Analysis of the main sources of investments financing in real estate

• Author: Ylldeze Sokoli
• Position: Vlora University (Albania)
• Pages: 146-155

ISSN 2410-3918

Acces online at www.iipccl.org IIPCCL Publishing, Tirana-Albania

Academic Journal of Business, Administration, Law and Social Sciences Vol. 2 No. 1

March 2016

146

Analysis of the main sources of investments financing in real estate

Ylldeze Sokoli

Vlora University (Albania)

Abstract

The development of the construction industry is an important sector and the special

contribution to the gross domestic product and as such should be subject to study, because the

performance of the fund financing the construction production is closely linked to the

performance of GDP, but also the role of this sector in generating economic growth. Even in

our country’s construction sector, as one of the leading sectors of the economy has affected the

growth trend of the Albanian economy. Many developing economies have shown that credit

markets and remittances are the main source of financing long-term investments in

construction. Increased investment in the real estate market includes free financial resources

and other populations, but the development and expansion of this sector has led to the reduction

of unemployment in the country. In periods of economic growth, coupled with the growth of

personal income, people seek to improve their living conditions and seek to take credit for use

to purchase real estate. The role of the banking system in financing for investments in the real

estate market is very important.

The purpose of this paper is to identify what are the factors affecting the financing of

investments in the construction sector, and to analyze the important relationships between

them and the financing of investments in real estate.

The methodology used in the paper is based on foreign literature, materials and works of

local and foreign authors. The data were taken from the reports of Bank of Albania’s Institute

of Statistics, World Bank and others. Linear Regression model is built referring OLS method,

to determine the factors affecting the financing of investments in the real estate market.

The results of this study can be used by relevant institutions and central governmental

institutions for the formulation of policies and strategies for the development of this industry,

as well as the stakeholders of this sector (businesses and construction) professionals to analyze

the dynamics of the development of the construction sector and to evaluate the effect of changes

in macroeconomic indicators in the size of this market development in Albania.

Keywords: investments, bank loans, remittances, real estate, construction sector.

Introduction

Construction sector size is affected by the performance of the economy, but also the

opposite. Sources for financing investments in real estate are some, but this paper

will treat the main sources of financing in real estate bank credit, remittances, their

impact and other factors in the fund to finance the construction sector.

The role of GDP in the construction sector is estimated to be higher in underdeveloped

countries, while the level of development increases, the role of GDP could be lower

and in some cases even negative (Crosthwaite, 2000).

The growth of the construction sector may be affected differently by different economic

sectors, however, the greatest demand, both for new constructions and reconstructions,