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Kenya ranks 4th in attracting global contractors in Africa, after South Africa, Ethiopia and Nigeria according to research by Centum real estate. Foreign contractors in the country number about 65 in the country according to the research, with 15 different nationalities involved.

According to Centum, construction industry growth in Kenya and Ethiopia has been too slow while Rwanda has been on the boom.

However, it points out that there are scalability constraints in Rwanda&rsquo;s construction markets even though it forecasts Y-o-Y growth of above 10 per cent for Rwanda between 2020-2029.

The report projects slowing Y-o-Y growth for both Kenya and Ethiopia&rsquo;s construction industries during the same period, with the Kenyan case attributed to financial constraints and base effects.

The data shows that Chinese companies have made significant inroads into the African construction industry and now claim top spot in most countries. Below are the top contractors on the continent according to the report:

<ol>
	<li>Sinohydro Corporation</li>
	<li>China Civil Engineering Construction Corporation (CCECC)</li>
	<li>China Henan International Cooperation Group Company Limited</li>
	<li>China Communications Construction Company(CCCC)</li>
	<li>China Harbour Engineering Company (CHEC)</li>
	<li>China Road and Bridge Corporation</li>
	<li>SOGEA-SATOM</li>
	<li>Mota-Engil China</li>
	<li>Geo-Engineering Corporation (CGC)</li>
</ol>

It’s about 10 years since the turn of the global financial of 2008 in which economies were cajoled into the arm twisting allure of the West’s subprime mortgages, the aftermath of which saw economies grapple with recovery. Africa has over the past decade not only recovered but significant improvements have been made which have intensified economic activity across the continent. Real estate, the culprit of the crisis, has in particular attracted a lot of investment in many countries especially in sub-Saharan Africa in recent years. The Africa Business Agenda report by audit firm PwC, released in 2017 identifies some of the opportunities going forward.

Many positive trends have merged together on the African scene, multiplying the potential for economic development and change in the real estate sector as well as in other spheres of business. Factors such as population growth, rapid urbanization, technological breakthroughs and shifts in global power dynamics are increasingly playing out in favour of Africa. The real estate sector stands to benefit enormously from each of these ongoing and looming transformations identified by the data from the report:

By 2035, Africa’s labour force is expected to be larger than that of China. Providing for the basic needs of this workforce will demand a lot of resources from governments and private investors to keep the workforce serviced.

Africa has the fastest growing middle class on the globe with 350m people belonging in this category and yet this represents less than 50% of the workforce.

Thanks to rapid urbanisation, there will be 12 megacities (over 10m people) in Africa by 2025, which is less than a decade away. The result is that by 2025, Africa will house some of the largest cities in the world. Of the 37 megacities expected, 12 will be from Africa. Cities such as Lagos, Kinshasa and Abidjan are projected to join the ranks of some of the world’s most densely populated urban areas. The kind of growth expected can be compared to the transformation of Asian cities such as Shanghai and Dubai which in a span of 10 to 20 years have grown into the urban bulwarks we know, creating opportunities and driving growth.

On population growth, Africa is expected to contribute 50% of the world’s population growth between now and 2050. With this increase in the number of consumers many of which will flock into cities, the demand for food, infrastructure, technology, financial services, housing and health services will rise.

Mobile broadband growth in Africa has since surpassed 50%, which is Africa catching up with the rest of the world. This has and will continue to affect the flow of information between Africa and the rest of the world.

The resulting concentration of economic activity in urban areas will be key to propelling Africa into greater economic heights. Urban areas are everywhere known to have the greatest influence on economic opportunities because they drive growth though innovation and technology, information exchange, infrastructure demand, social transformation and others.

The Cities of Opportunities report by PwC also ranks the African cities by regional index, opportunity index and overall index in evaluating the growth potential of those cities using a total of 29 variables for the overall index and 5 variables for the opportunities index. The variables included infrastructure, human capital, economics, society and demographics, rate of real GDP growth among others. Cities like Accra, Lagos, Nairobi, Cairo, Addis Ababa and Kampala rank in the top ten of both indices and already attract the highest Foreign Direct Investment in the continent.

Housing PS Charles Hinga yesterday revealed that Kenya will adopt International Finance Corporation's EDGE green housing standards in its affordable housing program.

The PS made the pronouncement during a virtual meeting held on Tuesday, that Kenya is keen to embrace low carbon housing developments in order to combat climate change.

