The developer sells an investor the design to a home before it is built, often at a discount. The developer then uses the upfront payment to complete the construction of the property, thus is able to secure financing for the project.

Why Off Plan?

The off-plan property is deemed attractive if there is a high level of infrastructure in the immediate area e.g a new university or express roads, either already built or due to be built within the next few years. In a rapidly rising real estate economics housing market, buying off-plan enables investors and homebuyers to buy a property at a lower price than if they wait for the construction of their chosen property to commence. In addition, buying off-plan may be the only way to get a property with a specific location or set of features as the choice may be limited once construction starts.

What are the risks?

Buying a property off-plan, whether to use it as a home or as an investment, incurs more risks than buying a property that has already been built.

The developer may go out of business before construction of the property is completed and the buyer may not be able to recover the monies advanced. This the plight of investors who paid huge sums of money to Banda Homes, Suraya Properties and now Lesedi Developers, whose stories have made headlines in the recent past. The investors complained of making payments but not seeing any considerable progress in the construction of their homes.

There have been suggestions to introduce regulations to strengthen the off-plan property purchase sector, that will weed out phony developers. In 2016, Dubai introduced a regulation that requires developers and brokers to get approval from Dubai’s Real Estate Regulatory Authority (RERA) before they advertise a property in the media. The new regulation was aimed at cracking down on fake property ads, protecting both buyers and genuine developers.

They further strengthened the property industry by introducing a regulation that requires a development to first attain 50 percent completion before they can begin off-plan sales.

In the absence of such regulations, would-be homeowners are expected to carry out due diligence before engaging the developers.

How to carry out due diligence when purchasing off-plan

1. Check the track record of the property developer. This includes viewing past completed projects and speaking to former clients. Evaluate the developer’s record of delivering projects within the stipulated time. You can go a step further and look at the project team i.e from the architects to the main contractor. Check on their certification e.g contractor should be registered under the National Construction Authority (NCA), architects under the Board of Registration of Architects and Quantity Surveyors (BORAQs), etc
2. Always visit the site prior to signing the contract and submitting any payments. You need to physically check and ensure that you are not buying into non-existent land. For those in the diaspora where the buyer is miles away then you can have a trusted family member or friend check out the site on your behalf.
3. Ask for constant updates on the project plan and especially on major milestones such as groundbreaking, completion of foundation works, etc. This ensures that there is adequate measurable progress in the project. Any developer not willing to provide updates to their customers is a huge red flag. 
4. Insist that payments are made based on milestones achieved in the project. These are some of the clauses that should be included in the contract. You can engage a lawyer who is well versed in property matters as they are able to understand complex contracts that are heavily skewed towards the contractor’s side.
5. Lastly, the investor can request that the new-build property developments are backed by bank guarantees that protect the buyer from a builder going bankrupt.

The post Why Off-Plan Properties Are Not A Scam appeared first on My Building Code.

The signing into law of the Finance Bill 2018 unleashed a heavy tax burden to be borne by the common mwananchi. Among the range of new taxes introduced, competing to rob Kenyans of the little they have, is the housing development fund tax. It entails a 1.5% mandatory levy on every worker’s gross salary with a maximum deduction pegged at Ksh5,000, meaning those with monthly income of more than Ksh166,000 will contribute Ksh2,500, with the employer matching the same.

Proponents of the fund argue that it is meant to help the State realize its goal of delivering 500,000 affordable housing units in five years as a means to stop the expansion of slums and informal dwellings in major towns in the country. A noble venture at face value but the devil is always in the details.

In an article by Adelaide Waithera, a senior tax consultant at Ernst & Young, she lists some reasons why the fund has faced a lot of resistance from the public.

“The employers are against introduction of contribution towards the NHDF mainly because this would increase the wage bill. Employees on the other hand are opposed to the proposed contribution for several reasons; first, it is not clear whether all contributors to the fund would eventually benefit from it.

Second, the public is afraid that the funds may be misappropriated. Third, some employees are already servicing mortgages for houses they have acquired privately and would still be compelled to contribute to the fund and lastly, this contribution is only imposed on employees and employers not on the rest of the public.”

The distrust the public has about the fund stems from the poor governance issues already experienced among State-sponsored funds such as the National Social Security Fund and the National Hospital Insurance Fund and it almost looks like the proposed fund is bound to suffer the same fate.

While the contributions towards the fund are supposed to enable Kenyans own a house under an affordable housing scheme, there is still not much clarity on what “affordable housing scheme” means and how the informal sector participates.

