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Kenya | Real Estate and Housing Sector

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#1 · (Edited)
This thread is dedicated to the boom in property (Real Estate) construction and lease in Nairobi and Mombasa and the fears/promises that might arise in future.

Kenya’s new property kings
By DAVID OKWEMBAH Posted Saturday, March 14 2009 at 22:01
In Summary

Influx of questionable foreign cash distorts real estate market and threatens to push ordinary people out of the housing sector
Money from abroad and Somalia shakes real estate sector, especially in Nairobi
Money from Kenyans living abroad and war profiteering in the region has flooded into the Kenyan property market, leading to a doubling of prices for land and houses and steep increases in rents, real estate experts say.

They attribute this trend in part to demand by non-Kenyans, most of them from war-torn Somalia. The areas most affected are Nairobi, Mombasa and other major urban centres where the price of land has more than doubled as property is sold long before it is ready for occupation.

And the increase in prices has not only affected upmarket areas but low and middle-income residential neighbourhoods as well. Findings by the Sunday Nation follow investigations by international security agencies that have discovered that millions of dollars reaped from piracy along the Somali coast and drug trafficking are finding their way into Kenya and other parts of the world through an intricate money-laundering scheme masterminded by international criminal syndicates.

The money-laundering, which also involves proceeds from tax evasion, has focused the attention of international security agencies on Kenya, which is being seen as a regional hub for the illicit activities. Areas of Nairobi most affected by the rise in property prices include Karen where the cost of an acre of land has jumped from about Sh5 million three to five years ago to at least Sh15 million today.
At Kilimani, an acre of land now goes for a staggering Sh70 million, with property valuers and conveyancing lawyers warning that the situation could get out of hand unless checked.

At Parklands, an eighth of an acre sells for Sh50 million, while at nearby Eastleigh, a similar piece is going for between Sh20 million and Sh25 million. Rents have also skyrocketed. In congested Eastleigh a two-bedroom flat that went for Sh10,000 two years ago is renting for Sh25,000 a month today.

At Nairobi West, a three-bedroom house was renting for Sh25,000 two years ago; today the rent is between Sh30,000 and Sh38,000. Real estate experts and lawyers say that much of the money that has flooded into the market comes from Kenyans, including Kenyan Somalis, living outside the country.

And some comes from businesspeople who have fled conflict in Somalia, the Democratic Republic of Congo and Burundi. Many properties in upmarket Nairobi areas including Karen, Upper Hill, Kilimani, Lavington, Westlands and Parklands have changed hands at prices that in the recent past would have been considered outlandish.

Investigations by the Sunday Nation have established that the cost of 10 acres at Karen, which had been put on the market for at least Sh4.5 million an acre, was recently raised to Sh6.5 million when a Somali national made inquiries.

A Kenyan, who also asked not to be identified, was eyeing a property on Kirichwa Road in Kilimani, Nairobi. The bungalow on a quarter-acre of land had been advertised for Sh25 million. It was eventually sold for Sh35 million.


In Nairobi’s Upper Hill area, next to Hill Park Hotel, a prime property recently changed hands and has undergone thorough renovation. It was not possible to determine the cost; the building is now being leased as an office block. In the city centre, two prime plots, one on Loita Street and another next to the Uchumi supermarket near Koinange Street, are also said to have been bought by foreigners.

Timothy Njehia, managing director of Crystal Valuers, told the Sunday Nation that property in Nairobi has appreciated by more than 100 per cent in the past three years. “Remittances from the diaspora have spurred the market and pushed up prices of property by more than 100 per cent,” he said.

The skyline of Eastleigh, a former residential estate, has changed markedly in the past decade as multi-storeyed buildings replace single-level dwellings. “Somalis have pushed the prices of property to an all-time high in the past three years because price to them is not an issue,” James Katana of Green Leaves Properties, Mombasa, said.

He claimed that Somali nationals have taken control of major estates in Mombasa, like Nyali, Tudor, Old Town and Kizingo. “They are even demolishing most of the properties they are buying and building flats which they are converting into apartments and budget hotels.” He said most of the foreigners, mainly Somali nationals, buying properties in prime areas of Mombasa and Nairobi acquire them through proxies.

But a city lawyer involved in conveyancing, who spoke to the Sunday Nation on condition that he be not identified so as not to jeopardise some of his transactions, also attributed the rise in prices to remittances from Kenyans abroad and non-secured local bank loans. He said the increase in prices seen in areas like Eastleigh, Parklands, Kilimani, Nairobi West and Lang’ata was at least in part due to change of use determined by the city council from residential to commercial.

