FACTORS AFFECTING IMPLEMENTATION OF REAL ESTATE DEVELOPMENT IN KENYA
A CASE STUDY OF JACARANDA GARDENS ESTATE
BY
GRACE WAMBUI KIHORO
NRB/DPM/40591
RESEARCH PROJECT SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF DIPLOMA IN PROJECT MANAGEMENT SUBMITTED TO THE KENYA INSTITUTE OF MANAGEMENT
SEPTEMBER 2013
DECLARATION BY CANDIDATE
This proposal is my original work and has not been presented to any institution for any other examination body. No part of this research should be reproduced without my consent or that of the Kenya Institute of Management.
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DECLARATION BY SUPERVISOR
This research proposal has been submitted for examination with my approval as the Kenya Institute of Management supervisor.
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For and on behalf of The Kenya Institute of Management
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Branch Manager
DEDICATION
I dedicate this research paper to my family which has been my pillar of strength from the beginning of my diploma course.
ACKNOWLEDGMENT
I wish to thank the almighty God for granting me the opportunity to undertake my studies at the Kenya Institute of Management and completing the research project on time. I wish to thank my supervisor Mr. Ngigi for his professional guidance and encouragement throughout this process of preparing my research project. I would also like to thank my cousin Mwangi for his constant encouragement and assistance that helped me through this process and everyone else who made this project a success. Finally, I wish to thank the Kenya Institute of Management for the provision of a good learning environment and learning materials from the library and to all those respondents who participated in the provision of necessary information required for the completion of this work.
ABSTRACT
Real estate industry is recognized globally for taking a critical role in social, political and economic development. The real estate industry plays primal role in providing employment opportunities, enhancing income distribution and alleviating poverty all over the world. However, the real estate industry in Kenya continues to fail to fulfill this fundamental role due to a number of unique factors that affect investment in the sector. The aim of this study was to examine factors that affect implementation of real estate development in Kenya. The factors identified in this study include financial, government policies, and marketing factors.
Descriptive research method will be utilized to undertake the study. The design is preferred as it involves answering questions such as who, how, what which, when and how much. It also entails complete description of the situation, thus limiting the level of biasness in the collection of data and an eventual reduction of errors in interpreting the data collected. Forty five Questionnaires will be used in the collection of data. Stratified random sampling will be undertaken in selecting samples. The researcher will select 45 participants as the sample size from the jacaranda gardens estate located at Kamiti Road in Nairobi area 254 in Nairobi. The findings of the study will show from the correlation analysis that government policies factors had the greatest impact affecting implementation of real estate development followed by marketing factors, and finally the financial factors. The study concludes that although deregulation of this sector is a necessary condition for revival of a healthy real estate sector, deregulation cannot by itself ensure that a full range of factors affecting implementation of real estate development is solved.
CHAPTER ONE
1.0 INTRODUCTION
This chapter gives background information to the study; provide statement of the problem, objectives, research questions, scope and significance of the study.
1.1 Background of the Study
The development of real estate industry is important for the overall development of a country. It contributes to employment, the development of commercial banking and ultimately to the development of capital markets. Most importantly, it increases the well-being of households by providing superior shelter and helping establish personal wealth – wealth that can be leveraged for creation of more wealth (Taylor, 2004).
It is important to point out that before we can expect development of a real estate industry, some prerequisites need to be in place. These include: first, defined property rights and the ability to transfer title of real estate; second, a legal system that supports the enforcement of contracts as well as support the ability of lenders to foreclose on defaulted loans and efficiently seize and resell collateral; and finally, a stable macroeconomic environment that is favourable to long term real estate development and subsequently mortgage market. The primary focus of this study, however, is not the aforementioned perquisites but ratherto examine to factors influencing the implementation of real estate development in Kenya.
Kenya has a well-developed construction and building industry with readily available quality engineering, building and architectural design services. The industry is currently on an upward trend, due to the implementation of programs such as the Urban Transport Infrastructure plan. The increase in population and rural to urban migration has presented numerous opportunities for investors, especially in the housing sector.It is projected that Kenya will have a population of over 60 million people by the year 2030 and more than 50% of them Will be living in urban areas, creating a huge demand for new housing units. It is estimated Nairobi alone requires approximately 150,000 new housing units per year against a maximum construction of about 10,000 units per year.
