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National Construction Authority (NCA) CEO Maurice Akech has revealed plans to improve local building capacity in partnership with foreign contractors.

Most local projects in Kenya are currently run by foreign contractors due to a lack of local capacity to handle large projects in the road, energy, water, building and telecommunication sectors.

The government has invested a lot in public infrastructure and the <a href="https://nca.go.ke/" style="color: #ff6600;">National&nbsp; Construction Authority</a> chief says there is need to build local capacity in order to have a vibrant construction sector.

&ldquo;Our desire is that local contractors acquire the same level of competitiveness as foreign contractors in the next five years so as to enhance the sustainability of the building sector,&rdquo; said Akech.

Akech said the authority is advocating for technology transfer from foreign to local firms to enhance capacity for undertaking complex projects.

Kenyan contractors normally lose out on big contractors especially Chinese, owing to inadequate technology and financial capacity.

Akech said the aim of capacity building is to ensure that the local construction sector is empowered to grow and be able to perform mega infrastructure projects.

According to the National Construction Authority, current legislation on local content and employment for foreign contractors requires that foreign contractors should outsource 30 per cent of their work to local companies.

Whether you are an agent, property owner, developer, marketer or whatever corner of the real estate cake you are currently biting, I hereby admit you to the fact these are very exciting times to be in business. The tools of the trade have become numerous and variant and information is easier to come by, leading to ever increasing openings and opportunities in the industry. Since the dawn of the internet age, subsequent technological developments have come thick and fast, transforming industries entirely.

In recent times, there has been the inviting case of 3-D printing, the imminently revolutionary block chain technology, the absolute manifestation of virtual reality and the very emergent artificial intelligence not to mention the array of robots and drones. The list is far from exhaustive and I will not make it so but for one addition, cloud computing. By now, this is a household term since it dates back to more than five years and I presume most people understand it. I am no expert ether but for the avoidance of doubt, I will outline the most interesting components of it in this space.

It boils down to this; cloud computing offers the pooled advantages of computing power, database storage, applications, analytics, web-hosting and other IT resources through a remote server or cloud based platform. Cloud based services are offered over the internet by cloud services companies via a pay as you use pricing. So what has real estate got to do with cloud computing, you ask? Well the benefits are many considering the multi-faceted nature of functions in the real estate industry but here are a few:
<ol>
 	<li>No investment in hardware</li>
</ol>
Cloud computing services are just that, services. The hardware is invested and maintained by a third party who is in charge of maintenance and ensuring efficiency in service delivery. Indeed investing in such a complex system would be costly and out of reach for the typical real estate company, property owners or other stakeholders except for perhaps, large conglomerates. Making the services open for all however, enables cloud service providers to achieve a minimum efficiency scale quickly while meeting client needs.
<ol start="2">
 	<li>Unlimited capacity</li>
</ol>
Real estate dealings and transactions can be data intensive along with the media that goes with it in this digital times. Storing such data as legal documents, sales records, images and videos requires substantial investments in data storage and the security thereof. Although cloud storage services are not exactly infinite, they can perfectly cater for your data storage needs which is basically what they are.
<ol start="3">
 	<li>Instant access to endless resources online</li>
</ol>
Most cloud services offer you instant access to your information plus additional resources online from any device in as much as you can access the internet. This flexibility can allow you to set up and perform certain tasks for example tracking project developments, backing up information, downloading and uploading documents and other media, sending files, printing files and updating your websites, from your device without going to the office.
<ol start="4">
 	<li>Security, time and cost efficiency</li>
</ol>
The ultimate beauty and drive for adopting technology is usually the savings in time, cost and improvements in efficiency and cloud offers all that. Although there is an associated risk of security breach whether you are on cloud or not, cloud service providers are ever more conscious and strict in enforcing security measures. Furthermore, there are different levels of cloud services that one could opt for, that is, public cloud, private cloud and community cloud. For sensitive users, a private cloud service which is more restrictive to the public could be of use.

Now, the millennials have arrived and the optimum method of reaching them for real estate players, large or small has to be defined by technology. The cloud should definitely be part of the strategy as millennials gain purchasing power. In Africa the adoption technological innovations is on the rise. Already in Kenya there are 31.9 million internet users out of the nearly 46 million population by June of 2016, according to Internet World Stats. That is an internet penetration of 68.4 per cent, which should impress anyone with a solid strategy.

Cloud technology is not limited businesses alone, even individual homeowners can monitor and manage their own real estate portfolios from the public cloud. The important thing is to be deliberate and methodical about it. You can begin by analysing your current situation and then noting down the considerations that matter to you before exploring the solutions available in the market. In Kenya there are several cloud computing service providers including international ones like Microsoft Azure and IBM Cloud. Local companies like Safaricom, Access Kenya, Microsoft Azure, Databank and TrueHost also provide the services.

