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17 Pages«<1213141516>»
Low End Housing: High Risk, High Return
obiero
#261 Posted : Wednesday, May 02, 2018 4:46:51 PM
Rank: Elder


Joined: 6/23/2009
Posts: 11,666
Location: nairobi
Mkimwa wrote:
obiero wrote:

Asante. Happy too with the outcome.. Took three years but the journey was worth every step.. Completed only one block out of the plan for three, but I doubt whether I have appetite for the extra four storied blocks.. I'm heading back to the securities exchange


Congratulations!!

Do share some photos of the finished product if you will..

Once the money starts rolling in, dont be surprised to do the other blocks...

How did the total spend compare with your initial estimates?

@Mkimwa the project was executed slightly below budget, with very minor variance. Unfortunately since the units are now let, sharing of extra photos will not be possible
COOP 5,500; KCB 3,700; KQ 221,100
Wakanyugi
#262 Posted : Wednesday, May 02, 2018 5:42:05 PM
Rank: Veteran


Joined: 7/3/2007
Posts: 1,535
Swenani wrote:
Wakanyugi wrote:
wukan wrote:
obiero wrote:
Wakanyugi wrote:


There is a question that no one is yet talking about. What is the likely effect of injecting so many extra housing units into a struggling real estate sector?

Don't get me wrong, I am not against the idea. But we are seeing a lot of companies struggling to offload houses especially on the upper middle and upper class segments. And now Uhuru is about to take the middle and lower middle class off the table too.

Could this finally burst the speculation buble that so many have spoken about?

@Wakanyugi the demand at the low end is insatiable at the moment.. Even the government will struggle to bridge the deficit


@Obiero, I don't get it if the demand is there why did you stop your construction(congrats by the way good stuff)? Can the lower end afford your estimated rent for you to recoup your costs?

Lower end is in need of social housing. From the documentation GoK is building the social housing in Kibera, Kiambiu etc while private sector will cater for the emerging middle class through PPP. Some of the projects look like the ongoing civil servant housing scheme lumped in for PR purposes.

GoK has already done these initiatives before with little impact on the market e.g Umoja, Jericho, Dandora. The impact on real estate will only be short term for the benefit of middle class.

Most of government social housing projects even in the US, UK end up being crime-infested, dilapidated structures or high-rise slums. They are segregated in terms of income concentrating poverty in an area. Politicians with an eye on next elections don't give much thought to these projects and the effects are felt a generation away(like the projects in US). A mixed income approach would have been more ideal something close to what Tatu city is trying to achieve.


Good points. But the effect of the projects you cite was not negligible. Initially touted as housing for the poor - they ended up benefiting the middle class. The real estate sector went through a depressed period in the late 90's (as did the wider economy of course). I suspect the coming on stream of massive housing stock in the 80's/90's; Dadora, Umoja, Nyayo Highrise (to an extent Buru) contributed to this state of affairs. I have no evidence though.

Finally considering that 600,000 is still too high for the majority of our people to afford, should we relay tout this as a solution to the housing problem?


Yes, A 600K purchased under the TPA for 25 years with an interest rate of 5% is aprox 4K every month while a 3M under TPA for 25 years is less than 18K every month


Makes sense, if we can keep the costs to the amounts promised. I know a few speculators who are salivating at these prices.

I recall Nyayo highrise was initially promised at 250K and ended up selling for 3 times as much.
"The opposite of a correct statement is a false statement. But the opposite of a profound truth may well be another profound truth." (Niels Bohr)
Wakanyugi
#263 Posted : Wednesday, May 02, 2018 5:45:08 PM
Rank: Veteran


Joined: 7/3/2007
Posts: 1,535
obiero wrote:
Wakanyugi wrote:
wukan wrote:
obiero wrote:
Wakanyugi wrote:


There is a question that no one is yet talking about. What is the likely effect of injecting so many extra housing units into a struggling real estate sector?

Don't get me wrong, I am not against the idea. But we are seeing a lot of companies struggling to offload houses especially on the upper middle and upper class segments. And now Uhuru is about to take the middle and lower middle class off the table too.

Could this finally burst the speculation buble that so many have spoken about?