In a study conducted by Mbugua (2006), it is estimated that over 80% of Kenyan population will have migrated from rural areas, meaning that that shelter is one of their basic needs. Presently, slum dwellers are1/3 of the urban dwellers population whereby Kenya’s Kibera slum is one of the largest dwelling in Africa yet only approximately three million people are urban dwellers. Hence, as rural urban migration occurs more houses that are well constructed must be built to combat slum uprising problem. The real estate industry should be supported and it will have to grow at a faster pace that it currently does. The Kenya industry is benefiting from economic growth of the country and the inflow of foreign aid is being regarded as a very promising venture.
1.1.1 Profile of Jacaranda gardens estate
The jacaranda garden estate is one of the most successful estates in Kenya. It comprises of 840 units comprising of two, three and four bedroom apartments. It is built on 20 acres of scenic land that combines function and aesthetics, incorporates over 40% of expansive manicured lawns, mature gardens, dedicated recreation spaces and pedestrian routes. Jacaranda Gardens’ recreation and commercial centre comes equipped with a state-of-the-art gymnasium, business centre, restaurants, meeting rooms, hospital, nursery school, and a swimming pool. The scheme comprises modern security and communication technology throughout, comprising CCTV, fibre optic cable access to all houses, automated gate and main door access
1.2. Statement of the problem
In recent years the population of Kenya has steadily increased, resulting to the urban population in Nairobi to a record of 3 million, whereby all these people need shelter, hence the real estate industry is doing well and contributing to the economy (Nuri, Erbas & Frank Nothaft, 2002). Despite recent indication that the real estate business in Kenya is performing well, there is evidence that certain challenges persist. These include amongst others, social, economic, cultural, legal and personal factors. This has led to stalled projects and unoccupied complete properties. This being an important industry that makes enormous contribution to the Kenyan economy, there are some gaps in the literature that ought to be filled, these includes: the available literature has not indicated ways in which real estate enterprises can be empowered to compete on equal levels with established businesses, (Mwangi, 2002).
This study, therefore, examines the factors influencing implementation of Real Estate development in Kenya, using a case of Jacaranda Gardens Estate Nairobi. It is expected that the gaps are established and appropriate measures recommended for purposes of improving investment in real estate in the country.
1.3. Objectives of the Study
1.3.1. General Objectives
The general objective of the study was to determine the factors influencing implementation of real estate development in Kenya.
1.3.2. Specific Objectives
The specific objectives of the study are:
i. To examine how funding influence investment in the real estate industry in Nairobi County.
ii. To assess how government policies influence implementation of real estate development in Nairobi.
iii. To determine how market influences implementation of real estate development in Nairobi.
iv. To examine how interest rates influences implementation of real estate projects in Nairobi.
Research Questions
The following research questions will guide the study:
i. What is the effect of financial factors on implementation of real estate projects in Nairobi?
ii. To what extent do government policies influence implementation of real estate development?
iii. How does marketing influence implementation of real estate development?
iv. What is the impact of interest rates on implementation of real estate projects?
1.4.Significance of the Study
1.4.1. Benefit Stakeholders and Players in the Industry
The findings of the study will be useful to the stakeholders and players in Real Estate Industry. The study will reveal the influence of economic, government policies and marketing in investing in real estate industry. There are many stake holders in the real estate industry and in various ways many of them are due to the benefit from the outcome of this research project. It is expected that this knowledge shall assist them in their day to day decision making process as they are expected to enhance the examined factors.
1.4.2. Potential Investors
Potential investors will be able to analyze benefits accrued from investing in real estate industry. It is anticipated that the data and study will trigger discussions amongst would be investors and stakeholders who in turn will come up with appropriate strategies of channeling financial aid to the real estate business in a manner that will ensure that the investors get due profits ultimately. The study will allow investors who have invested capital to have an avenue for creating more wealth, hence will inform them of opportunities availed by the real estate industry.
