MIP WEEKLY CONSTRUCTION INDUSTRIAL REPORT NO. 9

Period: September 28 to October 4, 2015

Works on 9.6 billion Avic complex along Chiromo road have been put on hold following a complaint from the neighboring Kempinski Hotel over environmental concerns.
Kempinski secured orders from the National Environmental Tribunal stopping construction until an appeal it has filed against Avic is heard and determined.
Kempinski says that Avic has not explained how it plans to deal with noise pollution, storm water drainage and air quality issues during construction

Stima Sacco is set to build 340 housing units in Malaa along Kangundo Road in Machakos county at a cost of Ksh. 1.3 billion.
The gated community dubbed as Stima Plains, will sit on a 20- acre piece of land which is currently virgin agricultural land.
The scheme will comprise 3Br. maisonettes, 3 Br. bungalows and 2Br. apartment blocks, a kindergarten area and a commercial area.
The Sacco expects to complete the project in 18 months.
A 2 Br apartment will go for 2.9 M, 3Br bungalow at 4.96 M.

Property owners in Karen and Langata will now have to pay land rates going back to the last 16 years after the High court last week declared that a 1999 court order exempting them from the fees was no longer applicable.
City hall says that it will compute the rates owed since then and bill the property owners. The amounts due will depend and differ since the parcels of land vary.

Erdemann Property is set to construct 2000 units comprising 2br. and 3br. apartments.
2br and 3br apartments will be going at Ksh. 5m and 6m respectively.

According to Knight Frank’s Kenya market update report for the first half year 2015, demand for prime office space in Nairobi dipped slightly in the first half of the year as multi-nationals downsize their local operations and demand from government agencies reduced.
Rent for prime commercial offices in the city, however remained stable in the period at $21(Ksh. 2184) per square metre

Cytonn investments broke ground for its real estate project set on five acres.
The Ksh 24M Amara ridge is expected to be a luxurious, gated residential development situated opposite Bomas of Kenya in Nairobi.
Amara Ridge is estimated to be complete by mid – 2017. Each unit will cost Ksh 95 Million.

Economic growth slowed down in the second quarter of the year, shackled by the near halving of activity in the key construction and manufacturing sectors in the wake of persistent exchange rate turbulence and the resulting rise in the cost of imported goods.
Official data released on Wednesday 30/09/2015, shows that the economy grew by 5.5 % between April and June, down from the 6% growth reported for the same period last year.

High interest rates and the currency depreciation have sighted some challenges affecting the real estate sector.Developers in real estate might be faced with the following challenges:
- With reduced internal rate of return (IRR) owing to the increased cost of borrowing, potential real estate investors may prefer to allocate more of their funds to less riskier assets like the 1 year treasury bond recently issued at a yield of 19.1%
- Developers will start exploring joint venture options so as to minimize on the cost of funding the projects.
- Uptake of mortgages will decrease, as the high interest rates will be a deterrent to people contemplating the purchase of a property through mortgage financing.
Best ways to address these exchanges and interest rates challenges are;
- Develop the most competitive real estate products that are differentiated in the market. The best quality at a fair value has the highest demand.
- Implement an aggressive procurement strategy to acquire same quality of inputs at a cheaper price.
- Secure increased and diverse sources of funding to weather through the volatile rates environment.