After Sri Lanka, Maldives, Tata moves into East African property market

Friday, 21 April 2017 00:00 - - {{hitsCtrl.values.hits}}

MUMBAI: After it tested the waters in Asian property markets of Sri Lanka and Maldives, Tata Housing Development Company is venturing into the East African property market with its mixed-use projects in Kenya and Tanzania spread over 70 acres.

“Given the early success in two of our overseas projects in Sri Lanka and Maldives, we have decided to continue expanding our international footprint. For now, we are starting with Kenya and Tanzania in East Africa, which is a promising market with robust pent-up demand and good brand visibility,” Tata Housing MD and CEO Brotin Banerjee told ET.

The Tata Group company is working on a plan to set up an investment platform worth $200 million for its projects in overseas markets. Currently, it is in advanced talks with private equity players for the same.

“Currently, we are talking to multiple private equity entities to set up a separate investment platform for overseas opportunities. The entire $200 million can be raised in one or two tranches depending on opportunities,” Banerjee said. “We will resort to capital-light model of development through joint ventures and joint developments.”

The company’s projects in Kenya and Tanzania will be executed through partnership with government and local private developers. Currently, it is in talks for three projects, including two government bodies and a private entity and of these, two are expected to materialise soon.

The company has already signed term sheets for both the projects and will be concluding the agreement for these over the next two months. The company plans to invest Rs 1,000 crore in these projects over the next three years. The first two projects to come up in Tanzania’s commercial capital Dar es Salaam and Kenya’s Nairobi will have a total 4.5 million sq ft saleable space.

The projects are expected to start by the end of this calendar year, and the company will explore more projects in Africa as it is optimistic about demand for housing in the entire region. “Despite high interest rates, the demand for mid and low-income housing is good there. Creating an eco-system of good contractors and accessibility to mortgage financing through financial institutions would be some of the challenges that we will have to work on in these new markets,” Banerjee explained.

According to a recent Knight Frank Africa report, the residential sector in the Kenya property market remained stable throughout 2016 due to steady macroeconomic conditions and minimal impact from external shocks. The Kenyan government estimates that there is a shortage of approximately 200,000 units per annum and is addressing the situation through measures such as slum upgrading and the provision of tax incentives for major developers.