What is in store for Kenya’s real estate market in 2013, a year that
has been described by many as a “make-or-break” for the country?
With
what is expected to be a watershed General Election barely two months
away, many Kenyans are keeping their fingers crossed while hoping for
the best.
Some analysts have already pointed
out that the election-related uncertainty might slightly slow down the
property sector in the first quarter of the year — just like might
happen to other sectors — as investors “hold off” and instead adopt a
wait-and-see attitude.
However, no matter how the elections go, 2013 seems to hold great promises for the property sector in the country.
Here are four major developments that are going to greatly catalyse and leave an indelible mark in the sector this year:
1. County governments
One
of the major highlights of the new Constitution is the introduction the
county system of government, otherwise known as devolution.
After
the March 4 General Election, Kenya will move to a system of county
governments as part of plans to address huge development disparities
across the country.
The 47 counties and smaller
towns are going to be major engines of economic growth in various parts
of the country, attracting key investments.
Workers
of the many companies and businesses that will set base at the county
headquarters are expected to create a high housing demand at the
“grassroots”.
Then there is the development of
the county headquarters. Observers say that the few buildings in most of
the proposed county headquarters are in deplorable states, meaning
there will be massive construction of new buildings to accommodate the
requisite county offices.
The introduction of
the county system of government is a development being followed very
closely by players in the real estate sector.
Already,
several developers have started planning how to “decentralise” their
offices to the counties as they angle for possible construction tenders
yet to be floated.
Recently, Housing Finance
managing director Frank Ireri told journalists that the mortgage firm
was planning how to seize the opportunities brought about by the
counties.
“We think there are going to be great
opportunities at the counties and we are keen to take advantage of the
economic growth brought about by the counties,” he said, revealing that
they plan to put up houses in the counties through Housing Finance’s
revived housing development arm.
Indeed, the
World Bank recently warned that the county system could affect the
growth of the already established urban centres as “property monies are
likely to be funnelled to rural areas”.
“Since
most of the counties are predominantly rural, there is a danger that
revenue collected from urban centres could be diverted to improve the
conditions of rural areas,” said World Bank country director Johannes
Zutt, warning that if that happens, urban areas will not be able to
maintain or improve their basic infrastructure, making them unattractive
to investment.
2. Real Estate Investment Trusts (Reits)
For
the first time in Kenya, shares of real estate developments will be
traded at the Nairobi Securities Exchange, enabling even small investors
to own property by buying shares of such properties.
The
Capital Markets Authority (CMA) has been working on Reits regulations
since 2009, and now says the guidelines could be ready by the first
quarter of this year.
As an investment vehicle,
Reits is structured to enable individuals to own shares in huge
property developments, thus guaranteeing them income at the end of every
year.
Such real estate developments — could be
residential, commercial, retail or industrial — are normally sponsored
by a super investor that could be a pension scheme or fund manager or a
cooperative society, who registers the housing scheme at the securities
exchange before selling shares, to be traded on the bourse, to
interested individuals.
At the end of every year, those who bought shares are paid dividends, depending on how much they had invested.
Acting
CMA chief executive Paul Muthaura says the regulations of the
investment Reits require directors of the super investor, who usually
lists on the bourse at a trust, to declare at least 80 per cent of the
total income from rent per annum as dividends.
The
main advantage of Reits is that it makes it possible for just about
anybody to invest in real estate. This, therefore, solves one big
problem that has for a long time put real estate investment of out reach
of the majority of Kenyans: its capital-intensive nature.
Second,
Reits will make real estate liquid since those who want to opt out
would easily sell their shares. Right now, a real estate investor who
wants to dispose of his or her investment has to sell the whole
property.
This makes real estate illiquid since
it takes time to get a buyer with the kind of money required to
purchase a mammoth real estate.
It is hoped
that with the advent of Reits, Kenyans in their thousands, if not
millions, will “own property” by simply buying shares, in much the same
way they buy shares of other companies.
3. Konza Technology City
Described
as one of the most ambitious construction projects ever undertaken in
Africa, the Konza Technocity will be developed in four, five-year
phases.
The first, expected to start this year,
includes constructing Business Process Outsourcing sites, a financial
district and a residential zone.
The $7 billion
(Sh595 billion) tech park will sit on 5,000 acres in Malili Ranch
situated in both Machakos and Makueni counties, 60 kilometres from
Nairobi. The smart city is 50 kilometres from the Jomo Kenyatta
International Airport, and 500 kilometres from the Mombasa ports.
The
project, to be undertaken through public-private partnerships, is
expected to create over 100,000 jobs. It will consist of a modern
science and technology park, a hospital, a financial district, a mass
transport system, residential estates and hotels, and even international
schools. Ultimately, it is expected to turn Kenya into a continental
leader in ICT.
The International Finance
Corporation, part of the World Bank, commissioned international
consultants to look at the master planning of the city, its economic
viability and development of detailed development proposal.
So
far, intense work by International Design Engineers and Pell Frischmann
from London has resulted in the preparation of a series of master
planning options for the project.
According to
analysts, Konza Tech City is likely to be an entry point for global tech
companies such as Apple, HP, Microsoft and RIM to set up more rooted
and dedicated sub-Saharan African operations.
As a Vision
2030 project, Konza Tech City is considered a strategic opportunity for
Kenya to spur the growth of economic activities that fuel higher value
employment generation and growth.
The city provides a
great opportunity to leverage Kenya into the knowledge economy. The
vision for the city includes a strong emphasis on Information Technology
and Information Technology Enabled Services, and a wide range of
commercial and support activities.
Its launch, which has been postponed more than twice, is expected to be presided over by President Kibaki this January.
4 .Tatu City
Lying
directly in the path of the planned urban development extending
northwards from Nairobi, Tatu City has been hailed as a unique value
proposition which will offer world-class infrastructure and a
comprehensive live-work-play solution to its occupiers.
Deviating
from the increasingly popular gated community concept, Tatu City is a
holistically planned residential and commercial development,
representing what property experts have termed a “new urbanism” in
Africa, a “world class environment and a completely novel approach to
organising the urban environment in Africa”.
When
completed, Tatu City’s mixed-use environment will cover an area of
1,038 hectares and will be home to over 60,000 residents and another
20,000-30,000 day visitors.
“Tatu City will see
the creation of a new focus area to the north of Nairobi, in line with
Kenya’s planning for decentralised development zones to alleviate the
congestion in Kenya’s most populous city,” says Gikonyo Gitonga, the
managing director of CB Richard Ellis, a leading real estate firm in
Nairobi.
Mr Gitonga says Tatu City will
contribute to the achievement of the Nairobi Metropolitan Region’s 2030
Vision: “It is a socially integrated, secure and accessible city that
will add value to the Kenyan economy and create jobs.”
However,
the Sh240 billion project has been embroiled in court battles among
original shareholders, delaying its long-awaited take off. Phase 1
comprises 3,000 residential units, 86,000 square metres of commercial
office space, 31,000 square metres of retail floor space, public
transport interchanges.
Adopted from
N-Soko 