Depressed valuation of publicly listed real estate company Home Afrika’s land and housing assets has contributed some Sh391 million to the firm’s loss of Sh887 million for the year ended December 31.
This is almost eight times worse compared to Sh168 million and Sh180 million reported in 2018 and 2017 respectively.
The loss comes despite the company reporting a whopping 233 per cent growth in gross revenue, adjusted for the percentage of completion, growing from Sh109 million in 2018 to Sh363 million in 2019.
The listed firm’s actual sales grew from Sh582 million in 2018 to Sh645 million in the year under review, an indication that the company sold more property even in the wake of a depressed economic environment.
According to Home Afrika’s MD Dan Awendo, there has been significant depression of valuations of the real estate asset class in Kenya in the recent past, with some companies even recording more than Sh3 billion loss owing to impairment in their property investment portfolio.
‘’In our case, the depressed valuation contributed up to Sh391 million of our loss for the year, Awendo said.
The listed realtor is counting on the Migaa Golf Estate projected expected to yield in about four years to bounce back to profitability.
The firm explained that, In line with IFRS, sales proceeds of the project are carried in the balance sheet as current liabilities both as deferred income and as deposits from sales of plots totals of which is now lingering at Sh3 billion as at the end of 2019 compared to Sh2.6 billion for the same period in 2018.
‘’This amount will convert to gross revenues in our statement of profit or loss as the percentage of completion of the project improves from the current 48 percent towards completion over the next couple of years,’’ it said in a financial statement.
The book value of the group’s sellable land and other inventory stood at Sh3.5 billion in 2019.
Housing Price Index, a survey-conducted quarterly by the Kenya Bankers Association (KBA) shows that house prices remained depressed in the three months ending December 2019.
According to the report, the trend in changes in house prices was in line with the softening of the economy and is a manifestation of the interplay between weak demand driven by the tepid disposable income growth and supply-side conditions.
The Central bank of Kenya's quarterly economic review shows the real estate sector registered the highest increase in NPLs by Sh6.1 billion representing 15.8 per cent of NLPs, due to slow uptake of housing units.