MIP WEEKLY CONSTRUCTION INDUSTRY REPORT NO.42
Sh16b enough to build new rail project, says leading UK magazine
PERIOD: June 6 to 12, 2016
06/06/2016 : The Business Daily, Page 6
- Sh16b was all that Kenya needed to construct a well -functioning SGR, a British magazine claimed.
- According to the article the money would have been enough to upgrade the old railway into an SGR.
- This would have spared the tax payer a whopping sh311b enough to fund all the other 47 countries. Kenya negotiated for a sh327b bilateral loan from China for the project.
- It also quotes consultants, including Pierro Pozzo di Borgo of International Finance Corporation wing of the World Bank, who says that rehabilitating the older line might have cost just fine PC sum as much as building a new one.
- The article seems to conclude that Kenya’s future generations will shoulder the burden of repaying the 327b debt, which could be avoided.
Muranga: locals accuse contractor of rip-off
06/06/2016 : The standard, Page 18
- Residents have accused a Nairobi – based firm of doing shoddy road repair works.
- They said the contractor was causing more destruction to roads, adding repairs were being done on roads on perfect condition.
- Peter Muchoki said the works by the company was a scheme to loot from the country. Transport executive Amos Njoroge ordered the company to stop the works to pave way for investigations.
City Hall plans to hand pension scheme another prime estate in debt swap
06/06/2016 : The Business Daily
- City Hall plans to hand out another of its prime estates to a pension scheme as part of the county government’s plan to reduce its sh45b debt.
- The county’s debt management strategy paper indicates that the city government has entered into negotiations with Local Authority Pension Trust (Laptrust) to transfer to cover the amount it owes.
- The paper did not specify how much Laptrust is currently owed and county officials had not responded by the time of going to press. Last June, City Hall owed Laptrust sh5 billion.
- This is the second transaction with the county government having transferred the Mariakani Estate to Local Authorities Pension Fund in early 2013. However the deal has since been challenged in court.
- The agreed estate will be valued by three professional valuers including the government in order to establish the correct value.Read more
Bamburi targets lower end of the market with Sh500,000 home plan
06/06/2016 :The Business Daily,Page 18
- Bamburi plans to lock in buyers with an offer to customized house models and technical support during construction.
- The firm has done cost estimates and developed 30 architectural drawings for different home sizes costing between Sh.500,000 to Sh5.2m to build.
- The package solely for residential homes – bungalows, mansionettes and incremental houses dubbed Maskani will see Bamburi partner with lenders and local distributors to fund the construction without distributing money directly to the client to tie them to their product.
- “The customer will make a pick from the set of design and we will then link them to a financial institution which will provide the money. We will give them bill quantities for their specific choice and then connect them with our local distributor who will provide all the materials,”Bamburi Cement Head of Marketing Irene onacha said.
- Bamburi is in consultation with two banks and 3 micro finance institutions to act as their official lenders for the project.
- Bamburi cement Managing Director said the Maskani initiative is initially being carried out in Nairobi and its environs but will progressively expand to other towns in the second half of 2016
- They will also offer technical support during construction to ensure the buildings are up to standard.
Crown Paints unveils eco-friendly products
06/06/2016 :The Business Daily, Page 18
: The Daily Nation, DN2, Page 3
- Crown paints has unveiled new eco-friendly range of paints as it seeks to meet growing demand for green construction materials in the market.
- The Zero VOC range, pose no danger to the environment as they do not contain unsafe chemicals.
- The paints contain special colourants sourced from Canada and are odorless.
- VOCs- Volatile Organic Compounds – are solids and liquids found in ordinary paints that convert easily to gas or vapour at room temperature which, when exposed to the environment and humans, can have harmful effects.
- Crown Paints have been manufacturing low VOC paint ranges but after years of research, has become the first company in the region to manufacture and offer Zero VOC products.
- The finished product ranges are tested in an accredited analytical laboratory in- TUV Singapore- for Zero VOCs contents as per the British Standards method.
- In March, the company raised its steaks in East Africa by opening a second factory in the country estimated to be worth sh400m.
