Land buyers keep off city as prices soar
Property developers are opting to buy land far away from Nairobi due to high prices in the county.
According to Mentor Group’s Daniel Ojijo, most developers who want to meet the rising demand for housing have no alternative but to seek land outside the city.
“We are seeing a scenario where land within the city is overpriced, making it difficult to develop and make profit. This explains the rise in commuter estates in the outskirts of Nairobi,” he said.
Build offices
Investor Alex Muema said land prices within a 20-kilometre radius are very high, locking out most would-be home owners.
“The people buying land within the city are those who want to build offices. This means that they have the financial muscle to break even on their investments compared to individuals,” said Muema.
Currently, an acre of land in Upper Hill fetches about Sh350 million, while in Westlands, the same would go for Sh400 million. Ngong Road, Kilimani and Runda also have almost the same asking price.
These figures are almost unreasonable as this stretches the number of years a developer will break even on their investments.
According to Ojijo, since 2002, land prices in Nairobi have shot up because of the appetite by the middle-class to own homes and the location of the city as East Africa’s hub.
In the past three years, Nairobi has witnessed a surge in the number of multinationals setting up offices here, with the latest being HSBC, General Electric, Google, IBM, Visa International, Pepsi, Nestle, and Foton.
Improved roads and sewerage systems as well as power supply have seen areas such as Kitengela, Athi River, Syokimau, Kiambu, Thika, Ruiru, Isinya and the greater Nairobi metropolis grow as home owners are pushed out of the immediate land within the city.
An acre of land in Syokimau, 20 kilometres from the CBD, costs Sh10 million while the same on Thika Super Highway is Sh20 million.
Chris Gachiengu of Chania Gardens said building a house outside the city is a good investment because land is affordable, the cost of construction is low and therefore, a higher profit.
“You cannot have plausible quick returns in Nairobi’s immediate environs but on the outskirts, its quicker and through such, we have been able to raise the value of property in the smaller towns,” he added.
“One thing I have noted in the last two decades I have been in this sector is the zeal by Kenyans to own a house or land. This is the reason we are seeing the cost of land going up,” said Ojijo.
This eagerness to own a home by Kenyans, he added, has been the key driver of Kenya’s real estate boom seeing it grow by an estimated average of 16.7 per cent annually.
In Nairobi county, where 95 per cent of all current real estate investments sit, two million people are in need of decent and affordable housing.
There is a serious shortage of houses in low-income areas where only 6,000 houses are produced a year.
This means that developers will source for land as far as Athi River and other far-flung areas where an acre goes for about Sh25 million to put up estates for Nairobi’s growing population.