environment as its research target. After the systematic literature review of the achievements both in China and abroad, this paper focused on the issue of thereal options within the field of the real estate project decision making. Firstly, it analyzed the decisive ways of the traditional property investment which keeps the sensible partof NPV and points out the value of the unpredictability and managerial softness in the management of the real estate investment sequentially leads to the analysis of the uniqueness and adaptability of the Real Options Theory; Secondly, under employing the B-SModel of the risk-neutral estimating methods with the combination of the uniqueness ofthe real estate project and the improvement of calculation and process of the traditionalBinomial Options Pricing Model, the key analysis is on the relevant parameters of theinvestment decision of the real estate. The applied framework of the share option modelhas been set which makes a comparison of the methods of the traditional methods andthe share option model, after that the superiority of the share option model is figuredout.Finally, taking the information of Project, which is a indigenous real estatedeveloper of Chongqing as basic data, working out the project investment decision-making extension value contained in the real option value of the project, the author has carried on the reasonable analysis of main parameters of the model and gives theconclusion that the real options method is more scientific and effective in largeruncertainty project investment decisions. It shows great practical value for investors inreal estate project investment decision by providing more scientific decision-makingbasis.