Real estate business plan in Kenya

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Real estate business plan in Kenya

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Real estate business plan in Kenya

  1. 1. Prepared by Fred M’mbololo Page 1 BUSINESS PLAN FOR A HOUSING REAL ESTATE IN KENYA.
  2. 2. Prepared by Fred M’mbololo Page 2 Table of contents: 1.0 Executive Summary 1.1 Objectives of the Real Estate Project. 1.2 Vision Statement 1.3 Mission Statement 1.4 Target Market 1.5 Swot Analysis 1.6 Start up financial summary notes 1.7 The People Needed 1.8 Sales Strategy 1.9 Profit Margins and Overheads 1.10 Important Assumptions 2.0 Reasons to invest particularly in the Housing Sector in Kenya. 2.1 Kenyan’s General Prospects 2.2 An overview of the Kenya Vision 2030
  3. 3. Prepared by Fred M’mbololo Page 3 1.0 Executive Summary: The Proposed Real Estate organization will be based in Nairobi County or some few kilometers nearby. The Organization will construct 50 residential housing units and offer them for sale. The housing units will balance safety, cutting edge features and a positive atmosphere for all potential investors. These housing units will be provided with unmatched levels of customer service and attentions, sales are projected to be very substantial in the first year after the completion of the housing units. Players in the business: With the launch of Kenya’ vision 2030 which is a new long term development blue print for the country. The aim of Kenya’s Vision 2030 is to create “a globally competitive and prosperous country with a high quality of life by 2030. It aims to transform Kenya into “a newly industrializing, middle-income country providing a high quality of life to all its citizens in a clean and secure environment. Consequently, there a few major housing developers in Nairobi but given that there are very many opportunities in the Real Estate sector makes this proposed project worthwhile. The Market: The Real Estate will target three distinct customer segments these are the expatriates, the working class groups and professionals of various fields.
  4. 4. Prepared by Fred M’mbololo Page 4 Profit Margins and Overheads We have estimated that £1(Sterling pound) will be exchanged at Kshs150 (Kenya Shillings). Therefore using the Kenyan Shillings, we estimate that the total sales(revenue) of the sale of the 50 completed housing units will be sold at Kshs 7,000,000 per unit which amounts to Kshs 350,000,000, which translates to £2,333,333. We also estimate that the total costs of the entire project to be Kshs 189,050,000 which translates to £1,260,333 Details Kshs Costs Sub-Total Sub-Total Sales No of units Total Revenue Total Revenue 7,000,000.00 50 350,000 ,000.00 2,333,3 33.33 - Cost of Sales 189,050 ,000.00 1,260,3 33.33 - Net Income 160,950,00 0.00 1,073,000. 00 £ Converted to £ at Kshs150 per 1£ 1,073,000. 00
  5. 5. Prepared by Fred M’mbololo Page 5 Development Plan: We intend to recruit at least two Architects and a quantity surveyor to do feasibility studies and come up with proposed drawing for the housing unit and identify the exact location for the project to take place. We thereafter hire a construction firm to undertake the construction of the housing units. We intend to hold monthly meetings to assess the progression of the entire project. We estimate that the entire project will be completed within a maximum period of two years.
  6. 6. Prepared by Fred M’mbololo Page 6 Business Plan of Real Estates 1.1 Objectives of the Real Estate Investments: The primary objectives of the organization are to:  To build about 50 apartments for sale within a period of two years.  Become an established and profitable estate organization that’s able to take up new investment opportunities in Kenya as they become available in the future.  Provide decent housing units for sale and rental  To develop a solid, corporate identity in our specified targeted market area.  To establish a good working relationship and begin working as a team, promoting communications and suggestions from all participants and stakeholders.  To realize a positive return on investment within the first 12 months after completion of the construction of the housing units. 1.2 Vision Statement: The vision of the Housing Real Estate will be to achieve the highest possible standards of the real estate industry while establishing our agency as the preferred real estate company within our market area and also in ten years’ time to expand to the neighboring countries 1.3 Mission Statement: The Real Estate will provide high-quality comfortable saleablel units in Nairobi County. The apartments units should offer state-of-the-art living conditions reflective of the rapid advancements in technology and a growing need for quality housing. The organization will be dedicated to a hassle free living environment in which tenants can enjoy all of the benefits of safe, attractive and inviting units. The houses to be constructed ideally should have an edge over their competitors in that they should have broad or Wi-fi Internet connections, a water borehole, installed stand by solar panels, a good sewage system and other amenities should be with easy reach such shopping malls, gyms and restaurants. Whilst maximizing profits will be our ultimate goal, our other primary objectives will also be to maintain the highest level of customer satisfaction that is achievable. Tenant safety, happiness and comfort will be our main goals. We will maintain competitive market prices, while working towards expanding the number of units built and owned over the years thus increasing total profits earned.
