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Low End Housing: High Risk, High Return
Rank: Elder Joined: 6/23/2009 Posts: 14,217 Location: nairobi
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Mkimwa wrote:obiero wrote:
Asante. Happy too with the outcome.. Took three years but the journey was worth every step.. Completed only one block out of the plan for three, but I doubt whether I have appetite for the extra four storied blocks.. I'm heading back to the securities exchange
Congratulations!! Do share some photos of the finished product if you will.. Once the money starts rolling in, dont be surprised to do the other blocks... How did the total spend compare with your initial estimates? @Mkimwa the project was executed slightly below budget, with very minor variance. Unfortunately since the units are now let, sharing of extra photos will not be possible
KQ ABP 4.26
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Rank: Veteran Joined: 7/3/2007 Posts: 1,635
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Swenani wrote:Wakanyugi wrote:wukan wrote:obiero wrote:Wakanyugi wrote:There is a question that no one is yet talking about. What is the likely effect of injecting so many extra housing units into a struggling real estate sector? Don't get me wrong, I am not against the idea. But we are seeing a lot of companies struggling to offload houses especially on the upper middle and upper class segments. And now Uhuru is about to take the middle and lower middle class off the table too. Could this finally burst the speculation buble that so many have spoken about? @Wakanyugi the demand at the low end is insatiable at the moment.. Even the government will struggle to bridge the deficit @Obiero, I don't get it if the demand is there why did you stop your construction(congrats by the way good stuff)? Can the lower end afford your estimated rent for you to recoup your costs? Lower end is in need of social housing. From the documentation GoK is building the social housing in Kibera, Kiambiu etc while private sector will cater for the emerging middle class through PPP. Some of the projects look like the ongoing civil servant housing scheme lumped in for PR purposes. GoK has already done these initiatives before with little impact on the market e.g Umoja, Jericho, Dandora. The impact on real estate will only be short term for the benefit of middle class. Most of government social housing projects even in the US, UK end up being crime-infested, dilapidated structures or high-rise slums. They are segregated in terms of income concentrating poverty in an area. Politicians with an eye on next elections don't give much thought to these projects and the effects are felt a generation away(like the projects in US). A mixed income approach would have been more ideal something close to what Tatu city is trying to achieve. Good points. But the effect of the projects you cite was not negligible. Initially touted as housing for the poor - they ended up benefiting the middle class. The real estate sector went through a depressed period in the late 90's (as did the wider economy of course). I suspect the coming on stream of massive housing stock in the 80's/90's; Dadora, Umoja, Nyayo Highrise (to an extent Buru) contributed to this state of affairs. I have no evidence though. Finally considering that 600,000 is still too high for the majority of our people to afford, should we relay tout this as a solution to the housing problem? Yes, A 600K purchased under the TPA for 25 years with an interest rate of 5% is aprox 4K every month while a 3M under TPA for 25 years is less than 18K every month Makes sense, if we can keep the costs to the amounts promised. I know a few speculators who are salivating at these prices. I recall Nyayo highrise was initially promised at 250K and ended up selling for 3 times as much. "The opposite of a correct statement is a false statement. But the opposite of a profound truth may well be another profound truth." (Niels Bohr)
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Rank: Veteran Joined: 7/3/2007 Posts: 1,635
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obiero wrote:Wakanyugi wrote:wukan wrote:obiero wrote:Wakanyugi wrote:There is a question that no one is yet talking about. What is the likely effect of injecting so many extra housing units into a struggling real estate sector? Don't get me wrong, I am not against the idea. But we are seeing a lot of companies struggling to offload houses especially on the upper middle and upper class segments. And now Uhuru is about to take the middle and lower middle class off the table too. Could this finally burst the speculation buble that so many have spoken about? @Wakanyugi the demand at the low end is insatiable at the moment.. Even the government will struggle to bridge the deficit @Obiero, I don't get it if the demand is there why did you stop your construction(congrats by the way good stuff)? Can the lower end afford your estimated rent for you to recoup your costs? Lower end is in need of social housing. From the documentation GoK is building the social housing in