- The factory in Kisumu can produce 1.2 m litres of paint per month and has automated 70 % of the processes, a factory that assures the quality of products.
Fake court orders used to stop demolitions
06/06/2016 : The Daily Nation, Page 11
- Owners of buildings marked for demolitions forged court orders barring the Nairobi County Government from knocking down their structures.
- Over 200 buildings were marked for demolition and so far 8 had been demolished in Huruma and Mathare. Demolitions had however been put on hold over the past two weeks after the developers pinned court orders outside the buildings that were marked for demolition.
- County Executive for Lands, Mr. Khaemba said the county government decided to involve a legal team, which went to the High Court, where the orders were supposedly issued, but records of the matter could not be traced.
- He said that the county government has resumed demolitions and targeted 2 other buildings in Huruma.
- The county has also been re-auditing the buildings, with owners of those that require repair given a grace period to carry out the necessary work.
Uganda economy to grow 5.9pc fed by construction, says World Bank
07/06/2016 : The Business Daily, page 14
- Uganda’s economy will grow by 5.9% in the 2016/2017 fiscal year, up almost a percentage from the levels estimated for the previous 12 months thanks to spending on large infrastructure projects, the World Bank says.
- “The predominant driver of growth will be an increase in the construction sector, with this growth driven by Uganda’s significant investments in public infrastructure,” said the bank.
Sh75m set aside for demolition equipment.
08/06/2016 : The Standard page 22
- City hall has justified the proposed allocation of Sh.75m to carter for purchase of equipment for demolition of condemned buildings.
- The Budget and Appropriation committee had allocated the money and sought for approval of the assembly.
- Other allocation to the lands docket include Sh130m for development of integrated development plans, sh70m for development of open spaces and sh60m for regularization of unauthorized buildings.
Architects push for tax cut on building materials
09/06/2016 :The Standard,Home& Away, page 2
- The Board of Registration of Architects and Quantity Surveyors (BORAQS) wants the treasury to reduce taxes on building materials to make housing affordable for the lower- and middle-income earners.
- This, says the BORAQS, will increase housing stock in lower cadre bracket.
- “On our part, we have started reviewing the building code and the various regulations that have for years been seen to be a barrier for the sector” said BORAQS chairman Nathan Kureba, during the launch of the 19th Build Expo last weekend. The event brought together players in the building and construction industry.
Rise in steel prices could slow down property growth
09/06/2015 : The Standard, Home & Away, Page 2
- Rising steel prices might slow down real estate growth in the country.
- Industry players say that global steel prices have more than doubled as Chinese manufacturers reduce their output
- This has been made worse by shortage of local scrap. Insiders say there is a very small fraction of scrap that can meet the industry’s current demand.
- Kenya imports steel as an intermediate good, meaning it is used in the eventual production of a final product and not consumed directly.
- Increase in price of steel is thus likely to increase the price of the final product.
- A spot check among steel traders shows prices have increased by between 10-20 per cent.Read more
Constructor sues La Nyavu Gardens for refusing to pay Sh181m
09/06/2016 :The Daily Nation,DN2, page 3
- A real estate firm associated with Christ is The Answer Minstries (Citam) church has been taken to court by a contractor who claims he is owed Sh181m from a housing project for members in Nairobi’s Karen suburbs.
- Dinesh Construction wants the court to compel La Nyavu Gardens, associated with Citam, to pay it the claim for infrastructure works done on the project dubbed Bogani Gardens.
- La Nyavu Gardens is the business arm of La Nyavu Savings and Credit Co-operative society, whose membership is drawn from Citam worshippers.
- The contractor says he completed the work La Nyavu hired him to do but it has refused to pay even after written demands and threats to sue it.
- La Nyavu has filed an application seeking to refer the dispute to arbitration, which it claims was one of the clauses in its contract with Dinesh intended to address any dispute arising from the project.
- Dinesh says it was to receive Sh259 for its services but has only been paid Sh78m.
HF Foundation leads the way in developing occupational standards for technicians
09/06/2016 :The Daily Nation, DN2,Page 4
- Housing Finance has steered the building and construction industry in developing a new set of building and construction occupational standards.
