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4-Star Hotel

The apartments accounted for approximately 43 per cent of transaction activity in the third quarter of 2020 according to the latest KBA house price index.

Maisonettes and bungalows accounted for 21 per cent and 33 per cent respectively, while townhouses accounted for 2 per cent of the concluded sales in the third quarter. 

However, the overall demand for apartments shrank by 63 per cent, while demand for bungalows and maisonettes expanded by 9 per cent and 72 per cent, respectively. Region Two which consists of Thindigua (Kiambu Road), Kiambu, South B, South C, Kabete, Komarock, Imara Daima, Membley, Buruburu, Rongai, Waiyaki Way (Uthiru, Regen, Kinoo, Kikuyu), Mbagathi road, Ngong Road, Langata, accounted for the most housing activity during the period at 53 percent. 

Transactions are still happening in low volumes reinforcing the earlier observations of buyers&rsquo; search for affordability. 

The KBA-HPI index based on the moving base, stood at 117.11 in quarter three compared to 117.20 in the prior period, indicating a slowing down of the drop which began in the fourth quarter of 2018 when the index stood at 127.0, its highest since its inception in 2013. 

KBA said that house price growth is flattening off, a sign that the market is now characterized by stability albeit still in the negative territory. Housing price fundamentals, just like prices of non-house goods, substantially depend on the state of the economy.

Equity Bank has threatened to auction properties located along Kampala’s Lumumba avenue over failure by the owner, Simbamanyo Estates to service a loan agreement.

Equity Bank yesterday issued a legal notice warning the property firm that it had until October 7 to pay at least 30 per cent (Ksh. 339M) of the amount or face auction.

“All potential buyers, tenants and occupants of the properties contained on Lumumba Avenue and Mutungo-Luzira are informed that if Simbamanyo does not pay to the bank the 30 per cent as ordered by the court, public auction of the mortgaged properties will take place on October 8,” read the notice.

Simbamanyo had taken the matter to court disputing the amount claimed by equity and challenging the legality of loans drawn from Equity Bank Kenya.

Uganda’s High Court had earlier, on Monday, granted Simbamanyo’s prayer to stay the sale of the properties by Equity Bank but added that in order to uphold the decision, the property firm must make the 30 per cent payment.

The dispute stems from an agreement by Equity Bank Kenya and Equity Bank Uganda to advance about Ksh. 600 million to Simbamanyo Estates in August 2012, with at least Ksh. 350 million drawn from Equity Bank Kenya and Ksh. 250 million from Equity Bank Uganda.

According to court documents, the consolidated sum of the loan including interest and fees would come to a total of Ksh. 810 million. However, the real estate firm challenged the figure, claiming it was only aware of Ksh. 719 million.

Among other accusations, Simbamanyo has accused Equity Bank Uganda of providing Equity Bank Kenya with an illegal cover to conduct business in Uganda where it has no jurisdiction.

The real estate company raised an issue on the inclusion of Equity Bank Kenya and Bank One of Mauritius (which provided a bridge facility of $10M) in the loan document despite the fact that it had never applied to the two banks and had no bank accounts with them.

However Equity Bank refuted the claim, stating that Bank One was drafted into the transaction at the request of Simbamanyo who acting through NISK capital had sought to restructure the loan in 2017, with a Ksh. 1 billion Standby Letter of Credit from Bank One.

The bank argued that the real estate company was aware of all the parties involved in the transaction and had benefited from it.

Simbamanyo has also accused the bank of absolute contempt of court for advertising the properties for sale before the expiry of a 30 day period given to pay the 30 percent.

“We find it irregular to find that lawyers for the bank [Equity] are publishing a response to the caveat emptor and giving our client 30 days to clear 30 per cent and before this time elapses they have advertised the same properties for sale,” the firm’s lawyers told the<a style="color: #ff6600;" href="https://www.monitor.co.ug/Business/Finance/We-shall-sell-disputed-assets-Equity-notifies-Simbamanyo/688608-5621098-r8x362z/index.html"> Daily Monitor</a>.

Simbamanyo had sought the funds for the construction of a hotel property in Mutungo, Luzira north-east of Kampala and facilitate the takeover of a prior facility advanced to Simbamanyo by Shelter Afrique.

