1. A starter’s description of what crowd funding is and what it entails.
Crowd funding is a method of investing in real estate where many people pool finances together to be able to afford a piece of real estate eg prime land then build and share the profit.
2. Is this a concept that is widespread in the country (Kenya) as compared to other countries (possibly in the West)?
Crowdfunding started in 2012 in the USA. Its quite common in USA and Europe.
Its slowly spreading to the rest of the world including Kenya.
A few Resorts in the Coast and Nakuru have been built using this method.
3. brief description of its journey in the Kenyan realty finance landscape and whether it has faced challenges.
In 2014, www.a4architect.com used crowdfunding to finance purchase of prime land along Southern Bypass for development. The purchased land has since risen in value by a large percentage, offering a good return on investment to the owners.
In 2015 there was an own a room project around Juja by Uriithi.
https://www.standardmedia.co.ke/business/article/2001319097/rent-wars-deepen-urithi-woes
This has had issues outlined above in terms of rent collection and management.
In 2018 a few resorts came up in Nakuru and the Coast funded by the same method.
4. Are Kenyans into this model? (Have they quite embraced it) or they do not understand of its being and workings.
Since this is a new method of financing, Kenyans are yet to embrace it fully.
With Covid devastating the economy and finances being scarce, this will push many Kenyans to use this method for investments and home ownership since it allows someone to own prime real estate without having huge capital injections.
5. The pros and cons of using this model to fund an investment in real estate –which ones outweigh the others.
Pros.
Someone can own prime real estate in Kenya without having to put in large amounts of money.
Crowdfunding enables investors to tap into deep real estate knowledge from architects without having to pay large consultancy fees.
Crowdfunding allows investors to use personal savings to tap into purchase of prime real estate in Kenya without having to go through the rigorous process of accessing bank loans.
cons.
Crowdfunding is relatively new so laws are yet to be put into place to guide .
Crowdfunding is still a new concept so alot of solutions have to be done through trial and error.
6. When it comes to equity-based crowd-funding what determines how the prospective investors are allotted, what defines their consequent shareholding and for how long does their shareholding lease last?
This depends with each company that arranges the crowd funding.
In the www.a4architect.com crowdfunding model, the land is designed into 2 bedroomed apartments which prospective investors can own .
The prospective investor will then own the ground where the unit of 2 bedroomed apartment will sit on,through sub lease title.
Investor can then work with a4architect.com construction management team to construct their 2 bedroomed apartment on the land that they now own as sub lease.
The 2 bedroomed apartment can then be stacked for 4 other units on top for the same owner depending on their ability to raise capital.
The a4architect.com model gives a 99 year sub lease renewable to the owner after 99 years as per Ministry of Lands terms and conditions.
7. Who are most advised to take on this concept (smallholder realty investors, SMEs, etc)
Kenyans working in Cities such as Nairobi, Mombasa, Nakuru, Kisumu, Meru, Nyeri where land is expensive. This crowdfunding enables working class Kenyans to access housing and rental investments in prime locations around the city.
For example, land around Southern Bypass , Dagoretti ,Riruta, Syokimau town, Kahawa wendani is around kes 10m per 1/8th.
This amount is high for an individual to buy and build.
In the www.a4architect.com crowdfunding model, such land is devided into 4 parts costing kes 2.5m under sub lease title.
An investor can then purchase a portion and build 5 units of 2 bedroomed apartments on their portion.
This guarantees that the investor can access a home to live in and good rental income in an area close to the city and infrastructure that guarantees high rental incomes .
Architect Francis Gichuhi kamau.
info@a4architect.com
0721410684
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