Companies

Real estate boom spills over to more urban centres

construcion

Construction workers build residential apartments in Kileleshwa area in Nairobi. High taxes for construction materials, stamp duty rates and the absence of government incentives are increasingly making it difficult to invest in property targeting low income earners.

The construction boom in Kenya is spilling to urban areas outside Nairobi with Nakuru town, Kenya’s fourth largest urban centre and the fastest growing metropolis in Africa, the latest to attract an investment of 450 low-cost housing units.

Milimani Holdings, a group of private investors, plans to spend an estimated Sh250 million in the construction, which is set to speed up development in the town recently named by UN-Habitat as Africa’s fastest growing urban centre.

The initial phase of the project will comprise 160 housing units, clustered in 10 blocks of 16 flats each in the five-year project scheduled to start next year.

“Nakuru is fast growing in terms of the attraction of professional services and skills, but the real estate sector has not been exploited to reflect the resultant demand from this influx,” Mr Edwin Gitau, an official with SEB Estates Limited that will manage the new housing project, told the Business Daily.

“We need to satisfy the housing needs of this professional workforce that continues to increase in Nakuru each day,” he added.

High population growth is said to be behind the town’s rapid economic expansion. Located about 160 kilometres from Nairobi and with a population of about 1.6 million, Nakuru was in September declared Africa’s fastest growing town in a report by the UN-Habitat. Growth of the town’s economic output is estimated at 13 per cent, “comparable only to Chinese cities,” according to Mr Thomas Melin, a UN-Habitat senior advisor. Nairobi is estimated to have an annual growth rate of seven per cent.

Nakuru’s rapid growth is also attributable to a large influx of new residents and especially after the 2007 ethnic clashes, which brought people who were looking for a cosmopolitan safe haven to the town.

Relocation of new industries in the town has also attracted a huge workforce from various locations countrywide. Records by the Nakuru Municipal council showed that about 70 to 100 business licence applications are received each month from investors.

Booming town

“The town is well equipped with facilities that support investors and the fact that it connects with other major towns makes it a favourable pick for the investors” mayor John Kitilit said.

The growth has spawned a booming town on the edge of a major highway cutting across the Rift Valley and into Uganda, but has also triggered a rally in the overall costs of operations for business owners who must contend with these new developments.

Those seeking residential houses haven’t been spared the heat with rent rates climbing by up to 50 per cent in under five years. Several investors in key sectors such as real estate are now seeking to tap into opportunities provided by the sharp influx of new residents into the town. The housing project by Milimani Holdings will sit on a 3.23 hectare parcel in the town’s affluent Milimani estate.

“Milimani Holdings is committed to providing houses to all segments of the population at an affordable price and these particular one is for low income group/middle income,” the investors said in an environmental impact assessment report seen by the Business Daily.

Nakuru Town Clerk Sheikh Abdirizak Abdullahi admits that the town faces a huge scarcity of housing but adds that they are trying to tackle the problem, citing a plan by the council to set up about 5,000 new housing units in partnership with the National Housing Corporation (NHC).

The concept of pre-sale construction of housing units is already popular in key towns across the country such as Nairobi. It involves having potential buyers place deposits on houses planned for construction and clear the balance payment upon completion. This helps those implementing the project to raise start-up capital for the work besides guaranteeing them a market for the finished units.

Milimani Holdings said it had chosen to put up the flats due to market trends in which more people preferred to live in flats due to lack of land besides the prohibitive costs of stand-alone houses.

“Therefore the best solution is building flats which will take less space but serve many Kenyans,” the company said.

Though billed as fast growing, Nakuru continues to grapple with a problem of poor infrastructure and planning—a situation that makes it unpopular with some investors.