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Application of Quantitative Risk Analysis in Property Development Projects in Nigeria: A Review

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  • Obinna Collins Nnamani

Abstract

Property development is a multifaceted, dynamic and risky enterprise. Property development projects are fraught with risks and uncertainties spanning through the stages of the development process. Risk and uncertainty, if not well managed, could have harmful impacts on development project by affecting time, quality, and cost of such project. In Nigeria, evidences abound of property development failures and abandonments with the attendant social, environmental and economic consequences. Development projects are abandoned before completion or completed projects are not disposed over six months. In other cases, completed projects are foreclosed by development lenders due to inability of the developers to service their loans. These problems could be attributed to development companies not employing formal strategic risk management in project evaluation. The aim of this paper is to review literature and previous research on application of risk management techniques in property development industry with a view to identify the possibility for further research in Nigeria. The review used various sources such as textbooks, journal articles, reports, masters’ dissertations and doctoral theses relevant to the study. The review showed that, generally, risk management is still largely handled in a subjective manner. Any notion that developers are now applying a wide range of rigourous and sophisticated risk management techniques is erroneous as this is scarcely manifested in actual practice. In the Nigerian context, there is probably no research on risk management by development companies; few risk management studies were limited to risk analysis/assessment; while others focused on building construction risk which is just one of the stages in the property development process. This paper recommends the development of an advanced risk management framework applicable to the Nigerian property development industry.

Suggested Citation

  • Obinna Collins Nnamani, 2018. "Application of Quantitative Risk Analysis in Property Development Projects in Nigeria: A Review," ERES eres2018_8, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2018_8
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    References listed on IDEAS

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    1. Anna Corinna Cagliano & Sabrina Grimaldi & Carlo Rafele, 2015. "Choosing project risk management techniques. A theoretical framework," Journal of Risk Research, Taylor & Francis Journals, vol. 18(2), pages 232-248, February.
    2. Nerija Banaitiene & Audrius Banaitis, 2012. "Risk Management in Construction Projects," Chapters, in: Nerija Banaitiene (ed.), Risk Management - Current Issues and Challenges, IntechOpen.
    3. Pavlos Loizou & Nick French, 2012. "Risk and uncertainty in development," Journal of Property Investment & Finance, Emerald Group Publishing Limited, vol. 30(2), pages 198-210, March.
    4. Zhen Chen & Sukulpat Khumpaisal, 2009. "An analytic network process for risks assessment in commercial real estate development," Journal of Property Investment & Finance, Emerald Group Publishing Limited, vol. 27(3), pages 238-258, April.
    5. Aven, Terje, 2016. "Risk assessment and risk management: Review of recent advances on their foundation," European Journal of Operational Research, Elsevier, vol. 253(1), pages 1-13.
    6. Sascha Marcel Donner, 2010. "Risk management in the aftermath of Lehmann Brothers -- Results from a survey among German and international real estate investors," Journal of Property Research, Taylor & Francis Journals, vol. 27(1), pages 19-38, May.
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    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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