Though the economy has slowed down, Kenyans still have an appetite for investments.
For the last 11 years, Mwenda Thuranira has been running Myspace Properties, a real estate development and property management firm with a focus on the Coastal region and Nairobi. Since 2017, the business has had to deal with a dip in Kenya’s property market which market analysts attributed to the global economic crunch. Covid-19 has only worsened the situation. “Come the global pandemic, and the situation that we expected did not normalise as there has been low circulation of currency since majority of Kenyans are only spending on basic necessities,” explains Thuranira. To stay afloat, the business and reinvent to suit the new wave of change. For instance, in Bamburi, Mombasa, where they manage rental houses, some tenants could no longer afford to pay the Sh20,000 rent for the two-bedroom houses. “Rather than move out, our tenants expressed the willingness to move in together, therefore we had two families living together, splitting the rent,” says Thuranira. Also, real estate residential development investors were cautious about investing, adopting a wait-and-see attitude that is still prevailing. For Kenya’s property market to get back on track, Thuranira says, there is need to inject more foreign direct investments as the shilling has weakened. This, he adds, will deliver more jobs and fast track socio-economic development. To weather the prevailing hard economic times, Myspace Properties has chosen to listen to what investors want. For instance, in mid-2020 Kenyan investors were enquiring more about studio apartments within well-secured areas in Nairobi.
“We went ahead and developed the Mina Heights studio apartments within Westlands and our first 20 units, going for Sh4.5 million, were all sold out during the open day.” Though the economy has slowed down, there is a market and an appetite for investments among young Kenyans. “This group is aged between 25 and 45 years and they do not want to try, they want to make it. They want to put their money in the right places to attract clientele,” he adds. This year, the company plans to go big within Nairobi by being more creative and more price-sensitive as cash has been hard to come by. “The appetite for more affordable studio apartments is high. With Covid-19, Kenyans have learnt that jobs and businesses are not sustainable sources of income, that investment in property is the way to go,” says Thuranira.
They are also betting on commercial developments such as petrol stations and supermarkets in strategic locations within the 47 counties. Fanaka Real Estate CEO, Moses Muriithi, says that when Covid-19 struck, the company was in the process of introducing their new strategy, which involved increasing their project launching to two per month due to increasing demand for housing. Thanks to the uncertainty brought about by the virus, they had to shelve the plan. “We were hit hard, and had to be innovative on how we ran our operations since chance of default from existing clients was high, besides, we had to be careful not to inhibit new business from potential clients,” says Muriithi. With this in mind, Fanaka had to review payment plans for cash, installment clients. “When push came to shove, we introduced a zero-deposit payment plan, extended some of our existing clients’ payment periods, reducing installment amounts,” he adds. There was also renewed focus on digital marketing, which meant allocating more resources towards the company’s online presence. The firm also upgraded its management and financial systems to allow clients to make payment and receive receipts anywhere at their convenience.
Around mid-2020, Kenyan investors were enquiring more about studio apartments.
The strategies have been paying off, for instance, thanks to the zero-deposit payment plan, discounted prices of up to 10 percent for cash buyers and extended instalment periods of up to 15 months, there have been more business opportunities for Fanaka within the pandemic period.
Real estate is among the highest return on investment earners, if not the highest in Kenya despite being illiquid. Land along Kangundo Road in the satellite towns of Kamulu, Joska and Malaa, for instance, has been appreciating in value at a rate of between 18 per cent and 22 per cent, depending on the location. “We are foreseeing an increase in the appreciation rate due to the ever-increasing demand from Nairobi dwellers to acquire parcels of land and set up homes in these satellite towns within Nairobi metropolitan areas of Ruiru and Kangundo Road,” Muriithi says. He advises investors to explore plots in the satellite towns along Kangundo Road due to their affordability and high appreciation rates and also in Ruiru due to the growing demand in the area fueled by the increasing middle-income earning population that wants to build homes around these areas.
As for Optiven Real Estate, the year 2020 started with vigor, energy and great focus. Come March 2020 however, Covid-19 happened, putting a damper on the big plans they had. It was so bad, the company’s CEO, George Wachiuri, had to send all his staff home. “As a business owner and an entrepreneur, it was a period of thinking differently as salaries, rent, loans and other overheads were accruing,” he says. He had to make some drastic changes to accommodate the liquidity issues brought about by the virus. The first step he took was to negotiate loans advanced to Optiven with its financiers. Fortunately, Optiven managed to get a two years’ relief, meaning that the interest accruing on those loans will be re-introduced after the two-year period. He then went ahead and negotiated office rent, and was able to secure 20 percent relief for six months. The real estate firm also slashed down on its spending, while investing more on aggressive marketing on various social media platforms. With all the goodwill coming their way, Optiven had no choice but to extend the same to their customers, waiving six months’ instalments interest. With all staff working from home, the company trained them on how to use recent technologies to enable them do business virtually, hold staff meetings, do appraisals and even make plot bookings. “In the course of 2020, in spite of the gloomy outlook, our teams were highly motivated, we also got into more business partnerships with the media, more than we have ever had before,” Wachiuri says. The real estate company also used this period to launch a campaign called #GoingGreenNaOptiven that supports green and renewable energy.
“All our projects use solar street lighting, last year, we installed 700 street lights in our projects and have, so far, planted over 5, 000 trees besides digging several boreholes in our projects in different counties,” Wachiuri says. Despite the Covid-19 challenges, the business has remained strong enough to attain 70 percent of its 2020 targets. In 2021, Wachiuri plans to expand Optiven’s operations through the provision of affordable homes within Nairobi. “We still have 80 percent of those that live in Nairobi renting, we also want to push the go-green agenda to ensure that we provide green buildings that recycle water and waste.” The other investment plans they have is to develop affordable homes in line with the government housing agenda. The third one is investing in gated communities. As 2021 takes shape, Wachiuri advises aspiring investors to put their money in land within the Nairobi metropolis, and a 10km radius around all the 47 county headquarters. To ensure efficiency in the real estate sector, he calls on counties and the national government to automate the lands registry. “Kajiado County is in the forefront in supporting developers and the going green agenda, for instance, it is now possible in Kajiado to do all approvals online, be it for individuals and developer’s,” he says. There are various lessons that the business will carry along from 2020. “We learnt that investing in, and adoption of technology earlier on was the right thing to do and that we need to keep improving on technology adoption into our systems, we also learnt that there is a bigger need for Kenyans to own homes, and even better, affordable one. – nation.co.ke