HOW TO GET 100% FINANCING FOR YOUR HOUSING CONSTRUCTION PROJECT IN KENYA.JOINT VENTURE METHOD.
Construction financing is a challenge to many land owners in Kenya.
Many land owners and developers would like to construct houses for sale but the limitation usually comes due to lack of finances.
Kenyan banks require that the land owner finances the consultancy fees, marketing and sales fees and bank interest.
All the above usually form an approximate of 15% of the total construction cost but varies from project to project depending on the scope.
HALF ACRE PLOT EXAMPLE
A half acre plot in a middle income area such as Ongata Rongai to be constructed with maisonette type units will cost approximately KES 80 million in total including cost of land purchase. Therefore, 15% of such a project is around KES 12.5 million.
After raising this amount, the banks require that the land owner or developer now raises a further 15% in terms of hard cash into the actual brick and mortar construction project.
This requirement has locked out many potential developers due to the high amount.
SOLUTION.
a4architect has worked out a solution to this.
a4architect offers equity contribution in terms of professional services namely Architecture, Quantity Surveying, Structural Engineering, Electrical engineering, Civil Engineering, Mechanical Engineering, Legal services and Sales and Marketing.
a4architect works out a Joint Venture/agreement with the land owner to offer part of these professional services as a contribution so that the land owner can reach the 15% project value contribution.
JOINT VENTURE WITH FINANCIERS
Once the land owner/developer’s equity reaches 15%, a4architect then organizes for a Joint Venture with financiers.
Financiers offers a further contribution of 15% of the total project value as contribution.
Once the land owner/developer’s contribution now reaches 30% [15% from land value+a4architect consultancy contribution AND 15% from financiers, local banks can now be approached to finance the balance of the construction project.
This way, the land owner can now get funding for their project with their only contribution being the value of their land. Consultancy fees are offered by a4architect at no initial cost to the land owner/developer.
SPECIAL PURPOSE VEHICLE
Once the land owner/developer contributes their 15% of the project value with the assistance of a4architect, financier forms a SPV which is a company owned jointly by financier and the Land Owner. The land ownership is now transferred to the SPV.
The SPV develops the project and at the end of the project, the profits realized are shared between financier and the land owner/Developer.
At this stage, a4architect receives monies that it had contributed to the land owner/developer initially.
CONCLUSION
The land owner/developer will now have realized profits from the sale of units with their only contribution of land.
For more information, contact www.a4architect.com.
Francis Gichuhi Kamau.
Architect.
PRISM DESIGNS AFRICA.
www.a4architect.com
+254721410684
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