- Unveiled at the end of last month, the occupational standards are expected to significantly improve the quality of training among artisans in the sector, as they evaluate the modalities of bridging the skills gap in the market
- As the foundation for training artisans, the occupational standards have been designed to facilitate collaboration between the industry and technical and vocational education and training (TVET) institutions in order to match the trainees’ skills with market demands, said Ms Winnie Imanyara, the executive director of HF foundation.
- The occupational standards were developed in consultation with both public and private sector players including the NCA
- HF Foundation, the social investment arm of HF group, steered the process of developing the new guidelines and handed them down to the Curriculum Development Accreditation and Certification Council(CDACC)
- If adopted, the occupational standards will entrench competency based education and training(CBET) in TVET institutions which would in turn impart employable skills among trainees in this institutions
- The adoption of CBET in Kenya will help meet the needs of the industry and expose the trainees to the global and industry practice.
Real estate sector set to benefit from tax incentives for low cost housing development and removal of construction levies.
12/06/2016 : Cytonn weekly report no. 23
- This week saw the reading of the Kenya 2016/17 Budget Statement, which contained several key highlights focusing on the Kenyan real estate sector. Key areas to note are:
- Corporate Tax Rate Incentives: Key from the 2016/17 Budget was the incentive that Government has provided developers with reduced corporate tax rates from 30% to 20% for developers that construct at least 1,000 units of low-cost housing per year. We applaud this action by the Government, which is a key step in increasing housing supply to cater for the annual supply deficit of 200,000 housing units. These incentives to increase construction of low cost housing, combined with the deepening of the Capital Markets through REIT regulations are positive steps towards increasing the number of real estate developers in the country.
- Removal of NEMA and NCA Levies: Government has scrapped NEMA and NCA fees, which were previously charged at 0.1% and 0.5% of construction costs, in an effort to reduce the cost of construction. In our view, removal of these fees will encourage increased development in the Kenyan market, as well as allow developers to reallocate project budgets towards additional value-adds, rather than paying it towards fees.
- Funding for Low Cost Housing: Government is working on putting in place a mortgage liquidity facility, which will provide long-term funding to financial institutions, including Saccos, to enable them to provide longer-term mortgages to their clients and members. The World Bank estimates, that Saccos have issued approximately 40,000 housing loans, indicating they’re a preferred source of housing finance compared to banks. At the same time, this will help improve both the formal and informal mortgage market reach, as currently less than 10% of all housing credit comes from the banking sector.
- Implementation of these actions will benefit the provision of low cost housing which has been difficult to achieve due to high costs of construction and credit and the rising land prices.
Increased foreign investment highlights positive investor sentiments on the Kenya real estate market
- This week also saw increased foreign investment in Kenya’s real estate sector, with activity from both Actis and China Africa Development Fund (CAD Fund). Actis closed out Actis Africa Real Estate Fund (AAREF) 3, with commitments totalling USD 500 mn, surpassing its initial USD 400 mn target. The fund will invest predominantly in retail, office and industrial developments, with AAREF 3 coming after AAREF 2, which closed in October 2012 with commitments of USD 278 mn. AAREF 2’s major investment in Kenya was the Garden City integrated mixed-use development, which was completed in 2015.
- China Africa Development Fund (CAD Fund) has partnered with Kenya’s Government to fund housing development, with CAD Fund keen on addressing the housing shortage in the Country. One of the projects earmarked to benefit from the partnership is the Ngara City, a redevelopment project that involves pulling down old houses in the old Ngara Estate and constructing new ones. The goal of this project is to increase the capacity of residential dwellings through constructing high-rise developments and providing affordable housing.
- Kenya was shown to have recorded the fastest rise in FDIs in Africa at 47%. The main drivers include:
- High returns from real estate which have averaged over 25% p.a over the last 5 years,
- Large housing market from the growing population and middle-income,
- Improved infrastructure development, with construction of roads opening up new areas for development, and,
- Improved operating environment such as technological advancement, ease of doing business backed by reforms in business and property registration and access to credit.Read more