Profit evolution for residential construction projects according to project characteristics

Abstract

The following research paper analyzes the evolution of financial variables considered in residential real estate projects in Quito, Ecuador. The analysis depends on the general characteristics of each project, from 2006 until the present. Specifically, the analysis relates the profitability of a series of projects with their type, total size in square meters, and general costs of construction, among other factors. For this, 344 real estate business plans were studied to obtain general information of the construction, and later categorized according to financial variables established. Usually, the initial planning of construction projects is not fully accomplished, due to such factors as the owner, design, location, or financial reasons, among others. As demonstrated, the misuse of resources has caused delays in the construction process, leading to economic loss. Essentially, the financial planning must provide a detailed explanation of the behavior of the variables affecting the proposed project's viability and financial efficiency. These variables must achieve optimal and positive annual profitability for the project to be successful. The results obtained for general and annual profitability find that general characteristics, such as type and size, affected profitability by increasing chronologically. Additionally, it was found that general profitability was most beneficial for a specific type of building and house, regarding its size, which is an essential financial factor to consider when investing or carrying out the construction of any real estate project.