Of late, there has been talk of Kenyans snapping up properties in the USA, South Sudan and South Africa but not so much in Tanzania, Rwanda and Uganda.
So, what is the “housing temperature” like in East Africa? According to Africa Report 2011, an annual study of the state of real estate in Africa by global property giant Knight Frank, Kenya’s residential market in both the middle and high end segments is vibrant. So our neighbours should take note and try to acquire a slice of the pie.
Prices, says the study released recently, have now recovered from the impact of the global economic crisis and the post-election clashes of early 2008.
“Houses in gated compounds and apartments have seen greater demand than single stand-alone homes,” it says.
The report, covering 34 African countries, notes that the current trend is to develop out-of-town integrated communities, targeting mainly the middle class. It gives Fourways Junction and Thika Greens as examples.
Older residential areas
In Uganda, the study says, the traditional residential areas include some sections of Nakasero Hill, the summit of Kololo Hill and Lubowa.
Kololo, which was once Kampala’s most desirable residential suburb, has seen a rapid change of use to offices.
“Housing estates, apartment blocks and townhouses have been constructed in both the older residential areas and new suburbs,” the report says.
Despite this, it adds, there still remains a shortage of well located, good quality houses which, if priced correctly, will always let and sell swiftly.
What about Tanzania? “Both prime residential rents and capital values in Oyster Bay and the rest of Msasani Peninsula have increased, especially for stand-alone properties.”
The supply of apartments and townhouses, it adds, has also increased and there is a good pipeline of future stock, which is expected to come on-stream in late 2011 or early 2012.
“As a result of the increased supply, rents and capital values are likely to come under pressure.”
The final East African Community country covered by the report is Rwanda. Rwanda’s residential property sector has seen strong growth in recent years and has attracted international developers, particularly from the Middle East.
The government has also encouraged the construction of housing projects to address the housing shortage, the report adds.
“Although the current residential areas provide low-density settlements, the government is promoting higher density developments, such as the Kimihurura Gateway project,” says the report.
The other areas in Kigali which are expected to witness rapid growth are the Akumunigo and Kimichanga development zones.
According to Samson Kiteng’e, who organised the East African Housing Expo 2011 recently, the bloc’s 130-million-population offers a huge market occasioned by huge housing deficits in all the member countries.
In Kenya, the annual housing shortfall is estimated to be between 150,000 and 200,000 units. The situation is not any better in Uganda, where the annual and accumulated deficit is 108,000 and 600,000 units, respectively.
Rwanda, on the other hand, has recorded a deficit of 20,000 units annually. “This is instructive of the huge gap existing in the region’s housing and property sector.
“Therein also lies the opportunity to provide affordable housing to the region’s growing middle-class population, including many others who can neither afford to buy nor construct a home,” says Joram Kiarie, Kenya Commercial Bank’s group mortgage director.
The mortgage division of KCB has already realigned its strategy in efforts to grow market share while widening its customer base.
This year, the bank launched mortgage services in Uganda and Rwanda and it has also set eyes on the new Republic of South Sudan market.
“We are delighted at the opportunities that virgin markets such as Rwanda and South Sudan offer,” says Mr Kiarie.
The bank announced that much of the Sh9.6 billion loan it received from the International Finance Corporation (IFC) would go towards mortgage lending, with a focus on the bank’s subsidiary mortgage businesses in Tanzania, Rwanda and Uganda.
Under the East African Community Common Market Protocol, firms that set up business in other member states are given the same treatment as local ones and enjoy privileges accorded by the laws of the host nation.
Such firms are also allowed to take with them personnel to the host country without the requirement of a work permit, courtesy of the free movement of labour component of the Common Market protocol.
Real estate players say that the protocol has not only opened new investment opportunities but has also offered an avenue to mitigate risks associated with the real estate business in East Africa.
The huge regional market provided under the protocol, they say, will help firms diversify their activities, making it easier to manage risks.
Under the protocol which came into force on July 1, 2010, cross-border investment has been made easy as companies can freely open branches in other East African states, or even partner with those carrying out similar businesses.
Already, a number of Kenyan firms are planning to open branches in Uganda, Tanzania and Rwanda.
A few others that have been operating mainly in Uganda and Tanzania say the Common Market Protocol will make it “easier and cheaper” to operate in those countries.
“It is a very exciting time for professionals in the real estate sector in East Africa. From dealing with a market of 40 million people, we will now be dealing with a market of 127 million people.
“That is huge. It will help us diversify and manage risks during difficult times,” Reginald Okumu, the director of Ark Consultants, a Nairobi-based real estate firm, says.
Common Market Protocol
Mr Okumu cites some of the risks as low demand in a given market, poor economic performance, and political instability. But these, he says, can be mitigated.
“When one market is not doing well, you can mitigate the losses by relying on the vibrant markets of other partner states,” he said.
Mr Okumu says that the Common Market Protocol will make it easier for professionals to travel within partner states and work in any country of their choice.
This, he adds, used to be difficult because of the work permit requirement: “Most of us used to hide under tourist and visitor visas, which sometimes never worked.”
Other than Kenya Commercial Bank, the other Kenyan companies that have already set up shop across the borders include Nakumatt Supermarket and Equity Bank.
“Those professionals who have been serving these companies will follow them across the borders to continue working for them,” says Okumu.
Among the well-known Kenya-based real estate firms that have been operating in the other EAC member states are Knight Frank, Gimco and Regent Management.
The Common Market Protocol is expected to spur growth in the region’s property industry as a result of cross-border investments.
This growth, according to experts, is hinged on the fact that the banking industry will become borderless, with banks offering mortgages to anyone who qualifies across the region, as KCB has shown.
Banks are the main clients of real estate professionals, who provide them with valuation services for mortgages and other forms of loans.
At the Expo, key players that included interior designers, developers, financiers, insurance firms, property and real estate agents — from across the region — got the opportunity to showcase their products and services and to directly interact with their target market.
Talk of the EAC Common Market making citizens of the five member states — Kenya, Uganda, Tanzania, Rwanda and Burundi — have a number of things in common.
But this was more than just a housing expo. It also served as the strongest sign ever that there is now a window of opportunity for Kenyans who want to invest in real estate beyond Kenya’s borders.
And none could have said it better than Housing minister Soita Shitanda, who welcomed the initiative, terming it a noble step towards raising the profile of the housing sector in East Africa.
“The East Africa Housing Expo will create synergies between regional sector players so as to share in new technologies that can help stir housing growth and development across the entire region,” Shitanda said.
He noted that the objectives of the Expo were in line with the Kenya Vision 2030, which seeks to empower players in the housing sector to deploy new technologies and tools so as to bridge the annual housing deficit, and at an affordable cost.