Financing Assumptions
Valuation models often factor in the cost and structure of financing used to acquire and develop the property. These assumptions affect cash flow projections and investor returns.
- Loan-to-value ratio typically ranges from 60% to 75%
- Interest rates on commercial loans are usually between 9% and 12% per annum
- Loan tenure often spans 5 to 10 years, depending on project scale and lender policy
Cost-to-Carry Components
Cost-to-carry includes all ongoing expenses incurred during the holding period before income is generated or the property is sold. These directly reduce net returns and affect net present value.
- Property tax, land insurance, security, and maintenance
- Interest payments on borrowed capital during the pre-leasing or construction phase
- Administrative costs, approvals, and compliance fees