By Victor Adar Off-plan buying appears to have given Kenyans a fresh lease of life becoming the latest way that makes buying houses more pocket-friendly. It is seemingly affordable, giving a foothold to first timers as well as new real estate firms keen on getting a piece of the pie. You don’t want to be the one getting surprised at a time when others got better deals. Return is king in this business. That is why more and more individuals choose to buy for speculation. Try to picture buying a property at say Sh14million when your neighbour bought at half that price barely a year ago. It makes sense to buy now and wait for value to grow. Real estate market may appear too saturated but the business is still a lucrative one. The sector has attracted many investors thanks to the big returns. In a last month market update by Knight Frank Kenya, residential rents in the high-end and upper-middle-income segments were sluggish owing to a lower uptake occasioned by cumulative high prices over the past few years. Despite the findings, the party is still on for those who buy and wait. It is said that if you pour your money at the right time you can make something between 20% and 30% when you sell the property. Bindya Kanji Halai, the General Manager of Mark Properties says that a while back they wanted something unique, so they took architects to Dubai to see how stuff works, especially in terms of concepts and design. Construction of the first phase of their Mac apartments would start from October 2013. At the time, a guy who is in Canada and never expected that individuals can afford modern apartments with classic design in Kenya got a rude shock; he found that it is possible, and anyone with purchasing power cannot go wrong by buying early. The client who was fascinated with their first project bought half of the 14th floor, an indication of how sizzling hot the sector is. A side from Mac Apartments, Mark Properties Limited boasts of Mac Gardens in Kileleshwa (their second project) and Le’ Mac (in Westlands, a long Waiyaki Way). Pricing is based on square feet bringing total cost of buying a unit to approximately Sh13.3 million, a deal hard to come by especially after construction is complete. “Mostly, investors are interested in projects like ours. If bought off-plan, it’s much cheaper than when it’s done. When it’s already up it will sell itself. Right now Lemac is the project we are working on and I know the price will really go up. I know of some people who bought for speculation hoping that they will get something. You better buy now, some people buy off-plan for resale.” For the first phase, Mark Properties have sold 80% off-plan, and the second phase from basement to 13th floor is 10% sold, where 14th to the 20th floor is still attracting buyers. Although their developments target the up-market, and most of their clients are foreigners as well as Kenyans who live abroad, even the ordinary individuals, including those who run small enterprises, are largely interested in buying. When those whose risk appetites are low are still thinking of buying completely finished buildings, the wiser guys are buying units early to save money, hoping to get returns in the long run. But just how does one go through the process? “First, a reservation form is filled… proposal goes to the director for approval, then a lawyer works on a sell agreement. A sale agreement is signed between the buyer and the developer. Once the whole project is finalised, lease agreement is issued to show that the apartment is yours. You get a lease…but the tittle deed remains in the name of one person, the developer.” The flipside There has been high appetite for middle class property but most damning, though, is the tough terrain – a majority of individuals, usually the low-income earners, cannot afford the high cost of buying houses. Ms Halai argues that off-plan buying whether, it is as a home or for investment would not be a solution to a certain lot now that the Kenya shilling is weaker than the dollar thanks to increased amounts of foreign inflows. Even with handsome earnings from real estate, investors might be seen opting for other financing ways like taking mortgages, or buying in cash. To a certain extent, buying in cash or through mortgage is a better alternative if interest rate is too high. This presents a risk for growth as many individuals are locked out. “Before, the dollar rate was down. But now because of fluctuation it affects the interest rates. People would rather put their money in fixed deposit accounts instead of investing in the real estate. When the dollar rate was constant, the market was really good, now it is affecting the interest rate… mortgage rates have gone up.” What it means is that investors, especially individuals, would rather put money in fixed deposit than in a project that is still under construction. If this does not change it will affect the developers. If rates go high, developers will not have buyers and would be forced to push rates down. This will kill the business. The buck, however, stops with the government who must fight not to let the Shilling continue to plummet against the dollar to cushion those who prefer to take mortgage rather than buy in cash.