Economic Analysis: Theory and Practice

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Analyzing the efficiency of development projects funded with the use of escrow accounts

Vol. 18, Iss. 8, AUGUST 2019

Received: 20 May 2019

Received in revised form: 17 June 2019

Accepted: 12 July 2019

Available online: 30 August 2019


JEL Classification: D40, G31, R31

Pages: 1464–1477

Kogan A.B. Novosibirsk State University of Architecture and Civil Engineering (Sibstrin), Novosibirsk, Russian Federation

Chaetskii A.A. OOO Project, Novosibirsk, Russian Federation

Subject The article considers development projects, their financial characteristics and performance indicators.
Objectives We analyze trends in property development due to changes in regulations, i.e. the introduction of mandatory use of escrow accounts (and a bank loan) in financing the project under agreements for participation in shared construction.
Methods The paper describes an electronic financial model of development project. This model reflects the specifics of the organization of construction, pricing in the primary real estate market, modern regulatory requirements (including the use of escrow accounts). The study employs the concepts of the theory of finance, methods of investment analysis.
Results On the basis of created models, we provide calculations for a real object of observation for two methods of financing (using the escrow accounts and without them), and for two market situations that form different dynamics of development project revenue.
Conclusions We revealed contradictions of investment appraisal (NPV, PI, IRR) and the ambiguity of trends. The introduction of mandatory escrow accounts can play both a positive and a negative role.

Keywords: developer, efficiency, escrow account, pricing


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