A look at Real Estate Joint Ventures in Kenya, and steps to know in Finance Structuring for Investors in Kenya Real Estate Market, for Investment Risks Management.
Real Estate Joint venture in Kenya is a business agreement between two or more real estate parties who decide to pool their resources together to undertake a specific real estate project. The arrangement allow for diversifying by the Joint Venture partners, pre-emptying competition, improving agility, sharing risks, scaling up efficiency, accessing skills and capabilities, as well as new markets.
Furthermore, a Real Estate Joint venture can be either contractual – where the parties agree to work together and as such form a separate legal entity to act as the special purpose vehicle, or a corporate joint venture – where the parties come together to form a corporate entity, which could be a limited company with the parties each owning shares in the company.
The following are steps that every Real Estate Investors should consider, if he or she intends to structure a joint venture investment deal with a Potential Investors, or inviting an Investor to invest a stake into the project.
Feasibility study.
The project sponsor is the person or group that owns the project, and who takes the overall accountability for the project, most of the time being the land owner or Real Estate Investment Management Company. As such, the project sponsor should establish the viability of the project by conducting a feasibility study, which should also showcase the rate of return of the intended project, as well as cost-benefit analysis. Moreover, a triple bottom line analysis comprising social-environmental-economic benefits of the project will be important to showcase in the feasibility study, for interpretation of the additional benefits the project will bring. Furthermore, to assess the probability of the project to achieve a satisfactory performance as intended in the objectives, a risk and sensitivity analysis should be conducted.
Preparation of Business Plan, and Investment Capital Structure Model.
The project sponsor has the upper responsibility for preparing the Real Estate Investment Business Plan for the project, from the outcome of the Feasibility Study. Real Estate Business Plan should showcase the proposed design concepts for the venture, associated costs for the project, implementation and operational methodology, marketing strategies, as well as risks mitigation strategies. The Business Plan should also show a Capital Structure of how the project sponsor intends to fund the project, and the investment stake that he/she proposes to offer to the investor partner.
Preparation of Capital and Preferred Returns Payment Model, and Profits Residual Payment Model.
Additionally, the Business Plan should showcase how proceeds from the project shall be paid out to both the sponsor and the investor as return of capital invested into the project, as well as payment of preferred returns and residual cash flow to both the Sponsor and the Investor. Besides, the formulae for sharing return should be clearly stipulated in the Model, for adoption in the joint venture agreement.
Finding an Investor Partner and setting objectives.
It is crucial for the Project Sponsor to research the partnering entity or investor to make sure that they are compatible in terms of performance, level of commitments, reputation, financial status, and creditworthiness. Additionally, the project sponsor should analyze each investor partner’s comfort and adaptability to the project technology as well as the skills required. Besides, the parties should be clear about the purpose of the formation of the joint venture, the individual party’s aims, and visions so that all undertakings in respect to the Joint venture are in line with the stated objectives. As such, the project sponsor should evaluate the skills, market knowledge, and the final commitment to the ultimate goal by the investor party they are willing to enter with or invite into a joint venture. Nevertheless, it is important to protect the confidential information of all the parties involved at this stage, and as such, a mutual non-disclosure agreement should be signed.
Technical Due Diligence
Investors looking forward to investing into a Joint Venture should visit the site where the project is set to be developed, and as such, establish the viability of the project by looking at the macroeconomic, location, and market factors such as the infrastructure, area zoning, security, support facilities, and other complimentary social amenities in the area. The due diligence also entails review of the Sponsor’s Business Plan, in relation to market dynamics of supply and demand, as well as review of all legal standings regarding the ownership of the property, and all previous transaction on the property. The technical due diligence enables the investor to confirm on the project particulars included in the Business Plan, as well as the viability of the project.
Drafting a Joint Venture Agreement, and Investment Memorandum
A Joint venture may bring up conflicts between partners in the course of the undertaking, if legal aspects of the same are not handled well. As such, the Sponsor should incorporate the professional help of a lawyer and Financial/Investments Real Estate Consultant to help in coming up with and documenting the Joint Venture Agreements outlining the terms and conditions of the investment development projects, and a memorandum of understanding covering issues like communication protocol, confidentiality and conflict resolution. This document is sometimes referred to as Investment Memorandum, of which the sponsor can either decide to prepare before inviting the Investor Partner comes into the project, or after the Investor Partner has come into the negotiating table.
