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A look at what lies in store for real estate this year

REAL ESTATE
By Peter Muiruri | January 7th 2016

How will the real estate sector perform in 2016? After registering mixed fortune in 2015, players are hoping that the New Year will bring good tidings to the property industry. Already, pundits are saying that all indications are that the sector will continue on an upwards trajectory owing to the huge demand for housing by the rising middle class in the country.

The government’s plan to reduce the country’s annual housing deficit that stands at about 300,000 continues to face financial and policy challenges. The continued presence of multinationals in Kenya will also see a need for more Grade A offices.

This factor alone has seen Upper Hill become the most expensive area in the country as far as land prices are concerned, with an going for Sh493 million.

So, what will shape the property market in 2016?

Infrastructure-based development

The planned infrastructure developments across the country will be a game-changer as far as property development is concerned. Key among these is the new Standard Gauge Railway that is expected to move closer to the city this year.

As transportation becomes easier, demand for land and housing in previously inaccessible locations will rise, prompting developers to change base from the congested city to outlying areas.

Infrastructure improvement will also mean that major services such as schools, hospitals and malls will be set up, creating new urban centres where none existed.

In an expanded land index report for the second quarter of 2015, HassConsult and Stanlib stated that satellite towns coalescing around the city such as Kiambu, Kiserian, Kitengela, Mlolongo, Ongata Rongai, Ruaka and Syokimau will be places to watch as land prices increased six-fold in such areas between 2007 and 2015.

“New data shows strong development and investment in these areas with land price growth equalling and bettering those in the inner city suburbs. Investors can receive the same returns on property in satellite areas with lower cost to market entry,” stated the report.

Standard Gauge Railway (SGR) workers go about their duty at Mtito Andei, Makueni County. The SGR is one of the infrastructure expected to open up outlying areas for development. (PHOTOS: DENISH OCHIENG/ STANDARD)

Ruaka, for example, had the most expensive acreage of the satellite towns, with a 9.4 per cent increase in the year to June 2015. An acre here is said to cost Sh56 million. The ongoing construction of Two Rivers Mall and Rosslyn Riviera will see land prices in the area appreciate further.

In addition, the easy road connectivity through the nearby Northern Bypass will see more people trooping to the area, further increasing Ruaka’s economic worth.

Hospitality industry

A keen observer will have noticed accelerated hospitality activities in Kenya. Major global hotel brands continue to set shop in Kenya, occupying grandiose structures previously associated with the developed world.

Nairobi Hemingways, Villa Rosa Kempinski, Sankara and DusitD2 are among the major players in the top-tier that have set base here in the last few years. Interestingly, the hotels came up at a time when Kenya faced negative press owing to recent terror attacks, especially in the North Eastern part of the country.

The drive to build more hotels is not about to die any time soon. According to Jens Brandin, the general manager of Radisson Blu, Nairobi, any major hotel brand would want to have a presence in Kenya more than anywhere else on the continent.

He says that the vibrant technology and mining sectors in the country are magnets for drawing top corporate heads to Nairobi, hence the need for high-end accommodation.

Is insecurity an issue? “Having faced acts of terror and learning from them, Kenya is much more prepared to handle security matters more than anyone else. It is much safer than some places in Europe that are just beginning to see the effects of terror,” says Brandin.

Avic International, a Chinese real estate firm, is planning to build one of the tallest structures in the city that will include a 35-floor five-star hotel block. However, the firm will have to deal with a legal issue instituted by Simba Corporation Limited, the company behind Villa Rosa Kempinski.

The proposed hotel is set to be constructed on a piece of land adjacent to Kempinski. This will be a matter to watch as Avic intends to invest Sh9.6 billion on putting up the new property.

Lands office

This will perhaps be the most watched office as far as real estate development is concerned. Land legislative matters took centre stage for the better part of last year, with various stakeholders finding fault with then acting cabinet secretary Dr Fred Matiang’i.

The man to watch here will be Prof Jacob Kaimenyi, the academician who did not have a very rosy stint at the Education ministry. How he will manage to navigate through one of the most turbulent dockets?

Reverse gear

While everybody hails the country’s progress in real estate development, it is not lost on observers that some of the country’s big projects seem to have stalled, slowed down or engaged the reverse gear. Key among them is Konza Techno City, a flagship project in the country’s development blueprint, Vision 2030.

This is the third year since retired President Mwai Kibaki laid the foundation stone of the project that was to turn the hitherto grazing fields into a mega city, with more than 200,000 people working in business outsourcing in the next two decades.

In December 2014, Deputy President William Ruto was back in Konza, this time around to lay the groundwork for the first phase of basic infrastructure. With 345 investors said to be waiting in the wings to invest over Sh100 billion and Konza Technopolis Development Authority advertising for interested parties to book development space, we will closely monitor further developments on this project.

Similarly, we will be waiting for the end of legal wrangles that have delayed the full development of Tatu City. The project, modelled after South Africa’s Sandton City, covers 2,500 acres near Ruiru. The mixed development project is meant to create commercial and social amenities for at least 70,000 residents and 30,000 commuters.

However, local and foreign directors have spent more time in court than on the ground. Will 2016 see the project turn a new chapter?

While still at it, we are still waiting for the final word from Machakos Governor Dr Alfred Mutua who promised us a brand new city launched by none other than President Uhuru Kenyatta in late 2013.

Despite the optimism in real estate investments, it is not lost on observers that the World Bank in October last year trimmed Kenya’s 2016 growth forecast from 6.6 per cent to 5.7 per cent. Only time will tell how the new projection will affect investments in the real estate sector.

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