In January 2022, President Uhuru Kenyatta banned trading in scrap metal. This affected local steel producing companies hence steel prices doubled . Rebar size D8 sold for kes 550 per bar in January. In March, the price has nearly doubled to kes 950 . Prices should come down if President Uhuru Kenyatta rescinds the decision to ban scrap metal dealings.
Cement.
Simba Cement, which is the largest producer of cement in Kenya after acquisition of Athi River Mining cement company, produces 2.7million tons per year followed by Bamburi cement at 2.1million tons per year.
Simba cement produces its cement clinker locally while the rest of the competition, Bamburi, Savannah, EAPL import clinker. The importation of clinker has been affected by the covid pandemic situation where there are shipping delays internationally hence the shortage of cement currently being witnessed.
Simba cement production has been slowed down by the huge import of clinker by Savannah, Bamburi and EAPortland cement companies. https://www.kahawatungu.com/national-cement-company-sacks-860-employees-emali-factory/
This imbalance has resulted to the current cement shortages whereby cement price has jumped from a low of kes 500 per bag in January 2022 to current March 2022 prices of kes 700 per bag.
These problems will cease once the Kenya Government Ministry of Trade comes in to help resolve the cement wars.
Devki
Coincidentally, both Simba Cement and Devki steel are the leading cement and steel producers in Kenya and owned by Narendra Raval.
Devki steel mainly uses local scrap metal to produce reinforcement bars and other steel members used in construction. Simba cement uses local clinker to produce its cement hence being able to sell lower than its competition.
Apartment construction in a higher cost land, 1/8th of an acre say in Umoja area, costing kes 10m vs apartment construction in a lower cost land costing kes 3m say in Kitengela areas.
Umoja 1/8th land kes 10m analysis.
A 1/8th plot is 500m2 in area. The price per m2=kes10m/500m2=kes 20,000 per m2. A 2 bedroomed apartment of 80m2 will have land value as 80m2 x 20,000=kes 1.6m.
This house will bring in kes 30k per month rent. The return on investment will be 5 years .
Kitengela kes 3m per 1/8th plot land analysis.
Price perm2 for the land=kes3m/500m2=kes 6000 per m2.
A 2bedroomed apartment, 80m2 , will have land value at kes 6000 x 80m2=kes 480k. The rental income brought in will be kes 20,000 per month. The return on investment will be 2 years.
Conclusion.
Return on investment for apartment buildings in lands of lower costs are higher than in lands that are at higher costs. This is assuming the cost of construction in both scenarios is held constant. Lands in more prime locations, which are more expensive, have an advantage of higher occupancy rates. Lands in lower cost areas, where rents are low, have an advantage of a much faster return on investment.
