This week, we focus on:
- A report that discusses the role and performance of transparency in real estate in global markets.
- A global real estate services company, Cushman & Wakefield, that is entering the Kenyan market through an affiliate program
- The announcement by Stanlib on the performance of the Fahari I-REIT
- The implications of the proposed revisions on NEMA fees
- The dispute that has plagued the Fourways Junction mixed-use development
- Features on low-cost housing in Mombasa and the log houses of Lower Kabete and Limuru
- An upcoming event: Totally Construction East Africa 2016
- A Photo Exhibition: Save The Railway – A Photography Exhibition on Kenya’s Antique Railway Stations (19 August 2016 – 2 September 2016)
- Training opportunities in Facilities Management and Construction Finance Planning
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A report by Jones Lang LaSalle (JLL) has shown that Kenya has improved in terms of transparency in the real estate sector.
Transparency in real estate activities fosters new investment, business activity and the well-being and inclusiveness of the communities. These activities include the investment, development, and occupation related to real estate.
In real estate, transparency is enhanced through the availability, quality and accessibility of reliable market data, the observance of utmost ethical standards and ensuring that real estate transactions in the marketplace are fair and transparent.
In this year’s report, Kenya has been grouped with 36 other real estate markets in the “Semi-Transparent” group. Like these other markets, Kenya’s real estate has seen rapid progress in terms of real estate transparency. The GRETI 2016 report, however, notes that in this category, “there is a notable disconnect between the existence of regulations and actual enforcement – particularly in land use planning, contracts, and building codes.”
In Kenya, some of the significant steps made towards ensuring transparency include the operationalization of the National Construction Authority (NCA), the digitization of the land registry and the launch listing of Fahari I-REIT. The digitization of the land registry has made the land registry functional, clear and accessible, and consequently ensuring the security of property. The operationalization of the NCA has also made it easy to ensure that housing and workplaces are safe through the existing and enforcement of legislation.
Professional bodies have also had to step up to ensure that their members adhere to the professional codes of conduct, acting “honestly and professionally”. However, the report notes, instances of building collapses are a result of inadequate oversight and enforcement of regulations.
In summary, real estate transparency is driven by a growing focus and spotlight on corrupt practices, the rising expectations of citizens, the increasing capital allocation of funds to real estate. Transparency is also driven by technological advancements and the demand for sustainable buildings.
What do you think Kenya can do to make its real estate market more transparent?
Cushman & Wakefield is a global property Services Company is planning to expand its services in the Sub-Saharan Africa region, including Kenya. This is going to be executed through an affiliate program with South Africa’s Excellerate Property Services. The new venture, Cushman & Wakefield Excellerate
In Kenya, Excellerate is the holding company of JHI Properties Kenya Limited. JHI Properties Kenya Ltd is a joint venture between Excellerate Property Services Kenya Ltd – a subsidiary of South Africa’s Excellerate Property Services – and Kenya’s Grenadier Group Limited, which controls 30% of the joint venture. It is important to note that JHI Properties Kenya Ltd are the property managers of StanLib’s Fahari I-REIT.
The affiliate program will see Cushman & Wakefield Excellerate provide integrated services to its clients that mainly consists of multi-national corporations, public sector organizations, developers, property funds and private investors.
The STANLIB Fahari I-REIT filed first half year (H1) returns that shows a 6.5% return. This was attributed to growth in capital and rental income in the period.
Listed in November 2015, Fahari I-REIT managed to raise Kshs 3.6 billion from the sale of units against a target of Kshs 2.6 billion. So far, the units have registered a headline earning of Kshs 23.19 per unit. Over the period, the I-REIT has managed to generate Kshs 117.9 million in revenues and a profit of Kshs 53 million. It has also invested 69% of its assets in properties.
One of the properties is the Greenspan Shopping Mall situated in Nairobi’s Donholm area. The 173,353 square foot commercial facility enjoys a 95% occupancy rate. Due to the uniqueness and location of the retail mall, tenant retention capacity is high and it provides a high scope for regular rental income to investors.
Fahari I-REIT has also invested in Bay Holdings in Nairobi’s Industrial Area. The 27,329 square foot commercial office block is 100% occupied.
Additionally, there is the Signature International or Highway House – 8,389 square foot commercial property also situated in Industrial Area. The 3-storey, warehouse is also 100% let to “a leading cooling equipment manufacturing and re-seller in the region.”
