Category: A4architect

How investors are enticed back into real estate developments

Real estate projects in Kenya have for the last few years witnessed scenarios where investors have lost their hard earned cash in property deals tat did not materialize as envisaged.

https://www.businessdailyafrica.com/bd/news/troubled-ekeza-sacco-begins-refunding-members-deposit-2276306

https://www.standardmedia.co.ke/business/real-estate/article/2001371299/agony-of-banda-homes-investors

https://www.standardmedia.co.ke/nairobi/article/2001380956/bloggers-barred-from-publishing-libellous-articles-against-urithi-housing-firm

Exlusive: Redeemed Pastors In N600m Scam

Humans have a nesting and homing instinct. Humans produce hormone estradiol, which, among other things, results in an uncommonly strong desire to organize and clean. Humans are territorial animals, with deep desires to mark and protect our territories. Every human being desires a home, hence amidst all the litigation happening in Real estate projects in Kenya, Kenyans still re demanding for houses. The negative publicity has not dented Kenyans’ need for land and housing.

Abraham Maslows hierarchy of human needs puts Shelter at the bottom, meaning that housing will always be in demand no matter the situations happening. No matter how many scandals appear on Kenyan real estate scene, Kenyans will always find different permutations and combinations to access housing for themselves.

Driving force of crowdfunding in real estate development. Investor decision dependence on crowdfunding initiatives

Crowdfunding is a method of real estate finance and development whereby land owner attracts investors who put in small fractions of the total whole project. This enables investors to own prime real estate without breaking the bank, literally. This financing method keeps banks and their high interest rates away from projects directly. Banks can play by financing individual investors with personal loans. In other projects, banks finance land owners with construction loans which are quite tedious in needed paper work and risky in case of default.

The ease of investment since the huge total construction cost is divided into small parts where many investors can afford, makes crowdfunding very marketable in Kenya.

‘Sponsor’ or ‘operator,’ reputation impact on the crowdfunding investment in real estate development.

The crowdfunding sponsor needs to be of impeccable reputation so as to enable investors feel confident to invest through them.

Consumer protection laws in Africa are generally very weak. Also, some unscrupulous real estate investors take advantage of the fact that neo colonization in Africa is still present , hence many Africans trusting projects that seem to be sponsored by Caucasians . Some have used this as a bait to fraud Africans eg in Ivory Coast.

In the recent case of Cytonn, it was evident that alot of investors usually don’t read the fine print before putting their money on the stake.

https://www.standardmedia.co.ke/business/financial-standard/article/2001418103/cma-admits-it-lacked-powers-to-protect-investors-lost-billions

The amount of funds invested in real estate through crowdfunding.

Crowdfunding is quite new into the Kenyan Market. By now, Billions of shillings have already been invested ito crowdfunded real estate .

https://nation.africa/kenya/business/ponzi-cost-kenyans-sh1-billion-cma-reveals-3467100?view=htmlamp

Impact of crowdfunding initiatives in the marketing of real estate developments growth.Attitudes of the crowdfunding promoters in the real estate developments.

Crowdfunding will enable many more people participate in real estate. Before crowdfunding, only a few rich peole who could amass the hundreds of millions needed to invest in prime properties could play the real estate field in Kenya. With crowdfunding, the huge real estate projects are cut into smaller portions which are within financial reach of many Kenyans. This will impact on Kenyan real estate with most prime properties in urban areas of Kenya finding access to capital easier. Land buying into far off hinterlands which was a common way for investors to play into real estate will slowly give way to much better methods such as crowdfunding which have better and higher return on investments.

Architect Francis Gichuhi Kamau.

gichuhi@a4architect.com

0721410684

The Miami Champlain towers was built in 1981 .

Sale price then was USD 140,000, approximately KES 14million.

Current sale price of the 2 bedroomed unit is approximately usd 600,000, kes 60,000,000

This works out to around 10% price appreciation per annum from 1981 to 2021.

