Written by Steve Mbogo
December 24, 2008: The coming year is promising good news for Kenyans eager to buy affordable residential houses after the launch of several initiatives by a construction solutions provider, a building professionals association and an investment group by Kenyans living overseas.
They have all announced plans to develop quality houses costing as low as one million shillings.
The common denominator being pursued by the three entities is to use technology that has been tested elsewhere like in Malaysia and US and use better financing arrangements that will make the cost of the finished units cheaper than what is available in the market today.
Spencon, a company that offers social infrastructure construction solutions across east and southern Africa, told Business Daily that it is ready to go as far as partnering with the Government in a private public partnership arrangement that will also include slum upgrading product.
The company has already formed a subsidiary known as Aviaspen and recruited architects and project managers to roll out construction of at least 1,000 affordable units by the middle of 2008.
Spencon is using a housing technology borrowed from US which it has already used to develop 2,000 housing units in Tanzania. This is what it will replicate in Kenya where annual house supply is 35,000 units against a demand of 150,000 units.
Others like the Joint Building Council (JBC), a grouping consisting of the Architectural Association of Kenya and the Kenya Association of Building and Civil Engineering Contractors plans to bring together a group of local investors to raise money through the Nairobi Stock Exchange to finance construction of middle and lower-middle income residential houses.
Mr Pragnesh Patel, the regional director of Spencon, confirmed that the company is assembling a consortium of equity partners to finance the project but intends to raise additional project money from other sources.
"But our core intention is for private public partnership with the ministry of housing," said Mr Patel, in addition to having a well functioning link to mortgage companies to make it easier for Kenyans to acquire loans.
He confirmed that the company is engaging its principal bankers, the Standard Chartered Bank, to develop better mortgage products.
Aviaspen's core objective is to reduce the transaction costs by completing projects faster and being able to replicate things faster rather.
This way, it hopes to develop units usable by a reasonably sized family for two million shillings to three million shillings.
The main spots Aviaspen will be looking to develop houses include Mlolongo, Kiambu Road and Konza. Later, the company plans to enter into also developing high cost residential houses.
The plan is to develop estates with independent utilities within so that the pressure to develop them near towns does not arise.
Mr Patel said the main challenge in developing such projects is to raise capital. "Venture capitalists are keen to come in but want commitment especially from the government. One of the best ways is for the Government to become involved in these projects so that this can give confidence to the venture capitalists," he said.
The Government could participate by giving some of its land for housing development a feature seen as likely to help reduce the cost of the units. Government could also give tax breaks to help importing products that will offer quality finishing and make it cheaper to import machines for use in making interlocking locks, which reduce the use and cement.
The other group, known as JBC says its investors will conclude the investment plan in February next year before a roll out in April. "Our focus will be middle income and lower middle income type of houses because there is huge demand," said Mr Harun Nyakundi, the project co-ordinator.
He said the plan also includes building another 1,000 units of houses in 2008, using a community project where a number of interested home buyers pull their resources together and then procure construction services.
Another project that is coming up in 2008 will involve a group of Kenyans living abroad who have hired a local asset management company to help in organising for funds to be put in construction of affordable houses.
The company declined to be named because the deal is yet to be completed but confirmed that the project will start in earnest after the first quarter of 2008.
The drive to have low cost housing is partly being motivated by tax incentives offered by Finance Minister Amos Kimunya in this year's budget.
He zero-rated goods and services supplied to specific projects for the construction of a minimum 20 units of houses situated in planned development schemes to benefit low-income earners.
Opportunities to benefit from tax incentives also exist in raising money from the capital markets for such projects, as JBC plan to do following the 2006 incentives offered by the Capital Markets Authority that interest income accruing to all listed bonds used to raise funds for infrastructure and social services, which have a maturity of at least three years, be exempt from withholding and income tax.
Mr George Apaka, an investment manager at AIG investments, said in earlier interview that there is potential for development in this category of residential property is high.
"There is a very strong demand for middle income houses," he said. Yields in this category are estimated at 10 per cent compared to eight per cent for high income residential property."
Source: Business Daily
