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Limited access to serviced land hurts investments

FINANCIAL STANDARD
By NICHOLAS WAITATHU | July 30th 2013

By NICHOLAS WAITATHU

Failure by the Government to provide social amenities in some urban areas has left investors competing for few serviced but expensive properties in the market.

A leading land economist Mr Mwenda Makathimo says the move has encircled investors in one area, scaling down  investments in the real estate sector.

“The result is that many investors are overflying our country for destinations with easier access to cheaper and serviced land,” Makathimo says.

He said the Government should do more to open up other areas to investors by providing such amenities as roads, water, energy, and communication. 

“The absence of the fundamental services has contributed to high operational cost of development,” he said.

Burden of transfer

This, he added, keeps investors at bay. Those who bear the burden of huge costs usually transfer the same to property buyers. “The inadequacies have contributed to hiking of land prices thus making it difficult to the majority to invest,” said Makathimo.

In the past decade, the land market has witnessed exponential growth in prices with urban areas suffering the biggest strain.

Yet even this skewed development has left private property developers concentrating their investments in the upper and middle upper segments of the market at exorbitant costs.

This neglect has left the low-end market suffering — at the disadvantage of majority of the urban poor. Experts are now warning that even as it appears that land prices are soaring, the land market is recording less than optimal performance. This is largely due to poor or non-existent social amenities.

According to local property developers, an acre of land in prime areas that cost Sh22 million in 2004 has since risen to between Sh130 million and Sh200 million by end of last year.

Well-serviced areas such as Karen, Lavington, Kilimani, Runda, Westlands and other middle upper segments have become almost a-no-go zone for low-end investors.  Only the monied can buy into such areas.

Ibrahim Mwathane an expert in surveying and land information management said that the upward trend has been occasioned by high demand prime land, economic growth, availability of credit from local and external markets

But even as the landowners celebrate high prices, some of them who want to construct house for sale have to contend with swelling prices of building materials and cost of credit.

Reduction in investment has also denied the country employment opportunities, substantial economic growth, revenue, and contributes to insecurity. 

Freeze on land

Mwathane told Business Beat in an interview that the Government’s move to freeze deposition of public land has affected businesses. He noted that some of the projects such as in water sector, roads, and energy which the government had not acquired land before the suspension are yet to take off.

“Indeed the embargo has suppressed the investors’ enthusiasm to participate in the economic building,” he added. National Land Commission chairman Mohammad Swazuri concurred that the embargo by the Cabinet indeed affected some aspects of business.  He noted that in the absence of public land, investors especially from foreign countries had to contend with high priced private land.

 “Investors have been relying on private land which equally has been very expensive. Private land owners have been raking  in substantial profits out of increased prices,” he said recently in an interview in his office.

However, even with the freeze order, some projects were initiated.  Land leases executed between 1913 and 1914 are ending this year. This will  require holders to seek renewal from the commission.

Foreign landowners with freehold tenure are required to convert their titles to 99-year leaseholds in line with the 2010 Constitution. He said the Commission will carry out audit over the usage of the land before renewing land leases.

 “Before renewing the lease the commission will carry out an audit to ascertain the true picture of land usage before the renewal of the lease,” Swazuri stated.

The commission was constituted in late February and currently it is setting up governance structures.

Dr Swazuri confirmed that the moratorium has been lifted but hastened to add that for any public land deal to be allowed it has to be governed by regulations and guidelines to be published before the end of the year.

 Mwathane said that burdensome procurement of land has forced land buyers to frequent land offices thus increasing costs.


 

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