NAME: partnership between Private Real Estate Companies

 

NAME: KAWA
DAVID. E

REG. NO:
7396/T.2014

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COURSE:
BSC. REFI

SUBJECT: LM
498: PRE-DISSERTATION

 

 

TOPIC:
Public Private Partnership (PPP) in Real Estate

 

CONCEPTS:

1.     
Transaction
of Real Properties

2.     
Land
delivery agents in urban areas

3.     
Benefits
of Public and Private Partnership

4.     
Regulations
and Rules guiding the Partnership

5.     
Sources
of Finance

 

ISSUE: Is the partnership between the private and
public entities in Dar es salaam,Tanzania, beneficial.

 

TITLE

Examination
of PPP in Real Estate Business: A case of partnership between Private Real
Estate Companies and Kigamboni Municipal Council.

 

MAIN
OBJECTIVE

To
determine the effectiveness of PPP framework in Real Estate Business.

 

SPECIFIC
OBJECTIVES

1.     
To
identify the various types of PPP in Real Estate.

2.     
To
explore the limitations and challenges faced by PPP in Real Estate business within Tanzania.

3.     
To
identify the benefits attained by PPP in Real Estate.

 

 

 

Reference:

H.J Bao. Issues in Housing and Real Estate. Hong
Kong: Hong Kong University Publishing Unit, 2013.

Brueggeman
W.B & Fisher J.D (2011). Real Estate
Finance and Investment. New York: McGraw-Hill Irwin

Baum,
Andrew. Real Estate Investment: A
strategic approach. London and New York: Routlegde Taylor and Francis
Group, 2004.

Tesha, Pius
Philip. Opportunities and challenges of
real estate development in Tanzania.
Dar es Salaam: Ardhi University, 2015.

David M
Gethor, Norman G Miller and Jim Cluton. Commercial
Real Estate Investments and Analysis, (2001)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RESEARCH
TOPIC: Real Estate Investment

 

RESEARCH
CONCEPT: Public and Private Partnership in Real Estate

 

RESEARCH
TITLE: Examination of PPP in Real Estate Business: A case of partnership
between Private Real Estate Companies and Kigamboni Municipal Council.

 

 

INTRODUCTION

Real estate is property comprised of land and the buildings on it, as well as the natural
resources of the land, including uncultivated flora and fauna, farmed crops and
livestock, water and mineral deposits. (Craig
2004). A building on a certain piece of land is considered as a real estate
property. The development of real estate properties may be done by a single
individual, a public organization, a private organization or by entering into
an agreement between different parties eg: a private to private partnership or
a public to private partnership.

 

Public Private
Partnerships (PPPs) are contractual arrangements between public sector
organizations and private sector investors for joint, symbiotic and
collaborative provision and financing of public projects and services. They
arise out of the realization that although the public sector is responsible for
the delivery of infrastructure projects, it often encounters financial,
technical and institutional limitations in availing such projects. (Broadbent,
2003)

Public?Private
Partnerships have become increasingly popular in Tanzania and throughout the
world.  Research and studies have been performed in the past few
decades to examine what public? private partnerships are, how they are
structured, and if they add value to the public sector. The purpose of this
study is to examine Public?Private Partnerships for what they are, how they are
defined, how the value to the public sector is measured, challenges they face
by this partnership and if they provide value to the public sector and the
community.   

 Consequently, this research is set out to study on the effectiveness of
PPP framework and its contribution towards the growth of Real Estate business
in Tanzania.

 

STATEMENT
OF THE PROBLEM

Recently
some private companies dealing with selling surveyed plots in different areas
of Kigamboni have entered into a partnership with Kigamboni Municipal Council
in conducting their activities. In this partnership there are various different
arrangements for the sharing of risks and benefits between the two parties.
From this arrangement various challenges tends to occur one of them involves
the private companies to incur higher costs than would been incurred while
operating outside this partnership. The arrangements and performance of duties
has resulted some of the private companies to remain dormant in this
partnership. Furthermore, many companies dealing with real estate business in
Kigamboni are left out of this partnership. There are some reasons for some companies
not to partner with the Municipal in their business. By using various private
companies who have partnered with the Kigamboni Municipal Council in Dar es
Salaam, this study tends to examine the role of each party in the sharing of
risks and benefits in undertaking their activities and their contribution to
the development of real estate business in Dar es Salaam.

 

OBJECTIVES
OF THE STUDY 

Main
Objective

To
determine the effectiveness of PPP framework in real estate business.

