Real Estate Finance and Capital Raising Challenge in Kenya, and Solutions available for Investors.

Posted on  |  Author Njoroge

YOUR CHALLENGE:

One of the major challenges to many Kenya Real Estate Investors and developers is roping in Finance into their development projects, in order to bridge the finance deficit occasioned with not having all the financing to meet the Project Cost Plan.

The challenges to Investors also include preparation of Real Estate Business Plans, coming up with the right Capital Structure for the project, Structuring Real Estate Joint Ventures, presenting the project Business Case to Investors, management of Investor’s relations, Legal Deal Structuring for Joint Venture Project, and Investment Management during Project Implementation.

YOUR SOLUTION AS AN INVESTORS:

There are various forms of Real Estate and Project Finance solutions and options, for investors and developers venturing in real estate investments in Kenya. The various solutions varies with the nature of project, the investment and property type, the finance deficit in a project, size of the project, and investment holding period for the financing. The various solutions and options include the following:

  1. Equity Financing – for joint venture structured project, in which the project sponsor and the financier pull resources together in form of land and capital, and through a special purpose vehicle of company and defines the relationship between the parties, obligation, and profit sharing arrangement.
  2. Contractor Debt Finance – whereby the Contractor comes into the project both as an Investor and Contractors in two separate contracts – one as investor in form of labour and materials equity contribution, or structured debt, and at the same time having a separate contract as the building contractor for the project. The model is common with Chinese Contractors, through offering of building-materials as equity or debt financing into the project.
  3. Institution Debt Finance – from local and international Debt Fund institutions.
  4. Bank Debt Finance – from your local or international banks.
  5. Pre-Sale Finance – whereby you can raise part of financing through off-plan sale for the development units or final product.
  6. Buyer Financing (Selling at Cost) – In this type of arrangement, a developer sells the investment property or final market product at cost or at the exact cost invested into the development, that is, selling the investment property at no profit in order to attract potential investor who are keen to make a good return once they sell the investment property at a profit once the project has been implemented or completed. In this case, the developers or investors reduces the price of redundant properties to attract buyer investors who were unable to buy at a higher price due to reduced income.
  7. Consultancy Services Finance – whereby the Project Consultancy Team contribute part of their professional expertise as equity into the project, for higher return payment later in the project.
  8. Crowdfunding – whereby several investors with common real estate investment goals come together to pool financial resource in order to invest in real estate projects, mainly through business clubs or local social groups. Crowdfunding creates a greater investment power, thus more diverse and rewarding investment opportunities through a simple economy of scale in a slow market economy.
  9. Islamic Finance, or Sharia-compliant finance.

Capital raising for a development project takes various structured step processes which includes Consulting and Advisory Phase, Investor Relations Phase, Transaction Phase, and Implementation and Recovery Phase.

THE CONSULTANT TO ENGAGE:

The Consultant to engage for Project Finance and Capital Raising for your development project is a Real Estate Finance Consultant.

WRITER OF THE ARTICLE:

This Article is written by Buildafrique Consulting Group, Kenya multi-disciplinary consultancy, that offers END-TO-END DEVELOPMENT CONSULTANCY, REAL ESTATE, and PROJECT FINANCE solutions through specialized subsidiaries. Among our solutions includes:

  1. Feasibility Studies and Market Research.
  2. Project Finance and Capital Raising.
  3. Project Management.
  4. Investment Design Appraisal.
  5. Quantity Surveying
  6. Construction Cost Consultancy
  7. Physical Planning and Planning Permissions
  8. Environmental Management and Impact Assessment
  9. Real Estate Development and Structured Investment Solutions
  10. Property Valuation
  11. Marketing and Property Sales Agency
  12. Property Management and Facility Management

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