PROPERTY & INVESTMENTS

CONTENTS South African developer bets big on low-cost housing 42 House developer opens doors to diaspora 44 Q&A: Housing demand still outstrips supply 45

20,000
Number of homes under mortgage in Kenya currently Innovation burning blue to go green Page 46

Housing demand still outstrips supply Page 45

WHEREs the BUBBLE?

Kenyas property boom lures S. African developer

Pam Golding Properties signs joint venture with Kenya real estate rm

am Golding Properties, a real estate development company with South African origins, has entered the Kenyan market. The company will partner with banks and law rms to run regular seminars, targeted initially at first-time homebuyers, to educate them on investing in property. Pam Golding has signed a joint venture with Property Link Africa for their Karen/Langata and North and South Coast oces, reinforcing the merger or acquisition approach that South African companies, such as MTN Business, have adopted in East Africa after the failed strategies of others like SABMiller and Nandos. Property is the cornerstone of wealth and certainly in South Africa that has been the case over the years, said Andy Collett, CEO of Pam Golding Properties Kenya. At the end of Apartheid in South Africa, there was a huge untapped market and now the black middle-class are moving the real estate market. Its the same here in Kenya. Kenyans love buying property. They have a desire for bricks and mortar. | Nairobi Business Monthly MAY

Groundbreaking: A Pam Golding property at Windsor Close next to the golf course.

Despite the hike in interest rates, which has slowed down mortgage uptake and tripled house prices, an increasing number of new properties are now within the reach of the average mortgage buyer. The Kenyan mortgage market has nearly doubled in the last ve years from 7,600 homes in 2006 to 20,000 homes in 2012, according to the Hass Property Index for the rst quarter of 2012. With now 38% of the new housing coming to market reachable for mortgage buyers, and mortgage oerings having ballooned in recent years, the mortgage market oers the chance of home ownership to tens of thousands of Kenyans, said Ms Carole Kariuki, Managing Director of The Mortgage Company. While I&M Bank tops the Hass Index list with

IN KENYA, THERE IS A SHORTAGE OF PROPERTIES WITH REAL DEMAND AND SO A CYCLE DEVELOPS. NOT A BUBBLE. Andy Collett

BUYERS CHECKLIST
PROPERTUNITIES 1. Location is very important. Be careful where you buy property. 2. Have a budget and stick to it. The bigger the down payment, the better, and closely look at whether you can aord the interest rate. 3. Are you buying for personal or for investment reasons? If it is for personal reasons and you are a young person, dont buy a one bedroom because you will outgrow it. 4. Understand the market. Be educated about whether it is a buyers or a sellers market. The seller sells but the market determines the value. 5. Look at the history of the developer and the other projects they have worked on. Did they nish in time, or are they y by night? BEWARE 1. Dont be driven by emotion. Make sure an advocate has vetted the documents before you sign. 2. Dont buy where there is open ground next door. The area could be rezoned or squatters may move in. Either way your property value will drop. 3. Dont buy a property that has any faults, whether they are latent or patent like cracks in the walls. 4. Houses date, and the two rooms that show it the most are the kitchen and the bathroom. If these rooms have been well maintained and are updated, then it is a good indication. 5. Dont sign until you have carried out a due diligence on the integrity of the company.

the lowest interest rate oering of 19%, Mr Collett says the more exciting oerings are from reinsurance companies through their mortgage investment arms. That is always a good sign both for prospective home owners and for real estate agents who play a middleman role in the process, said Mr Collett. The Pam Golding brand has developed a reputation globally for targeting the upper market, but Mr Collett says Pam Golding is excited about the opportunity that lies at the lower end and middle segment of the market in Kenya. Their showing at the recently concluded Kenya Homes Expo spanned properties for the lower income groups of Sh3.6 million in areas like Lower Kabete and Ring Road and homes for over Sh20 million in prime locations like Lavington. For many first time buyers, buying a house spells their nancial future. If it is a bad deal, they lose their life savings but if it is a good investment, then 5 to 7 years down the line they will sell and upgrade

to a bigger property or get a second investment property, Mr Collett said. The Hass Property Index shows that over the last decade, mortgaged buyers across all properties consistently made positive returns until the interest rate rises of 2011. The market is very healthy and there is a lot of genuine demand. Kenyans are saying I dont want to rent; I want to buy, Mr Collett says. He questioned the perception that Kenya was experiencing a property bubble. Kenya is not going through a bubble, he said. A bubble is created by unrealistic expectations and not real demand. You think bubble, you think Dubai. In Kenya, there is a shortage of properties with real demand and so a cycle develops. Not a bubble. He explained that as supply factors change, so will prices and this will adjust the housing market. Pam Golding plans to open oces in Nanyuki and Laikipia to tap British and expatriate community, and expand into Uganda, Tanzania and Burundi in the next three years. MAY Nairobi Business Monthly |