Decision Support Mechanism For Risk Allocation In Private Real Estate Purchase Agreements

Real estate development is considered as one of the sectors with transaction of billions of Birr inrnthe Ethiopian market. Real estate development contributes to the economy of the country and inrnalleviating housing problems. However, the sector is facing different problems. Problems that existrnin real estate development make the business environment susceptible to uncertainty. Therefore,rnthis research is aimed at identifying risk factors in private real estate development projects andrntheir impact on project objectives, examining the current practice of risk allocation in real estaternpurchase agreements and providing a practical mechanism that can be used by real estaterndevelopers to allocate risks properly. Risks were identified and impact analysis was conducted.rnSubsequently, residential real estate purchase contracts were reviewed and it was found that mostrnof the reviewed agreements do not include the severe risk factors. Purchase agreements currentlyrnbeing used lack completeness in addition to risks being misallocated. It is believed the decisionrnsupport mechanism provided helps real estate developers make proper risk allocation decisions.rnKey words: Decision support mechanism, Purchase agreement, Real estate, Risk, Risk allocation,rnRisk allocation principles, Risk impact.

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