Building and Construction Sector in Tanzania: An Interview with Andrew Kim Chami of LCH Builders

Interview with Andrew Kim Chami, CEO of LCH Builders

What is your scope of business?

We are a construction company. We started off as property developers, where we aimed at focusing mainly on providing affordable housing solutions. But we came into a problem where we realized what people really need. It is not cheap houses or materials, but they need the access to professionals – architects, surveyors, and engineers to build quality houses. In Tanzania, most people go into construction without knowledge and use phony artisans to build their homes. A person does not have a clear budget of what the project is going to take and also, due to unprofessionalism, they are spending more than what they plan for or to an extent that they cannot complete their project. We created an ecosystem with in house designers who design the houses, in house property developers responsible for locating land to build the houses on and responsible for surveying and formalizing the settlement. We have a professional in house construction company registered by law. We create an infrastructure where we provide building materials for these projects. We have the design team, we have the building team, and we have the material supply team, and they all work hand in hand to ease the process of building one’s home and to ease the process for first time home builders. Our target market is the middle income earners and the working class, people who cannot get access to loans because they do not have the collateral or even if they get access to loans, they cannot get access to professionals to build their home. A project means from the point where a person needs land to a point where we give a person a key to enter their home. Sometimes, we have one or two clients and sometimes we get more than 15 clients at a time. People build here in phases, unlike other countries. The person will decide when they have money to build a foundation and then leave it there. Then after some time, they will come to build again from the foundation to the roof. We are doing one project now with an institution where we have entered an agreement to provide houses for its staff. We are beginning from the land acquisition to building a complete home, but their staff cannot afford to pay for these houses. So, they connect them with financial institutions since we have learned that the land acts as a collateral for them. Then, they are eligible to secure the right mortgage financing that will enable us to build their homes. From there, we can now start thinking of mega projects. For right now, we are still at the level of having five projects a month. We are a one stop shop where we provide everything for the customer. It is a constructive way of approaching things.

Are you looking for investors or funding?

In the next three years, we are looking at having affordable housing projects in all five districts of Dar es Salaam. We have started implementing that.

We had a roadmap, a five year plan, saying that since we cannot access funds that easily, first, we have to equip ourselves. First, we have to raise our revenues. When you face the investors, the figures show if you are not a profitable company, but you might be profitable in three to four years to come. So, we are currently building ourselves. All of the profits that we get we reinvest back in the business, so that we keep on growing and creating our competitive edge, innovating our way through the process. We have not really thought of bringing in investment until we are well equipped ourselves to ease the process. We have been lucky in the early stages to get some investment, but it is personal money injected into the business from colleagues and other partners who believed in the process. We actually managed to pay back the money. Currently, we were thinking from year four to year five, if we have established ourselves fully, then we will be ready to go out there in search of investors and talk to banks. By then, we will have met the requirements needed by them – the assets, the collateral, etc.

What is your assessment of the construction industry currently?

There is still a huge demand for more contractors to come into the market because we have a shortage of at least 200,000 homes per year. More players should keep coming in and contribute something to the market. We are in the right place, the right market, and the right business.

What is the reasoning behind the lack of contractors or developers in the market?

There is a slow insertion of people coming into the market. You have companies coming from abroad that come and invest here, but for homegrown companies, people who are willing to venture in the space, there have not been that many. It is just an issue of people willing to get into the market.

What are your competitive advantages?

The biggest player currently in the nation is the National Housing Corporation who is providing affordable housing to the masses. That is the direction where we want to go. In the construction sector, we look at general construction rights and material supply. In manufacturing, we like to dream and see ourselves like the big construction companies like Saint-Gobain who have extended their playing field into the material manufacturing and supply. Our competitive advantage is the hunger or the drive to always innovate and provide affordable, in house solutions. We would not want somebody to come to us then look for construction materials somewhere else. We need to help them in housing design solutions and try to innovate in a way that caters to the need, the local context. How people define construction is how we want to do construction, not the other way around.

