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Money Markets

Real estate boom draws global marketing firms

Houses under construction in Nairobi. The property boom in Kenya has caught the eye of international marketing firms. Photo/ANTHONY KAMAU
Houses under construction in Nairobi. The property boom in Kenya has caught the eye of international marketing firms. Photo/ANTHONY KAMAU 

The real estate boom has caught the eye of international marketing firms, which have intensified efforts to link up local developers with opportunity-seeking foreign investors, particularly those based in Europe and other emerging economies.

A team from Reed Midem, a France-based international marketing group, was in Nairobi last week, seeking to register local real estate developers for next year’s annual real estate exhibition conference —dubbed MIPIM— in Cannes.

Asset management

The annual MIPIM exhibition brings together real estate investors and developers, and is said to have attracted 17,306 participants last year- 4,084 of whom were investors.

They included asset management companies, institutional investors and hedge fund real estate investment trusts and hotel groups.

Promoters of Tatu City project—which was launched last week, attended the MIPIM conference last year, where they crystallised their idea to launch the Sh240 billion real estate plan.

“After the conference last year, we got very good responses and contacts and this gave us the encouragement to launch this year. It gave us international exposure and helped us interact with investors from different parts of the world,” said Mr Josephat Kinyua, a director at Tatu City Limited.

Strong growth in frontier and emerging markets like East Africa, China, Brazil and India have attracted massive interest from international developers who are seeking high returns on their investments as growth in western economies remains subdued.

“The potential for growth here for real estate in the East African market is enormous. Investors are asking about this part of the world” said Germain Daleau, the Reed Midem Sales Manager at a media briefing last week.

“Last year we had about 50 companies coming from Africa mainly from South Africa and Nigeria. There is a demand for information from the global investment companies because of the potential here,” he added.

Another company, Stenon Africa, has been running adverts in local newspapers calling for investors who are willing to put money in the rapidly growing Indian sub-continent.

Hussaini Nawala, director of Stenon Africa said the company is targeting the big local population of Kenyans of Indian origin.

“There are a lot of Indians and people of Indian origin in Kenya, this is why we have chosen to advertise this investment opportunity here,” said Mr Nawala.

World Bank data shows that high income country economies that include the United Kingdom and United States shrunk by approximately 3.3 percent last year, while developing economies grew by 1.7 per cent.

Projections show that the United States economy will grow by 3.3, 2.9 and 3 per cent this year, 2011 and 2012 respectively; while Euro area countries are forecasted to grow by 0.7, 1.3 and 1.8 per cent respectively.

Developing economies on the other hand are projected to grow by 6.2 this year and six per cent in 2011 and 2012.

The strong growth in frontier and emerging countries signals higher chances for investors making better returns in these economies.

Hass Consult, in a recent study, said local investors who put their money into property in the year 2000 have seen their value rise by 183 percent, while a diversified portfolio at the Nairobi Stock Exchange returned 125 percent during the same period.

Reed Midem says that 1,727 exhibiting companies from 81 countries participated in the MIPIM conference last year.

“The event has been happening for the last 22 years and we have not had enough African companies, especially from the East African region participating” said Elizabeth Ndungu, the local contact person for Reed Midem.

Ms Ndungu said that local developers are likely to meet real estate investors who are eyeing the region and get high returns apart from networking with their peers from all over the world.

Mr Daleau said that interest in investing in Africa had grown, and Reed Midem had decided to dedicate an “African Street” where companies from Africa will be allowed to showcase their projects at a high traffic area.

Shirish Shah, managing director Greenspan Investments Limited that participated in a similar conference in London said that such conferences could be beneficial but that corruption was affecting relations with investors because delayed approvals were affecting completion projections.

“The investors are concerned that we shall not be able to deliver on time” he said.

He said that recourse is needed where application for project approvals are not given by a certain time. 

Greenspan Investments Limited is constructing a Sh5 billion housing estate in Donholm, Nairobi comprising 270 maisonettes and 980 apartments in 50 acre piece of land and is also shopping for 150 acres in Njiru.

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