AN INTEGRATED APPROACH BASED STRUCTURAL MODELLING FOR DEVELOPING RISK ASSESSMENT FRAMEWORK FOR REAL ESTATE PROJECTS IN INDIA

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1 International Journal of Civil Engineering and Technology (IJCIET) Volume 9, Issue 13, December 2018, pp , Article ID: IJCIET_09_13_171 Available online at ISSN Print: and ISSN Online: IAEME Publication Scopus Indexed AN INTEGRATED APPROACH BASED STRUCTURAL MODELLING FOR DEVELOPING RISK ASSESSMENT FRAMEWORK FOR REAL ESTATE PROJECTS IN INDIA Pawan Koul* Department: Amity Business School, University: Amity University Uttar Pradesh, Noida, India Dr R.S.Rai Professor Decision Sciences, Dy Director Research Planning and Statistical Services, Department: Amity Business School, Amity University Uttar Pradesh, Noida, India Dr Vanita Ahuja Director National Institute of Design, Kurukshetra, India *Corresponding Author ABSTRACT Every real estate project passes through the different phases, each of which has a purpose, duration and scope of work. Risk and uncertainty are inherent in all phases of the project. Risk assessment evaluates the characteristics individually identified project risks and prioritizes risks based on agreed upon parameters. Thirteen risk factors have been identified through literature survey and interaction with industry experts. This research has used interpretive structural modelling to present the hierarchical model showing the interrelationship between the risk factors. In order to mitigate risks, risks have been prioritized using the interpretive structural modelling (ISM). The most dominant factor identified from the model was economic factors which includes project funding, global economic crisis and high cost of financing. Secondly, cross impact matrix multiplication applied to classification known as MICMAC analysis has been used to analyse the group of factors and group them into four categories namely dependent, independent, and autonomous and linkage. The findings from this research may be useful to real estate industry and may also interest academicians; also this method can be applied in other areas of real estate industry as well editor@iaeme.com

2 Pawan Koul, Dr R.S.Rai and Dr Vanita Ahuja Keywords: risk assessment; interpretive structural modelling, MICMAC analysis, risk prioritization Cite this Article: Pawan Koul, Dr R.S.Rai and Dr Vanita Ahuja, An Integrated Approach Based Structural Modelling for Developing Risk Assessment Framework for Real Estate Projects in India, International Journal of Civil Engineering and Technology, 9(13), 2018, pp INTRODUCTION According to PMI, Project management book of knowledge, Project risk management (Project Management Institute, 2008) includes the processes concerned with identifying, analysing and responding to a project risk. Change may be brought in the industry by improved risk management i.e. by studying the causes of risks, their probability and their impact on time, cost and quality. Risk Analysis depends on the quality of data available so the system has both qualitative and quantitative analysis. As per the construction project management guidelines issued by Bureau of Indian standards in their report on risk management, risk is defined as an exposure to a danger or hazard and is viewed negatively. However, risk could be both, a mix of danger and opportunity. Project risk management is way of understanding the project risks and responding to these risks throughout the project life cycle and has objectives of completing projects in estimated time and cost and to the required specifications and quality standards. The constant aim of project risk management is to minimize the uncertainties and move towards opportunities. The goal of risk management is identification of project risks and developing strategies which either reduce them or attempt to avoid them so as to achieve project objectives. All the phases of projects have risks associated with them which need to be identified during all the stages of construction project. Project risk management is not only for corporations or public organizations but for each activity of project whether of short or long duration. To achieve the objective of the above explained risk analysis and management process following steps need to be taken. Risk management planning Risk identification Risk assessment Risk response planning Risk monitoring and control 1.1. Risk Management Planning It is process of how to conduct risk management activities for the project. The required information for risk management planning includes Project scope, Time management plan, Cost management plan, Information and communication management, Procurement management plan, Quality management plan, Human resource management plan, Health, safety and environment plan and Project environment. The risk management plan gives details of structuring how risk management can be structured and performed. Roles and responsibilities of each member for each type of activity in risk management. Risk categories that identifies the various area and causes of potential risks editor@iaeme.com