Twitter user @dnahinga opines that “The Housing Levy is set to solve a problem that has not been defined accurately. Like the SGR before it, feasibility will be done later. The size of the problem is Unknown. The solution will be singular, from tenderprenuers. And if it fails, it will be expanded.”

The post Why Kenyans Are Not Happy With The Housing Development Fund appeared first on My Building Code.

Kenya has made significant progress in infrastructure development in recent years eliciting interests from foreign Engineering, Procurement, and Construction (EPC) firms based oversees. It had the highest number of mega infrastructure projects in East Africa in 2016, according to Deloitte thus maintaining its lead as the regional powerhouse.

The mega infrastructure projects initiated by the government have been largely financed by loans. It comes as no surprise that the country’s largest infrastructure project since independence, the Standard Gauge Railway was built by a Chinese contractor.

The growing dominance of Chinese firms including Sinohydro Corporation Limited, China Wu Yi and China Roads and Bridges Construction Company can be traced back to then President Mwai Kibaki’s policy shift to the Asian giant nearly a decade and a half ago.

The shift opened aid taps for construction of roads and upgrade of airports, but it also came with strings attached, with State agencies required to only contract Chinese firms for Chinese-funded projects.

China’s allure has been its detachment from local politics and its massive resources that allows it to finance mega projects built by its multinationals, with Kenya repaying the loans over lengthy periods.

Kenyan construction firms have cited delayed payments by the government as a major factor for breaching loan terms, revealing an operational reality that favors Chinese firms.While local firms take loans from local banks at double-digit interest rates, their Chinese rivals have large cash reserves besides an option to access subsidized credit from the state-owned China Export-Import (EXIM) Bank.

This well-oiled machine is what helps Chinese firms to complete their projects relatively faster, enhancing their reputation in public and private sector contracts. The ability of Chinese firms to arrange financing for their projects and complete them on time has seen many of them pre-qualified to build 2,000 kilometres of roads across the country.

To get a piece of the mega projects during these times when the Chinese presence looms large, local contractors have had to team up with conglomerates from markets like Europe in consortia where they are junior partners.

Many local contractors such as Kirinyaga Construction Company, which thrived under former president Daniel Moi’s regime, were confined to undertaking small projects in rural areas. Others like H Young and Intex Construction have since resorted to forming consortia with European and Indian conglomerates when bidding for government tenders, where Chinese firms enjoy pre-qualification status tied to the funding of the projects.

While the government prefers Chinese firms for their ability to finance projects, this has been criticised for promoting short-term contracts at the expense of long-term investments. Chinese firms, which often build projects single-handedly, are not open to working with local companies.That Chinese companies import labor from China rather than hire locally is a criticism echoed across Africa, but particularly strong in Kenya where youth unemployment is the highest in the region.

Some Chinese contractors have, however, started making local investments, encouraged by the growth potential in the country’s construction sector. China Wu Yi, for instance, is building a Sh10 billion housing materials plant in Athi River for its own use and sale to other construction firms.The factory, which will produce precast construction materials, is the company’s first such facility outside China.

Source: Why Chinese firms are elbowing out foreign rivals in road construction

The post Made in Kenya, By the Chinese appeared first on My Building Code.

The event was graced by various notable heads including Marwa Kitayama (MP from Kuria West), Emmanuel Wangwe (MP Navakholo) and Fred Ouda (Mp from Kisumu Central) as well as representatives from big firms across the Construction Industry including Cytonn Investments, TechnoConstruct Kenya, Howard Humphreys East Africa, and Mentor Management Limited just to mention a few.

The association having been launched just recently, used the event as an opportunity to highlight their achievements over the past few months as well as some of the challenges faced in their quest to regulate how project management is being practiced in Kenya.

In a previous post, I had explained why a construction manager is a key player in the overall success of projects and the financial gains that companies stand to make by employing one.Their management function and leadership is an important asset within the industry as they are responsible for keeping the project up to date, within budget and within acceptable quality standards.

Current trends in project delivery methods have seen a shift to design/build and EPC (Engineering-Procure-Contract) methods where the contractor takes on more more risk than he would have in a traditional design-bid-build.

This is expected to result in an increase in uptake of construction managers as many firms, in a quest to improve their market share and gain a valuable competitive advantage against other companies, will seek to offer turnkey project management among their range of services.

So who qualifies to be a construction manager?

Currently the course is being offered at degree level, labeled as Bachelor of Construction management, Bachelor of Science (Construction Management), Bachelor of Technology (Building Construction) or Bachelor of The Built Environment (construction management) in The University Of Nairobi, Jomo Kenyatta University of Agriculture and Technology, Technical University of Kenya and Jaramogi Oginga Odinga University.

