How flourishing real estate breathes life into the tourism sector
Except for 2020, when international visitor arrivals declined sharply to just over 560,000, in the five years before, the number of foreigners coming to Kenya increased steadily with the highest being in 2019, which recorded over two million visitors. Tourism is becoming one of the strongest engines of the economy, and the real estate market has a big influence on the boom.
Harriet James @harriet86jim
Many a times we have heard of how foreigners on holiday or business to the country have been so impressed by what Kenya has to offer, falling in love with the beauty of the land, the mountains and the seas that they decide to buy or develop property here giving themselves a reason to keep visiting the country.
In other instances, it is the favourable business environment and a diligent workforce that is compelling not only overseas, but also local investors to put their money in developing properties in internationally renowned holiday destinations, such as Masai Mara National Reserve, Naivasha, Nanyuki, the coast or even Nairobi to take advantage of the opportunities the country has to offer. This is what real estate tourism is all about.
This model first emerged in China in the 1990s and it is characterised by the development of large-scale tourism resources, such as hotels, theme parks or malls alongside residential properties or land under the notion that they will increase the value of the property or vice versa.
When infrastructure, such as roads, public transportation as well as facilities in an area is upgraded, either the development itself, such as a state-of-the-art building becomes an attraction or the tourist attractions around the area get a boost.
When Maiyan Hospitality and Development firm did their pre-opening of their project in Nanyuki, Laikipia county in 2017, the board of directors didn’t anticipate that in just three months, they would record 500 per cent sales increase in tourism.
The spike in sales was attributed to the combination of both tourism and real estate giving travellers who desire to tour Nanyuki a luxury experience at the villas, while investors who purchased these properties get revenue from these tourists during the times of the year when they are away from their villas.
“We have had a lot of investors willing to invest in a property that delivers and creates value.
When they are not staying with us, we sell the property on behalf of the owners, giving them good returns,” explains Omar Ikram, the Group CEO Maiyan, Falcon Heights and Swara Ranch.
He says the past two years have been great as we have sold our properties at a faster rate, thanks to this model.
There has been a great belief in our product making it the most promising development in Laikipia county.
Though the two are different industries, tourism and real estate are correlated with mainly due to the fact that the performance of the property sector directly affects the hospitality industry.
Some of the projects that are currently taking shape under this model in Kenya, includes Centum Real Estate-Vipingo Ridge concept, Pazuri Villas by superior homes among others.
When Vipingo Ridge began, the land was a vast sisal plantation dotted with mango trees and bushes.
But it has now grown to be one of the most exclusive estates in the country with the golf course as the beacon around which the palatial villas were constructed.
A front row on a high elevation with uninterrupted views of the ocean sold for Sh33 million.
“Developments that combine real estate and tourism are considered integrated developments where residential, themed parks and malls are built together with residential components,” says Effie Otieno, a real estate analyst.
Effie says that the areas that have potential to expand, such as tourism attraction sites have the potential of expanding.
“Tourism hotspots are said to perform better when real estate in these attraction areas thrives and thereby attracting.
Such attaction sites have the capacity to house many high-end developments that end up changing the value of this place, adding appeal and attracting investors thereof.
Eventually, the property value around the locations ends up increasing over time,” Effie says.
She adds that this model comes with a number of advantages. First, it brings value for money.
“These types of developments are able to generate higher returns mainly because of their exclusivity and ready market thus driving returns.
Real estate projects initiated near tourism attraction areas attract expatriates as most of these facilities offer high-end amenities that provide the much desired luxury and convenience, offering them the feeling of being “home far away from home”.
“Developers using this model can benefit from the available infrastructure.
Most governments treat tourism as priority initiatives as it is a way of generating returns, therefore, infrastructure leading to tourism sites, such as public transportation is often taken care of,” she notes.
Architectural Association of Kenya President Wilson Mugambi says real estate tourism provides developers with the opportunity to attract potential buyers with units that guarantee them some sort of consistent income while at the same time being a getaway for the buyers when they need to go on holiday, eliminating the need to be booked into hotels when they do so.
Wilson notes that the main challenge with this model will emerge in the area of provision of services to potential land parcels.
“The government needs to step up provision of water, sewer and electricity to many parts of the country.
Developers can tap into this market by conducting feasibility studies that justify such projects and investing in the same while adding value to the surroundings.
This value addition may be in form of community based initiatives that employ the locals and also upgrading existing amenities all within sustainable practices,” he continues.
He says they can also focus on one area that’s bound to have maximum returns (lake front, sea front, parks or conservancy) and put up the initial project then cascade the same by people investing in neighbouring parcels.
“For the successful delivery of these projects and for these projects to realise returns, the tourism sector must be stable with a good number of tourists coming in to create the ready demand.
Decline in tourism activities can affect investments near tourism centres as it affects the need for tourist homes and hence investors may end up recording loses,” Effie notes.
“More focus needs to be placed on ensuring the homes match the international standards of housing for them to be more suitable for tourists,” she adds.