According to the World Bank, Tanzania has been declared as a middle income country. Does that have an effect on your company?

Our clientele are mostly middle income earners and the working class. We have seen the rise of the young generation, the millennials who want to build their homes. We work with the middle income earners, the working class, people who work for the government and the ones who work for the private sector. They have a monthly wage, but they cannot get access to the right financing, only if they have the necessary collaterals. So, we provide them with land, we provide them with bridging the gap between the financial institutions and what the individual wants to build, and they are eligible to get the necessary mortgage finances. We try to assure the bank that this person has land, so you can use this land as collateral, you can give them money. Through us, we can enable the building process because most of the financial institutions just do not want to release the funds. They wish to release the funds and see an already established house, not just land.

What kind of investment opportunities do you wish to attract to the company?

Most importantly, we are looking for skill sets, technical partnerships where you gain some expertise to manufacture products. For the affordable housing solution, we want to move from the conventional or the traditional construction methods and try to search for more such as the modular housing techniques. If you do not have the right skill set and your people are not trained, then you cannot achieve the goal. There are companies who are using these modern technologies, but the masses are not educated. Also, there are new technologies, claiming to provide affordable construction that isn’t actually affordable because people cannot use that skill set. Availability is also quite an issue. So, funding is not the only challenge.

What are some aspects or success stories from the past three years that you are proud of?

Three years ago, it was only four of us in the company, the founders. Currently, we have over 20 employees in all the necessary areas. We are creating an ecosystem where we provide in house services. When you speak of LCH Studio, we speak of designing everything from architectural drawings, engineering drawings, to BOQs. When you think of LCH Builders, you should think of property development, general construction works. When you talk of LCH Shop, you see material supply and creating the necessary infrastructures. We have managed to grow a team that is working hand in hand to provide these services. Currently, we have partnered with some developers to create an online platform where people can now purchase building materials from the comfort of their homes or offices and create an information system that will enable people to monitor their construction projects. We have everything in house and now it is about time we take this and scale it and grow it. We are quite proud of how far we have come.

What is your vision for the next three years, the medium term?

In the next three years, we are looking at having affordable housing projects in all five districts of Dar es Salaam. We have started implementing that. We are working now in Kigamboni. We have started developing land and talking with institutions to see if they can invite their staff. We are also working with microfinances. In this area, we have village community banks and there is one interesting one that we are working with. It is all about contributing, buying shares, etc. They have managed to grow their capital to an extent that we have bought at least 100 acres of land and it has been given to the people who would not have had access to buy that land. We have surveyed the plots and right now we are in talks to see how we could help them build the homes through the same process because they are contributing shares. Then, they get loans from the same village community bank at a very low interest rate that they can afford. We are providing the professional field for them to build quality, affordable homes. We are in the designing stage now. In the next three years, we hope to be one of the successful players in that area.

What is your background and your drive?

I come from an entrepreneurial background. My dad is a businessman. He actually owns the Dar es Salaam School of Journalism. Even growing up, the only thing I knew was running businesses and doing entrepreneurial tasks. My mother was the same. I have always been fascinated with building and construction. I majored in architecture. After graduating, I saw that people needed to be informed about modern construction methods. So, we started a TV program on YouTube called The Builders Home mainly to talk about construction because I knew as an architect that not many people knew my role in construction. People here just build houses; they do not consult professionals. So, I thought first we should start with that. Let people know about construction, then you can move one step more. From 2011, we did the TV program, and then in 2014, we started our real estate agency. We did that for two years but the market is a bit stagnant now. So, I thought, instead of being an agency, I could actually be a developer, because that is where you create more value. That led to the birth of LCH Builders because now I had all the skill sets from the media, doing the TV shows, and from that, I learned how people were struggling with construction, with mainly the access to professional contractors, finances, and formal land.

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