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Kenya's construction projects surge amid rising cost of building materials

Real Estate
 A photo of a residential development project. [File, Standard]

The construction industry has defied a tough year to register notable achievements with the country registering an influx of projects.

According to the Architectural Association of Kenya’s (AAK) Built Environment Report 2023, released last week, the National Construction Authority (NCA) received 4,770 applications from January to October this year. Notably, 70.3 per cent of these applications, totalling 3,354, were successfully registered.

Residential development constituted the majority at 1,821, representing 54 per cent of the total, compared to 2022 when it accounted for only 60 per cent of the overall projects.

This was a slight drop, reflecting a sustained demand for development.

Mixed-use development constituted 30 per cent of the projects, while commercial development at 15 per cent, both of which recorded growth. In 2022, they recorded 24 per cent and 11 per cent respectively.

In terms of the monetary value of the projects, residential development recorded the highest at Sh97.5 billion worth of projects approved by NCA in the period January to October 2023.

Nairobi City County Government recorded the highest number of building applications, totalling 1,985 from January to November 2023 with a cumulative value for developments during this period amounting to Sh176 billion.

However, this reflected a marginal decrease compared to the same period in 2022, which saw 2,078 applications valued at Sh191.6 billion. In the same period, the county generated revenue through approvals amounting to Sh1.9 billion.

There was a noteworthy increase of Sh1.2 billion in the revenue collected by the City-County in 2023 compared to the corresponding period in 2022. Out of the 1,985 applications received by Nairobi County in 2023, 1,889 were approved, 86 were deferred, and 10 were declined.

However, adherence to construction standards and guidelines remains a challenge in the country, as evidenced by the number of suspended projects recorded at 7,042 (66.1 per cent) of the 10,655 site inspections conducted by the authority.

In the survey run by AAK among its members in November 2023, to establish their recent experiences using the Nairobi Planning and Development Management System (NPDMS) portal, respondents submitted 167 applications on the NPDMS.

Most members, constituting 42 per cent, submitted approval applications for residential projects, corroborating the data provided by the Nairobi County government and the NCA.

Fifty per cent of the 167 development applications submitted to the NPDMS portal had received approval, while 50 per cent were still pending. Forty-three per cent of the AAK members noted an improvement in approval times, with approvals being granted within an average of eight weeks.

However, members attributed this improvement to the facilitation given to the county officials, which undermines the intended efficiency and transparency of the system. However, the construction sector faced formidable challenges, notably the escalating costs of construction.

A report by Integrum Construction Project Managers indicated that in 2023, the construction costs in Kenya averaged about Sh41,600 per square meter for a standard bungalow and Sh100,800 per square meter for luxurious high-rise towers in the city of Nairobi.

Construction cost

However, in 2022, the average cost ranged from Sh34,650 to Sh77,500 per square meter, respectively. The construction cost, therefore, rose by between 20.06 per cent and 36.22 per cent over the past year as of June 2023.

This spike was attributed to the increased costs of construction materials and fuel, exemplified by the surge in the price of steel reinforcement bars from Sh140.60 per kilo in December 2022 to Sh160.26 in December 2023, marking a 14.29 per cent increase.

Similarly, the cost of cement rose from Sh650 per 50kg bag in December 2022 to Sh750 in December 2023, an increase of 15.38 per cent.

These escalations have been largely a result of the increased import costs influenced by the weakening currency. In addition, land rates have surged by an alarming 6.41 per cent since December 2007.

In urban centres like Nairobi, what was valued at Sh30.3 million has now risen to Sh190.4 million in 2023.

“These exorbitant construction costs, hinged on the cost of building materials and land, threaten the achievement of affordable housing programme,” said AAK President Florence Nyole.

The Status of the Built Environment (SBE) report provides an overview of the current state of the Built Environment in Kenya highlighting key trends, challenges and opportunities.

Development control regulations emerged as a critical challenge that is stressing construction industry professionals. The absence of essential planning and legal frameworks, such as local physical development plans, zoning regulations, development control regulations and building regulations, contributed to haphazard developments in urban areas

“For instance, the Nairobi Development Control Ordinances expired in 2014 and the zoning guidelines have been arbitrary,” she added. Recognising this, AAK surveyed its members to gauge the efficiency of Nairobi, Mombasa, Kisumu, Nakuru, Uasin Gishu, Kilifi, Tharaka Nithi, and Kiambu counties in granting development control applications.

The survey revealed that the delays in construction permitting experienced in the counties are not inherent to the systems or external factors but result from human actions and oversights.

While 43 per cent of AAK members in Nairobi noted an improvement in approval times, with an average of eight weeks, seven per cent reported the most prolonged approval timeline, exceeding 32 weeks.

In Mombasa County, only 16.7 per cent of applications received approvals, with 83.3 per cent remaining unapproved. In most cases, members have to provide facilitation to county officials for successful processing.

The engagement of consultants in the Affordable Housing Program (AHP) has been AAK’s focus since the inception of AHP under the Big Four Agenda.

With a total project pipeline of 838,876 units, the government has completed 584 units and launched 39,879 units and some 34,355 units were waiting to be launched as of November 2023.

“While some of our members have volunteered to be consultants for the affordable housing project, there is still an issue when it comes to the negotiation of the consultation fees for the work they are doing. Feasibility studies also need to be done for the projects and we have given our comments on the same,” said Ms Nyole.

According to the report, in Kenya, over 80 per cent of the developments are carried out without any professionals.

NCA Executive Director Maurice Akech said the new building code will soon be gazetted by the Lands, Public Works, Housing and Urban Development Cabinet Secretary Alice Wahome. He said they will be issuing joint statements with other built environment professional bodies so that whenever a building or structure collapses, professionals involved are publicly listed, ashamed and also held accountable.

AAK Vice President George Ndege said they are working on establishing a standing disciplinary board to reign in on their members, who are practising illegally.

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