Complexities around availability of land have been identified as the major challenge for developers seeking to participate in the government led affordable housing agenda, a latest analysis shows.
The analysis shows the challenge goes beyond the pedestrian narrative of how expensive land is, roping in the state’s hiccupped digitisation process, and how some areas do not have the necessary horizontal infrastructure to attract developers.
The issue of resettlement, community disputes and caveats on property have also been raised in the analysis contained in a report published August 2023 by Centre for Affordable Housing Finance in Africa (CAHF).
The report is based on information shared with CAHF through its Open Access Initiative by International Housing Solutions (IHS), a real estate fund manager with interest in the Kenyan affordable housing market.
It is noted in the report titled Practice Note: Reasons for Rejection, that IHS has an established fund for investment in affordable housing in Kenya of Sh11.9 billion and expects to construct about 5,000 affordable housing units in the country by 2032.
The analysis focused on 50 projects that IHS sought to undertake where 29 located in Nairobi Metropolitan Area were rejected for various reasons, land being a major factor, during review.
These 29 projects have a total of 3,000 housing units.
Of the projects, 15 were found to have land related issues, eight were rejected due to market dynamics, affordability and performance, four had infrastructure associated challenges while two were not feasible due to property management or operational factors.
The analysis maintains that for many of these issues, the resolution depends on the government’s input.
“Understanding the array of factors that impact on each distinct, proposed affordable housing development, is critical as government seeks to promote the affordable housing pillar of the Big Four Agenda,” reads the analysis.
President William Ruto inherited the affordable housing agenda from the previous administration - of which he was part - and seeks to inject into the market 200,000 units annually.
Slightly different, though, is that Ruto has rallied counties to provide land for construction of the affordable housing units, and promises that the national government, in partnership with county administration, will provide the necessary horizontal infrastructure.
However, persistent challenges such as land titling still linger for present developers.
Titling, resettlement, community disputes, cultural heritage concerns and caveats are the land related challenges IHS encountered during the review of the projects.
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It is noted in the analysis that financiers are jittery of projects that are likely to lead to forceful evictions to page way for developers.
This is particularly with the rising cases of land encroachment which leaves developers struggling with resettlement process usually met by resistance from the community.
“In other cases, investors restrict institutions from financing projects that could trigger forceful evictions as this is considered violation of human rights, in addition to the process of resettlement being time-consuming and expensive, and requiring legal expertise to expedite,” the analysis reads.
This leads to delayed project commencement, financial loss in the resettlement and in the worst-case scenario inhibits project implementation.
There are some incidents also when the developer is served with a caveat or encumbrance. An encumbrance is when a claim is made against a property by someone who is not the property owner.
This affects transferability of the property and restrict its free use.
“Encumbrances in the form of liens, leases, mortgages, restrictive covenants or deed restrictions can cripple the use of land for development purposes until the subject issue has been resolved,” the analysis says.
It adds that the resolution process can be lengthy, time consuming and costly thus making the proposed project undesirable by the investor.
“Additionally, the use of the property may remain restricted thus challenging the utilisation of the land. The subject projects were rejected due to the existing encumbrances on the land,” it explains further.
The analysis details that the legal and policy framework with respect to land is cumbersome and complex with the multiple legal regimes.
While some light at the end of the tunnel, has been seen with the Land Act of 2012 and the Land Registration Act of 2012 that simplified the legal regime, it is still a complicated affair, according to the publication, since some legislation has not been operationalised with regulations.
“Additionally, it fails to engage productively with the notion of land value, and the impact this has on land use choices and affordable housing,” the analysis states.
It adds that the 2009 National Land Policy, while having important implications on affordable housing given its impact on the availability and price of land, it is out of date and under review.
“Other aspects of the law that require review include the operationalization of the Land Acquisition Tribunal to enhance conflict resolution and support land transactions, and the streamlining of the foreclosure process to promote mortgage lending,” it says.
The process currently takes about six months thus restricting lenders from recovering their monies upon default, thereby discouraging lending.
The complexities have been documented on the titling challenge and particularly the digitisation process.
The analysis states that while positive results are anticipated, the process has had teething problems and is thus slowing down current land registrations, transactions, and the entire development process, and hampering investment into affordable housing.
“The digitisation process started in 2018 and was initially set for completion at the end of 2024, across all of Kenya.
“It is now widely accepted that these timelines are not feasible given the minimal progress that has been made so far: the process is only underway in Nairobi County – that is, in only one of the 47 counties in Kenya,” the report says.
It documents the delays associated with the digital platform, Ardhisasa, where migrating of records to the new platform is slow and complicated to property owners.
“A key stumbling block is the lack of knowledge on how the system operates and the government’s capacity,” the analysis says.
“Notably, there is growing evidence of a need for a hybrid system where the older manual system can continue to operate while the new system is fully implemented.”