DRYING CASH TAPS COMPEL PROPERTY DEVELOPERS TO REVIEW STRATEGIES.
By Movince Oduor
With economic times getting tough, real estate developers have been forced back to the drawing board to rethink their methodology of raising funds. This is catalyzed by the increasing futility of their monotony of using capital market to increase funds.
Real estate sector has quickly adapted to the dynamism of mega projects, but its desire to carry on with the ‘mega trend’ is deeply hurdled by cash crunch crisis and high rates from financiers.
Fusion Capital, one of the key players in the sector tested the murky waters of raising funds through Development Real Estate Investment Trust (D-REIT). Their bid to put up a sh. 2.3 billion prime property dubbed Greenwood City in Meru never saw the light of day, having only collected sh.873million with a paltry of four investors out of the standard requirement of seven.
While it is undeniable that high end developments have been out of grasp for many Kenyans, property developers are keen on diversifying incentives that are aimed towards forming partnerships to finance the projects.
Fractional property ownership, a form of property ownership with its roots deep in Europe and the United States is slowly taking center stage in the Kenyan arena. In this setting, buyers are able to own a share of property, for example a luxury home worth millions of shillings at just a fraction of its actual cost.
One such developer bringing the foreign trend on the local sphere is Nest Manor. Its flagship project Nest Manor residence and suites, located in the serene King’ong’o area just two kilometers from Nyeri town offers deluxe, premium and executive suites that can be co-owned by up to five people. According to Annette Muthoni, Nest Manor Managing Director, the return for investments for a deluxe room will be sh.315, 000 per year, sh.395,000 for the executive room and sh.595,000 for the premium suite per individual. To own the deluxe room, one will cough sh.1.94 million per share with a deposit of sh.500,000 and a payment of sh.120,000 per month for 12 months. For the executive room, a buyer needs sh.2.4 million per share with a deposit of sh. 600,000 and payment of sh.150,000 per month for a year while the premium suite terms state an investment of sh.3.6 million per share with a deposit of sh.900,000 and a payment of sh.225,000.
Soho furnished apartments; a player with similar strategy allows ownership of one unit, which it strictly operates as a let out. This ensures the investor earns interest from the revenue made when the room is booked. Soho has ownership ranging from studio, one to three bedroom units which it surrenders to an operator who takes charge of overall welfare on its behalf.
At Soho, apartments are quoted at an average of sh.9.5million for a studio to sh.35million for a three bedroom duplex. Soho, a penchant for quality prefers to use international operator as it seeks a niche for newcomers who want affiliation with global brands.