Real estate investment has long been considered a reliable and lucrative option for individuals looking to grow their wealth. However, an alternative investment avenue that now needs to be noticed is commercial fruit farming.
 |
| Commercial fruit farming VS Real estate development |
In the wake of the COVID-19 pandemic the
real estate industry experienced a huge downturn in demand for office spaces and
in-person meetings. With the advancement in technology in-person meetings are
likely to go down.
While real estate certainly has advantages, this article highlights the numerous reasons why commercial fruit farming can be a superior investment option in the current age of. By examining the initial investment needed, Return on Investment(ROI), economic viability, potential for long-term returns, environmental benefits, and risks and comparing it to real estate investment, we will uncover the compelling case for commercial fruit farming as a profitable and sustainable investment strategy.
1) Return on Investment (ROI)
The Return on Investment in real estate in Kenya can vary widely
based on factors such as location, property type, market condition, property
management, and economic trends. ROI calculations can be complex and may need
to consider various costs and potential revenue streams. Be it as it may, we
can take a simple example: all factors are constant.
Assuming a rental property that a middle-class Kenyan could
afford, maybe a pensionable government employee like a teacher would manage
to do. They buy a plot located a few kilometers out of town for about Ksh.
1.5M. The cost of building simple 8 or 9 one-bedroom houses on the 50 by 100
land ranges from 3.5M-5M for a single floor without a concrete slab for future
development. The cost may go high depending on the availability of raw
materials nearby and the choice of house finishes the owner may decide to have.
That would bring the estimated total cost to about 6M.
Assuming 70% tenancy (some months the tenancy could be 100% and others below 50%) for houses whose rent would be 7,500-10,000 depending on how far the
house is from the town, eight houses at Ksh 8,000 per month would generate
about Ksh 44,800 monthly, which translates to Ksh 537,200 annually. Routine
maintenance and improvement plus caretaker remuneration would take away an
estimated figure of Ksh 80,000. A percentage of the annual income goes to a
real estate agent who will manage the property on the owner's behalf; as many
would understand, dealing directly with tenants can be hectic if you deal with
a bad lot.
Include rental tax and the estimated annual income would be around Ksh—400,000 for that
property. If you divide this figure by the 6M cost figure, you will look at a
15-year ROI period, assuming that all the money generated would go to
repaying a loan they took. Most loans by government employees take about 96
months or eight years to repay. This forces the owner to take top-ups and
mostly end up losing the property or selling at a throwaway price to ease the
burden on the pay slip. This explains why hundreds of rental properties are up
for sale on jiji.com and Facebook Market Place, some generating as much as half
a million in monthly rent.
As for commercial fruit farming, we can pick common practices like Hass avocado, Pixie oranges, passion fruit ,Macadamia or dragon fruit farming for export: see the details we have given about these crops at the end of this article. For our case, we will pick what Kenya is now best known for in the export market: Hass avocado farming.
2) Initial Investment
The average price of a 50x100 property in a prime area with enough potential for real estate investment could be anywhere from Ksh 3 million in smaller towns running into hundreds of millions in big towns like Nairobi, Nakuru, and Mombasa. Conversely, arable land suitable for Hass avocado farming would go from a few hundred thousand in areas like Laikipia, other parts of the Rift Valley, Eastern region, Coast Region, Nyanza, and Western. There's cheap farming land in every corner of this country, going for as low as Ksh300,000 per acre in places with road, power and water accessibility.
With real estate development, it is advisable to do a one-off
complete structure instead of incremental development where you build several
floors depending on cash flow issues. Developing land with some occupants poses
a health hazard as the potential for injuring people is high, and dust and
noise pollution for occupants may chase them away. On the other hand, expanding
the area under cultivation on your farm does not inconvenience anyone; as such,
the initial amount for investment does not have to be as huge as is the case for real estate.
3) Nature of Land
For real estate investment, the nature and location of land is one of the most important factors. Commercial land should be located in a prime area with a high potential for tenancy. Acquiring land in prime areas is a very expensive affair.
Compared to fruit farming, land for cultivation can be located in remote locations where land is cheaper. The only issues to consider are the nature of the soil and avoiding extreme weather conditions. Water availability for irrigation can be checked off by drilling a borehole or harvesting rainwater using dams. Most fruits do quite well within the tropics as the climatic conditions are very stable.
4) Economic Viability of Commercial Fruit Farming
When it comes to commercial fruit farming, the potential for
high financial returns is high. Fruit, a staple in our diets, has a constant
demand both locally and internationally, ensuring a steady market. The profitability analysis of fruit farming
reveals attractive margins, thanks to the increasing health-conscious trend
among consumers.
See the projected profit margins for 5 select fruits in this article: 5 Fruit Crops That Start Earning You Money In The Second Year.