Moreover, the Joint Venture Agreement (JVA) or Investment Memorandum should be well negotiated and formulated to ensure transparency and to address the following issues:
i.) The purpose of the venture and the type of project to be undertaken
ii.) The structure of the Joint Venture, either contractual or a separate business entity.
iii.) Ownership of intellectual property created by the joint venture
iv.) The development approvals, and responsibility of the same between the Sponsor and the Investor.
v.) Profit, liability, and loss sharing
vi.) Project timelines
vii.) The roles and obligations of partners, shareholders agreement, and profit and returns sharing methodology.
viii.) The modes of making decisions, project finance, and taxation
ix.) Termination of the Joint Venture agreement.
Formation of the Joint Venture
Upon documentation and signing of the Joint Venture Agreement or Investment Memorandum, a special purpose vehicle company is formed to accomplish the joint venture’s objective. Besides, as discussed earlier, the investor could either choose to form a separate legal entity or structure a contractual venture which can operate under a joint venture agreement without having to create a separate business entity. Moreover, with the formation of a separate legal entity, such as a limited company, the entity should be registered as a private company under the Kenya Company Acts. Besides, having a limited company provides more legal protection, while the contractual option is best suited for short term projects.
Approval and Project undertaking
Upon approval of the project by the relevant government bodies, the joint venture company should then commence the project by incorporating professionals like Project Managers, Architect, Quantity Surveyors, e.t.c., if the professional had not been appointed already during conceptualization of the project and preparation of design documentation.
In conclusion, when the project sponsor or Investor gets an Investment Partner with the correct skill sets, capital resources, and market knowledge, joint ventures are beneficial to making a business idea to come into reality. Nevertheless, joint ventures open investors to risks and liabilities, and therefore, the Project Sponsor and Investor Partner needs to understand the possible risks and formulate them in the joint venture agreement through the help of Real Estate Finance and Investment Consultants, and Legal Professionals.
Buildafrique Consulting Group is a specialist in Real Estate Joint Ventures in Kenya, together with structuring joint venture agreement and Real Estate Finance. We also structure Investment Capital and Payment Financial Models associated with Real Estate Joint Venture Investments.
B.) WEEKLY NEWS HIGHLIGHTS
MAJOR ECONOMIC NEWS HIGHLIGHT.
i.) Implementation of new tax laws on water, beer, and fuel delayed to next year
The Kenya Revenue Authority has delayed the implementation of a 5.5% exercise duty for a wide range of goods, including fuel, bottled water, juice, and beer, by six months to commence on 01st January 2021. That follows the amendment to the Finance act 2020, where the tax arising from annual inflation adjustment will be effective from January 2021 instead of 01st July 2020, in line with the Finance Bill of 2020.
ii.) VAT refunds amount to sh25 billion
In a statement on 07th July 2020, The Kenya Revenue Authority (KRA) said that it had paid firms Sh25 billion in value-added tax (VAT) refunds as of June 2020 in the face of the coronavirus crisis. According to the KRA Commissioner for Domestic Taxes Elizabeth Meyo, in the 2019/2020 financial year, claims worth Sh36.1 billion were processed, out of which Sh25 billion were paid out. She further said that the amounts paid so far were a new record compared to the previous highest payment of Sh14.1 billion in the 2018-19 financial year.
iii.) The National Treasury says economic growth will not slump past 2.5%
The Cabinet Secretary for Finance Mr. Ukur Yatani expressed confidence that the country’s diversified economy will weather the impact of Covid-19. While launching the second voluntary national review on the implementation of the sustainable development goals report on 07th July 2020, the CS said that Kenya’s economic growth would not go below 2.5 percent, even as the Covid-19 pandemic continues to ravage various sectors of the economy. The cabinet secretary further said that the partial re-opening of the country, announced by President Uhuru Kenyatta on 06th July 2020, will boost economic activities and, consequently, economic growth.
iv.) Majority of MSMEs require more than Sh. 250, 000 in the capital for virus recovery
According to a survey conducted by Nairobi-based Viffa Consult between 28th May 2020 and 6th June 2020, the majority of micro, small and medium enterprises (MSMEs) require sh250, 000 in capital support to get back in shape, with only eight percent needing more than sh1million capital boost. The survey report, which was released on 9th July 2020, further indicated that forty two percent of firms that suffered under the coronavirus induced pandemic required between sh50, 000 and sh100, 000, while seventeen percent required between sh101, 000 and sh250, 000.
