NAIROBI cleared building plans valued at Sh242.13 billion last year, 6.18 per cent more than in 2014, driven by developers' rising appetite for in-demand residential blocks.
The county government approved building plans worth Sh228.02 billion in 2014. Data from the Nairobi county government indicates 60.69 per cent of the plans were for residential with the remainder non-residential.
Plans for residential structures were valued at Sh146.95 billion, the data show – a rise of 11.21 per cent from Sh132.13 billion approved in 2014.
Investment in non-residential property, however, appeared to stagnate, declining by marginal Sh710 million to Sh95.18 billion from Sh95.89 billion worth of approved plans. Non-residential blocks largely include offices, shopping malls and warehouses.
The statistics suggest developer activities were not adversely hit by increased cost of getting approvals for construction as established by the World Bank Group in its Ease of Doing Index for 2016 report published on October 28, 2015.
“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.
A growing number of middle-income residents has, however, drove up demand for housing, resulting in increased investment due to relatively high returns.
“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.
The data released by the Nairobi county’s Planning, Compliance and Enforcement department showed that November posted the highest value of approval of building plans at Sh25.46 billion, while the lowest value was recorded in January at Sh12.71 billion.
Over the last decade, supply of residences largely in the mid- to high-income segments of the property market, has been looking up.
Recent quarterly surveys by HassConsult and Kenya Bankers' Association have suggested rent prices are stagnating on rising supply, especially for apartments.
Flats are popular with developers due to scarcity and spikes in land prices that have led investors to build high-density units to maximise land use.
The HassConsult report for the fourth quarter of last year, for example, indicated apartments made up 59.6 per cent of rental market in December – five times more than maisonettes and town houses combined.
Rent prices for apartments consequently fell by 2.3 per cent quarter-on-quarter against the industry's average of 0.1 per cent drop.
The proposed blocks, which have been approved by the county authorities, are likely to take at least two years to be ready to be sold or let.
Bureaucracy in construction value chain has been a drag foot in Kenya's overall ease of doing business index, with the country presently ranked 108 out 189 surveyed annually by the World Bank.
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 wee