Markets & Finance

Why real estate firms are going for the luxury homes market

towler

Hello Properties director Ashton Towler. Photo/Diana Ngila

Hello Properties recognised a gap in Nairobi’s real estate market in 2005. The industry was undersupplied with unique houses.

Buyers were forced to buy what they didn’t necessary want and paid high prices for the second-choice properties.

The company’s ambition is to become a demand-driven developer with a value proposition for the buyer and to serve the unique needs of each customer.

The company’s first development was the Hardy Manor built in Nairobi’s Karen estate and sold nine country-style homes cut to the taste of buyers looking for something different.

It was at Hardy Manor that Hello Properties discovered that Kenya has a large number of prospective home buyers who are looking for luxury vacation homes.

Ashton Towler, the company’s managing director, spoke to the Business Daily about a development that has been cut to the chase for this segment of the market—the Mandharini Luxury Resort in Kilifi slated to be the biggest luxury resort in East Africa.

READ: Kilifi property wins global accolades

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What is your take on the state of Kenya’s real estate market?

Robust! Kenya is ranked among the top three investment destinations in Africa and the real estate sector has been an outperformer in the economy. Ours is a very robust real estate market mainly because of under-supply. There’s more demand for units than the market can supply.

More importantly, Kenya is an underleveraged buyers’ market where most of the downtrends come from over leverage in the development market of the property market.

On the buyers’ side, only 1.5 per cent have taken mortgage, so there is really no leverage and that makes for a very stable market.

We are also seeing continued growth going by the trends that are published in the market by experts. Growth has been tempered a little bit in the past three or four years, but the trajectory is positive.

Which segments of the market are particularly promising?

Growth is generally across the board and I think the real tide is the economic growth and the expansion of the middle class.

Everybody wants to own a home and a large number of Kenyans now understand that property makes a very good investment as well; so there is general growth across the board.

What we are seeing is an increasing appetite for quality properties in the market.

Is this why you have come up with an offer on luxury homes like Mandharini at the Coast?

Mandharini means a place of beautiful views. This development is located in Kilifi on the Indian Ocean coastline at the creek area.

Our vision was to come up with a development that captures the best of Kenya—hospitality, culture and lifestyle in a world class resort environment.

We have combined that with an outstanding investment opportunity.

This definitely pushes us towards the high end of market, but what all we are trying to do is to keep in line with the government’s Vision 2030 strategy, which has earmarked Kilifi as a flagship development area for a tourism resort city.

Much of the focus is on high end accommodation and service and I think we are the first movers into that market with Mandharini.

How have you financed this project? 

Mandharini is a Kenyan company founded by a group of Kenyan investors. Some of our more recent investors are Safaricom staff pension scheme.

We are very pleased to have attracted such high calibre of investors, which is a great endorsement for our investment strategy and the vision we have.

About 70 per cent of our allocation is from offshore investors who have come into the equity base.

READ: Investors kick off second phase of Kilifi holiday homes scheme

Who is your target market for this investment?

Our primary market for the sale is within Kenya and the greater East African Community where there is significant demand for coastal properties.

We know that many citizens of landlocked East African countries have been coming to Kenya and spending a lot of money on vacations. This is a clientele that would easily want to own holiday homes.

There is also a lot of money within the region chasing good investment opportunities and I think Kenya’s property market makes for good investment.

We hope to push out into the wider markets such as Singapore, Dubai, and London once we secure an international hotel operator to manage the Kilifi resort and to look after the homes and rental programmes that are in place.

You launched the second phase of Mandharini last week. How is that punning out?

We have the show house which is open for viewing and we are about to finish the first 22 homes. In the next six weeks, these units will be ready for occupation. We have privately sold most of these units amongst a network of people we know and who know us and trust the quality we deliver.

Getting that far using private network gave us the confidence to go out into the market publicly and release what we now call the links phase, which consists of 11 luxury villas and 28 Maskani residences.

Aren’t you worried that the current state of insecurity at the coast could dim Mandharini’s prospects?

We believe we are in a very good and secure area so we don’t see this as having a negative impact on investing at the coast.

Most people in the region seem to understand that the majority of incidents reported are isolated acts of lawlessness that are carried out by disaffected groups within high density urban areas.

As such these incidents do not tend to affect the wider market, so we do not foresee any dampening of appetite for property, but instead expect a strong take-up in the market.

What is the return on investment if I buy a luxury home and give it to the hotel operator to rent it out?

We have used the best financial advisors, developers and architects who understand what the market wants in terms of homes and destination for this project.

They have helped us structure the project from a financial perspective – making it attractive to us as developers and for the hotel operators who will look after the homes.
This definitely is a successful investment for the home buyer. Independent calculations in terms of what investors should expect have been done.

The estimate is that once the resort is complete, the home owners should be able to get a return of 10 per cent per annum net of all costs from the rental income.

Since this is your second phase, what are your sales like?

In the second phase we took 50 homes to the market and in the past few days we have had a lot of interests from prospective buyers.

There is particularly robust demand for the Maskani residences that are priced at Sh23.7 million per unit.

Most people want a foothold at the Coast and this is a particularly good investment that will take 15 months to be completed.

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