He said First and Second Avenues in Eastleigh have been converted from residential to commercial use, pushing up property prices on the two streets. He said the Somali and Asian communities in Kenya were well known for their entrepreneurship, especially in property conversion. But he did not say whether those buying were Kenyan nationals.

The lawyer said this was also true for Parklands, especially the road that runs from Forest Road cutting across to Highridge shopping centre. He said property prices along this road have more than doubled in the last five years as residential areas are converted to commercial use.

He said the same was true for properties on Ngong Road, Argwings Kodhek and Lenana Road, all in the Kilimani area. While the majority of properties in these areas were residential, they have now been converted into multi-family dwellings, and office and business premises.

Mr Njehia said that in areas like Kilimani, Kileleshwa and Lavington, the cost of building apartments has gone up. But he also suggested that the global credit crunch could soon hit the local property market. The valuer said the local market has started to experience stagnation since the beginning of the year when overseas Kenyans stopped remitting money.

“There is stagnation in the properties market, but the magnitude can’t be measured at the moment,” he said. A banker who cannot be named as he is not authorised to speak to the media, said banks had financed the cost of an estimated 500,000 houses since President Kibaki took over power in 2003.
But he cautioned that with rising inflation, many Kenyans who secured mortgages might start experiencing difficulties servicing their loans. He suggested that as many as half these houses might be repossessed because of inflation spurred by the global credit crisis.

International security agencies are also said to be concerned about the less-than-transparent acquisition of petrol stations and other businesses.
 
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#232 ·
Shitanda backs skyscrapers to tackle city housing crisis

Nairobi city residents may live in skyscrapers of up to 40 floors if plans by the Housing ministry are implemented.Housing Minister Soita Shitanda said the government is finalising plans to build multi-storied housing blocks to accommodate the city's growing population.
"We intend to start in Eastlands and the houses may go up to 35 or 40 floors each.This will utilise available space and accommodate more people,"he said is response to a question by Makadara MP Mr Gideon Mbuvi (alias Mike Sonko) in Parliament yesterday.
The MP said only about eight per cent of Kenya's urban population can afford a mortgage and asked what the Government has done in the last ten years over the situation.
The plans will improve access to housing ,said the minister.There are about 12 million urban dwellers in Kenya.

Daily Nation November 17 2011
 
#242 ·
With kenya outpacing the rest of the world in price increases this is bound to be unwelcome news to the marginalised.
I read that report and what it said about Kenya, and the increase in land prices can be attributed to:

“Safe haven” isn’t necessarily a phrase many people would use to describe the country in a global context, but compared with many of its neighbours it is just that, according to Ben Woodhams, Managing Director of Knight Frank Kenya. He says that Kenya’s rapid economic development is attracting domestic and international private equity, with particular growth in remittances flowing from Kenya’s increasingly affluent diaspora.
 
#244 ·
We have to be careful we don't lead our economy into a financial bubble because housing prices increasing is usually the cause of it. But in turn it will make mombasa and other areas of kenyan into rich people extravaganza.
 
#247 · (Edited)
èđđeůx;90433965 said:
25% increase?:uh: At that rate say goodbye to owning a home on the coast. But hey you can always rent an apartment or buy a condo.:lol:
Both apartments or Condos are still way out of reach of ordinary kenyans and getting even further away with these type of rises.
In comparison,though, kenyan prices are very affordable in comparison to other locations.

PIRI

Average Price Per SQ M
Rank
Location
$ per sq m Q4 2011
1 Monaco

8,300
2
Cap Ferrat
51,800
3
London
48,900
4
Hong Kong*
47,500
5
Courchevel 1850
44,000
6
St Moritz
42,600
7
Gstaad
39,900
8
St Tropez
38,800
9
Geneva
31,900
10
Hong Kong**
28,300
11
Paris
27,200
12
Cannes
25,900
13
Singapore
25,600
14
Moscow
24,000
15
Sardinia
24,000
16
zurich
23,900
17
New York (Manhattan)
23,300
18
Sydney
22,400
19
Val d’Isere
22,000
20
Meribel
21,400
21
st Petersburg
20,200
22
Shanghai
19,600
23
Mustique
19,400
24
Verbier
18,700
25
Rome
18,100
26
Beijing
39
Aspen
10,500
40
Chamonix
Provence
7,800
50
Revelstoke, Calgary
7,400
51
Bangkok
6,500
52
Western Algarve
6,500
53
Miami
6,300
54
Cape Town
6,000
55
Brussels
5,800
56
Barcelona
5,300
57
Kuala Lumpur
5,000
58
Umbria
4,400
59
Christchurch
3,400
60
Jakarta
2,900
61
Bali
2,600
62
Kenyan Coast
2,100
63
Nairobi
1,700
 
#248 ·
Real Estate Investment Trusts (REITs)

What Are Reits

Broadly speaking, REITS are regulated investment vehicles that enable collective investment in real estate. Investors, both retail and corporate, are allowed to pool their funds under the umbrella of the REIT and then engage in real estate projects.