In Kenya, land appreciate at around 20% per annum.

Apartment appreciation rate in Kenya is much slower. Apartments that sold for kes 15m in Kileleshwa 5 years ago are still selling for same amount, meaning zero or minimum appreciation rate.

A similar sized beach apartment in Diani for example, costs approximately kes 20,000,000, 3 times lower than the Miami one at kes 60m.

Developer.

The Miami condominium apartments were developed by Nathan Reiber. He was born in Poland, migrated to Canada then USA . Architectural designs were done in the late 1970s.

Nathan Reiber served as the Assistant Vice President for the Jewish Institute of National Security Affairs . He died on 1st July 2014.

Architect Francis Gichuhi Kamau.

gichuhi@a4architect.com

0721410684

[youtube https://www.youtube.com/watch?v=TrP-Zl7NHzE&w=560&h=315]

The Miami Champlain towers building was constructed in 1981, making it 40 years old. Its next to the ocean, front row. This proximity to the ocean means that the air and moisture around it has elements of salt within it. Salt accelerates steel reinforcement corrosion. This corrosion reduces the size of the steel diameter and also reduces the grip of the steel reinforcement on the concrete surrounding it.

Steel Rebar.

This reduction in size of rusted steel and loss of grip is especially very dangerous on the columns that support the building’s weight, especially the columns in the lower part of the building, foundation and 1st floor.

The Champlain building had a basement parking where the columns had visible rusting and concrete cancer on the lower parts. A recent structural engineering report had recommended repair of the affected columns but was not effected.

Sale value.

The 3 bedroomed apartments were valued at kes 100,000,000 per unit. The owners had an association where they managed the affairs of the building block such as repairs . The management had in 2020 contracted Engineer Frank Morabito to check on the structural viability of the building.

Management.

Condominium apartments usually have problems with management unlike rental apartments where there is only 1 owner so information flow is easily acted on. In condominium sale apartment situations, the board is elected from the owners hence abit slow in acting on issues. In the Miami case, after the structural engineer gave out his report, the management board took long to act on the issues raised until the building collapsed.

Kenyan Coast.

Apartment ownership in Kenya is on the increase around the city, Kilimani, Upper Hill areas and around the Kenyan coast, Watamu, Diani, Mombasa areas. This Miami building collapse case should be a wake up call to apartment building owners to ensure that their building blocks are regularly checked by structural engineers and action is promptly taken to repair any issues raises especially for the apartments around the coast, Mombasa, Diani, Shanzu, Watamu etc.

Architect Francis Gichuhi Kamau.

gichuhi@a4architect.com

0721410684

This architectural design is engineered to enable smooth running of the unit as an AirBnB business.

The ground floor level is utilized as a car parking that can comfortably park 3 cars under 1 particular unit.

The 1st floor level is designed to accommodate the living room and open plan American style kitchen. This living room and kitchen is designed to serve the 3 bedrooms in the other 2 floor levels, i.e 2nd floor and 3rd floor,

This unit can be occupied as a 3 bedroomed home and can also be occupied as 3 floor levels with a bedsitter unit per floor.

This flexibility of design from a 3 bedroomed unit into 3 spacious bedsitter units makes it very friendly for the AirBnB business set up.

The house owner can use the house as a 3 bedroomed marionette or as 3 separate bedsitters depending on the market situation. Bedsitter option with double bed and 2 sofa beds seems a very marketable airbnb venture since many visitors usually prefer that typology of room compared to a complete 3 bedroomed unit.

House owner can also decide to live in the house as a 3 bedroomed unit as they weigh in on airbnb monetizing options in future.

Architect Francis Gichuhi kamau.

0721410684

gichuhi@a4architect.com

Consultants required in a Residential Apartment Building Construction.

Construction of an apartment building in Kenya commences with the developer nurturing the idea to develop.

Land Acquisition.