1.4.3. Other Enterprises in the Same Industry
This study will focus on those enterprises in the real estate industry hence will allow other enterprises in the same industry to have information that may affect them and therefore be able to implement the needed recommendation of the study or combat limitations that may affect them from the solutions that will have been prescribed. The enterprises will have information on issues that may affect them and hence be able to place measures or blockades to protect them from the issues and deal with the problems before they are affected.
1.4.4. Source of Public Information
The public will have the chance to gather information on the real estate industry, hence the reference point. It will also show employment opportunities presented by the industry that they could take advantage of. The information will also benefit individuals intending to construct properties and be homeowners; they will have the study as reference point on the various players in the industry.
1.4.5. Government
The government being the industry regulator is going to benefit from this research since the study hopes to show how the regulations that it has implemented affect investment in the real estate industry and therefore be useful for future planning, and benchmarking activities in this important sector of the economy.
1.4.6. Other Researchers
This area of study has not been previously studied adequately hence it will add to the pool of knowledge on the under researched area of factors influencing investment in real estate industry. Future researchers will have a reference point from the information gathered that will contribute to understanding the factors as well as contributing to subsequent studies. It forms a basis for and stimulates research in order to develop a better understanding of factors influencing investment in the real estate industry.
1.5 Limitations of the Study
One limitation of the study will be in getting information from community participants since most of them perceive strangers with suspicion. Another limitation of the study is that the participants were reluctance to cooperate and fitting into the busy schedule of the respondents
1.6 Scope of the Study
The study will mainly focus on how marketing, financing and government policies influence investing in the real estate industry in Nairobi, currently there are over 50 real estate industry developers registered by the ministry of planning and national development. The study will target the Jacaranda Gardens Estate in Nairobi. It was done between July and September 2013.
CHAPTER TWO
LITERATURE REVIEW
2.1 Introduction
This chapter starts with a general overview of the real estate industry. Then the chapter unveils information on the status of the real estate industry in Kenya. This chapter also has a summary of the conceptual framework of the study.
2.2 Real Estate Investment
It is possible to identify three broad streams within the real estate literature. The first stream encompasses studies, which focus on real estate as an asset class within the life-cycle consumption model. The second stream focuses on the owner-occupier/tenant portfolio choice of households. The third stream is directed towards public policy and the provision of low-rent or public housing.
Lustig & Van Nieuwerburgh (2005) examines real estate as an asset class within household portfolios. In turn, this implies that the market price of risk will rise and the household will reallocate its portfolio, placing greater weight on less risky assets. It is expected that the impact of solvency variable become more important during poor economic conditions, such as the economic recession of the early 1990s and for more tightly constrained households.
According to Brueckner, (1997), most of the tenure choice studies are cast in a partial equilibrium setting in which the supply of owner occupied housing is assumed to be perfectly elastic and is not generally addressed. The supply side of the market is addressed in general equilibrium models, such as those discussed in Berkovec (2009) empirical evidence suggests, that investors may over-invest in real estate (Taylor, 1998). Such portfolio inefficiency is not necessarily attributable to irrational behavior on the part of homeowners. As outlined in Henderson & Ioannides (2003) the quantity of housing owned must be at least as large as the amount of housing consumed. The homeowner must balance the consumption benefits of the asset with the indivisibility of the housing investment. A higher marginal propensity to consume from housing as compared to financial assets provides further rationale for households to accumulate a higher concentration of assets in housing.
Despite the high weighting of owner-occupied housing in household portfolios, most of the literature on real estate as an asset class relates to the performance, pricing and management of diversified real estate investment trusts (REITs) (Benjamin et al 2004). As with other risky assets, the beta of the REIT security is important for assessing performance and for asset allocation decisions (Chiang et. al 2005). Following studies such as McIntosh et al (1991) which reported that betas were declining, Chiang et al undertook an analysis of the time-series properties of EREITs using both the single-factor model and the three-factor model of Fama and French (1993). Their results indicate that the betas estimated with the three-factor model are more stable than those estimated with the one-factor model and they conclude EREIT betas do exhibit long term stability.
