City Hall opens Nairobi’s leafy suburbs for high-rise buildings

City Hall is reviewing existing building restrictions in parts of Nairobi, paving the way for construction of high-density settlements that could reduce the value of property in upmarket estates.

The new by-laws, to be published in October, will open up exclusive neighbourhoods to developers of highrise flats in a drive to ease the cost homes that have nearly doubled in the past six years – buoyed by high land prices.

Real estate agents say high density settlements, such as those that City Hall is opening the leafy suburbs to, enable developers to distribute the land costs over more units, ultimately pulling down prices.

City suburbs

Review of the restrictions targeting inner city suburbs including Kileleshwa, Kilimani and Westlands that are classified as zones three and four, is expected to significantly dilute the value of property in these locations with the rise in number of homes.

Mr Patrick Odongo, the director of planning at the Nairobi City Council said easing development restrictions should bring down land prices and encourage new investments in the real estate sector.

“City Hall is working on raising the plot ration restriction to 200 per cent from the current 75 per cent in these estates to encourage investments that have been stifled by high cost of land,” Mr Odongo told investors.

Plot ratio is a measure that compares the total built floor space with the size of the land on which the property sits. Authorities use the measure to determine developments in different locations demarcated as zones.
Mr Odongo said building regulations in the affected suburbs will shift from plot ratio as a tool to alternative instruments that include establishing minimum finishing requirements to preserve the value of established settlements.

“We plan to introduce new instruments to regulate developments in these areas but we certainly need a vertical city that makes better use of the limited serviced land available,” he said.

City Hall said a consortium of professionals is working on the building regulation reviews and the final submissions are expected next month, before their enactment in October.

That means residents of the designated estates could start seeing highrise residential buildings of up to 10 floors in their neighbourhoods that are currently synonymous with massionettes and manicured hedges beginning next year.

The new measures will also encourage developers to invest in own solid waste management, water collection and recycling, and tapping of solar energy by awarding development credits to built up areas that are self reliant.

Developers with capability to fully manage their waste disposal could be allowed to build additional two floors.

A high rate of urbanisation coupled with rapid growth in income levels has increased demand for homes in the top-end of the housing market, piling pressure on land and driving up selling and rental prices.

Average property prices in Nairobi and outlying areas have risen more than three and half times in the past 10 years according to a recent housing survey by asset management firm Stanbic Investments.

It is, however, the infiltration of low-rise apartments and commercial buildings that have swayed land prices the most, rising over ten-fold since 2000, with recent deals on an acre clocking Sh150 million and above.
More recently, restrictions on the number of floors allowed in certain areas of the city have made the development of residential property less economically viable because of the high cost of land.

The last zoning review carried out in 2004 allowed developers a maximum of four floors for apartments in Westlands, Parklands, Woodley, Kilimani and Kileleshwa — a move that has visibly changed the leafy look of the suburbs.

Daniel Ojijo, the chairman of Mentor Holdings, a property development firm with an interest in the top-end of market, says the present guidelines have limited to four the maximum number of town-houses on a half an acre plot in Kileleshwa which costs about Sh60 million.

This means that before accounting for any other construction costs and developer’s margins, the cost of land for each unit is Sh15 million. The new regulations could slash that by at least half.

“We have been asking the council for these reviews to contain property prices,” said Mr Ojijo.
He said the scarcity of serviced land, including water and sewerage system, has forced developers to focus on the few estates that have the installed infrastructure pushing land prices beyond the reach of many.

Mr Odongo said volatility in the cost of land has been the result of government’s failure to lead in the supply of land for new development rather than leaving it to the private sector.

Developers say land constitutes the biggest expense, taking up more than half of the total input costs in the up-market estates while it should ideally account for less than 15 per cent.

Joe Mungai, the managing director of Tamarind Properties termed the development as monumental since it would allow developers to reduce the eventual property prices to enhance the possibility of faster selling.

“Developers have to recoup their costs, forcing them to price the houses at a level that covers input costs and make a margin,” said Mr Mungai.
“Higher selling prices means that the houses have to stay longer on the listings” he added.

Projects financers are weary that the high land prices amidst restricted development has placed their funds at risk as developers’ ability to service loans becomes a reality because they have lately been exposed to holding dead and expensive stocks.

Mr Joram Kiarie, the director of Mortgages at the Kenya Commercial Bank, says the lender is now concerned about providing construction loans to developers building to sell citing that such credit lines now posed real of default.

“Investors need to look out for the kind of developments they can put up, just to be sure they do not invest too much on land and then they are not able to make any return.”

Emma Miloyo, an architect and the chief executive at Design Source says that the proposals would simply double the built space and residents, and a consequence strain the available infrastructure.

“Doubling the plot ratio means a strain of infrastructure, leading to heavier traffic in the area which has a potential to lower the overall value of individual properties in the zones,” said Ms Miloyo.

Construction costs

Economists expect that the move would allow developers to have a bigger built-up area, thereby slashing the overall construction costs borne by developers since the expense will be spread over a bigger number of units.

Barth Ragallo, a land economist and managing director at Tysons, a real estate consultancy firm, says raising the plot ratio meant increased supply of serviced land to developers but pointed out that home prices would only be determined by market forces.

“The move means increased access to serviced land because developers can gain higher utility but the eventual home prices would be a factor of demand and supply,” said Mr Ragallo.

While the proposed reviews are expected to win wide approval from developers, it is yet to be seen how neighbourhood associations in these areas would react since allowing for high density developments would rob their suburbs of exclusivity that has ensured they only attracted the rich.