RISK MANAGEMENT OF SELECTED RISK CATEGORIES AND ITS EFFECT ON PERFORMANCE OF COMMERCIAL REAL ESTATE PROPERTIES IN KENYA
Keywords:
Risk management, entrepreneurship, risk factors, performance, commercial real estate propertiesAbstract
Purpose of the study: The purpose of this study is to examine risk management and its effect on performance of commercial real estate properties in Kenya.
Methodology: The study adopted a descriptive survey design having a quantitative approach. The target population for this study was 9,320 real estate developers comprised of 884, 95, 320 and 8,021 sourced from Softkenya directory, Kenya Developers Association, Estate Agent Registration Board and National Construction Authority respectively. A sample size of 324 developers was selected and using a stratified random sampling procedure, developers that participated in the study were identified and later served with online questionnaires using their emails. The primary data that was collected was analyzed descriptively and inferentially using frequency distribution - mean and standard deviation, Chi square and multiple linear regression analysis with the aid of the Statistical Package for Social Sciences (SPSS), version 20.0.
Findings: Technical risk was the most critical risk that affects the performance of commercial real estate properties in Kenya. This was attributed to poor site investigation, delays in documents approvals and majority of the real estate entrepreneurs depending on judgment, intuition and general experience obtained in construction industry in managing their risks. With the exception of market risk management, technical and financial risk management were all statistically significant in explaining performance of commercial real estate properties.
Unique contribution to theory, practice and policy: From the empirical findings the study recommends the need by the government to ensure thorough site investigation is undertaken before commencement of any project development, a risk management compliance certificate submitted before construction approval and establishment of one stop shop of construction document approvals to minimize bureaucracy, delays and corruption. With over 70% of the real estate entrepreneurs relaying of judgmental, intuition and experience approaches to manage their risks due to low knowledge on risk management, the study recommends the need to have entrepreneurs trained in risk management practice and concepts.
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