Kenya: Chinese luxury resort developer not targeting buyers from China
Real estate is a thriving industry in Kenya, attracting millions of dollars in investments from individuals and institutions. In the capital Nairobi, and across the country’s secondary cities, big housing projects, shopping malls and office buildings are springing up. Chinese investors, who often focus on infrastructure and natural resources, are now also looking for a piece of Kenya’s property boom.
North of the port city of Mombasa, Chinese real estate firm Sultan Palace Development is putting up a $47.5m luxury resort. The 43-acre beach-front project comprises villas, condos, beach houses, a waterpark and a five-star hotel to be managed by a leading hotel brand. The first phase of the Sultan Palace Beach Retreat project is set to be completed by December 2016.
Sultan Palace Development is a subsidiary of China-based Jiangxi Xinyu Real Estate Development Company, which is part of China Jiangxi Corporation for International Economic and Technical Cooperation. The group, also known as Jiangxi International, has been involved in Africa for over a decade, mostly doing infrastructure construction work in Botswana, Zimbabwe, Kenya, Ghana and Zambia.
Similarities to China’s property market in 1990s
Jiangxi Xinyu has been behind several property projects in China. According to Liu Tiancai, general manager of Sultan Palace Development, the Kenyan project is its second undertaking in Africa, after putting up a commercial building in Botswana.
“We have a long history of doing real estate in China. As a company we experienced the boom period in China. And in Kenya we see what China’s real estate market looked like in the late 1990s. We see a lot of opportunities here with many people looking to buy homes,” says Tiancai.
Over the last five years several high profile gated and golf housing projects, targeting middle class and wealthy families, have been built in Kenya. Despite security concerns that have affected tourism, developers are putting up luxurious holiday homes at the coast. Some high profile projects include the EnglishPoint Marina in Mombasa and the 2,500-acre Vipingo Ridge golf development.
“We chose the coastal town of Kilifi because of the ocean, the beautiful beaches and the strategic position of Mombasa city. The city has a port, an international airport and there is a new railway project under construction. There is also a gap in the real estate industry at the coast – with very few such projects there despite a growing demand,” says Tiancai.
Chinese not buying
The Sultan Palace Beach Retreat is targeted at buyers who will eventually rent to tourists. The holiday homes sell for between Ksh.11m and Ksh.72m (between $104,000 and $683,000). So far it has attracted mostly local professionals and business people, as well as some expatriates.
But just because the developer is from China doesn’t mean Chinese professionals in Kenya are lining up to buy.
“The Chinese professionals here don’t have a long history in Kenya and most of them don’t have that sort of money. And the people in China who have lots of money prefer to buy real estate in developed countries, not in Africa,” explains Tiancai.
Chinese companies have a vibrant presence in Kenya developing roads, rail, and port projects. They are also conspicuous in the technology industry with many electronics items coming from the Asian country. While Kenyans may praise Chinese-built highways, some hold negative perceptions regarding the quality of other products and services associated with China.
Tiancai notes that when people find out the Sultan Palace Beach Retreat is being developed by a Chinese company they are often a bit put off.
“It is a reality we cannot deny. So we always tell them to go visit the project – and after the site visit their impression changes. One Kenyan doctor [who was initially hesitant] paid for a house immediately after going to the site visit. He has been very supportive ever since, and at events and site visits he always comes along with his friends.
“I believe if we do the right things we will slowly build trust,” says Tiancai.
He notes that the development was designed by award-winning international firm Wimberly, Allison, Tong & Goo (WATG). The luxury resort will also feature high quality finishes sourced locally, and some imported from Asia and Europe.
“I know some Kenyans don’t have a good impression of some Chinese companies when it comes to quality. But for us quality is the first priority. We have the experience from China, so definitely we are bringing some best practices from there,” he adds.
A series of terror attacks over the last four years, which affected Kenya’s tourism industry, has also had a negative effect on sales.
“We have a lot of potential buyers but many are still not certain about the security situation. The holiday homes are supposed to be rented out to tourists and the tourism industry has been adversely affected by terror attacks. However, sales have improved in the period after [US President Barack] Obama’s visit. People are more optimistic and confident about the economy and the security situation,” says Tiancai.
Sultan Palace Development plans to put up another real estate project in Nairobi, and wants to expand into other markets in Africa.