Land prices in Kiambu fall following county plans to regulate use

NAIROBI, KENYA: The prolonged electioneering period has seen Kenya’s real estate sector face one of the most turbulent phases in recent history.

Various reports in the last two weeks paint the picture of a jittery sector as the elections that were supposed to be concluded in August dragged on to this week with clouds of uncertainty hanging overhead. A legal challenge to Uhuru Kenyatta’s win has the potential to push the political stalemate to February next year.

Besides politics, the sector has been grappling with the outcome of its own success. An oversupply in some segments such as commercial and residential apartments has seen a low uptake of the units thus depressing returns for investors, some of whom have to repay loans owed to financial institutions.

A glance at the almost empty underground parking lots of the glittering offices coming up in Upper Hill and Westlands reveals a sector struggling to convince prospective clients to fill up the buildings, some of which are two thirds empty.

And now, developers have to face yet another hurdle resulting from newly constituted county governments.

The change of guard at the counties means that a change in policies that inform businesses is inevitable.

First, the alarm bells came from Kiambu, a county that is regarded as Nairobi’s closest bedroom owing to the number of residential units that house city workers.

In June, the county’s department in charge of land, housing and physical planning announced plans to regulate land use in order to boost food security. The county will partner with international agencies to prepare a new spatial plan for the region.

The expected policy shift caused ripples in the sector with land prices falling. According to a report released by HassConsult last week, urban centres in the county saw land prices drop as investors await clarity from the county regarding the expected policy shift.

Land prices in Ruiru fell by 3.5 per cent, that in Juja by 5 per cent while Limuru saw a drop of 5.7 per cent.

“Land for real estate commands a significantly higher price than land meant for agricultural use. Policies that prevent the change in land use from agriculture to real estate will therefore adversely affect land prices. Investors are therefore holding back on buying land in satellite towns in Kimabu County until they are certain that purchases will not be affected by the proposed policies on landuse,” says Sakina Hassanali, the company’s head of development consulting and research.

The county is home to some of the country’s biggest housing projects including Migaa, Tatu City and Edenville. Tatu City is expected to house 70,000 people with another 30,000 commuting to the city on a daily basis.  

The new city is a flagship project under the country’s ambitious economic blueprint Vision 2030 and will sit on 2,400 acres of a former lush coffee plantation.

Migaa, one of the premier real estate developments by Home Afrika lies on what was part of the large Migaa Coffee Estate pioneered way back in 1922 by Ronald Stuart Findlay. Upon independence, the farm has changed hands several times before being purchased by the current developers in 2010.

With real estate development offering more premiums within a relatively short period of time than farming, it remains to be seen how the county will implement the radical policy shift.

Efforts to get comments from the county’s planning department were unsuccessful. An official from the department told Home & Away to await the appointment of county executive committee “so that the relevant CEC member with the authority of the governor can give the official position.”

While stating the right of county governments to set policies in line with their manifestos, Sue Muraya, a director with Suraya Property Group says real estate development grows out of need for a particular type of development in an given area.

“Urbanisation brings itself, it is not forced. Unfortunately, there is no central paper from the national government that guides zoning regulations in all parts of the country. That is why each countycomes up with its own development plan that is prone to change after every election cycle,” says Muraya.

With such a scenario, Muraya says it becomes difficult for a developer to come up with a long term plan especially where the development approval regime keeps on evolving.

“We have the case of Nairobi where the former governor came up with new development approval charges. What happened was that some developers opted not to go for the approvals, opting to use unscrupulous individuals in the construction phase. The result was the spiraling cases of building collapses. If counties make approvals more affordable, more developers would do things the right way from the beginning,” she says.

Chairperson of Kenya Property Developers Association Mucai Kunyiha says that with an annual housing deficit of more than 200,000 units, counties need to release more land rather than hoard. “In any case, counties have not had proper planning policies that guide development. It would be fitting if any new plans take cognizance of what is on the ground and approved for development first,” he says.