An understandable response to the economic fallout of Covid-19 is for governments, industries and businesses trying to predict the path that the global economy will take in the coming months and years.

However, given that this is a challenging exercise at best, it’s probably a better investment of valuable time and effort to ponder the many lessons – some very hard to swallow – that the pandemic has taught us, and integrate them into our future business and investment plans and strategies, so that we’re more prepared for what the future brings, irrespective of what that is.

For the African property sector this approach is especially vital. As a largely developing continent, Africa’s advantage over its so-called developed economy counterparts is that, in almost every aspect, it has the capacity to reset its economic development compass on the back of Covid-19. Property is a case in point.

Where property stakeholders in most developed countries and continents will now have to consider how they can adapt or retrofit what they already have in place to a post-Covid reality, Africa’s property landscape is still very much in its infancy.

Meaning that it has immense opportunities to leverage the pandemic lessons as a springboard for the type of future-focused property development that could very well position the continent as a global property leader.

With that in mind, it’s worth taking a closer look at how Covid-19 has impacted the key property sectors in Africa and, more importantly, what opportunities may present themselves going forward.

The hospitality sector was undoubtedly the hardest hit by the pandemic, with revenues coming to a complete and sudden halt as travel was shut down. Interestingly, this is probably also the sector that will be least changed by Covid-19 in the long-term.

However, stakeholders would still be well advised to consider innovative ways in which to leverage and maximise the significant value of their assets as the world once again becomes more mobile going forward.

The office sub-sector also experienced significant negative impacts, but revenue streams were not as widely or extensively shut down as with the hospitality sector, given that many tenants were able to pay some or all of their rent through the crisis.

However, office space is the one area where the post-Covid-19 future needs to be very carefully considered. The virus threw a bright spotlight on a truth that was already widely known, but largely ignored – which is that the way we use office space is evolving.

With the potential for remote working now clearly demonstrated, workplace ecosystems are set to transform, and there is a real opportunity to completely rethink the role and purpose of office space going forward.

The same is true for retail property. The isolation resulting from Covid-19 lockdown responses illustrated the need that exists in African communities for human interaction. And retail destinations were highlighted as the spaces where such interaction is facilitated.

While the impact of the pandemic was quite severe in this sub-sector, the recovery may also be swift – particularly given that online trade has not yet gained enough of a foothold to be a significant driver of shopping behaviour change.

So, there is significant opportunity for retail developers to capitalise on the lessons learned over the past two months; the most important of which is the need to rethink the primary role of retail centres and change the focus from shopping centres to holistic experience destinations.

The logistics/industrial sector, while not as severely impacted as the previously mentioned sub-sectors, also has the potential to position itself to capitalise on Africa’s post-Covid-19 future. It is likely that online shopping will continue to grow in popularity across the continent, which has the potential to drive significant growth in the logistics industry.

To make the most of this opportunity, sector participants will need to carefully and strategically think about where to locate future light industrial developments for maximum exposure and leverage.

So, there are undoubtedly opportunities for property in Africa to flourish going forward. But there are a few caveats to keep in mind.

For one, if Africa wants to fully capitalise on its property development springboard potential, stakeholders in the sector have to avoid the temptation to now become bogged down in trying to anticipate the next global crisis or attempting to build such considerations into their property feasibilities.

While there is always the possibility of another Covid-type event, with global repercussions, the relatively low probability means that adjusting for it now will have little or no long-term impact on property development models – other than requiring large investments of time, intellectual resources and money that could be better spent elsewhere.

Of course that doesn’t mean that investors and developers in Africa should simply be throwing caution to the wind and going full steam ahead with new developments they had planned before the pandemic struck.

There is still much uncertainty about what the future holds. And while we can’t forever be held captive by that uncertainty, we also cannot afford to ignore it.

Where projects and developments can be delayed by a few months, it would almost certainly be prudent to do so. At least until the economic fog has lifted somewhat – particularly in terms of local currency stability, commodity prices and tenant sustainability – and the future is a little clearer.

By Gerhard Zeelie; Head of Property Finance Africa: Nedbank CIB

Planning more important than prediction for Africa’s property sector now

The Case of Cloud Computing for Real Estate

The National Treasury has published the Income Tax (Real Estate Investment Trusts) Rules, 2020 which has made minor changes to the income tax exemption regulations for REITs in Kenya.

