Migori youths’ value addition project pays off

Mr Daniel Okal felt challenged when  a group of elders from his village visited him in Nairobi in 2014 and asked him to vie for a political seat in 2017 so that he could help young people from his home area. Not keen to enter the murky world of politics, he turned down the request.

Mr Okal, who  was then working as a gender consultant and part-time lecturer in social studies at the Catholic University, however, promised that he would do something to help young people in his Ranen Village in Rongo Sub-county in Migori County.

So he brought together 100 youths to form a self-help group and registered them under the business name, Red Oak Property Ltd.

Okal, 30, says the model was simple: all he asked them was to pay a registration fee of Sh1, 000 each to get seed capital; he also shopped around for sponsors and got another Sh100,000.

“With Sh200,000 in hand, our group could draw up an investment strategy. We unanimously agreed that we would buy big tracts of land, subdivide them and sell them for a profit. Within the first year we were Sh400,000 richer,” he says.

SGR WINDFALL

Thereafter, they registered Ujasiri Housing Finance, where they floated the idea of building homes for their clients as a way of adding value to the land they were buying.

“The idea worked since most of our clients were interested in homes, not agricultural or commercial land,” he says.

The model worked well because as a group, they could research on areas the central and county governments were opening up through the construction of roads and the provision of amenities.

“My knowledge was, indeed, being put to good use because updating myself on current affairs relating to government-sponsored development was not difficult,” says the graduate of social work and development studies who had registered for a PhD in development. “I was able to pick areas in Murang’a, Kajiado, Laikipia and Kisumu counties where water, power, roads and the Standard Gauge Railway project would pass through, adding value to the land,” he says.

With the Sh400,000 seed capital, they  bought pieces of land in the above-named counties at low prices since the owners were not aware of the upcoming projects.

“By mid 2015, we had acquired 1, 000 acres of land, which by early 2016, we had sold for Sh12 million. Each member of our group was guaranteed a Sh100,000 profit share,  minus Sh20, 000  to pump back into our operating capital,” says Mr Okal.

From the proceeds, the  group members accessed financial credit, which they have invested into boda bodas, while some have  used their earnings to pay bride price. He says their capital grew to Sh5 million after the members increased their savings and so far, they have acquired a further 100 acres, for which they are seeking partners to develop a gated estate for sale.

GROWING PORTFOLIO

“We are seeking partnerships with several county governments as well as with financial institutions to work out profitable formulae for fast-tracking our wealth-creation dream,” he says.

Mr Okal says banks and Saccos are the ideal partners “since with their mortgage products they can partner with us since we already have a name and available, clean land up for resale” “Land is a very sensitive issue and getting a customer to part with his/her money in exchange for a parcel of land requires serious convincing. The irony is that  if you advertise, the potential clients become even more suspicious of your investment,” he says. Still they have done well. By  July  this year, their client portfolio had grown from the initial two to 1,006.

“If all goes well — and we are very optimistic that it will— by 2030 we want to be among the movers and shakers in real estate, with every member owning a home and other investments,” he says.

“Our core business now is to acquire more chunks of low-priced land, add value to them and dispose of them to through hire purchase. Our model targets low- and middle-income earners where, for a commitment deposit, we l avail land to them and they can settle the difference in instalments.” he says.