RDC Properties is lining up a P42 million acquisition of residential flats in Gaborone’s leafy suburb of Extension 9 as the company looks to rebalance its portfolio through diversifying away from retail and office markets.
Shareholders of RDC are expected to give the nod to the acquisition at a general meeting to be held on Thursday, May 21, 2015.
Known as the ICC Flats, the residential property consists of 26 flats built on five plots where RDC would develop a further 45 apartments.
In a circular to shareholders, RDC said the acquisition would enable the listed company to participate in the residential segment of the property market, which delivers high yields in comparison to other sectors in the property market.
“There exists a large portion of land on the properties which is not developed. RDC intends to demolish one old block of six residential units, and then on that land develop an additional 45 residential flats and ancillary services,” reads the circular.
On completion of the development, RDC estimates that all the 65 residential flats would yield a return of 9.4 percent on capital being the purchase consideration and build costs.
The acquisition of the flats from its sister firm, ICC, marks the property company’s entrance into the residential market where major industry stakeholders are currently investigating the need and practical opportunities of embarking on residential housing projects. With the retail and office markets’ growth opportunities now limited due to over supply, there is still high demand for residential properties, particularly the low to middle income housing.
However, RDC says the current challenges facing the financial institutions are expected to affect the purchasing and development prospects due to the corresponding effect on availability of funds to prospective buyers and developers for executing projects.
Due to shortages of loanable funds coupled with consumers’ rising propensity to default on loan repayments due to weakening disposable incomes, banks are increasingly becoming cautious with lending.
In 2014, household borrowing slowed sharply to 9.4 percent from 24.2 percent in 2013 largely on the back of a significant decrease in mortgage lending from 40.1 percent to 18.4 percent and a steep fall in the growth of personal loans from 19.6 percent to 5.3 percent.
According to the 2015 Knight Frank Africa report, the current housing supply does not sufficiently meet the demand pressures emanating from population growth, increased numbers of single-family households, inward migration and the growing student and elderly populations.
“There is a big gap in the market for low-to-medium cost housing, despite the increased prevalence of sectional title ownership,” reads the report.
As part of its efforts to diversify its portfolio away from the retail and office markets, RDC is also expanding its exposure to the industrial sector with the construction of 14 new warehousing units measuring approximately 231 square metres each in the Gaborone West Industrial area. With Masa Centre having been affected by the glut in office space in the CBD, RDC has also devised a strategy to convert 2000 square metres of offices at the iconic building into hotel suites for Lansmore Hotel.
The company, whose flagship properties are the Masa Centre in the CBD and the Chobe Marina Lodge in Kasane, has a portfolio worth close to P1 billion.