CONSTRUCTION INDUSTRY HIGHLIGHTS
i.) Kenya to adopt World Bank’s green housing standards in its affordable housing project
Ministry of Transport, Infrastructure, Housing, Urban Development, and Public Works Principal Secretary Charles Hinga, revealed in a virtual meeting on 07th July 2020 that the Kenyan government will adopt the World Bank’s green housing standards in its affordable housing program. The principal secretary said that Kenya is keen to embrace low carbon housing developments to combat climate change. The PS further said that the minimum standard for the design of affordable, climate-friendly homes should be IFC’s excellence in design for greater efficiencies (EDGE) green building certification program.
ii.) NMS clears Nairobi development approval backlog
The Nairobi metropolitan services cleared the backlog for 4,400 development approval applications that had been stuck with the Nairobi city authorities since august 2019, paving the way for a stream of property developments in Nairobi. The success is due to the introduction of the e-construction development control system to process development approvals in Nairobi County. The backlog came after the Nairobi Governor Mike Mbuvi Sonko suspended the Nairobi county’s urban planning chief and 16 other members of the county planning technical committee between august and September 2019.
iii.) NMS establishes a new urban planning technical committee to handle building plan approval.
In a public notice on 06th July 2020, the Nairobi Metropolitan Services (NMS) announced the establishment of a new urban planning technical committee to handle building plan approvals in the city. The notice further stated that the new multi-sectoral urban planning committee would handle all planning approvals while the director-general’s office would deal with the planning tasks. The new committee was formed following the disbandment of the former City Hall’s pre-technical committee and the urban planning technical committee by the NMS director-general Mohammed Badi in May 2020, to pave the way for the single team.
iv.) Kenya’s construction sector to contract to 3.1 percent
GlobalData has cut its growth rate for Kenya’s construction sector to 3.1 percent for 2020 (down from the Q1 2020 update of 3.6 percent). The 2020 construction output growth forecast for the sub-Saharan Africa (SSA) region was also revised down to 0.7 percent from the previous pre-COVID forecast of 3.6 percent. Furthermore, according to the global construction outlook report released by Globaldata on 3rd July 2020, construction growth in Kenya was expected to remain slow in 2021 before regaining strength in 2022.
COMMERCIAL REAL ESTATE HIGHLIGHTS
i.) Cabinet Secretary for the Ministry of Environment and Forestry barred from demolishing homes in Ngong Forest row
The Environment and Land Court barred the cabinet secretary for Environment and Forestry Keriako Tobiko from demolishing homes in Ngong forest over claims that they were erected on grabbed Ngong Forest land.
In a petition certified urgent by Justice Benard Eboso of the Environment and Land Court, Lang’ ata residents said that they obtained the title deeds lawfully and plans by the CS and Kenya Forest Service (KFS) to demolish their homes were illegal.
ii.) Kenya ranked at position 52 in a global real estate transparency index by JLL
The JLL 2020 Global Real Estate Transparency Index ranked Kenya’s Real Estate Market as semi-transparent, making it the third most transparent real estate market in Africa after South Africa and Mauritius. According to the index, only South Africa has attained full transparency in Africa, while only three countries (Kenya, Mauritius, and Botswana) were ranked as semi-transparent. The report released by JLL on 07th July 2020 indicated that Kenya had implemented several reforms including, continued work on digitizing its land registry and moving procedures online, but it has also withdrawn some measures – for example, land ownership information is no longer publicly available – and implementation of past initiatives remained slow.
iii.) Rental yields drop in Kenya amid Covid-19
According to recent reports by Cytonn Investments, he average rental yields softened across all sectors in Kenya in the 2nd half of 2020, coming in at 7.4, 7.3, and 5.1 percent for retail, office, and residential sectors, respectively, from 7.7, 7.8 and 5.2 percent in Q1’2020. Furthermore, the land sector recorded an overall annualized capital appreciation of 1.4 percent, with asking land prices in low rise residential areas recording the highest annual growth at 3.8%, which was a result of increased demand for affordable land.