The Construction Project Managers & Construction Managers Bill 2017 proposes that all construction professionals including project managers should be registered with ACMK before they can be cleared to undertake any construction work in the country.

If passed, the Bill will establish a board that will vet and approve construction and project managers and prescribe an examination they must pass before they are registered with the association.“Subject to the approval of the Cabinet Secretary, the board may, from time to time, formulate, vary and carry into effect schemes and curricula for education in construction project management and construction management,” states the Bill.

As one Bob Ochieng, a construction manager by profession, rightly put it, ” It is important to note that the recently emerging bills and construction laws in Kenya are largely borrowed from the South African Model, for reasons that it seems to work in Africa and secondly, Kenya has benefited immensely from her students who have over the past years sought further education and greener pasture in South Africa.

Globally, there are emerging technological advancement, challenges and newer ways of doing things effectively or conveniently. Drawn from the desire to harvest the best of these worlds into a Kenyan experience, South Africa, it seems, is emerging as the new benchmark upon which Kenyan progress shall be measured, especially in the Architecture Engineering and Construction (AEC) sector.”

The post Can The Real Construction Managers Please Stand Up? appeared first on My Building Code.

The Construction Project Managers And Construction Managers Bill 2017 which is being fronted by the newly launched Association Of Construction Mangers of Kenya, ACMK, seeks to end malpractices that have bedeviled the local construction industry.

According to the bill, each construction project should have a a professional manager who will oversee the construction process.

Traditionally, this role was reserved for the architect and as expected the bill has raised mixed reactions largely by virtue of the fact that role of the construction manager is still a new concept in Kenya.

An architect is primarily a design professional who will come up with plans that will form the basis for construction.

A construction manager or CM will plan, coordinate, budget, and supervise the construction project from start to finish.

The purpose of the CM is to control a project’s time, cost and quality.

The profession is not new per se since “management” of construction has been around, of necessity, for as long as construction itself and was provided as an ancillary service by architects or engineers in other instances, and as a routine part of what construction contractors do.

The argument behind having construction managers as a separate profession relates to the changing times and demanding requirements of the industry.

Construction projects have become complex as different professions are involved in one single project and all these have to be managed and coordinated in order to achieve a project’s objectives.

In addition, tough economic times means that every penny counts. This results to a need to exercise higher level of control while executing the construction process so as to minimize delays and at the same time giving best value for money.

The building owner’s needs have also evolved. While, originally most owners were concerned with the initial cost, nowadays they will prioritize sustainable development and look at the overall asset life cycle performance to make decisions relating to the project.

For this, they will need an expert well versed in construction techniques and technology to advise them This is the niche that a well trained and experienced CM will be able to fill. The Construction Management Bill, therefore, is a definite step in the right direction to be lauded by all.

The post Architects Vs Construction Managers: A Game of Thrones appeared first on My Building Code.

With the nominations still fresh in our minds and with just months to the August 2017 general elections, the country has been plunged deep into campaign mood and as history would have it, we are already experiencing a slowdown in economic growth.

The Standard Gauge Railway  is one of the infrastructure projects that has raised eyebrows with regards to its economic viability. 

Growth in the construction industry has slowed down due to delayed spending as investors and key businessmen postpone key decisions till a new government is in place.

Most investors are waiting to gauge what the future policy will be before launching big projects.

A report by the parliament’s budget office released on May 19th 2016 is quoted as saying “The election mood currently being experienced as the country is gearing itself for the 2017 elections have dampened the investment mood of the country as most investors are practicing the wait and see approach”.

Other economic factors such as inflation have a direct effect on the construction industry. Record election spending will boost economic activity around election time, driving the inflationary pressure on the upside.

As campaign money is released into the economy and the IEBC begins to spend the staggering 45billion shillings as quoted in their budget for the 2017 polls, we’ll have a alot of money in circulation.

Opportunistic spending such as these will fail to lift the economy and instead stoke the fires of inflation.

This in turn points to a rise in construction prices, with cost overruns becoming the norm and an increased likelihood of project abandonment as an extreme measure.

A section of newly completed Southern bypass along Mombasa Road, part of vision 2030 infrastructure project.

Experts say elections, especially in emerging markets such as Kenya, are high stake affairs dominated by a ‘winner takes all’ mentality.

