Interview: Real Estate in East Africa

Keep it simple. Don’t overdo it. Too much jewelry distracts people in the wrong way. It’s also a good idea to keep up with current fashion trends but be sure to maintain that professional look.

KIGALI, Rwanda, January 31, 2020/-- Today we are privileged to have Festus Mutia a Kenyan professional based in Rwanda weighing in on property market in the East African region among other issues.

Festus welcome to Kikao...

[Question 1] Introduce Festus Mutia to Kikao audience.

Festus Mutia is a high potential, seasoned and experienced real estate professional with over seven years of professional experience in residential and commercial property leasing, management and mall lettings, as well as portfolio management, stakeholder engagement and governance & risk in corporate real estate environment.

I hold bachelor’s degree in Economics and Statistics from The University of Nairobi, holder of CPA-K, and currently pursuing CFA and post graduate diploma in Project Management.

I am passionate about matters real estate and my professional goal is to utilize both my local and regional extensive work experience to drive business by developing and converting customers to loyal clients, deliver the goal-standard in customer experience and service and to become a trusted advisor to my business partners; while positively impacting lives across the continent.

[Question 2] What are your experiences as a young professional in this industry?

I started out in 2013 as an accounts assistant in a real estate firm and within 3 months I had developed a keen interest in real estate industry, I asked to be allowed to assist it management of the residential building within our portfolio then and in 6 months I was the head of property management in the firm. I managed to work and study until 2016 when I moved to another company to head their property management department with a bigger portfolio that included commercial buildings. I however didn’t last long there, within 8 months I left and went solo for about a year. Late in 2017, an opportunity to manage a huge mall in Kigali, Rwanda came which I took gladly and that is where I am now as the Senior Leasing Manager and Mall expert.

Besides all this, I have been running a real estate and investment consultancy in the region with which have been able to do consultancy works for investors ranging from feasibility studies, property market consultant to estates management.

My experience in real estate has been good, thrilling and a learning curve. My professional experience, networks and horizons have been widened.

I came up with a real estate YouTube channel dubbed “Matters Real Estate” in August 2019 to share my knowledge and experience with people out there and to strengthen by brand and voice in the industry.

[Question 3] Take us through the mortgage market in East Africa and opportunities therein.

The East African Community (EAC) is a regional intergovernmental organization of six states: Burundi, Kenya, Rwanda, South Sudan, United Republic of Tanzania,2 and Uganda, with its headquarters in Arusha, Tanzania. The EAC is home to 172 million citizens of which over 22 percent is urban population and it had a combined GDP of US$172 billion in 2017.

In terms of access to finance, Kenya leads within the EAC with 43 commercial banks, followed by Tanzania with 26 commercial banks, then Uganda with 21 commercial banks, Rwanda has 11 commercial banks, Burundi has seven commercial banks, South Sudan has 30 commercial banks.

Mortgage lending in East Africa is still very low. In Kenya, the number of registered mortgage loans was only 26 187 as of December 2017. The rest of the countries in EA follow suit in terms of small number of mortgage loans.

Lenders have been reluctant to expand their mortgage portfolios because of limited access to capital markets and stringent collateral requirements. Some of the other constraint to the mortgage market in the region are: -

• Inadequate housing supply especially in major towns. NB: Lenders are reluctant to finance property outside urban areas.

• Complicated legislation for land titling and registration in most of East African member countries.

• Inadequate property price indices and a lack of information on the property market affects mortgage evaluations.

• High incidental costs of borrowing, e.g. stamp duty fees, legal fees, valuation charges, insurance premiums, etc.

• Cost of housing remains one of the main constraints to the growth of the mortgage market

Opportunities

Mortgage markets in the region are likely to grow if affordability is increased along the housing construction and financing.

Mortgage markets across the EAC are only likely to grow if they are affordable, which will not only increase access to adequate shelter, but can have a significant impact on economic development.

The raise in housing finance in Rwanda has been partly a result of it being one of the most progressive enabling environments in Sub-Saharan Africa and partly because the country has removed obstacles to obtaining land titles and enabled citizens to use them as collateral in lending transactions.

Uganda has huge market potential for housing delivery in the affordable market segment. With the widening gap in annual housing supply compared to the established demand, developers could find lucrative business in this segment. Also, stability in market lending interest rates has encouraged an upsurge in mortgage finance for the past two years. However, availability of low-cost finance could further raise the demand for mortgage finance.

South Sudan still faces and unstable political, which hinders the business environment. If this is resolved, an opportunity exists in strengthening non-conventional financial service providers to advance housing finance through alternative means.

As Burundi progresses towards political stability, developing affordable housing is an inviting opportunity, along with initiatives to overcome financing challenges.

