Mombasa Island has seen an increase of high-rise apartments sprouting up at an exponential rate with most being residential spaces.
With limited horizontal space, investors in real estate are now utilising the vertical space.
Imposing, magnificent high-rise buildings are lighting and changing the face of Mombasa's skyline which for decades has been dotted with Swahili architectural houses.
Majengo is one of the neighborhoods that is rapidly losing its Swahili touch with residential apartments coming up rapidly. Majengo has been likened to Eastleigh, which has seen a significant development that has been spearheaded by the Somali community.
Kizingo, a rich suburb, has also experienced high-rise buildings offering an oceanic view to its high-end clientele.
Ganjoni and Tudor estates have also seen more apartments of between 10 and 15 floors coming up with most offering hostel space for the various institutions surrounding them
According to real estate developers Solian Investments, domestic tourism has led to a huge boost in the real estate space in Mombasa.
Solian Head of Operations Brian Kosgei said that the demand has been spurred due to rapid urbanisation with a housing deficit of 200,000 units per year.
"The holidaymakers are always looking out for an amazing view of the ocean and coastline. Some buyers may purchase units in 15-floor high-rises as investment properties to rent out to tenants, targeting the rental market for young professionals or students," said Kosgei.
He said just like Uber disrupted the taxi business AirBnB has come to disrupt the hotel industry in this space.
Kosgei said AirBnB has made it affordable to holiday in Kenya's number one holiday destination hence an increase in the demand for housing.
He said more individuals have turned to real estate as a means of diversifying their investment portfolios and seeking steady returns through rental income or property appreciation.
Kosgei said the rise of short-term rental platforms, such as Airbnb, has disrupted the traditional hospitality and rental markets, providing alternative accommodation options for travellers and additional income streams for property owners
"As a business, we have observed the key investors spanning from the diaspora and Nairobi. Other categories that have also been keen on the investments are the locals but on a smaller scale," said Kosgei.
He said local developers and construction companies in Mombasa have been active participants in the real estate market, most often undertaking residential and commercial projects, including apartment buildings, shopping complexes, and office spaces.
Joint ventures
For luxurious apartment developers Shikara Apartments, there has been a high demand for high-rise residential apartments by individuals, families, and companies partnering in joint ventures.
Shikara chief executive Alice Wahome said that the sale prices are lower and therefore individuals are investing in them. She said more people wish to sublet to get an income from Airbnb.
"The ultra-modern houses target tourists, both local and foreign, the younger people who also prefer high-rise apartments," said Wahome.
She said the investors want to maximize the use of the minimal space available due to the high cost of land and its scarcity.
Wahome said the cost of purchasing a unit depends on the location of the premises and the prevailing demand.
She said the premises located near towns, main roads, and along the beach are very highly-priced.
"The location, size of the apartment, and type of finishes influence the prices. The construction cost is from Sh42,000 to Sh56,000 per square meter while the sale prices go from between Sh9 to Sh14 million," said Wahome. She said the demand for office and retail space has slowly shifted from the island.
Wahome said, previously, office and business space was mostly on the island of Mombasa but in the last five years, there has been a shift to other environs, especially Nyali, and out of the Island.
She, however, pointed out that the introduction of a 7.5 per cent withholding tax on rental income and subsequent remission of the same to KRA within five days is going to hurt the business because the time left to remit the tax is very short and might affect the cash flow of the landlords.
"Previously, the industry was lucrative as the competition was minimal and the cost of construction was much lower. With the high cost of construction and high competition, many investors are forced to lower their prices to get clients. In the end, the return on investment has significantly gone down," said Wahome.
Further, she said the real estate industry is faced with high costs of repairs and maintenance because of the effect of salt and the high humidity that causes rust to the metals and furniture.
Title deeds
She said the cost of land is high because it is limited and most people do not own land but leasehold and many plots lack title deeds.
"High incidental costs such as installation of window grills, air conditioning, and water desalination plants make the cost high coupled with high service charges on most properties that have lifts and swimming pools," she said.
On his part, Kosgei points out that the new tax on housing will allocate funds or provide incentives to support affordable housing initiatives or address housing shortages in certain regions.
He said alterations in stamp duty rates can impact the overall cost of property transactions, influencing both buyers and sellers.
Kosgei said the issue of the approval process for construction is sometimes lengthy and tedious.
He said land ownership and titling issues are also a challenge in the industry. He said limited access to affordable financing is and can be a challenge for both developers and potential homebuyers with high interest rates and stringent lending criteria hindering property development and limiting the ability of buyers to access mortgages.
