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Focus of the Week: Nairobi Metropolitan Area Land Report 2017
Jun 11, 2017
Over the course of last year, we covered real estate performance across the various themes, including commercial office, residential, retail and hospitality. We saw that these sectors have over the last 5-years delivered high returns of over 25.0% p.a, driven by continued improvement of the Kenyan economic climate, improved infrastructure and the growth of the middle-class, leading to increased disposable income. This week we turn our focus to land, the capital asset on which real estate is developed.We carried out research on the land sector performance in Nairobi Metropolitan Area over the last 5-years, between 2011 and 2016. The research was carried out in 18 suburbs and 11 satellite towns in the Nairobi Metropolitan Area as classified below. The findings and analysis are presented in the analysis below. We start by an introduction to the sector, the factors driving the performance, the performance of the sector according to zones and locations, and concluding by ide...Focus of the Week: Joint Ventures in Real Estate
May 28, 2017
In the last 5-years, the Kenyan real estate sector has performed well realizing returns of above 20.0% p.a for investment grade real estate and thus attracting the interest from landowners and investors. The main ways to invest in real estate include (i) development and exit through selling or renting out, (ii) buying real estate products to realise capital gains and rental yields, and (iii) buying real estate-backed structured products such as project notes and Real Estate Investment Trusts (REITS). Land owners in particular are increasingly interested in real estate development but are constrained by (i) financial capability, (ii) development expertise, and (iii) time to do the development themselves. Unknown to many, joint venture arrangements with reputable developers is the most prudent way to tap into the real-estate-benefits. This week, we demystify real estate joint ventures and highlight their benefits.What is a Joint Venture?A joint venture (...Focus of the Week: Cost of Living
May 21, 2017
The Economic Survey 2017, published annually by the Kenya National Bureau of Statistics, revealed that GDP is estimated to have grown by 5.8% in 2016 from 5.7% in 2015; this was in line with our expectation of a band of 5.7% - 6.0%. In order to assess the cost of living, we have picked two components of GDP, agriculture and financial intermediation, because (i) food is a big component of the Consumer Price Index (CPI) and a necessity that is produced through agricultural activities, hence knowing how the agriculture sector performed will give us insight on food supply and prices, and (ii) knowing about the growth of money supply in the economy and credit accessibility to households will give us an indication of household income and whether they can easily subsidize this with credit when the need arises. Agricultures contribution to GDP declined by 0.4% to 21.8% and its weighted y/y growth rate slowed down to 4.0% from 5.5% in 2015. This was attributed t...May 14, 2017
The Banking (Amendment) Act 2015 has drawn both plaudits and critics since its introduction in Q32016. The amendment stipulates a deposit and loan pricing framework, with (i) a cap on lending rates at 4.0% above the Central Bank Rate (CBR), and (ii) a floor on the deposit rates at 70% of the CBR. There was a mixed view on the impact of capping interest rates, with some looking at it as being able to make loans accessible to most Kenyans, while others viewed the introduction of the rate cap as being detrimental to the economy. We wrote severally on the matter, and also an article summarizing our view at the time: Interest Rates Cap is the Kenyas Brexit Popular but Unwise. Now that it is months after the law came into effect, we have seen some activity aimed at looking at the impact that the capping of interest rates has had so far on the economy. In January 20...Focus of the Week: Off Plan Investment in Real Estate - What a Buyer Needs to Know
Apr 16, 2017
Over the last couple of weeks, we have witnessed a number of property buyers coming to the fore claiming to have been swindled by developers over off plan real estate purchases. This week we thus seek to demystify off plan investment in real estate. We start by introducing off plan investments in real estate, the processes involved, the potential gains and risks. We then cover briefly the two most recent cases in the dailies of Simple Homes and Gakuyo, and conclude by advising buyers on what they should look out for when purchasing property off plan. Introduction Off plan investment refers to the purchase of property before completion, generally driven by the high price of real estate and the long time taken to deliver units, given low supply of real estate units despite the increasing prices. The buyer hence buys the property off the plan or design stage of the development. It has become increasingly popular as the prices of the prope...- Talk to us
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