Indian tycoon, Mukesh Ambani, has deepened his investment in Nairobi’s real estate sector with the acquisition of 10 prime plots valued at Sh2.9 billion that are to be used for commercial and residential development.
The plots and ongoing development projects are jointly owned by Mr Ambani’s Reliance Industries and Delta Corp East Africa Limited (DCEAL).
Reliance Industries is the majority shareholder with a 60 per cent stake, while Delta Corp holds the remaining 40 per cent.
“DCEAL has acquired 10 prime plots of land in Nairobi with a planned developable area of approximately 1.2 million square feet of commercial and residential assets,” says the latest Delta Corp end of year report for up to March 31 2012.
Mr Ambani has in recent years acquired prime plots within Nairobi which he has developed and either sold or rented out to international organisations, private companies and government parastatals.
Some of the most recent multi-billion shilling transactions include sale of the Delta office towers located in Westlands to the University of Nairobi and financial consulting firm PwC, and another block in Upper Hill area, Delta Center, to the World Bank.
The Delta Corp annual report says the company made an after-tax profit of Sh510 million from a turnover of Sh2.2 billion in 2012.
The report does not reveal transaction prices for the reported deals, and it is not clear whether the sale of one of the Delta Towers to PwC for a reported cost of Sh4.4 billion was part of the transactions captured in the financial year.
Consolidated plots owned by Delta Corp cover approximately 27.5 acre, the report says.
“With rising demand for both commercial and residential space, areas like Upper Hill, Westlands, Kilimani and Mombasa Road are fast emerging as new commercial centres,” says the report.
“Currently, four projects are under various stages of development,” says the annual report, without however disclosing location of the projects.
The 2011 sale of Delta Centre to the World Bank was reportedly valued at $22.8 million (Sh1.9 billion). The Delta Corp annual report also says that the company has leased property to the Ministry of Justice.
The company’s entry into Nairobi is driven by Kenya’s growing middle class, inflows of investment and a promising natural resource industry.
DCEAL’s outlook for Nairobi’s property market reflect similar findings by the Economist Intelligence Unit (EIU), the research arm of the Economist publication, global real estate consultants such as Knight Frank and Jones Lang LaSalle.
The EIU recently ranked Nairobi among 120 most promising global cities of the next decade. Nairobi was amongst seven African cities that made it on the list. Globally, however, it ranked poorly at 112 out of 120 cities included in the EIU report.
Kenya’s capital ranked at the tail end of the list in nearly all of the parameters that were used implying the Herculean task that awaits city planners.
The ranking looked at the city’s economic strength, physical capital, financial maturity, institutional character, social and cultural character, human capital, environment and natural hazards risk and global appeal.
Nairobi ranked 117 in environment and natural hazards risk, said analysts at the EIU.
“Specific areas to improve include improving city disaster management plans, improving environmental governance policies (water quality, waste strategy and air quality),” said Eva Blaszczynski, senior analyst at EIU in an email response.
Other areas where Nairobi ranked poorly and where there is need for improvement were physical capital which looks at infrastructure and where the city ranked 113, as well as social and cultural character which looks at crime levels and where Kenya ranked 106. Economic strength was the Nairobi’s strongest area at rank 52.
“That said, Nairobi did make progress in this category, mostly its city real GDP growth rate which we forecast will be about 5.3 per cent by 2025. Areas where Nairobi could improve is raising its GDP per capita rate as well as Real GDP,” said Ms Blaszczynski.
Knight Frank ranked Nairobi as the city with the fastest growth rates in rent for high-end commercial property in 2012.
Rents in the city’s top areas increased by 17.9 per cent , ahead of 15 other cities in Africa, Asia, Middle East and Europe surveyed by Knight Frank.
The increase was due to growing demand as more multinational expand to the continent and choose to set up base in Nairobi in addition to entrants of oil and mineral prospecting firms.