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.

Annual demand for houses is currently estimated at 150,000 units whereas the market can only supply 30,000 units, creating a shortfall of 120,000 units each year.

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 .

The corporation has also intensified joint ventures with private investors such as land owners, financiers and property developers to boost home supply.

“NHC is working in partnership with other players such as land owners, developers and financiers to ensure that we provide more houses at the least cost to ensure affordability,” said Mr Bosire Ogero the chairman of NHC.

For instance, NHC has partnered with Sahal Construction to put up 4,500 units in Mavoko area.

The housing project, that is estimated to cost Sh12 billion, will be the single largest housing scheme in the country.

With a market price of Sh2.75 million for the two bedroom units and Sh3.75 million for three bedroom units, it heralds the lowest market prices.

“NHC is looking at carrying out projects of such magnitude to enable us influence the prevailing market prices for the benefit of the home buyers,” said Mr James Ruitha, the corporation ‘s managing director.

“This project is expected to trigger price changes with the potential of lowering costs and enhancing house ownership,” said Housing minister Soita Shitanda while presiding over the signing of the partnership agreement.

NHC is in the process of finalising agreement for the construction of a similar number of houses in Thika and Doonholm.

It is also planning to pull down Nairobi’s old restates such as Jamhuri, Shauri Moyo, Starehe and Makadara to put up more units.

It is currently constructing 315 units in Shauri Moyo which will be used to settle the civil servants living in the old houses estimated to occupying 15 acres of land.

According to Mr Shitanda, the relocation will allow the corporation to put up 2,500 units which will be allocated to civil servants and others sold.

Subsequent redevelopment of the estate will provide units for sale to the public.