A Study on Bid Decision Factors for Non-Performing Real Estate Project Financing and the Valuation Basis

Taegeun Kim, Heecheol Shim () and Sungrok Kim
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Taegeun Kim: Department of Real Estate Studies, Kongju National University, Yesan-gun 32439, Republic of Korea
Heecheol Shim: Department of Real Estate Studies, Kongju National University, Yesan-gun 32439, Republic of Korea
Sungrok Kim: Department of Real Estate Studies, Kongju National University, Yesan-gun 32439, Republic of Korea

Sustainability, 2025, vol. 17, issue 3, 1-20

Abstract: As the scale of real estate project financing (PF) of large construction companies in South Korea increase, discontinued construction projects and PF default rates in the financial world are also rapidly increasing. Furthermore, the percentage of PF bad debts in South Korea today has increased as much as about three times compared to that in 2023. The increase in bad debt rates results mainly from the moderate supply of new funds, delays in non-performing PF arrangements, and so forth. To address this problem, it is necessary to restart the development of non-performing real estate PF development sites through successful bidding and to review the valuation basis for development projects. Therefore, this study aims to derive internal and external characteristics of non-performing real estate PF development sites in South Korea and examine the effects of specific factors on their successful bidding. In addition, significant variables are selected based on the analysis result; the analytic hierarchy process (AHP) analysis is performed to establish a new valuation system for real estate development projects. After careful consideration of various literature reviews and expert opinions, an analysis model is established to ensure the suitability of the study model with the error range minimized. As AHP was performed based on the newly established hierarchy, the higher ranks of each valuation factor were derived based on priority and importance, and the valuation basis was rearranged accordingly. The conclusion was derived through a comprehensive review of the results of the two analyses above. It was verified that certain factors—business feasibility assessment, work performance assessment, and basic evaluation—played key roles in the success and successful bidding of real estate projects. This point suggests that strict project management and performance standards must be set based on the economic achievements of financial validity indexes and business performance capabilities. Stable profit distribution and business transparency are also viewed as vital factors for the success of projects. Therefore, this study reestablishes the valuation basis for development projects in South Korea and presents policy suggestions on location propriety and business advancement based on the analysis of non-performing PF bid decision factors and the development project valuation basis.

Keywords: development project; project financing; bid decision factor; regression analysis; AHP; valuation basis (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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