Inadequate data holding back local real estate sector

An aerial view of Nairobi's Kangemi slums. [Davdi Njaaga, Standard

Do you know the size of the smallest residential plot ever sold? What of the average cost of a square metre of land in Nairobi?

To ordinary investors or players in the real estate industry, such information may not be available to them. But such pieces of information, says the Centre for Affordable Housing Finance in Africa (CAHF), are important for the growth of the industry.

The think-tank in a fact sheet dated June 2, 2022 details seven areas of interest to the sector with corresponding indicators to existing gaps.

These gaps exist either because such data is not available or industry players don’t want to share it – particularly in the private sector.

CAHF, which compiled the fact sheet together with Reall and 71point4, notes that industry-wide data sharing initiatives can sometimes succeed.

However, there is a risk of free-riding, with some participants failing to submit the data while making use of other people’s data. “Often, participants in data sharing initiatives fatigue, as more pressing business concerns are prioritised. At the same time, the housing sector and its participants generate data just by existing,” reads the fact sheet.

“Much of this is collected by regulators who govern the processes of construction, investment, urban development, and participation in property markets.”

Some of these indicators concern answering questions like what the smallest residential plot of land recorded or the minimum regulated plot of residential land, what is the average cost of a plot of land per square metres, and how long does it take to register a residential property in days and which process in the registration procedure is the longest?

The above fall under land and infrastructure, one of the seven areas of interest, which out of the 29 indicators, only six are not available. The majority can be accessed through data that details the ease of doing business in Kenya.

The challenging area however falls on the developers’ feet – the sales and rental where 16 indicators are not available.

CAHF notes that not many players want to share data that answers these questions as they are in business and have to play their cards close to their chests.

Real estate agents and finance providers maintain data on their own activities. [iStockphoto]

Under this area, important data sets should respond to queries like ‘what is the rental price in local currency for cheapest newly built dwelling by formal developer or contractor, and the existence of a foreclosure policy’.

Other areas evaluated are construction and investment, maintenance and management, enabling environment, economic environment and demand.

Housing investment

Of the 29 indicators under land and infrastructure, the data fact sheet released on June 2, 2022, shows 23 are available while of the 23 indicators in construction and investment, only 10 are available.

Of 43 indicators in sales and rental, 27 are available while maintenance and management have six indicators available out of the total seven.

The rest have all their indicators fulfilled. The fact sheet notes that various organisations generate and collect data and could potentially provide access to data that is useful for housing investment decision-making.

“Within the private sector, participants such as developers, real estate agents and finance providers will maintain data on their own activities. But they might be reluctant to share data because of competitive concerns,” reads the fact sheet.

It adds that where data is made available by for-profit entities at no cost, it may be provided sporadically and partially, and often to build reputational capital in higher-income segments of the market.

“Non-uniformity of data provided by various companies and unsynchronised releases reduces the usability and value of this data,” reads the fact sheet.

CAHF notes that where data is not available or severely limited, underlying administrative or regulatory processes are inefficient or poorly aligned with the needs of the market.

“This poor alignment is often the underlying cause of informality. In light of this, the Data Agenda challenges existing notions of formality and seeks to explore how new data could enable improved visibility, laying the foundation for better governance, more appropriate regulations and sustainable participation in the financial sector.

The fact sheet provided by CAHF records that the cheapest newly built house by a formal developer is Sh4 million whose size is 47 square metres. Only 14.2 per cent of households in the country can afford this house.

There is a risk of free-riding. [iStockphoto]

The percentage of those who rent in the country is 35 per cent, while 61 per cent own their dwelling.

CAHF says the assessment of data availability and data quality in Kenya’s housing sector has highlighted several data gaps and limitations regarding available data.

“Data gaps along various components of the housing value chain affect the ability to accurately measure investment in Kenya’s housing sector, measure the contribution of housing to Kenya’s economy and measure access to finance and affordability,” reads the fact sheet provided by the housing think-tank.