Real estate's dream lives on amid visible ruins

The front view of the newly constructed Sabby Grand Hotel in Kandara. [Boniface Gikandi, Standard]

In 2002, Mwai Kibaki became Kenya's third president, a transition that ignited a surge of hope among Kenyans.

President Kibaki's ascension brought renewed optimism and ignited a flame of economic aspiration. In the early days of his presidency, interest rates for government loans dropped to about two per cent thus forcing banks to seek customers to take up loans.

This triggered an increase in borrowing from Kenyans and stimulated investment. Kibaki's Vision 2030 blueprint offered a glimmer of a prosperous future that catalysed both local and international investors to venture into large-scale real estate projects, hitherto unseen.

Estates like Eastleigh, Kilimani, Lavington, Westlands, Kileleshwa, and Upper Hill metamorphosed into urban landscapes filled with high-rise apartments and bustling shopping malls. Kenya emerged as an attractive investment destination due to its relative stability and lucrative returns.

Money poured in from global sources, including Somali pirates, Congolese gold dealers, South Sudan's oil revenues, and investors from China and Europe. The sudden flush of investments in the real estate sector even outstripped funds taken from banks, a testament to the foreign capital attracted by the country.

Real estate investment is typically a long-haul game, with the return on investment averaging 15 years. Hence, an investor has to possess confidence in the country's political and economic stability over this period. Kibaki's economic recovery plan was successful in instilling this trust among investors.

Two investment trends emerged from this confidence: buying extensive remote land areas and subdividing them into smaller plots for resale, known as 'buroti maguta maguta' (prime, eye-catching plots), and the advent of luxury cottages and holiday homes, particularly those on golf courses.

Despite the inherent risks in these ventures, some projects reaped success. Vipingo Ridge, a multi-billion-dollar estate in Kilifi County, was once known for its sisal plantations, but under Kibaki's era, it metamorphosed into a plush residential area housing Kenya's affluent. Other successful investments include the Great Rift Valley Golf Course and Thika Greens, which lived up to their promise.

But the journey was not smooth for all. Some projects, such as Longonot Gates by Home Afrika, fell flat. Many of these ventures underestimated the size of their target market and over-ambitiously relied on Kenyans' ability to afford second homes. As a result, there was an oversupply of properties, with many projects left unfinished or not even initiated, leading to huge losses for many investors.

Promises of future developments, like new roads and cities, caused a sharp rise in the cost of land. But when these plans were delayed, investors found themselves stuck with land they could not even sell to get back their initial investment.

An example is the Lamu Port-South Sudan-Ethiopia-Transport Corridor project that was expected to grow towns such as Isiolo, Lamu, Manda and Hindi, among others.

The era of economic prosperity under Kibaki, buoyed by easy credit and an influx of foreign capital, was also disrupted by significant policy changes. With the increase in Treasury bill rates, banks shifted their investments to government securities, squeezing the private sector and hiking interest rates.

Today, the once vibrant projects were left incomplete by its end resemble ghostly relics. Overgrown grass, rusty iron fences, and faded signs now mark these sites.

Yet, amid the grim reminders, we hold on to the possibility that we may rise again, dreaming anew and learning from past lessons.

The writer is an expert in property law