Kenya's affordable housing plan boon for investors – report

Kenya's affordable housing drive under the Big Four Agenda provides an opportunity for investors in Kenya, Pan-African professional real estate services provider, Broll Property Group, has said.

In the 2021/22 financial year, National Treasury plans to spend at least Sh13.9 billion to drive the affordable housing agenda.

This is meant to provide “affordable and decent housing for all Kenyans” according to Treasury CS Ukur Yatani.

This sets the platform for investors to tap in, notes Vivian Ombwayo, director of research and valuation at Broll Kenya.

With attractive incentives for private developers, the affordable housing sector offers developers an opportunity to diversify their portfolios, especially those concentrating mainly on the commercial-user space, adds Jess Cleland, chief operating officer Outside of SA, Valuations and Intel at Broll.

“It means they are able to diversify into the residential sector, thanks to attractive government incentives,” Cleland says.

Ombwayo and Cleland spoke when they presented a research report on the sector at the eighth annual East Africa Property Investment (EAPI) Summit.

The research report was co-sponsored by API Events. According to the report, the abundant housing opportunities in Kenya also allow complementary users to be included in affordable housing projects, such as retail, office, institutional and also medical.

This means that, at the end of the day, despite having to manage their revenue and cost carefully, private developers are able to achieve a healthy return from comprehensive affordable housing projects.

Another factor to be considered is the social impact of affordable housing, stresses Ombwayo:“We have so many developers, such as those in the private equity space, heavily involved with the social benefits that such projects afford local communities. There are no better projects than affordable housing in this regard.”

Kenya has an annual housing demand of 250,000 units with an estimated supply of 50,000 units, culminating in a housing deficit of two million units, or 80 per cent deficit.

Housing affordability is a key challenge in Kenya with many people unable to afford to buy or build their own home.

While there is no formal definition of what constitutes affordable housing in the Kenyan property market, according to the Kenya Mortgage Refinance Company(KMRC), the ceiling for a typical three-bedroom unit is Sh4 million.

“However, it is very much dependent on the developers themselves, who often base the definition of affordable housing on not cost alone, but also on the proximity to socioeconomic amenities,” notes Ombwayo.

The demand base of low- to middle-income earners, which accounts for more than half of the economically active urban population, lends a real impetus to the demand for affordable housing.

For example, the online affordable housing platform developed by the government, known as Boma Yangu, has clocked up over 320,000 subscribers to date.

“While private developers are finding it very tight to maintain the ceiling of Sh 4 million, we are not really seeing any projects offering anything above the standard typology of three-bedroom apartments,”Ombwayo notes.

The cost of land within the major urban centres is increasingly pushing developers to the outskirts, where the main attraction is the ready availability of relatively cheaper land.

Land cost remains a critical aspect in affordable housing, coupled with innovative ways of minimising overall projects costs, such as alternative building technologies.

“The private sector is yet to catch up, but there has been a lot of traction in recent years, especially as the private sector attempts the tricky balance of cost versus the final price of a unit,” explains Ombwayo.