The value of building plans approved in Nairobi during the first nine months of the year rose by a 5.89 per cent to Sh168.76 billion compared with the same period last year.
This is Sh9.94 billion more than plans worth Sh158.82 billion that were approved in the corresponding period a year go, fresh data from the Nairobi county government shows.
The statistics suggest developer activities were not adversely hit by increased cost of getting construction approvals as established by the World Bank Group in its Ease of Doing Index for 2016 report published on October 28.
“Kenya made dealing with construction permits more difficult by requiring an additional approval before issuance of the building permit and by increasing the costs for both water and sewerage connections,” the report capturing data between June 2014 and last May, said.
The value of approvals for residential property, however, increased by 14.11 per cent to Sh103.83 billion in the nine-month period to September 30, from Sh90.99 billion last year.
“The most attractive returns in this market are in real estate and private equity,” head of private equity-real estate at Cytonn Investments Shiv Arora said on November 2, explaining the high appetite by developers.
This is underpinned by the growing population in Nairobi which has resulted in the mismatch between supply and demand, resulting in mushrooming of slums.
There was, however, a 4.15 per cent drop in the value of plans for development of non-residential blocks – mainly offices, shopping malls and warehouses. Their value dropped to Sh64.93 billion from Sh67.74 billion last year. This could be attributed to recent oversupply, according to quarterly industry reports by Knight Frank.
The data released by the Nairobi county’s Planning, Compliance and Enforcement department showed that September posted the highest value of plans this year at Sh23.54 billion.
That seven per cent higher than Sh22.00 billion worth of plans cleared in September, last year. It also only second to Sh23.71 billion, in October 2014, over the last years.
The World Bank’s report ranked Kenya’s ease in dealing with construction permits at position 152 out of 189 countries surveyed – three positions better than last year.
According to the survey, it takes an average of 146 days for developers to get construction approvals in 15 procedures. This is slightly more than 14.4 procedures, on average, for sub-Saharan Africa.
Getting approval for architectural plans takes the highest days at 45, with associated charges averaging Sh340,439. It is followed by approval for environmental impact study from the National Environment Management Authority at an average of a month at a cost of Sh2,936.
Procedures such as obtaining a survey plan, notifying the county of commencement of works and applying for water connection at a fee of Sh5,000 can, however, be done in a day. That also applies to requisition for inspection including assessment of connection fees and foundation excavation works.
To connect to water takes developers 30 days at no further charge after paying application fee, while applying to connect to sewerage system takes about a week at Sh7,500.
Real estate is a key indicator of performance in the construction sector. The sectors’s growth decelerated to 9.9 per cent in the April-June period from 16.6 per cent a year ago, pulling down overall economic growth to 5.5 from six per cent, according to the Kenya National Bureau of Statistics.