Pooling together to invest in real estate opportunities in Kenya

//Pooling together to invest in real estate opportunities in Kenya

Pooling together to invest in real estate opportunities in Kenya

The principle of collective responsibility and pooling together is at the heart of almost every grand venture or company that exists today. The adage that says, “If you want to go fast, travel alone, but if you want to go far, you ought to go together” stands true in the world today in every sector of our economy. The ability to work as a team defines successful ventures in the corporate scene. This is no different within the real estate sector in Kenya. If you are interested in real estate opportunities in Kenya, this is the way you  must go.

Real estate in Kenya requires a collaborative approach to succeed

real estate development in KenyaWith the growth of the real estate sector throughout the country, there has been a definite increase in the attention that various sector players have given to the industry. The truth is that there is a need that needs to be fulfilled in the society. The need for affordable housing, adequate infrastructure linkage as well as creation of affordable usable facilities for commercial activities are needs that require to be bridged within urban settlements in the country.

Real estate in Kenya requires a product that the prevalent market can absorb

Paying attention to and providing for this kind of market requires an entry strategy that favors high volume inexpensive financial products, quick market turnover and relatively low time demands on loan payback. This sounds like an investor’s dream financial package, but it is the reality required for a product for the middle to lower level of the market to be realized. In addition, it may call for developers to settle for somewhat lower profit margins such that the end product can be absorbed by the target market.

Such dream finance is challenging to obtain within a financial dispensation as the like facing Kenya today. Financial institutions interested in making a kill in the market have financial products that require strong financial inflows to be present before they can get involved in a project. Getting such a project off the ground therefore requires a developer to levy goodwill from relationships and other more friendly sources to be able to obtain sufficient seed capital that does not have as many encumbrances.

Incidentally, this brings us to the principle of collective investment as a means to achieve sustainable capital for a project. Sustainable capital is capital that is affordable to the project within its target market and delivery period. The demands accompanying the project finance should be able to be absorbable throughout the life of the project, and even better should be absorbed and paid back by the project itself. One should not have to go to other sources of finance beyond the project itself to obtain the money they need to service the obligations of the project arising especially out of financial demands.

Collective Investment is the way to achieve affordable real estate in Kenya

Therein lies the quandary for many projects as financial institutions demand moratorium interest immediately a developer draws down, regardless of the fact that the project is yet to reach a place of yielding revenue for itself that can be used to service interest payments.

The only solution that is viable for most young developers can be found in the power of aggregation. When people pool together, and are able to agree on reasonable repayment time frames and financial guarantees, it is possible to achieve greater projects offering higher yields than usually possible through other formal means. Trust can be attained through use of formal agreements enforceable by law to ensure that a developer delivers according to their promise. With the understanding that the developer shall offer returns that are worth the risk of involvement in the joint venture, an investor can get into a market and attain a reasonable level of returns for themselves.

Another level of security that an investor in such a project can attain and enjoy is through conversion of their contribution into ownership stake in the whole development. Their investment can be secured by relevant agreement clauses that will allow their investment contribution to become equity stake in the project should the alloted time period for them to receive their returns get delayed due to market forces. They do not lose their money but instead gain partial ownership into a real estate development that entitles them to a part of the recurrent revenues that the project will generate, as well as the final proceeds when the project sales do take place.

This kind of arrangement has been further structured and formalized at a higher level through the use of REITs. The principle of collective investment in real estate is the same, though the method of payback is different in the way one’s value of investment is calculated and dividends are realized and paid back.

Interested in opportunities for real estate development in Kenya? Get in touch with us.

Through Adroit Architecture Ltd. we are offering investors an opportunity to take part in the real estate market in Kenya through partnering with us on our real estate investment projects. Offering the level of guarantees stated above, we are inviting interested investors wanting to partner with us in development of various real estate projects. Top in our agenda is the completion of the Kenani Waterfront Project, which is a masterplanned gated community of 36 homes on two locations, among others that are coming up.

Interested in receiving further information on real estate investment opportunities in Kenya? Give us your details right here and we shall be in touch with something worth your while.

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By |2015-01-20T16:12:11+00:00January 20th, 2015|Real Estate|0 Comments

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