Management Research Of The Upfront Costs Of Real Estate Development Projects

Along with the urbanization of China, China’s industry of real estate has undergonea booming period under a series of policies stimulating the property purchase after theending of year2008in particular. As domestic and oversea enterprises as well asinvestment fund have gradually entered the market and competed fiercely with each other,the property development has dramatically changed in terms of developmentenvironment, market mechanism, product development, market strategy and managementapproach. In such circumstances, while government has issued macro-control policies toadjust land and finance, developers gain considerable profits through the recent risingprice of property. The huge increase of potential competitors has accelerated thecompetitiveness of the industry due to the scarcity of lands as non-renewable resource.Being gradual normalization of the market and further competitions, it indicates afarewell of excessive profit. How to survive or develop has become an utmost toughquestion that real-estate enterprises have to confront with. How to cut down cost ofdevelopment and raise investment return from project development has been a headachefor many enterprises. Apparently, reducing cost of has become an effective way toproduce profits. Considering the stability of land charges, the construction andinstallation costs, marketing costs, management costs and financial costs, the main focusof cost reduction relies on the initial cost control.In this paper, based on the fundamental theory and methods of cost management andsummarized the domestic and foreign scholars’ views about the cost control research ofreal estate project, it carries on the discussion to the theory and practice of cost control ofChinese real estate development enterprise. This paper analyzes the current situation ofcost control of real estate projects in China and reveals the existing problems regardingcost control from the investment decision-making stage, project planning and designstage, and bidding and tendering stage; secondly, the analysis of the main factors for pre cost management effect of real estate development project from the perspective ofcharacteristics of different stages of cost management and control; thirdly, from thespecification of early work process of real estate development project, it introduces theprocess and method of the cost management of real estate development project; finally,when a district of Tianjin XX real estate project has been set as an example, this paperintroduces a detailed process of the pre project cost management, emphasizing itsimportance at the project investment decision-making stage and the planning and designstage. It expounds the value estimation and bidding decision-making stage of land projectsetting, through dynamic analysis by using the discounted cash flow method for projectinvestment returns, and it reveals the target cost determinant and the profitability of theproject. Associated with decomposition of the prior work of real estate developmentproject and the corresponding costs, it suggests an establishment of a good managementmode for the formation of an effective system of cost management of real estatedevelopment project.