Real Estate Development Financing through Pre-letting and Pre-sale Arrangements:

An Assessment of Adoption Level in Emerging Markets

Abstract

Utilisation of pre-letting and pre-sale financing (PPF) arrangements for housing delivery have gained increased attention in the literature. However, the increasing rate of housing deficit in the emerging markets does not represent the reality of an increase in the adoption of PPF arrangements. With the aid of a semi-structured questionnaire, this study examined the level of adoption of PPF arrangements by property development companies (PDC) in the emerging markets. The questionnaires were administered to 87 PDCs in Lagos metropolis to gather property-related data such as the number of property units developed between 2008 and 2023, unit type, number of units pre-let, and number of units pre-sale, among others. With the use of an Excel spreadsheet and SPSS software, the acquired data were analysed using percentages and regression analysis. Findings revealed that the proportion of pre-letting against the total units of property developed during the year under review was 7.48 percent, and pre-sale 17.44 percent. While 67.70 percent of the pre-letting proportion applied to commercial properties, 53.24 percent of the pre-sale proportion applied to residential properties. An increase in pre-sale adoption was observed throughout the years under consideration. Though a more significant increase was witnessed in the residential properties, commercial properties equally witnessed a slight increase across the years. The regression analysis outcome showed that none of neither pre-letting nor pre-sale financing adoption was significantly influenced by the tested organisational parameters in the study area. It is, however, necessary that the stakeholders pay attention to pre-letting financing arrangements and increase the adoption of both arrangements to improve housing provision.