Chinese investors drawn by house building boom

Africa's expanding middle class has created a real estate boom in Africa over the past decade, as the demand for mid-level and higher-income housing has taken off in major capitals such as Johannesburg, Cairo, Lagos, Luanda, Addis Ababa and Nairobi.

In some countries, other cities have also experienced a big demand for such homes. These include Durban and Pretoria in South Africa, and Kisumu and Mombasa in Kenya.

The increase in demand has pushed the prices of land, housing and rent upward in many of these cities, which has been lucrative for investors. The opportunities have attracted many Chinese investors, and also Chinese companies that have demonstrated their expertise in building major construction and infrastructure projects in many countries.

Daniel Ojijo, the CEO of real estate consultancy and management firm Villa Care, says high interest rates are a major challenge to real estate investors. But he maintains that the 2016 outlook for the property market in Kenya is still positive. Ojijo also is founder and executive chairman of Universal Homes, the parent company of Villa Care.

Ojijo says he is encouraged by Chinese investors joining the sector. "We have a portfolio that boasts about 2,500 listings, and out of those 600 are by Chinese investors. As a company, we started dealing with them in 2007 and the portfolio has been experiencing immense growth since then," Ojijo says.

Professor Martin Nyongesa, a leading economist at the Kenyatta University School of Economics, says that developing countries, especially in Africa, need to look to the East, especially to China, if they are to resolve their growing demand for housing and real estate development.

"One thing we must understand is that developing countries have a huge propensity for urbanization and with that comes a lot of demand for housing in urban centers. In my experience, only Chinese real estate developers can cope with the growing demand for housing in African capitals as they tend to finish their projects in record time," he says.

Ojijo cites infrastructure developments such as the standard gauge railway between Mombasa and Nairobi and the ambitious Lamu Port South Sudan Ethiopia Transport corridor project as major drivers that have led to the unprecedented rise in demand for property in major towns.

Bethanie Mukanga Musyoka, a manager at the Cooperative Bank of Kenya, foresees a promising future for Chinese real estate investors.

"Chinese real estate investors remain aggressive in the Kenyan market. And as such you will note that a number of developments in low-, middle- and high-income areas are done by the Chinese," says Mukanga, who spent five years studying in China and is now in charge of corporate and high net worth Asian clientele in Kenya.

She notes that the Chinese "have the capital muscle to do the projects efficiently in regard to time and other critical resources".

Villa Care is the sales agent for the upcoming 4 billion Kenyan shilling ($39.4 million) AVIC Park in the upmarket Kileleshwa area of Nairobi. The project, undertaken by AVIC International Real Estate, part of the Aviation Industry Corp of China, is slated to become not only the most expensive luxury apartments in Kenya, but in East Africa as well.

It will include four-bedroom luxury apartments that will each cost 88 million Kenyan shillings. The projects also will have two- and three-bedroom apartments at 27 million and 38 million shillings respectively.

Tanzania's CBA Bank agreed last year to work with AVIC International Real Estate to provide homes to Tanzanians living in the Kigamboni residential area, a suburb in Dar es Salaam. According to the Tanzanian Ministry of Lands and Human Settlements Development, there is a demand for about 200,000 housing units annually in Tanzania, with a deficit of 3 million units.

In South Africa, Chinese real estate investment up to 2010 was minimal. That has changed in the past six years, however, and in 2016, real estate has become the fourth-biggest sector for Chinese investment in the country after technology, metals and finance.

For China Daily

(China Daily Africa Weekly 04/08/2016 page16)