 

SPECIFIC
OBJECTIVES

1.     
To
identify the various
types of PPP in Real Estate.

2.     
To
explore the limitations
and challenges faced by PPP in Real Estate business within Tanzania.

3.     
To
identify the benefits
attained by PPP in Real Estate.

 

RESEARCH
QUESTIONS

 

1.     
What
are the types of PPP in Real Estate existing in Tanzania?

2.     
What
are the limitations and challenges faced by PPP in Real Estate business in
Tanzania?

3.     
What
are the benefits attained by PPP in Real Estate?

SIGNIFICANCE
OF THE STUDY

This study
is expected to save as a reliable source of Real Estate Investment information,
specifically on the area of private and public partnership framework in
Tanzania. It aims at pointing out the rules and regulations guiding the
partnership, benefits and the challenges and limitations encountered by PPP in
the real estate sector. The study reveals usefulness to the following groups:

a.      
Public
sector

The study
will be useful to the Public Sector in determining their position, strengths
and weaknesses by
contracting with the private sectors in real estate business and also in
finding out ways to recover partially or fully from their weaknesses by treating the
sources of these weaknesses.

 

b.     
Students

The study
will provide knowledge to students pursuing real estate careers by exposing
them to the role exercised by both public and private sector towards developing
and advancing of real estate business in the country. On the other hand the
study will act as a useful tool for future studies that might be trying to
study the same research matter by covering probable gaps arising from this
study.

 

c.      
New
Investors

The study
will be useful to all new investors in real estate, as they will be able to
learn on the existing PPP’s types and challenges faced by them in real estate sector
and through assessment being able to come up with the best solutions towards
eradicating the existing challenges so as to maximize benefits to both parties thus the private and the public sector.

 

SCOPE OF
THE STUDY

The study
concerning the examination of PPP in real estate business in Tanzania provides
for the study coverage in terms of physical and conceptual range. In physical
coverage this study is limited in Dar es Salaam region since the headquarters
of selected Private companies are located in Dar es Salaam. However in
conceptual range the study focuses on the evaluation of Private and Public
Partnership in the promoting of real estate business together with the
challenges faced by this arrangement within the sector.

 

ETHICAL
CONSIDERATIONS

 

The study will have ethical considerations for both the
participants and researcher

a) Ethical Considerations for Research participants

In relation to participants that will take part in this
research (Municipal officers and the private firms workers) ethical
considerations have been portrayed in ensuring that, the researcher obtains
informed consent from the participants before collecting any information from
them. This is achieved by explaining clearly what is the research all about, the aim of the research
and what information does the research seek from them, the aim is to ensure
voluntary participation. Also
the participants will be told what harm may come up if they decide to participate
(if any); the confidentiality of the information given out by
participants will be promoted. In case research participants do not want their
identity to be disclosed anonymity principle should be adhered to.

 

b) Ethical considerations for researcher

The researcher will report exact information as obtained from
participants without any biasness, fabrication or falsification. Information
collected will be used for the purpose intended (academic purpose) as
prescribed to the participants and not otherwise. In data collection the
researcher will not ask sensitive questions that may offend the participant and
keep time in case of meeting. In data management a researcher will indicate how
data will be stored, who will access the data, how long will the collected data
be stored and how she will deal with unforeseen events such as how the data
will be backed up.

 

 

 

 

 

 

 

 

 

 

 

 

 

LITERATURE REVIEW

The
financial crisis of 2008 onwards brought about renewed interest in PPP in both
developed and developing countries. Facing constraints on public resources and
fiscal space, while recognizing the importance of investment in Real Estate
sector to help their economies grow, governments are increasingly turning to
the private sector as an alternative additional source of funding to meet the
funding gap.

Public?Private Partnerships (PPPs) refer to arrangements where the private sector supplies infrastructure assets and services that traditionally have been provided by the government. In addition to private execution and financing of public investment, PPPs have two other important characteristics: there is an emphasis on service provision, as well as investment, by the private sector; and significant risk is transferred from the government to the private sector. PPPs are involved in a wide range of social and economic infrastructure projects, but they are mainly used to build and operate hospitals, schools, prisons, roads, bridges and tunnels, light rail networks, air traffic control systems and water and sanitation plants. (IMF, 2006)  The author gave out a general definiton of the
PPP and failed to explain in details on how these PPP can be well established
in the developing countries and bring about the positive impacts towards the
advancement of various sectors i.e Real estate within their respective
countries. This study aims at identfying various beneficial PPP legal
frameworks that can be adopted in Tanzania for the purpose of resolving various
issues impacting the real estate sector and the improvement of the sector as a
whole in general.

 

The term
PPP has been explained and interpreted widely in the literature to encompass
any form of arrangement between the public and private sector to deliver
services to the public which was previously provided by the public sector
alone. The definitions of PPPs differ in scope and formality of arrangements.
PPPs vary from country to country in terms of information and operation even
within the developed countries (Hodge, 2004).

