Interview with Francis Wachira Muguku, Director of Dinara Developers

Could you tell us what you do?

What we do with our customers is that they pay us as we develop their property. This eases the need for extra financing on our side and enables the customers to have extra time to pay for the development.

How would you assess the real estate sector in Kenya?

It’s a big sector that is booming right now because the demand for housing is more than the supply currently. On average every year there are supposed to be 200 000 units delivered and all the developers combined cannot do even half of that.

That means there are more and more competition and companies.

The demand is higher than what the companies we have in Kenya can deliver. Unfortunately the cost of housing is also higher than what the people who need the homes can afford.

What is Dinara Developers' niche in the market?

We generally concentrate on residential properties because we are usually based close to the city and there are a lot of people coming in from the rural areas to the urban areas. It gives us an advantage.

What kind of residential do you focus on?

Our main target is usually the low income and middle income housing bracket. We like to deliver affordable units. The type of units that even people who can’t get a mortgage can afford to pay for by themselves.

How would they be able to pay for it themselves?

The people I am talking about are not people who work in the public sector. These are usually people who have small businesses that do not make a lot of profit so if they had to go to a bank for a mortgage it would be denied. They have money but because they do not have an official payslip they cannot qualify for a mortgage. We have come up with a product for them that looks past the need for a mortgage and works with their earnings directly.

So you are replacing the role of the bank with your product. Could you tell us more about this?

We always find clients because there is a target group that has been ignored, the group that does not qualify for mortgages.

Yes. We did a lot of research and we realized that there were many people who avoided banks firstly because of the interest rates. Secondly, if they have financial challenges they fear that their property could be auctioned off. They prefer to work slowly till they have saved enough money to pay in cash for what they need and what we do is we offer them our solution. We will take what they have saved and start building and we will continue constructing as you continue paying. Even if you haven’t finished paying once we have finished construction you get the house and you keep paying us.

What do you call this product?

We call it the off-plan product. We build as they pay. Therefore they are buying it on an off-plan level.

What has the response been to this product? Are there many people interested?

It has become very popular. Mostly you will find that all our units are booked even before we have started construction.

When you say that most of them are booked does that mean your projects always find clients?

Yes. We always find clients because there is a target group that has been ignored, the group that does not qualify for mortgages.

Can you describe what the house would look like?

Generally it's all average housing in apartment styles. That helps to reduce the cost of land which is always a major expense in construction. We usually do a minimum of two bedroom units all en suite and generally spacious enough to accommodate an average family.

Let's talk about your projects. Could you give us some examples of projects?

We have a number of projects around the city. About 40 kilometres from Nairobi we have a project called Mazuri One in progress. It is a development of a 169 two bedroom units all going for less than 4 million Kenyan shillings each. We are starting on Mazuri Two right next to Mazuri One. Mazuri one is nearly fully booked. There are still approximately 200 units available going for around 4.5 million Kenyan shillings. We have another project along Thika road about 25 kilometres from Nairobi. The project is called Dinara Lenkai. It consists of 60 housing units that go for an average of 5.5 million Kenyan shillings. These are also two bedroom units. There is another project along the eastern bypass between the Thika super highway and Muranga road. Those are 19 standalone houses going for about 12 million Kenyan shillings. They are big units with their own compounds. Those houses are aimed at the middle income housing bracket. We have another project on Kiambu road which is about 6 kilometres from Nairobi. There are 3 on-going projects. One is completed and they are two bedroom apartments going for 6 million Kenyan shillings each. Those are our current projects.

Let's talks about your challenges and how do you face them? How do you finance your projects?

We involve our consumers in the financing of projects. How we go about it is that we, as a company will acquire the land to build on and then we take the consumer on-board. We give them the price of the house and we give them a timeframe of 2-4 years. In that period of time we agree on an amount of money that has to be paid monthly. It’s our consumers that finance the projects. Of course there are challenges involved because the financial situation of a customer could change at any time and it could hinder the progress and speed of the project. Then we would be forced to find additional capital to cover that gap.

Is this a scheme that is proving to work well?

It is working very well and it is something I would encourage other developers to try. The demand for housing is high but the logistics in financing stops people from buying houses.

Do you get any support from the government? Because at the end of the day what you are doing is providing housing for the Kenyan population.

Unfortunately not and it does affect us because the government has a way of viewing developers as super rich. So rather than seeing the concept of giving Kenyans affordable housing they are seeing it the other way around. They see a business making a lot of money out of the deficit in housing. If they could just see that developers are trying to offer a solution to a problem currently in Kenya it would better than viewing it as companies that make a lot of money and should be heavily taxed. There are so many taxes in development. It can be quite discouraging.

Are you looking for any investors local or international to partner with you? To be either directly involved in your company or to establish a joint venture?

Investors are always welcome. We have a good concept. I wish we had a greater flow of money because we could do much better. We would be able to deliver directly in a shorter time. We would be able to supply as much what the demand is. A company moves as fast as its finances allow. That means that if you have an investor things move faster.

If everything goes well and we have an investor injecting capital into the company I think that in the next 2-3 years the company could be worth 10-20 billion Kenyan shillings because the market is huge. We have a database of people needing housing. We know what to do and we deliver. Our vision is a big vision. We would also hope to see our company listed in the Nairobi stock exchange with shareholders investing in the company in the next 3-5 years.