An Examination of Financial Risks in Real Estate Development: A Case Study of Lekki Peninsula, Lagos
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Background of the Study
Real estate development, especially in rapidly growing urban areas like Lekki Peninsula in Lagos, involves significant financial risks. With increased demand for residential, commercial, and industrial properties, developers face various financial challenges, such as fluctuating market conditions, financing constraints, regulatory changes, and project delays (Sani & Okeke, 2024). Lekki Peninsula, known for its fast-paced development, is an area that has attracted considerable investment from both local and international developers. However, the potential financial risks involved in real estate development in the area are substantial, requiring careful assessment and risk management strategies.
Financial risks in real estate development can take various forms, including construction risk, market risk, financial liquidity risk, and regulatory risk. These risks can significantly impact the profitability and sustainability of real estate projects. This study seeks to examine the financial risks faced by real estate developers in Lekki Peninsula and evaluate how these risks are managed to ensure successful project completion and profitability.
Statement of the Problem
While real estate development in Lekki Peninsula is booming, developers face several financial risks that could jeopardize their projects. The lack of detailed research on these risks and how developers manage them has created a knowledge gap that needs to be addressed. This study aims to investigate the financial risks in real estate development in Lekki Peninsula and identify strategies for mitigating these risks.
Objectives of the Study
1. To identify the financial risks involved in real estate development in Lekki Peninsula.
2. To assess the strategies used by developers to manage financial risks in Lekki Peninsula.
3. To recommend measures to minimize financial risks in real estate development in Lekki Peninsula.
Research Questions
1. What financial risks are associated with real estate development in Lekki Peninsula?
2. How do developers in Lekki Peninsula manage financial risks during real estate development projects?
3. What measures can be adopted to mitigate financial risks in real estate development in Lekki Peninsula?
Research Hypotheses
1. Financial risks significantly affect the profitability of real estate development in Lekki Peninsula.
2. Developers in Lekki Peninsula employ risk management strategies that minimize financial risks in real estate projects.
3. The adoption of effective financial risk management strategies will improve the financial performance of real estate development in Lekki Peninsula.
Scope and Limitations of the Study
This study will focus on financial risks in real estate development within Lekki Peninsula, Lagos, with a focus on projects from 2023 to 2025. The limitations include the potential difficulty in obtaining financial data from private developers and the evolving nature of market conditions that may affect financial risk assessments.
Definitions of Terms
• Financial Risks: Risks that may lead to financial losses or reduced returns on investment due to factors such as market fluctuations, construction delays, and regulatory changes.
• Real Estate Development: The process of developing new properties or redeveloping existing ones for residential, commercial, or industrial use.
• Risk Management: The identification, assessment, and implementation of strategies to minimize or control risks.
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