Category: A4architect

0.25 Acre plot. Invest and earn kes 985,000 per month.

Return your investment in 6.3 years.

Plots within 500m or less form tarmac near large towns such as Rongai, Kitengela, Juja, Ruiru, Kiambu , Ruai can unlock this return.

The total construction cost is estimated at kes 54m.

Land 0.25 acres has been estimated at kes 7.5m but can vary from location to location.

BEDSITTER/ 1 BEDROOMED 20M2 6 FLOORS 112 UNITS
Cost Item	Kshs	%
Land	7,500,000.00	10.00266738
	0.00	0
Construction	56,000,000.00	74.68658309
	0.00	0
	0.00	0
Professional fees	4,480,000.00	5.974926647
Project Management fees	560,000.00	0.746865831
Marketing	4,760,000.00	6.348359563
Financial Charges	1,680,000.00	2.240597493
Total	74,980,000.00	100
Financing Plan	Kshs	%
Developer	18,980,000.00	25.31341691
Debt Finance	56,000,000.00	74.68658309
Presales	98,560.00	0.131448386
Total	74,980,000.00	100.1314484
PROFIT
TOTAL MONTHLY RENT FOR 112 UNITS	985,600.00
YEARLY RENT	11,827,200.00
TOTAL EXPENDITURE	74,980,000.00
RETURN ON INVESTMENT. YEARS	6.34

Francis Gichuhi Kamau, Architect.

0721410684

Analysis of how to reduce cost of Housing in Kenya.Kitengela vs South Africa.

Kenyan cost of housing is high compared to other parts of the world such as South Africa and USA.

The average cost of a 3 bedroomed 100m2 house in a middle class area such as Kitengela is kes 5.9m.

This is a house situated between 1 to 2 km from main tarmac road.

See example here

http://langata.olx.co.ke/newly-build-3-bedroom-house-for-sale-in-kitengela-iid-527243632

http://langata.olx.co.ke/house-for-sale-in-kitengela-muigai-area-iid-526041738

http://south-b.olx.co.ke/3-bedroom-bungalow-in-kitengela-near-new-valley-estate-iid-525923651

http://south-b.olx.co.ke/3-bedroom-bungalow-for-sale-in-kitengela-new-valley-area-iid-525021666

http://fedha.olx.co.ke/kitengela-3-bedroom-for-sale-iid-523676948

A similar sized house in South Africa costing kes 6m will have features as below

http://johannesburg.olx.co.za/brand-new-houses-for-sale-100-bonds-available-iid-527425896

http://pretoria.olx.co.za/affordable-houses-iid-527392047

http://johannesburg.olx.co.za/family-home-iid-527317315

http://robertson.olx.co.za/up-on-a-hillside-iid-527303698

The South African property will have more superior infrastructure compared to the Kitengela one. There will be tarmac roads, secure neighborhood, proximity to shopping centres,schools and hospitals compared to Kitengela houses.

Quality of construction.

By comparing pictures of available property for sale in South Africa and Kitengela above, it’s clear that the quality of workmanship in a similar priced South African house is higher.

This is because in South Africa, developers tend to ensure that all relevant consultants in the construction industry, i.e., architect, quantity surveyor, engineer, interior designer etc are used during construction.

In Kenya/Kitengela, the average developer will most likely only use these professionals during design to ensure the local authority approves the building. During construction, the developer will think that by not using the professionals for supervision will save money.

Eventually, the developer ends up with an overpriced house with poor workmanship.

The South African developer who ensures architects and engineers are engaged throughout the construction period ends up with cheaper housing at a more superior workmanship hence more profit.

Unique Designs.

By ensuring architects and engineers are engaged throughout the construction period, South African developers will have the benefit of better aesthetics since each house tends to be unique compared to the Kenyan middle class situation whereby all houses in Kitengela and Rongai for sale look the same.

This unique design ensures that the South African developers have better , faster and more sales hence more profit compared to the Kenyan developers with monotonous repetitive designs.

Economies of Scale.

The use of architects and engineers throughout the construction by South African developers has ensured that research gets within the countrywide construction industry.

This research has in turn enabled more specified contractors.

