Financial assessment of incremental seismic retrofitting of Nepali stone-masonry buildings

Abstract

Despite its critical location, right on top of the Main Himalayan Thrust, the building stock of Nepal is mainly constituted by highly vulnerable non-engineered unreinforced masonry (URM) buildings. Most of them were realized with traditional construction techniques and locally available materials like field stones and mud mortar. The empirical evidence from historical earthquakes has shown that these buildings have very limited seismic capacity. On the contrary, if adequate retrofitting interventions are implemented, their seismic performance can improve substantially. Unfortunately, the upfront investment required by retrofitting remains an issue since it is considered too high and not associated with an immediate and tangible benefit. This prevents building owners and investors from retrofitting properties as preparedness measure. Starting from these considerations, this work presents an incremental approach for the implementation of retrofitting so that the total investment is spread over time in a gradual and cost-effective way. In details, two government-approved retrofitting techniques for Nepali stone in mud mortar masonry (SMM) buildings are broken down into phases and analysed from an engineering and financial perspective. A probabilistic cost-benefit analysis of each phase is carried out to quantify the return on investment and the payback time of seismic enhancement. Results indicate that retrofitting is a financially advantageous investment since the reduction in future earthquake-induced loss exceeds the upfront cost of the intervention. Additionally, the incremental approach allows more flexibility in implementing effective risk management actions at regional and national scale.

Introduction

Past seismic events in many parts of the world have shown that retrofitting is an effective strategy for earthquake risk mitigation (e.g. Refs. [1,2]). Retrofitted constructions are safer for the occupants and less prone to damage. Therefore, communities living in earthquake proof settlements are more resilient against disasters. Since the majority of the seismic economic loss comes from physical damage [3], financing retrofitting schemes at national level can limit disproportionate impacts on the economy when an earthquake strikes. This is particularly important for highly seismically active regions where the building stock is mainly constituted by non-engineered unreinforced masonry (URM) buildings. It is well known that URMs have several structural deficiencies in terms of earthquake capacity [4] such as: low mechanical properties, poor construction quality, lack of wall-to-wall/wall-to-floor connections, absence of seismic detailing (e.g. Refs. [[5], [6], [7]]). In Nepal, URMs account for 60% of the building inventory [8] which directly impacts on the country's risk level. For instance, the average annual loss of the residential portfolio estimated by the Global Earthquake Model [9] is about USD 400 Million. This is roughly 0.36% of the asset replacement cost, consistently higher than the average 0.11% of the world's top sixteen earthquake affected nations in terms of average annual loss versus asset replacement cost ratio [9].

Despite these figures, there are still barriers to financing schemes for retrofitting. First, structural seismic enhancements are an important upfront investment for building owners, that can be up to 60% of the replacement cost of the building [10]. Second, such interventions are usually invasive (involve the removal of non-structural components and finishing) and disruptive (require temporary relocation of the building occupants) [11]. Third, building owners and investors are generally uncertain about the benefit of retrofitting that is projected into a distant and unforeseeable future. That said, the financial cost of disasters is eventually paid by Governments that must cope with disproportionate economic losses given the large number of damaged buildings. In this sense, from a policy maker perspective, it is crucial to incentivize retrofitting before a major earthquake strikes [12].

The last decades have led to an increase of funding programs for seismic retrofitting in many parts of the world [13]. A common feature of these policies is that existing buildings are not required to achieve the seismic performance level of new constructions. Partial and incremental retrofitting interventions are instead recommended. In this way, the limited available resources for earthquake risk mitigation can be distributed over a larger number of assets to homogeneously reduce the vulnerability of the building inventory. In the United States, the California Residential Mitigation Program [14] allows owners of houses constructed before 1979 to apply for a grant of USD 3,000 that can be used to bolt down the building and brace the cripple walls with plywood, to prevent collapse or sliding off its foundation. According to the US Federal Emergency Management Agency, a total of 6,667 homes will be retrofitted throughout the life of the funding program [15]. In New Zealand, the Building Amendment Act 2016 requires commercial property owners to upgrade their buildings up to at least 34% of the most recent design code and provides specific grants for historical listed buildings [16,17]. In Italy, the Sisma Bonus Act [18] supports residential and commercial building owners to invest in seismic retrofitting thanks to a cost reimbursement in the form of tax deductions up to 85% of the total retrofitting cost. To access the tax relief, the owner must file a structural report that quantifies the seismic performance of the building before and after the intervention. The performance is expressed in terms of risk classes from G to A+, where A/A+ is the expected performance of a new construction. When the retrofit generates an improvement of one class, the Government's contribution is 70–75% of the retrofitting cost. If the intervention produces a jump of two classes the contribution is 80–85% of the total cost [19]. An important aspect of this funding program is that the credit from the tax deductions can be transferred from the building owner to the construction company that carries out the intervention, limiting the upfront investment of private owners.

Looking at these successful experiences, some non-governmental organizations (NGOs) operating in Nepal ̶ mainly the National Society for Earthquake Technology (NSET) (https://www.nset.org.np) and, in recent years, Build Change (https://buildchange.org) ̶ have become advocates of the implementation of seismic retrofitting and have partnered with academic institutions, such as the University of Bristol, to carry out research on the advantages of retrofitting. Along these lines, this paper presents the results of a technical-scientific study aimed at developing an effective incremental retrofitting strategy for traditional stone in mud mortar masonry (SMM) buildings in Nepal. This methodology could allow to spread the upfront investment of seismic enhancement over a longer time while increasing flexibility in disaster risk reduction actions. In details, the work (i) proposes a technically sound way to divide the standard retrofitting approaches for SMMs (approved by the National Reconstruction Authority (NRA) of Nepal) into separate incremental phases and (ii) quantifies the financial cost-benefit ratio of these phases by adopting catastrophe modelling techniques [20]. In particular, the benefit requires the quantification of the financial risk associated to masonry structures, i.e., the economic loss from physical damage that potential future earthquakes could generate on the buildings. This loss is calculated by incorporating seismic hazard, building vulnerability and exposure according to the performance based earthquake engineering framework (e.g. Refs. [21,22]).

Lastly, an extended discussion on the variability and uncertainties around construction costs in Nepal is reported to emphasise the challenges of implementing cost-benefit analysis studies in data scarce regions.