By David Wanjala
Buying land in an upmarket area and putting up rentals may seem like a good idea. It actually turns in good money for some individuals. When put on paper, these multi-billion projects look viable. But wait until you embark on a project targeting the wealthy. You will sell many of the units by chance. Sometimes, it takes many years, as long as three, to get someone to buy your highly priced house.
After weighing the many challenges that come with the upmarket segment, it turns out investors are better off focusing on the middle class, down to the low-income lot. Instead of constructing a house to sell at say, Sh15 million, it would be best to target high growth areas, and put up houses valued at half the figure. Alternatively, one can focus in counties where land prices are a little lower compared to major towns. This would also help reduce heavy financial burden currently put on buyers.
Most houses are built and bought with loans. With interest going through the roof, the cost of housing is bound to get more costly, which will eventually make real estate unattractive to both buyers and the developers.
In a market update released by Knight Frank in September, prime retail rents remained unchanged in the first six months of the year at about Sh8,593 ($84) per square metre per month. On the other hand, prime commercial office rents in Nairobi remained stable during the same period, at Sh2,148 ($21) per square metre a month – this is attributed to a number of multinationals down sizing their local operations.
Furthermore, demand for space from government agencies also reduced as residential rents in the high-end and upper-middle-income segments became sluggish, thanks to a reduced uptake of housing, occasioned by cumulative high prices over the past few years. What this means is that investors in real estate sector should then consider constructing affordable houses targeting a majority of Kenyans in the lower segment of the market.
There are worrying trends in the service industry such as rising rates on mortgages and collapsing banks and companies, among others. While the population rises, and with demands that people must live in better houses, developers can only entice bigger numbers of buyers with low income property, which is what most can afford.
On a more positive note, developers need to do everything possible to ensure business stays healthy. This can only be possible if, and only if, we start hearing stimulating and illuminating stories from high -end to middle income customers. There is no need for anyone to break a bank to buy a house, especially with low-cost housing now with us.