Meyer & Wieand (1996) show that in a competitive economy with well-diversified landlords, the returns from non-diversifiable housing investments were priced according to a constant marginal price of risk. This result implies that the offer price for a house with riskier returns were lower than the price of a similar house with less risky returns.
Two core public policy issues are addressed in this literature. The first is whether a more deregulated housing market will result in greater provision of low-rent housing. The second issue is whether these small investors should be supported by the public sector. Berry (2000), Berry & Hall (2005) identify elements of public policy that are particularly relevant to the provision of low-rent cost public housing in Australia. Van Der Heijden & Boelhouwer (1996) who review and assess the private rental sectors of seven European countries give an international perspective.
These studies conclude that the expected return from investing in residential income property is increasing. This improved outlook is associated with a swing in government policy away from public provision of rental housing to the private provision of rental housing. However, the authors argue that the expansion of investment in residential income property may not result in the provision of more low-cost housing. A similar point is discussed in Crook & Kemp (1996), who analyze the decline and partial revival of the private rental sector in the UK. They conclude that although deregulation of this sector was a necessary condition for revival of a healthy rental sector, deregulation cannot by itself ensure that a full range of rental accommodation is provided. This raises the question: should small income property investors be subsidized to provide low-rent housing?
Yates (1996) explores the role of private residential income property investors in the supply of low-rent housing in Australia. From analyzing survey data, Yates concludes that small investors (including unintentional investors, such as those temporarily renting out their main place of residence) are significant suppliers of low-income housing. In contrast, she argues that the short term mandates of fund managers make them unresponsive to the long-term returns generated from residential income property through capital appreciation. In her view, it may therefore be reasonable to encourage individual property owners rather than institutional ones. A favorable taxation regime for these small investors would reinforce their perception that their investment was long term and secure.
2.3 Factors influencing the real estate industry investment
2.3.1 Financial Factors
A major challenge in real estate industry is financing, both at development stage and in end-user finance. Kenya has only two financial institutions specializing in real estate funding. These are Savings and Loans (S & L) and Housing Finance Corporation of Kenya. The former merged with its mother company, the Kenya Commercial Bank on 1st January, 2010 which now only leaves the latter as the only stand-alone real estate finance company. Because of the limited financing options, the real estate industry in Kenya has been characterized by rigid financing conditions and relatively high interest rates. Margret (2005) states that in business there is need to put capital aside for the growing of the business in response to the demand of which small scale business operators do not have. Taro (2004) states that the lack of capital is a problem for small and micro business enterprises therefore most have remained operating in small scale.
Capital is a major factor in the day-to-day practice of any business. The real estate enterprise requires investing huge amounts of capital in order to allow construction of property. Lack of finance for the business will lower its credibility hence face problems whilst negotiating credit duration of construction materials, or when negotiating bank loans and guarantees are based on the financial base of any business. Gaulick & Margret (2005) point hold weight in that real capital comprises of physical goods that assist in the production of other goods and services e.g. Machinery and tools for constructing buildings.
The other challenge has been with regard to building technologies and materials used in the Kenyan building industry. All buildings in Nairobi are constructed using conventional building materials (concrete blocks or building stones for walling and tiles or corrugated coated iron sheets for roofing). This technology is characterized by high cost of materials and long periods for construction. There is need to adopt newer technologies for building construction and the Government of Kenya has already authorized use of such technologies and is at the same time promoting their use, especially outside Nairobi. However, the situation in Nairobi is different as there is a need to change the Nairobi City Council By-laws before the use of these new technologies can be commercialized within the city.
Demand for real estate is derived from the basic need of human beings. Shelter is required for all human activities. The demand for real estate can respond to changes in price but is rather inelastic compared to other commodities. This is because there are a few participants in real estate market so that it is possible to have periods where only buyers and sellers respectively control the market, while the process is complex and expensive due to property taxes.