Kibera, Kiambiu etc while private sector will cater for the emerging middle class through PPP. Some of the projects look like the ongoing civil servant housing scheme lumped in for PR purposes. GoK has already done these initiatives before with little impact on the market e.g Umoja, Jericho, Dandora. The impact on real estate will only be short term for the benefit of middle class. Most of government social housing projects even in the US, UK end up being crime-infested, dilapidated structures or high-rise slums. They are segregated in terms of income concentrating poverty in an area. Politicians with an eye on next elections don't give much thought to these projects and the effects are felt a generation away(like the projects in US). A mixed income approach would have been more ideal something close to what Tatu city is trying to achieve. Good points. But the effect of the projects you cite was not negligible. Initially touted as housing for the poor - they ended up benefiting the middle class. The real estate sector went through a depressed period in the late 90's (as did the wider economy of course). I suspect the coming on stream of massive housing stock in the 80's/90's; Dadora, Umoja, Nyayo Highrise (to an extent Buru) contributed to this state of affairs. I have no evidence though. Finally considering that 600,000 is still too high for the majority of our people to afford, should we relay tout this as a solution to the housing problem? @wakanyugi indeed these projects have an impact even to this day! Eastlands was built around the stated estates.. In my thinking, the proposal by GoK to have a TPA scheme similar to the Nyayo Estate model is proper. Citizens will be able to pay 'rent' to the GoK real estate entity with a view to eventually owning the property, rather than throwing cash away to a landlord My free advise to GOK would be to let private sector agencies handle the rent collection. Otherwise we shall end up with the mess in Eastlands and Madaraka kanjo houses, or worse. "The opposite of a correct statement is a false statement. But the opposite of a profound truth may well be another profound truth." (Niels Bohr)
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Rank: Veteran Joined: 11/13/2015 Posts: 1,654
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@wakanyugi, I'm getting your point on the property cycle theory that boom years in real estate also bring the burst. However the stream of housing stock in 80's/90's was very limited to have any significant impact. The balloting for Buru was massive they had to use a computer to select. Umoja was offered as alternative to Buru with aim of having the allotees put up bungalows. It didn't work as well because the area ended up as high rise development with spillover into Donholm, Tena etc.
In the 80's there was a lot of demand for serviced properties with water,sewer and other amenities like shopping centres which was not met. The effect was the dispersed settlement pattern with homes being built in zimmerman, Githurai, Kawangware, Huruma etc without physical planning. This dispersal was very inefficient in the use of space, infrastructure and resources and largely contributed to depressed period in the 90's. This is what brought the spreading out of the city and matatus which keep following the settlement patterns.
Contrast this with how the Somali community kept to Eastleigh. They didn't spread their resources chasing new places to settle they concentrated on trade and services. The result you have a vibrant local economy and a massive redevelopment with buildings having both commercial and residential functions.
You will not see the economic vibrancy of Eastleigh in the GoK social housing projects. Some of the proposed settlements are far as Mlolongo disconnected and dislocated. The TPA scheme is proper and so too the multi-generation mortgages. Ownership of the units instead of rentals is much more desirable.
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Rank: Veteran Joined: 7/3/2007 Posts: 1,635
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wukan wrote:@wakanyugi, I'm getting your point on the property cycle theory that boom years in real estate also bring the burst. However the stream of housing stock in 80's/90's was very limited to have any significant impact. The balloting for Buru was massive they had to use a computer to select. Umoja was offered as alternative to Buru with aim of having the allotees put up bungalows. It didn't work as well because the area ended up as high rise development with spillover into Donholm, Tena etc.
In the 80's there was a lot of demand for serviced properties with water,sewer and other amenities like shopping centres which was not met. The effect was the dispersed settlement pattern with homes being built in zimmerman, Githurai, Kawangware, Huruma etc without physical planning. This dispersal was very inefficient in the use of space, infrastructure and resources and largely contributed to depressed period in the 90's. This is what brought the spreading out of the city and matatus which keep following the settlement patterns.
