South African financial services group Sanlam is looking to buy commercial properties in Nairobi through a new fund it plans to set up.

The firm is in the process of setting up a sub-Saharan Africa-focused real estate fund that will specialise on commercial property investments in "select" countries outside of South Africa.

The fund will not develop properties but acquire completed income generating assets "with little or no risk associated with them", and will thus be a traditional income fund with a core investment strategy.

"Kenya is one of the countries approved as an investment destination for our fund. At this stage we have not identified any specific asset in Kenya that we intend (to) invest in," Thomas Reilly, the Sanlam Properties chief executive officer, told the Star in email correspondence.

The firm will not be looking into residential assets but is instead seeking to buy out a mix of income generating properties such as shopping malls, office space and a bit of industrial properties.

"We expect that investments in Kenya will largely be dominated by retail driven investments - large shopping malls - as well as potential for some investment in office and select industrial property," Reilly said.

Sanlam's exposure to Kenya's real estate sector will be limited to Nairobi at the moment, according to Reilly.

The firm in February disclosed that the real estate fund will be launched later this month, and will be listed on the Stock Exchange of Mauritius.

The group is set to close the initial capital raising process on March 31, and is targeting a portfolio of $500 million (Sh42.7 billion) in the medium-term.

The fund is part of Sanlam's growth strategy for Africa, which is seeking to exploits its existing footprint. Besides Kenya, the real estate fund has set sights on Tanzania, Uganda, Ghana, Nigeria, Mozambique and Zambia among a few other countries.

A mismatch of supply and demand in Nairobi's real estate market has in the past one year attracted a number of investment and private equity funds targeting the lucrative returns.