Building boom hits city
Nairobi is experiencing a construction boom, data from the Kenya National Bureau of Statistics (KNBS) shows.
According to KNBS figures, the number of houses approved for construction by the planning department of the Nairobi City Council have doubled.
The value of approved home plans in Nairobi increased by 115 per cent in the first half of this year, while the residential building plans approved during the period increased to Sh51 billion compared to Sh23.7 billion in the first half of 2012, signaling increased builder confidence.
Daniel Ojijo, the Chairman of Mentor Holding Limited, a real estate consortium, says that the rise in approvals shows that developers are working overtime to meet the increased demand.
However, the pace of non-residential construction remained flat during the period under review.
The value of non-residential building plans dropped to Sh46 billion, from Sh46.26 billion recorded at the same time last year.
The market is more pro-residential as compared to office blocks, which explains why there is a drop in the approvals of offices and an increase in the residential sector.
Martin Makau, a quantity surveyor says it is logical for developers to seek investments that have a quick payback which residential construction offers, as compared to office blocks that have a long term payback.
In areas like Westlands, Upper Hill, Hurlingham and Milimani, an acre of land goes for about Sh200million.
If you add high construction costs, it means that it will take a minimum of 20 years for developers to recoup their investments compared to between 10 to 15 years in residential areas.
Soaring land prices and stagnating prices of commercial spaces have caused major commercial developers in Nairobi to shift gears and seek returns in building residential houses.
The selling price of residential buildings has been on a steady rise thereby attracting more property investors keen to tap higher returns.