Contrast this with how the Somali community kept to Eastleigh. They didn't spread their resources chasing new places to settle they concentrated on trade and services. The result you have a vibrant local economy and a massive redevelopment with buildings having both commercial and residential functions.
You will not see the economic vibrancy of Eastleigh in the GoK social housing projects. Some of the proposed settlements are far as Mlolongo disconnected and dislocated. The TPA scheme is proper and so too the multi-generation mortgages. Ownership of the units instead of rentals is much more desirable. Thank you for the detailed explanation. I stand educated. "The opposite of a correct statement is a false statement. But the opposite of a profound truth may well be another profound truth." (Niels Bohr)
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Rank: New-farer Joined: 8/16/2017 Posts: 20
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What is your ROI, assuming 100% occupancy?  Congratulations on sticking with it to the end! obiero wrote:Mkimwa wrote:obiero wrote:
Asante. Happy too with the outcome.. Took three years but the journey was worth every step.. Completed only one block out of the plan for three, but I doubt whether I have appetite for the extra four storied blocks.. I'm heading back to the securities exchange
Congratulations!! Do share some photos of the finished product if you will.. Once the money starts rolling in, dont be surprised to do the other blocks... How did the total spend compare with your initial estimates? @Mkimwa the project was executed slightly below budget, with very minor variance. Unfortunately since the units are now let, sharing of extra photos will not be possible
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Rank: User Joined: 8/15/2013 Posts: 13,237 Location: Vacuum
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Jon_Gray wrote:What is your ROI, assuming 100% occupancy? Congratulations on sticking with it to the end! obiero wrote:Mkimwa wrote:obiero wrote:
Asante. Happy too with the outcome.. Took three years but the journey was worth every step.. Completed only one block out of the plan for three, but I doubt whether I have appetite for the extra four storied blocks.. I'm heading back to the securities exchange
Congratulations!! Do share some photos of the finished product if you will.. Once the money starts rolling in, dont be surprised to do the other blocks... How did the total spend compare with your initial estimates? @Mkimwa the project was executed slightly below budget, with very minor variance. Unfortunately since the units are now let, sharing of extra photos will not be possible 100% occupancy is stretching it too far.Arealistic ROI for rentals should be based on 70-80% occupancy depending with the target market and location/town If Obiero did it, Who Am I?
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Rank: Elder Joined: 6/23/2009 Posts: 14,217 Location: nairobi
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Swenani wrote:Jon_Gray wrote:What is your ROI, assuming 100% occupancy? Congratulations on sticking with it to the end! obiero wrote:Mkimwa wrote:obiero wrote:
Asante. Happy too with the outcome.. Took three years but the journey was worth every step.. Completed only one block out of the plan for three, but I doubt whether I have appetite for the extra four storied blocks.. I'm heading back to the securities exchange
Congratulations!! Do share some photos of the finished product if you will.. Once the money starts rolling in, dont be surprised to do the other blocks... How did the total spend compare with your initial estimates? @Mkimwa the project was executed slightly below budget, with very minor variance. Unfortunately since the units are now let, sharing of extra photos will not be possible 100% occupancy is stretching it too far.Arealistic ROI for rentals should be based on 70-80% occupancy depending with the target market and location/town @Jon gray the investment is in a rural setting hence ROI is unprintable. usability of the property market value as collateral for other investment(s) is key for me
KQ ABP 4.26
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Rank: Elder Joined: 2/16/2007 Posts: 2,114
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Just wondering..when a property is being valued,would the accruing rent be taken into account or that would be a non issue? obiero wrote:
@Jon gray the investment is in a rural setting hence ROI is unprintable. usability of the property market value as collateral for other investment(s) is key for me
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Rank: Elder Joined: 6/23/2009 Posts: 14,217 Location: nairobi
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Chaka wrote:Just wondering..when a property is being valued,would the accruing rent be taken into account or that would be a non issue? obiero wrote:
@Jon gray the investment is in a rural setting hence ROI is unprintable. usability of the property market value as collateral for other investment(s) is key for me
Non issue since it could be a non rental
KQ ABP 4.26
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