The first step towards constructing is acquiring land. The land acquired should be in an area where demand is high, hence need for high rise apartment construction. Areas where land is low cost will not be viable for high rise construction since the cost of acquiring land is low hence makes more economic sense to build low rise bungalows and extend horizontally.

Architectural Design.

After land is acquired, the developer is required to source for an architect to come up with the architectural drawings for the house. These drawings are designed to capture the aesthetic appeal of the developer, get the developer’s taste eg African design, Arabic, Mediterranean, modern flat roof style etc.

Once the style is to the liking of the developer, the architect then works out the sizes of the rooms and the typology eg if 1,2,3 bedroomed or bedsitter depending on the feasibility study and demands for the particular area.

Costing.

Once the architectural design is complete, the developer is required to source for a Quantity Surveyor to work on the cost estimation for the project. This will help the developer manage their budget well.\

Structural Engineer.

After project costing, the architectural drawing is shared to a structural engineer whom the developer also sources. The structural engineer determines the supporting structure of the building eg size of columns, steel reinforcement type of slab etc.

Electrical and Mechanical Engineers.

After structural engineering is through, the developer is required to source for an electrical/mechanical services engineer to come u with electrical wiring and plumbing drawings.

Plumbing drawing

County Government Approval .

The developer is required to lodge the architectural and structural drawings to county government department of planning for building approval.

The county government planner checks if the construction is as per the county’s set bye laws eg how many floors allowed, whether the building fits within the plot without encroaching to the road or neighbors, whether there is a safe sewerage disposal method etc.

If the building complies to the particular bye laws, the County Government gives an approval letter. The developer is required to erect a sign post at the building entrance showing the approval number and consultants involved in the approval process.

Actual construction.

The developer is required to source for a building contractor registered with NCA. After negotiations on construction costs , the developer and contractor enter into construction agreement whereby the consultants supervise the building construction process to completion.

Property Manager.

After construction is complete, the developer is required to source for a property manager to help source for tenants, collect monthly rent and carry out minor repairs during occupancy.

Architect Francis Gichuhi Kamau.

0721410684

gichuhi@a4architect.com

1 Acre for sale, Kitale, Milimani.

Kes 20m.

https://goo.gl/maps/yWMDWq4jjcaQ5V19A

[googlemaps https://www.google.com/maps/embed?pb=!1m18!1m12!1m3!1d3220.459705948253!2d35.01096615835518!3d0.9967429987002963!2m3!1f0!2f0!3f0!3m2!1i1024!2i768!4f13.1!3m3!1m2!1s0x0%3A0x0!2zMMKwNTknNDkuNiJOIDM1wrAwMCc0NS4xIkU!5e1!3m2!1sen!2ske!4v1623842922197!5m2!1sen!2ske&w=600&h=450]

Call 0721410684

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Kes 9,000 per Day.

Call 0721410684

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Serviced apartments are furnished houses with caretaker services where someone can rent for a minimum of 1 day and have an inhouse cook and househelp to assist in cooking and cleaning . They are especially marketable to family or group travelers who would like to be in close proximity to each other in a 1,2,3 bedroomed house.

Assuming kes 5,000 per night for a 2 bedroomed apartment, this works out to kes 75,000 per month at 50% occupancy. The same apartment fetches around kes 35,000 per month in rent.

Return on Investment.

Assuming construction cost of kes 3m, and a yearly income of kes 700,000 as serviced apartment or kes 350,000 as normal monthly rent plan, this works out as below

4.2 years as serviced apartment.

8.8 years as normal rentable house.

From the above, we can deduce that serviced apartment method works much better as a real estate investment compared to normal rental method. The Return on Investment for serviced apartment type building at 50% occupancy rate is close to Return on Investment for hotel type building , minus the management hustles that come about running the hotel.

Architect Francis Gichuhi Kamau.

gichuhi@a4architect.com

0721410684