3 An Integrated Approach Based Structural Modelling for Developing Risk Assessment Framework for Real Estate Projects in India Risk Budget which assigns funds needed for risk management. Schedule for Risk management process which defines when and how often the risk management process will be performed throughout the life cycle. A definition of risk probability and impact gives the quality and creditability of risk assessment process. Reporting formats and communication for defining the outcome of process, risk monitoring and risk auditing Risk Identification To manage a project once the risk management plan has been completed and all anticipated risks shall be identified. The objectives of risk identification is to identify and categorize risks that can affect the project and then to document these risks. The outcome of this step is comprehensive list of risks based upon historical reviews (past), present project assessment and assessment of future risks by applying tools and techniques. This includes identification of sources of risks irrespective of whether are under control of project team, areas of impact due to these risks and their causes and potential consequences. The best practices used for identifying risks are identification of risks at an early stage in project life cycle, Identification by comprehension, creative thinking, broad range of stakeholders, and identification of secondary and residual risks. The tools which are used for identification of risks are Brainstorming, Delphi Technique, Interviewing, documentation review and SWOT analysis Risk Assessment Risk assessment evaluates the project risks and prioritizes risks based on agreed upon parameters. Risk assessment can be performed qualitatively or quantitatively. Qualitative risk assessment includes categorization of risks based on their sources, identification of causal chain between the linked risks. The techniques that may be used for qualitative risk analysis are root cause analysis, documentation review and analytic hierarchy process. Quantitative risk assessment provides the overall risk to project when it is subjected to all risks simultaneously on the project. Quantitative risk analysis leads to likelihood of project to complete on scheduled date or earlier and the extent of contingency in time and cost needed to provide the organization with the desired degree of confidence level. The techniques used for quantitative risk analysis are decision tree analysis, expected monetary value, fault tree analysis, Monte Carlo simulation, and documentation review and sensitivity analysis Risk Response Planning Risk assessment and risk categorization of all identified risks leads to the development of risk response plans. It is formulated in form of a report on identified risks and recommended actions for reducing the probability of occurrence of these risks and minimizing the impact of risks in case of their occurrence. The risks which are low category can be retained or accepted. Risks can be reduced by the reducing the probability of their occurrence and impact. Risks can be shared by project team where mutual incentives are recognized. Risks can be transferred for which probability of occurrence cannot be reduced but the impact can be minimized by transferring the liability to another entity. Extreme risks the probability of occurrence and impact can be reduced. Specific Insurance policies are utilized for specific Industries. Implementation of certain risk responses may generate additional risks that are known as secondary risks that shall be assessed Risk Monitoring and control editor@iaeme.com

4 Pawan Koul, Dr R.S.Rai and Dr Vanita Ahuja Risk monitoring and control shall be performed throughout the project life cycle by risk management team. It comprises of risk monitoring meetings and risk reports. Risk meetings are carried out by the risk monitoring teams for the usefulness and risk mitigation actions and their effectiveness. 2. LITERATURE REVIEW The literature review has been done from concept feasibility stage to construction phase of real estate project. (Morris & Pandey, 2007), understood the land acquisition process in India. They found that the land acquisition and rehabilitation process is very time consuming and require number of statutory approvals with authorities.these delays are responsible for cost overruns in real estate projects.(schieg, 2007), found that by using post-mortem analysis, it is a successful instrument for identification and evaluation of risks. The members of team gain new knowledge and experience which can be used successfully for starting new projects. This post mortem analysis was done by interviews, group discussions and questionnaires. Ishikawa diagrams were used to understand the issues faced while executing of project.(wang, Dulaimi, & Aguria, 2004), identified the risks the foreign countries will face while working in developing countries and developing a framework to mitigate those risks. They found that country level risks are more critical followed by market risks and then project risks. The major country level risks are approval and permit and change in law. The instability in political systems, increase in cost due to delays, corrupt practices and amendment in government policies are some other risks which foreign firms face while working in developing countries. (Tah & Carr, 2000), proposed risk assessment of projects using fuzzy logic.the fuzzy logic was used to find the varaibles which define the risks and their consequences.the relationships between risks and their likelihoods were represented in cause and effect diagrams. (Odimabo & Oduoza, 2013), developed a framework for projects under construction in developing countries. They studied bayesian belief network for risk assessment and found risk severity by finding out degree of loss and probability of occurrence. They found that risk factors can be of social, political, economic, environmental and logistical nature. (Zavadskas, Turskis, & Tamošaitiene, 2010), by using multi attribute decision making model studied the risk assessment of construction projects. They classified risk management into three stages namely identification, analysis and control. Further risk identification can be of external, project or internal nature. (Doloi, Sawhney, Iyer, & Rentala, 2012), revealed from their research that lack of commitment is one of the most important factor which leads to delays in construction project. Based on relative importance index material shortage was found to be important factor affecting delay. The regression analysis was also carried out and the finding was that slow decision making by the project owner, unproductive labour lead to significant delay in projects. (K. N. Jha & Iyer, 2006), did statistical analysis to find success and failure attribute of a project which impact project quality. The analysis led to conclusion that project manager s competence is most important success factors; his interaction with project participants has positive influence on project quality while lack of knowledge and conflict among project participants adversely affect the quality of project. (Dewlaney & Hallowell, 2012), aimed to identify risks in Leadership in Energy and Environmental Design (LEED) certified buildings through this study. Data which was collected from respondents focused on strategies how to mitigate the risks. The more commonly found risks were falling at same level or to lower levels, injuries like eye strains and muscular sprains.(gardoni & Murphy, 2014), proposed risk scales to assess the various kinds of risks. The assessment was done on the basis of risk dimensions namely consequences, probability and risk sources.the risks which are higher in ranking have higher consequences and more probability of occurance. (Ling & Hoi, 2006),identified the kind of risks that Singapore based real estate companies face while working in India.This study editor@iaeme.com