@Wakanyugi the demand at the low end is insatiable at the moment.. Even the government will struggle to bridge the deficit


@Obiero, I don't get it if the demand is there why did you stop your construction(congrats by the way good stuff)? Can the lower end afford your estimated rent for you to recoup your costs?

Lower end is in need of social housing. From the documentation GoK is building the social housing in Kibera, Kiambiu etc while private sector will cater for the emerging middle class through PPP. Some of the projects look like the ongoing civil servant housing scheme lumped in for PR purposes.

GoK has already done these initiatives before with little impact on the market e.g Umoja, Jericho, Dandora. The impact on real estate will only be short term for the benefit of middle class.

Most of government social housing projects even in the US, UK end up being crime-infested, dilapidated structures or high-rise slums. They are segregated in terms of income concentrating poverty in an area. Politicians with an eye on next elections don't give much thought to these projects and the effects are felt a generation away(like the projects in US). A mixed income approach would have been more ideal something close to what Tatu city is trying to achieve.


Good points. But the effect of the projects you cite was not negligible. Initially touted as housing for the poor - they ended up benefiting the middle class. The real estate sector went through a depressed period in the late 90's (as did the wider economy of course). I suspect the coming on stream of massive housing stock in the 80's/90's; Dadora, Umoja, Nyayo Highrise (to an extent Buru) contributed to this state of affairs. I have no evidence though.

Finally considering that 600,000 is still too high for the majority of our people to afford, should we relay tout this as a solution to the housing problem?

@wakanyugi indeed these projects have an impact even to this day! Eastlands was built around the stated estates.. In my thinking, the proposal by GoK to have a TPA scheme similar to the Nyayo Estate model is proper. Citizens will be able to pay 'rent' to the GoK real estate entity with a view to eventually owning the property, rather than throwing cash away to a landlord


My free advise to GOK would be to let private sector agencies handle the rent collection. Otherwise we shall end up with the mess in Eastlands and Madaraka kanjo houses, or worse.
"The opposite of a correct statement is a false statement. But the opposite of a profound truth may well be another profound truth." (Niels Bohr)
wukan
#264 Posted : Thursday, May 03, 2018 11:15:40 AM
Rank: Veteran


Joined: 11/13/2015
Posts: 1,107
@wakanyugi, I'm getting your point on the property cycle theory that boom years in real estate also bring the burst. However the stream of housing stock in 80's/90's was very limited to have any significant impact. The balloting for Buru was massive they had to use a computer to select. Umoja was offered as alternative to Buru with aim of having the allotees put up bungalows. It didn't work as well because the area ended up as high rise development with spillover into Donholm, Tena etc.

In the 80's there was a lot of demand for serviced properties with water,sewer and other amenities like shopping centres which was not met. The effect was the dispersed settlement pattern with homes being built in zimmerman, Githurai, Kawangware, Huruma etc without physical planning. This dispersal was very inefficient in the use of space, infrastructure and resources and largely contributed to depressed period in the 90's. This is what brought the spreading out of the city and matatus which keep following the settlement patterns.

Contrast this with how the Somali community kept to Eastleigh. They didn't spread their resources chasing new places to settle they concentrated on trade and services. The result you have a vibrant local economy and a massive redevelopment with buildings having both commercial and residential functions.

You will not see the economic vibrancy of Eastleigh in the GoK social housing projects. Some of the proposed settlements are far as Mlolongo disconnected and dislocated. The TPA scheme is proper and so too the multi-generation mortgages. Ownership of the units instead of rentals is much more desirable.
Wakanyugi
#265 Posted : Thursday, May 03, 2018 1:59:58 PM
Rank: Veteran


Joined: 7/3/2007
Posts: 1,535
wukan wrote:
@wakanyugi, I'm getting your point on the property cycle theory that boom years in real estate also bring the burst. However the stream of housing stock in 80's/90's was very limited to have any significant impact. The balloting for Buru was massive they had to use a computer to select. Umoja was offered as alternative to Buru with aim of having the allotees put up bungalows. It didn't work as well because the area ended up as high rise development with spillover into Donholm, Tena etc.