For example, in South Africa, all doors and windows are specified and have a unique name. Eg a 2m by 1m window will be called ND2010 for example. This means that all architects during design can specify the exact window throughout the republic. The window manufactures then produce these which can be found in every hardware shop and supermarket. This mass production in turn benefits the developers since there is less wastage and more efficient production. In Kenya, each architect specifies any window dimension which will be specifically fabricated. There are no specific standards. This results in wastage during construction and lack of benefits from economies of scale. This cost is then pushed to the consumer hence increase in cost of housing.

See roof truss contractors here
http://www.rooftrussproducts.co.za/

Cost of Finance.

The Kenyan developers have to borrow at the average market rate of 18% from local banks.

The South African benchmark interest rate is at 5%.

http://www.tradingeconomics.com/kenya/interest-rate

Kenya benchmark interest rate is at 8.5%

http://www.tradingeconomics.com/kenya/interest-rate

Standard Bank South Africa is currently giving home loans at 8.5%.

http://south-africa.deposits.org/home-loan-rates.html

Housing Finance Bank Kenya is giving the same loan at 16%, down from 18%.

http://www.housing.co.ke/

If the gurus at Ministry of Finance, Central Bank and corporate banks can sit down and come up with solutions to reduce cost of borrowing, this can go a long way in reducing construction cost.

Currently, cost of borrowing takes 10% of construction cost as shown below.

example Kitengela house costs
Cost Item	Kshs	%
Land	1,250,000.00	24.90784099
	0.00	0
Construction	2,800,000.00	55.79356381
	0.00	0
	0.00	0
Professional fees	224,000.00	4.463485105
Project Management fees	28,000.00	0.557935638
Marketing	212,500.00	4.234332968
Financial Charges	504,000.00	10.04284149
Total	5,018,500.00	100
Financing Plan	Kshs	%
Developer	2,218,500.00	44.20643619
Debt Finance	2,800,000.00	55.79356381
Presales	590,000.00	11.75650095
Total	5,018,500.00	111.7565009
PROFIT
TOTAL SALES FOR 48 UNITS	5,900,000.00
TOTAL EXPENDITURE	5,018,500.00
NET PROFIT	881,500.00
% Profit Margin	17.56500946

Cost of land.

In South Africa , capital gains tax has ensured that people do not land bank. Its not possible to buy land then let it sit vacant till when you decide to develop or resell at a profit. If for example you buy land then resell after a few years for a profit, the South African government will heavily tax you on the profit. This has discouraged hoarding of land , making land price stabilize . There is plenty of available land to develop compared to Kenya.

In Kitengela, for example, if you check on the Google map below

http://goo.gl/maps/ZTpGn

you will notice that there is so much idle land very close to the road.

This land has gained value due to the whole country’s tax contribution towards constructing the tarmac road.

The owners by holding on the land without developing it, are making other Kenyans in need of housing to go further off the tarmac to construct their houses. This creates an artificial demand for land, leading to over 25% annual land value increase.

Once the owner sells after several years, they keep all the profits without sharing with the tax payer who helped /contributed to the tarmac road construction. In South Africa, capital gains tax discourages this.

From the table above, land costs 25% of the total house project costs. If this can be stopped from increasing , housing costs will be lower.

Conclusion.

For Kenya to have reduced housing costs, bank interest rates, land price and construction costs need to come lower.

Bleow is a table showing reduced construction costs, interest rates and land cost.

The kes 6m houses will cost kes 4m with a 25% profit margin for the developers. This means developers will still make as much money but with more sales due to increased potential house buyers due to lower cost.

Reduced land interest construction cost
Cost Item	Kshs	%
Land	625,000.00	19.46737268
	0.00	0
Construction	2,100,000.00	65.41037222
	0.00	0
	0.00	0
Professional fees	168,000.00	5.232829777
Project Management fees	21,000.00	0.654103722
Marketing	212,500.00	6.618906712
Financial Charges	84,000.00	2.616414889
Total	3,210,500.00	100
Financing Plan	Kshs	%
Developer	1,110,500.00	34.58962778
Debt Finance	2,100,000.00	65.41037222
Presales	410,000.00	12.77059648
Total	3,210,500.00	112.7705965
PROFIT
TOTAL SALES FOR 1 UNITS	4,100,000.00
TOTAL EXPENDITURE	3,210,500.00
NET PROFIT	889,500.00
% Profit Margin	27.7059648

With the current situation with expensive land, high interest and high cost of construction, developer are making kes 800,000 per unit.

