(Case Study the Pearl Residential Apartments) BY

100 Pages·2017·1.65 MB·English

by  Mubarak Alkhelaifi

QATAR UNIVERSITY
COLLEGE OF BUSINESS AND ECONOMICS
Property Assessment in Qatar (Case Study the Pearl Residential Apartments)
BY
Mubarak Abdulrahman Alkhelaifi

A Project Submitted to
Faculty of the Collage of Buisness and
Economics

in Partial Fulfillment
of the Requirements
for the Degree of
Master of Buisness Adminstration

January-2017
© 2017 Mubarak Alkhelaifi. All Rights Reserved.
COMMITTEE PAGE

The members of the Committee approve the thesis of Mubarak Abdulrahman Alkhelaifi
defended on 12-January-2017.

Ph.D. Belaid Aouni
Thesis/Dissertation Supervisor

Ph.D. Adam Mohamedali Fadlalla]
Committee Member

Approved:

Khalid Al-Abdulqader, Dean, Collage of Business and Economics
ii
ABSTRACT
Alkhelaifi, Mubarak, A., Masters : January : 2017, Master of Business Administration
Title: Property Assessment in Qatar (Case Study the Pearl Residential Apartments)
Supervisor of Project : Belaid, Aouni.
The Gulf countries have been maintained as Tax Free heavens due to their strong revenue
from their natural resources like Oil. However, by the end of 2014, the oil prices has
dropped in the world resulting in the gulf region to have a tremendous drop in their
earning; which lead to a big deficits in the gulf countries’ budgets. Many analysts believe
that property taxes are on the way, because governments are seeking means to diversify
their income base and reduce their dependence on oil. Property taxes are one of the key
determinants of property value in the west, and so will require a method to evaluate the
market price of properties. This research paper will draw inferences from the limitations
of traditional and contemporary real estate appraisal methods from academic research.
Many of the past and contemporary methods assume vast assumptions which make them
largely unreliable. A goal programming model can be made inclusive of the all variables
affecting a property’s value and does not make substantial assumptions. We applied a
goal programming model to assess the model’s effectiveness in estimating the price of a
real estate property and found that it comes significantly close to the actual value price.
KEYWORDS
Real estate Qatar, property assessment, Goal Programing Model, Property Valuation.
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TABLE OF CONTENTS
List of Tables ................................................................................................................................. vii
List of Figures .............................................................................................................................. viii
Acknowledgments .......................................................................................................................... ix
1. Introduction ............................................................................................................................. 1
2. Literature review ..................................................................................................................... 4
2.1 Valuations Methods ............................................................................................................. 4
a. The Income Approach to Valuation............................................................................................................. 6
b. The Residual Method .................................................................................................................................. 7
c. Market to Sales Comparative Approach ....................................................................................................... 8
d. Mean or Median Transaction Prices .......................................................................................................... 10
e. Hedonic Pricing Model .............................................................................................................................. 11
2.2 Valuation Using Indices ................................................................................................... 13
a. The Home Price Index ............................................................................................................................... 14
b. Laspeyres price index ................................................................................................................................ 16
c. Liquidity Adjusted Indices ........................................................................................................................ 18
d. The FNC Index: A hybrid between a traditional index and the Hedonic model ........................................ 20
2.3 The Goal Programming Model VS. Historical and Contemporary approaches ............... 23
2.4 Goal Programming: A Brief History ................................................................................ 24
2.4 The Pearl-Qatar ................................................................................................................ 25
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3. Methodology ......................................................................................................................... 27
3.1 Goal Programming Model ................................................................................................ 27
3.2 Goal Programming Application ....................................................................................... 30
a. Parameters and Variables .......................................................................................................................... 35
b. Decision Variables ..................................................................................................................................... 38
c. The Objective Function ............................................................................................................................. 38
4. Analysis and Results.............................................................................................................. 40
4.1 Using Lindo ...................................................................................................................... 40
4.2 Interpreting the Variables ................................................................................................. 40
4.3 Significance of the Mean Absolute Difference ................................................................ 41
b. Mean absolute difference: Apartments and Townhouses .......................................................................... 42
c. Mean absolute difference: Apartments ...................................................................................................... 43
d. Mean absolute difference: Townhouses .................................................................................................... 43
4.4 Testing the function .......................................................................................................... 44
a. Townhouse ................................................................................................................................................. 44
b. Regular Apartments ................................................................................................................................... 47
c. Combined Analysis Regular Apartments and townhouses ........................................................................ 49
4.5 Slack or surplus ................................................................................................................ 56
4.6 Dual Prices ....................................................................................................................... 56
4.6 Steps to Optimum Solution and Iteration ........................................................................ 57
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4.7 Objective Function ........................................................................................................... 57
5. Goal programming: limitations ............................................................................................. 59
6. Conclusion ............................................................................................................................. 61
7. References ............................................................................................................................. 64
8. Appendices ............................................................................................................................ 70
Appendix A. Lindo Code for Apartments and townhouses combined ...................................... 70
Appendix B. Lindo File Result for townhouses and apartments combined .............................. 73
Appendix C. Lindo Code for Regular apartments only ............................................................. 78
Appendix D. Lindo File Result for Apartments ........................................................................ 81
Appendix E. Lindo Code for Townhouses ................................................................................ 85
Appendix F. Lindo File Result for Town Houses .................................................................... 89