In the 80's there was a lot of demand for serviced properties with water,sewer and other amenities like shopping centres which was not met. The effect was the dispersed settlement pattern with homes being built in zimmerman, Githurai, Kawangware, Huruma etc without physical planning. This dispersal was very inefficient in the use of space, infrastructure and resources and largely contributed to depressed period in the 90's. This is what brought the spreading out of the city and matatus which keep following the settlement patterns.

Contrast this with how the Somali community kept to Eastleigh. They didn't spread their resources chasing new places to settle they concentrated on trade and services. The result you have a vibrant local economy and a massive redevelopment with buildings having both commercial and residential functions.

You will not see the economic vibrancy of Eastleigh in the GoK social housing projects. Some of the proposed settlements are far as Mlolongo disconnected and dislocated. The TPA scheme is proper and so too the multi-generation mortgages. Ownership of the units instead of rentals is much more desirable.


Thank you for the detailed explanation.

I stand educated.


"The opposite of a correct statement is a false statement. But the opposite of a profound truth may well be another profound truth." (Niels Bohr)
Jon_Gray
#266 Posted : Monday, May 07, 2018 12:09:19 AM
Rank: New-farer


Joined: 8/16/2017
Posts: 20
What is your ROI, assuming 100% occupancy?
Applause Congratulations on sticking with it to the end!

obiero wrote:
Mkimwa wrote:
obiero wrote:

Asante. Happy too with the outcome.. Took three years but the journey was worth every step.. Completed only one block out of the plan for three, but I doubt whether I have appetite for the extra four storied blocks.. I'm heading back to the securities exchange


Congratulations!!

Do share some photos of the finished product if you will..

Once the money starts rolling in, dont be surprised to do the other blocks...

How did the total spend compare with your initial estimates?

@Mkimwa the project was executed slightly below budget, with very minor variance. Unfortunately since the units are now let, sharing of extra photos will not be possible

Swenani
#267 Posted : Monday, May 07, 2018 10:17:24 AM
Rank: User


Joined: 8/15/2013
Posts: 12,998
Location: Vacuum
Jon_Gray wrote:
What is your ROI, assuming 100% occupancy?
Applause Congratulations on sticking with it to the end!

obiero wrote:
Mkimwa wrote:
obiero wrote:

Asante. Happy too with the outcome.. Took three years but the journey was worth every step.. Completed only one block out of the plan for three, but I doubt whether I have appetite for the extra four storied blocks.. I'm heading back to the securities exchange


Congratulations!!

Do share some photos of the finished product if you will..

Once the money starts rolling in, dont be surprised to do the other blocks...

How did the total spend compare with your initial estimates?

@Mkimwa the project was executed slightly below budget, with very minor variance. Unfortunately since the units are now let, sharing of extra photos will not be possible



100% occupancy is stretching it too far.Arealistic ROI for rentals should be based on 70-80% occupancy depending with the target market and location/town
Poverty is the root of all evil
obiero
#268 Posted : Monday, May 07, 2018 1:37:19 PM
Rank: Elder


Joined: 6/23/2009
Posts: 11,666
Location: nairobi
Swenani wrote:
Jon_Gray wrote:
What is your ROI, assuming 100% occupancy?
Applause Congratulations on sticking with it to the end!

obiero wrote:
Mkimwa wrote:
obiero wrote:

Asante. Happy too with the outcome.. Took three years but the journey was worth every step.. Completed only one block out of the plan for three, but I doubt whether I have appetite for the extra four storied blocks.. I'm heading back to the securities exchange


Congratulations!!

Do share some photos of the finished product if you will..

Once the money starts rolling in, dont be surprised to do the other blocks...

How did the total spend compare with your initial estimates?

@Mkimwa the project was executed slightly below budget, with very minor variance. Unfortunately since the units are now let, sharing of extra photos will not be possible



100% occupancy is stretching it too far.Arealistic ROI for rentals should be based on 70-80% occupancy depending with the target market and location/town

@Jon gray the investment is in a rural setting hence ROI is unprintable. usability of the property market value as collateral for other investment(s) is key for me
COOP 5,500; KCB 3,700; KQ 221,100
Chaka
#269 Posted : Monday, May 07, 2018 2:13:40 PM
Rank: Veteran


Joined: 2/16/2007
Posts: 2,078
Just wondering..when a property is being valued,would the accruing rent be taken into account or that would be a non issue?
obiero wrote:

