Here is the cheapest route to real estate business

Prospective entrepreneurs in real estate are always put off by the impossibly huge capital needed to venture into the industry.

Tuesday May 3 2016

One of the apartments constructed by National

One of the apartments constructed by National Housing and Construction Company. Prospective entrepreneurs in real estate are always put off by the impossibly huge capital needed to venture into the industry. FILE 

By OTIATO GUGUYU
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Prospective entrepreneurs in real estate are always put off by the impossibly huge capital needed to venture into the industry.

Even buying just land is bound to set you back millions of shillings especially in Nairobi where the prices have gone through the roof. When you add the prohibitive construction costs, you are talking of an industry that’s largely the exclusive domain of the moneyed.

However a new model is set to change this and with less than Sh10 million you can be in real estate business. All you need to do is buy a unit of an apartment and allow the developer to run it commercially.

Kenyans are used to a situation where you buy a unit of an apartment for a home. However, in the new model, you buy it as a form of investment. Anyone who can afford can own a unit — one to three bedroom unit — and surrender it to an operator who will run it for the investors.

Soho furnished apartments are the trailblazers in this novel ground.

As an investor, you earn from your unit when it is rented out. As the developer will be operating under an internationally recognised brand, your investment will have a head-start in the increasingly competitive industry.

“You will be able to obtain your lease and title to the property but you will be tied to an international operator,” said Mr Nathan Luesby, a consultant for the project.

Gruelling process

The apartments target non-government organisation, embassy and multinational workers visiting Kenya for short periods of between three and 12 months.

The advantage is that investors are buying into a recognised brand and hence do not have to go through the gruelling process of marketing and position the business in the market.

Mr Luesby estimates that the apartments could deliver returns of up to 14 per cent.

“This is an overlooked niche with a very high demand by clients who do not want long-term rentals or expensive hotels where they are billed per day,” Mr Luesby told Money.

He estimates that the apartments could be able to attract up to 80 per cent occupancy.

The apartments will go for an average of Sh9.5 million for a studio to Sh35 million for a three-bedroom duplex.

Mr Luesby said they are in talks with several international operators to run the investments who might add brand premium once they come on board.

“We are hoping to get a deal in the next four to six weeks, and who knows maybe they will even charge more than our current prices, so it’s better to get one now,” he said.

Real-estate agent Realto Group Ltd managing director Rajbal Sahib said expatriates like serviced and fully furnished apartments to enable them settle in and start working upon arrival.

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A Nairobi Securities Exchange staff monitors trading at the Exchange building. PHOTO | FILE

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Theft: To eliminate inside job, set up a favourable system for whistleblowing

A busy electronic shop on Kimathi Street, Nairobi, is renowned for selling genuine electronics having been in existence for decades.

Tuesday May 3 2016

US National Security Agency (NSA) whistle-blower Edward Snowden. The NSA on Monday, November 30, 2015 will end its mass phone surveillance programme. PHOTO | AFP

US National Security Agency (NSA) whistle-blower Edward Snowden. Audit, tax and advisory firm KPMG says the reality of employee fraud in today’s businesses informed its latest product in the market to allow for safe whistleblowing. PHOTO | AFP  

By EDWIN OKOTH
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A busy electronic shop on Kimathi Street, Nairobi, is renowned for selling genuine electronics having been in existence for decades.

Ms Isabella Mwashigadi was convinced by a friend that the shop sells genuine products and was encouraged to buy an external hard disk from the shop. She was slightly shocked by the high price but because it was of good quality, she decided to put in just a little bargain.

“I was told a lower price would only be possible if I waited outside the shop and the gadget would be delivered to me without receipt. I called my friend to seek his advice and he told me to cooperate because that is normal. I found it a bit too risky and left,” Ms Mwashighadi told Money.

Surveys show that many businesses suffer immensely from employee theft. In fact the vice has been cited as one of the main reasons many start-ups fail to make it beyond the second year.

According to the 2012/2013 Economic Survey on the Global Retail Theft Barometer (GRTB), organised retail crime is a major concern with the Sh200 billion retail trade market in Kenya said to be losing an estimated Sh3 billion annually.

The Statistics from GRTB reveal that global shrinkage owing to customer theft, employee theft and general stock losses due to internal system errors in 2011 alone, exceeded $119 billion.

Audit, tax and advisory firm KPMG says the reality of employee fraud in today’s businesses informed its latest product in the market to allow for safe whistleblowing.

Whistleblower

The Ethics Hotline Service provides a company with a whistleblower hotline and an online platform where employees can raise the alarm without revealing identity.

KPMG then passes the information to the relevant business channels who can then exercise caution as it investigates potential loss in revenues from employee-related theft.

The vice has grown from small-time theft from shelves of pocket size items into a complicated web of perpetrators who have mastered the art of dodging many established control mechanisms. Now thieves target high-value products such as electronics, furniture, baby food products, cosmetics and general food items.

According to the retail sector’s lobby group, the Retail Trade Association of Kenya (Retrak), theft is a major problem facing retailers and it is at times perceived as a “victimless crime,” thus attracting lenient penalties.

Supermarkets are the worst hit due to what Retrak attributes to their expansive physical distribution in the country.

Retailers are losing not only from the shelves, but also from the back office stock system and the front office, or at the till where employees collude to steal.

A survey released by KPMG puts the country’s false claims prevalence higher than her East African neighbours.

In June 2015, retail chain Tuskys Supermarket suspended 91 employees at its Tom Mboya Street store in Nairobi on suspicion of internal theft.

The employees are accused of working with an external cartel that was allegedly clearing goods from the store and later selling them to retail shops in Nairobi and its environs.

Even CCTV cameras do nothing to address the problem as employees are adept at circumventing technology. Yet the same employees hold the key to rooting out the menace.

KPMG says over 40 per cent of all fraud cases within an organisation are detected with tip-off from employees accounting for nearly half of all information that leads to the discovery of fraud.

The firm’s chief executive Josphat Mwaura said organisations with effective hotlines are more likely to catch fraud by a tip-off because employees have a channel to report misconducts which are inconsistent with their organisations’ values or the laws of the land.

However for employees to help the company in battling theft, there ought to be a proper mechanism that protects them from being victimised. “What really matters is how you let your employees alert you without the fear of victimisation and how you will carry out an independent verification to eliminate any attempts of set-ups and wrong information.” he said.

Experts also advise that businesses address the situation through cultivating a culture that allows employees and other stakeholders to report corruption, misconduct and fraud with their identities kept confidential unless they choose otherwise.

An Ethics Hotline is a simple, yet highly effective management tool designed to enable concerned employees in an organisation to report fraudulent, corrupt and unethical practices.

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