Demand for low housing in Nairobi far outstrips supply. Demand is so large that approximately 50% of Nairobi’s more than 3.3 million residents live in slums. Demand for middle income is also extremely high. For these two market segments, there exists huge demand gap. It is estimated that Nairobi alone requires approximately 150,000 new housing units per year against a maximum construction of about 10,000 units per year.
To satisfy its urban housing needs, the Government of Kenya is encouraging innovative and proactive strategies to meet the challenge of reducing the national housing deficit of 200,000 housing units per year to manageable levels. The current deficit translates to an average of 550 units per day for urban sector, with Nairobi alone experiencing a deficit of 410 units per day. Narrowing this deficit is not a mean target and any units of houses completed within the greater Nairobi will therefore contribute positively towards reduction of the shortfall.
2.3.2 Government policies
The government is a huge force that affects the running of a business enterprise. It enforces taxes in real estate based on the incomes, which sometimes are prohibitive to interested investors. The government being a regulatory body also has laws that real estate businesses must adhere to such as planning regulations, permits for land use, titles deeds for land ownership and rules that businesses adhere to e.g. registration of the business. Legislation is also another factor that can have a sizable impact on property demand and prices.
Tax credits, deductions, and subsidies are some of the ways the government can temporarily boost demand for real estate for as long as they are in place. Being aware of current government incentives can help you determine changes in supply and demand and identify potentially false trends. For example, in 2009, the U.S. government introduced a first-time homebuyer’s tax credit to homeowners in an attempt to jump-start home sales in a sluggish economy.
According to the National Association of Realtors (NAR), this tax incentive alone led to 900,000 homebuyers to buy homes. This was quite a sizable increase, although temporary, and without knowing the increase was a result of the tax incentive, you may have ended up concluding that the demand for housing was going up based on other factors.
Okatch (2002) says that there are three aspects of the political environment, which can affect an entrepreneur’s ability to carry out its business activity, the influence of pressure group and politics of a country, and those of the internal environment do affect business. The government is also a big market for the business community. According to Margret (2005), policies are tools for setting standards in the provision of public goods and services; they protect consumers, investors and the public while by-laws set controls that ensure that urban areas are safe and clean.
Dorothy et al. (2007) say that policies that affect the business environment in Kenya can conveniently be grouped into four broad categories that is; macroeconomic policies which include inflation and money supply policies, interest rate policies, credit policies and business income tax,. There are also incentive policies for example banking and financial laws and requirement on collateral or security. The institutional policies are licensing, registration requirement, product standards and certification and infrastructure policies including utility development and land policies.
2.3.3 Markets
The market to target is the lower middle income and middle income segments of the population. These comprise mainly of high school, tertiary education diploma and university level graduates who are employed or in own business and would like to live in their own houses. The number is large and major criteria for buying are affordability while not sacrificing too much on quality. Estimates put these two market segments at more than 85% of the 150,000 units required each year for the City of Nairobi and its environs. This segment of the market will easily accept houses built on space frame technology.
It is imperative to adopt both strategic and tactical marketing plans in the drive to dispose of the units in the shortest possible time. In the strategic marketing plan, emphasis was placed on the target markets and the value proposition that the new development promises to offer based on the analysis of the best market opportunities. The tactical marketing plan on the other hand lays more emphasis on the marketing tactics, including product features, promotion, merchandising, pricing, sales channels and service.
The units available for sale should be sold on the basis of “on and off plan” where purchasers commit to buy the units during the construction period prior to completion. Purchasers were encouraged to pay an initial deposit to reserve the plot for development. As construction progresses, purchasers will further be required to pay a minimum of 10% down payments for the residual price of each unit with the balance of purchase price payable on completion of the development or as construction progresses. To accelerate sales during this period, use of appropriate marketing tools were employed including use of competent estate management consultants.
The pricing of the units were the key factor in marketing the development. The project should aim to sell the units at the most competitive prices. These were houses targeting lower middle and middle-income earners and our surveys and available statistics reveal that a very large customer base exists in Nairobi and its environs. What is crucial is affordability and the houses must be appealing to would be buyers.
