Karibu Homes – Building Futures

Brochure

Brochure

As a Kenyan developer dedicated to providing affordable housing in Nairobi, Karibu Homes is currently constructing Phase 1 of its pilot project, Riverview, on the banks of the Athi River. Essential Business spoke to co-founder and developer Nick Johnson to find out more about the company’s position in the property development industry.

Established in 2012, Karibu Homes — with “karibu” meaning “welcome” in Swahili — is already well on its way to make big changes to Kenya’s affordable housing sector.

With lower margins than the lucrative high-end developments, affordable family homes have been widely neglected by the majority of commercial developers in the region, yet demand is only increasing. With 50% of the country’s population aged 18 or under, an ever-increasing number of young adults are reaching working age and flocking to urban areas in search of employment.

“Demand for property is stratospherically high, because traditionally less than 10% of the urban population could afford to buy the housing stock that was in the market. Kenya has seen very rapid rises in land values and consequently in home prices, and all that’s done is brought home ownership further and further out of the reach of ordinary families. The gap between supply and demand is estimated about 150,000 units a year for the foreseeable future,” explains Johnson.

“Most developers make better margins on higher end properties than they would on more affordable homes, so that’s where the activity’s been focused. All the demand is further down the income spectrum — and that’s where Karibu Homes is.”

In 2008, Nick Johnson and Irfan Keshavjee met on a residential advanced management programme at their alma mater, Oxford University. Here, at the world’s leading centre on social enterprise, they were encouraged to think about creating meaningful businesses with real social impact. As part of that, Johnson explains, he began talking with Keshavjee about the situation in Kenya.

“Kenya had just experienced significant upheaval with the post-election crisis. There were thousands of people who’d been killed, and on his analysis, Irfan felt there were underlying causes that were to do with desperation and that they had nothing to lose,” says Johnson. “He believed that home ownership could help address some of those issues, in that if you’ve got a roof that you own over your head, you’re no longer so desperate, and you do have something to lose.”

Karibu Homes’ efforts are currently focused in Nairobi, where a large portion of the population lives in one-storey dwellings in slums. Kibera, the largest of these slums, has a greater population density than Manhattan. After spending some time here to understand the situation and how it worked, they approached a range of experts in the field about devising a solution to the problem.

“If we could provide housing that was accessible to people who were living in slums, or on the periphery of slums, that couldn’t extract themselves from them because there was no affordable product on the market, then we thought that would be an interesting opportunity because there was a massive demand for it. So that’s where we started,” says Johnson.

“There’s no point providing houses for people who can’t actually afford them, and there’s no value in providing free housing.  People who it’s given to don’t value it, and what they tend to do is make a sensible economic decision, which is to stay put and just rent out the property. And that doesn’t resolve anything.”

The first phase of the Riverview development is to be completed in March next year, bringing 281 new units onto the market. When complete, Riverview will be a 1,000 mixed-use estate just 1km from Mombasa Road, and will feature a range of amenities, including a health clinic, nursery school, and community centre.

“The purpose of the project is to establish that our business model works, and assuming we can do that, then we’ll be looking to scale up to be doing tens of thousands of homes,” says Johnson.

“Shelter Africa are our debt providing partners on this project. They’re a pan-African bank that specialises in real estate development. In particular, they have a mission to deliver affordable housing, so it’s a very good partnership. They’re providing financing, but that’s always much more involved than people might otherwise think.”

While the current focus for Karibu Homes is Nairobi, this is likely to change if the Riverview development is a success.

“We say we’ll focus on East Africa, but the practical reality of it is that our focus at the moment is Nairobi. Nairobi is the dominant city in East Africa, and it’s where the greatest demand lies, so that’s where we are right now,” Johnson explains. “But over time, we’d like that to expand.”

Prices at Riverview start at KES 1.6m (under USD 15k) for a one bedroomed home to KES 3.7m (under USD 34k) for a 3 bedroomed home. Further details can be found at www.karibuhomes.com.