M a r k e t N e w s

Transport firm Express Kenya now goes into real estate

Posted on : Monday, 12th September 2016

 Transport and warehousing company Express Kenya says low interest rates will boost its entry into the real estate business, even though it has been in the red for three years now.

The firm, which lost its main logistics business line with East Africa Breweries Ltd three years ago — forcing it to lease out its fleet and equipment — has rolled out plans to construct a housing estate.
“The company is in the process of finalising borrowing to assist in kickstarting the project (whose groundbreaking was done in April,)” said Express Kenya in their recently published half-year results.
“We hope to finish the first phase of the project in 18 months. Some units will be for sale and some will be for rental. Loan interest rates are not as steep as before, so we will definitely benefit from that,” said Jane Nungari, the company’s senior manager for project accounting.
Kenya remains a low mortgage penetration market with a total of 24,458 accounts. Analysts expect the capping of credit facilities by the government to drive up uptake of mortgage products especially those secured by land.
The new law — which is yet to be gazetted — caps lending rates at four percentage points above the Central Bank Rate, which currently stands at 10.5 per cent.
Express Kenya hopes to gain from low financing costs and increased demand. The firm already owns the land on which the estate — comprising studio, one- and two-bedroom houses — is to be built.
The company’s project accounting manager said the estate will be located next to Nairobi’s Eastern Bypass adding that this will boost its appeal.
However, experts warn that the real estate market often slows down before and during a general election, then picks up after the polls as investors and buyers await the outcome.
The president of the East Africa Institute of Architects, Gad Opiyo, said that moving to real estate was still a viable business option considering the country has a shortage of 200,000 housing units per year, which puts pressure on existing accommodation facilities.
Express Kenya’s board did not recommend an interim dividend for the year ending June, having reported a loss of Ksh31 million ($310,000) compared with the same period last year when they reported a loss of Ksh23.2 million ($232,000).
The operating loss increased as a result of a rise in finance costs from Ksh8.7 million ($87,000) to Ksh8.9 million ($89,000). The company’s revenues almost halved from Ksh60 million ($0.6 million) to Ksh35 million ($0.35million).

Source : www.theeastafrican.co.ke
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