What is in store for Kenyaâ€™s real estate market in 2013, a year that has been described by many as a â€œmake-or-breakâ€ for the country?
With what is expected to be a watershed General Election barely two months away, many Kenyans are keeping their fingers crossed while hoping for the best.
Some analysts have already pointed out that the election-related uncertainty might slightly slow down the property sector in the first quarter of the year â€” just like might happen to other sectors â€” as investors â€œhold offâ€ and instead adopt a wait-and-see attitude.
However, no matter how the elections go, 2013 seems to hold great promises for the property sector in the country.
Here are four major developments that are going to greatly catalyse and leave an indelible mark in the sector this year:
1. County governments
One of the major highlights of the new Constitution is the introduction the county system of government, otherwise known as devolution.
After the March 4 General Election, Kenya will move to a system of county governments as part of plans to address huge development disparities across the country.
The 47 counties and smaller towns are going to be major engines of economic growth in various parts of the country, attracting key investments.
Workers of the many companies and businesses that will set base at the county headquarters are expected to create a high housing demand at the â€œgrassrootsâ€.
Then there is the development of the county headquarters. Observers say that the few buildings in most of the proposed county headquarters are in deplorable states, meaning there will be massive construction of new buildings to accommodate the requisite county offices.
The introduction of the county system of government is a development being followed very closely by players in the real estate sector.
Already, several developers have started planning how to â€œdecentraliseâ€ their offices to the counties as they angle for possible construction tenders yet to be floated.
Recently, Housing Finance managing director Frank Ireri told journalists that the mortgage firm was planning how to seize the opportunities brought about by the counties.
â€œWe think there are going to be great opportunities at the counties and we are keen to take advantage of the economic growth brought about by the counties,â€ he said, revealing that they plan to put up houses in the counties through Housing Financeâ€™s revived housing development arm.
Indeed, the World Bank recently warned that the county system could affect the growth of the already established urban centres as â€œproperty monies are likely to be funnelled to rural areasâ€.
â€œSince most of the counties are predominantly rural, there is a danger that revenue collected from urban centres could be diverted to improve the conditions of rural areas,â€ said World Bank country director Johannes Zutt, warning that if that happens, urban areas will not be able to maintain or improve their basic infrastructure, making them unattractive to investment.
2. Real Estate Investment Trusts (Reits)
For the first time in Kenya, shares of real estate developments will be traded at the Nairobi Securities Exchange, enabling even small investors to own property by buying shares of such properties.
The Capital Markets Authority (CMA) has been working on Reits regulations since 2009, and now says the guidelines could be ready by the first quarter of this year.
As an investment vehicle, Reits is structured to enable individuals to own shares in huge property developments, thus guaranteeing them income at the end of every year.
Such real estate developments â€” could be residential, commercial, retail or industrial â€” are normally sponsored by a super investor that could be a pension scheme or fund manager or a cooperative society, who registers the housing scheme at the securities exchange before selling shares, to be traded on the bourse, to interested individuals.
At the end of every year, those who bought shares are paid dividends, depending on how much they had invested.
Acting CMA chief executive Paul Muthaura says the regulations of the investment Reits require directors of the super investor, who usually lists on the bourse at a trust, to declare at least 80 per cent of the total income from rent per annum as dividends.
The main advantage of Reits is that it makes it possible for just about anybody to invest in real estate. This, therefore, solves one big problem that has for a long time put real estate investment of out reach of the majority of Kenyans: its capital-intensive nature.
Second, Reits will make real estate liquid since those who want to opt out would easily sell their shares. Right now, a real estate investor who wants to dispose of his or her investment has to sell the whole property.
This makes real estate illiquid since it takes time to get a buyer with the kind of money required to purchase a mammoth real estate.
It is hoped that with the advent of Reits, Kenyans in their thousands, if not millions, will â€œown propertyâ€ by simply buying shares, in much the same way they buy shares of other companies.
3. Konza Technology City
Described as one of the most ambitious construction projects ever undertaken in Africa, the Konza Technocity will be developed in four, five-year phases.
The first, expected to start this year, includes constructing Business Process Outsourcing sites, a financial district and a residential zone.
The $7 billion (Sh595 billion) tech park will sit on 5,000 acres in Malili Ranch situated in both Machakos and Makueni counties, 60 kilometres from Nairobi. The smart city is 50 kilometres from the Jomo Kenyatta International Airport, and 500 kilometres from the Mombasa ports.
The project, to be undertaken through public-private partnerships, is expected to create over 100,000 jobs. It will consist of a modern science and technology park, a hospital, a financial district, a mass transport system, residential estates and hotels, and even international schools. Ultimately, it is expected to turn Kenya into a continental leader in ICT.
The International Finance Corporation, part of the World Bank, commissioned international consultants to look at the master planning of the city, its economic viability and development of detailed development proposal.
So far, intense work by International Design Engineers and Pell Frischmann from London has resulted in the preparation of a series of master planning options for the project.
According to analysts, Konza Tech City is likely to be an entry point for global tech companies such as Apple, HP, Microsoft and RIM to set up more rooted and dedicated sub-Saharan African operations.
As a Vision 2030 project, Konza Tech City is considered a strategic opportunity for Kenya to spur the growth of economic activities that fuel higher value employment generation and growth.
The city provides a great opportunity to leverage Kenya into the knowledge economy. The vision for the city includes a strong emphasis on Information Technology and Information Technology Enabled Services, and a wide range of commercial and support activities.
Its launch, which has been postponed more than twice, is expected to be presided over by President Kibaki this January.
4 Tatu City
Lying directly in the path of the planned urban development extending northwards from Nairobi, Tatu City has been hailed as a unique value proposition which will offer world-class infrastructure and a comprehensive live-work-play solution to its occupiers.
Deviating from the increasingly popular gated community concept, Tatu City is a holistically planned residential and commercial development, representing what property experts have termed a â€œnew urbanismâ€ in Africa, a â€œworld class environment and a completely novel approach to organising the urban environment in Africaâ€.
When completed, Tatu Cityâ€™s mixed-use environment will cover an area of 1,038 hectares and will be home to over 60,000 residents and another 20,000-30,000 day visitors.
â€œTatu City will see the creation of a new focus area to the north of Nairobi, in line with Kenyaâ€™s planning for decentralised development zones to alleviate the congestion in Kenyaâ€™s most populous city,â€ says Gikonyo Gitonga, the managing director of CB Richard Ellis, a leading real estate firm in Nairobi.
Mr Gitonga says Tatu City will contribute to the achievement of the Nairobi Metropolitan Regionâ€™s 2030 Vision: â€œIt is a socially integrated, secure and accessible city that will add value to the Kenyan economy and create jobs.â€
However, the Sh240 billion project has been embroiled in court battles among original shareholders, delaying its long-awaited take off. Phase 1 comprises 3,000 residential units, 86,000 square metres of commercial office space, 31,000 square metres of retail floor space, public transport interchanges.