A Chinese real estate group has announced plans to build a mega city in Nairobi’s Athi River area at an estimated cost of Sh200 billion, deepening the Asian nation’s inroads into Kenya’s construction sector.
Beijing Damei Investment Company, a Chinese construction giant, on Wednesday said the project -- dubbed the Friendship City -- will be modelled along the mega Chinese parks that comprise homes, factories and amenities like hospitals, schools and shopping malls all in one location.
The city, whose construction starts later this year, will sit on about 1,200 acres of land in Athi River, Businessman Bobby Kamani said Thursday, while disclosing that he has shareholding interest in the multi-billion-shilling project through his Zuri Group of companies.
It is estimated that the city will have the capacity to host 150,000 Kenyans, many of who will live and work on site.
The Friendship City will have the status of a Special Economic Zone with a township and five separate functional parks within the property, documents related to the project have revealed.
It will attract an initial foreign direct investment into the country of approximately Sh201 billion (about $2 billion) with the potential of up to Sh756 billion (about$7.5 billion) by the time the entire development is complete, said Jiannan Bao, the director of the Beijing-based Damei Investment Company.
“There exists the potential of direct employment of 150,000 people whilst indirectly employing close to 500,000 people, thus impacting over 2,000,000 lives,” said Mr Bao in the project documents. The investors will enjoy tax breaks consistent with Kenya’s policy of special economic zone (SEZs).
“The major selling point of SEZs in Kenya is the tax shields offered within the confines of an SEZ. Particularly, from a tax perspective, SEZs are considered to be outside the customs territory of Kenya, thereby operating within a jurisdictional bubble that shields investors from taxes and similar regulatory hurdles that directly or indirectly impede trade,” said Mr Bao.
Thousands of acres of agricultural land have in recent years been turned into satellite cities with the developers hoping to tap into the aspirations of Kenya’s growing middle class.
Kenya has been seeking partnerships with the private sector to develop housing units, as the country looks to plug a housing shortfall of approximately 240,000 units per year.
The United Nations urban development agency, Habitat, estimates that more than half of Nairobi’s four million people dwell in slums.
A high demand for decent housing has seen developers conceptualise satellite cities such as Tilisi, Konza, Tatu City and Northlands.
Chinese companies have been the lead contractors in these and other multi-billion-shilling housing projects across the country, besides building hundreds of kilometres of tarmac roads as well as the Standard Gauge Railway between Mombasa and Naivasha.
Tatu City, which is already under construction, is expected to house an estimated 150,000 people on completion.
Zuri Group is owned by the Kamani family, which holds vast interests in the hospitality industry worldwide, including Zuri Hotels.
Bobby Kamani is the son of billionaire Deepak Kamani, who has been mentioned in multi-billion-shilling scandals involving State agency contracts including the infamous Anglo Leasing scam.
The Friendship City’s plan is borrowed from the Chinese urban development strategy.
China’s economic reform and opening up in the 1980s began with “special economic zones” like Shenzhen in southeastern China.
Mr Bao said the Friendship City hopes to follow a similar path to growth.
Other African countries have also tried to copy the Chinese development model.
However, the Chinese-style SEZs in Africa have proved underwhelming, limited by operational and legal bottlenecks.
Real estate mixed-use project Tatu City development continues to take shape despite numerous bottlenecks that the firm has faced at the project site in Kiambu County.
Grandiose plans, red tape and a lack of funding have also left Konza Technopolis - the multi-trillion-shilling new city to be built some 60 kilometres outside of Nairobi - way behind schedule on its goal of having 20,000 people on site by 2020.
Dubbed the Silicon Savannah, Konza aims to become a smart city - using technology to manage water and electricity efficiently and reduce commuting time - and a solution to the rapid, unplanned urbanisation that has plagued the capital city.
Kenya’s real estate sector has been booming over the past decade, but the middle to low-income housing segment has remained underserved as developers have tended to go for the higher end of the market in search of higher returns.
The number of mortgage loans in the country has also remained low due to high cost of financing, thus locking out millions more from home ownership.
There are about 24,000 outstanding mortgage loans in Kenya, a relatively low figure in a country of 44 million people.