The housing boom currently being experienced in Kenya has resulted in the slow uptake of commercial and residential real estate. Commercial Real estate investors in various parts of Nairobi are now accepting relatively low offers to boost occupancy levels in their developments. Similarly, residential real estate developers are also formulating flexible terms of purchase for buyers to boost their sales volumes. In this article, we discuss some of the means real estate developers are using to increase their profits.
Varying market conditions which result in changing interest rates are a major deterrent when it comes to home buying. In most cases, fluctuating interest rates keep prospective buyers away.
To curtail this, developers are now providing the free interest home buying option to individuals who can complete payment of a home over an agreed time frame from a minimum 36 months.
The payment plan may vary from an initial down payment between 10 and 20 percent after which the remaining amount is paid in installments.
For some developers, a buyer is required to pay at least 80 percent of the selling price by the end of a 3-year period, though in the case that a buyer falls out of the payments, the accumulated payment can be refunded without any penalty deductions.
To manage the fixed price product, developers will purchase bulk building and construction materials in advance and hence pass on the economies of scale and bulk buying to buyers.
One of the biggest barriers to home buying is the down payment requirement put on most purchases. To counter the challenge, developers are providing buyers with the option to buy a home without a down payment but in monthly installments. The strategy, which is in its infancy in Kenya, targets individuals whose income levels can allow them to make monthly installments but cannot afford to raise the down payment.
Basically, the structure allows individuals to pay rent and own a home without the trouble associated with sourcing for the standard 10-20 percent deposit.
Instead, buyers are obligated to make monthly installments for a period of 18 months or more whereby after completion, one can choose to rent or occupy as the scheme is converted into a negotiated mortgage which maintains or lowers the monthly installments.
Show houses are a great way of showcasing how a house will look like after adding aesthetics and furniture to appeal to potential buyers. In Kenya, although popular among developers, more buyers are opting for houses that come fully or partially furnished, saving one the trouble of lagging couches and beds up a flight of stairs.
For developers, this mode of selling is particularly popular with developers seeking to sell several units due to the rising glut of apartments and townhouses in Nairobi. They work with potential buyers to furnish the house according to the customer taste and preference.
According to property developers, staged units sell faster as buyers yearn for the total package. Currently, most developers will furnish one or two rooms in the house with the kitchen being the most preferred as the fittings are easy to work with. Furniture retailers are also cashing in on this trend by getting into partnerships with developers to furnish the show houses. Holiday homes are the leaders in this model.
By employing real-time technology and devices such as the VR virtual reality headset, developers can show off the progress of units of housing under construction as well as completed units.
First, the developers create a virtual tour which allows visitors to use virtual reality goggles, a joystick controller or VR headsets to walk through a finished or unfinished housing unit. The technology cuts on costs and allows a potential buyer to see what is happening without them taking a lot of their time.
Virtual reality is also being used in home improvements where shoppers can see a 3-D mock-ups of their renovation plans.
Some systems allow simulated space to be customized with personal sizes of rooms, finishing, and colors.
The efforts put in place by real estate developers are disrupting the real estate sector. For instance, virtual marketing is gaining preference as a marketing means for major developers in the country. And while interest-free purchases were pioneered by the Islam home buying structure, more developers in Kenya are adopting the technique in the face of changing economic conditions such as the ever-increasing prices of homes and demand for high mortgage qualifications. Notably, we see a large number of such offers from houses built within gated settings and mostly under construction. With the housing glut expected to persist over the foreseeable future, more developers will be getting innovative to make sales, thereby presenting prospective buyers with multiple options for purchases.
This article is written by Buildafrique Consulting Group; a Kenya Real Estate Consultant and Development Solutions provider that offers End-to-End Financial, Development Management, and Investments Solutions in Real Estate, to allow Developer, Investors, and prospective Home Owners manage risks and realize value for their investments in a fast-evolving Real Estate market.
Contact Us today for Solutions to your Challenge in Real Estate Investments and Project Development:
- Email: [email protected]
- Tel: +254 722 474285 / + 254 20 8058493
- Website: www.buildafrique.com