With lower land cost, lower interest rates and lower construction costs eg in South Africa, developers are still making the same amount of money as profit.

Francis Gichuhi Kamau, Architrect.

info@a4architect.com

0721410684

Current Real Estate Investment Opportunities.

Joint Venture.

1.
Runda.

Location map.
http://goo.gl/maps/yJNPG

http://a4architect.com/2013/05/06/runda-kiambu-road-housing-estate-green-architecture-concept/

Land size. 7.5 acres.

2.
6th Parklands avenue.

Location.
http://goo.gl/maps/SE8Zx

http://a4architect.com/2013/06/07/joint-venture-proposal-parklands-nairobi-city-kenya/

Land size. 0.5 acres.

3.

Ngong road.

http://goo.gl/maps/qX9XJ

Land size. 0.5 acres.

4. Eastleight.

Map.
http://goo.gl/maps/jQfjZ

Land for Sale.

1.
Pangani .

Map.

http://goo.gl/maps/CWgkS

1/4 acre plot for sale.

Kes 65m.

More details

http://a4architect.com/2013/05/21/feasibility-study-for-highrise-housing-in-pangani-nairobi-on-a-0-25-acre-plot/

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Form 1

Form 2

Capital Gains Tax in Kenya. Why Uhuru Kenyatta Government needs to borrow from Pennsylvania.

The Uhuru Kenyatta Government has recently reintroduced and revitalized Capital Gains Tax in Kenya.

Capital Gains Tax definition.

Capital Gains tax is a tax levied on profits accrued from the sale of an asset bought at much lower cost than the sale price.
The most common assess that attract capital gains tax are stocks and real estate property.

The main aim of tax is to enable funding of infrastructure ,hence increasing productivity.
Tax should also not be seen as punitive. It should be able to encourage growth, investment and create opportunities.

Kenyan Situation.

An enforcement of Capital Gains tax within land and property investment transactions will lead to the investors pushing the taxes to the purchasers, thereby increasing cost of land and buildings. The same situation will apply in case of enforcement of Rental income tax.

Use of Property tax for Infrastructure.

If the tax collected can be appropriately used to increase the infrastructure on the property, then this becomes a win win situation. For this to happen, the Government will need to be sure that all other sectors such as food security, health, education etc are well taken care of so that the rental and capital gains tax go to improve the infrastructure on the properties that enabled and raised the tax, thereby creating a win win situation.

Example. Block of flats.

For example, if a block of flats in Rongai paid rental income and capital gains tax then a tarmac road and sewer system were installed by the Governemnt, this will in turn enable the investors get better rents in a win win situation.
If the tax from the same flat all goes into public health and education in Moyale for example, the investors will not benefit .

Solution.

2 rate Property tax method. Pennsylvania situation.

Pennsylvania’s capital city, Harrisburg, was voted 2nd best city to live in the US by Forbes Magazine for year 2010.

Pennsylvania, in the USA has come up with an ingenious method of taxation of properties.
It’s called the 2 rate method.
In this method, there are 2 separate tax rates for land and buildings.
The tax for land is higher than for developed property.

High development means lower tax.

The tax rate is designed such that the more the development on a building, the lesser the land tax. Land tax is highest on vacant undeveloped land.
This discourages people from holding land for long without developing it. People without funds to develop are forced to sell to developers. This has created alot of new job opportunities due to many construction projects.

Advantages to Pennsylvania.

As of 2010,this enabled a 28% reduction in crime rate, created thousands of new jobs and enabled usd 48 billion worth of new investments into Pennsylvania.
Vacant underutilized lands fell by 80%.

This taxation method has enabled Pennsylvania’s capital city, Harrisburg, win the 2nd best place to raise a family position by Forbes Magazine.

Advantages to Kenya.

With such well designed taxes, Kenya can be able to encourage investment in Real Estate, collect more taxes and spur economic growth.

Francis Gichuhi Kamau, Architect.
info@a4architect.com
www.a4architect.com

Acreage -1.7766877 Acres (Approx)
Built area (House roof)- 208 sq m
2 Villas each 4 bedrooms
2 Swimming pool Approx 5mx12m
Built in 2005
Approx 600m from the beach
Single title.

Expected rent for short stays 20-30k per villa
Monthy rent 120-160k per month

Price. Offer invited.

