Developers should now change tack and invest in health infrastructure
A residential estate in Kiambu County. Building hospitals and affiliated infrastructure may yield better returns for investors. PHOTO | SALATON NJAU
I visited a real estate development firm’s offices a couple of years ago to discuss possibilities of collaborating with health workers to develop tailor-made infrastructure for our sector.
The problem arose from real estate developers’ endless investment in housing and retail properties. Across the country it seems like almost every major business enterprise has some investment in the real estate sector. Even those previously not aligned to the sector like battery maker Eveready, logistics firm Express Kenya, and Kenya Railways are diversifying from their core areas to real estate development.
While data from the Housing ministry indicates there is a glaring shortage of housing, corresponding economic and banking data may not justify the investments.
Judging by incomes and mortgages or other sources of funding home purchases, some analyst have been pointing at an impending glut. The glut appears to be fuelled by a past wave of house purchases that may speculatively have been funded from dubious sources.
The tightening noose around financial data reporting and illegal proceeds of crime has been linked to the reduction in buying houses.
It isn’t just residential houses that have witnessed a fall in purchases, newspaper reports show a decline in retail space costs and challenges developers are facing in wooing customers to fill their shopping mall spaces.
No real time data is available on the occupancy rates of shopping malls or the time it takes to sell or lease a house, but this may be rising.
Why is it so hard for developers to venture into hospital infrastructure?
For a long time now, health workers have been forced to do with makeshift infrastructure as hospital premises.
For most of us progression has been starting from a single room and growing to bigger space and maybe some day buying an entire premises or even demolishing an old one to build new ones.
A look across major hospitals shows that almost all have had to undergo some demolition at some phase. In short, very few hospitals are built from the start the way they ought to be. The reason being that the expertise and resources needed are not within our reach despite having potential.
While developers look at the return on investment and see houses and retail shops as safer bets, perhaps on a long-term analysis hospitals and affiliated infrastructure may yield better returns.
Realtors look at the square foot sale or rent price as a starting point. Depending on your location this could range from Sh60 to Sh142 per square foot and may even be higher.
In comparison, hospital beds start from a low of Sh2,000 a night to a high of Sh15,000 for some “suites”.
Interestingly though, this space is actually not available. In major hospitals in Nairobi many patients are “parked” in the casualty ward as bed space is awaited, others turn patients back because of lack of bed space. The scenario is even worse in rural areas and townships because private hospitals are few.
As a small investor in the real estate company mentioned above, I have been bothered by their lack of vision to diversify into this field to escape the inevitable housing bubble. Perhaps the current crunch will serve as a wake-up call.
