With the government’s plan to build more affordable housing units in its affordable housing plan, local real estate firms are jumping into this opportunity to fill the gap that otherwise the state might not fill.
Government has been trying to be at the forefront in delivering affordable housing units. However, it has fallen short of this projections in most cases. For instance the state has not been able to deliver more than 50,000 units annually. This contributes greatly to the housing deficit that continues to affect the livelihoods of many citizens especially urban dwellers.
With the constant increase in urban population, the government’s failure to meet its projections has given a leeway to local firms to tap to this opportunity. According to government data, more than 60 per cent of urban population are in are living in informal settlements. These settlements are punctuated by poor living conditions including but not limited to insecurity, lack of safe water, congestion and lack of social amenities.
Amaziah DMW limited is one of the local firms which has taken up the opportunity to fill the gap that the government has failed to fill through its new model of funding and mainly working with investors to deliver housing units. Hellen Kamwamba, the director of Amaziah DMW says that most of the developers has been targeting larger families thus neglecting smaller families. This, however, is part of the entire plan to build units for general population.
“We had no investor who builds a community based standard of living. There is more of two bedroom and three bedroom and most of the developers have been targeting big families yet there is need or young families and people who are starting out in life to get houses,” Kamwamba notes.
How it works
The firms works on consumer-centric projects where it works with investors to build the affordable housing units by partnering. This model has proven viable because sourcing capital in Kenya through financial institution and other investors is a not easy to come by. Kamwamba says that they preferred off plan projects where investors invests in projects that they take ownership upon completion and rent them out to tenants through the management of Amaziah DMW.
“The concept of Amaziah project has been off plan building that means part of our capital comes is coming from the buyers. For instance, in off plan project, the buyers need to put a down payment and then you have to arrange a payment plan with them. We are more of partners with with the buyers,” she says.
Contributing to housing agenda
Kamwamba opines that the private sector is part of the housing agenda as the government may not build houses for every individual. Additionally, they build the units in the outskirts of Nairobi making it more cheaper compared to the ones situated closely to the city and accessible as well.
“We are part of the housing plan. Given that the government cannot cater for every market and most of the developers are in Nairobi and there is scarcity of land and expensive so we have mainly focused in the outskirts of Nairobi which makes the project relatively affordable. The government cannot built for everyone and that we can deliver the project on time and also deliver the project at an affordable price thus we are contributing to the housing agenda,” she says.
This off plan project is flexible in such a way that investors can decide to live in one of the units that he’s invested in rent out the rest.An investor may partner with the company to build several units and upon completion choose to live in one of the units and rent ou the rest thus getting a unit to reside on and getting passive income from the other units that are rented out.
“Once we sell the project, it’s upon the discretion of the buyer to decide whether to buy as an investment or rent out the unit. For instance a buyer who buys multiple units can opt to live in one of the units. The units are quite spacious and also about the amenities and locations, it can easily be accessed using either public or private means. We have a pool on site, we have a retail center,” she says.
Major setbacks
Despite the potential that such a project can have in the housing industry, there are tons of bottlenecks that threatens to cripple it. One of such setbacks is the constant increase in taxes by the government which makes the building materials to be expensive.
According to Kamwamba, they offer clients with a fixed price for but the changes in price of construction material as well as the declining shilling against the dollar is a great challenge.
“The biggest challenge is the cost of construction because in off plan, you fix the price and log in the buyers but along the way we have seen the cost of construction go up because of various reasons including the exchange rate with (the) dollar and inflation and it becomes difficult to go back to buyers to increase the price,” Kamwamba narrates.
She added, “Another challenge is macroeconomics and the interest rate have gone up. It’s not easy to get credit in Kenya.”
Kamwamba also pointed out to acquisitions of approvals and land registry as one of the setbacks which slows down the projects. Additionally, she notes that financial institutions don’t like investing in off plan projects.
“Getting approvals from government and land registry takes quite some time which is slowing down the process,” she says adding that “Financial institutions generally shy away from financing off plan projects.”
She urges the government to ease acquisition of approvals in order to fasten the development of housing units as it contribute to the housing agenda.