PPP’s can
be defined in broad terms or in more narrow terms. In broad terms, it simply
means any form of cooperation between organizations in the public sector and
the private sector, usually meaning “cooperative ventures between the
state and private business (Linder, 1999). Contracting out can be viewed as a
form of PPP in this perspective (Savas, 2000). A more narrow conception will
look at PPP’s as distinct from contracting out. Contracting out means
principal-agent relationship between public purchasers and private providers.

Mac Gough
(2000)  pointed out that private entities
when engaged into public matters can bring about a positive contribution
towards achieving the laid out objectives into a satisfactory manner. He further
argues that, the involvement of private entities into public real estate
matters can help in solving various challenges such as the bureaucrasies in
land measuring and land delivery, valuation, land titling procedures and
property constuction. He also explained on how the private sector can help in
reducing the burden to the public sector and the assuarance of providing
maximum quality to the stakeholders in general. Private entities adopt to change
faster compared to the public sector, the partnership of the two will help in
reducing the setbacks facing the public sector and the strenghts of the public
sector will act as a remedy towards the shortages of the private sector eg;
sources of funds. The author  however
failed to explain on the ways of solving disputes when they arise in the
partnership of the two parties and the legal framework that protects the
interest of the two parties.

This
research intends to go further covering such gap that on studying the different
arrangements of PPP and their effectiveness in real estate business.

Public-private
partnerships can provide a wide variety of benefits for society and become a
win-win collaboration by improving innovation, reducing the time of project
implementation, transferring risk to the private sector, improving the allocation
of public resources, and reducing costs. These collaborations have a high
chance of being successful and can enable governments to focus on their core
mission of freeing up resources for other public needs (Nijkamp, et al, 2002).

 

The
partnership between the private and public sector is vital in solving various
challenges facing the Real Estate sector within Tanzania. The interdependency
between the two parties tends to solve one’s another problems for the purpose
of achieving more. For instance in this partnership, the difficulties that used
to face the public sector in carrying out its duties are condensed by the
private sector and the vice versa is true.

The PPP
approach is expected to eliminate the decision making and managerial
bureaucracy associated with the public sector (Perrot and Chatelus, 2000). It
further positively draws from the good credit rating and general goodwill of
the public sector to consolidate market based procurement of project finances
while ensuring less resistance from the general public. The private sector’s
limitations in managing macro level public infrastructure risks as pointed out
by Carnevale (2002) can be overcome through the backing by the government in
policy formulation for implementation of PPPs.

 

Fraser (1993) stated that, owning real estate is not only the best
way, the quickest way and the safety way but the only way to become wealthy.
However this argument is only true if the property investment perfomance is
greater to the extent that it generates high returns as expected over a given
period  of time. Moreover, most of the
real estate investors do not achieve enough return to become wealthy enough due
to the fact that real properties are always associated with a number of risks
and other irrelevant investment decisions which in turn hinder better
perfomance of an investment. A potential investor in real properties however,
has to take into consideration several factors which would enable an investment
to generate high returns; these includes safety of investment, certainty of
yield, liquidity of investment, capital appreciation, taxation advantage,
managerial responsibilities, reinvestment of net return and opportunity of
leverage. With little consideration regarding these factors by most of real
property investors,there has been little return from most of the real estate
investments leading to poor performance in terms of income generated from these
investments.Thus this study will specifically explore the influence of  Private and Public Partnership towards the
advancement and performance of real estate sector.

 

According to
Rogerson (1997) explains that, there must be several reasons for the current
interest in creating PPPs for buildings and infrastructure. One of them is greater
efficiency in the use of public resources. Experience has shown that many
public sector activities can be undertaken more cost effectively with the
application of private sector management disciplines. Besides these advantages,
others are mentioned by different scholars such as, Acceleration of
infrastructure provision as well as faster implementation because of shorter
construction timeframes (Heinz 2005), Enhanced new public management (Winkel
2003) and Better allocation of risk to the party best able to manage it at
least cost (cf. EC 2003).

 

 

In 1967
Tanzania became a centrally owned, planned and managed economy. The Government
was the “great provider” and in doing so created some 425 parastatal
enterprises across all sectors. In the 1980s, the vulnerability of the
structure became apparent with performance indicators under pressure (GDP
growth 1percent, inflation > 30percent, foreign reserves drawn down followed
by budget deficits) with the government heavily subsidizing the parastatals. By
the early 1980’s the economy of Tanzania had deteriorated to the extent that
Tanzania was the World’s second poorest country in terms of GDP per capital.
These crises signaled a need for movement towards a market economy and, in
1987, the government’s focus became financial reform as they redefined the role
of the State as that of policy maker, maintenance of law and order, provider of
basic social and economic infrastructure and facilitator of economic growth
(Economic Recovery Programme). Subsequently, there was a mass privatization of
state assets facilitated through the National Investment Promotion Act (enacted
in 1990 and revised 1997) to create Tanzania Investment Centre (TIC)) and the
creation of the Presidential Parastatal Sector Reform Commission charged with
divesting 400 public enterprises and state assets. Over the subsequent years,
public enterprises have been on a journey whereby some are fully privatized

In strengthening of the real estate sector various private
entities such as Blackwood, Land General Planning and Property International
and others are participating with the public sector for the purpose of
expanding and harvesting more from the real estate business within the country.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RESEARCH METHODOLOGY

This section provides for a framework of how the study is to
be carried out, essentially the procedures by which the researcher will go
about the work describing, explaining and predicting phenomena. It points out
the methods used to collect, analyze, interpret and present data.

