MIP WEEKLY CONSTRUCTION INDUSTRY REPORT NO 32
PERIOD: MARCH 28, to APRIL 3, 2016
31/3/2016 : The Standard, Home & Away, Page 2.
Basco launches paint as Kitengela gets new project
- Basco paint has launched a new silicon-based paint within the Dura-coat portfolio that it says is resistant to weather elements.
- This new range of paint will be able to solve the challenges of flaking, cracking and ageing of exterior coatings over a period of time.
- It is a water-based paint that is resistant to extreme temperatures,weathering,ageing,oxidation,moisture and ultra-violet radiation.
- Meanwhile, Kitengela has welcomed a yet another gated community development that targets middle-class home buyers. The investors have been the luxury of buying the land and choosing their own house designs.Read more
31/3/2016 : The Standard, Home & Away, Page 6-7
Slum upgrading: Kibera residents to get new homes at last
- Newly completed apartments in Soweto East await their owners which are part of the Kibera Slum Upgrading Project.822 units were put up on a site where mud hovels stood just a few years ago.
- For a resident to benefit from the new project, one had to pay a deposit of either Kshs.100,000 or Kshs.135,000 for a two-bedroom or a three-bedroom house, respectively.
- Measures have been put in place to ensure that homes remain in the hands of the original beneficiaries.Read more
31/3/2016: The Standard, Home & Away, Page 9
For real growth, interest should be below 10 per cent
- For a decade now, the real estate sector has been experiencing robust growth, which has encouraged the development of many real estate firms in the country.
- At the moment, we have 11 commercial banks charging lending rates of below 16%, with the remaining 33 charge over 17% by refusing to bring down interest rates; commercial banks have made it expensive for borrowers.
- More action is therefore needed to bring down interest rates to below the 10% to keep the real estate growth going.Read more
31/3/2016 : Daily Nation, DN2, Page 48
Lowly earth now deemed perfect building material
- Soil the oldest construction material known to man seems to be back in fashion. Buildings made of mud are coming up all over the world and interest in contemporary earthen architecture is on the rise. Interest in finding sustainable building materials and natural building methods is also rising.
- Some of the advantages include cutting down on fuel consumption and pollution substantially. The number of trees we cut down for construction would also be reduced.
- It is unfortunate that African professionals are still stuck in the trend of trying to ape the West knowing that only a small number of Africans can afford conventional housing and even formal schools.Read more
31/3/2016 : Daily Nation,DN2, Pg.48
OLX opens a portal for construction industry players to interact
- Online advertising site OLX has created a construction industry segment, offering individuals a portal where they can buy or sell building materials, equipment and even secure services a call away.
31/3/2016 : Daily Nation, DN2, Page.48
Cytonn enters into real estate franchising deal with counties
- Cytonn Investments has launched a franchising model for its real estate business, with partners in 10 counties. These franchisees will benefit from Cytonn Real Estate’s expertise in identifying, evaluating, structuring and financing real estate projects.
3/4/2016 : Cytonn Annual Market outlook, 2016
Private Public Partnerships
- The ability of PPPs working for the real estate sector remains highly skeptical because in order to attract private capital into a project, the respective land has to be separated and moved into a special purpose development vehicle that has title to the land. There is currently no framework to enable transfer of public land into special purpose vehicles that can attract private capital and bank debt. For example, the Kenyan University student hostels PPP between KU and Africa Integras, which was announced in July 2015 is yet to take off. The second terminal of the Mombasa port was also set to be developed through a PPP but it is being plagued by corruption allegations at the tendering stage.
- The first quarter of 2016 saw a number of PPPs being signed or are under consideration at the County level, they include:
- Mombasa County planned redevelopment of the 11 old estates.
- KCB Group placed bid to The County Government of Nairobi for the redevelopment of three estates in the City that is the Old Ngara, New Ngara and Jevanjee estates.Read more.
- As the Kenyan real estate market becomes more institutionalized and developers undertake major projects, more financing is required for the projects. In the first quarter of 2016 there was increased funding for real estate projects that came in form of:
- Increased FDI’s with shelter Afrique receiving financing both debt and equity worth Kshs 3.36 billion from Islamic Development Corporation and Africa Development Bank Corporation, Cytonn Investments received additional mezzanine financing of Kshs 400mn from Finnish Investors Taaleri.
- D-REITs – Fusion Capital was given approval by the Capital Markets Authority to issue Kenya’s first two D-REITs to fund both commercial and residential developments in Meru, Mombasa and Nakuru.
- Government launched a project to fund up to 20% of project costs for local contractors to enable them compete with Chinese and South African Contractors who have had more financial muscle.Read more
- Oversight bodies such as National Construction Authority (NCA) showed increased vigour in the enforcement of their regulations. This has resulted in the NCA marking various buildings in Nairobi and Kiambu Counties for demolition mainly due to the blatant non- compliance with regulations by developers and contractors. The various regulatory bodies are also automating their services, a move that is expected to result in ease of access to construction permits as well as an increase in the quality of new buildings.Read more
Distressed Real Estate assess in the country
- Increase in distressed real estate assets and real estate bad loans: During Q3’2015, Kenya witnessed a high interest rate environment, which had a lagged effect over Q4’2015 and Q1’2016, negatively impacting developers.Read more
3/4/2016 : The Standard, Page.4-5
Why Kenya risk losing Kshs.20 billion after throwing out airport mega project
- Kenyans risk losing up to Kshs.20 billion following the controversial cancellation of the Greenfield Terminal Project. The project for the construction of a brand new airport at Jomo Kenyatta International Airport (JKIA) grounds was designed in 2008 as part of a plan to make Nairobi, a premier aviation hub for Africa. It was to be the only one of its kind upon completion as it would have been the single largest facility in Africa. The airport was meant to stimulate passenger numbers and in turn boost other sectors such as tourism, business travel and horticulture.
- The government has issued a vacation notice to the contractor, China National Aero-Technology International Engineering Corporation (Catic).According to the notice, the contractor must vacate the site by April 11,2016 and the government has also declared the contract ‘null and void’. The proclamation by the government came at a time when the contractor had just issued a notice to Kenya Airports Authority (KAA) requiring them to complete financing arrangements to enable the full start of works has sparked an epic legal battle as both parties are in for a fight.
- Termination of the contract was brought about by prevailing operational, economic and financial dynamics which have been going downhill for the past three years. According to aviation experts, should the contract be terminated, the total payments due and penalties for cancellation could approach Kshs.20 billion which is a third of the total initial cost without the project.
- However, last month the contractor wrote to the government stating that so far it has carried out preparatory works amounting to Kshs.8.7 billion. Catic intends to seek further compensation for loss of business and anticipated profits which the Kenyan taxpayer will have to pay should the matter favour the contractor when it goes for arbitration.
- The government is currently challenging the validity of the very contract it signed and wanted executed, basing its argument on a dispute about whether the construction cost included 16% VAT or not, foreign currency application and demands by the financier that Treasury supports the borrowing by guaranteeing the loan in what is known as a sovereign guarantee.