Private developers can embark on affordable housing projects without necessarily relying on government incentives,
CEO of Rendeavour Stephen Jennings has said.
He said increasing units under construction and using new building technologies would allow developers meet their profit margins while at the same time move towards meeting the housing shortfall especially for the low and middle income households.
“I think the private sector can do a lot without subsidies. The key really is scale. We need large scale infrastructure and we need large scale construction of the units,” Jennings said.
Under President Uhuru Kenyatta’s Big Four Agenda, the government plans to build one million low-cost homes by 2022 through two programmes – social housing and affordable housing.
The State plans to partner with financial institutions, private developers, manufacturers of building materials and cooperatives to deliver homes faster and reduce the cost of construction by at least 50 per cent.
The aim is to deliver units under the affordable housing programme ranging from Sh800,000 for a bedsitter to Sh3 million for a three-bedroom unit.
“It is very hard for private developers to establish houses going for below a million and make a return meaning it will not be viable,” Karibu Homes founder and MD Ravi Kohil said.
This has been reiterated by other local private developers who deem the project as unprofitable.
“Developers are not actually able to build low cost housing because it is expensive as they will be taking on a lot of government’s work including infrastructure development,” Hass Consult research analyst Sakina Hassanali said.
Jennings noted that other than infrastructure development the building and construction industry suffers from a weak supply chain. He said Kenya needs to establish a robust manufacturing base for construction materials to reduce operational costs for developers.
“As we get more scale, efficiency and materials manufactured in Kenya rather than being imported, the price will keep coming down but it is very hard to leap all the way to that bottom price point,” he said. “A lot of these components need to be manufactured locally and the cost of manufacturing needs to go down.”
Karibu Homes yesterday signed an agreement with Tatu City to develop 1,300 affordable homes priced between Sh2.5 -5 million in the mixed-use, mixed-income development in Kiambu county.
“The cutting point for the private sector to get involved in this agenda should be between Sh1.8 -2 million,” Kohil said. “We’ve already made it work in Athi River.”
He said from the President’s agenda, more than 70 per cent of the affordable homes will have to be provided by the private sector and the rest by the government.