Real Estate Paradox: was with a real estate developer who’s looking to set up even more projects over the weekend; he talked about a paradox where real estate rental prices are dropping, while house prices continue to rise. Note: I’ve not seen signs of rental drops, but this probably applies to the developer’s current financial outlook when choosing to build for sale or to rent in Nairobi today
NSSF the Kenya National Social Security Fund NSSF continued a trend started last year of publishing their financial accounts. For the year to June 30 2008, they had of total assets of Kshs. 87.53 billion (~$1.1 billion), partially comprising 49% equity investments (43.7 billion), treasury bills & bonds (11.2 billion), and land & building 24% (20.97 billion) which was down from 29% the year before.
While NSSF’s investment income of Kshs. 5 billion was a 25% increase from the year before, poor returns in local shares at the Nairobi stock exchange have hit pension, fund, and insurance schemes leading them to seek greater returns and safety by investing in real estate. Yet the NSSF, because of its past association when it was a political cash cow and got saddled with unpalatable properties, is going against the popular grain, but has no choice even as it faces as long struggle to be viable safety net for retired workers.
Water shortage: dry water pipes in some Nairobi estates have been a pain to residents in some parts of town who have to buy water from vendors. Many construction sites even have to ferry in all the water they need by lorry seems to be a good business idea to have a water lorry now
Bricks & Banks: The new Equity Bank headquarters are now up in Upper Hill and UAP Insurance will soon be putting up a building in the area. On the Westland’s side its Southern Credit Bank and Standard Chartered Africa with new buildings about to be completed.
Cement & inflation: I’ve added retail cement prices to the inflation index starting with a 50 kilo bag of bamburi cement at 780 shillings (~$10).
S&L Gone: Savings & Loan is no more after KCB shareholders absorbed the subsidiary within the group structure as a cost saving measure. There was a nice (offline) article by Carol Musyoka in the Business Daily and she highlighted that S&L’s rapid growth was funded, not by deposits, but by funds drawn from parent KCB and wondered what return this was to KCB shareholders
Goodwill barrier: goodwill is a fee demanded by business owners from business tenants, shop owners etc. It’s a strange phenomenon; the fee, often as much a year’s rent, is paid before the building is even put up for the shop-tenant to secure space in the building. Another fee is paid each time a shop moves in or out of the building. This exorbitant business expense has put off many start ups and small business owners from renting or setting up shop in downtown Nairobi.
More articles on the goodwill phenomenon from Ghana, a Kenya forum and the Standard
8 comments:
I did see some stall space being advertised at a building on Muindi Mbingu the other day that said there was no goodwill being charged. I thought that was strange considering the norm. And talking of how much goodwill is, I was told of a building put up in town that cost the developer 75 million (cost of land and construction). He got that money back in one day from goodwill paid to him for shops on just two levels of the 5 level building!
real estate for real... rent is only up and up... dyu know the reason prices are high..... for rent because... there is a housing shortage.... imagin the prices people pay for those tiny servants quaters.... then there are those high rises that are financed using bank loans.. at todays cost of credit of course they will be expensive... dont even get me started about the speculators... then there are all those idiots that can and do afford them....
nice post. i have been meaning to ask you if you can make posts this detailed about other east african countries. at the moment i am in Uganda and i would like to get info like this about the state in Kampala etc. nice work though
ps. i have always thought this blog is Ugandan becoz the name bankelele sounds like Luganda... :-)
http://kenyantykoon.wordpress.com/
There is no way rental prices in the Country can ever drop. Kwanza now that the prices of electricity are to go up, this will be a very good excuse for landlords & ladies to increase rent. As for goodwill, I was taught that it's a fee which should be paid if you are to buy a business with a good & famous business name or you are to do business under a good, famous well reknown business name. Example, if you were to purchase Nakumatt Supermarkets or acquire Nakumatts Franchise, you are to pay goodwill because Nakumatt in itself is a brand name which is well known & shoppers flock there in the thousands. Good will which is demanded by Landlords even before the construction is complete is just an excuse for greedy landlordsto rip off money from people.
Hey all, i dont see what the fuss about goodwill is all about.If you own a stall in CBD where you want to charge rent of 50k/month....and 10people offer to pay....how else would you reduce this number to 1 person?If the goodwill was soooo crazy....i don't think people would pay.If I had a building coming up say on Moi Avenue i would take goodwill from guys even based on the plans....and why would they pay?Coz they know that whatever they set up in that location will definately thrive!
EGM: that could be a scam, even people who don’t believe in goodwill charge it as an extra
- Would that building be the Jamia mall?
Peter: not seen any drops, but I’m seeing more to let signs
- Several real estates constructions are not bank financed
Kenyantykoon: thanks for reading, I like reading Ug blogs and will add yours to the list
Chegepreneur: But landlords don’t pay electricity in many cases. I agree its unlikely that sale prices will drop, but they could flatten (like they did until about 10 years ago)
- yes you can pay goodwill to share a building with nakumatt, but even run down old building landlords charge for it
YoungMoneyKenya: then set a higher price, but don’t hide behind ‘goodwill’
Banks, the building is Electronics House on Luthuli Avenue.
I agree on the idea of increasing rent if the demand is so high.
what is this fallacy about rents not going down. Rents will go down either directly or indirectly. Indirectly by renters getting room mates or through inflation or refinancing and re amortization.
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