  7. 7. Prepared by Fred M’mbololo Page 7 Within the company, we will strive to work as a cohesive, harmonious unit focused on exemplifying our mission. Just as customer satisfaction will be intricate part of our success, so will employee satisfaction be. We believe that employee satisfaction will make the company a success and will be key to our longevity. The proposed housing units will target the professionals, expatriates and the working class group either for sale or rentals. The company will also foster the ideals of the importance of house buyers and tenants needs alongside with healthy environment, understanding relationships and a professional commitment to satisfaction. 1.4 Target Market: The Organization will be an enterprise that is involved in numerous aspect of the housing industry. Primary experience and expertise will be in the development of high-quality, lower cost living for the working class, expatriates and professionals seeking the most up-to-date technologically advanced living environment. This project will be relevant in Kenya as we try and meet our Vision 2030 target of achieving a middle income level status and it will realize the standards of living. The first 50 completed housing units will be easily sold out to the target market within a period of 12 months and occupied continuously thereafter. Our big dream will be that in five to ten years will be well established and owning numerous estates across the East Africa region including Uganda, Rwanda, Burundi and South Sudan. 1.5 Swot Analysis Strength  High profit margins  Well established customer base (potential for business to expand).  The team has sufficient experience and skills to operate business.  Owner is knowledgeable in business management  Good customer relations.  Improved Infrastructure facilities.  Well established Selling Agents and Advertising companies. Weakness  Major customer segment is unaware about the product.  Information gaps exist. Updated information on technology and credit facilities (Revolving Fund) is not readily available to all potential clients.
  8. 8. Prepared by Fred M’mbololo Page 8  Regular needs assessments are not done.  Delays in process application and registration of business.  High capital layout & transaction costs Opportunity  Increasing demand for the services.  Few numbers of Competitors in the Market.  Market is expandable, demand of the product increasing day by day.  Qualified consultants are available and have expressed interest in monitoring and evaluation of business.  The sound political, commercial & social setting of our country has and instilled a confidence in suppliers, investors, lenders and insurers. Threat  Someone who is financially strong may enter the industry.  Excessive Business Regulations.  Increase in taxation or re-introduction of the capital gains tax.  Economy recession or Stagnation. 1.6 Start-up Financial Summary notes: The total start-up expenses will include legal, stationery, architect, brochures, consultants, insurance, rates, land, construction costs, land, stamp duty and legal fees, machinery and equipment. Initial cash will be needed to handle the architect and contractor fees prior to opening, additional cash will be needed to pay for government regulations. We will finance growth mainly through cash flow. We recognize that this means we will have to grow more slowly than we might like. 1.7 The People Needed: A team of working people will be required we will need at least two qualified architects to draw up the proposed housing unit, a construction company to hire for period of construction, a quantity surveyor and an accountant to estimate the entire cost and time anticipated to complete the project. We will need a secretary and a few messengers to send around. This team will eventually take over the running of the business.
