Risk Management Practices and Performance of Real Estate Construction Projects in Nakuru County, Kenya

Abstract

Real estate development performance in Nakuru County continuously deteriorates, as evidenced by rising vacancy rates in outdated office buildings, restrained consumer spending due to the difficult economic climate, and competition from unofficial retail spaces in some submarkets. The study aimed at finding out how risk management practices influence the performance of real estate construction projects in Nakuru County. The research determined how technical risk management practices, financial risk management practices, market risk management practices and operational risk management practices affect the performance of real estate construction projects in Nakuru County. This research used a mixed-method study design with a population target of 45 ongoing and 25 completed real estate projects in Nakuru County. Using stratified simple sampling technique, a sample size of 25 ongoing and 15 completed real estate projects were selected. The study was affixed on strategic planning theory, Decision theory and risk/uncertainty bearing theory. The researcher used questionnaires to obtain data and suggestions from the respondentsA pilot study to assess the research instruments' accuracy and dependability was conducted in Nairobi County. The research utilized Cronbach's alpha to calculate the reliability coefficient of the questionnaires. Cronbach value greater than 0.7 was considered reliable. The gathered data was cleaned, coded, and accuracy checked for ease of analysis, and then subjected to descriptive analysis involving the calculation of mean, frequency distribution, and standard deviation. Using Pearson correlation analysis, the relationship between the dependent and independent variables was evaluated. Regression analysis was done using the analysis of variance technique (ANOVA). The study found that technical, operational, market, and financial risk management practices each had positive and substantial impacts, indicated by regression coefficients of 0.451, 0.313, 0.531, and 0.273, respectively. Further, the study established that these practices are crucial in managing various risks effectively, demonstrating their significant role in overall risk management strategies. . Constructed from the study findings, this study recommends that the Kenyan government should review all of the approvals that real estate developers need, formulate policies that regulate the construction sector by ensuring that real estate developers demonstrate their creditworthiness on their expected investments before granting any licenses. In addition, real estate developers should be encouraged to take advantage of staff empowerment through professional bodies that equips managers through risk management courses. Lastly, future studies conducted should concentrate on other risk variables not included in this study including legal and environmental risk management practices. Keywords:  Risk Assessment, Project Performance, Construction Management, Real Estate Development, Mitigation Strategies