2.3.4. Interest Rates
Interest rates also have a major impact on the implementation of real estate development. Changes in interest rates can greatly influence a person’s ability to purchase a residential property. That is because as the interest rates fall, the cost to obtain a mortgage to buy a home decreases, which creates a higher demand for real estate, which pushes prices up. Conversely, as interest rates rise, the cost to obtain a mortgage increases, thus lowering demand and prices of real estate. However, when looking at the impact of interest rates on an equity investment such as a real estate investment trust (REIT), rather than on residential real estate, the relationship could be thought of as similar to a bond’s relationship with interest rates.
When interest rates decline, the value of a bond goes up because its coupon rate becomes more desirable, and when interest rates increase, the value of bonds decrease. Similarly, when the interest rate decreases in the market, REITs’ high yields become more attractive and their value goes up. When interest rates increase, the yield on an REIT becomes less attractive and it pushes their value down. The most evident impact of interest rates on real estate values can be seen in the derivation of discount or capitalization rates. The capitalization rate can be viewed as an investor’s required dividend rate, while a discount rate equals an investor’s total return requirements. K usually denotes RROR, while the capitalization rate equals (K-g), where g is the expected growth in income or the increase in capital appreciation.
Each of these rates is influenced by prevailing interest rates because they are equal to the risk-free rate plus a risk premium. For most investors, the risk-free rate is the rate on government; these are guaranteed by the credit of the government, so they are considered risk-free because the probability of default is so low. Because higher risk investments must achieve a commensurably higher return to compensate for the additional risk borne, when determining discount rates and capitalization rates, investors add a risk premium to the risk-free rate to determine the risk-adjusted returns necessary on each investment considered.
Since K (discount rate) is equal to the risk-free rate plus a risk premium, the capitalization rate is equal to the risk-free rate plus a risk premium, less the anticipated growth (g) in income. Although risk premiums vary as a result of supply and demand and other risk factors in the market, discount rates will vary due to changes in the interest rates that make them up. When the required returns on competing or substitute investments rise, real estate values fall; conversely, when interest rates fall, real estate prices increase.
Most retail investors, especially homeowners, focus on changing mortgage rates because they have a direct influence on real estate prices. However, interest rates also affect the availability of capital and the demand for investment. These capital flows influence the supply and demand for property and, as a result, they affect property prices. In addition, interest rates also affect returns on substitute investments, and prices change to stay in line with the inherent risk in real estate investments. These changes in required rates of return for real estate also vary during periods of destabilization in the credit markets. As investors foresee increased variability in future rates or increase in risk, risk premiums widen, putting increased downward pressure on property prices.
2.4. Critical Review
This study seeks to address gaps identified from review of past studies. All the past studies reviewed have focused on Africa and Kenya. The studies reviewed have also been very specific on identifying factors affecting implementation of real estate projects in particular. The studies also identify some factors affecting implementation of all real eastate projects in general within Nairobi area. This study will be specific in assessing factors that affect specifically implementation of real estate development in jacaranda gardens estate located at Kamiti Road in Nairobi.
2.5. Summary
The above review of past studies has identified that the policies adopted by the government has great impact on the implementation of real estate development in the sense that it enforces taxes in real estate based on the incomes. These taxes are sometimes very prohibitive and discourage investors. The government can however boost implementation of real estate development through offering tax credits, deductions, and subsidies to real estate investors. Funding is another major challenge affecting implementation of real estate development, as there are few institutions offering finances to investors in the real estate industry. In addition, the market has a significant effect on the implementation of real estate project as the quality of the houses should be balanced with the affordability of such houses by the lower middle income and middle income population.
2.6. Conceptual Framework
For this research, the dependent variable is the investment in the real estate industry in Nairobi, while the independent variables are the factors, which include economic, government policies and markets and marketing.
Independent variables Dependent variable
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Influence
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Figure 2.1: Source: developed for the study (2013)
Operationalization of variables
Financial factors to be considered in this study include; the availability of investment funds interest rates, taxes, income levels especially of the target population, costs of building materials, cost accrued or brought forward, Profit margin and the general Appreciation rate of houses. Government polices to be considered in the study includes; government taxes especially those influencing real estate investment, government planning regulations, permits for land use, title deeds for land ownership, rules that businesses adhere to e.g. registration of the business and individual commitment.
