advertisement

Market News

Why affordable housing investors will likely prefer specific areas

housing
The high cost of land was cited as one of the reasons most Kenyans don’t buy homes. FILE PHOTO | NMG 

Private sector players looking to participate in the provision of affordable housing are likely to favour areas with well-developed support infrastructure due to cost implications, a new report says.

Investment firm Cytonn says in its Nairobi metropolitan area infrastructure report 2018 that areas such as Ngara, Jogoo Road, Mavoko and Shauri Moyo with existing support infrastructure such as roads and sewerage are likely to find it easier to attract projects, compared with remoter parts of the metropolitan region.

It also places the onus on the government to rapidly improve such infrastructure if it is to attract wide participation of the private sector in these projects.

“Infrastructural costs in Kenya account for approximately 25.6 per cent of construction costs. By providing infrastructure, therefore, the government provides an impetus for real estate developers to develop more affordable units, as the cost of construction reduces considerably,” said Cytonn in the report.

“Investors are therefore likely to align their projects with infrastructural projects given the expected benefits including higher demand, price appreciation and savings on construction costs,” said Cytonn.

The government’s plan is to provide up to 500,000 affordable housing units in the next five years, with the private sector expected to contribute to the plan.

Attractive

Developers have traditionally tended to follow infrastructure development in order to make sure their units are attractive to occupants.

For instance, the development of Thika highway has seen developers flock to put up housing units and malls along the road, as has been the case with the northern bypass.

“In real estate, infrastructure acts to facilitate the sector’s growth as its availability, or lack thereof, determines the growth momentum of the real estate sector in a given location,” said Cytonn.

The Nairobi metropolitan areas continue to lag, however, in sewerage coverage, with the average access at 17 per cent. Nairobi leads at about 50 per cent, followed by Machakos (17 per cent), Kiambu (15 per cent) Murang’a (three per cent) and Kajiado at less than one per cent.

Most households are forced to rely on septic tanks, latrines and bio-digesters to handle their waste, a solution which may not work for large-scale housing projects such as those envisaged in the affordable housing plan.

The counties have, however initiated efforts to increase access to sewerage services, with a number of projects run by the various water services boards being undertaken.

advertisement