Financial Modeling for Modular and Offsite Construction

The advantages of using modular and offsite construction compared with the traditional construction methods are numerous due to its efficiency in delivering shorter schedules, lower cost, higher quality, and better safety. However, one of the biggest challenges facing the prefabrication industry today is the inherent difference between financing traditional construction and the upfront capital requirements for modular and offsite construction. Any solution for this problem should introduce better coordination among developers, banks, financial partners, lending institutions, manufacturers, and general contractors. Financing modular construction is challenging as banks are not familiar with the characteristics of this modern industry, and it is all about risk and return. Financing also helps in reducing risk for developers and allows them to undertake projects without having the upfront capital. However, few studies in literature focused on the financial modeling for modular and offsite construction. This paper is presenting a state-of-the art literature review for current practices concerning financial modeling for modular and offsite construction. This review discusses current challenges for financing this industry, as well as the introduced initiatives by governments to facilitate financing of modular and offsite construction. Conclusions are presented regarding the current practices for funding the prefabrication industry. Furthermore, recommendations are drawn for encouraging the development of prefabricated housing, and its ability in solving the current shortage of housing in different parts of the world.