Research Approach

With consideration to the research problem, the research
approach employed in this study will be qualitative and quantitative approach.
The methods are complimentary to maximize the strength and minimize the strength
of each (Kothari, 2000). Qualitative approach will be adopted so as to provide
an in depth description of PPP framework existing in the real estate industry.
On the other hand Quantitative approach will be used to express quantity
measurements of the real estate units constructed under the partnership of
public and private entities.

 

Research Method

Under qualitative approach a research method used will be
case study, as this will attempt to shade light on the framework of PPP in real
estate sector by studying in depth the suggested case study (K, NHC and
Ministry of Lands, Housing and Human Settlements Developments). Under
quantitative approach survey will be used as a research method as it will
provide a descriptive association on the number of real estate units
constructed under the partnership of public and private entities, amounts and
the strategies used by both parties in the real estate industry.

 

Sampling

The study ought to contain……….??? It will be a non-probability sampling as
it will be purposive in nature due to judgmental technique used to select
sample (Creswell, 2009). This technique was adopted because of a belief that
the participants are knowledgeable concerning the issue studied and are in a
position to provide reliable data.

 

Data Collection method

The study will collect primary data using face to face
surveys and interviews whereas questionnaires and interview guide will be
designed and administered face to face. In personal interviews the interviewer
guides the interview by probing questions and clarifying questions to the
interviewee where necessary (Creswell, 2009). These data collection methods
were chosen because they are flexible in case of directional questions,
observation of participant is done, therefore judgment of response given can be
easily done through facial expression, if the researcher thinks the sample is
biased she has the ability to change and ethical issues such as informed
consent are taken into account before interviewing or questioning the
participant.

Secondary
data will be collected through reading the investment policies, financial and
audited accounts reports of all the selected entities so as to observe their
contribution in real estate sector trends and motives of doing that.

 

 

Data Processing, Analysis and Presentation

After the data have been collected, the obtained data are
organized and classified to ease the analysis process. Processing and analysis
of data will be done with the help of Microsoft Excel which will point out how
PPP’s have contributed to the real estate sector over the years. The analyzed
data will thereafter be presented in descriptive and analytical forms which
comprise figures, tables, charts and text.

 

Measurement Strategies

Reliability and Validity consideration

Reliability is a measurement strategy that points out how
consistent are the information provided by the participants (Marczyk, 2005). In
this study reliability will be promoted by ensuring uniformity in the data
collection methods; example by using the same questionnaire and interview guide
to obtain data from all the participants from the Kigamboni Municipal and from
the different private real estate entities found within the Municipal. This
will provide a good basis of comparing and contrasting the information, thus
being able to measure their reliability.

Variability on the other hand measure the accuracy of the
research design used in the study and it is known that the higher the validity
the more accurate and meaningful the end results are expected to be (Marczyk,
2005). This will be best ensured by choosing a research design which captures
the research objectives, thus guarantee derivation of valid conclusions.

 

 

 

Brodie,M.J.
1995. Public-Private Joint Ventures: The Government as Partner – Bane or
Benefit?. Real Estate Issues. Chicago 20 (2), pp. 25-29.

European
Investment Bank, 2000. The European Investment Bank and Public Private

Partnerships.
The Newsletter of the International Project Finance Association, 1, pp.3-4.

Frilet, M.,
1997. Some Universal Issues in BOT Projects for Public Infraestructure.

Grant, T.,
1996. Keys to Successful Public-Private Partnerships. Canadian Business

Review.
Ottawa, 23 (2), pp. 27-28.

Hambros,
SG., 1999. Public-Private Partnerships for Highways: Experience, Structure,
Financing, Applicability and Comparative Assessment. Canada.

Krozner,
R.; Shiller, R.J., 2011. Reforming U.S. Financial Markets: Reflections before
and beyond Dodd-Frank. The MIT Press.

Li, B.,
Akintoye, A., Edwards, P. J., & Hardcastle, C., 2005. Critical success
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economics,
23(5), pp. 459-471

Nijkamp,
P., Van Der Burch, M., & Vindigni, G., 2002. A comparative institutional

evaluation
of public-private partnerships in Dutch urban land-use and revitalisation

projects.
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Public-Private Partnerships for Real Estate Projects: Current Framework and
New Trends