SECTIONS

Face-to-face with the sad reality of Kenya’s housing sector

Acting Housing Cabinet Secretary Fred Matiang’i last week came face-to-face with the sad reality of Kenya’s real estate market: Most of the new housing projects coming up are out of reach of millions of Kenyans, including those who are well-paid and in the fabled ‘middle-class’.

Acting Housing Cabinet Secretary Fred Matiang’i (centre) at the Suraya Property Group’s stand at the Kenya Homes Expo in Nairobi last week. Matiang’i wondered why developers are not putting up low-cost housing. (PHOTO: COURTESY)

Before officially opening the 22nd Kenya Homes Expo at the Kenyatta International Convention Centre (KICC) in Nairobi on Friday, Matiang’i took time to visit various stands. As he moved from one stand to another, the CS wondered why very few developers were interested in constructing homes for the lower segment of the market, where the real demand for housing is.

“All I see here are top-end developments costing tens of millions. How will those fellows with a house allowance of Sh6, 000 ever get to own a home?” he asked.

The question seemed to follow hot on the heels of his promise to give a road-map on delivering 300,000 houses by 2017 as pledged by the Jubilee administration.

During a stakeholder’s consultative forum on affordable housing held in Nairobi earlier this month, Matiang’i said that numerous meetings on affordable housing have been held without achieving tangible results.

Matiang’i repeated the message during his official speech at the formal opening of the expo last Friday afternoon.

“We are proud of the private sector for its immense role in housing delivery in the country. However, despite all the efforts, there is a huge demand for housing, and particularly affordable housing. This trend signifies the need for developers to invest in rental houses to meet the growing needs of Kenyans residing in urban areas,” he said.

 Foremost proponent

The answer to his question, however, lay within the expo grounds.

At the Suraya Property Group stand, Matiangi met one of the foremost proponents of affordable housing, Pete Muraya, the group’s CEO.

For the last three years, the company has spearheaded the construction of studios, one and two-bedroom apartments in various parts of the city and beyond. He had a ready answer to the Cabinet secretary’s question.

“Construction of affordable housing is close to our hearts. However, we continue to face the challenge of having to put up prerequisite infrastructure, especially motorable roads into order to reach our sites. This takes a big percentage of finances that should go directly into providing affordable homes,” said Muraya.

Muraya gave the example of their Encasa project off Mombasa Road comprising 1,000 units on 12.5 acres. The apartments are targeted at first-time home owners and retail at Sh999, 000.

However, the developer had to spend an enormous amount of time and money on roadworks.

“Such extra projects eat into the final costs of the project. If the Government steps in to take care of such requirements, then the benefits will be passed on to the consumer, in this case, those who are starting out on life,” he said.

According to Elly Ongoma, a director at Eldon Properties, and head of sales for Victoria Gardens (the company behind Victoria Gardens in Kisumu), developers will have problems putting up affordable housing as long as the cost of financing remains high.

 Alternative funding

Ongoma says the reason there is more stock available to the upper and middle-classes is that these segments do not necessarily rely on borrowed funds to own property.

“The middle and upper-classes have the means to own homes. A number of them have alternative sources of financing. For them, mortgages are just untenable,” said Ongoma.

Added to the problem of infrastructure development and cost of financing is the issue of land. In many urban areas where there is an acute shortage of affordable houses, there is little land for home construction.

With demand affecting prices, the cost of the little land remaining shoots through the roof. The result? Even the moneyed will have a problem putting up houses that will not guarantee a healthy return on investment.

“A developer is a businessperson. The final numbers must make sense and no developer will put up homes if he or she cannot recoup the cost of investment plus a modest profit,” says Ongoma. For the affordable-housing model to work, Ongoma says, there must be a joint effort spearheaded by either the central or county governments, who have a wider mandate on the country’s resources.

He says many urban centres in Kenya have old estates that can no longer support the population density being witnessed lately. He gives the example of Kisumu, where some older estates like Shauri Moyo that no longer make economic sense, need to be pulled down and in their place modern homes erected.

“We must move away from the delusion that everyone should own a house. County governments should consider developing social houses for rental purposes targeting those in informal settlements. Later, when the county recoups its investment, the tenants can have the option of purchasing the homes,” says Ongoma.

It is the same story from Coast-based real estate developers. Mwenda Thuranira, CEO of Myspace Properties, says the few developers willing to construct affordable homes can only put up a few units due to financial constraints. The situation, he says, has been made difficult by the ever-rising interest rates.

“Home development is about profitability. Many more would like to join the league of low-cost home developmers but feel trapped by rising interest rates. Let the Government intervene in the twin areas of cheap land and money,” he says.

Well, with this state of affairs, the ball is squarely in Matiang’i’s court. He needs to come up with specific intervention measures that will see the country bridge the perpetual housing deficit.