In an interview with CEO Africa magazine, Daniel Akal – CEO and Owner of Red Oak Properties, gives insight of the growth in Africa’s Real Estate Sector that inspired his entrepreneurial venture.
It is notable that investment returns from Real Estate in Africa’s rapidly expanding economies significantly exceed those achievable in almost all developed markets with more significant growing opportunities in which spans every sector.
Forecasts of 20% net annual returns from investing in shopping malls, office blocks or industrial complexes in countries across Africa continue to draw in new investors. In almost all markets, demand for high-quality housing, offices and industrial space continues to outstrip supply as international and local occupiers respond to new economic opportunities.
However, despite this positive growth and high middle class purchasing power, large number of youths in Kenya still can’t get the taste of this progress due to unemployment, corruption as well as high interest rates with tough terms and conditions that many seem as hindrance from accessing loans to improve and grow themselves financially despite them having potential to contribute to the economy growth.
A number of young people between the age of 21-45 fall under this category. Out of this, Red Oak Properties, a young but fast growing Real Estate firm was formed to help solve this problem by providing more affordable housing and friendly terms of ownership for the Kenyan population. In its two years of operation, through its well connected networks, has managed to gain leverage in this cut throat competitive sector.
Some of the contributing factor to the growth of ventures such as Red Oak is affordability as it is one of the shortfalls in residential property across Kenya. Also the increase of people in the middle income bracket has increased purchasing power which prompted demand of refined lifestyles attributing to demand in quality infrastructure. The company has responds to these demands by offering this group of people well designed properties in secure places as competitive prices.
Kenya’s property market growth remains positive with residential property value going up by 357% between the year 2000 and 2014 as per a report released by Hass Consult Limited. With the prevailing political stability a remarkable growth in the Real Estate sector has been noted and with the establishment of a safe environment for the local and foreign investors. Economic growth, improving political stability and ongoing investments in infrastructure are opening previously inaccessible markets, while increased transparency and availability of local partners is helping to improve the ease of doing business.
According to Akal, rising interest in Real Estate Investment Trusts (REITs), steady population growth and plans for billions in new infrastructure outlay have led to a positive mid- to long-term forecast. However, the sector might face near-term challenges, as slow headline growth, rising inflation, labour unrest, and an expected interest rate hike in mortgages continue to affect consumer confidence and spending culture in terms of purchasing of property.
In the advent of a growing Real Estate sector Akal ventured and Red Oak Properties was born. It started out as a passion that eventually became a registered entity in 2014. Red Oak Properties’ core business is making large land purchases which are then subdivide into plots that are then sold to SACCOs, Chamas, Housing Finance Co-operative Societies or Individuals who are interested in purchasing single or multiple plots. For an individual purchasing these plots the prices are discounted and affordable for anyone planning to invest in a plot or build a house.
The company targets both employed and self-employed persons as Akal put into perspective, “With this product, the common person who earns between KSH.15,000-20,000 can own a property from us by paying installment of between KSH.5,000 to 10,000 per month depending on your terms of registration. After full payment is completed one is presented with the title deed.”
Red Oak Properties is currently working on a housing project in Ruiru and Kisaju that will be open to the market on completion. The mega construction of low cost houses will range from KSH. 800,000 – KSH. 7.5 million Per unit. In the coming 5-10 years, the independently owned company sees itself solving housing need now that they are venturing into low cost houses by building units for mass market which will help bring down the deficit of housing insufficiency in Kenya today.
Red Oak has focused its radar on satellite towns and outskirts of Nairobi where land prices are still friendly and affordable as well as easy availability of large piece of land in one place, good road network to and from the city, good security among other considerations. The company has also set eyes on areas including: Nanyuki, Sultan Hamud next to Standard Gauge Railway (SGR) sites, Naivasha and Ngong among others.
In order to protect the customer’s needs and concerns from fraudsters, the company has a strong legal team who do intensive and extensive research before buying and selling property as well as to sensitize clients to carry out their due research to confirm the property authenticity before they transact towards the pointed property.
Another problem facing land buyers is the long period that it takes to process a title deed, however, Red Oak strives to deliver to its customers on time by processing them within short time after completion of payments and signed in the transfer form.
More interesting, the company uses a different business model where they are flexible to work within the client’s budget as their interests always come first. The client gives a figure of the amount they can afford and what they are able to pay. This distinctive feature is one that distinguishes them from other Real Estate companies.
If you cannot afford the property, you don’t need to stress yourself out wondering where to source money from. With the strategic partners, the company can refer you to them where you will be given affordable loans at low interest rates which will be used to pay for the property you acquired as you service the loan using the land’s title deed as collateral. Another amazing distinguishing factor!
The company’s target market is newly employed youth among whom the company has invested time in educating them on property ownership. To get them equipped before investing in property Red Oak educates them in one on one forum on best ways to go about property ownership and the opportunities that are available in the market.
Challenges are part of running a company and Red Oak is no exception. It has fallen victim of the recently disbanded land rate by the Land board by compromising their delivery of the Title deeds.
The government’s inability to satisfy the demand and bridge the massive housing gap which is estimated to be 100,000 units per year, Akal is of the opinion that this gap can be significantly narrowed by giving developers tax payrolls and regulating the price of lands, keeping in mind that most developers want to cash in especially in the low income bracket.
He adds that the government should offer strategic partnership with developers by giving them advantage loans with much friendly interest rate to develop their properties then pay them back after the sale of the units. By doing so, it will not only reduce housing cost but also help reduce the current demand for housing facilities.
Among the company’s achievements, Red Oak sponsored ‘Kenya strongest man’ competition- a country wide event- by awarding the overall winner with land in Olepolos valued at KSH. 300,000. The sponsorship went a long way in promoting the brand and giving an opportunity for youth to own property.
Akal is also enthusiastic about opening Red Oak Foundation in the near future that will focus on helping brilliant students who lack finances. One of the ways to empower the youth is through formal education and this is a step towards reaching the companies CSR goals through philanthropy. The foundation is aimed at supporting students by providing financial support and internship opportunities through Red Oaks networks which will give them an opportunity to practice in their area of specialization.
Daniel Akal is a graduate a from the Catholic University of East Africa (CUEA). After graduating with a bachelor in arts and development studies, job scarcity in the market proofed nightmare in his dream to get a job in the market.
Desperate to get a job, Akal kept himself busy by accompanying his Dad to the construction sites where he was undertaking different projects. Seeing his father’s progress and achievements, Akal became fond of his father’s work hence prompting him to start his own real estate empire through his father’s guidance. Armed with an idea and less than KSH.100, 000 he started his venture not knowing what lies ahead. His determination and persistence in making Red Oak grow is an inspiration to youth.
Akal is one of the young CEO who has managed to start and grow a venture. Apart from his company, youth, family and education are closest to his heart. He looks for avenues and forums to mentor youth within his community encouraging them to build their own startups. On his free days he makes a point of catching up with his family. He also lectures Sociology at CUEA and Marist. Akal is currently pursuing his PhD in Development Studies at the Jomo Kenyatta University of Agriculture and Technology (JKUAT).
Akal’s passion for what he does is his drive and his parting shot, “Stick to what you do best. Don’t rush to a certain business because you heard it is making big profits, do what you are passionate about and you will succeed. Have integrity and remember that vision and hard work comes before money.”
Red oak site visit are done every Saturday and on request for any other day. Clients who have shown interest in making a purchase get an opportunity to go and see the property before making their final decision to purchase.