Developer speaks about trends in Kenyan property market
Kenyan property company Hello Properties’ Mandharini lifestyle resort was recently voted as Africa’s best multiple units development in the Bloomberg African Property Awards. Dinfin Mulupi chats with Hello Properties executive director Friso Abbing about the new trends in Kenya’s real estate market and areas of opportunity.
Give us an overview of Hello Properties
The several Hello Properties development companies are joint ventures between Kenyan and foreign investors financing the development of up-market properties in Kenya. We focus on high-end real estate projects and take an integrated approach of offering top quality homes that are supported by extensive on-site infrastructure and post-construction management services.
What is the reason behind your investment in self-catering facilities for tourists on the Kenyan coast?
There is definitely a growing trend towards self-catering on the Kenyan coast. More and more people want to rent apartments, cottages and villas. The middle class in Kenya and east Africa has been growing steadily and therefore the group of people going for holidays has increased. However, accommodation facilities, especially hotels, are very expensive. A mid-range hotel charges on average about US$150 a night; this is way out of range for most people travelling with their families.
We established Blue Bay Cove, a US$4.5 million project on the north coast of Kenya, to give holidaymakers the option of having a hotel experience at a third of the price. Blue Bay Cove has 12 homes overlooking the Indian Ocean, and is fully serviced with daily housekeeping, chefs, nannies, laundry services and a 24-hour concierge on standby. We opened in October 2011 and since then the occupancy level has been rising with many repeat customers. Our model of ownership and rentals, where investors purchase the homes and we rent them to tourists, has paid off well. The buyers earn a rental yield of 10% at a time when research shows that apartments in Nairobi are delivering much lower rental yields of around 5.7%.
Your Mandharini project has won awards and received a lot of attention internationally. Tell us more about it
Mandharini is a Ksh.4.5 billion (US$54 million) residential holiday project with 130 villas for sale and a boutique hotel set on 150 acres of lagoon front land in Kilifi. It combines several elements ranging from a golf course, water sport club, environmental conservancy area and the Mandharini Village. The Village is the hub of the development containing several bars, restaurants, spa, gym, kids club, and shops.
We are creating a lifestyle destination that offers activities for all members of a family. The villas will be sold and most of them will be entered into the rental pool, which will be managed by an international hotel operator. The operator will ensure top class management and high levels of bookings, leading to strong rental returns for our buyers.
Do you expect the killing and kidnapping of tourists in Lamu last year to affect the uptake and bookings in Mandharini?
First of all I think Lamu is well under control now. Large numbers of security officers have been deployed on the island to ensure safety. Everybody is looking at Lamu to see how the situation there turns out, and whether the travel warnings will be lifted.
Our projects are hundreds of kilometres south of Lamu and we are focusing largely on the domestic and regional markets. Their attitude towards these occurrences is not one of panic and our businesses at the coast are therefore hardly affected.
Research has shown that Kenya’s luxury real estate market recorded the greatest price increase globally in 2011. How do you see the sector performing moving forward?
The strong price rises show the power of Kenya. It’s a great country and it’s moving in the right direction. For the future I expect real estate prices to continue growing healthily, but probably at a more sustainable rate than the very fast rises of the last few years. The double digit growth of 20% a year witnessed in the last few years is hard to sustain in the long-run. New upmarket projects are rising fast in quality as the market is getting more discerning. This is a good trend and bodes well for the future.
Low-cost housing projects remain the eternal “gap in the market” as the potential demand is huge. However, due to the absence of good infrastructure in many parts, the costs and therefore sale prices of these projects are such that the homes are not really affordable for the target market.
What opportunities are still unexploited in the Kenyan market?
Kenya is the most developed country in the east Africa region and the middle class is growing fast, creating opportunities for housing. Business tourism has increased significantly in Kenya, creating the need for more accommodation facilities. There is a need for investment in affordable hotel accommodation facilities that are up to par with international standards.