@Jon gray the investment is in a rural setting hence ROI is unprintable. usability of the property market value as collateral for other investment(s) is key for me

obiero
#270 Posted : Monday, May 07, 2018 6:57:38 PM
Rank: Elder


Joined: 6/23/2009
Posts: 11,666
Location: nairobi
Chaka wrote:
Just wondering..when a property is being valued,would the accruing rent be taken into account or that would be a non issue?
obiero wrote:

@Jon gray the investment is in a rural setting hence ROI is unprintable. usability of the property market value as collateral for other investment(s) is key for me


Non issue since it could be a non rental
COOP 5,500; KCB 3,700; KQ 221,100
Wakanyugi
#271 Posted : Monday, May 07, 2018 9:23:33 PM
Rank: Veteran


Joined: 7/3/2007
Posts: 1,535
obiero wrote:
Chaka wrote:
Just wondering..when a property is being valued,would the accruing rent be taken into account or that would be a non issue?
obiero wrote:

@Jon gray the investment is in a rural setting hence ROI is unprintable. usability of the property market value as collateral for other investment(s) is key for me


Non issue since it could be a non rental


Nevertheless if you are valuing to borrow, then rental income becomes an important demonstration of cash flow. To my knowledge it is not included in the valuation.
"The opposite of a correct statement is a false statement. But the opposite of a profound truth may well be another profound truth." (Niels Bohr)
obiero
#272 Posted : Monday, May 07, 2018 9:48:41 PM
Rank: Elder


Joined: 6/23/2009
Posts: 11,666
Location: nairobi
Wakanyugi wrote:
obiero wrote:
Chaka wrote:
Just wondering..when a property is being valued,would the accruing rent be taken into account or that would be a non issue?
obiero wrote:

@Jon gray the investment is in a rural setting hence ROI is unprintable. usability of the property market value as collateral for other investment(s) is key for me


Non issue since it could be a non rental


Nevertheless if you are valuing to borrow, then rental income becomes an important demonstration of cash flow. To my knowledge it is not included in the valuation.

Accurate. It's not included in valuation but does influence the bank decision on how much to lend. In this case though the individual has other income streams
COOP 5,500; KCB 3,700; KQ 221,100
Fullykenyan
#273 Posted : Thursday, May 10, 2018 1:59:42 PM
Rank: Member


Joined: 7/27/2014
Posts: 549
Location: Eastlando
Swenani wrote:
Fullykenyan wrote:
Swenani wrote:
Fullykenyan wrote:
obiero wrote:
winmak wrote:
obiero wrote:
kayhara wrote:
What's the definition of low class? I just met a Mombasa guy with
28 Swahili houses, he tells me each cost him an average of 3.5 million to build including a borehole for each. so that's about 98 million.
each house has 10 small one bedroom going for 8,000 each including water,
so each house income per month is ksh. 80,000/-
all 28 houses is ksh. 2,240,000
assuming he built them all in one year? (he built over 5 years) it will take him only 3.5 years to recoup his investments, that's assuming the rent is constant.
well....

Low end refers to the target market not the landlord.. There are 4 different seven storied bedsitter units in Pipeline with 10 houses per floor owned by the immediate former Governor that earn him an average of KES 2,380,000 monthly from rent of KES 8,500 per flat


Wow, now I didn't know he had interests in such..

Now @Obiero, I am prospecting, I want an 8th in areas of Kasarani or such like neighborhoods to build a rental flat in the next 3 years. How much do the high traffic areas go for? and would you advice me to go for this area or are there other lucrative areas? (I had been adviced on Kinoo , Gachie... but I fear those areas)

@winmak last I checked, from Sunton, Clayworks, Seasons going to main centre at Kasarani you will need KES 8,500,000 for a plain 1/8 acre. Mwiki headed down to Kangundo road budget for KES 3,500,000 to KES 6,000,000

Kitengela there is no land for sale from 1st to 3rd row all the way upto Yukos. Fourth row is available at KES 5,500,000, but being a victim of an intricate land fraud in the county dating back to 2009, I will not lead anyone to invest in the area. Im still in court!



These prices are equivalent to the price of land in Germany, where you have all the roads tarmacked, electricity and water on site. Something is wrong in kenya.