Tatu City has welcomed the Government’s move to offer incentives to industries operating in Special Economic Zones, saying that the initiative will help to spur growth, and drive Foreign Direct Investment (FDI), in Kenya’s built infrastructure.

Speaking at the sidelines of the East Africa Property Investment Summit at a Nairobi Hotel, Nick Langford, Country Head Rendeavour Kenya – the majority owner and developer of Tatu City – said the decision will encourage more firms to set up in Kenya, and help in the successful operation of Industrial Parks that have been established in mixed-use development projects such as Tatu City.

“With Special Economic Zone status, there are massive tax advantages for setting up businesses in Kenya making it possible for firms that had hitherto not considered the country as a business destination, to do so,” he said.

National Treasury Cabinet Secretary, Henry Rotich, in this year’s Budget Statement, said that the Government will be offering industries operating in Special Economic Zones a host of incentives to boost creation of modern urban centres.

“Under the SEZs, the Government will provide a host of incentives for industries to operate in and boost creation of modern urban centers. These incentives include exemption on VAT, reduced corporate tax rates for a defined period, access to quality infrastructure, and one-stop shops for licenses,” he said.

Tatu City also singled-out increased investment in infrastructure development as well as Government’s efforts to enhance the ease of doing business in the country to increase FDI

As part of its masterplan, Tatu City is setting up an industrial park on 457 acres that has already seen a host of industries sign up to expand or relocate their business there. These include Unilever, Chandaria Industries, Dormans, Kim-Fay, Chandaria Industries, amongst others.

Tatu Lauds Government's Incentives to Industries in Special Economic Zones

There are two essential parts to achieving affordable housing in Kenya: building decent, low-cost homes, and developing a housing finance market that enables low-income earners to buy those homes. For, without finance, almost no home price is low enough to be affordable on an average salary.

For this reason, Kenya’s mortgage market has been growing. Housing loans have risen more than ten-fold since 2006, from 1,278 loans valued at Sh. 19m 12 years ago to 24,458 loans valued at Sh. 203.3bn by 2015, according to the Central Bank of Kenya (CBK).

But the market still remains tiny when compared with other nations. In Kenya, the mortgage loan value was equivalent to 3.15 per cent of GDP by 2015. In South Africa, it contributed some 32 per cent of GDP.

Yet in countries where mortgages drive a large flow of home buying, home owners prime the pumps of the economy with additional spending power in an inflow that makes for faster economic growth.

However, our own mortgage market is held back by multiple constraints, including bureaucracy. Normally, the purchase of a property takes around three months to complete. But mortgage finance in Kenya typically takes six months to arrange, mired in nine separate, manual, administrative processes.

These span land rent and rates clearance certificates, transfer filing and consent, the search, the valuation and its endorsement, and the stamp duty and lodging of documents. This process, which the government is now working to simplify, adds cumbersome work, as well as risk, thus increasing the cost of mortgages.

Most primary mortgage lenders thus set higher mortgage rates and focus on high net worth individuals and high earners who can afford higher rates. They also run shorter repayment periods, ranging from as low as three years to an average of eight years.

But repaying at such high rates, so rapidly, puts borrowers under considerable pressure and leads to defaults, which today stand at some 12 per cent of Kenyan mortgages. It is additionally a model that offers very few opportunities for low and middle-income Kenyans to own homes.

We, thus, need a radical overhaul of mortgage financing if we are to achieve widespread home ownership, which is where mortgage refinancing comes in.

Providing a source of secure, long-term funding for mortgages has a direct impact on the affordability of home loans for home buyers and is a vital pillar to achieving a developed mortgage system. Such funding was critical, for instance, in Malaysia and Singapore, where about 80 per cent of houses are now mortgage-owned.

For this reason, the National Treasury is contributing to the Affordable Housing Pillar of the BIG 4 Agenda by supporting the creation of a lending facility (the Kenya Mortgage Refinance Company) to provide longer-term funds for banks and SACCOs for residential mortgages in Kenya.

