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Before you invest in real estate...

By Peter Muiruri | November 25th 2020 at 12:33:00 GMT +0300

Listening to Sakina Hassanali (pictured), the head of development consulting and research at HassConsult talk about real estate quarterly indexes can be mind boggling to the uninitiated. But real estate is a field her family has navigated for about 30 years now, giving her a front row seat in the turbulent arena. She shares some insights into the world of real estate.

What is great about family members running a business together?

HassConsult was set up as a family business in 1991. My mother joined the company six months after my father set it up. And I joined the firm in 2008. My sister Farhana is the CEO. We run the company currently. The great thing about the business is that you have this extended institutional memory within the family.

If I ever have a challenge, someone within the family will have been through it and will be able to mentor me. There is a strong support structure and you always know that everyone is shouldering the responsibility together.  

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Were you ever in employment before?

Real estate has always been my passion, and so after a few years in the advertising industry I decided to jump ship and see if I could be of any use in real estate.

Ever felt inadequate speaking boldly in an industry once seen as a preserve of men? 

When I started out, it was not my intention to be heard, really. I was more interested in learning. So, I spent most of my formative years listening and trying to decode the economics of the real estate market. When the time then came for me to guide the market, the authority came from knowledge and experience, not gender.

But you say the female gender plays a big role in real estate

Yes, it does. Half of the inhabitants of real estate are women and I think having a male dominated industry guiding design may result in the needs of half the audience being overlooked. Women are generally more attuned to the finer details – both aesthetics and functionality.

Developing these creatively will ultimately shape a better product. It is for this reason that specialist interior designers and landscape architects are women and an integral part of our design process. Currently, the HassConsult team has a 40:60 male to female ratio. We hope we are doing our part in creating a more balanced voice in the industry.

How has the business fared during the pandemic?

Initially we had a three-month freeze in the market with no one really knowing what to do in the unprecedented scenario. Buyers and developers held off on making concrete decisions. However, we have seen some return to normalcy in the sector and I can safely say we are getting to pre-Covid-19 activity levels.

Looking to invest in real estate?

The hottest places to invest in right now are… 

Well, to know that you ought to follow the infrastructure; the new roads, rails, ports, large scale industries and you will find the place. The periphery of new infrastructure are the new growth areas.

However, if you are looking for sustained rental income, choose properties close to a commercial hub such as Westlands or Upper Hill. Such areas have sustained demand that are insulated from short term economic shocks.

Do it early and maximise an increase in capital value.

 Is this a good time to invest in real estate?

Yes. The best time to buy real estate is when the economy is stagnant, when you know you will get a fair deal. For example, land is always a solid long term investment, and Kenya being a growing economy with a large young population coming into adulthood soon, the need for expanded provision of goods and services is unlikely to slow down. There will always be an upward pressure on land prices. 

The key challenge in Kenya’s real estate market for the buyer is…

The lack of sufficient regulation and the power to seek legal recourse should something go wrong. We need to put in place measures that will keep the industry in check and compel developers to take responsibility for their output.  This will result in a more effective and productive industry.

The developer? 

The key challenge is financing, both to the project and the end user. Local financing is very expensive. Today, you must get the project concept right so that buyers can fund a part of the project. If the project concept is flawed and sales insufficient, the whole project stalls. If we have an economic slowdown and sales reduce but debt finance repayments remain relentlessly high, the project stalls.

The only way out is to have and use market data to create market aligned project concepts that will stand the test of any economic shock. It comes down to that all-time adage – location, location, location. Some areas stand up better than others in tough times. 

To purchase a home or to save and buy property to build?

Purchasing a home is going to be a lot easier but can be a stretch financially whereas buying land and building can give you the time you need to shore up the finances even though it takes more effort to get it right. Buying off-plan is a somewhat intermediate option that allows you to pay over a few years and not have the headache of building it yourself. However, there are risks to off-plan purchases. Ensure you buy from a team with an established track record.

What is one thing you wish the government would do to spur growth in the sector?

In Kenya, debt is excessively high because banks factor in their risks. Currently, the risks include an overwhelming number of non-performing loans and loss of collateral through title fraud. The government can help in establishing a decent credit rating agency and streamline the ability to seek legal recourse efficiently. Digitization of titles will also reduce these risks and allow banks to adjust their rates downwards.

With the many odds in the sector, where can one start to build a career in real estate?

Like anything else in life, nothing surpasses knowledge. The more you know, the easier it is to navigate the field and spot an opportunity. Obsessively learn everything there is to know and then get real world experience. Once you do that, you will recognise the real estate related problems that you can solve for your business to thrive. 

To save for a house or get a mortgage?

Save if you can lock it away and not be tempted to use it. Get a mortgage only if your monthly rental income from the property covers your monthly mortgage repayments.

Any projections of the sector post pandemic?

The residential sector, in my opinion, will remain stable but may not grow at the rates we were used to. Economic growth deterioration has dampened prospects in all industries. Real estate is no exception. In addition, commercial real estate is somewhat oversupplied and may go through some restructuring. We have been forced into a new working ‘normal’ and a lot of companies have found working virtually to be more cost effective.

This will affect the demand for physical office space. The hospitality and retail sectors have had the biggest disruptions to their business models and will look to diversifying their products to ensure they are solely not reliant on physical visits. E-commerce will play a much bigger role in shopping and dining services.

[email protected] 

Real Estate Investment Sakina Hassanali HassConsult
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