You can't compare Kenya with a shithole country in Europesmile smile


I have realised that albeit too late smile.
@Swenani, do you know of anyoned selling land in Masaku?



No, but if you can consider my unsolicited advice and if you are buying for long term, my opinion is that you consider some of these counties; Isiolo(Isiolo town), Uasin Gishu(Eldoret town),Lamu(Lamu Town) Busia(Busia Town) and Bungoma(Bungoma and/or Malaba town). These towns will not be the same in the next 10-15 years especially if SGR and lapset projects are realized

@Swenani and Obiero, what about those plots that safaricom is selling? have you tried them? or would you recommend them?
obiero
#274 Posted : Friday, May 11, 2018 4:39:26 PM
Rank: Elder


Joined: 6/23/2009
Posts: 11,666
Location: nairobi
Fullykenyan wrote:
Swenani wrote:
Fullykenyan wrote:
Swenani wrote:
Fullykenyan wrote:
obiero wrote:
winmak wrote:
obiero wrote:
kayhara wrote:
What's the definition of low class? I just met a Mombasa guy with
28 Swahili houses, he tells me each cost him an average of 3.5 million to build including a borehole for each. so that's about 98 million.
each house has 10 small one bedroom going for 8,000 each including water,
so each house income per month is ksh. 80,000/-
all 28 houses is ksh. 2,240,000
assuming he built them all in one year? (he built over 5 years) it will take him only 3.5 years to recoup his investments, that's assuming the rent is constant.
well....

Low end refers to the target market not the landlord.. There are 4 different seven storied bedsitter units in Pipeline with 10 houses per floor owned by the immediate former Governor that earn him an average of KES 2,380,000 monthly from rent of KES 8,500 per flat


Wow, now I didn't know he had interests in such..

Now @Obiero, I am prospecting, I want an 8th in areas of Kasarani or such like neighborhoods to build a rental flat in the next 3 years. How much do the high traffic areas go for? and would you advice me to go for this area or are there other lucrative areas? (I had been adviced on Kinoo , Gachie... but I fear those areas)

@winmak last I checked, from Sunton, Clayworks, Seasons going to main centre at Kasarani you will need KES 8,500,000 for a plain 1/8 acre. Mwiki headed down to Kangundo road budget for KES 3,500,000 to KES 6,000,000

Kitengela there is no land for sale from 1st to 3rd row all the way upto Yukos. Fourth row is available at KES 5,500,000, but being a victim of an intricate land fraud in the county dating back to 2009, I will not lead anyone to invest in the area. Im still in court!



These prices are equivalent to the price of land in Germany, where you have all the roads tarmacked, electricity and water on site. Something is wrong in kenya.


You can't compare Kenya with a shithole country in Europesmile smile


I have realised that albeit too late smile.
@Swenani, do you know of anyoned selling land in Masaku?



No, but if you can consider my unsolicited advice and if you are buying for long term, my opinion is that you consider some of these counties; Isiolo(Isiolo town), Uasin Gishu(Eldoret town),Lamu(Lamu Town) Busia(Busia Town) and Bungoma(Bungoma and/or Malaba town). These towns will not be the same in the next 10-15 years especially if SGR and lapset projects are realized

@Swenani and Obiero, what about those plots that safaricom is selling? have you tried them? or would you recommend them?

I would not be overly afraid of buying into a Safaricom Sacco land offering. The brand just would not want to be embroiled in any messy affair, hence relatively solid investments
COOP 5,500; KCB 3,700; KQ 221,100
obiero
#275 Posted : Friday, June 29, 2018 10:00:18 AM
Rank: Elder


Joined: 6/23/2009
Posts: 11,666
Location: nairobi
Let me leave this here https://www.businessdail...37446-c03c8cz/index.html
COOP 5,500; KCB 3,700; KQ 221,100
MugundaMan
#276 Posted : Saturday, June 30, 2018 9:16:59 AM
Rank: Veteran


Joined: 1/8/2018
Posts: 1,700
Location: DC (Dustbowl County)
obiero wrote:


Quote:
KNBS does not currently track the rent for one-bedroom houses. The rent data means developers of single-room units, popular with low income earners, have gained the most in terms of rate of returns on their investments, especially in major towns. They are followed by investors in two-bedroom flats, then three-bedroom maisonettes while bungalows are bottom.