5 An Integrated Approach Based Structural Modelling for Developing Risk Assessment Framework for Real Estate Projects in India resulted in concluding that instable political conditions, difference in culture, delay in getting approvals from authorities, frequent changes in exchange rates are majorly faced risks by the international companies to work in India. (Hemanta Doloi, 2012),collected data from 77 respondents and with the help of structural equation modelling concluded that influence of client on project is a major factor for delay of a real estate project.studied the use of structural equation modelling for investigating factors affecting delays in Indian construction projects. (Koul & Ahuja, n.d.), prepared a risk matrix through literature review to identify various risks from starting of project till construction of a real estate project. The list of factors are mentioned below Table 1: Summary of Risk Factors 3. RESEARCH METHODOLOGY The objective of the study is to examine the relationship between the thirteen risk factors mentioned above and rank them with respect to performance measures. Interpretive structural modelling has been used by find interrelationship between the factors which are under consideration. ISM was first proposed by J. Warfield in Interpretive Structural Modelling (ISM) It is a unique general purpose analysis and decision support technique that provides a structured method for dealing with complex situations. It generates a visual map of the situation (or editor@iaeme.com

6 Pawan Koul, Dr R.S.Rai and Dr Vanita Ahuja problem) that is used to obtain new insights, and construct new approaches to the problem at hand. ISM incorporates pair-wise comparison, Transitive logic and concept synthesis to construct a visual map of the situation. ISM is unique because it creates logical links between elements to form a visual map that is a higher level view of the system or problem at hand. Other tools generally breakdown the situation into finer detail and then create simple 'lumps' of information without structured logic and analysis. The various steps used in this technique are 1. Analyse the literature and get opinion from experts. Identify the various factors which are related to this problem. In the present study the various risks involved from project inception to construction phase of real estate project has been taken into consideration from literature review. 2. From the variables identified from the study, the contextual relationship among factors is examined. 3. Develop a structural self-interaction matrix (SSIM) of elements. It indicates pair wise comparison of various elements. 4. Developing of initial reachability and final reachability matrix after the checking of transitivity. 5. From reachability matrix the level partitions are formulated. 6. Draw a digraph showing the relationship among the various factors involved. 7. MICMAC analysis is used to group the various factors. 8. Review the model and check for inconsistencies if any editor@iaeme.com

7 An Integrated Approach Based Structural Modelling for Developing Risk Assessment Framework for Real Estate Projects in India Figure1: ISM Model 4 CASE STUDY A total of 3 experts from various facets of the industry (real estate company, construction firm and project management company) were consulted. The experts chosen were having more than 25 years of experience in the industry and showed their willingness to participate in this research editor@iaeme.com

8 Pawan Koul, Dr R.S.Rai and Dr Vanita Ahuja The expert views were taken on the 13 factors and ISM technique was used to show their relationships. These same responses have been used in MICMAC (impact matrix cross reference multiplication applied to a classification) analysis as well Structural self interaction matrix (SSIM) ISM method suggests the use of expert opinions based on various management techniques such as brainstorming, group discussion, interviews, etc. in developing the contextual relationship between the variables. Professionals occupying top posts from the Indian Industry were consulted to identify the contextual relationship between the risk factors and a contextual relationship of aggravates was chosen. This means that whether one variable or factor aggravates another variable or factor was examined. Based on this, a contextual relationship between the variables is developed. Keeping in mind the contextual relationship for each factor, the existence of a relation between any two factors (i and j) and the direction of the relation is questioned. Four symbols are used to denote the direction of relationship between the variables (i and j). V: risk factor i will aggravate risk factor j; A: risk factor I will be aggravated by risk factor j; X: risk factor I and j will aggravate each other; O: risk factor i and j are interrelated Reachability matrix The SSIM is changed into a binary matrix called the reachability matrix by substituting the V, A, X, O by 1 and 0 as per the case (Kumar Neeraj Jha & Devaya, 2010). The rules of substitution of 1and 0 are as follows. If the (i, j) entry in the SSIM is V, then the (i, j) entry in the reachability matrix becomes 1 And (j, i) entry becomes 0; If the (i, j) entry in SSIM is A, then the (i, j) entry in the reachability matrix becomes 0 and The (j, i) entry becomes 1; If the (i, j) entry in the SSIM is X, the (i, j) entry in the reachability matrix becomes 1 And the (j, i) entry also becomes 1; and If the (i, j) entry in the SSIM is O, then the (i, j) entry in the reachability matrix becomes 0 And (j, i) entry also becomes 0. After following these above mentioned rules we get the reachability matrix shown in table editor@iaeme.com

