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

Abstract

Although Real estate Housing Industry Projects continue to gain popularity and awareness in Kenya and abroad, many Real Estate Housing Companies do not have effective financial risk management practice systems established. In Busia County, there are problems of lost time and increased costs that cannot be regained occasioned by construction issues which are mostly experienced as a result of land disputes that prolong the completion time of most real estate construction projects in the County. Not unless this problem is addressed, the County will continue lagging behind in terms of performance of real estate construction projects. As such, there will always be a problem of prevalence and incessant abandonment of real estate construction projects creating serious financial risks that if not effectively addressed would influence Real Estate Construction Projects Performance hence creating win –win situation for both the contractor and its customer. The objective of this study was to establish the extent to which liquidity risk management influences performance of real estate construction projects in Busia County. The descriptive research design used in this study helped to explore the link between the independent and dependent variables. The composite mean and composite deviation   for the Liquidity Risk Management were 4.05 and 0.941 respectively; implying that using the Likert scale, the respondents agreed that Liquidity Risk Management Influenced Performance of real estate construction projects in Busia County. The overall correlation coefficient for Liquidity Risk Management and Performance of real estate construction projects in Busia County was found to be 0.662 with a p-value of 0.000 < α=0.05 . The study found that there was a significant relationship between Liquidity Risk Management and Performance of real estate construction projects in Busia County; leading to rejection of the null hypothesis and acceptance of the alternative hypothesis. The study concluded that there was a significant influence of Liquidity risk management on Performance of real estate construction projects in Busia County. The study recommended that in order to encourage home ownership, the government should use social security payments to pay for housing. Secondly, citizens of working age should be encouraged to make monthly contributions of at least 20% of their income to the central provident fund and are then entitled to draw down a portion of their savings as a down payment for housing and to service monthly mortgage installments. The policy implication to this study  is to create awareness to the policy makers that expansion of home ownership is a core element of housing policy since it encourages and promotes economic growth, encourages saving and investment which can best be determined by the level of liquidity in the economy.

Keywords: Liquidity Risk, Management Practices, Performance of Real Estate Construction Projects