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Bad time to be a landlord in Kenya

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Earlier this year, tenants of an apartment block in Ruaka, Kiambu County, were pleasantly surprised when their landlord slashed their monthly rent by Sh5,000.

Property manager Bekam Properties Ltd gave its clients residing in the deluxe apartments a reprieve by lowering the payment for their two-bedroom houses from Sh35,000 to Sh30,000, effective February 1.

Their notice read, “ … in consideration of the prevailing economic situation in Kenya, the landlord has decided to lower your monthly rent from Sh35,000 to Sh30,000 with effect from February 1, 2020.”

Elsewhere, it was an early Christmas for some traders in Dagoretti late last year when their landlord reduced their monthly rent, citing tough times.

The property’s manager, identified as Simon Ngugi, asked occupants of Muhu Building on Naivasha Road in Dagoreti North to pay Sh2,000 less in rent for their stalls beginning November 1, 2019.

The tenants had hitherto been paying Sh10,000 per month for each unit.
The decision, the manager said, was made in an effort to retain current tenants and attract new ones due to “serious business fall”.

The move was a rare gesture given that the majority of Kenyan property owners only revise rent upwards on the flimsiest of reasons, including a fresh coat of paint.

These are just a few of the numerous instances in which landlords and developers cut their charges in the past few months.

Some proprietors are providing discounts such as a free months, longer fit-out periods and other inducements to retain their tenants and attract new ones.

But while these revisions may appear an act of kindness to help struggling tenants meet their targets and basic needs owing to tough economic times, a deeper look portends a property sector in turbulence due to the economic slowdown alongside sector-specific challenges that have seen the returns drop significantly.

Industry players are unwittingly staring at the likelihood of empty premises, devoid of customers, as the tough economic times persist and the property sector gets saturated with options.

They have resorted to using inducements as the only possible means to ensure they retain their tenants as high rents would only result in customers choosing more affordable options available in the already bursting market.

The House Price Index released earlier this year by property consultancy firm HassConsult Ltd showed home prices in satellite towns declined by 50 basis points last year.

This is the first-ever drop since the survey was launched in 2008.

The decline was attributed to the challenging economic environment witnessed during the period characterised by massive job losses and company shutdowns.

Landlords are becoming less demanding, especially in areas where there is an oversupply of similar units, according to HassConsult’s head of development consulting Sakina Hassanali.

Cytonn analysts and Knight Frank Kenya’s first-half market update released in September both attributed the gloomy performance in the commercial sector to an oversupply of retail space.

The increased development of malls did not make matters easier as it heightened competition, especially for the low-end markets.

A market update by Knight Frank Kenya showed that prime residential prices fell by 1.8 percent over the same period, increasing the decline to 6.7 percent in the period to June last year.

The report held that these factors transformed the market in favour of buyers and tenants, a perception that was then heightened by multinationals continuing to downsize their investment while there were fewer expatriates relocating to the country.

This combination of dynamics hurt the niche market.

Wacu Mbugua, a market analyst at Cytonn, notes that oversupply of retail space mostly hit the Nairobi metropolitan area, exhibited by the cropping up of malls and low occupancy rates, and in turn lower rental yields.

“The outlook for the sector is neutral and we are likely to witness reduced development activity in Nairobi, with developers shifting to county headquarters in some markets such as Kiambu and Mt Kenya regions,” she says.

The shift to the outskirts such as Kiambu is believed to have caused the prices of property and rent to rise earlier in 2019.

However, in the last quarter of the year, property management companies began sending notices to their clients indicating an intention to slash rent.

Ms Hassanali says developers looking to make a killing in the lucrative real estate market are now revising property and house prices if they are to make any headway.

The House Price Index goes further to show that rent in satellite towns dropped by 2.1 percent last year, an indication that landlords reduced their demands in response to the tough economic times and increased market supply.

As a result of the value adjustment, Juja recorded the highest drop of 9.6 percent over the year, while in Nairobi suburbs, it also took a downward turn, dropping 2.3 percent in the same period.