"The minimum standard for the design of affordable, climate-friendly homes shall be IFC's excellence in design for greater efficiencies (EDGE) green building certification program. The standard entails a 20 percent less energy, less water and less embodied energy in materials compared to a base case building as estimated within the EDGE software," Hinga said.

He also revealed that the government signed an agreement with seven private investors to construct 130,000 affordable houses just last week, adding that the investors had committed to making the houses environmentally friendly.

Early this week a report by IFC highlighted that the green buildings provide a USD 509.6 billion opportunity for residential developers in sub-Saharan Africa (USD 413 billion for single-family units and USD 96.6 billion for multi-family units.

Local developers have been reluctant to provide affordable housing due to the high cost of land in the country alongside complex land tenure systems. As a result, private developers have traditionally focused on constructing houses for the middle and high-income segments of the population.

The affordable housing programme is an intention to build 500,000 low-income housing units by the end of 2022.

Read; <a style="color: #ff6600;" href="https://estatecloud.co.ke/green-buildings-present-usd-768-bn-opportunity-in-sub-saharan-africa/">Green buildings present USD 768 billion opportunity in sub-Saharan Africa</a>

Kenya's housing program to adopt World Bank's green housing standards

Land speculation continues to be one of the most widespread investment strategies for real estate investors in Kenya.

Investors accumulate capital individually or collectively and then buy large or small chunks in selected locations, in anticipation of future infrastructure projects, planned developments or the natural growth of urban centres to drive up the value of land.

Many low-income and middle-income earners have found this an easy strategy by using collective investment schemes like SACCOs or Chamas to purchase large tracts of land and then subdivide.

As a result, SACCOs have become some of the largest buyers of land in major urban centres. This strategy has made land one of the biggest asset classes, even more than house or apartment rentals.

“It has actually created a crisis in urban development because there are a lot of people buying land, not for the sake of building anything or adding value, but for the sake of speculation,” Nahashon Mungai, Executive Director for Global Markets at Standard Investment Bank told <a style="color: #ff6600;" href="https://marcopolis.net/standard-investment-bank-the-highest-returning-fund-manager-in-kenya.htm">Marcopolis</a> in a recent interview.

The inevitable result of speculation has been overpricing which has suppressed the returns on investments for those who buy land for the purpose of building rentals. Rental yields are affected by the market value of a property which in many cases has been inflated by the high cost of land.

“A lot of land is overpriced due to the speculation around it and it causes a very poor return if you actually develop property for rent or for sale. The average rental yield in this country is around 5 percent which barely beats inflation which is around the same level. As an asset class, it underperforms in the market,” he said

Real estate, stocks and government bonds remain three of the most accessible asset classes for investors seeking to grow their money.

Check Out; <a style="color: #ff6600;" href="https://estatecloud.co.ke/property/list-of-land-available-for-sale/">List of Land Available for Sale in Nairobi</a>

How land speculation has affected property investments in Kenya

African Cities and Opportunity

Africa’s property markets are advancing from basic residential and commercial needs into a more diversified market portfolio. With improved ability to do business, better infrastructure and transformation of societies by the information age, changes are happening at a greater pace and new trends are emerging that are expected to change the real estate sector.

New opportunities are coming up and investors are taking note. This year’s Africa Property Summit slated for September 20th- 21st in South Africa will gather together leaders to discuss these issues. However, below is a brief highlight of some of the key issues:

1. Industrial Property

Logistics needs have increased all over the continent with the expansion of industrial activity and the spread of commercial activity in most African cities. However, these changes have been met by challenges due to lack of professionally managed supply chains on the continent and inefficient supply chains. As a result, the cost of logistics in Sub-Saharan Africa as a percent of product cost is still very high at 30-40 per cent.

Experts say there is no grade A warehouses in the continent since most investors flock towards retail and commercial property. Yet the continued growth of e-commerce, third-party logistics companies, distributors, retailers and local industries has raised the demand for modern industrial property.

2. Affordable Housing

Most African countries have a housing crisis. Due to lack of adequate planning and funding, there has been a build up of under supply in most countries which has so far overwhelmed both the governments and private developers. As a result, citizens in most countries have to do with the inadequate housing available.

However, governments are giving more attention to the issue in collaboration with the private sector and institutional investors. More incentives are being formulated and more initiatives are set to be executed towards the achievement of affordable housing.

This has opened to investors a new front, especially those with the ability to leverage new technologies that can enable them construct houses at prices affordable to the low-income target market.

