Interview with Centum Real Estate Managing Director, Samuel Kariuki

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Centum Investment Company Plc. is East Africa’s leading investment company listed on the Nairobi Securities Exchange and Uganda Securities Exchange. The company is self-described as an investment channel providing investors with access to a portfolio of inaccessible, quality, diversified investments.

Founded in 1967 as Industrial and Commercial Development Corporation Investments (ICDCI) and rebranding to Centum Investment Company Plc (Centum) in 2008; Centum’s total assets exceeded Ksh66 Billion ($655 Million) as at 31st March 2018.

The firm’s objective within the Real Estate sector is to develop new urban nodes across the East African region that represent investment grade assets of scale. Centum seeks to “master plan attractive sites across the region and provide commercial impetus for investors to establish city shifting developments.”

With this in mind, Centum Real Estate Managing Director, Samuel Kariuki explains the more recent moves that the company is making, while offering professional insights into the future of Kenya’s property market.

 

Kenya’s government recently launched a plan to provide its citizens with 500,000 affordable houses as part of its ‘Big 4’ development agenda. Do you believe that the initiative will be successful?

As one of Sub- Saharan’s preeminent opportunity destinations, Kenya presents a compelling investment environment that is necessary to support the government’s development agenda. The Big 4 Agenda is a noble development road map underpinned by strong economic fundamentals associated with demographic trends, rapid urbanization and the implementation of business-friendly policies by the Kenyan government.

Affordable housing in Kenya, as is elsewhere in Africa, is both a moral and economic issue. Sustainable solutions have eluded not only the developing world but also advanced economies. To achieve the ambitious goals under this pillar, the Government has some significant ground to cover in institutionalizing an enabling framework, eliminating the burden of bulk infrastructure provision and dealing with existing land and urban planning issues, including the commoditization and cost of land. Additionally, there need to be concerted efforts in developing sustainable funding models that incorporate participation of both local and foreign institutional investors. Significant challenges exist and the path to realizing the ambitions will be bumpy. But it’s not an insurmountable challenge, with the right incentives for the Private Sector to drive the process.

 

What are some of the projects that Centum Real Estate is currently working on?

 Centum Real Estate is a master developer of mixed-use urban nodes across East Africa. Our current projects include.

Vipingo Development

  • Located at the Coast of Kenya, this is an 11,000 acre development anchored on an industrial park and a leisure city. We have broken ground on the core industrial park infrastructure, including the region’s first water desalination plant. We are also developing two residential projects within the site, namely Palm Ridge consisting of 1,255 affordable apartments and Awali Estate consisting of 152 mid-market maisonettes and bungalows. Through development partnerships with other investors, a commercial center incorporating a mall and leisure center is under development.

Pearl Marina

  • This is a 384 acre development on the shores of Lake Victoria, near Entebbe, Uganda. We are currently developing the residential node, comprising 524 affordable apartments and mid-market villas. Supporting infrastructure for the residential node is already in place. We will soon be breaking ground on another set of town houses. On the same site, we are partnering with other investors through sale of development rights for development of a school, a hospital and a 5 star hotel. The Marina, whose construction is eminent, will anchor the city’s entertainment and lifestyle offering.

Two Rivers Development

  • This is a premier 102 acre development in Nairobi is anchored on the Two Rivers Mall, among Africa’s largest. Third party developers have also put up a hotel and an office block on the site. We recently launched the Eye of Kenya, Africa’s largest Ferris wheel. We are now progressing to launch the residential node of the development, whose first phase will include two luxurious apartment developments, with a total of 582 apartments. A third-party developer is also putting up 500 residential units on the side. options for affordable living have been made possible in Vipingo as well.

Affordable urban nodes in Nairobi and Uganda

  • We are at advanced stages of breaking ground on other mixed-use developments  in Nairobi and Uganda, anchored on affordable housing. Our objective under this pillar is to transform neighborhoods into places where people want to live and communities come alive.

 

In your professional opinion, what are some of the things that potential buyers should look for before purchasing a home?

 For first time home buyers the following factors are most important

  • The location of a property is a primary consideration
  • Consider optimal functionality of the house design
  • Key amenities, including availability and consistency of utilities provision and precinct maintenance
  • Availability of other social amenities/infrastructure
  • Run through all pre and post transactional costs before starting the home-buying process

For second time or more home buyers then the following should be considered:

  • Capital appreciation or rental yield of the area
  • The Potential for Future Projects:

 

What are some of the new or emerging trends happening in Kenya’s housing market?

    • New neighborhoods have emerged further away from the center of Nairobi, as developers follow recent public investments in infrastructure. Institutional participation has not been to the scale that addresses the existing demand, particularly in affordable and mid-market segments where supply has tended to be somewhat fragmented.
    • The use of structured finance products to fund developments is emerging. However, this remains at a low scale as that part of the financial market lacks the necessary depth.
    • Building Technology:
      • Increased demand for low-cost housing leading to the use of alternative building technology such as prefab building material and modular construction where a building is constructed offsite and then assembled onsite.
      • The application of green technology to ensure energy efficiency for utilities is gaining importance, both for Water and Power utilities.
    • Virtual and Augment Reality:
      • VR and AR are leading to experiential decision-making.
      • VR gives designers the ability to understand better the outcome of the design before anything is built
      • AR devices allow contractors and engineers to see the digital model overlaid onto the physical site and interact with the built environment

 

There have been rumors of market saturation in Kenya’s property sector scaring away investors. Is this really the case or does Kenya’s real estate industry have more to offer?

As Kenya’s economic fortunes started to change post 2003, investors focused significantly on high end residentials, retail and offices. While pockets of opportunities still exist in those segments, they are somewhat saturated currently. However, supply for affordable and mid-market housing has remained largely fragmented, with no significant institutional participation. There are therefore significant opportunities in these segments. Equally, opportunities exist in the supply of Grade A logistics space and serviced industrial parks.

 

What advice do you have for low to middle-income individuals looking to invest in the property market?

 Consider purchasing of off plan units because structuring of payment plans is more flexible and long term as opposed to incurring higher upfront purchase costs for completed units, which are typically sold at a premium. However, the purchase of these units should be from trusted real estate developers, such as Centum Real Estate.

 

Why is the East Africa Property Summit this year important?

The 2019 EAPI summit comes at a time where both public policy and private sector thinking is focused on affordable housing. It is therefore a timely platform that brings together private and public sector players across the real estate value chain to address this elusive goal. The conference will also provide solution-focused avenues to address the institutionalization of real estate as a financial asset class, a current gap in the region but also an opportunity. The conference’s objectives around unlocking of land for real estate development and building the investment case for alternative asset classes and affordable housing are at the core of our (Centum Real Estate’s) investment thesis as a developer of investment grade real estate assets.

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