ABSTRACT
This study evaluated the property development practice by estate surveyor and valuer. The case study for this research was Lagos state. The study employed both a descriptive and correlative research design method. Structured questionnaires were randomly administered on the target population and information on the investment appraisal techniques employed, factors considered for its selection, viability criteria considered, problems involved for employing wrong choice of viability criteria and appraisal technique were sought and the findings analyzed using the 3-4point likert scale. Data for the study was obtained from Eighty-seven (87) practicing Estate Surveyors and Valuers in the study area. Findings revealed that the payback period is the most adopted appraisal technique in practice as evidenced with a mean score of 3.57. The objective(s) of the investor is also the most significant factor being considered while selecting appraisal technique with a mean score of 3.83 while the problems of actual return varying from the expected return and also difficulty in the repayment of loans always result when a wrong viability technique is employed. The success of any viability study goes beyond knowing the objective(s) of the investor; therefore, it was recommended that appraisers should ensure that they are equipped with adequate knowledge required for the execution of feasibility and on viability studies because knowing the right viability criteria for a particular objective will help in advising an investor on a course of action that will best achieve the developer’s objective.
CHAPTER ONE
INTRODUCTION
1.1 Background of the study
A capital investment appraisal is a means of ensuring value for money in relation to developing an estate strategy and capital project. It is not meant to provide an indication of profit or loss, but rather a comparison of costs in relation to those areas of the estate where there is an opportunity or an inclination for change (Baum, Mackmin and Nunnington, 1997). Capital investment decisions are of high importance to any business because they involve commitment of key resources and have an impact on the firm’s long-term performance as well as the shareholders’ wealth; therefore finding reliable methods for measuring the potential value of capital investment proposals is a matter of concern for not only managers but also shareholders of a firm. Complex property development process involves diverse professionals and the expenditure of huge capital has resulted in different attitudes to property development particularly due to inevitable uncertainty. While ascertaining the worthwhileness or not of a project, there exists various techniques from which the most appropriate one that meets the investors’ objective(s), which is to maximize profit while also minimizing risk, is chosen.
The decision to invest in a project is based on the expectation of future returns; this is so as rational investors usually aim at minimizing risk as well as maximizing returns. This therefore calls for a thorough investment appraisal through the application of a technique that will guide the investors in order not to incur loss on his capital outlay. Investment appraisal involves the weighting of benefits against costs by the application of one or more decision rules (Okoh, 2008). Appraisal is a way of ascertaining the worthwhileness of an investment. Umeh (1977) suggest that decision valuation is an aid or guide to logical, rational or prudent decision-making. Viability appraisal centres on the worthwhileness of an investment and it is very important in investment decision making because it determines the extent to which a designed project can survive. In recent time, there have been cases of abandoned and/or non-performing projects in cities and these has been as a result of factors such as non-involvement of professionals in carrying out viability study of such projects, and the use of wrong decision-making techniques (Umeh, 1977). Ogbuefi (2002) opined that the stabilization of the market forces of demand and supply in the property market, increase in sophistication of developments and other forms of investments, recent globalization of the world’s economy, inflation as it affects building cost and other raw material inputs, labour mobility and sophistication, high and unstable interest rates have contributed to a more difficult and competitive investment climate in Nigeria.