The new law requires all REITs to apply to the Kenya Revenue Authority for exemption from income taxes during the authorization of the REIT Scheme by the Capital Markets Authority (CMA) or during the process of acquiring a REIT.

“The Commissioner shall upon consideration of the application, communicate its decision in writing within thirty days of submission of the application, to the REIT or the REIT Controlled Entity,” it says.

According to the rules, REITs that fall short of the requirements by CMA and the Income Tax Act shall forfeit the exemption from tax payments. Previously, REITs only required authorization from the CMA in order to effect the income tax exemptions.

The move is also a step by KRA to close all possible gaps for loss of revenue.

At the same time, the Capital Markets Authority (CMA) has issued new guidance for Collective Investment Schemes (CIS) on valuation, investment performance measurement, reporting and other related matters.

The new standards require fund managers of special funds that invest predominantly in real estate to present the CIS fund and benchmark component returns for all periods presented.

“The fund manager shall disclose all significant events that would help a prospective investor interpret the CIS performance report. This disclosure shall be included for a minimum of one year and for as long as it is relevant to interpreting the track record,” it says.

In addition, the new regulations require portfolios to be valued daily and in accordance with the definition of fair value as set out in IFRS 13. External valuations for real estate investments shall be performed by an independent registered property valuer.

Read; <a style="color: #ff6600;" href="https://estatecloud.co.ke/why-zero-rating-low-value-property-transfers-coud-help-markets/">Why zero-rating low-value property transfers could help markets</a>

The total number of restructured real estate loans in Kenya reached 5,786 between Match and June 2020 according to the Central Bank of Kenya&rsquo;s Financial Stability <a href="https://www.centralbank.go.ke/reports/financial-sector-stability-reports/" rel="noopener noreferrer" style="color: #ff6600;" target="_blank">Report</a>.

The total value of restructured loans for the real estate sector during the period reached KSh. 123.8 billion. Outstanding loans for the sector stood at KSh. 429.6 billion.

Another 1,615 loans were restructured for the building and construction industry during the period with a total value of KSh. 35.9 billion.

CBK had instituted accommodative monetary policy and financial measures following the pandemic.

This included asking banks to renegotiate terms and restructure loans for borrowers, whose loans were performing as at March 2, 2020 but now faced difficulties in servicing their loans as a result of the pandemic.

SASRA also allowed SACCOs to restructure and renegotiate loans to ease pressure on their members facing difficulties in repaying loans due to the pandemic.

Saccos restructured loans totalling KSh 4.7 billion in 3 months to June 2020, reflecting the difficulties members were facing in loan repayment.

The report says the Covid-19 pandemic eroded the banks&rsquo; asset quality gains made in 2019 as shown by the increased Non-Performing Loans (NPLs).

Asset&nbsp;quality was affected by among other things, delayed government payments to suppliers, low real estate occupancy rates and prices, weak credit underwriting standards, and drought.&nbsp;

Restructured Real Estate Loans Hit KSh. 123.8 Billion in Four Months

Trends over the past two years show that wealthy individuals have been increasing their investments in property. This is the result of increased volatility in global markets stemming from greater uncertainties in financial markets and alternative investments.

“The footprint of the ultra-wealthy is growing larger when it comes to property investment. Go back 10 or 15 years, and UHNWI residential property investment would have been driven largely by the decision as to where children were to be educated,” said Andrew Hay, Global Head of Residential at Knight Frank in the recently released 2018 wealth report.

“Education is still a key consideration, but UHNWIs are also becoming increasingly strategic in response to global uncertainty and political upheavals. As a result they are investing in additional homes in cities and countries where they can see greater levels of stability,” he adds.

In the years to come, growing economic and geopolitical challenges such as rising interest rates, the withdrawal of fiscal stimulus, slowing economic growth and trade tensions, not to mention Brexit and the ongoing upheaval in the Middle East, are set to translate into moderate wealth creation, but also a search among the ultra-wealthy for stability, both personally and in terms of their assets.

According to the report, ‘growth in non-financial assets, that is real estate, is one of the leading factors driving the growth of Ultra-High Net-worth Individuals’. These are people with a net worth of more than $30 million.

The report also includes the Knight Frank City Wealth Index which ranks the cities with the highest potential for wealth creation globally. According to the index the top five ‘global urban powerhouses that matter most to the world’s movers and shakers’ include London, New York, Hong Kong, Singapore and Los Angeles.

Read; <a href="https://estatecloud.co.ke/global-investment-volumes-grew-in-2018/">Global real estate investment volumes grew in 2018</a>

Estate Cloud

Estate Cloud

National Construction Authority Moves To Boost Local Contractor Capacity

By Estate Cloud - over 2 years ago - Kenya

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