Construction boom opens cash taps for building tools lenders

Kenya has enjoyed a construction boom for the past decade as developers rush to keep up with a fast rising population and an increasing demand for urban housing.

The boom has not only altered the country’s landscape but it has also created a lucrative business opportunity for individuals who venture into the trade of hiring construction tools and equipment.

In Nairobi, for example, renting of construction apparatus is gaining in popularity for various reasons including the rising cost of equipment and limited access to finance, which have forced developers to find creative ways to save.

Hiring of equipment – from small tools such as chisels, hammers, and spades to large apparatus such as concrete mixers and earth-movers – is becoming a viable option for builders seeking to cut costs and run a more financially stable business.

“Demand is rising by the day as more construction projects get underway across the city,” says Peter Ngotho, who operates a hardware shop on Kamiti Road in Nairobi.

Mr Ngotho, who mainly hires out wheelbarrows and concrete mixers, says that most of his clients are property developers and masons who operate in Zimmerman, Roysambu and Kasarani where construction is booming as developers seek to meet the rising demand for housing in the estates.

According to Mr Ngotho, it costs about Sh40 per day to lease a chisel, while a hammer goes for Sh70 a day. A wheelbarrow is rented out for Sh200 per day. The businessman told Construction Kenya that he makes about Sh6,000 daily, signalling the enormousness of the business.

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Large enterprises lease out big machinery such as excavators, mixers, demolition hammers, among others. A concrete mixer is, for example, hired out at a cost of Sh4,500 to Sh7,000 per day depending on location and a client’s negotiation skills.

The business is, however, not without its own challenges.

“There are so many conmen masquerading as customers,” says Tom Kamau, who has been in the business for three years.

“You must vet the client and ask for credible referees before you release your tools,” he says adding that many shop owners have lost their valuables to conmen.

Mr Kamau says that he retains borrowers’ identification documents until they return the tools after a day of work.

“It does not make economic sense to buy all these tools only to keep them in a store after a development is over,” he added.

Renting of construction tools avoids the upfront costs associated with purchasing and it allows developers to better allocate their financial resources.

Besides, purchasing equipment, and maintaining it as long as possible, requires quite a large investment on top of your upfront purchase price. As value continues to depreciate, it becomes difficult to recover the cost of your initial investment.

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