Skyrocketing housing prices and unpredictable rent regimes have witnessed emergence of ‘smart’ investors in Nairobi who buy apartments off-plan at discounted prices.
Real estate property developers now prefer off-plan products that provide them with upfront sales enabling them to evade costly bank loans.
A survey conducted in Nairobi by Cytonn, a real estate investment firm found that off-plan developments were growing in popularity. This is because prices quoted for off-plan properties were much lower than the market value and at times, up to 50 per cent less than the price of a completed house.
“Off-plan properties are also known to appreciate in value even before completion. Owners can select fittings and location of their unit. Off-plan’s instalment mode of payment makes it easy for one to pay a deposit and pay for any property as construction continues,” says Cytonn.
“Developers factor every cost they incur and this starts with loans they seek to fund the construction. But when our clients pay upfront and continue paying monthly instalments, this helps us pay contractors in phases as construction progress helping keep the price of every unit at a minimum,” said Rama Homes Limited sales manager Adrash Hussein.
Mr Hussein indicates that buyers were also keen to move in as soon as the units are ready, helping them save on rent that is then used as a top-up for their monthly repayments thereby enabling them complete payments within shorter periods.
“Kenyans are now looking at off-plan developments as Rent-to-own schemes that we have priced equivalent to prevailing rent rates within the project’s vicinity. Clients know after two years, they will move into the houses and continue paying the instalments as well as top-up with the rent money earlier spent in their rented premises,” said Mr Hussein.
High-end homes developer, Elegant Properties Limited marketing director Amjad Rahim said increased infrastructural developments from roads developments to electricity supply to Nairobi’s outskirts had encouraged many residents to take up off-plan units.
High housing prices made many units unreachable but off-plan projects are a new avenue to buy units in select areas at lower prices.
“Say our latest project, the 18- floor Skynest Apartments along Mkungu Close in Westlands where units are selling at between Sh 12 million and Sh15 million. But upon completion, the selling price could shoot to Sh16 to Sh20 million,” he said.
Mahiga Homes Limited managing director Patrick Muchoki said they had built standalone housing units off-plan at Sh3.75 million for 120 families in the past year along along Kenyatta Road in Kiambu County where clients paid Sh1 million upfront and the balance paid within the next 10 months.
“This ensures no interest fees are incurred on any items or services that is paid for to facilitate construction of the gated ‘small’ communities. This helps improve security of an area as well as boost togetherness that is essential for children’s upbringing,” he said.
Mr Hussein adds that off-plan projects also gave clients a wide array of value adds to choose from that helped define their lifestyles.
“Kenyans are alive to the importance of healthy living. Gyms, swimming pools, running tracks as well as playgrounds for their children are now a must-have. This ensures one enjoys this value adds at anytime without the need to leave their compound and incur extra costs,” he says.
Rama Homes, now in its sixth project has invested Sh3 billion on its five-acre Kitengela property that will accommodate 500 families with each unit selling at Sh7.9 million off-plan. Buyers can sign up for a six- year repayment plan for the three bedroomed units.
Mr Rahim adds that buyers sign deals that are commensurate with the construction phase rate where any delay also gives them a leeway to ease payments.
“When a project is completed, demand rises but the off-plan buyers will only pay what they agreed when the deal was signed.
The off-plan developers said improved infrastructure greatly helped defray development costs enabling reduction of the sales prices for individual units.
Mr Hussein said Kitengela had larger parcels of land that were conducive for development of gated communities with numerous value adds, but lacked essential infrastructure such as roads, water and sewerage connectivity.
We have contracted a biogas plant installer to help mitigate the sewerage disposal challenge. This will be clean energy piped to individual houses at nominal cost,” he said.