Affordable housing can be defined as quality housing options that are accessible by those with a household income that is at or below the median income of a country. Affordable housing investments typically revolve around the purchase, ownership, management, rental, or sale of residential properties to generate a return on investment, while targeting lower income earners. Affordable housing investment is a growing and seemingly profitable investment avenue in Kenya. By providing housing at affordable rental rates, affordable housing investment can generate steady cash flows from rental income, while at the same time addressing the high demand for affordable housing.
On the demand side, there are two types of target markets in affordable housing investment schemes. First are individuals or families who either purchase or rent a residential unit as owner-occupiers or as tenants. The second target market consists of retail investors, who purchase rental properties and rent them out, with the expectation of realizing a return on their investment through the generation of passive income. Passive income is the term used to refer to earnings that require minimal effort on an ongoing basis once the initial investment or setup is completed – the retail investor purchases the unit, collects rent to cover the costs of the investment, and benefits from appreciation in the property over the long term. In the world of finance, passive income is a significant way of realizing financial independence.
At the forefront of enabling investments by retail investors into affordable housing is Tsavo, a real estate investment company based in Nairobi, Kenya. Tsavo was established in 2015 by copreneurs Emily and Leonard Mcharo, and since then, the company has focused on the affordable housing sector and currently has seven completed projects, with +2,000 residential units.
TSAVO designs, builds, sells, and manages their properties. The firm has focused on real estate for investment purposes. The target market for Tsavo is retail investors who are looking for alternative investment asset classes from the traditional equity and treasury bills and are also seeking for a cash yielding asset.
This market commentary delves into what affordable housing is as an investment case for retail investors, drawing the example from Tsavo Apartments in Kenya.Download PDF