iv.) 70 per cent of households in Kenya struggle to pay rent
A national survey conducted by the Kenya National Bureau of Statistics (KNBS) on the impact of Covid-19 on households in May 2020 and released on 9th July 2020 by the Cabinet Secretary for Finance Mr. Ukur Yatani, revealed that nearly 70 percent of households had difficulties in paying their rent in May 2020. The survey further revealed that 31.6 percent of those interviewed paid rent on time in May 2020 compared to 41.7 percent in April 2020. In comparison, 23 percent paid partially, and another 8.5 percent were hopeful of meeting the landlord’s obligations, reflecting the impact of restrictions to curb the global Covid-19 pandemic on workers’ incomes.
C.) KENYA REAL ESTATE TRENDS
i.) Construction companies embrace new technology that facilitates observation of Covid-19 safety measures in building sites.
Amid Covid-19, construction companies are re-inventing to cope with the strict guidelines of the coronavirus to meet strict timelines as developers run out of delivery projects. As such, developers and construction companies are embracing modern building technologies, which allows them to ditch noisy concrete mixers and congestion of many laborers carrying cement bags, buckets, and spades. The technology of mixing concrete out of site in a bathing plant prepared by experts, is gaining traction among builders.
Furthermore, the technology allows the right amount of concrete to be delivered to the construction site in a truck, which is then transferred by a boom pump from the truck to any floor, thereby making the slabs. Moreover, according to builders, using a ready mix concrete eliminates unnecessary wastage and improper mixing, adding quality as well as reducing over congestion of employees on the site, thereby facilitating social distancing. As well, construction firms continue to embrace the use of EPS building technology (the use of expanded polystyrene panels) and the precast concrete panels, which are energy-efficient and affordable, to save on the cost and duration of construction. The synthetic material used in EPS panels is light, requiring only a few construction workers to carry them around and hence maintaining social distancing and thus enabling workers to observe the coronavirus safety measures.
ii.) Serviced apartment lettings take a massive hit amid Covid-19
Over the recent years, there has been an increase in demand for furnished and serviced apartment options available to serve the real estate market in Nairobi, attributed to the city being a regional hub and therefore experiencing a high influx of international guests. The high demand was also attributed to lower operating expenses for serviced apartments as compared to hotels, convertibility (where serviced apartments can be easily converted to normal apartments), and relatively longer tenancy compared to hotels. Moreover, travel and booking websites such as Airbnb and booking.com enabled this market segment to grow.
However, with the tourism industry being adversely affected following lockdowns and travel restrictions in various countries, demand has effectively collapsed. Some of the listings for serviced apartments, such as Airbnb, have crept back to the rental market in hopes of finding tenants, but many have remained vacant as a result of Covid-19 travel restrictions. For the past three months, Airbnb hosts in Kenya have struggled with unprecedented financial fallout occasioned by a wave of cancellations due to the Covid-19 pandemic. With the Covid-19 pandemic looming, the trend is feared to continue as most business meetings and events will be held virtually – leaving thousands of furnished apartments empty.
D.) GLOBAL REAL ESTATE TRENDS
i.) Retail sector: The malls sector is springing back to life in china.
Malls are slowly coming back to life after a long time of inactivity, albeit with precautionary measures including temperature checks and social distancing measures in china. Nevertheless, leasing activity remains subdued with recent surveys projecting a possibility of further impacts from the lockdown in the second half of 2020.
Furthermore, international brands are selectively continuing their expansion plans while grocery stores and supermarkets are benefiting from people staying in rather than dining out. As well, brands located in malls have accelerated their adoption of integrated online and offline sales as consumers prefer to avoid crowded shopping areas. In the retail sector, more retailers are adopting a flexible channel sales model, given that many residents still face strict curbs on their movements. Consequently, Retail sales plunged 16 per cent year on year in May.
ii.) Short-term pullback expected in capital flows as uncertainty builds in the property market across the Globe
Over the short term, investment activities in global commercial real estate have slowed down significantly. Furthermore, restrictions and uncertainty around the valuation of real estate properties continue to limit investors’ ability to perform due diligence and to execute transactions. Delayed launches and elongated transaction timelines are increasingly evident in affected markets as city lockdowns, travel restrictions, and social distancing become commonplace around the world. Moreover, the uncertainty of the duration of the pandemic and the inability to appropriately price risk will maintain higher barriers to the normalization of capital flows in the near term.
