Assessing the negative effect of risk management practices on real estate financing.

Abstract

The topic of study was assessing the negative effect of risk management practices on real estate financing. This was carried out to establish the negative effects of risk management practices. The data that was used in this study was both primary and secondary data obtained from previous studies in line with the study, risk management and real estate sector. The data obtained was mainly analyzed with M/S Excel 2010 software which successfully facilitated the discussion, interpretation and the presentation of the findings. A sample of 35 respondents which was purposively obtained was considered from which data was obtained using questionnaires and interviews. A non-probability sampling technique was used snowball sampling technique in particular. The data obtained was analyzed which informed the conclusions and recommendations made in this study Lending by commercial banks to real estate is vital to the sector since it finances most of the developments in real estate ranging from commercial, residential and industrial properties and so on. However, the harmonious stream of collapse, discredits and failures in advancing loans towards real estate by banking and financial services industry has served as a catalyst for concern about risk management. This study discusses the negative effects risk management, the kind of risks faced by the banks in awarding the loans to real estate and the various risk management practices in place The negative effects of risk management, risks, risk management practices and recommendations are well discussed in the findings, the negative effects include: Increased Cost of credit Increased Non performing loans, Increased Foreclosure, Reduced loan advances to real estate sector.