Poor infrastructure a problem at the Coast

By Njoki Chege

How would you compare the Kenyan property market and the region?

The Kenyan property market is experiencing a boom compared to other East African countries as a result of high local and foreign investment.

There is a lot of demand for beach plots in Kenya as opposed to Tanzania; the prices are also much higher here. The Kenyan coastal market has also experienced a lot of demand and supply in the high-end holiday homes segment. What are the challenges facing developers in Mombasa?

Lack of infrastructure. There are still many areas that are not serviced by tarmac roads and fresh water connection, and where they are serviced, the land prices are high. Developers also have to grapple with the acquisition of finance (due to long approval processes by financiers) as well as lagging development approvals by the requisite authorities.

The purchasing power of Mombasa residents is on average lower than those in Nairobi. Construction costs are higher in Mombasa than inland, especially where raw materials have to be transported to Mombasa.

There is limited space for expansion of developments on the island. For instance, there is high demand for land in Kizingo but there is almost none on the market.

How does the Coast compare to other regions, given the numerous land issues in the region — in respect to cost of land and construction?

Land is expensive. There are, however, affordable plots in areas like Mtwapa — Sh850,000 for an eighth of an acre — and about Sh300,000 in Kilifi.

Construction costs in Mombasa are higher due to transport costs of raw materials. The resultant built products are, however, still affordable. For your projects outside Mombasa, how does the environment compare?

Myspace Properties has ventured into Isiolo, Nairobi, Mombasa and Lamu. Developments outside Mombasa island allow for more undeveloped space within the property estates — less plot coverage allows for bigger compounds, landscaping and gated communities in residential areas.

The demand for residential properties to let in Mombasa Island (eg Tudor and Kizingo) is higher than in other areas..

Does Myspace have low cost housing projects?

Yes, we are currently selling 60 low cost units in Kisimani Enclave. We started selling these at a price of Sh3.6 million. We have learnt from other firms such as Equity Bank and Safaricom that the profits are at the bottom of the pyramid. Many consider buying a home ‘unaffordable’ due to high profit margins. What is your take on this?

This may be true in the high-income residential units. However, market forces determine the sale prices of the properties. The higher the demand, the higher the price; the sellers cannot just decide to sell at exorbitant prices.

Due to the high construction costs, the profit margins in some instances are reduced to about 20 per cent of the cost of development. How can the government support property developers?

Provision of subsidies in some of the raw materials of construction like cement. The Government could also provide for tax exemptions on some raw materials and provide loan facilities to developers.

Inclusion of real estate in its tourism marketing campaigns is also another option as is the amendment of legislations governing the property sector where there may be loopholes

What are some of the opportunities that can be explored by real estate players?

Proper implementation of off-plan developments can develop trust among stakeholders and increase the property supply. They could also encourage gated communities.

There is a lot of opportunity for foreign and local investors to tap into the property markets in Kenya, Uganda and Tanzania.

What is your take on joint ventures?

It is viable for both the developer and property owner in that the property owner who might never have had enough capital to develop the prime property earns from partial ownership through reimbursement of the value of the plot and an extra amount from the sharing of proceeds, with the developer, from the sale of the development.

What is the contribution of Mombasa Homes Expo to the real estate market?

It’s a meeting point for stakeholders of the real estate industry: Developers, potential buyers, manufacturers, government agencies and development financiers.

It creates awareness to the general public of the types of properties offered in the market and their respective prices.