NHC projects to lower housing costs in Nairobi

The cost of housing for Nairobi’s middle class is set to fall further as the cash-flush National Housing Corporation rolls out cheaper mega home projects.

The State- owned agency—which is in the middle of raising Sh5 billion through a bond—has intensified its efforts to raise funds for joint ventures with private developers to build houses in the city.

This will see it add about 10, 000 units of two and three bedrooms to the housing market in the next two years that will be 25 per cent cheaper than those put up by private developers.

“NHC’s bid to put up huge housing schemes can alter the prevailing market conditions as such projects enjoy economies of scale and shared utilities that lower overall costs. Private developers on the other hand incur higher costs small-scale projects,” said Mr Reginald Okumu of Ark Consultants.

Mr Okumu said more houses from the NHC would lower property costs as private developers cut prices to boost uptake.

Home prices in the upper end of the market have been stagnant while rents have fallen on increased supply and reduced demand from the middle class whose disposable income have also been hit by Kenya’s economic slump, according to a recent housing survey by Hass Consultants.

“I think over-supply in the high-end market has forced prices down, with new owners getting up to 15 per cent less in rent,” Mr Daniel Biwott, who manages apartments within Kilimani and Kileleshwa in Nairobi told Business Daily in an earlier interview.

Kenya’s property market had been red hot in the three years to 2008 on increased demand and speculation, with Hass indicating that home prices rose 120 per cent over the period.

But there is a shortage in the lower and middle sections of the market from where investors have shied away fearing measly returns.

This has, as a result, set the stage for a rally in home prices in these segments.

For instance, two bedroomed units in Nairobi’s Langata, Kileleshwa and Lavington are estimated at six million shillings, up from three million shillings in 2005.

But the NHC is seeking to intensify its activity in this segment to boost supply and cool down property prices.

The corporation is currently developing two bedroom houses in these areas for Sh4 million.

The planned Sh5 billion corporate bond—which is set to be completed later this year—will help NHC put up 2,000 more units .