The majority urban poor population opt for the small units whose charges fit their meagre budgets.


Of course this is a no-brainer, I was in fact very tempted to go this route because
1. Returns are higher
2. Need for parking and other costly amenities is next to zero
3. Cost of building is cheaper because you can go for the cheapest of the cheap finishings and may not even need to plaster your machine cut walls
4. Economies of scale given low fixed costs compared to returns.
5. Extra income from running businesses at the ground floor

But the reasons why I rejected this route

1. Slummification of entire neighbourhoods (and cities) starts with these buildings. Look at Umoja. Note exactly a great place to raise kids and live a decent life. Some of those apartments are like modern day tombs! Kenyans deserve better. This is why I laud Uhuru's low cost housing agenda. Quality subsidised homes for all.
2. Headaches to the landlord galore. general security issues, Tenant to tenant crime may be rife, eviction problems, blocked drains due to tenants pouring all sorts of plastics and things into the drains, vandalism and constant repairs are no joke. It is as management intensive as it gets and my life is too short to spend all my hours managing all these problems.
3. Cap gains are much lower per annum for these types of structures. What you gain in cash flows you lose big time in cap gains compared to say a guy who buys a 1/4 acre in a leafy area and builds a huge maisonette on it.

Bottom line, I would take decent 2br and 3 br flats, as well as 4+ br maisonettes any day over 1br blocks of flats despite the cash flows. Kenyans, seriously ask yourselves, do we want the whole country to look like this (below). If we are not careful, bila planning, that is the direction we are headed in.



Compare to Enugu (below)in Nigeria. Much more pleasing to the eyes and to the general well being of all tenants :)



"The fool says in his heart, "There is no God." - Psalm 14:1
Dustbowl County is the Future of Kenya.
**1700 posts = Adios (for real this time!)**
obiero
#277 Posted : Saturday, June 30, 2018 10:32:40 AM
Rank: Elder


Joined: 6/23/2009
Posts: 11,666
Location: nairobi
Photos will be shared here of besitters in New York and Beijing! Smaller living spaces are the trend going into the future. Execution of the project is what matters. Umoja failed because of lack of coordination by GoK which could easily happen to the Big Four housing agenda.. Look at Marish, Ungem, Ofafa, Baha..
COOP 5,500; KCB 3,700; KQ 221,100
MugundaMan
#278 Posted : Saturday, June 30, 2018 10:48:45 AM
Rank: Veteran


Joined: 1/8/2018
Posts: 1,700
Location: DC (Dustbowl County)
obiero wrote:
Photos will be shared here of besitters in New York and Beijing! Smaller living spaces are the trend going into the future. Execution of the project is what matters. Umoja failed because of lack of coordination by GoK which could easily happen to the Big Four housing agenda.. Look at Marish, Ungem, Ofafa, Baha..


Show me bedsitters ANYWHERE in Kenya that come close to matching those huge luxury studio apartments in New York! Some of those things are bigger than a 4 br hapa. Hakuna hata moja hapa Kenya. Those studio apartments (their version of bedsitters) cost hundreds of thousands if not millions of dollars! I am yet to see a decent block of "posh" bedsitters anywhere in Kenya in 99% of all cases. Please prove me wrong. Yet even the stock of those is but a tiny fraction of the entire housing market in New York. Smaller living spaces is just a media catchphrase and fad. Wake me up when it becomes mainstream and actually happens en masse. Saying everybody is running for tiny bedsitters is like saying everyone is rushing to sell their cars to buy those tiny suzukis I see being used for uber chap chap that can almost be held in the palm of one's hand

I do however agree with you that execution (corruption, lack of maintenance, poor management, land grabbing *especially during the man with the rungu's error)*, ignoring zoning laws and outright incompetence) caused the collapse of otherwise well planned estates.

