Cytonn, Kenya’s real estate investment firm, is set to invest US $100m in commercial and residential housing units in Kampala. These units, according to Managing Partner and Chief Executive Officer, Edwin H. Dande, will target middle class population.
Dande said that according to their market research, Kampala ranks as the most compelling market. This is in terms of returns in the region amidst high construction and financing costs. He also added that Cytonn has over US $795.4m of projects under mandate. The projects run across 10 real estate projects, all of which are in Kenya.
State-owned National Housing and Construction Company National Social Security Fund as well as small scale property developers currently dominates Uganda’s real estate industry.
Cytonn’s latest report shows that real estate investment in Kampala has an attractive returns. This is with average rental yields of 6.8%, 10.2%, and 10.6% in residential, retail and commercial office, respectively. The percentages are against Nairobi’s average rental yields of 5.6%, 10.0% and 9.3% in similar groups.
The report cites high demand in most areas, ease of access from the Central Business District, and low supply in the market to cater for the high demand as the key drivers for the attractive returns in the Kampala market for the best performing zones.
According to the Cytonn Investments Head of Private Equity, Shiv Arora, the new development comes at a time of retail boom over the last five years. This has since influenced high supply in the market improving the performance of the commercial retail sector.
Going forward, the firm’s executives said they expect increased development. This is more so especially in the middle income residential segment. Furthermore, infrastructural developments are currently opening affordable to low and middle income segments in suburbs such as Naalya, Naguru and Lubowa respectively.