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Fnce 424:Real Estate Finance And Investment December 2010 Question Paper
Fnce 424:Real Estate Finance And Investment December 2010
Course:Bachelor Of Business Management And Information Technology
Institution: Kabarak University question papers
Exam Year:2010
KABARAK UNIVERSITY
UNIVERSITY EXAMINATIONS
2010/2011 ACADEMIC YEAR
FOR THE DEGREE OF BACHELOR OF BUSINESS
MANAGEMENT AND INFORMATION TECHNOLOGY
COURSE CODE: FNCE 424
INSTRUCTIONS:
1. Answer question ONE and any other TWO questions
2. Write your registration number clearly, be neat, brief and to the point
3. Do not write anything on the question paper.
Question 1
a) Discuss any 5 types of risks that need to be analysed during real estate financing decisions.
(10 marks)
b) A real estate investor has tried to sell a property worth 100, 000 KES, with projected net operating
income (NOI) of 20, 000 KES and the general market capitalisation rate is 10.4 percent but all in vain.
Due to this market condition the investor has decided to seek advice from industry experts. Use the
above given data to estimate the market value of the property, then advice the investor accordingly.
(6 marks)
c) Discuss any 3 “informal” ways of mitigating housing challenges by the low and middle income
earners the in Kenyan real estate market. (6 marks)
d) Given is a situation where a borrower wants to buy a new one bed-roomed flat, putting down an
amount of 20,000 KES cash and financing the remaining 60,000 KES with a 30 year mortgage loan
and the current market rate of interest is 15 percent. Suppose however, that the developer offers to
buy down the interest rate to 13 percent for the first 3 years of the loan.
Under this mortgage plan estimate the borrower’s payment and the “mark – up” (8 marks)
Question 2 (Total marks 20)
a) Justify the need for property management in the current real estate industry. (10 marks )
b) Discuss the 3 commonly applied Real estate appraisal methods. (10 marks)
Question 3 (Total marks 20)
i. In a study on housing facilities in Kenya, the Ministry of Housing discovered the presence of some
constraints to affordable housing in both urban and rural areas.
Discuss any 5 of the constrains talked of above: (10 marks)
ii. Critically analyse the phrase “real estate syndication” and describe 5 reasons for its existence.
(10 marks)
Question 4 (Total marks 20)
a) Discuss the following types of mortgages. (10 marks)
i) Zero interest Mortgage (Z.I.Ms)
ii) Growing Equity Mortgage (G.E.Ms)
b) Describe leases and sale-leaseback financing environments. (10 marks)
Question 5 (Total marks 20)
a) Give a detailed description of Kenyan Mortgage Finance Industry trend to date. (10 marks)
ii. Assume that an investor has Ksh.500, 000 and wants to invest this amount in a variable – rate –
payment mortgage at 8.5 percent original interest rate, with a 30 year term and monthly payments. In
the contract, the interest rate is meant to be adjusted at the end of each year and rate increases at 0.25
percent per year. Estimate the monthly payments for the 1
st , 2nd , 3rd, 4th and 5th years of the loan.
(10 marks)
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