Based on recent public participation in initial public offers and bonds (including Government bonds) at the Nairobi Securities Exchange, we would expect the introduction of REITS to attract significant public participation, thereby providing large sums of capital for real estate projects.

Proposed Reit Regulatory Framework

In the last quarter of 2011, the CMA engaged various stakeholders in consultations on the REIT framework, culminating in the preparation of a discussion paper setting out key elements of the proposed framework. These key elements will still undergo further consultation before an agreement is reached and draft REIT regulations are published.

Stakeholders have proposed the establishment of two types of REITS, namely, the Income REITS and the Development REITS. The key distinction between these two REITS is as follows:
Income REITS would generally be permitted to invest in income generating real estate products, in the form of rent receivables and similar income.
Development REITS would generally be permitted to invest in property development and construction projects.

There have been proposals to have Development REITS converted into Income REITS once the development has been completed.

Stakeholders also noted that there has been increased consumer demand for Islamic investment products. In line with this, stakeholders proposed for a framework that establishes REITS that are compliant with Sharia law.
 
#249 ·
We expect the draft REIT regulations to be released in the first half of 2012. It will be interesting to see whether the proposals made by stakeholders will be taken on board in the final regulations to be published. If properly drafted, REIT regulations are expected to revolutionise the financing of real estate projects in Kenya and spur further growth in the real estate sector
 
#259 ·
An example of a REIT in Kenya. kipande.net is an example of a REIT. kipande.net is the ultimate platform to buy property. Kipande.net enables you to buy a share of otherwise unaffordable property.Check out this new and amazing platform.

Is this not how they did to the "investors" on some property in Machakos and they up'ed the asking amount to 50K in 72hrs and called for a memership meeting. Those who did not honor the 50K were disenrolled from said property and lost their initial payments??? Wenye wako Kenya twambieni...about such deals...I did not say this was one...Just asking and being courtious.
 
#251 ·
Need for a regulatory framework for REITs in Kenya

In the last decade or so, the Kenyan economy has experienced significant growth in most key sectors. This growth has been attributed to a vibrant private sector and the ever increasing appetite for foreign investments in Africa. Kenya has been regarded as the preferred hub for multinationals and other international organisations with operations in East and Central Africa.

The Kenyan Government, in response to this, has invested heavily in infrastructure development. In addition, the Government has taken steps to improve the legal and regulatory framework in key sectors of the economy.

Presently, Kenya does not have a formal framework that allows for efficient financing of large real estate developments, other than the usual mortgage financing. Real estate developers have resulted to entering into joint ventures of various forms, in order to efficiently finance their development projects.

However, as these joint ventures are not specifically designed for real estate projects, they create significant limitations for developers and potential investors. These limitations include tax inefficiencies and increased development costs. In addition, it is not uncommon to have disputes between the joint venture partners. The disputes lead to delays in delivery of the real estate products and also negative publicity of the real estate project.

In recognition of the significant growth in real estate sector of the economy and the need to provide a framework for financing real estate investment projects in Kenya, the Kenyan Government proposes to introduce a framework for real estate investment trusts (“REITS”) in Kenya. In line with this, the Capital Markets Authority (“CMA”) has been mandated to develop REIT regulations. In addition, the Finance Bill 2011 proposed various amendments to the Income Tax Act that are meant to lay a suitable tax regime for REITS in Kenya.
 
#252 ·
Proposed Tax Treatment of Reits

The Finance Bill 2011 proposed various amendments to the Income Tax Act. These amendments seek to have income generated by REITS exempt from income tax (presently 30%). It’s important to note that the proposals to amend the Income Tax Act have been made prior to the creation of the REIT regulations.

It has been suggested that ideally, the exemption from payment of income tax should only apply to income that has been distributed to unit holders and not all the income generated by the REIT. This proposal is meant to incentivise REITS to distribute as much income as possible to the unit holders.

However, it would appear that the income tax exemption for REITS will not be automatic and each REIT would have to apply to the Commissioner of Income Tax for exemption from income tax. Proposals have been put forth to have the income tax exemptions as automatic provided the REIT has been registered by the Capital Markets Authority.
 
