Challenges in Applying the DCF Method for Investment Property Valuation in Sri Lanka: Insights from a Delphi Study

Abstract

This study aimed to identify the challenges of implementing the Discounted Cash Flow (DCF) valuation method for investment properties in Sri Lanka. Through a mixed methodological approach involving the Delphi technique and structured interviews, insights were gathered from industry valuation experts via two Delphi rounds. The study's key findings were derived from the consensus reached among these experts, focusing on data- and valuer-bound factors. One of the primary challenges identified in the Sri Lankan context is the lack of training, which significantly hinders the knowledge and understanding required for implementing the DCF method effectively. Other significant hurdles included obtaining relevant data and accurately determining the discount rate. Imperfections in available data, the absence of a centralized digital data system, and challenges associated with increasing cash flows and market uncertainties also hindered the adoption of the DCF method in Sri Lanka. This study contributes to the existing DCF literature and provides valuable insights for practitioners and future researchers in the field of property valuation in Sri Lanka.