Factors Affecting Profitability of Real Estate Business in Ethiopia: The Case of Private Real Estate Developers in Addis Ababa
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Date
2023-06-09
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A.A.U.
Abstract
Real Estate industry plays a vital role in the economic development where it paves the way to stabilize the economy through guarantying continuous capital flaws for financing .The study was based on the factors which affected the profitability of the private real estate industry in Addis Ababa. The sample in this study includes six private real estate companies panel data covering for five years period from 2018-2022. Secondary data that analyzed obtained from individual real estate companies annual report of financial statements (Balance sheet and Profit/Loss account) and Commercial Bank of Ethiopia data over the period from 2018 to 2022. The Panel Regression Analysis was employed to derive the impact of firm specific factors and macro-economic factors on the profitability of real estate industry in the countries. Firm size, Liquidity, Leverage and Age of the firm are used as the firm specific factors while GDP, Exchange rate and Inflation rate as macro-economic factors. The results indicate that, Exchange rate and Liquidity have a negative significant impact while, GDP, Inflation, Firm size, Leverage and Age of the firm have insignificant impact with the profitability (ROA) of real estate companies in Addis Ababa. The panel regression results also indicated that interest rates, inflation rates, GDP, leverage, liquidity, firm age, and size were responsible for 58.40% of the profitability of Real estate in Addis Ababa. The paper offers strong implications for the authorities, real estate firms as well as investors, researchers and regulators.