  9. 9. Prepared by Fred M’mbololo Page 9 1.8 Sales Strategy:  An attractive brochure is an important marketing tool. Relatively inexpensive brochures need to be developed to provide information about your type of experience, unique features, location, bathroom arrangements, and getaway aspects, rules, nearby restaurants and recreational activities, and sightseeing ideas. We will make sure the brochure fits into a business envelope, is rack size (approximately 4 inches wide by 9 inches long), and has good rack visibility. Be very careful to select images and words that will represent your proposed business in an accurate and inviting manner.  We will aggressively pursue opportunities for stories in newspapers and magazines. Media coverage is very important for new housing units. We will send regular news releases to national, radio and television stations.  TV and radio appearances describing the uniqueness of your business can be extremely effective. We will also consider contracting with a freelance writer to develop articles.  To objectively evaluate our property and its architecture, imagine that you are a tenant/house buyer, looking for a nice place to live or a decent house to buy.  About your business for submission to regional newspapers. Some newspapers have a weekly calendar and tourism section that lists the area’s new accommodations.  We will occasionally use the selling and letting agency to market and collect revenues on our behalf and pay them standard commission percentage charges.  Develop a website advertising all our products and services also use face-book and twitter accounts to get new potential clients.  Advertising in the yellow pages magazines and other real estate magazines.  Advertising on Billboards and Daily Newspapers
  10. 10. Prepared by Fred M’mbololo Page 10 1.9 Profit Margins and Overheads: Business Plan of 50 housing Units Cost of Construction Lsbf Details Kshs Costs Sub-Total Cost of Land Land Cost 80,000,000.00 Stamp Duty 4,000,000.00 Legal 300,000.00 Misc 10,000,000.00 94,300,000.00 NCC Costs & Approvals Land Rent & Land Rates 1,000,000.00 NCC Plan Approval - Architectural 500,000.00 Occupation Certificate Reinstating Charge-Water Road Plan Approval Sign Board Approval Storm Water Planning Street Lights Planning Structural Planning Water Rent Consultancy Fees For Plans 2,000,000.00 0.00 3,500,000.00 Professional Costs
  11. 11. Prepared by Fred M’mbololo Page 11 Architect - 2,000,000.00 Quantity Surveyor - 1,000,000.00 Structural Engineer 3,000,000.00 Electrical Consultant 1,000,000.00 Nema 1,500,000.00 Change of Use 500,000.00 Sub-Division Golden Terrace Knight Frank 9,000,000.00 Civil Works Drawings & all Approvals Misc. Surveyors: Include Liaising with City Council & Lands Debt & Survey of Kenya Obtaining individual Deed Plans 750,000.00 750,000.00 K.P.L.C Service Line 1,000,000.00 Water service Line 500,000.00 1,500,000.00 Legal Costs/Stamp Duty (on loan) Legal Cost on Sale 3,000,000.00 3,000,000.00 Sales & Marketing 20,000,000.00 20,000,000.00 Construction Costs Costs 50,000,000.00 50,000,000.00 Finance Costs 2,000,000.00 2,000,000.00 Misc. 5,000,000.00 5,000,000.00 Gross Total Costs 189,050,000.00
  12. 12. Prepared by Fred M’mbololo Page 12 189,050,000.00 Business Plan of 50 housing Units Sale of the Construction Houses Lsbf Details Kshs Costs Sub-Total Sales No of units Total Revenue 7,000,000.00 50 350,000,000.00 Less Cost of Sales 189,050,000.00 Net Income 160,950,000.00 £ Converted to £ at Kshs150 per 1£ 1,073,000.00
  13. 13. Prepared by Fred M’mbololo Page 13 The above current valuation are based on the current prevailing market rates which have been extrapolated from a current ongoing project , the estimates are further adjusted by an Inflation Rate of about 14% 1.10 Important Assumptions:  We assume that the economy will continue growing at about 10% per annum for the next five years  We assume that the taxation system will remain largely the same.  We assume that the level of political stability will continue in the foreseeable future.  The Inflation rate will not exceed 14% for the next five years 2.0 Reasons to Invest particularly in the Housing Real Estate: Housing and Urbanisation: Given the current demographic trends, Kenya will be a predominantly urban country by 2030. The country must, therefore, plan for high quality urban livelihoods for most of her people by that date. The 2030 vision for housing and urbanization is “an adequately and decently-housed nation in a sustainable environment.” This will be attained through:  better development of and access to affordable and adequate housing;  enhanced access to adequate finance for developers and buyers;  pursuit of targeted key reforms to unlock the potential of the housing sector;  initiation of a nationwide urban planning and development campaign, starting with Kenya’s major cities and towns.
  14. 14. Prepared by Fred M’mbololo Page 14 I got this idea from a friend who works for a real investment company that just buys land, construct houses and then sale them off for profit. Given that there is no capital gains tax presently in Kenya, the company makes super profits in such engagements. 2.1 Kenya’s General Prospects Perhaps the best summary of Kenya’s prospects is that they are as bright as Kenya chooses to make them. While this could apply elsewhere, it is particularly apt for Kenya, given the country’s enormous advantages. Kenya has a strategic location, a port and a coastline, a broad manufacturing base, the best business infrastructure in the region, an able and enterprising workforce, and excellent resources for agriculture and tourism – the list is not endless, but it is long. The challenges to be met are serious but hardly insuperable. An investor with an interest in any of the major opportunity areas mentioned above would be most unwise to ignore the potential of a country that is working hard to renew itself and strengthen its status as a regional powerhouse.
  15. 15. Prepared by Fred M’mbololo Page 15
  16. 16. Prepared by Fred M’mbololo Page 16 2.2 An Overview of the Kenyan’s Vision 2030

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