In line with direct investment, new fundraising activity is likely to be delayed. Furthermore, according to reports, despite the denominator effect being a byproduct of successful diversification, it may slow deployment of new capital to the asset class in the near term given the recent volatility in the public markets around the Globe. Nevertheless, investors around the world continue to increase their target allocations to real estate as a means to get ready to take advantage of anticipated market dislocation.
E.) COMMON REAL ESTATE & DEVELOPMENT CHALLENGES, AND SOLUTIONS
Transitioning a Development Project from Construction to Occupation Property:
YOUR CHALLENGE:
There are three phases of Development and Real Estate Projects, these being the Design Phase, the Construction Phase, and the Property Operational or Occupational phase. The challenge comes in transitioning the project from construction phase after completion, to operational and occupational phase, by adhering to transitional guidelines that manage investment risks, as well
THE SOLUTION:
There are a number of checklist to observe, consider, and implement while transitioning a project from construction phase after project completion, to operational or occupational phase, and as below:
a) Occupational Certificate: The occupier or operator of the property should ensure that the occupational certificate has been issued by the relevant County Planning Department, after the project has been completed. This documentation is facilitated by the Project Architect.
b) As-built drawings: The occupier or operator of the property should also ensure that he/she receive all the as-built drawings from design consultants, starting with Architect, the Structural Engineer, and Services Engineer.
c) User Manual and Machine Maintenance Schedule Templates: The occupier or operator of the property is also advised to ask from the contractors for all User Manuals for machinery and equipment installed during the construction phase, as well as Maintenance Schedule Templates during the handover of the project at completion.
d) Insurance: The occupier or operator of the property should also ensure that he/she places necessary insurance for the house, or development after completion, or a transition transfer or handover is made from Construction Insurance to the Property insurance.
e) Security: In any project, the security during the construction phase is usually the responsibility of the Contractor. The occupier or operator of the property should ensure that he/she procure his/her own security arrangement during the handover process.
f) Management Company: For major real estate project, it is recommended that the project after completion be handed over from the building contractor to a Property Management company to allow a smooth transition. The occupier or operator of the property should therefore hire a property or facility manager prior to handover.
THE CONSULTANT TO ENGAGE:
The Consultant to engage to help you in choosing the right and reputable contractor to execute your project is a Project Manager, with the help of a Property Manager.
F.) THIS WEEK ON FREQUENTLY ASKED QUESTIONS (FAQs), AND ANSWERS
QUESTION:
How can I get maximum use of land property, during the building plans approval process?
ANSWER:
Land-Use Zones established by County Planning Departments restricts the use of land property and buildings in each categorized zone. The Land-Use Zones also controls volumes and heights of buildings by Ground Coverage (GC) ratio and Plot Ratio (PR) of the land property, and this also influence the property price.
Ground Coverage (GC) refers to the ratio of the Building Area or Floor Space of the building divided by the land (site) area. On the other hand, Plot Ratio (PR) refers to the ratio of Total floor area of the building divided by Land (site) area. Depending on the Land-Use Zone category, a building has to be constructed within the specified maximum Ground Ratio (GC) and Plot Ratio (PR) in the zone.
Under specific cases, Ground Coverage (GC) and Plot Ratio (PR) may be relaxed or additional restrictions may apply under what is referred as “Special Extension & Conditions” by the County Planning department. This either provides permission for additional limit to Plot Ratio (PR) or relaxation of Ground Coverage (GC) ratio by the Planning Department once the Developer of the plot has met certain special development planning conditions.
Below are factors that a developer can utilize to negotiate for “Special Extension”, or permission for additional limit to Plot Ratio (PR), or relaxation of Ground Coverage (GC ratio) by the planning department:
a) Increasing parking areas: This entails allowing for enough parking space in design for all the housing units or occupational spaces that the developer wish to develop. Parking can be provided either through basement floors or elevated floors.
b) Providing adequate waste management system: Providing for adequate water management system in design, especially in areas that do not have local authority sewer lines, may also build a case for the planning department to allow for the requested built up areas, as long as waste management is well catered for in design in terms of waste management.
c) Provide Access to top floors through Lifts: Access to top floors demands that lifts be provides in designs, for easy access to would be occupants or operators of the property. This then allows the Planning Department to allow for more floors within the zoning regulation.
d) Provide Adequate Water Supply in your development: Provision of improvised water supply, say through borehole, especially in areas without water supply by local authority, may provide grounds for allowance of additional facilities or built up areas, especially for projects like hospitals and factories.
e) Design with adequate natural Lighting: Finally, minor design considerations like allowing for natural lighting to all the rooms in the building also plays a part in getting approvals for various part of the building design that would normally not get the approval if lighting was compromised.