The Ruling party from the electoral outcome in Kenya is bound to have a majority both in the Senate and the National Assembly hence its ability to push through bills in parliament, and muscle in the awarding of tenders.

The government invests in the construction industry by initiating infrastructure projects. According to political scientists, political parties are still owned by their financiers.

In an article by the Daily Nation, Prof Karuti Kanyiaga of the institute of Diplomacy at the University of Nairobi, is quoted as saying “The initial thinking was that political parties would evolve into institutionalized bodies, but they are still personal outfits run like private companies”.

It is no surprise hence, that some builders will divert funds to fund political campaigns with the hope of securing massive government tenders in the future once the party wins. The contract amounts awarded in such are normally higher than what would be considered the best price.

It becomes a never ending cycle of corruption with the common mwanachi bearing the brunt of this “tenderprenuer” culture.

The new guidelines to control polls financing for candidates and political parties by the IEBC is a welcome move to prevent money driven politics.

The Election Campaign Finance Act provides for the regulation, management, expenditure and accountability of campaign funds during election and referendum campaigns. As they say, the proof of the pudding is in the eating, and all eyes are on IEBC to see how this law will be operationalized and enforced.

The post Make or Break: How Politics affects the Construction Industry appeared first on My Building Code.

It is quite galling that 1.3 million Kenyans in 12 counties are facing starvation owing to drought when more could have been done to mitigate against its effects.

It has been reported that in counties such as Garissa, Wajir and Mandera, there hasn’t been proper rainfall for more than a year, yet little has been done to develop adequate water sources even though opportunities exist to exploit ground water aquifers.

Dry years do occur often and Kenya’s people and economy have become highly vulnerable to erratic climatic patterns and limited water availability.

We may not be able to stop an impending drought, but we can prepare for it and reduce the disaster risk by preventing the worst of it.

Rainwater Harvesting for the individual

Rainwater harvesting and construction of storage infrastructure is probably one of the most ‘do it yourself solutions’ that an individual can attempt.

It simply involves the collection of water from surfaces on which rain falls, and subsequently storing this water for later use and can be used to supplement the main supply as well as provide water when there is a drought.

The basic rainwater harvesting system is more of a plumbing job than a technical job as all the outlets from the building terrace are connected through a pipe to an underground tank that stores water.

To get it right, you need to appropriately size the rainwater storage and estimate the amount of rainfall that is able to be collected by the area of capture or roof area.

The rainfall capturing area must be large enough to maintain adequate flow with the water storage tank size being large enough to contain the captured water.

Dam construction

A more expensive undertaking , which helps to secure a permanent water supply for urban settlements over the dry season, would be the construction of dams.

For thousands of years, dams have been used to store water and to create energy.

They serve to ensure an adequate supply of water by storing water in times of surplus and releasing it in times of scarcity, thus also preventing or mitigating floods.

A dam is the cornerstone in the development and management of water resources development of a river basin.

The multipurpose dam is a very important project for developing countries, because the population receives domestic and economic benefits from a single investment.

Purified waste water

In ensuring we have adequate supply of water for our need, we also have to check on how we use and dispose of the waste water from our homes.

Currently waste water reuse is illegal in Kenya but given the low national average rainfall of 400mm, its high time the government steps up efforts to harvest, store and re-use wastewater.

Water recycling is reusing treated wastewater for beneficial purposes such as agricultural and landscape irrigation, industrial processes, toilet flushing, and replenishing a ground water basin (referred to as ground water recharge).

Wastewater treatment can be tailored to meet the water quality requirements of a planned reuse, for example recycled water for landscape irrigation requires less treatment than recycled water for drinking water.

Recycled water can satisfy most water demands, as long as it is adequately treated to ensure water quality appropriate for the use. It is worth noting however, that recycled water is most commonly used for non-potable (not for drinking) purposes, such as agriculture, landscape, public parks, and golf course irrigation.

Ground water as an alternative

An untapped area to Kenya’s water crisis would be the exploitation of ground water. Water beneath the earth’s surface comprises over 97 per cent of the world’s readily accessible freshwater.

In Kenya, the full potential of groundwater is unknown. Meanwhile, the intensifying use and demand for water resource in Kenya reveals its strategic importance with an intervention in groundwater expected to bring tangible change.

Back in September 2013, findings of a groundwater mapping project, GRIDMAP (Groundwater Resources Investigation for Drought Mitigation in Africa Programme), spearheaded by UNESCO in partnership with the government of Kenya and with the financial support of the Government of Japan had identified two new groundwater sources: The Lotikipi Basin Aquifer and the Lodwar Aquifer.