Furthermore, the development and better capitalization of Mortgage Liquidity Facilities (MLF) already present in Tanzania, could play a vital role in building domestic capital markets.

[Question 4] You are a Kenyan based in Kigali. Give us a perspective of the Rwandan real estate landscape.

Real estate services and construction in Rwanda contributed 14.8% to the GDP in 2017. Kigali has attractive rental returns, with the sector recording an average of 9.0%.

In January 2018, the average rental returns across all themes was 8.1% and 9.8%, 12.6% and 5.6% for residential, office, retail and serviced apartments sector respectively. In May 2016, Kigali reported attractive rental returns of 9.3%, 10.8% and 12.3% for residential units, offices and retail space, respectively.

In comparison to the January 2018 report, this is a 1.2% and 1.0% decline in rental yield for residential units and office space respectively, and 0.3% increase in rental yield for retail sector. The residential sector offers relatively high total returns of 12.6% with apartments at 12.8% and stand-alone units 12.5% respectively.

In terms of 2018 performance, the serviced apartments recorded a 5.6% rental yield at 62.7% occupancy rates.

The residential sector recorded an average rental yield of 8.1%, where high end apartments have an average rental yield of 8.7%, while the middle income market have 7.2% rental yield, on the other hand high end standalone units have an 8.4% rental yield, while the middle income units had an average rental yield of 8.3% .

For commercial office, Grade A & B offices recorded higher returns at 9.9% compared to Grade C at 9.7% .

In retail sector, the monthly rent per square meter in Kigali is USD. 21.0, with an average rental yield of 12.6% at 89% occupancy.

Activities in the real estate sector have been noted to increase across all the themes given the good operating environment in Rwanda. However, the unavailability of construction materials, has been a key challenge to developers resulting in high development costs.

The demand for commercial office is reducing leading to increased vacancy rates due to increased supply over the last five years.

The opportunity in Kigali is mainly in residential driven by the large housing deficit and government incentives. The housing demand in Kigali for 2012-2022 is estimated at 186,163 units with an average demand of 16,923 affordable units per year.

We expect increased investment in housing sector and serviced apartments driven by the high housing demand, attractive returns, political stability, a positive demographic profile and government support through incentives.

[Question 5] With a thriving YouTube Channel; explain to us why you started it and what we should expect?

Over the many years have been in real estate sector, have seen people so passionate to invest in real estate only to end up being duped of their hard-earned cash. I started “Matters Real Estate with Festus Mutia” channel to educate, inform and inspire people out there on real estate industry and investment in general.

Expect more genuine and verifiable content backed with facts and reflecting real property market landscape in East Africa and beyond. I endeavor to explain, rather than just state. Break it down, rather than just convey. And to shine the light down the path to help you navigate the maze around property market. Later on I will be inviting highly opinionated individuals in the property sector to shed more light on some of the aspects of the market. Stay tuned!!!

[Question 6] You relish motivating others on social media. Do you mentor too?

I do mentor young people here and there though not in a formal setting.

I use my social media platforms to share motivating messages. I believe that we need to use our platforms to share positive energy to others. It doesn’t matter if only one person is touched. We can always start somewhere.

Like I said, I would like to use my YouTube channel not only as an educating platform but also motivating tool to those are or aspiring to venture into real estate both as a career and an investment.

[Question 7] Festus Mutia Flair Drip. Give our male audience tips on grooming.

Look the talk. In this sector where huge amount of investment is involved, Appearance is extremely important, people will buy the property right before you open your mouth so always ensure you are on point. When meeting clients, keep in mind that first impressions matter a lot and clients derive their perception about you from that first encounter.

Keep it simple. Don’t overdo it. Too much jewelry distracts people in the wrong way. It’s also a good idea to keep up with current fashion trends but be sure to maintain that professional look.

Dress for your market. Perceptions matter a lot at least in real estate business. Driving a popularly desired car sends a strong message to potential clients. I remember many times I had to borrow fancy machines to meet wealthy where in most of those occasions I ended up closing the deal.

Office appearance. The appearance of your office send a very strong message to first-time visitors. Always keep it organized and meticulously clean, and display attractive curios and artwork. A messy desk is the sign of a disorganized person who no one wants to do business with.

Blending in. Not every location, situation, or prospective client requires trendy, ultra-professional clothing. Many experienced real estate professionals recommend dressing the way prospective clients dress. The type of property, weather, or client determines how you dress. Always have a change of clothing ready when the situation requires it.

The written interview was compiled by Phineahs Munene – Co-founder of Wazo Moja for Festus Mutia – of festusmutia.com, Kigali, Rwanda.

Distributed by Wazo Moja on behalf of festusmutia.com

SOURCE

festusmutia.com