The fever to own a holiday home is catching up fast amongst Kenya’s well-to-do households, for both owner-occupier and investment.
Prices of such properties can nonetheless prove too high, especially when a buyer considers the little time they will spend at the facilities in a year.
However, a new concept of fractional ownership is gaining traction in the Kenyan market, making sense of holiday home ownership especially if one may not have the lump sum for whole units when they come up for sale.
The first operational fractional ownership scheme has been unveiled in Malindi and comes complete with 99-year sub-leases and share certificates.
The development, christened The Village Malindi, comprises 27 units of two-bedroom townhouses and six units of one-bedroom townhouses. The units allow for self-catering and are equipped with lifestyle value-adds.
The lifestyle residential complex, built by the Baobab Development Group, sits on 14 acres of land 2km from the beach and 15 minutes from Malindi Airport.
“Fractional ownership is the future of the way holiday homes will be acquired, but shared ownership has to be understood well,” Ewan Jackson, a director of the Baobab Development Group, said in an interview.
Under this model of ownership, buyers pay once-off for a stake in a holiday home. In this case, ownership has been divided into 12 fractions, translating into one full month in a year, which is further spread into one week every three months.
“The Village acts as a boutique hotel when the owners are not using it. There will be audited accounts to enable scrutinise operations. Owners will benefit from capital appreciation and earn from rental income,” said Jackson.
The fractional ownership model has worked well at The Village, with only three units of two-bedroom and a unit of one-bedroom remaining, and about 14 fractions; three for one-bedroom units and 11 for two-bedroom units.
The units are on sale for Sh13.7 million and Sh19.7 million for the one- and two-bedroom units respectively, having increased by Sh1 million and Sh2 million respectively this week. Fractional prices are now Sh1.5 million and Sh2 million for the units respectively.
Jackson said majority of the buyers – over 90 per cent – are Kenyan (many in the diaspora), with the rest being foreigners, such as Italians and a mix from landlocked countries like Rwanda and Uganda.
Buyers are seeking rental yields when not using the units on holiday. The African Collection, the property’s manager, is targeting a minimum of nine per cent in rental returns for the investors.
“You state when you want to use your unit or whether it should entirely be availed for letting. A unit can’t be let without the owner’s authority,” said Miriam Magare, the firm’s sales and marketing manager.
Rent collected is remitted into two pools – for one-bed and two-bed – and divided by the number of units in each pool. The yields depend on the level of occupancy of the units and the time an owner avails for letting. Rental income is paid twice-yearly to owners.
At The Village Malindi, a one-bedroom unit is let for Sh12,000 a night and can accommodate up to four adults. A two-bedroom is let for Sh16,000 a night and can accommodate up to six adults.
“The units are self-catering, equipped with utensils and other amenities. It offers total flexibility,” said Magare.
Service charges at the development include a 30 per cent of rental earnings as management fee, and a maintenance fee of $600 (Sh51,000) a year for a fraction, while those who have whole units pay $5,500 (Sh467,500) a year. The maintenance fee is however exempt for the initial two years, according to Miriam.
The Baobab Development Group is engaged in several other projects in Diani, Watamu and Naivasha. The Diani development comprises stand-alone villas with own-compound and a swimming pool.
“This concept (villas with own-compound) was borrowed from Bali, Indonesia. It was received quite well,” said Jackson, adding that the firm would revisit the concept in future developments.