The study found that Turkana hosts a minimum reserve of 250 billion cubic meters of water, which is recharged mainly by the rainfalls of the Kenyan and Ugandan highlands at a rate of 3.4 billion cubic meters per year.

The water source alone is said to be twice the amount Kenyans consume today and could boost the country’s share of water by 17%. Upon further research however, the preliminary test results from Lotikipi showed that the water was too salty to drink.

After drilling 350 meters underground, saline levels were seven times higher than considered safe by the World Health Organization (WHO).

Experts were still hopeful of the viability citing desalination of water as one of the solutions.

Already there are organizations who are desalinating water from the rift valley which ordinarily has very high levels of Flouride. It may be a bit expensive but its definitely cheaper than tracking water to those communities for human consumption.

The solution lies within our borders

Even as the drought continues to bite, the government of Kenya remains adamant that it cannot be declared a national disaster but just a crisis that will be managed according to Cabinet Secretaries Henry Rotich, Mwangi Kiunjuri and Eugene Wamalwa.

All eyes are now on, the Kenya Red Cross which has launched the #EmbraceAFamily movement urging Kenyans to support a hungry child in drought hit areas.

An almost similar initiative, then dubbed ‘Kenyans for Kenya’ initiative by the same organization back in 2011 was commendable not only as a show of solidarity in order to alleviate the suffering of fellow countrymen but also as a symbolic reminder that the solutions lie within us.

We have the capacity to solve our own problems, let’s not look elsewhere.

The post The Untapped Water resources appeared first on My Building Code.

In the month of October 2016, residents of Nairobi were informed that they would have to bear with traffic snarl ups for an additional six months due to delayed completion of the Outering road project.

The announcement came as the Chairman of the Kenya Urban Roads Authority (KURA), Daniel Njora, opened part of the road and defended the delay in implementation of the project citing the relocation of services such as water, sewer and power lines as the main setback.

This means that the project that was scheduled to be launched in September 2017 will now run till March 2018. An obvious ripple effect would be a rise in total cost of the project which is reportedly being projected to increase from 7.395 billion to 8.2 billion.

 Overpass construction Outering road

Cost and time overruns on government projects are a global phenomenon.

Describing government infrastructure, the World Bank is quoted stating that, “studies show a history of extensive cost and time overruns in construction projects across the sectors and in countries around the world.”

Given the important role the construction industry plays in national economic development, this is a problem whose importance is a national headache and cannot be taken for granted because it bears in a part on the very basic facets of National economic development and the social welfare of the state.

Particularly for developing countries which have a long way to go in the process of development and given that some projects are funded with foreign debt, this is an issue that needs to be taken seriously with a view of curbing it.

The construction of Greenfield terminal at Jomo Kenyatta International Airport 

In Kenya, the construction of Thika Superhighway which was set to be completed in the year 2011 was realized a year later.

The deadline was moved twice resulting in both cost and time overruns. The project cost kshs 7 billion more than the original budget.

The construction of Greenfield terminal at Jomo Kenyatta International Airport had its start date postponed several times before it was finally abandoned altogether.

This was after the contractor had already mobilised 90 per cent of the equipment required for the execution of the work and excavations for foundations had been ongoing.

Queries have also been raised over the economic viability of LAPSETT, after key landlocked state Uganda opted for Tanzania as its preferred route for an oil pipeline and Ethiopia signed another agreement with Djibouti in October last year for the construction of a 550-kilometre pipeline to transport diesel, gasoline and jet fuel from port Access in Djibouti to central Ethiopia.

The Standard gauge railway, a sub project of the LAPSSET Vision 2030 initiative, has had questions raised regarding its costing especially after it emerged that Kenyans are being charged $6.6 million per kilometre compared to $4.9 million per kilometre for Ethiopia’s ER.

SGR railway project

Cost overruns in public construction projects are often the content of scandal in the news media.’

Typically government officials and contractors are treated as eager participants in bribes, awarding illegal tenders and other forms of corruption.

Wasteful spending is another big problem since people tend not to spend other people’s money as carefully as they spend their own.

In governments, policymakers and administrators deal with large amounts of other people’s money and should exercise due diligence in how they choose to spend that money.

In addition for successful execution of a project, effective planning is essential for minimizing delays and cost overruns.

Each project should be managed by a competent and experienced project manager who will be able to exercise appropriate cost and time control measures and hence taming the runaway problem of delays and subsequent increases in cost.

The post The good, the bad and the ugly: A review of public infrastructure projects in Kenya appeared first on My Building Code.