Developers may loose up to US $15m in profits on failure to deliver projects on time

22 February 2018

Developers may end up losing a whopping US $15m of their profits if they fail to submit their projects on a given period of time due to one reason or another; this is according to a research by the Construction Industry Institute; a consortium of leading owners, engineering-contractor and supplier firms from both the public and private based in the US.

According to the report, for every day late, it equates to thousands of dollars lost, and a 10% overrun can lead to five million dollars blow to project profitability.

“With the average of 20% to 30% delay that most projects report, you are looking at a significant profit loss one that is just shy of US $15m,” reported Construction Industry Institute.

A good example is Two Rivers Mall which is currently the largest shopping complex in Kenya, postponed its opening dates thrice before finally opening in February last year.

The mall was first planned for opening in October 2015 but it was later pushed to March 2016 then to September 2016 and later to Valentine’s Day last year in 2017 when it was finally opened. The developer attributed the delays to its increased letting space capacity and underestimation in the scale of work involved.

Moreover, whatever the reasons, such kinds of delays also reduce returns for its investors. At the same time, ready tenants miss out on revenues attributed to the shopping sprees within a particular lucrative season.

“Delays in project delivery can cost an organization a significant percentage of its return on investment. Also, it triggers a surge of negative issues such as drop in share prices on the stock market, profit reduction which can be hard to recover in the long term and a loss of interest from consumers; thus, they are forced to spend more in advertising and marketing in order to gather the initial momentum,” said Stella Kimani, a brand strategist.

Extract from ConstructionReview.com

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