Kenya Railways and National Housing Corporation have entered into a joint venture that will see the rail firm open its land for construction of affordable homes in urban areas.
The rail company has about 320 acres of land surrounding the rail stations in Nairobi, Kisumu and Mombasa — which currently lies idle—and has been scouting for investors to help develop office blocks, light manufacturing industries, residential homes and shopping malls.
Under the joint venture, Kenya Railways will provide the land, the biggest costs item in housing construction, and part financing, and earn annual leases.
NHC say the deal will allow it to increase the supply of affordable homes because it has land that has been one of its main hindrance to boost supply of homes that will help cool the run-away prices.
“The joint venture will save us the cost of buying land at market rates,” said James Ruitha, the NHC managing director, adding that the savings will be transferred to consumers in the form of cheaper homes.
NHC has also been seeking financing partners in a business model that see a number of investors own a single real estate project. Already, the two State companies have sealed a deal involving a prime land owned by Kenya Railways in the upmarket Kileleshwa where they will construct apartments that will sell at Sh8 million each compared to market rates of Sh10 million.
The Business Daily could not get a comment from Kenya Railways, but earlier the firm had said it will form partnerships with private investors to develop a real estate project worth Sh256 billion on its 320 acres of land surrounding the rail stations in Nairobi, Kisumu and Mombasa.
The firm is targeting to raise about Sh1 billion annually in land leases and use the money to develop new rail infrastructure as the current structures will be developed by Rift Valley Railways that was granted a 25-year concession to run the Kenya-Uganda line and five years for the passenger services.
Besides NHC, it still looking for a consortium of investors with finances and experience in joint real estate projects — a pointer that it’s keen on foreign investors. This plan comes at a time when institutions are making deep forays into the real estate market including Centum Investment, National Housing Corporation, National Social Security Fund , insurance companies and Renaissance Capital, the Moscow-based investment bank, which plans to spend billions of shillings in the real estate market.
Kenya is experiencing a property boom that has seen home and office block prices rise 3.5 times in the past decade — a return that has also caught the eye of foreign investors.
Rapid urbanisation, population growth and expansion of the middle class have emerged as drivers of the property market that is riding on nearly three decades of under investment.
The residential homes, shopping malls, restaurants and the industrial park will create a fresh income stream for the cash-strapped rail firm.