For the past 16 years, developers in Kenya have been majorly focusing on building housing units for high & upper middle income groups ignoring the lower middle & low income groups who form a sizeable part of the population. What is not so obvious is that a shortfall of supply in the mid-to-lower end of the residential market is putting upward pressure on pricing for such units, exacerbating already severe affordability issues. Superior profit potential has thus skewed recent housing production toward the luxury spectrum but the glut is steadily catching up. Is the dream of affordable housing becoming a reality?

Kenya’s story of real estate development can be traced back to early 2000s when pioneering developers put up the first units. Fast forward to 2016, the real estate market has grown exponentially with the sector now on the booming stage albeit fears of undercurrent bubble are rife. While this journey has been largely rossy, especially for; investors, developers as well as a handful of people who have managed to acquire homes, majority have been left behind due to scarce affordable housing options.
“It has always been my desire to own a home but the current steep cost has been prohibitive,” says Derrick, a Real Estate Associate working in Nairobi.
For the past 16 years, developers have been focusing on building housing units for high & upper middle income groups ignoring the lower middle & low income groups who form a sizeable part of the population. The developers/investors on their part argue that the cost of (serviced) land is too high and that return on investment is much higher for properties targeting upper echelons of the society and extremely little for the lower segment. Superior profit potential has thus skewed recent housing production toward the luxury spectrum. What is not so obvious is that a shortfall of supply in the mid-to-lower end of the residential market is putting upward pressure on pricing for such units, exacerbating already severe affordability issues. As a result of this investment parttern, the cost of housing both under rent and sale categories have skyrocketted leaving the lower income groups vulnerable. The net effect has been rapid mushrooming of informal (slums) settlements in major cities with Nairobi bearing the biggest brunt.
Whereas it’s the state’s obligation to provide affordable housing for its citizens, the government agency, National Housing Corporation (NHC), charged with the responsibility have failed to live up to the expectation as well as meet the ever increasing demand. The demand in Kenya urban areas currently stands in excess of 250,000 units per year with Nairobi metropolis needing slightly more than 80,000 units p.a. The housing pressure has been driven up by the increase in rural-urban migration as people troop the cities looking for gainful employment. The NHC is targeting to construct 30,000 housing units by 2017. While the agency has been in existence for a long time, the targeted population haven’t been able to fully enjoy the low cost housing scheme as the units built have been hijacked by private interests-well do individuals through corrupt means leaving the deserving populace hanging.
However, the party seems to be over for luxury and premium residential projects as the high income & upper middle income market is experiencing a glut due over supply according to research done by Hass Consult in quarter II of 2016. The focus is now shifting to low cost housing targeting lower middle & low income groups who constitute a big chunk of the marketplace. The govenrment, with an objective of encouring home ownership is offering a tax relief for developers constructing over 1000 low cost units. This comes on the background of capping on bank loan rates which will also support home purchasing especially aspiring home owners who were previously locked out by the high lending rate regime.
As the trend steams up, a reasonable expectation is for the homeownership rate to grow steadily in the short run and over the long haul, housing demand will be much greater in the low cost housing segment. Nairobi, whose high land prices is not favourable for low cost developments has resulted to a shift to satellite towns like Athi River, Machokos, Kitengela, Ngong, and Isinya among many others where the cost of land is quite low comparatively. This means that the developers/ investors can make reasonable profits given that they can buy large tracts of land and build multiple units as low cost real estate requires a mass market model approach.
It is with no doubt the pressures already exist, and are building. Since housing affects everyone, it is no wonder that voters will be pushing politicians for action as the country heads to the general election in 2017. Creative low cost housing ideas, though, will likely depend upon the real estate sector’s savvy if they are going to be effective. As the country looks forward to realization of affordable housing outstanding issues like distorted access to land, high land prices, existence of rigid building laws and regulations as well as the deterioration of housing stock due to lack of a maintenance framework should be looked into urgently.

167 comments

  • Lorri
    Comment Link

    Lorri

    05 12 2018

    I just could not go away your web site prior to suggesting that I really loved the usual information a person supply in your visitors?
    Is gonna be back regularly to inspect new posts

  • Ricardo
    Comment Link

    Ricardo

    05 12 2018

    Great post. I was checking continuously this blog and I am
    impressed! Extremely helpful info specially the last part
    :) I care for such info much. I was seeking this particular information for
    a long time. Thank you and good luck.

  • Antonio
    Comment Link

    Antonio

    05 12 2018

    Very good article! We will be linking to this particularly great article on our site.

    Keep up the great writing.

  • Jared
    Comment Link

    Jared

    05 12 2018

    Hello my family member! I want to say that this article is awesome,
    great written and come with almost all significant infos.

    I'd like to look extra posts like this .

  • Hugh
    Comment Link

    Hugh

    05 12 2018

    Write more, thats all I have to say. Literally, it seems
    as though you relied on the video to make your point.
    You definitely know what youre talking about, why waste your intelligence on just
    posting videos to your weblog when you could be giving us something enlightening to read?

  • Beryl
    Comment Link

    Beryl

    05 12 2018

    Every weekend i used to pay a quick visit this web site, because i wish for enjoyment, as this this website conations genuinely good funny information too.

  • Darlene
    Comment Link

    Darlene

    04 12 2018

    you're really a excellent webmaster. The website loading velocity is
    amazing. It seems that you're doing any unique trick.
    Moreover, The contents are masterwork. you've performed a fantastic process on this topic!

  • Michaela
    Comment Link

    Michaela

    22 11 2018

    Hi there! This blog post could not be written any better!
    Looking at this article reminds me of my previous
    roommate! He constantly kept talking about this. I will send this article to him.
    Fairly certain he's going to have a very good read.
    Many thanks for sharing!

  • Thanh
    Comment Link

    Thanh

    21 11 2018

    I for all time emailed this webpage post page to all my contacts, because if like to read it next my links will too.

  • Grady
    Comment Link

    Grady

    20 11 2018

    Greetings! Very useful advice within this post! It is the little changes which will make the most
    significant changes. Thanks for sharing!