“Contrary to what is universally believed, the rent rates in high-end areas such as Lavington, Kileleshwa, Westlands and Loresho actually dropped in 2019,” the real estate consultant details, noting that Parklands recorded the largest drop in rental prices of 5.2 percent over the year.

Nonetheless, Kenya’s capital is understood to be witnessing a resurgence of demand from global investors eyeing bargains in select high-end properties.

The country remains the favourite investment spot for foreign direct investments and the reduced property prices blamed on price corrections give buyers a reason to smile, according to the HassConsult Ltd property adviser.

However not all property owners read from this script, as some maintained their initial rent charges despite cries from some tenants.

Mr Mundhir Abdirahim, a resident in Eastleigh, decries the rising rates of rent in the area despite the economic state of the country.

“Things are different in Eastleigh. Even when the economy is crumpling, landlords will keep asking for more,” he said.

by nation.co.ke

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Uhuru’s housing project in limbo as Treasury CS says there is no money

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President Uhuru Kenyatta’s pet project of affordable housing for the country is facing financial turbulence.

This comes after National Treasury Cabinet Secretary Ukur Yattani admitted before a parliamentary committee that the government may not allocate money in the next financial year due to a dip in national revenue collection.

After President Uhuru Kenyatta was sworn in for his second and last term in 2017, he announced his Big Four agenda for the country which include, manufacturing, universal health coverage, food security and affordable housing.

Under the housing, the President outlined his government’s plan to construct at least 500,000 housing units across the country by 2022.

To construct 100,000 units, the government requires about Sh45 billion so as to attract investors to pump in more money into the programme.

But while appearing before the Transport, Public Works and Housing Committee of the National Assembly Thursday, Mr Yattani noted that his ministry is facing financial difficulties and that he cannot guarantee the availability of the funds required for the project.

“We may not provide anything in the next financial year,” Mr Yattani told the committee chaired by Pokot South MP David Pkosing.

Transport, Public Works and Housing Cabinet Secretary James Macharia, who also appeared before the committee, noted that the government now intends to bring onboard the Saccos.

According to Mr Macharia, 228 units of the 1,370 units being the first phase along Park road in the city’s Ngara estate, have been completed and handed over to the government.

The projected completion of the entire project is December this year.

In the current financial year, Sh5 billion has been set aside for the programme and will be fully disbursed after Mr Macharia complained that out the allocation, only Sh1 billion has been given out.

Mr Macharia told the committee that it was regrettable there will be no money to fund the President’s legacy project noting that if the requested amount was availed, the country would be having 130,000 units.

He noted that given the reality that the country may not have the money required, it may be prudent to explore the mortgage culture and rope in the low-income bracket.

“Currently there are about 25,000 mortgages in the country, which by any standards is quite low. This culture needs to change. The ministry is encouraging investors to come in and take risk by putting up houses for sale,” Mr Macharia said.

He noted that the government will provide the required land, infrastructure, water and power among other things to support the investors in this.

“With all this provided, the cost of putting up houses might go down by up to 40 percent. This is the strategy that we want to use,” he said.

Mr Yattani explained to the committee that the Kenya Mortgage Refinance Company (KMRC) will also play a key role in boosting the success of affordable housing programme.

KMRC was incorporated in April 2018, to provide secure long-term funding to primary mortgage lenders (Banks and Saccos) in order to increase availability and affordability of housing loans to Kenyans.

Mr Macharia told the committee that the take-off of the project faced setbacks due to delays in the implementation of mandatory contribution and lack of support from the public as provided for in the Finance Act, 2018.

The law had made it mandatory that workers contribute 1.5 percent of their basic salaries with their respective employers contributing a similar figure to finance the project.

However, the Federation of Kenya Employers (FKE) obtained court orders to suspend the implementation of the mandatory contribution.

Before the matter could be determined in court, President Kenyatta while leading the country to mark Jamuhuri Day celebrations on December 12, last year, he decreed that changes be made to the Finance Act to make the contribution voluntary.

by Nation

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Dreamliner KQ ranked last among 10 carriers in the Middle East and Africa

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A strike and pilot sabotage are among factors that dragged Kenya Airways to the bottom of Middle East and African carriers’ ranking in the 2019 on-time performance (OTP) review.

