Wednesday, August 25, 2010

Can you be the next Donald Trump (in Kenya)?

Stephen Alala, co-founder of SoftLaw once told me an interesting story about a lawyer who while doing an assignment for a venture capital firm was so enthralled by the work that he decided to quit the practice and join the angel investors. At the next meeting with the other angels, intending to wow the board he excitedly gave a presentation on a new business venture that would make the firm triple-digit returns on their investment. He was therefore surprised that after he finished his pitch the expressions on the faces of the board members all around the table were unimpressed, bored, and even disgusted. One of the friendlier faces explained the mood with a question "it's all well and good that this idea can make money, but will it race up my pulse, make my mouth dry, keep me from sleeping at night, and wake me up early in the morning twitching and excited?"

Simply put, these angel investors had already made tons of money, and that alone could not excite them. What they needed was an idea that they were so passionate about, that it would occupy their every waking thought.

I took a lot of comfort in this story, because I've also always pursued business with the need to achieve something greater than making money. My passion is to support, grow, and develop other entrepreneurs through sharing knowledge and leveraging the power of technology. The difference is that for me that I am yet to make tons of money :( Well today I want to try something different,  I want to blog about what makes a lot of money in Kenya - the property business.

In the past few years, we've probably witness more new millionaires in Kenya than at any other point in our history as land prices shot through the roof and beyond. I hear stories of someone who bought a 'shamba' at KES. 15,000 back in the nineties, and now is selling it at KES. 5,000,000. Or of masaai sons whose father left them 'worthless' hundreds of acres in Kitengela. Land brokers who got on the gravy train early on are now living off the fat of their early bird status.

It is pointless to look at this and wishfully think. To be a true property tycoon, one now has to rightly predict how the property market will look five years from now and make the right decisions. Today, I will give you my three predictions on how to make money in property in the coming years.

1. First of all we must realise that land speculation as we know it (in Nairobi) , is all but finished as a way to make money. Not only will the new provisions of the constitution discourage this by taxing people for idle land, but we will also witness a high urban to rural migration that will take pressure off land outlying Nairobi that has seen the highest price increases. If you want to make money, then you need to know where migration will be going to.

My prediction is that with the decentralisation of government through counties, a lot of this migration shall be to the centres of these counties. Also unlike before where the central government retained control of the purse strings, this time money shall flow to the counties. This will mean that marginalised low density population counties like Tana River which has adequate natural resources will now have plenty of cash to develop. The bigger budget and smaller competition population-wise for the money will mean traders, merchants, and brokers of all and sundry shall flock to such areas.

Whoever owns the land around these areas which can be bought pretty cheap now will be in prime position to benefit from the migration.

2. Donald Trump made money in New York by taking on large building projects in Manhattan that would offer opportunities for earning high profits, utilizing attractive architectural design, and winning public recognition. He was a master at turning derelict properties into high-class real-estate. Despite my predicted urban-to-rural migration, I believe Nairobi will remain a growing city and the commercial centre of Kenya and Eastern Africa. More and more local and international businesses will want to set up in Nairobi. With the impending completion of the widening and modernisation of Thika Road, the Eastern side of the CBD (the area between Globe Cinema roundabout, Kirinyaga Road, and Ring Road will be prime real-estate to renovate (if one can manage the politics Donald Trump style). Already there are plans to turn Muthurwa estate into a modern state-of-the art residential and commercial complex. Once this is done there will be pressure on the property around it and investors will be willing to put up similar properties.

3. Thirdly... ummm okay it seems I only had two predictions, but keep your eyes on this space as I share more wacky ideas on how to be the next (Kenyan) Donald Trump.


Anonymous said...

Its such article.u r truely exercing your passion to seeing that people get tips on how to become successful entreprenuers.kudos n keep up ur cool job.

Harry Karanja said...

Thanks Anon. I'm glad you appreciate it.

Elle254 said...

Poor governance, and corruption has hindered Kenya's ability to evolve into a giant house both economically and politically. Unstable political climate, turns investors away. I believe that this trend will slowly but surely fade away, if and only if, the new constitution will be implemented, if corruption is reduced to a minimum, if elected leaders indeed work for the citizens,and those in the diaspora, continue to invest heavily back at home. Political stability is the prime building block in self sustainability and economical advancements in Kenya.