On Monday 15 August, Kenya’s National Environment Management Authority (NEMA) published its new risk-based approach towards charging the environmental audit fees on construction projects.
The Environmental Impact Assessment (EIA) Licence for Medium Risk Projects such will cost 0.1% of the total cost of the project. The minimum fee will be Kshs 20,000 and the maximum fee will be Kshs 10 million. Such projects include multi-dwelling housing units (less than 100 units), hotels with not more than 150 beds and, commercial offices, shopping complexes not bigger than 10,000 square metres in size.
The EIA Licence for High-Risk Projects will cost 0.1% of the total project cost, with a minimum fee of Kshs 50,000 and a maximum of Kshs 40 million. Such projects include the establishments or expansion of industrial estates and recreation areas. Also, housing estate developments which have more than 100 units.
Additionally, NEMA proposes to reduce the period of issuing the license from the current 45 days to 30 days.
The NEMA EIA Licence was first effected in September 2013, where a flat rate of 0.1% of a project’s cost was slapped on property developers. However, in October 2014, President Uhuru directed that this method be reviewed and caps introduced. This was reiterated by the National Treasury CS Henry Rotich during the reading of the 2016/2017 national budget. This was a directive in a bid to make it easier to conduct business in Kenya. This generated a number of reactions and feedback from the stakeholders.
A dispute between the investors in the expansive Fourways Junction mixed-use development has led to the High Court stopping its construction, planned sale and advertisement of the development’s third and last phase. The joint venture, formed between 2007 and 2009, is a result of the partnership between Muga Developers and Suraya Properties Group. This week, it was reported that the dispute arose from a breach of an agreement made 20 years ago. This is despite the fact that the matter is already being handled through arbitration. The Fourways Junction project covers 200 acres is valued at approximately Kshs 30 billion.
Is it possible to construct and sell a two-bedroomed house at Kshs 2.5 million in a location where an acre of land goes for at least Kshs 40 million? The Daily Nation highlighted such a project situated in Mombasa’s upmarket Nyali Estate.
The Othaya Group is a property development firm that has specialized in the construction of luxury, upmarket housing. One of their signature developments in Kenya are the log houses in Nairobi’s Lower Kabete area and the Limuru-based Limuru Hills Health Resort, Spa and Residences. The Business Daily Online featured this unique project.
Essentially, these are four events under one roof. In this year’s event, you will be provided with methods to increase sustainability in construction projects within the East African region. You will access innovative building systems, quality control enforcement and techniques and alternative technologies that can significantly reduce the cost of construction.
The four events in this year’s Totally Construction East Africa are: The African Cement and Concrete Summit, The Housing for East Africa Forum, Commercial Property Developers East Africa Briefing and Digital Construction East Africa.
By attending Totally Concrete East Africa 2016, you are guaranteed of front row access to construction business opportunities of all sizes across markets in East Africa.
Between 19 August 2016 and 2 September 2016, a photo exhibition dubbed “Save the Railway – A Photography Exhibition on Kenya’s Antique Railway Stations” will be held at the Shifteye Gallery at the Priory Place along Argwings Kodhek Road.
This has been organized by Tayiana Chao through Thee Agora who were resourceful in our research on the historical significance of the Kenya Uganda Railway on construction in Kenya.
Quantum Limited is a Kenyan consulting and training firm that has developed and delivers international Facilities Management (FM) training program in Kenya. The course targets individuals at management and technical levels in organizations who are involved in planning, management, design and operation of properties, buildings, equipment, and machinery – among other things.
Quantum will hold a four-day course on Facilities Management Principles & Practice to be held between 23rd and 26th August 2016. The course will cost Kshs 79,600 plus 16% VAT per participant.
For more information, contact Elsa Ochola through email on: email@example.com.
The Board of Registration of Architects and Quantity Surveyors (BORAQS) will hold a two-day CPD seminar on 1st and 2nd September 2016. The training is themed “Project Financing and Investment Planning” and it will be held at Safari Park Hotel. The event targets architects quantity surveyors as well as property developers, contractors and anyone interested in attending the event.
Participants will learn more about – among other things – project financing in construction, project financing models and management of project financing agreements. More details about the CPD seminar are available here.
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Feature Image: Jerry Riley [Check out his interview]