The other problem with catering to the low income segment is that they are not able to afford to live in decent accommodation which is expensive to build, nor maintain it even if they are subsidised into it. Look at Kibera Highrise whose walls are now reddening with mud. In the USA look at Cabrini Green in Chicago - beautiful apartments that had to be torn down when they became crime and drug havens. In Paris pia look at the banlieues - modern urban ghettos with grafitti despite the buildings themselves originally being very decent. Mixed use housing (high end mixed with subsidised low income) seems to have better luck. Whether that can work in Kenya is debatable though.
"The fool says in his heart, "There is no God." - Psalm 14:1
Dustbowl County is the Future of Kenya.
**1700 posts = Adios (for real this time!)**
wukan
#279 Posted : Saturday, June 30, 2018 11:50:24 AM
Rank: Veteran


Joined: 11/13/2015
Posts: 1,107
MugundaMan wrote:

Of course this is a no-brainer, I was in fact very tempted to go this route because
1. Returns are higher
2. Need for parking and other costly amenities is next to zero
3. Cost of building is cheaper because you can go for the cheapest of the cheap finishings and may not even need to plaster your machine cut walls
4. Economies of scale given low fixed costs compared to returns.
5. Extra income from running businesses at the ground floor

But the reasons why I rejected this route

1. Slummification of entire neighbourhoods (and cities) starts with these buildings. Look at Umoja. Note exactly a great place to raise kids and live a decent life. Some of those apartments are like modern day tombs! Kenyans deserve better. This is why I laud Uhuru's low cost housing agenda. Quality subsidised homes for all.
2. Headaches to the landlord galore. general security issues, Tenant to tenant crime may be rife, eviction problems, blocked drains due to tenants pouring all sorts of plastics and things into the drains, vandalism and constant repairs are no joke. It is as management intensive as it gets and my life is too short to spend all my hours managing all these problems.
3. Cap gains are much lower per annum for these types of structures. What you gain in cash flows you lose big time in cap gains compared to say a guy who buys a 1/4 acre in a leafy area and builds a huge maisonette on it.

Bottom line, I would take decent 2br and 3 br flats, as well as 4+ br maisonettes any day over 1br blocks of flats despite the cash flows. Kenyans, seriously ask yourselves, do we want the whole country to look like this (below). If we are not careful, bila planning, that is the direction we are headed in.



Applause Applause Applause Applause
obiero
#280 Posted : Saturday, June 30, 2018 11:56:04 AM
Rank: Elder


Joined: 6/23/2009
Posts: 11,666
Location: nairobi
MugundaMan wrote:
obiero wrote:
Photos will be shared here of besitters in New York and Beijing! Smaller living spaces are the trend going into the future. Execution of the project is what matters. Umoja failed because of lack of coordination by GoK which could easily happen to the Big Four housing agenda.. Look at Marish, Ungem, Ofafa, Baha..


Show me bedsitters ANYWHERE in Kenya that come close to matching those huge luxury studio apartments in New York! Some of those things are bigger than a 4 br hapa. Hakuna hata moja hapa Kenya. Those studio apartments (their version of bedsitters) cost hundreds of thousands if not millions of dollars! I am yet to see a decent block of "posh" bedsitters anywhere in Kenya in 99% of all cases. Please prove me wrong. Yet even the stock of those is but a tiny fraction of the entire housing market in New York. Smaller living spaces is just a media catchphrase and fad. Wake me up when it becomes mainstream and actually happens en masse. Saying everybody is running for tiny bedsitters is like saying everyone is rushing to sell their cars to buy those tiny suzukis I see being used for uber chap chap that can almost be held in the palm of one's hand

I do however agree with you that execution (corruption, lack of maintenance, poor management, land grabbing *especially during the man with the rungu's error)*, ignoring zoning laws and outright incompetence) caused the collapse of otherwise well planned estates.

The other problem with catering to the low income segment is that they are not able to afford to live in decent accommodation which is expensive to build, nor maintain it even if they are subsidised into it. Look at Kibera Highrise whose walls are now reddening with mud. In the USA look at Cabrini Green in Chicago - beautiful apartments that had to be torn down when they became crime and drug havens. In Paris pia look at the banlieues - modern urban ghettos with grafitti despite the buildings themselves originally being very decent. Mixed use housing (high end mixed with subsidised low income) seems to have better luck. Whether that can work in Kenya is debatable though.

Ngong Road is littered with the studio highrise apartments. Tembea Kenya! http://www.suraya.co.ke/?property=the-lynx-royal

https://www.the-star.co....-rent-in-ngong-road.html
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