The lull before a storm

Konza

2014 has seen mixed fortunes as far as trends in real estate are concerned. With the never-ending housing crisis, residential apartments and business parks cropped up right, left and centre.

Upper Hill saw unprecedented construction boom with corporates putting up what will be some of the tallest edifices in the region while basic infrastructure development moved at a snail’s pace.

The growth in office space came amid the November report by Mentor Management Ltd that warned of a glut in office space in the same area during the next two years.

“We predict that by the end of 2016, there will be over 2.8 million square feet of office space - 19 per cent of the total stock of new buildings delivered since 2009 - lying vacant. This excess supply of office space is expected to originate from Upper Hill and Westlands during 2015,” stated the MML report. In spite of such dim forecasts, the country was still on the international radar with global real estate agencies stating that the country – and Nairobi in particular – was still a hot property destination.

The 2014 World Wealth Report released by Knight Frank at the beginning of the year gave Nairobi a favourable mention when it placed it at fifth position in the continent as far as Ultra High Net worth Individuals index is concerned.

Real estate was said to play a key role in the new wealth creation.

Buoyed by such reports, there was optimism in the sector as different players predicted a fruitful year owing to the cash channeled through the devolved governments.

However, these units of governments spent a better part of the year begging for more development cash from the central government.

There have been sustained calls for a referendum to force the government pour more cash to the devolved units. Many had little to show as far as investments as far as the construction sector was concerned. Among the few who dared to dream was Machakos Governor Alfred Mutua.

During the second half of 2013, he was the envy of many of his colleagues when he outlined plans for an ultra modern city to be built on 2,200 acres. The artist’s impressions of the new city were awe inspiring. But that was all.

Despite high profile investment forums where funds to build the city were pledged, little was heard of the new metropolis in 2014.

Kisumu

Among the few counties that stirred interest in the market was Kisumu as developers eyed Riat Hill, a region that is shaping up as the “Muthaiga” of the lake region.

Already, Swedish entrepreneur Fred Anderson has committed over a billion shillings for the development of 30 Swedish-style villas on a piece of property on the hill.

“Riat Hills is becoming the preferred destination for high end real estate developments in Kisumu. We want to be part of the projected capital appreciation similar to that being witnessed in the city over the last decade,” said Andersson.

As usual, debate regarding the ever skyrocketing interest rates that made home ownership beyond the reach of most Kenyans got its fare share of airtime in local media.

And financial institutions were accused of keeping the rates high although the regulator had lowered its rate. It was also the year when the government went ahead to re-introduce the capital gains tax after a 30-year hiatus.

Through the Finance Bill tabled in parliament in August, the government will starting January 1 levy a five per cent tax on net gains from among others, property transactions.

The move was resisted by players within the sector who said it will slow the growth that has been witnessed within the sector in the last few years.

Unfair distribution of land in Kenya came under sharp focus following the massacre of close to 60 people in Mpeketoni, Lamu County in mid June. While the President Kenyatta blamed local politicians for the massacre, local leaders said the unresolved land question was a contributing factor in the bad blood between the locals and ‘outside investors.

Following a meeting between the president and local leaders, the National Land Commission cancelled tens of title deeds in the region belonging to land that was said to have been acquired illegally.

All the above issues were however overshadowed by the turf wars between Lands cabinet secretary Charity Ngilu and the chairperson of the National Land Commission Muhammad Swazuri.

Ngilu, Swazuri tiff

2014 was Season Two of the tiff that began in 2013. It was mainly fuelled by the question as to who had the executive powers over land administration matters such as the issuance of title deeds, the constitution of land management boards in the counties among others.

The bad blood between the two had a negative effect on the construction sector as far as obtaining the various approvals and land transfer documents from the Ministry of Lands were concerned.

Efforts by stakeholders to reconcile the two bore little fruits. NLC would take the matter to the highest court in the land for arbitration.

The Supreme Court urged the two to reconcile culminating in a signing of an agreement witnessed by the country’s top leadership on November 10. “It is great that we have a working agreement between the commission and the ministry. Now that brings assurance and hope. At the end of the day, the people of Kenya want service and not differences between us,” said the President.

Was this a lull before another storm? Only time will tell.

After some two years of relative silence, good news came out of Konza, the proposed location for the country’s version of Silicon Valley.

This December, Deputy President William Ruto officiated over an event marking the commencement of infrastructure works at Konza.

This was a major morale booster both for the local labour market and investors who had seen little progress in the project since the Jubilee government took over.

The year, however, drew to a close on a sad note for the industry when a six-storey building that was under construction collapsed in Nairobi’s Kaloleni area.

The December 17 tragedy cost the lives of at least seven people with others still missing by the time of this writing. This is another indictment of statutory bodies mandated with providing approvals and continuous monitoring of such projects. Already, Nairobi Governor Evans Kidero has ordered a public probe into the incident.