Newly appointed Superior Homes chief executive Shiv Arora talks about the pain inflicted on real estate by the pandemic and the emerging opportunities for the sector.
Newly appointed Superior Homes chief executive Shiv Arora is taking the reins at the property developer at a time business has been hit hard by Covid-19.
He talked to the Business Daily about the pain inflicted on real estate by the pandemic and the emerging opportunities for the sector.
*****
WHAT IS THE REAL ESTATE INDUSTRY OUTLOOK THIS YEAR? HOW BADLY HAS THE PANDEMIC HURT YOUR INVESTMENT?
The Covid-19 pandemic is an unprecedented phenomenon that has transformed the real estate sector for good, with investors, homeowners, and developers all being forced to adapt and change the way they carry out real estate investments.
This is especially true with the management of cash flow for real estate projects going forward, with expectations of a more cautious approach towards capital injection into projects.
However, despite the challenges brought about by the pandemic, the industry has also witnessed positive implications. More so, middle-income to high-income households have been buying real estate units in anticipation of capital appreciation in the future. Investment in residential homes provides a sense of security during shock situations, like the Covid-19 pandemic.
In all honesty, the real estate sector was already under pressure pre-pandemic and the virus has simply highlighted the resilience of many of its sub-sectors as well as its future opportunities. In real estate, there will always be a market within a market!
WHAT MEASURES DID YOU TAKE TO SURVIVE THE COVID-19 STORM?
We went lean, with major focus being on selling completed units within our projects. But we are back to developing new units based on customer demand and payments. Superior Homes’ model, which is both the contractor and developer, with very little to no external debt pressures means that we are resilient as a brand to changes in the market.
WHAT SHOULD A DEVELOPER DO WHEN SUCH A SITUATION ARISES?
There is no playbook for this kind of situation. Upon realising Covid-19 is a long-term phenomenon, conduct a risk assessment focused on the impact of disruptions. Identify your needs where key elements of your revenue and operations are most at risk.
Ask yourself, what if the resources we need become unavailable? What if I get caught by the bug and I am forced to stay away from work? What happens then? How does the company function? What if my workforce gets caught by the bug? What does this mean for the brand? What happens when we go into a full lockdown?
At Superior Homes, we had to come up with a pandemic playbook as quickly as possible and this involved thinking through what could go wrong and developing strategies to address such disruptions to the brand. Our business continuity plan included establishment of a work and succession plan.
WHAT CHANGES DO YOU EXPECT IN THE REAL ESTATE SECTOR POST-COVID-19?
We expect a huge difference in risk-appetite towards projects, especially from a funding perspective. Funding will not be as aggressive as before, especially from the banking sector and risk appetite will be lower as developers focus on taking phased approaches towards building.
Focus will also shift towards developers with good track records that delivered despite the challenges that they were not in control of.
SUPERIOR HOMES LAUNCHED KENYA’S FIRST COMMERCIAL RETIREMENT HOME PROPERTY, FADHILI CARE AT GREENPARK IN KENYA IN ATHI RIVER THAT HAS 12 FULLY FURNISHED BUNGALOWS AND A CLUBHOUSE. HOW HAS THE RECEPTION BEEN?
The purpose-built assisted living complex was informed by cultural shifts where the elderly no longer retire to the village. The elderly lack the same strong ties to the village as previous generations had and many are not attracted to the notion of spending their retirement in their rural villages.
The market reception has been great so far. We have received some great feedback from investors and we are finishing up some minor details to make the retirement home even better.
ANY PROJECTS UNDERWAY?
The first phase of Pazuri at Vipingo, Kilifi County, our master-planned holiday and residential estate is currently 25 per cent complete and the units are investment-ready. We currently have 39 units left and we are looking to have them fully sold next year.
On the hospitality front, our Lake Elementaita Mountain Lodge is fully operational, hosting guests and conferences. We have partnered with our affiliate company, Embiance Limited that is tasked with customising packages for the UK market. Additionally, domestic tourism has also been good and it is what has kept us operational.
WHAT CAN BE DONE INT ERMS OF POLICY TO HELP REAL ESTATE PLAYERS TAKE AN ACTIVE ROLE IN ENHANCING HOUSE OWNERSHIP?
The Kenya Mortgage Refinancing Company’s main objective is to grow Kenya’s mortgage market by providing long-term funding to primary mortgage lenders. A waiver on stamp duty for first-time home buyers and tax breaks for developers to reduce the cost of construction, which can ultimately then be passed to consumers, would help.
WHAT MAJOR HURDLES FACE THE SECTOR?
First and foremost there has been the issue of bad publicity where ‘developers’ swindled Kenyans of their hard-earned money. This made a number of investors very sceptical, slowing off-plan sales.
The best way to curb this is by simply investing in what you see. I usually encourage investors wanting to get into real estate to critically evaluate a company’s track record and strictly invest in what they can see. Remember, cheap can be expensive.
Lack of home financing and the few methods in place tend to be expensive. Developers must moot products that give clients better payment terms and easier access to financing.
PAYE Tax Calculator
Note: The results are not exact but very close to the actual.