9 An Integrated Approach Based Structural Modelling for Developing Risk Assessment Framework for Real Estate Projects in India Table2: Structural self-interaction matrix (SSIM) Risk factor (i) Code Risk Factor (J) R13 R12 R11 R10 R9 R8 R7 R6 R5 R4 R3 R2 R1 Economic V V V V V V V V V V V V R2 Regulatory V V V V O V 0 V V V O R3 Political A A O O O V O A O O R4 Environmental A A O O O A O A O R5 Design A A A O O A O A R6 Construction cost V V V V V V V R7 Bidding O V O O O X R8 Contract Duration A A O O O R9 Quality A A A A R10 Site Management A X X R11 Safety X O R12 Material Procurement O R13 Manpower 4.3. Final reachability matrix formation The final reachability matrix is deduced from initial reachability matrix by applying the transitivity rule.the transitivity means if a variable A is related to B and B is related to C, then A is necessarily related to C Level Partitions From the final reachability matrix, the reachability set and antecedent set for each factor are found. The reachability set consists of the risk factors itself and the other risk factors on which it may impact whereas the antecedent set consists of risk factors itself and the other risk factors which may impact on it. Thereafter, the intersection of these sets is derived for all the risk factors. The risk factors for which the reachability and intersection sets are the same occupy the top level in the ISM hierarchy (Kumar Neeraj Jha & Devaya, 2010). As soon the top level risk is identified it is separated from the other risk factors. The same process is repeated to find out the risk factors in next level. This process is continued until the level of risk of each factor is found. These level help in building the ISM model. Table 3: Initial Reachability Matrix Code Risk Factor (J) R1 R2 R3 R4 R5 R6 R7 R8 R9 R10 R11 R12 R13 R1 Economic R2 Regulatory R3 Political R4 Environmental R5 Design R6 Construction cost editor@iaeme.com

10 Pawan Koul, Dr R.S.Rai and Dr Vanita Ahuja R7 Bidding R8 Contract Duration R9 Quality R10 Site Management R11 Safety R12 Material Procurement R13 Manpower Table 4: Final Reachability Matrix R12 R13 Code Risk Factor (J) R1 R2 R3 R4 R5 R6 R7 R8 R9 R10 R11 Driving Power R1 Economic R2 Regulatory R3 Political R4 Environmental R5 Design R6 Construction cost R7 Bidding R8 Contract Duration R9 Quality R10 Site Mgmt R11 Safety R12 Material Procurement R13 Manpower Dependence Power editor@iaeme.com

11 An Integrated Approach Based Structural Modelling for Developing Risk Assessment Framework for Real Estate Projects in India Table 5 Identification of levels Iteration 1 Iteration 2 Iteration editor@iaeme.com

12 Pawan Koul, Dr R.S.Rai and Dr Vanita Ahuja Iteration 4 Iteration 5 Iteration 6 Iteration editor@iaeme.com

13 An Integrated Approach Based Structural Modelling for Developing Risk Assessment Framework for Real Estate Projects in India Figure 2: Overview of Risk Assessment Framework for Real Estate Projects in India Table 6: MICMAC Analysis Driving Power Cluster 4 Independent Enablers Cluster 3 Linkage Enablers 13 R1 12 R R13 R R R10 R8 3 R6 R7 2 R2 R3 1 R4 R5,R Cluster 1 Autonomous Enablers Cluster 2 Dependent Enablers Dependence Power editor@iaeme.com