In October 2006, while President Obama was still a US Senator, an American business associate, Mr Ian Houston, suggested to me that since Chicago has the largest hoteliers in US and is represented by Senator Obama who has Kenyan roots, it could be an easy connection between the American hotel investors and Kenya.

I wrote an email to his aide at the time, Mr Mark Lupert.
http://www.thedailybeast.com/newsweek/2008/07/18/the-aide-who-went-to-war.html

This is how the deal went.

3 years later, the then Senator Obama was elected 44th President of the USA and commenced office in January 2009.

Its a pleasure for me to have had to contact and communicate with a Senator who later on 3 years later turned to become a 2 term president in USA.

Its now 7 years since. President Obama is currently in Africa to seek the same connections that i had unsuccessfully tried to create .
The investment opportunities to American hoteliers are still welcome.

We are now 7 years older with experience. We can now deal with more experience.

Building your house loan free in Kenya. The a4architect house plan.

The best way to be able to construct your house in Kenya without the huge bank loans is through pooling resources together.
Plots close to tarmac roads where it’s convenient to live and be able to go to work daily are quite expensive. They range from a minimum of kes 1m per 1/8th for plots over 1 km from main road to 3m per 1/8th for plots close to main roads.

Lack of infrastructure.

Unfortunately, since the costs are prohibitive to many working Kenyans, they are forced to buy land in far inaccessible areas such as Joska, Kantafu, Rangau, Isinnya, Juja farm and hope that one day, the Government will lay infrastructure such as schools, police stations and tarmac roads so that the areas can be inhabitable.

They then opt to rent houses closer to the road where it’s safer and amenities such as schools are easily accessible.

Financial Loss due to buying unusable land.

The land that they have bought will on average cost anywhere between kes 400,000 to 1.5million.
This amount of money is quite huge for it to be used on purchasing land that is not being used due to inaccessibility.

One could say that the land purchased will one day in future have a developed neighborhood .

In reality, the best investments are the ones that can be able to give returns immediately.

Solution.

For the same amount of money that goes to buy land that cannot be livable due to distance from main road, insecurity, lack of water and electricity and sometimes even no network coverage, a4architect.com has come up with a quick fix solution that enables one to own a home or rental unit that will immediately begin to add value in terms of comfortability and rental income.

Cost of expensive land divided by 12.

The design is such that within the 1/8th acre plot, 12 spacious, 20m2 plinth area size bedsitters fit within the compound on the same level.

This means that the cost of obtaining the expensive land near main road is divided by 12.

The 1m land will now cost 83,000, the 2m land will cost 170,000 and the 3m land will cost kes 250,000 to obtain for construction purposes.

Immediate gains.

A bedsitter in such a location can now be able to earn you good rent or house you in a safe place near the road where its more convenient for you to move to and from work.

Cost of house compared to cost of inaccessible land.

With the same cost of an average plot in an inaccessible area such as Rangau, Kiserian Pipeline, Joska, Kamulu, Isinya,Juja farm, you will be able to build a spacious bedsitter in a very good neighborhood such as Rongai town, Kitengela Milimani area, Athi River, Syokiamu etc.

This is good value for your money compared to buying land that you can’t be able to live in till after 10 or more years.

Spacious design.

The design of the bedsitter is such that if you decide to purchase 2 bedsitters next to each other, they can be easily joined to form a 1 bedroomed unit.

If you decide to buy 3 bedsitters next to each other, they easily make a 2 bedroomed unit.

The interior of the bedsitter has also been optimized to give space and increase privacy.

If the bed is placed at the farthest end and a curtain introduced, the bedsitter unit will have the same privacy level as a 1 bedroomed unit. Visitors to the bedsitter will only interact with the living room and open kitchen area without interfering with the bed space area.

See the bedsitter floor pan and furniture arrangement below.

Curtain to separate bed space area.

If a curtain is introduced across the room after the bed space, it effectively creates the unit from a bedsitter to a 1 bedroomed in terms of privacy levels.

A young family can now live in the unit comfortably as they wait for the finances to grow and the family size to increase.

Future growth.

The design is such that 4 other floors can be stacked vertically up in future.
The 12 shareholders can come up with a majority decision to construct vertically upwards within the confines of the sectional property act law.

To learn more and join this investment plan, visit a4architect.com/discuss/ or email info@a4architect.com.

Francis Gichuhi Kamau, Architect.
info@a4architect.com
0721410684