G.) THIS WEEK ON DEVELOPMENT COSTS ANALYSIS – SYOKIMAU, MACHAKOS COUNTY
This week’s focus on Development Cost Analysis is for Syokimau in Machakos County, a fast growing satellite residential area in Nairobi Metropolitan area. The Development type in this area according to the land-use and county zoning regulations includes Maisonettes and Town House, Shopping and Retail Complex, and Warehouse and Godowns.
Below is an analysis of Construction Cost per Square Meter (SM), for the option of procuring the development project through a Building Contractor, or an option of direct procurement of the Materials and Labour through a Labour Contractor for recommended building types.
H.) THIS WEEK ON REAL ESTATE PRICE ANALYSIS –SYOKIMAU AREA, MACHAKOS COUNTY.
The Real Estate price analysis focus for this week is on land, sale, and rental prices for a 2 and 3 bedroom apartment in Syokimau Area- Machakos County. The data were obtained through surveys, and analysis of asking prices on property listings in Nairobi.
i) Sales price – Apartment and houses
ii) Rent price – Apartment and houses
iii) Land price per acre (commercial/residential)
I.) CENTRAL BANK OF KENYA INTEREST RATE WATCH – (T-BILLS)
The money market remained liquid over the week ended 09th July 2020, due to government payments as the new fiscal year commences, with banks holding on to 32.8 billion in excess reserves above the 4.25 percent statutory cash reserves requirement (CRR). Moreover, over the week, the appetite for government securities increased as investors oversubscribed to the Treasury bills issued. Furthermore, the open market operations remained active, and the interbank rates remained relatively stable.
91 day T-bill declined by 0.272% from 6.546% previous week rate to 6.274%. CBK offered a total of Kshs4 billion, and bids amounted to Kshs37.923 billion, of which 18.419 was accepted. Volume on bids received increased week on week basis. 182 day T-bill declined by 0.289% from 7.048% previous week rate to 6.759%. CBK offered a total of Kshs10 billion, and bids amounted to Kshs27.373 billion, of which 7.155 was accepted. The 364 day T-bill declined by 0.069% from 7.769% previous week rate to 7.700%. CBK offered a total of Kshs10 billion, and bids amounted to Kshs20.665 billion, of which 20.665 was accepted.
J.) KENYA EQUITY MARKET INDICES
The week ending 10th July 2020 witnessed a plummet in NSE trading activities due to a reduced investors’ confidence, which was majorly attributed to investor’s tension due to a surge in Covid-19 cases in the country amid a phased re-opening of the economy.
The NASI, NSE 25, and the NSE 20 share index plummeted by 5.15%, 2.29%, and 3.95% percent, respectively. Market capitalization, equity turnover, the number of shares traded, and the I-REIT turnover also declined by 3.88%, 57%, 61%, and 23%percent, respectively. As well, the number of I-REIT deals decreased from 31 to 12 deals.
K.) KENYA CAPITAL MARKET ANALYSIS
The volatility of the capital market remained relatively low during the week ended 10th July 2020. Activity in the banking sector accounted for 32.7% of the day’s traded value with notable declines on Equity (-3.8% to KES 31.50) and Absa (-3.1% to KES 9.4). Trans-century was among the top gainers of the week (+9.3% to KES 1.76) on the announcement of plans to de-list from the NSE.
The week’s top gainers were TCL Kenya, Longhorn Publisher, Centum, CIC Insurance, and Sanlam Kenya PLC, which had their shares increase by 9.66%, 8.65%, 5.64%, 3.21%, and 3.05%, respectively. On the other hand, Nairobi Business Ventures Group, Express Kenya Ltd, Flame Tree Group Holding, Total Kenya Ltd, and Kenya Reinsurance Company stocks lost by 8.06%, 7.83%, 6.62%, 5.71%, and 5.66%, respectively, becoming the week’s top losers.