14 Pawan Koul, Dr R.S.Rai and Dr Vanita Ahuja 5. DISCUSSION As we can see from figure 3, the risks R1, R2 and R13 namely economic, regulatory and manpower are placed in cluster 4 meaning that these enablers are antecedent of other enablers R2 regulatory, R6 cost of construction, R3 political,r10 site management and R11 site safety which are in the middle of hierarchy and which in turn help to achieve top enablers namely R5 Design, R4 environmental, R8 contract duration and R7 bidding. The observations from driver dependence diagram shows that the R1, R2 and R13 appear in the fourth cluster which is having the lowest degree of dependence power and most prominent driving power. The higher driving power shows the capability of these enablers to affect other factors. The economic factors namely project funding is driving and independent factor and in case of any fund issues will impact all the other risks in a real estate project. Similarly regulatory issues delay the project inception and lack of qualified manpower affect the project schedule as well as the project quality. in cluster 3, R12 namely material procurement is linkage factor and has strong dependent power as well as driving power. This factor drives the project as it is among the three M s of real estate project i.e. men, materials and money. It has a strong depending power also as material is subjected to availability also. The enabler s site management, site safety, contract duration, environment, design and quality are in the cluster 2 with high dependence and low driving power. the enablers bidding and political conditions are in cluster 1 and have low dependence and driving power. These are disengaged risks and have least impact in completion of real estate project. 6. CONCLUSION This research has been used to identify and prioritize the risks with respect to risks found from project inception to construction phase of real estate project. The salient contributions of this research paper are as under. Thirteen risk factors have been found from literatures which impact the real estate project completion in India editor@iaeme.com

15 An Integrated Approach Based Structural Modelling for Developing Risk Assessment Framework for Real Estate Projects in India it has also been observed that the risks like economic, regulatory and manpower are most important enablers with highest independence. Thus in order to get the real estate project completed in stipulated time, the funding of project should be timely, project approval from government authorities should be in place and trained and adequate manpower is required to deliver quality project within stipulated time. Presence of enablers like site management, site safety and manpower would improve the risk assessment and enhance the realization of risk enablers like bidding and contract duration and quality and further would enhance risk enablers like environment, design and delay in decision making by customer. The environment is coming as top risk enabler because the respondents are from Delhi and due to lot of recent delays in project completion due to environmental issues it has been ranked as on of the top risk enabler. 7. LIMITATIONS OF STUDY The number of experts selected from only few selected organizations which were not representing the entire real estate companies of India, rather than the respondents were from Delhi/NCR region. REFERENCES [1] Dewlaney, K. S., & Hallowell, M. (2012). Prevention through design and construction safety management strategies for high performance sustainable building construction. Construction Management and Economics. [2] Doloi, H., Sawhney, A., Iyer, K. C., & Rentala, S. (2012). Analysing factors affecting delays in Indian construction projects. International Journal of Project Management, 30(4), [3] Gardoni, P., & Murphy, C. (2014). A Scale of Risk. Risk Analysis, 34(7), [4] Jha, K. N., & Devaya, M. N. (2010). Modelling the risks faced by Indian construction companies assessing international projects Modelling the risks faced by Indian construction companies assessing international projects, [5] Jha, K. N., & Iyer, K. C. (2006). Critical Factors Affecting Quality Performance in Construction Projects. Total Quality Management & Business Excellence, 17(9), [6] Koul, P., & Ahuja, V. (n.d.). Risk Identification and Assessment as Well as Mitigation Strategies used during the Construction Phase of a Real Estate Project: A Literature Review. Retrieved from [7] Ling, F. Y. Y., & Hoi, L. (2006). Risks faced by Singapore firms when undertaking construction projects in India. International Journal of Project Management, 24(3), [8] Morris, S., & Pandey, A. (2007). Towards Reform of Land Acquisition Framework in India. Economic and Political Weekly, (May), [9] Odimabo, O. O., & Oduoza, C. F. (2013). Risk Assessment Framework for Building Construction Projects in Developing Countries. International Journal of Construction Engineering and Management, 2(5), [10] Project Management Institute. (2008). Project Human Resource Management. A Guide to the Project Management Body of Knowledge (PMBOK Guide) - Fourth Edition editor@iaeme.com

16 Pawan Koul, Dr R.S.Rai and Dr Vanita Ahuja [11] Schieg, M. (2007). Post-mortem analysis on the analysis and evaluation of risks in construction project management. Journal of Business Economics and Management. [12] Tah, J. H. M., & Carr, V. (2000). A proposal for construction project risk assessment using fuzzy logic. Construction Management and Economics. [13] Wang, S. Q., Dulaimi, M. F., & Aguria, M. Y. (2004). Risk management framework for construction projects in developing countries. Construction Management and Economics. [14] Zavadskas, E. K., Turskis, Z., & Tamošaitiene, J. (2010). Risk assessment of construction projects. Journal of Civil Engineering and Management, 16(1), editor@iaeme.com