Management of Uncertainty in Real Estate Development Appraisals: A Literature Review
Keywords:Appraisal, Flexibility, Management, Real Estate Development, Real Option, Uncertainty
This paper provides an in-depth examination of various concepts related to the forms and sources of uncertainty, as well as the management of uncertainty in real estate development (RED). The study also examines factors influencing the adoption of Real Option Analysis (ROA) in RED given the need to improve the knowledge of stakeholders in RED appraisal, and to ensure best practices. Based on desktop analysis of past authors’ perspectives, orientations and submissions regarding the management of uncertainty in RED appraisal, the findings reveal that while there are varying forms and sources of uncertainty in RED appraisals, there are also diverse methods used to manage the uncertainty of it. It is, however, noted that the methods employed are dependent on RED appraisers and other institutional factors. The consensus from previous studies favours ROA in managing uncertainty in RED. This paper adds to the debate for the need to embrace ROA in managing the effects of uncertainty in RED appraisal.