Assessment of the Effect of Price Escalation in Real Estate Projects
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Date
2022-06
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Addis Ababa University
Abstract
The purpose of this study is to investigate the effect of price escalation on real-estate projects in terms of cost, time and quality. Construction is unique, complicated, exposed to different risks and carried out by integrating different disciplines. This unique characteristics expose the industry to various types of risks. One of the major risk is price escalation. Price escalation is a problem that affects highly the construction industry. Real estate project is categorized as a major segment of Construction Industry. Real estate projects usually take longer time to accomplish the desired goal. The probability of occurrence of price escalation during the implementation phase of a project in general is high. When price fluctuation occurs in a project, the estimation will be mismatched with the actual cost. So, it is difficult to complete the project within the given budget. As a result of this problem, the project will be at risk of cost overrun, time delay and quality degradation. It also causes dispute among stakeholders. This study used descriptive type of research design to answer the research question how price escalation affects real estate projects. And quantitative method approach is used by collecting primary data from 81 participants. Descriptive statistics and inferential analysis was done to interpret the data acquired. The tool used in the study for analysis purpose is Statistical Package for the Social Sciences Version 26.00. The study found effects price escalation on real estate projects to be on cash flow of projects, project delay, increased cost of projects, quality degradation and claim and dispute among parties. The study analyzed that price escalation has significant effect on real estate projects’ cost, time, quality and stakeholders involved in projects.
Key words: Price escalation, project cost, project time & Project quality