Is joint venture the next big thing in Kenya’s real estate?
Real Estate
By
David Mwitari
| Jan 31, 2019
Joint ventures are gaining ground on the property scene as the market begins to recover after a slow year.
Ordinarily, a real estate joint venture is where a financier partners with a land owner to put up a project, with a comprehensive understanding on how each party will benefit.
But with time, the concept has evolved to take other forms that take into consideration the unique needs of the parties involved.
A good example is the approach taken by SamPesa, a local real estate firm dealing with the development of property and real estate management.
READ MORE
Expert: The shilling has regained value, but don't expect it to last
Unearthing the artifacts of WWII: A journey through Matuu and beyond
Roam, County Bus Service partner to deploy 200 electric buses
Budget cuts loom for Parliament thanks to Sh9.6b Bunge Towers
Private sector partnerships important to catalysing sports
Tax stand-off as boda boda riders defy county call to pay
Islamic banking gets traction in Africa as Salaam Bank feted
Data privacy major challenge for Kenya's digital space, report
Angola ICT Minister: Invest in space industry to ensure a connected, peaceful Africa
Samuel Murigi, SamPesa director, says they develop land leased from individuals.
“A joint venture assists the community in investing in real estate by providing funding for building houses and drilling boreholes by bringing professionalism in the venture,” he says.
He says SamPesa leases strategically located plots for 15 years then build apartments. During the lease period, they take 70 per cent of the rent whereas the 30 per cent goes to owner of land.
But what if the property developed does not get tenants?
Murigi says feasibility studies have cushioned them against incurring losses. However, he says, even if they fail to get their money back during the lease period, they still exit the property and leave it to the owner of the land.
He says despite its popularity; the model needs a lot of care so that there is no loophole that can be exploited by either party.
State plan
Joint venture is one of the models the government will use in its affordable housing plans.
Transport, Infrastructure and Urban Development Cabinet Secretary James Macharia announced that they were planning for joint venture projects with local companies to execute the planned 8,000 low-cost housing units in Mavoko, Machakos County. The project is already underway.
He said local firms had failed the test of solely building the houses.
“No local firm has the capacity for such developments and what we wanted were companies that have a verifiable record of having handled mass housing developments. But we encourage joint ventures that will promote local companies’ capacity as well as foster a practical technologytransfer platform,” Macharia said.
Most Kenyan real estate developers have been using other models like rent-to-own, mortgage financing and many others to do construction projects.
The government said 35 companies had been shortlisted for the Mavoko project under an engineering and procuring construction model. The model allowed winning bidders to source for financing and put up the houses using affordable model of below Sh1.5 million designs and technologies that are time-efficient but of high quality.
Land from counties
Macharia had said counties had identified land for the projects.
“Land is a major hindrance to housing development as it constitutes up to 30 per cent of the building costs. Once we provide land, the builders, using alternative technologies, will be able to enjoy fast-tracked processes, enabling them to utilise time and labour efficiently,” he said.
With government incentives such as a 15 per cent corporate tax relief to developers who construct more than 100 low-cost units, joint ventures could be the next big thing in the Kenya’s real estate industry.
dmwitari@standardmedia.co.ke
- Expert: The shilling has regained value, but don't expect it to last
- Budget cuts loom for Parliament thanks to Sh9.6b Bunge Towers
- Lenders raise interest on loans despite CBK holding key rate