Kenya’s Real Estate: what more can be done by the Government to improve the sector?
This is the year when confidence will gain ground for local real estate, according to a PricewaterhouseCoopers’s (PwC) report. According to the government, on the other hand, it all seems upbeat.
Public Works Principal Secretary Gordon Kihalangwa said the year will see increased activities in the building front, with major construction works targeting middle and low-income earners.
Metropol TV Digital desk spoke to Jonathan Jackson, a real estate developer, and the Chairman and Founder of Lordship Africa. Jackson chose to invest in the sector away from Europe about eight years ago, with key interest to expand sustainability and according to him, it’s his wish to see Kenya become a key pillar in the global investable real estate.
Nairobi’s skyline is set to change with the coming in of tallest residential building in Upper Hill. It is a 44-storey private building which is expected to be completed in three years. Why have you chosen Upper Hill of all places in Nairobi?
Upper hill is being designated as the new Central Business District (CBD) and high-rise buildings are allowed in the area.
But the main compelling reason is that there are main hospitals in Upper Hill, law courts, the World Bank and other financial institutions and embassies. Approximately 40,000 people who work in Upper Hill travel 3-4 hours a day through Nairobi traffic to get to and from work. It is an obvious solution that rather than travelling to where they live, build them something nice right in Upper Hill so that they can walk to work and not necessarily drive. We are helping to reduce traffic by enabling people to live where they work. It’s a huge investment and there’s no competition.
As a real estate developer based in Kenya, what are the biggest challenges you have experienced, and how easy is it to become a real estate developer in Kenya?
Among the challenges that Kenya has is administration and the process one has to go through. Building standards in the world have really changed and Kenya while a bit behind, has shown significant improvement. It is quite welcoming that the Kenyan government is working towards upgrading the building control systems. The procedure and what is acceptable under building technical standards, are being updated because some of them are still very old standards of construction.
Another challenge is bureaucracy. If you compare Kenya to Czech Republic, my last project there took 11 years to get a permit because there are systems and processes where one can be obstructed. In the Czech Republic, there are strict conservation rules because it’s the largest UNESCO protected area in the world, so there are very high standard protection of buildings making it very difficult.
In Kenya, it’s possible to get a permit within a year provided there’s no obstruction by politicians. The biggest hindrance is politicians who get involved. The civil servant planning departments are well set out and know the process to be followed. The problem is our leadership.
Where is Lordship Africa in the next 10 years along the path for realizing vision 2030?
Much of 2030 is the development of Nairobi and its growth. To achieve that, means we need a master plan for Nairobi for about 40-50 years. Every city, here and around the world should have a master plan of where the roads will go, where industries and playing fields will be put up or even shopping centers. You may have a well-established shopping Centre, but it is counter-productive when there are no roads wide enough to cope with traffic.
When you look back at how the real estate sector performed in 2019, what do you think is happening to the sector when it comes to responding to unoccupied units in the country?
There are unoccupied units, a rush to erect buildings, property prices have been rising rapidly from 2010 upwards and people have been making losses out of this. One of the big changes is that financial institutions and pension funds were allowed to release more money into real estate at around 5%, which was then was increased to 25%.
Unfortunately, people don’t understand that real estate is a professional business and not just buying a piece of land and building a house on it. There’s a lot of analysis that has to be done, including evaluation of the building and considering the future of the building and how it will be used.
Often, buildings have been put up in the wrong location, some in a good location but designed badly. We have a mixture of products and this is a factor which has resulted in tenants refusing to rent some of the apartments. There’s lack of understanding of real estate, and there’s a need to understand the market and the fact that real estate is a profession.
President Uhuru Kenyatta in his second and last term came up with key pillars for development in the country, among which is affordable housing. Where can you rate the agenda so far?
We need affordable houses in Kenya, and the President has good people involved in undertaking the agenda, but it is a very complicated matter to solve when there are many stakeholders involved in it, from taxation, constructing materials, land, land opportunity, politicians wanting a hand in the pocket, and the banks financing the projects. It is highly complex to ensure returns to the investors. Some of the locations for the houses in the designated areas in the country are dependent upon investors. And some of them present high risks. I am, however, confident, that if done right, it will be a highly successful undertaking.
The private sector has been incorporated to see affordable housing agenda comes into effect. Are there major obstacles that come along with the public-private partnership for this particular agenda?
Public-Private partnerships can work and I think it is the best solution. It’s more like a joint venture, and the principle is good. Key to look out for will be how the details are worked out and how investors can get the tax benefits.
What is the scorecard for Kenya on the documentation process for one to be cleared to develop property if you compare to Europe?
In Kenya, the process is considerably straight forward than in Europe in terms of documentation. It is also much simpler. Compared to Kenya, documentation in Europe is tighter because it creates some protection for investors to produce a good product. There is a need to balance, here in Kenya, we need a bit more standards and more control.
There are systems in place but there are opportunities to improve and develop them, but again it comes down to leadership and good governance. We need to make sure public money issued for public use does not disappear into people’s pockets and projects which cannot benefit Kenyans.
Majority of people have read about Lordship Africa with you being the Chairman and Founder. Who exactly is Jonathan Jackson?
I was born in Kenya and I am a Kenyan Citizen. My father was a teacher, and a principal of Mosoriot Teacher’s College. I went to school here in Kenya but did my degree in London. I started my business in the Czech Republic. My first project in real estate was renting an apartment, making it clean, painting and sub-leasing it. I went, did the same to another and from there grew my business in Czech Republic.
I decided to return about 8 years ago, and invest here and I have been taking the money that I made from the profits I made in Europe to invest in Kenya. I am now working on projects as a real estate developer here in Kenya.
Our very first project at Lordship was Karen Hills, which is a big residential development of high-end quality one-acre plots in Karen and has proved to be an amazing project.
How exactly did you start your real estate business?
It was in the days after the Velvet revolution. After communism had left, there were foreign companies which were coming into the Czech Republic and told other Eastern European countries. There were no modern office spaces, with no place for them to work at all. They wanted to set up representative offices and it was very hard to find good quality space. I saw an opportunity there that I could rent an apartment, paint it put some new lights in it and make it look comfortable and sublease it to one of the international companies coming into the market.
I would rent the apartments for a small price and sub-lease it for a higher price, ensuring I had a big margin between the two. I saw it was a good business and I did more. Eventually, I had money to rent out the whole building, re-constructed it and sub-leased all floors in the building.
What piece of advice would you offer someone who wishes to venture into real estate in Kenya, whether a foreigner or a local?
It’s a matter of understanding where demand is coming from. Are you going to build a high-quality building in the wrong area? Understand the market and with focus, there are opportunities in the real estate. And like any other business one can always find out a down market.
It’s about the location and getting professional advice. Walk around, talk to a few people and make a decision for yourself on what sounds reasonable.
Besides, it depends on what you are going to build. Is it for residential or non-residential use? Develop in a place where you feel there will be a high demand for your project.
You seem to have an eye for sports having bought Nairobi City Stars, what is a key driver for your love for sports?
My key driver for buying Nairobi City Stars is: I have a real heart for the less fortunate in the society, especially in Nairobi. Many Kenyans are living in terrible conditions with many of them going a day without food. So, this is my way of helping these communities.
I started my own foundation called Jonathan Jackson Foundation, and part of what we know is that the best way to work in communities is through football and other sports, and that’s why I bought the football club.
The foundation was started to help provide solutions to some of the biggest issues Kenyans in Nairobi face, catapulted by how much we can help remove them from the current state. This forms the pillar of the foundation.