Real Estate: How the sector has performed in Kenya within 20 years
By Nancy Marende
Real estate in Kenya is turning out to be a lucrative sector of investment that most business people and civil servants heavily direct their funds to.
The emergence of real estate companies is on the rise and Investors are placing their resources in these companies with high hopes of making great profit margins.
Most of these reputable sectoral firms are concentrated in Nairobi, Mombasa and Kisumu and perhaps all major towns.
According to a report released by HassConsult late last year for the third quarter of 2019, house prices in the capital are still 4.4 times higher than in 2000. The average value of residential property in the agent’s database surged to Ksh31.2 million in September 2019, from just Ksh7.1 million in December 2000.
High demand for low middle-income housing in far-flung Nairobi’s metropolis is surging as tenants opt for cheaper units.
“Asking rents for a modern apartment may cost as little as Sh23, 400 and this bodes well for many tenants who now prefer affordable units as they take caution to save in the wake of job losses across all sectors. Notably, as the cost of living soars, the lower middle class is opting to pay slightly more in transport but less in rents,” said Ms. Sakina Hassanali, Head of Research and Marketing at HassConsult.
Kiserian recorded the highest drop over the quarter with rents in the area reducing by 4.6 per cent while Athi River recorded the lowest annual growth rate for houses at 4.1 per cent.
Parklands was the best performing suburb with rents in the area increasing by 1.9 percent over the quarter and 9.3 per cent annually.
On the losing end, Loreto recorded a 2.7 percent drop over the quarter and 3.5 percent over the year. Overall asking rents dropped by 0.9 percent over the quarter but marginally increased by 0.8 percent on an annual basis.
The average price for a 1-3 bedroom residential property is currently at Ksh14.4 Million while the average price for a 4-6 bedroom residential property is Ksh39.1 Million.
Some of the real estate developers in the country are opting for Nairobi’s Upper Hill for housing units for commercial and residential purposes.
According to Jonathan Jackson, a real estate developer, and the Chairman and Founder of Lordship Africa, Upper hill is designated as the new Central Business District (CBD) and high-rise buildings allowed in the area.
“The main compelling reason is that there are main hospitals in Upper Hill, law courts, the World Bank and other financial institutions and embassies.” Says Jackson.
Approximately 40,000 people who work in Upper Hill travel 3-4 hours a day through Nairobi traffic to get to and from work. Jackson says It is an obvious solution that rather than travelling to where they live, building them apartments right in Upper Hill is paramount so that they can walk to work and not necessarily drive.
President Uhuru Kenyatta’s administration set out precedence for the sector as among his administration’s key pillar for development by the time he leaves office in 2022.
Unfortunately the increase in the urban population has outpaced economic development in the country, resulting in spiked demand for safe, clean and adequate housing that is also affordable by this population.
While a number of initiatives have been taken up by several countries, the situation largely remains uncertain.
Shortage of finance
The perceived risks, high costs of doing business and longer term for returns create a situation where the affordable housing sector lands directly in competition with other types of real estate investment like commercial spaces, luxury segment and high-end housing which are perceived to reap greater and faster benefits on investment.
Multiple contradictory land tenures and agreements, out-of-date land registries, lack of computerized land titling systems, inadequate incentives coupled with varied disagreements between the local and central policies make land policies for affordable housing, counterproductive. This reflects on the security of land being under constant threat, posing complications in property rights. Consequently, investors get discouraged, land assembly gets difficult and cost of land outstrips its value.
These primary challenges encountered by real estate are highly complex which makes them impossible to be solved by a single body. Thus, necessitating a platform which can bring together multiple stakeholders from varied areas of expertise in order to deliberate and seek solutions to such common problems.