Construction boom as resurging economy creates new opportunities

By Morris Aron

Construction in the real estate sector surged in the first six months of the year, driven by a growing number of developers investing in middle-income residential estates, Kenya National Bureau of Statistics figures have shown.

Leading economic indicators for the month of July show City Council of Nairobi (CCN) approved development plans worth Sh11.6 billion, with the residential property segment accounting for Sh7.3 billion of the planned developments for the month of June alone.

The latest KNBS figures confirm a trend that many property analysts have in the recent past projected.

Developers are now building residential units for the middle and low-income groups. Photo: File/Standard

Real estate experts say there is a renewed interest among developers who are moving to cash in on the opportunities created by the ongoing infrastructure developments, particularly roads in and around the city, which are promising to open up land prime for residential estates on the outskirts of the city to meet demand for housing.

"Demand for housing is most acute at the middle and low end of the market," said Frank Ireri, the managing director of Housing Finance, a mortgage financing company at a recent function.

High land prices

"Unfortunately, high land prices have barred many from venturing into this housing segment. This is, however, bound to change as road developments open up the city’s outskirts."

According to the KNBS statistics since January, CCN has approved residential developments worth Sh32.9 billion. CCN has to approve all property developments within Nairobi before construction can commence, and is the best indicator of the level of activity in the real estate sector. The figures also indicate that commercial property plans worth Sh25.9 billion were done between the months of March and May.

Real estate experts say the statistics are in sync with a growing trend, as developers focus on building homes for the middle and low-income groups.

This is where the housing shortage is acute, especially after a number of investors burnt their fingers following the on-going market correction in the high-end apartment market, due to oversupply.

The figures also match a slow down in the commercial property sector — offices and retail outlets — after a period of increased office supply, as firms relocated to the office nodes of Upper Hill, Westlands and Mombasa Road to avoid losses associated with traffic jams in the Central Business District (CBD). This now appears to be stabilising.

Looking for opportunities

"More developers are increasingly looking for opportunities in the low and middle income housing projects, especially along the corridors of major road developments, and in the old dilapidated housing units built in the colonial era," said Wilberforce Oundo of Regent Group, a property company.