Multi-billion chamas transforming real estate

Chamas have graduated from being the monthly gatherings where members discuss their social issues between cups of tea and mandazi to serious investment groups with several real estate investments, writes NJOKI CHEGE

Without a doubt, real estate is a capital intensive investment that requires immense effort to own and reap profits from. Most middle class people will probably own one or two properties in their lifetime, while to some, the dream of owning a property remains a mirage.

It is for this reason that many Kenyans will find themselves in investment groups or chamas to seek the most viable investment vehicle through which to channel their money. In most cases, real estate tops the list of suitable investment options and that is why many chamas own a piece of land or a block of flats.

But the bar has been raised and investments taken a notch higher, as more and more chamas invest monies to the tune of billions in real estate. It works well for everyone, since every member gets an equal piece of the cake.

Mwai wa Kihu. Chairman, Amalgamated Chama Limited.

Proper advice

Patrick Kariuki, the chairman of Kenya Association of Investment Groups (KAIG), says investment groups have a huge potential and they play a big role in the country’s real estate industry.

"Some investment groups and chamas have investment capital exceeding Sh120 billion, which makes them significant players in the real estate market — both on the supply and demand side," he says.

Kariuki reckons that group investments have a high likelihood of prospering if they invest wisely and with the proper advice.

"Chamas, which have invested in accordance with good investment policy and professional advice have made very good returns. With the current high interest rate environment, it is key that they keep close contact with their professional advisors to manage their risk exposure," says Kariuki.

The KAIG has so far brought together 70 investment groups. Many of these associations are eager to grow fast and invest in high-value assets like real estate and in the riskier, but higher returning small and medium enterprise assets.

It is for this reason that Amalgamated Chama Limited (ACL) or ‘The chama of chamas’ was formed. The organisation provides an avenue for investment groups to pool their resources and realise superior long-term returns under a serious, dynamic and best practice based investment group.

The role of ACL is to see how best the monies collected by chamas can be invested and reinvested with maximum returns. Besides real estate, the organisation also invests in private equity.

According to ACL’s chairman Mwai wa Kihu, many chama members choose to invest in real estate in order to realise a dream they would otherwise have not realised alone. In a chama, individuals do much better and move up faster provided the group is serious and organised.

Board of governors

Says Mwai: "Many chama members are small or middle income earners who find it difficult to buy property. To own several units of real estate is tough unless one is extremely wealthy or successful. But their dream are being realised thanks to chamas."

Mbugua Gecaga. Marketing Director, Home Afrika.

So far, ACL has 18 constituent chamas and barely a year after its existence, it has bought 600 acres of land in Loitoktok, at the foot of Mt Kilimanjaro. The group is in the process of facilitating funding to build an exquisite holiday resort. Not all members of KAIG are members of ACL — as it is optional, but chamas that want to join ACL have to register with a minimum share capital of Sh1 million and a monthly contribution of Sh10,000. The ACL board of governors is then left to make investment decision, such as the 600 acres of land in Loitoktok.

"We basically want to brand the word chama to be a respectable name — to be the ‘Toyota’ of investment in Africa," he says.

Another investment group that has left an indelible mark in the real estate industry is Home Afrika, which initially began as a group of five friends on a mission.

"Our aim was to develop a concept that would deliver housing for the low-income earners. The reality, we realised, was that developers only constructed for the high-end market, leaving out the low-income earners," says Mbugua Gecaga, the Marketing Director of Home Afrika.

The five friends shared their dream with other friends and before they knew it, 122 people had come on board, and in July 2008, Home Afrika Limited was born.

Out of the 122 members, a board of governors was elected as well as several other committees to come up with various projects.

About two years ago, the company went into a joint partnership with a landowner and 18 months later, Morningside Office Park came into being. The apartment is almost sold out now. The shareholders have recovered their money and the profits re-invested to yet another project known as Migaa.

Limited liability

Today, the private company has three major real estate developments — the Sh400-million property on Ngong Road, Morningside Office Park and Migaa (a 774-acre piece of land now estimated to be worth Sh11 billion).

"We want to start by serving every county in Kenya then we go to other African countries," says Mbugua.

If you want to take your investment group (chama) to the next level and have a chance to invest big in real estate, you are first advised to register it as a limited liability company in order to qualify to join KAIG. The next step would be to join ACL or even work independently, but make sure you get the right information before investing.

You are advised to work with small compact groups because they are easier to manage. They ease communication and decision-making. The magic numbers are between three and seven members.

But as Mwai advises, Kenyans who want to make it big in investing should move away small short-term investments. He adds that patience is key in this line of investment and one has to wait for at least five years to start thinking about reaping dividends.

"There is no promise of quick returns. We want to promote the investment mind-set among our members. It is time we moved away from ‘Christmas saving’ to long-term investments with greater profits," he says.