“ The Jamii Bora Makao Model”

1. Low Income Housing in Africa - Context

2. Overview of Jamii Bora Makao Project

3. Development Planning

4. Financing the Development

5. Property Development

6. Property Management

7. Social Impacts

8. Financial Performance

Agenda

Africa’s explosive demographic growth

The African population is growing at a rate of 2.4% a year.

It is estimated that by 2030, 50% of Africans will live in cities;

The African workforce will reach 1.1 billion people by 2040 - the largest in the world ( McKinsey);

And by 2050, Africa will be home to 1.9 Billion people.

Africa’s is facing an urban challenge

By 2040 Africa is expected to be the 2nd most urbanized continent after China.

At current urbanization rates, an additional 14 million housing units per annum are needed in order to accommodate the increasing urban demand.

62% of the populations living in Africa’s cities ( 32 million households) live in informal housing where basic services are poor or non-existent.

Africa faces a large gap in low income housing

Region Demand Supply

Sub- Saharan Africa

32 million households in Sub-Saharan Africa are considered inadequate.

Under current urbanisation rates , an additional 14 million housing units per annum are required

308 million people; 191 million of whom live in inadequate housing.

Kenya 60% of households are considered ‘inadequate’ housing and are located in slums.

150,000 units are required per year

Less than 30,000 units supplied per year The annual deficit is thus more than 120,000

housing units per year

Ghana Ghana’s annual demand for housing currently stands at 120,000 housing units per annum

Current housing supply provides 42,000 units per annum which is only 35% of the demand

Nigeria 33.6 million Nigerians living in urban areas (46% of the urban population) are considered to be living in inadequate housing

The annual deficit is 16 million units 720,000 units need to be created annually to

meet the demand Current supply is however meeting only 3%

of this demand

Tanzania 80% of the entire population is living in unplanned, informal housing.

The housing deficit in urban areas is estimated at 1.2 million units.

Founded in 2007 as a subsidiary of Jamii Bora Group.

Group initially focused on Microfinance and then expanded into a full range of social services including Housing and Insurance

Kaputei New Town is the flagship project. Targeting 2000 low income and middle income houses by 2014.

Concept is an integrated community with residential, commercial and social aminities.

Group provides and end to end solution including financing and propery management.

Introducing Jamii Bora Makao

Development concept

Jamii Bora Makao contributes to resolving the problem of affordable housing in Kenya using the following tools;

Cross subsidization: Achieve affordability through mixed income housing communities, and apply cross subsidization between middle and low income housing units. Collaboration: Create a network of partners around each project including designers, contractors, bankers, financiersEmploy beneficiaries of the low income houses in the construction process

Integrated construction: Integrate the entire value chain and pass on saving to buyers.

Low cost of ownership: Reduce recurring cost to owner by using green technology ( Waste recycling, Solar energy, rain water storage etc..)

Building at the periphery: JBM achieves affordability by building integrated housing communities with Residential, Economic and Social amenities at the periphery of large urban centers.

Waste Water recycling facility

2000 bungalows – 2 and 3 Bedrooms – grouped in 8 neighborhoods.750 houses delivered to date.

Social Amenities including places of worship, community center, police station etc..

School facility – Primary and Secondary ( 350 students)

Commercial Center with 1,000 shops and light industries

Kaputei NewTown Site Plan

The cost of land is an important component of low income housing development.

JBM acquired a 293 acres land 60km from Nairobi. The distance and agricultural classification allow the land to be purchased at a discount.

The change of use and statutory approval process took 3 years and included a lawsuit introduce by environmental groups. JBM prevailed.

Development Planning

An MOU was signed with the Massai community allowing access to Construction jobs, community Borehole, schooling and access to ownership in the commercial center shops.

Government participation was minima. To the contrary, the school was donated to the state as a public school.

Financing the development

The development was financed by a combination of in kind shareholder equity ( land), Grants and Shareholder loans.

Jamii Bora Group invested the 293 acres valued at $4.7m as Equity. An additional $2.4 m in equity was invested by Jamii Bora Scandinavia.

Jamii Bora Scandinavia provided a loan of $7m to the project ( 8% pa – 10 years).

The project also received close to $5m in grants especially for electrification and social amenities.

The houses are designed to be constructed using hallow concrete blocs and concrete roof tiles.

The construction process is vertically integrated in order to keep cost down.

Concrete blocs and tile and manufactured on the construction site. The factory employs residents.

The simple design enables the use of relatively unskilled labor – Which allows the project to provide employment to residents.

Thanks to the use of this approach, the construction material used is in average 30% bellow market cost.

Property Development – Cost minimization

JBM has set up a property management unit that is responsible for sourcing and managing all basic services. The units provides the following

Utility management

Waste collection and disposal

Security

Property Maintenance

Property Management – Service Delivery

The residents are represented by an association managed and governed by elected members of the community

A property managed charge of $12/month is levied on the residents.

The charge is included in the rent/mortgage payments.

The cost of the 2 bedroom unit house is $9,000. Initially the company has been selling houses at subsidized rate. Now houses are sold for $12,000 in order to remunerate capital.This cost includes the infrastructure received by the project. In the absence of such subsidies , the cost would have exceeded $12,000.

Pricing

JBM sells houses on Plan. The clients are required to save with the Jamii Bora Bank until they can afford to pay a 20% deposit on a house.

The balance of the price of the house is due on delivery. Clients are offered financing solutions

The construction process is broken down by neighborhood ( 230 houses). A construction phase starts construction when 80% of the houses are reserved..

The average selling time for a phase is 30 days.

Sales Approach

Jamii Bora Group members are given priority in the sales process.

50% of the clients have been provided an installment sales arrangement by Jamii Bora Makao. Payments are scheduled over 15 years.

The remaining clients have either paid for the houses for cash or secured a mortgage with Jamii Bora Bank.

The innovative mortgage process has been mainly applied to Jamii Bora Bank but is in the process of being applied to other local microfinnace and SME banks.

Mortgage Provision

Mortgage Bank

Jamii Bora Makao

Finance 80% of Price of the House Security Fund

20 % Deposit

Home Buyer

Single Secured Mortgage

Bundled Instalments of 20

Deposits of 20%

Home Buyer

Home Buyer

Sell Houses to Buyers

Monthly Instalment

Kaputei has been designed as an environmentally friendly community. Water supply is provided by a Borehole ( 2 more being added). Pre paid water meters are being installed in the 750 houses.Waste water is recycled through a Wetland. Recycled water is used for landscaping. A second Wetland is planned for the end of 2012.Despite the recent connection to the grid, all houses are equipped with Solar kits.

Security is provided by the municipal police and a team of local community members ( Massai) hired by Jamii Bora Makao.

Social Impacts - Environmental Responsibility

The objective of the the Kaputei project is to break even by end of 2014 when all phases are completed. The project has been able to generate enough cash flow to carry on the development without Bank debt. We expect to purse the same approach until completion.

Financial Performance

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