Real Estate in Emerging Markets

Course Number 1462

Lecturer Nicolas Retsinas
Winter, 20 sessions
Paper

Career Focus

For students seeking a career in developing, or investing in real estate in emerging markets domestically and/or internationally. The course is for those students who are aware of the potential and the opportunity for investment returns in markets that are often perceived as too risky and/or too poor to generate either short-term or long-term profits.

Educational Objectives

1. How to assess market context;
2. How to distinguish between perceived risk and real risk;
3. How to understand the role of the public sector;
4. How to reduce energy risk; and
5. How to mitigate overall development risk including regional and project risk.

Course Framework

Real estate in domestic and international markets is best learned through a rigorous and thorough understanding of the context, the role and the perspective of actors from both the private sector and the public sector.

Two themes recur throughout the course. The first is that market inefficiencies and the dearth of usable information can elevate perceived risk. A better understanding of the true risk (and how to mitigate that risk) can create margins of profitability. Traditional real estate practices can exacerbate or undermine development opportunities in emerging markets. Failing to recognize the disproportionate role of government in these environments can derail the best thought through venture. In such scenarios the ability to mitigate risks is even more critically needed than in a traditional investment environment.

The second theme is that the poor have purchasing power and represent a viable market as illustrated through affordable housing initiatives in the US and in profitable commercial and residential projects in the developing world. Market gaps (absence of products and services) and density of population can lead to opportunities. Although financial distress and the lack of infrastructure impede development, they can be overcome by innovation and creative partnerships.

The course investigates how entrepreneurs and investors analyze real estate development options. Cases illuminate how developers and lenders analyze markets and development opportunities, with emphasis on the pricing and management of risk.

Through cases, the course analyzes the legal and financial infrastructure for real estate finance in developing countries. We will examine changing institutions, new private sector actors and evolving public policies. The course will address the connections (or lack thereof) to global capital markets. Cases include pure private sector responses, not-for-profit initiatives and public-private sector partnerships and demonstrate how capital markets and investor interest are turning to foreign emerging markets.

Course Content

Course sessions will revolve around cases from a diverse variety of perspectives and environments. Over three quarters of the cases will be drawn from international experiences. Supplementary materials will be distributed for further background on individual cases. Grades will be based on class participation (50%) and a paper (50%).