CIC Insurance has acquired 400 acres of land in Isinya and Kitengela area at a cost of Sh1 billion for a multi-billion-shilling property development targeting the middle class.
The insurer bought the land from various individuals at a cost of between Sh1.7 million and Sh2.1 million per acre and will use it to build maisonettes priced at between Sh7 million and Sh12 million.
This is the second major land purchase by CIC which in 2010 acquired 200 acres in Kiambu for Sh560 million on which it plans a mixed development comprising residential and office blocks.
The listed firm joins a growing number of high networth investors including pension schemes, PE funds and insurers that are turning to the property market.
“We are targeting Kenyans in the diaspora and the local middle class with the maisonettes we are going to build in the Isinya/Kitengela area,” said Nelson Kuria, the chief executive of CIC Insurance.
The company will rely on buyers’ deposits and mortgage financiers to fund the multi-billion-shilling development that will diversify its earnings from insurance premiums, equities and fixed income markets. CIC raised the Sh1 billion from internal resources.
The company listed at the Nairobi Securities Exchange (NSE) in June and its share has shed eight per cent over the past three months to the current price of Sh3.45—which is below the bourse debut price of Sh4.50.
Its net profit increased 20.1 per cent to Sh584.2 million in 2011 and it’s the fourth largest in the general insurance market with assets worth Sh9.4 billion in December 2011.
Rapid urbanisation, population growth and expansion of the middle class remain the main drivers of Kenya’s property market that is riding on nearly three decades of under investment in mid-tier segment of housing.
At present, 32.2 per cent of Kenyans or 12.4 million live in urban residents, up from 23.6 per cent or 5.6 million in 1990—assuring property developers of demand that has seen the prices of apartments in Nairobi’s middle-income areas more than double in the five years.
Property market analysts say the rising rent and home prices that has gripped Nairobi and other urban centres will continue to hold further underlining real estate as an asset class of premium returns relative to equities, bonds and bank deposits.
This is what is attracting high net worth investors like Centum Investment, UAP Insurance and Renaissance Capital to real estate.
In its land in Kiambu, CIC Insurance will construct homes, office blocks and shopping malls for sale, with consultants set to advice on the finer details of the projects.
The project comes at a time when the Kiambu/Runda area, also known as the diplomatic community, has generated a lot of interest from developers seeking to cash in on demand from high net worth city dwellers.
Some of the upcoming developments in the area include the Sh200 billion Tatu City project—which is expected to house 60,000 people and Centum’s Two Rivers project on a 100-acre land where the investment is set to build hotels, apartments, and offices, and shopping centres.