Related; <a href="https://estatecloud.co.ke/cbk-sets-stage-for-mortgage-refinancing-companies-in-kenya/">CBK sets stage for Mortgage Refinancing Companies in Kenya</a>

The Kenya Mortgage Refinance Company (KMRC) will provide secure funding to mortgage lenders so that they can offer more mortgages at lower prices. With such long-term funding, primary mortgage lenders will also be able to lengthen repayment periods to 15 to 25 years, and offer a fixed interest rate, making mortgages both safe and affordable for low-income earners.

The new financing will mainly be available for lower cost housing, valued at less than Sh. 4m in Nairobi metropolitan area (Nairobi, Machakos, Kiambu and Kajiado) and Sh3m elsewhere. Likewise, to qualify for the housing loan, Kenyans must be earning less than Sh. 150,000 a month.

Refinancing the financial institutions will also enable them to expand their lending scope to finance developers as well.

The Government Affordable Housing project seeks to develop 500,000 houses in five years, which presents the largest real estate opportunity for a long time. But with the country having only managed to produce about 50,000 units over the last two to three years, achieving the targeted 100,000 houses a year will require considerable investment in construction.

The financing structures necessary to achieve this will be outlined in forums at the April 10th -11th East African Property Investment Summit, which aims to support the Government Affordable Housing Project. But as government and industry leaders convene to discuss the delivery of the targeted affordable housing, mortgage refinancing will be taking centre stage as a crucial enabler.

Article By Johnstone Oltetia, the Interim CEO Kenya Mortgage Refinance Company (KMRC)

OOpEd: Affordable housing requires a new shape for the mortgage industry

Equity Bank In Dispute With Ugandan Developer Over Ksh. 600M Loan

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;

Nairobi’s property market fundamentals have been outlined in the latest East Africa macro-economic overview by international property firm JLL. In the report, the country’s GDP is expected to contract by 1.9% during 2020 according to Oxford Economics.

According to <a style="color: #ff6600;" href="https://www.jll.co.za/en/trends-and-insights/research/east-africa-macro-economic-overview-2020" target="_blank" rel="noopener">JLL</a>, East Africa is the fastest growing economy in the real estate sector over the last decade from an economic development perspective.

Office Property Market Fundamentals

Nairobi’s <a style="color: #ff6600;" href="https://estatecloud.co.ke/nairobi-prime-office-rents-fall-by-7-as-kampala-records-7-increase/">office market</a> has come under severe pressure as vacancy levels continue to rise. Vacancy rates ranging between 20%-35% have been reported and have subsequently eroded rental levels across all office segments.

Despite the oversupply, approximately 90,000 sqm of new stock is expected to come to the market annually over the next 2-5 years.

According to JLL, the construction boom between 2012 and 2019 saw Nairobi’s total office stock experience average annual growth in excess of 20%. This was driven by aggressive private sector investment, while many multinationals sought to establish headquarters in East Africa’s commercial hub.

“Annual prime asking rentals range from US$145-US$180 per sqm, depending on quality and location (JLL, 2020). In line with market corrections, however, recent lease renewals have been reported between US$90 and US$110 per sqm p.a.,” says the report.

The opportunity is that dampening property market fundamentals in the office sector over the short to medium term will make it possible for emerging occupiers to enter Kenya’s commercial environment.

“We subsequently anticipate that new brands and businesses will take up space in the Kenyan economy,” it states.

Retail Property Market Fundamentals

<a href="https://estatecloud.co.ke/nairobi-retail-markets-performance-for-2020/">Nairobi’s retail markets</a>, one of the largest and most developed in sub-Saharan Africa, currently holds more than 700,000 sqm of formal stock.

Average retail sales have increased by 7.6% per year since 2014, fueled by continuous sector growth in the sector which has not escaped international retailers.

According to JLL, the market has been oversupplied for the last three years, driving down rents by 10% to 15% over the period.

New stock coming to market over the past 5-years has remained limited, with most of the new supply classified as convenience facilities in

“New stock coming to market over the past 5-years has remained limited, with most of the new supply classified as convenience facilities in established areas such as Kilimani Mall,” the report states.

The current pipeline for further development includes the 8,000 sqm Nairobi Global Trade Centre (GTC Mall) in Westlands which is set for opening in Q3, 2021.

