An Evaluation of critical risk factors in local condominium developments through analytic hierarchy process (AHP)

Abstract

Within the last few decades, the Sri Lankan construction industry is experiencing significant growth in high-rises, particularly the condominiums in Colombo and other highly urbanized areas in Sri Lanka. It is also evident that the condominium market has been expanding with the involvement of both local and foreign investors coming in contributing greater extent of choices and the local construction industry has also been significantly benefited through these developments. However, long term sustainability of these developments is still uncertain due to various socio-economic and political issues. Therefore, it is highly imperative to understand the root causes for such uncertainty and the risks that condominium industry faces in its future developments. Hence, this study intended to provide an insight on the significance of following a proper risk management framework in condominium projects in Sri Lanka and to enhance the awareness on critical risk factors that might hinder the future developments and progress from the developments’ perspective. Thus, the main research question formulated to investigate is “What are the major risks faced by condominium developers as hindrances to the sustainability of condominium developments in Sri Lanka?” The study has mainly adopted both quantitative and qualitative approaches in data collection, in order to bring the developers’ perspective on the risks that have a primary importance from their own point of view. Hence, a desktop study was carried out first to understand the risks that affect the condominium development industry and it enabled to identify fifteen (15) risk factors through published literature. Thereafter, a questionnaire survey was carried out using twenty-one (21) respondents comprising of professionals who are involved in condominium development projects representing three major sectors i.e. Developers, Consultants and Contractors, in order to validate the factors identified. The survey was carried out in two rounds using the Delphi Technique where the questionnaire respondents were requested to rank the risk factors based on their criticality to the condominium developments. Thereafter, the fivemost Critical Risk Factors (CRFs) were identified. The data gathered was analyzed and interpreted by adopting Analytical Hierarchical Process (AHP) with the involvement of ten experts selected among the survey respondents. According to the analysis, the location of a development, inaccurate forecasting on sales and demand, issues related to funding, delays in obtaining clearances and construction challenges due to labour scarcity were considered to be the most critical risk factors in developers’ perspective. These risk factors could heavily impact on the investment decisions of the vi developers in condominium projects. Thus, the study provides an insight that can be used in policy formation and practices of the Sri Lankan condominium industry to develop a better risk management framework.