L.) CURRENCY HIGHLIGHTS
The Kenyan shilling was stable during the week supported by inflows from horticulture exports amid light dollar demand from the energy and manufacturing sectors.
The Kenyan shilling exchanged at KSh 106.9 per U.S. dollar compared to KSh 106.54 per U.S. dollar on 02nd July 2020. Moreover, Central Bank data indicated that the country’s forex reserves remained adequate at 9,717 million (5.84 months of import cover) as of 09th July 2020. This meets the CBK statutory requirement to maintain at least four months of import cover and the region’s convergence criteria of 4.5 months of import cover.
M.) FACTORS THAT WILL SHAPE THE REAL ESTATE AND OTHER MARKETS IN THE NEXT ONE WEEK.
i.) Removal of local travel restrictions
President Uhuru Kenyatta, on 6th June 2020, announced a phased re-opening of the economy, with the resumption of domestic flights from 15th July 2020 well as the lifting of internal travel restrictions. The move came as pressure mounted to kick-start the country’s ailing economy after four months of coronavirus restrictions, which had devastated vital industries such as Building and Construction, tourism, and hospitality.
Speaking during the launching of the second voluntary national review on the implementation of the sustainable development goals report on 07th July 2020, the cabinet secretary for finance, Mr. Ukur Yatani, said the move would boost the economy, which was projected to average at 2.5% in 2020. Furthermore, more money will be disposed of in the supply as a result of increased consumer spending on travel, fuel, and food, thereby facilitating the stabilization of cash flows for businesses in these sectors and consequently the creation of jobs. Also, the ease of inter-county movement restriction will boost the tourism sector, and thus, the hospitality sector, as domestic tourism, is expected to recover more quickly.
ii.) Surge in Covid-19 Cases in the Country
The number of Covid-19 infections in Kenya surpassed the 10,000 mark on 11th July 2020 as the country continues to see a surge in new cases. The Ministry of Health announced 379 new cases on Saturday, 11th July 2020, bringing the total infection tally to 10,105 cases. The ministry also announced that one more patient had died in the past on 11th July 2020, taking the country’s total fatalities to 185.
The surge is likely to impart fear among players in the economy, and consequently lead to reduced economic activities in the coming week. The surge will also lead to tension among consumers who are likely to reduce their spending to save what they have. Moreover, consumer spending will reduce, and as a result, lead to a disruption in the cash flow in the market.
N.) UPCOMING REAL ESTATE EVENTS AND TRADE SHOWS IN THE COMING ONE WEEK.
i.) Online Conference: Construction Safety, Health & Environmental Virtual Conference- A construction industry annual conference to hone in on the most critical safety and health compliance and risk issues impacting the business of construction.
Date: 16th July 2020
Time: 09:00AM – 06:00 PM EAT
Venue/Media: Online
Event Organizer: https://www.agc.org/learn/education-training/events/agc-construction-safety-health-environmental-virtual-conference
ii.) Webinar: Digital Housing Annual Conference – The conference will provide an opportunity to explore strategies for delivering and advancing digitalization and digital inclusion across the Housing Sector.
Date: 23rd July 2020
Time: 09:00AM – 06:00PM
Venue/Media: Online.
Event Organizer: https://insidegovernment.co.uk/event/digital-housing/
Writer of the Report:
This Report 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:
- Feasibility Studies and Market Research.
- Project Finance and Capital Raising.
- Project Management.
- Investment Design Appraisal.
- Quantity Surveying
- Construction Cost Consultancy
- Physical Planning and Planning Permissions
- Environmental Management and Impact Assessment
- Real Estate Development and Structured Investment Solutions
- Property Valuation
- Marketing and Property Sales Agency
- Property Management and Facility Management
Our Contacts:
- Office: Navigators, Kindaruma Road, Nairobi.
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- Email: [email protected]
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Disclaimer:
The information contained in this report is for general information purposes only. While we endeavour to keep the information up to date and correct, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the information contained on the report for any purpose. Readers are therefore advised in all circumstances to seek the advice of Registered and Licensed professionals in all matters related to Real Estate Investment and Project Development.