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LIST OF TABLES
Table 1. List of transactions of properties in the Pearl ..................................................... 31
Table 2. View Type Level ................................................................................................ 37
Table 3. Townhouse Table and calculation of MAD ........................................................ 45
Table 4. Apartments table and calculations ...................................................................... 48
Table 5. Estimation and calculations of the MAD for combined Townhouses and
Apartments ........................................................................................................................ 51

vii
LIST OF FIGURES
Figure 1. Home Price Index .............................................................................................. 15
Figure 2. Laspeyres price index ........................................................................................ 16
Figure 3. Liquidity Adjusted Indices ................................................................................ 19

viii
Acknowledgments
The completion of this report could not have been possible without the assistance of
Professor Belaid Aouni, Associate Dean for Research and Graduate Studies. I am also
grateful to Ibrahim Al-Othman the Chief Executive Officer (CEO) and Hussain Al
Baker, Director of Marketing & Communications and other team members at United
Development Company for their prolonged support.

Thank you.

ix
Introduction
Oil and gas account for about 85 percent of Qatar’s export revenues and over 50
percent of GDP. Qatar's proven oil has the world’s third-largest oil reserve, exceeding
over 25 billion barrels. Though Qatar ranks the highest in the world in terms of GDP per
capita, it is now feeling the financial pressure of low oil prices. Oil prices have dropped
over 70% over the least two years. After 15 consecutive years of surpluses, Qatar is now
running a “minor” budget deficit of $12.8 billion, equal to about 0.7 percent of its GDP.
(Reuters, 2015). The government hiked utility rates, doubled fines for wasting water and
even increased rates for postal services, to finance the shortfall from the reduced
revenue due to dropping Oil prices,
Many analysts today believe that Qatar’s recent economic measures have strongly
indicated that it is headed in the right direction to recovery from the austerity measures
(Trading Economics, 2016). Qatar’s Zero property tax has been a part of the
government’s efforts to search for new ways to attract local entrepreneurs and foreign
direct investments to diversify its economy (Sylva, 2015). Though there are is no
property tax in Qatar, when buying property, there is a one-time ‘transfer fee’ of 0.25
percent of the total value of the property. The zero tax strategy brought in much foreign
direct investment in Qatar over the last few decades. Today here is an increasing
realization that in the future, Qatar may be introducing a real estate tax on both
residential and commercial properties, similar to other countries in the region, like Saudi
Arabia, have done to diversify their revenue base.
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