The update done by Cirium, a London-based airlines advisory and consultancy firm, rates global airlines through their on-time arrivals, departures, average delay in minutes per flight and those that operate within scheduled time.

TIME ARRIVAL

The airline was ranked last among the 10 carriers in Middle East and Africa, a blow to the carrier that saw its losses double last year.

The rating saw Kenya’s national carrier come in 10th with a 72.25 per cent on time arrival of flights just below Addis Ababa-based Ethiopian Airlines at 74.22 per cent.

Qatar Airline was ranked top with 82.45 per cent on time arrival, followed by Dubai-headquartered Emirates Airlines at 81.02 per cent and troubled South African Airlines at 79.38 per cent, coming a close third in terms of punctuality.

KQ had an average of 47 minutes in delays for its over 54,061 flights it operated last year, a slight improvement of its 50 minutes in 2018.

“Arriving on time at a destination is becoming increasingly important to millions of both leisure and business passengers around the world every day. Therefore, our on-time performance review 2019 is designed to inspire airlines and airports to continually innovate to improve their performance,” the report said.

PILOT SHORTAGE

Kenya Airways Director of Operations Capt Paul Njoroge attributed the poor show in flight performance to aircraft withdrawals as a result of collision mid last year and industrial action by the airlines unionised employees.

“We were then negatively affected by the withdrawal of two aircraft due to the unfortunate incident in the hangar.

This was then coupled by the Kenya Airlines Workers Union (KAWU) strike and pilot shortage in the second and third quarter of last year, which saw the on time performance drop to as low as 67 per cent in August 2019,” Capt Njoroge said, adding that this was way below the 81 per cent performance they had achieved by April of last year.

In February last year, two of the airline’s Embraer 190 aircraft collided in the hangar while undergoing maintenance which saw them withdrawn from service.

Three months later, the airline’s unionisable employees under KAWU went on strike, protesting against the proposed merger between the national carrier Kenya Airways and the airports regulator. This saw more than 24 of its flights cancelled, while more suffered incessant delays.

By Nation

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Kenya to import US wheat from Idaho, Oregon, and Washington

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Kenya has agreed to lift a decade-old prohibition on US wheat following a deal between President President Uhuru Kenyatta and Donald Trump.

It will see American wheat from Idaho, Oregon, and Washington states shipped to Kenya regardless of state of origin or port of export, US Department of Agriculture (USDA) said in a statement.

For the last 12 years, Kenya has locked wheat from the three states, citing prevalence of a fungal disease known as flag smut of wheat (urocystis agropyri).

“American farmers in the Pacific Northwest now have full access to the Kenyan wheat market,” USDA Undersecretary for marketing and regulatory programms Greg Ibach said in a statement.

The Kenya Plant Health Inspectorate Service (Kephis) and APHIS/PPQ of the US signed the Export Certification Protocol allowing the wheat imports to Kenya on January 28.

The protocol gives US exporters full access to Kenya’s wheat market, valued at nearly Sh50 billion ($500 million) annually.

Kenya is a net importer of wheat, bringing in two-thirds of its requirement to meet the annual consumption of 900,000 tonnes against the production of 350,000 tonnes.

Kenya charges 10 percent duty on all imported wheat, which is cheaper than the locally-produced commodity.

As part of the technical agreement, APHIS of the US will enhance general surveillance for the fungal-disease-prone wheat.

The win for US farmers comes amid discussion for a free trade pact between Nairobi and Washington.

“Going forward, the USDA team looks forward to building on this success and further strengthening our relationship with Kenya as we pursue a new bilateral free trade agreement that will create additional market opportunities for US producers and exporters,” said US Undersecretary for Trade and Foreign Agricultural Affairs Ted McKinney in a statement.

President Trump and President Kenyatta announced intention to start formal talks on a trade agreement.

President Kenyatta had said a new trade deal could make Kenya a hub for US companies doing business in Africa.

By Nation

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