Indian tycoon tightens grip on Kenya’s real estate market

Indian tycoon Mukesh Ambani is deepening his foray into Kenya’s real estate market with a series of office and residential property developments that have already earned him an estimated Sh2.5 billion in profits, barely three years after his first investment in the country.

Mr Ambani, through Delta Corporation East Africa – a local subsidiary of his Indian conglomerate Reliance Industries – is currently constructing multi-billion shilling office towers in Nairobi’s Upper Hill and Westlands areas.

Delta Corporation East Africa is also developing a multi-million shilling residential estate in Athi River.

The 53-year old Indian business tycoon is believed to have pocketed Sh2.5 billion from two recent property deals, one of which was last month’s sale of Delta Centre to the World Bank.

Forbes Magazine has listed Mr Ambani as the world’s ninth wealthiest person with a personal fortune of $27 billion.

The multi-storied office tower that Mr Ambani sold to the World Bank is located in Nairobi’s Upper Hill area and is estimated to have cost Delta East Africa Sh960 million to develop, returning a profit of Sh1.24 billion after it was sold to the World Bank for Sh2.2 billion.

Ongoing sale of the Sh550 million Delta Plains estate in Athi River — comprising 153 residential units is estimated to have fetched Mr Ambani’s companies Sh548.8 million. He has so far sold houses worth a total of Sh1.2 billion with each unit selling at a price of Sh8 million.

Nilesh Shah, the executive director of Delta East Africa could not be reached for comment as his office and personal phones went un-answered.
Madabhushi Soundararajan, a director and former chief executive of Delta declined to comment on the company’s plans when contacted by Business Daily. 

Multiple sources familiar with Delta East Africa’s plans say the Indian billionaire is betting big on Kenya’s real estate, and has projects worth an estimated Sh3.4 billion in the pipeline.

Teams Management Services (TMS), another wholly owned subsidiary of the Reliance Industries, is leading the design and construction of the multiple development projects, which have positioned the Ambani business empire to becoming a leading player in Nairobi’s real estate space.

Silvester Mutharia, the chief executive of TMS, said the design and approval of the new office blocks had been completed and actual construction was awaiting the nod from Delta.

Plans are at an advanced stage to start construction of a 16-storey Delta Chambers at a projected cost of Sh1.2 billion, and a 13-storey Delta Point commercial complex at a cost of Sh320 million. Both properties are located in Upper Hill area of Nairobi.

Real estate agents who talked to Business Daily estimated that up to 90 per cent of Delta Riverside Office Block, consisting of four blocks and developed at an estimated Sh320 million, has been sold.

Delta Corner, a 21-storey commercial office block in Westlands is almost ready for letting out.

Delta House, Ambani’s first property in Nairobi, is currently housing the government’s Commission on Implementation of the Constitution.

It also hosted the Committee of Experts who drafted Kenya’s new constitution.

Plans by Delta to develop a 25-storey luxury hotel in Nairobi’s central business district were shelved following a tussle over the four-acre parcel of land that belonged to the National Social Security Fund (NSSF).

The land had been acquired from the NSSF in 2008 and was to house a shopping mall and a five-star hotel, but the deal was cancelled after it was found that the seller had overstated the size of the land, then valued at Sh1.37 billion.

Information from the company’s website indicates that Mr Ambani’s foray into the country’s real estate sector was informed by high returns from Kenya’s real estate market.

The high rate of returns have been made possible by sustained undersupply over the years that real estate agents say is finally beginning to match demand.

“Real estate in East Africa has been identified as an emerging opportunity with immense potential by the Company,” reads a statement on Delta’s website.

“To tap this opportunity, the Company has entered into a 40:60 Joint Venture, Delta Corp East Africa Limited (DCEAL) with a wholly owned subsidiary of Reliance Industries Limited.” It read further. Mr Ambani is the chairman and managing director of Reliance Industries, a family business that has grown to be India’s biggest private company and is also listed in Fortune 500.

He is the eldest son of Dhirubhai Ambani, the late founder of Reliance Industries.

Other Indian multinationals including Tata Group, Essar, Bharti Airtel and AMS Properties have also made major inroads into Kenya in the recent past, placing them amongst the biggest gainers of the decade-long boom in the country’s economy.

Backed with their resource-rich parent companies back home, their foray into nearly all critical sectors of the Kenyan economy has been rewarding, at least going by their planned investments.

Tata Group has said it is scouting for investment opportunities in geothermal electricity generation in Naivasha, perhaps to benefit from the perennial shortage of energy in the country as supply continues to lag demand in the ever-rising need for energy to power the expanding economy.

Michael Odera, the chief executive of Tata Chemicals Magadi - the firm that extracts soda ash from Lake Magadi – recently told the Business Daily that he has been tasked with evaluating the geothermal potential in the Rift Valley to inform the multi-billion investment in about five years.

Tata Chemicals will commission its newly installed Sh10 billion soda ash purification plant in Magadi early next month, expected to double the firm’s output to 700,000 metric tonnes per year.

“We are now moving to Ol karia in Naivasha where the geothermal wells are thought to have the desired potential,” he added.

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