Unlike real estate investment, which can be subject to market fluctuations and economic downturns, the fruit farming industry remains fairly resilient. People will always need and crave delicious, juicy fruits – no matter the state of the economy.
5) Potential for Long-Term Returns in Commercial Fruit Farming
Commercial fruit farming offers excellent growth prospects if
you're in it for the long haul. As the world's population expands, the demand
for fresh and nutritious food will only increase. This presents a golden
opportunity for fruit farmers to corner their market and reap long-term rewards.
Furthermore, factors like advancements in agricultural
technology, improved farming techniques, and access to global markets
contribute to the fruitful returns of commercial fruit farming. As an investor,
you can tap into these developments and enjoy watching your orchards flourish
over time.
Several options are available for the long-term commercial fruit
farmer; here, we would look at fruit crops that would be giving you returns for more than 20
years.
1. Dragon fruit farming
·
Cost per seedling Ksh.
500
·
Seedlings per acre
-2,000
·
Spacing - 2m by 2m
·
Fruit price- Ksh.
400-500 per kg (farmgate)
· Yield- 20-30 fruits per plant per year
·
Lifespan - 40 yrs plus
Read Dragon
fruit farming step by step guide
2. Hass avocado farming
- Cost
per seedling Ksh. 150
- Seedlings per acre - 150
- Spacing - 5m by 5m
- Fruit price- Ksh. 15-22 per fruit
- Yield-
600-800 fruits per tree per season
- Lifespan 30 yrs plus
More information on How
To Grow Avocados In Kenya For Export
3. Citrus fruit farming
In this category we have pixie oranges,
Washington oranges, blood oranges, tangerine, lemon among others.
- Cost per seedling Ksh. 250
- Seedlings per acre - 270
- Spacing - 3m by 5m
- Fruit price- Ksh. 5-10 per fruit
- Yield-
300-500 fruits per tree per season
- Lifespan 40 yrs plus
Read ;Why Pixie Orange Farming In Kenya Is Booming Now
And also Tangerine Farming: How To Grow The Best Tangerine For The Market In Kenya
4. Apple fruit farming
- Cost per
seedling Ksh. 250
- Seedlings
per acre - 450
- Spacing
- 3m by 3m
- Fruit
price- Ksh. 20-30 per fruit depending on variety
- Yield-
500 fruits per plant per season
- Lifespan 30 yrs plus
Read; Apple
farming in Kenya: How to produce Big Juicy Apples
We would also love to give you some interesting facts here about commercial apple farming:
The highest number of fruits recorded to have been produced by an apple tree in one season is 2,820. This record was set by a Granny Smith apple tree in New Zealand in 2009. The tree was 25 years old and was planted in a commercial orchard. It was well-cared for and received regular fertilization, irrigation, and pest control. The tree also benefited from a mild climate and long growing season.
The average number of apples produced by an apple tree in one season is 400 to 800. However, the number of apples produced can vary depending on the variety of apple tree, the age of the tree, the growing conditions, and the care that the tree receives.
5. Mango farming
- Cost
per seedling Ksh. 150
- Seedlings
per acre - 180
- Spacing
- 4m by 5m
- Fruit
price- Ksh. 6-10 per fruit (farm gate)
- Yield - 600 - 1,000 fruits per tree
- Lifespan
30 yrs plus
More information; Mango
Farming In Kenya: How To Grow The Best Mangoes For Export
6. Macadamia farming
- Cost per
seedling Ksh. 300
- Seedlings
per acre - 80
- Spacing
- 7m by 7m
- Fruit
price- Ksh. 100 per kg
- Yield-
100 kgs per tree
- Lifespan
30 yrs plus
Here's how to do it; Professional Macadamia Farming in Kenya: Full Guide
Conclusion
Real estate development is quite a good form of long-term investment. It gives the investor an opportunity to earn the residual monthly income from rent while enjoying the rising value of land over time. While commercial fruit farming offers the same benefits but with a lower initial investment, quicker and higher returns in investment and diverse investment options, it hasn't been taken up by many, mostly because of lack of knowledge.
The commercial fruit farming field in Kenya had also not been given much attention in the past, hence few innovations and support services were developed. However, with the success of companies such as Kakuzi, the recognition of Kenyan fruits in the international markets and the growing interest in agribusiness among youths, the field is becoming better investment alternative to real estate.
Innovative companies such as Richfarm Kenya have also entered the space with invaluable solutions. Investors in commercial fruit farming can now enjoy hands free investments just like their counterparts in real estate: our agribusiness consultancy services provide what real estate agents provide for the investors across the divide. The saying that Future Billionaires Will Be Farmers has never been more valid than it now is.
