MARCH 2021 ISSUE INSIDE Making the Housing Finance Markets Work: Housing Finance Ecosystem: Central to a post COVID-19 resilience and recovery strategy The Goldilocks Problem of Housing Demand, Supply Matching Housing Demand, Supply, and the Intervention The Kenya Institute of Management (KIM) is a membership based non-prot making professional management organization committed to the pro- motion of excellence and integrity in the practice of management. JOIN KIM MEMBERSHIP TODAY Contact Us 0712 200 969 [email protected] Payment Methods MPESA Paybill no. - 896600 Account no. - Membership no. NCBA Wabera Street Branch Account no. - 6425720016 Coperative Bank of Kenya Ltd University Way Branch Account no. - 01129170300100 The Kenya Institute Of Management @kimkenya.ke @kimkenya Kenya Institute Of Management www.kim.ac.ke INSIDE THIS ISSUE COVER STORY 10 The Housing Pandemic: KMRC’s Intervention SPECIAL REPORTS 10 14 Access to Affordable Mortgages for All - Wishful Thinking or an Attainable Dream? 16 Financing Property Ownership amid a Pandemic and Recession the trends you’ll be seeing everywhere this season. 18 Real Estate Investment: Best Strategy in an Economic Downturn SPECIAL FEATURE 22 Trends Shaping the Housing Market in 2021 EXECUTIVE CHAT 26 From the Ground up: Kenya Experiencing Rail Sector Renaissance BIG IDEA 28 Passive Real Estate Investing, What You Need To Know 30 Real Estate Could Be the Hidden Gem for Unlocking Economic Development of a Nation SMART SOLUTION 32 Management Company Protects Your Investment: It’s That Important! 34 Benefits of using big data analytics for inclusive Real Estate SMART LEADERSHIP 36 How to Increase Psychological Safety in the Workplace THE ENTREPRENEUR 38 Tips for Buyers and Aspiring Agents MONEY MATTERS 42 Turning Real Estate into Real Fortune TECHNOLOGY 44 AI in Real Estate: Ways Investors can Make More Money HEALTHY LIVING 46 How to Recognize and Address Seasonal Depression OFFICE DIARY 48 Meetings: Work? Or just a waste of time? ISSUE NO. 090 March 2021 Management Magazine 1 EDITORIAL Can Anyone Make AG. HEAD OF BUSINESS DEVELOPMENT, MEMBERSHIP & CORPORATE COMMUNICATIONS: Money in Real Estate? Tom Onguru ([email protected]) EDITOR: ccording to data from Forbes, more billionaires made their wealth through real estate investments than any other category - by far. Jackline Mukami ([email protected]) Buying real estate is a popular way to invest, and - if you do it SUB-EDITOR: A right - you can make some real money! You know why? Because the Derrick Vikiru ([email protected]) property is valuable. As Mark Twain put it, “Buy land. They’re not making DESIGN & PRODUCTION: it anymore.” Leonard Kibor ([email protected]) The combination of a consistent cash stream, capital appreciation, and tax breaks have however helped lay the foundation of great fortunes CONTRIBUTORS: and stable retirements. But billionaires aren’t the only people who know Ian O. Odongoh, Mercy Kambura, Goretti Kimani, Jackson Wanjala, Ivy W. Njoki, Edwin Moindi, Asiago how to invest in real estate. You can do it, too. Emmanuel, Joseph G. Muthama, Nancy Marangu, First, though, let’s answer a common question: Is Real Estate a Good Wanjiku Kimani, Esther K. Njiru, Joyce Kaduki, Robert K. Njagi, Wambui Waruingi Investment? COVER PHOTO: Shutterstock The short answer is ‘yes’. Investing in real estate is absolutely essential for anyone looking to secure their financial future. Real estate should (Copyright Infringement not intended) be one of the core pillars of your investment portfolio for two crucial PHOTOS: reasons; One, real estate has historically generated rates of return com- Shutterstock photos, Courtesy parable to stocks and equities with much lower volatility, and two, real ADVERTISING SALES (KENYA): estate investment returns are largely not correlated with stocks or bonds. Boaz Kisero, Elizabeth Mbinya, Lawrence Opondo These two points may sound a bit academic; however, what it means for CIRCULATION ENQUIRIES you is high rates of return without the roller coaster ride of investing in [email protected] stocks. PUBLISHER Real estate investments also have a hidden benefit that we don’t nor- THE KENYA INSTITUTE OF MANAGEMENT, mally think about; illiquidity. Some investment advisors tell you that Luther Plaza, 2nd Floor, investing in illiquid assets is bad because you might need that money Nyerere Road/University Way Roundabout quickly. Trying to unwind a real estate investment can take a lot of time P.O. Box 43706 - 00100 Nairobi, Kenya. and incur large financial penalties and taxes. The hidden benefit of illiquidity, however, is that it prevents us from Tel: 020 2535277 becoming our own worst enemies. Great investing requires staying in- www.management-africa.co.ke vested long-term without being swayed by the ups and downs of the stock or real estate markets. By putting up financial barriers that keep you from making decisions based on fear or greed, real estate investing lets you reap the benefits of the most powerful wealth-building tool ever