#253 ·
Property Syndication

Property Syndication (otherwise known as proportionate ownership) means individual investors combine funds to purchase a commercial property. Commercial property includes office buildings, retail stores, shopping centres, malls, medical centres, hotels, golf courses, motels and residential buildings. By forming a syndicate, investors can participate in ownership of properties that would otherwise be unavailable to them.
 
#254 ·
Many people would not consider purchasing a shopping mall or an office block because that would require a lot more capital up front, bigger risks and specialist knowledge. Commercial properties are normally too expensive for the normal man on street to purchase on his own. By investing in a property syndication he can have his own slice of a commercial building. One avenue to create and sustain lasting value particularly in uncertain economic times is through acquisition of property. Unfortunately, most people consider this to be way out of their league. These property syndicates can also be used to raise funds for development, for instance, a group of Kenyan investors can form a syndicate to raise funds to construct a shopping mall in Johannesburg. In this article, I will concentrate on property syndication as an investment vehicle for building some kind of passive income.
 
#255 ·
Property Syndication is yet another way to create an ongoing passive income. You will not become wealthy by working for a boss. It is vitally important that each person start building some kind of passive income, no matter your age or circumstances. Did you know that only 1% of all people will be able to retire wealthy and only 3% will be able to retire financially secure. The rest will have to either work till they die or depend on their families to feed them. Wealth is measured in the amount of time you can maintain your current lifestyle without working. That is what you need a passive income for and that is where property syndication can be one of the passive income generating vehicles you can use.
 
#256 ·
A More Affordable Way to Invest in Real Estate
In property syndication, one can easily buy and sell their share, often at a profit. "Some people shy away from investing in property because it is a long term investment, but this gives them an easy way of investing and enjoying the returns.
 
#257 ·
Major Benefits of Property Syndication

Syndication offers a tax effective investment as investors are able to take advantage of negative gearing and taxation allowances thereby paying minimal tax in the initial years. In Kenya, for instance, Finance Bill 2011 proposes tax exemptions on 90% of the revenues that REITs passes on to their shareholders.
Syndication provides the ability to invest in quality properties not normally affordable to an individual which will produce strong income return and sound long term capital growth. One can expand his/her investment portfolio by investing in quality properties not normally affordable to an individual.
Regular income stream to investors.
Minimal risk - syndication finance is obtained on a non-recourse basis meaning the lenders have security over property - investors are not personally liable for the debt.
The property is professionally managed (usually an Holding company) - investors need no knowledge of commercial property administration.
Usually the commercial property is carefully selected by a professional team to maximise investor returns.
 
#258 ·
Is this not how they did to the "investors" on some property in Machakos and they up'ed the asking amount to 50K in 72hrs and called for a memership meeting. Those who did not honor the 50K were disenrolled from said property and lost their initial payments??? Wenye wako Kenya twambieni...about such deals...I did not say this was one...Just asking and being courtious.
 
#261 ·
Why invest at kipande.net:
1. At kipande.net we have also created unique offerings, which we call “Vipande”, which along with our financial and legal partners, offer a richer, more exciting experience than simple mortgage or outright purchases.

2. We have gone beyond ordinary property syndication, to create an ecosystem of concepts and lifestyles, county level participation, and tools that, while completely compatible with the recent developments in the housing and investment industry standards in Africa, offer a more complete, coherent, colorful and fun experience.

3.kipande.net is the only place you can obtain small chunks of ordinary level property across the 47 counties of Kenya.
 
#262 · (Edited)
Kenya is set to become one the most expensive countries to live in. Don't get me wrong we all should chip in n pay taxes n all but a whooping 30% from your own hard earned cash to the govt????Hah I really fear for all tenants across kenya coz they'll definately bear the whole 30% increment of rent burden(FACT).
This is a new way of the govt plan to squeeze off more money from the common mwananchi indirectly without being noticed n nt get blamed for it coz b4 deciding this, they all new rents will go up.For all i know...they're all landlords of some sort.So somehow govt is sending landlords to do their dirty work. Landlords will be hated more as usual bt at the end of the day,money will b streamed to KRA.When Mr Githae said we should “think smarter"this is it!!. Bravo bwana waziri!!!!!
http://www.the- star.co.ke/national/national/80450-kra-to-hunt-down-landlords-
 
#265 ·
tallglassy said:
Taxes must be paid! We can not DEMAND services yet dont want to pay taxes!
Taxes must be paid thats true,but 30% is too high. If we are talking about 8-10% makes more sense. Investors will be scared away. This is not transport sector that govt can privatise through metros n stuff. Govt can never afford to house even 5% of its public. They need private investors.Either govt re-negotiates with private investors or the real estate sector dies and instead, slums start coming up along super highways that's a guarantee coz of high rents and we can all kiss vision 2030 goodbye.
 
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