Property Developers and Real Estate Experts Urge Kenya’s Government to Help Make Affordable Housing a Reality

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Kenya’s government is planning to build one million affordable homes within the next five years. If successful, the drive could ignite a lagging real estate sector, and place Public-Private Partnerships (PPPs) at the centre of economic life for one of Africa’s most rapidly urbanising countries, Kfir Rusin, Managing Director of the East Africa Property Investment (EAPI) Summit, has said.

The Summit is the region’s largest real estate focused event, whose primary focus is developing a strategy for realising the government’s goal.

“We’re bringing private and public-sector stakeholders together under one roof at EAPI 2018, and we believe we will develop the roadmap to making affordable housing a reality,” said Rusin.

The one million affordable houses plan was unveiled by Kenya’s President Uhuru Kenyatta in November 2017. Real estate sector players said the move energised a tepid real estate market, still recovering from its worst performance in six years.

However, Chairman of the Kenya Property Developers Association, Mucai Kunyiha, argues there is a lot of work to be done first.

“Our members are keen to unlock the key obstacles that have hindered progress in the sector in the past, including proper planning by local authorities, provision of adequate infrastructure, and a complete overhaul of the Land Registries, whose ability to deal with the existing volumes of transactions is already strained,” said Kunyiha.

But the demand for affordable housing is one of the most significant opportunities for PPPs in Africa, with Kenya having the opportunity to create a workable model for the continent to adopt.

Kecia Rust, Executive Director of the Centre for Affordable Housing Finance in Africa (CAFH), argues that the opportunity for affordable housing is immense and could lead to the creation of 1.3 million jobs across the continent and $400 Billion in direct economic activity. Kenya, she argues, is one of the markets that could lead the way by creating a workable PPP model: however, certain fundamentals must be addressed.

“The real challenge is the housing value chain, and if we look at the first step, land, how do we get access? We have to look at the municipalities and ask who administers it and address infrastructure requirements and needs first,” Rust explained.

For Rust, the government has an essential role to play in making it attractive for developers to invest in housing by providing incentives and infrastructure financing. One solution, she says, is to split funding between housing and infrastructure, with the state issuing 100-year bonds to fund bulk infrastructure, including roads and water projects. This strategy would reduce development costs and make affordable housing projects more attractive for developers.

The need to develop bulk infrastructure has been a principle driver for developers in focussing on higher-end consumers alone, in delivering an estimated 35,000, mostly unaffordable, homes per year, while the lower and middle end of the market continues to be underserved.

“The majority of the middle class and working-class households simply can’t get a foot in the door,” Rust commented.

Reducing costs and providing finance for aspirant homeowners is critical, in a market facing such an acute shortage. Prices have risen dramatically in Nairobi since 2010, with a ten-fold increase in price for the most inexpensive home. Yet mortgage uptake remains low with only 25,000 mortgage-purchased homes, in total.

While the government remains tight-lipped on what an ‘affordable home’ is; Kunyai defines it as a building costing up to Ksh4 million ($39,600) to buy, and aimed at households that earn between Ksh40,000 ($396) and Ksh100,000 ($990) per month.

Addressing the shortage of homes will provide an economic stimulus to the entire economy through the creation of jobs and increased investment, which is likely to spill over into the regional economy.

And while PPPs are not a new route to large infrastructure development, globally, the scale, social focus and timeline of the projects will lead to increased attention by investors, developers and public-sector stakeholders across the continent.

At the EAPI Summit this year, which will be held on the 24th and 25th of April, a core theme for its stakeholders, will be the ambitious housing projects launched by Kenya’s government.



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