imagined: compounded annual returns Most importantly, smart investing requires a thorough real estate mar- ket analysis as well as investment property analysis. With that said, however, you do not have to be a real estate expert to start investing and buying investment properties. All it takes is the right level of real estate knowledge, time, and financial resources to turn your investment properties into a money-making real estate business. Without a doubt in mind, there are many good reasons to invest in real estate today and if you are still contemplating whether or not to become The views expressed in this Magazine are the authors’ a real estate investor this year, we tell you to hurry up now. and do not necessarily reflect the views of The Kenya Institute of Management. The Editor welcomes articles from readers on subjects of interest to the Institute. Reproduction of any articles or pictures without JACKLINE MUKAMI is the Editor at Management Magazine permission is prohibited. E-mail: [email protected] 2 March 2021 Management Magazine ISSUE NO. 090 Accredited in Kenya by the TVET Authority Now offered at The Kenya ABOUT ICDL Institute of Management (KIM) International Computer Driving Licence (ICDL) is the digital skills standard. Across the world, education and training institutions, and public and private sector employers use ICDL to provide the current and future workforce with the digital skills necessary to perform effectively in the modern workplace. THE ICDL COURSE AND FEE ICDL TRAINING FEE BASE MODULE 1. Computer Essentials 2. Online Essentials 3. Word processing Kshs. 37,500 4. Spreadsheets INTERMEDIATE MODULES 1. Online Collaborations 2. Presentations using MS PowerPoint 3. IT Security (OR. Databases using MS Access) REGISTRATION IN PROGRESS The Kenya Institute of Register Now at any KIM Branch Management is accredited by Please call : +254 719054101/ +254 722200864 TVET Authority and approved Email: [email protected] to offer CBET training ISSUE NO. 090 Kenya Institute of Management March@kimkenya 2021 Management Magazinekimkenya.ke 3 MANAGEMENT | PERSPECTIVE How Capital Availability Will Determine the Future Real Estate Landscape As confidence returns to real estate, the industry faces a number of fundamental shifts that will shape its future BY MURIITHI NDEGWA he Covid-19 pandemic has affected every industry, within the next few years are now speeding up their time- but perhaps none as surprisingly as the real estate. lines to make their money go further. TDespite the economic uncertainty around the world, Lowered budgets, however, are changing what some the real estate industry is going strong. Triggered by job and homebuyers are looking for, leading to growth in less ex- financial changes, the push to stay at home, and low-inter- pensive regions. Although individuals are lowering their est rates, a record number of people have bought homes personal budgets, the markets as a whole are increasing. A during the pandemic. rise in demand is actually raising home prices. According to a report by McKinsey 2020: Voices of Infrastructure – The Future of Real Estate: “With record-low Leaving Cities and High-Tax Areas interest rates, forecast price growth, and increasing rental While the growing acceptance of remote work will cer- yields, there is currently plenty of upside to property in- tainly benefit real estate markets once considered to be vestment. In other words, low mortgage rates continue to outlying suburbs or even prime vacation destinations, re- provide greater purchasing power, especially for first-time cent studies have shown that fewer workers can actually homebuyers.” However, the unique market conditions and take advantage of this lifestyle. a surge in demand from prospective buyers are combining Consequently, the oft-discussed escape from the cities to create a unique set of factors that are changing the prop- may be premature, especially if urban areas can gradual- erty investment landscape. ly reopen surviving event venues, bars, and restaurants safely. With the millennial generation increasingly reach- Changed Budgets, Higher Prices ing their prime home-buying years, they’ll certainly tell The home-buying surge comes in the middle of a finan- us their preferences in terms of location, home size, and cial strain and high unemployment numbers. According amenities in 2021, while the Generation Z tailing them will to the McKinsey report, many people are buying homes, offer insights into the potential duration of the societal they are not stretching their budgets. This goes to show changes highlighted in the past. that when paired with record-low interest rates, lower budgets can still get buyers more homes than they could The real estate boom is far from over have bought a year ago. With interest rates likely to stay Moving forward, in our view, there will be two things low throughout 2021, buyers who were thinking of buying to watch: supply and affordability. Will there be enough 4 March 2021 Management Magazine ISSUE NO.