Massachusetts Bay Transit Authority (MBTA) officials said yesterday they expect construction on the extension of the Red Line, which has disrupted Harvard Square for several months now, to continue for about four years.

The construction has required the dismantling of hundreds of feet of the southwest part of the brick wall surrounding Harvard Yard, where all freshmen live.

As reparation for the disturbance created by the construction, MBTA has given Harvard several hundred thousand dollars to soundproof Wigglesworth and Straus Halls.

In the wake of the MBTA awards to Harvard, many businessmen who own shops in Harvard Square or along Mass Ave towards Porter Square have voiced anger because they have been unable to persuade the MBTA to give them similar compensation for the loss of business caused by the construction.

The construction has interfered with the visibility and access of dozens of small businesses in the Square and along Mass Ave. Some businesses reported losses of 20 to 40 per cent of normal sales.

In addition, community residents have protested the extension of the Red Line past the Harvard stop because of late-night dynamiting, the eye-sore caused by the construction and the traffic problems that have resulted.

The estimated budget for the project is $540 million, Peter Lynch, MBTA project coordinator for development, said yesterday. About 2000 workers will take part in the construction, which will extend several miles to Alewife.

Construction is occurring simultaneously along all points of the extension, a construction method never before used by the MBTA. The date of expected completion is 1983.

The City Council last spring joined with opponents of the extension to try to halt the construction temporarily, despite estimates that such a stoppage would result in the loss of millions of dollars per day.

The council contended that the original Environmental Impact Statement (EIS) no longer fulfilled federal requirements because the MBTA had altered its plan for the extension after the report was written.

However, a federal judge ruled against the city when it formally filed suit, claiming that the original 1500-page EIS was an adequate prediction of the effect of the extension.

The other suits that Cambridge has lost this summer one to give the city the power to inspect MBTA-constructed sites and another to stop MBTA dynamiting past 8 p.m., have demoralized the city's attempts to thwart the extension.

Eighty per cent of the cost of the extension is funded by the federal government, 20 per cent by state agencies