3. Student Housing

The popularity and relevance of higher education has grown on the continent leading to the creation of more institutions of higher learning to satisfy demand. Growing student populations has increased the demand for student accommodation yet a majority of Africa's population still consists of the young most of whom are yet to get higher education.

In contrast to developed countries like the UK and Australia where the demand for student accommodation is fueled by international students, in Africa the demand is domestic and the growth, organic. This is a space to watch for any investor with an eye on such opportunities.

4. Serviced Apartments

In Africa, serviced apartments represent less than 1% of all hotel type accommodation with the highest concentration is in South Africa while internationally the figure is close to 9% . Serviced apartments can be a secure and affordable alternative to hotel rooms but due to low information about the segment, most capital is elusive.

While there is no shortage of alternative accommodation on the continent, serviced apartments would offer and entirely new experience hence the untapped potential.

Africa's real estate, in comparison to global markets, is still at a nascent stage and a lot of value is yet to be created. These trends show just how much is yet to be done.

&nbsp;

&nbsp;

Real Estate Investment Fund Stanlib Fahari (STANLIB) has announced the appointment of Ms. Nozipho Makhoba as the Acting Chief Executive Officer of the STANLIB Fahari I-REIT (Fahari-I-REIT) effective 1st July 2018. Nozipho replaces Mr. Kenneth Masika whose contract came to an end on 30th June 2018.

The Fahari I-REIT is Kenya’s first REIT, launched in late 2015. It currently has a market cap of KES1.91bn and 3 properties in the retail, office and light industrial sectors.

During the announcement, STANLIB Board of Directors recognized Kenneth’s contributions to the ongoing success of the STANLIB Fahari I-REIT. During his tenure as the Chief Executive Officer, Kenneth steered the team towards a significant growth in earnings. The REIT successfully concluded substantial property acquisitions which will help bolster the yield and quality of the existing portfolio.

Nozipho who is currently the Chief Financial Officer for STANLIB Fahari I-REIT has 17 years’ experience spanning across financial management, external audit, property investment and corporate finance. As the Chief Finance Officer of the STANLIB Fahari I-REIT she has been responsible for financial management, risk management, financial reporting and strategic resource planning.

Before joining STANLIB, Nozipho worked for the Liberty Group (South Africa) from 2012 in various areas of the business including Liberty Properties and Group Corporate Finance. She was instrumental in the Group’s mergers and acquisition transactions related to property.

Prior to joining the Liberty Group, Nozipho spent six years in the audit profession and five years with the largest asset management firm in Africa – the Public Investment Corporation as a Finance and Operations Manager in the Property Investment Division. While at the Public Investment Corporation, she held non-Executive Director roles for various property investment companies including Pareto Limited (South Africa).

She holds a Bachelor of Commerce (Accounting) and a Post-Graduate Diploma in Accounting, both from the University of Kwa-Zulu Natal. She is a registered Chartered Accountant with the South African Institute of Chartered Accountants.

&nbsp;

Fahari-I REIT gets new acting CEO

Real estate stakeholders have expressed optimism that property markets in sub-Saharan Africa are expected to undergo rapid recovery from Covid-19 constraints. The rate of recovery, especially in non-resource dependent economies, has been faster than earlier anticipated.

Speaking during the just concluded Africa Property Investment Summit, panellists who were mostly composed of bankers and developers, affirmed that funding for real estate is not going to be significantly affected post-pandemic.

“Real estate is generally uncorrelated to equity and fixed income market volatilities,” said Neville Mandimika, Economist and Fixed Income Analyst, Rand Merchant Bank (RMB).

He also said that with regard to the pandemic, the worst in dollar forex is now water under the bridge following a significant drawdown in forex over the past few months.

African real estate markets are expected to receive momentum from the on-going rural-urban migrations among other factors. The result is expected to raise demand for property in all segments further, necessitating the input of banks and other financial institutions.

“Given the structure of real estate investments, debt is intrinsic to it. Our focus is on cash flow sustainability,” Niyi Adeleye, Head of Real Estate Finance-Africa Regions at Standard Bank Group.

He said experienced real estate investors can leverage the sustainability of one asset by backing it up by another asset.

Real estate investors that had capital during the period appeared to have continued to pursue these investments, albeit at a slower pace while investors reliant on external financing mostly paused their investment activities.

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Chinese Companies Dominate List Of Top Contractors in Africa

By Estate Cloud - over 2 years ago - Kenya

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