Industrial Property Market Fundamentals

Kenya’s warehousing and logistics market growth has been supported by rapid infrastructural development initiatives like the likes of Nairobi’s northern, eastern and southern bypasses, Inland Container Depots (Naivasha), and the <a href="https://metickets.krc.co.ke/" target="_blank" rel="noopener">Standard Gauge Railway</a> (SGR).

The steady growth in A-grade warehousing stock is expected to place downward pressure on older B-grade and sub-grade stock performance.

Annual asking rentals range between US$65-US$95 per sqm for A-grade facilities, with vacancy rates recorded as high as 20%. Asking rentals for B and C-grade warehouses currently range between US$25 and US$40 per sqm p.a. while renewed industrial lease agreements have been reported at US$30 per sqm.

“Occupancy levels are likely to drop amongst lower-grade industrial stock over the medium term, as newer, better quality spaces come to market,” reads the report.

Residential Property Market Fundamentals

In the last two years, private developers have demonstrated a growing interest in building entry-level apartment products priced below US$80,000.

This follows a slowdown in the relatively saturated high-end market, where sales and rental prices have remained constant and occupancy rates have eroded since the 2017.

According to the research, residential demand in Nairobi is fueled by a strong population growth rate (3.4% per year over the last ten years) and a steady decrease in household size (averaging 2.9 people per household).

“The growth of the sales market is primarily limited by the lack of access to affordable housing finance, with mortgage rates offered by banks averaging at 13%,” it says.

Current residential property market fundamentals support the 2019 National Census which shows that the city remains a tenant-driven market, with only 9.3% of the population owning their main residences. The remaining 90.7 percent of residents rent their units.

See Property; <a style="color: #ff6600;" href="https://estatecloud.co.ke/property/dew-drop-heights-milimani/">DEW DROP HEIGHTS, MILIMANI</a>

Nairobi Property Market Fundamentals

Kasada Hospitality Fund LP (&ldquo;Kasada&rdquo;), yesterday announced its acquisition of a portfolio of Sub-Saharan African Hotels from AccorInvest.

The acquisition is the first transaction made by Kasada Capital Management through the debut hospitality <a href="http://www.kasada.com/" style="color: #ff6600;">fund</a> and is the largest cross-border M&amp;A deal in Africa.

The transaction will give Kasada control of 1,602 fully operational hotel rooms with facilities spread across three countries- Ivory Coast, Senegal and Cameroon.

In 2019, the Sub-Saharan hospitality investment platform reached a first close on its maiden fund Kasada Hospitality Fund LP with equity commitments of over USD 500 million, with USD 350 million from Katara Hospitality and USD 150 million from Accor.

&ldquo;The first platform of its kind in Sub-Saharan Africa, Kasada Capital Management intends to bridge the gap between the local hospitality market players and international investors.&rdquo; says a statement from the company.

The fund which is expected to be a game-changer in Africa&rsquo;s hotel investment landscape said the acquisition will focus on servicing intra-regional business travel in Africa.

The transaction was executed during one of the most challenging periods for the African hospitality sector and is a reflection of Kasada&rsquo;s continued commitment to the region and belief in the prospects for its post-Covid-19 recovery Kasada has committed to implementing new standards in terms of local management teams and environmental footprint while ensuring guest satisfaction levels continue to develop.

AccorInvest is the owner and operator of a property portfolio of more than 880 hotels, owned and leased, located across 28 countries in Europe, Latin America and Asia.

The sale of the portfolio of hotels in Sub-Saharan Africa to Kasada marks the refocusing of its investment strategy on Europe, positioning Kasada as the market leader in Sub-Saharan Africa.

&ldquo;This is an outstanding portfolio of hotels covering all market segments and fully aligned with Kasada&rsquo;s strategy. We look forward to working with the fantastic teams running the portfolio and to help drive the growth of the hospitality sector in this promising region,&quot; said Olivier Granet, Managing Partner and CEO of Kasada.

Also Read;&nbsp;<a href="https://estatecloud.co.ke/covid-19-could-ruin-record-year-for-africas-hotel-developers/" style="color: #ff6600;">COVID-19 could ruin record year for Africa&#39;s hotel developers</a>

Estate Cloud

Estate Cloud

Demand for apartments down 63 percent as buyers opt for maisonnettes

By Estate Cloud - over 2 years ago - Kenya

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