Making property in Kenya a success

Kenya’s population is estimated to be over 50 million in 2018 according to World Population review with an estimate of one million Kenyans being born every year. Urbanization rate currently stands at 4.4%. Majority of those who move to urban areas in search of employment have to experience prolonged renting periods as they cannot move into their own homes as most properties in the market are unaffordable. This drew the attention of the real estate sector long ago and they began targeting this population with properties that could fit their incomes and give them a hassle-free investment journey.

In line with providing decent housing, the government also launched the Affordable Housing Agenda and the Big Four in December 2017 as a response to the public outcry for affordable housing. The government pledged to build 500,000 units of houses by 2022 which will be 1.5M units less of the deficit because as at now, Kenya needs 2 million housing units according to the World Bank. This situation is however not hopeless because properties can be made accessible to all Kenyans through private and public partnerships as below:

Provide basic infrastructure

These are basic physical and infrastructural developments. The government can commit to put up infrastructure such as roads, water, and electricity in areas close to major towns. This will encourage the population that has already bought land in areas close to Nairobi such as Ngong, to develop their property. As land is still relatively affordable in the outskirts of Nairobi, the private sector can put up low-cost houses in such areas and offer them for sale at affordable prices. Fully digitize land records The digitization of land records is currently pending in Parliament awaiting the passing of land regulations allowing for online conveyancing and issuance of title deeds. When this is fully implemented, it will significantly reduce the time taken to process title deeds and give the owners the latitude to develop their properties.

Mortgage Financing Policies should be formed to curb the interest rates and deposits required for taking a mortgage to encourage the residents and the developers. Majority of the low-income earners cannot service mortgages due to the high-interest rates and deposits required. If the government came up with policies to regulate the interest rates, the majority of the investors will take up the mortgages.

High construction costs

The traditional methods of construction are expensive and unaffordable. It is estimated that construction costs account for 50%-70% of the house, which is unaffordable for the majority of middle-income earners. If the government adopted and encourage the use of new low-cost technological methods such as interlocking bricks, cement-coated expanded polystyrene (EPS) panels. This will significantly reduce construction costs and time and make properties affordable.

Financing the mass production of housing units

The private sector has the capacity to set up low-cost housing units to meet the demand. However, the government needs to provide incentives and implement policies that will ensure the units are taken up by the government upon completion and sold to Kenyans.

Establishing criteria for individuals who fit into the affordable housing scheme

This will prevent people not intended to benefit from taking up these houses and reselling them at a profit. In case an individual has to resell their house, they have to be sold to those who are already in the scheme.

In conclusion, affordability is key to the success of the property uptake in Kenya. The private real estate companies have been in the market for long and have identified the specific needs of the population, therefore they should be on the forefront to implement the affordable housing agenda in Kenya and help the government attain this vision.

Written by Reuben Kimani, CEO, Username Investment Limited.