Different real estate companies use different marketing techniques. This study is going to focus on a number of aspects. These aspects include marketing strategies such as targeting the middle income level market; taking advantage of the space frame technology to sell more units; having both a strategic and a shortest possible time tactical plan to dispose the units; giving out promotions, merchandising. The study shall also examine the use pricing as a marketing tool availability of a plan to enable unit purchase before their completion, low initial deposits to attract many customers and the use of estate management consultants to increase outreach.
CHAPTER THREE
RESEARCH METHODOLOGY
3.1 Introduction
This chapter highlights the methodology, which was used in data collection, analysis and presentation. It also highly depicts the research design, target population, sampling design, limitations and delimitations of the study, ethical issues consideration and the expected outcome of the study.
3.2 Research design
In this study, a descriptive research design was adopted. The goal of a descriptive design as explained by Sekaran (2003) is to offer the researcher a profile to describe relevant aspects of the phenomena of interest from an individual or industry-oriented perspective.This research was not only restricted to fact finding but also resulted in the formulation of knowledge and solutions to the problem under consideration.
3.3 Target Population
According to Mugenda & Mugenda (1999), target population is the complete set of individual cases or objects with some common characteristics to which the researcher wants to generalize the results of the study. The study targeted Jacaranda Gardens Estate in Nairobi County. For purposes of this study, four respondents were interviewed i.e. senior officer, assistant manager, director and senior manager.
3.4 Sampling Design
3.4.1 Sample
Jacaranda Gardens Estate in Nairobi has been chosen for reasons that most real estate businesses are located in this county. A sample of fourty five participants were selected from the employees of Jacaranda Gardens Estate in Nairobi. Out of these employees, the senior and middle level management were selected as the key respondents since they are best knowledgeable concerning the challenges that face the industry. Further information was gathered from government officials of the Ministry of Lands and the Nairobi County Council.
3.4.2 Sampling Techniques
Since the sample is small i.e. 45, a census approach was used. All the participants were considered for the study, contractors, the senior and middle level managers was issued with questionnaires which they filled and formed the basis of the data. A non-Probability sampling technique such as purposive was also used to obtain further information from related institutions and regulatory bodies.
3.5 Data collection
3.5.1 Sources of Data
This study comprised both primary and secondary data. The primary data was collected using the process of interviews and questionnaires both in the offices and on site. The secondary data was gathered from theMinistry of Lands, Ministry of planning and National Development andNairobi City Council registry where we shall obtain data relevant to the number of registered contractors and on-going projects.
3.5.2 Data collection instruments
Data was collected using questionnaires and interviews. The questionnaire has been preferred since it enables coverage of population with little time, personnel and cost; anonymity of the respondents helps them to be honest with their responses; it avoids bias due to characteristics of interviews; and allows respondent enough time to answer questions to avoid hasty responses. Questionnaire had structured questions, which were easy for respondents to answer and helped the researcher to form an opinion and a conclusion. It also had unstructured questions that gave room for the respondents to give more information and clarify other aspects of his answers.
3.5.3 Research Procedures
The researcher dropped and collected the questionnaires from the respondents. This was possible since the location of the real estate enterprises is not very far from the Central Business District and therefore easily accessible to the researcher and the fact that the sample size was manageable. To ensure that the respondents were able to fill in the questionnaires, simple language was used and confidentiality well communicated to them noting that the findings were purely used for research purposes. Interviews were also conducted with the top managers and officials from the regulatory bodies to obtain further information that may not necessarily be requested for in the questionnaire.
3.5.4 Validity and Reliability Assurance
Validity aims at ascertaining the extent to which the research instruments collects the data intended. Reliability aims at ascertaining consistency of responses collected by the instruments. Questionnaires were designed and pre-tested before the actual survey was conducted to enhance their validity and reliability. Pre-testing also helped in ensuring that the right concepts were measured in addition to making the instruments more clear and focused. Pilot testing (test-retest) involves conducting a preliminary test of data collection tools and procedures to identify and eliminate problems, allowing programs to make corrective changes or adjustments before actually collecting data from the target population.
