Business services

Kenya gets first state of development annual report


 The Kenya Property Developers Association and HassConsult today launched Kenya’s first ever annual report on the state of
development in Nairobi with a warning that the city was heading for extreme shortages in urban middle class housing and failed development goals, based on current trends.

The housing shortage in Nairobi is acute, and deteriorating, the report shows. The country’s aim was to be building 200,000 housing units a year in Nairobi to create a world class middle-income city by 2030. But in 2013, just 15,000 housing units were planned.

At the same time, sharp increases in land rates and the city council construction fees added increased financial disincentives to development. The construction permit fees were raised by between 200 times and 1,250 times their previous level. By the fourth quarter of last year, these newly increased charges generated Sh114m, or 23 per cent of the city council’s revenue.

At the same time, the gap between lending rates and the Central Bank of Kenya’s base rate further widened, impacting interest rates for the financing of both development and property buying.

“Nairobi has declared its intention to emerge as a world class city, but this depends on a sharp increase in construction, where current trends are instead slowing down the development industry’s rate of growth,” said Robyn Emerson, CEO of KPDA.

The report comes as the government and industry work to deliver a master plan for the city’s development, which may never be realized without a shift in gear: from exploitation of construction activity as a source of public revenue, to facilitation of a 13-fold increase in construction to reach the plan’s goals. KPDA Board member says, “We are keen to work with government

to come to workable solutions for development goal achievement and a better Nairobi, better Kenya for all.
Ongoing development is now reaching buffers in other areas too, the report found, with building densities rising – with more units per plot – and the availability of new land in the most heavily developing areas of the city now declining drastically.

 In Kilimani, which was one of the most heavily developing suburbs in 2013, the report found just 12 vacant plots remaining, compared with 470 in the much more static area of Runda.

The areas currently enjoying the greatest levels of development are Kilimani, Kileleshwa, South B and Embakasi, but land availability is now set to see attention shift to other areas with more space to develop.

The report, delivering the first such data gathered and compiled on property development in Nairobi, has been produced by KPDA as part of a strategy to increase the investor rating on Kenyan real estate.
The Jones Lang LeSalle Global Real Estate Transparency Index, used by investors globally to assess the safety and appeal of regional real estate investments currently rates Kenya at 67 of 97 countries for the quality of information on its real estate industry.

“The production of an annual report in this kind of detail and depth is a key plank in the criteria for getting Kenyan property re-graded as a transparent investment asset,” said Ms Emerson.

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