The data was reliable as all the variables had a Cronbach Alpha value of greater than 0.800, which is the minimum value variables, must meet in order to be considered reliable.
3.6 Data analysis Techniques
The researcher used the statistical package for social sciences (SPSS) to analyze the data. The statistical method of Pearson Product of Correlation Coefficient was used to analyze relationship between various variables. SPSS and Excel were used to establish the factors influencing implementation of real estate development in Kenya. Pearson Product of Correlation Coefficient was used to determine the magnitude and direction of the relationship between the factors (independent variables) and investment in real estate industry in Kenya (dependent variable).
The regression analysis model
Y= α +β1X1+ β2X2+ β3X3+ β3X4+ Ԑ was used to determine the linear relationship between the variables
Where
Y= the dependent variable real estate investment
β (1-3) = regression coefficients
X1= Independent variable financial factors
X2= Independent variable government policies
X3= Independent variable marketing
X4= Independent variable interest rates
3.7 Data Presentation
After field work, all the questionnaires and interview schedules were checked for reliability and validity. The data has been presented by use of frequency tables, graphs and charts, which facilitate easy interpretation, and understanding of the information.
3.8 Ethical Issues of the Study
In order to observe research ethics, the researcher prepared confidentiality agreements to be signed by the respondents to satisfy their informed consent. In addition, authority was sought and obtained in advance from the respective institutions to authorize undertaking of the survey. The researcher frankly revealed any constraints in methodology and ensured that the information obtained is as objective and unbiased as much as possible.
3.9 Limitation/ Delimitation
There was suspicion from the respondents who might suspect that am spying on behalf of their competitors in the real estate industry. Limiting factors such as reluctance to cooperate may also be encountered during the research and fitting into the busy schedule of the respondents.
The delimitation of the above was to provide assurance of confidentiality to the respondents hence putting them at ease to freely answer questions and be cooperative. The researcher also ensured that the timing issue was addressed and managed with the respondents appropriately, so that it did not affect the quality of the study.
RESEARCH QUESTIONNAIRES
SECTION 1
Background information
Tick as appropriate
1. Category of respondent
o Director
o Senior manager
o Assistant manager
o Senior officer
o Other please specify……………………………………
Section 2: Real Estate Investment
2. Your company’s goals have been achieved in the midst of challenges in the time it has been in industry
o Strongly Agree
o Agree
o Not Agree
o Disagree
o Strongly disagree
Section 3 Financial Factors
4. Does the economy affect investment in the real estate industry?
o Strongly Agree
o Agree
o Not Agree
o Disagree
o Strongly disagree
- What impact do the following factors have on real estate investment
|
Very great impact
(5) |
Great impact
(4)
|
Moderate impact
(3) |
Low impact
(2) |
Very Low impact
(1) |
Availability of investment funds | |||||
Taxes | |||||
Interest rates | |||||
Income levels | |||||
costs of building materials | |||||
Cost of labor | |||||
Accrued liabilities | |||||
Profit margin | |||||
Appreciation of houses |
Section 4: Government policies
6. Do government policies influence real estate investment in Kenya
o Strongly Agree
o Agree
o Not Agree
o Disagree
o Strongly disagree
7. To what extent do you agree with the following statements?
|
Strongly disagree (5) |
Disagree (4) |
Uncertain (3) |
Agree (2) |
Strongly Agree (1) |
Government taxes affect real estate investment | |||||
Government planning regulations affect real estate investment in Kenya | |||||
Permits for land use affect real estate investment in Kenya | |||||
Titles deeds for land ownership affect real estate investment in Kenya | |||||
Rules that businesses adhere to e.g. registration of the business affect real estate investment in Kenya | |||||
Individual commitment determines the prosperity of an entrepreneur | |||||
Government Tax credits, deductions and subsidies will help in boosting real estate investment |
Section 5: Marketing
8. Does marketing influence real estate investment in Kenya?
o Strongly Agree
o Agree
o Not Agree
o Disagree
o Strongly disagree
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