How Kenya can achieve the low-cost housing dream

The government’s Big Four economic blue-print intends to deliver 1 million affordable homes in the next five years.

Out of this, 800,000 units are bedsitters, one-, two- and three- bedroom, costing between Sh800,000 and Sh3 million.

The remaining 200,000 units are social housing, which involves the development of slums (1-2 room units costing Sh600,000 to Sh1 million). The project is expected to be implemented on 7,000 acres of land in Nairobi, Mombasa, Nakuru, Kisumu, and Eldoret.

To deliver affordable homes to Kenyans, the government is eyeing partnerships with private developers by making public land for development available and undertaking land swaps, which involves the transfer of public land to private developers in exchange for more suitable land for development, but of equal value.

The government is also exploring the establishment of a land bank; a taskforce has been formed to set aside land from excess land holdings by corporations and parastatals, including East African Portland Cement, the Kenya Broadcasting Corporation, Kenya Prisons and the Ministry of Agriculture.

Plans are underway for the approval of idle land tax as a way of discouraging speculative land purchase. The team also aims to unlock land that is suitable for affordable housing projects.

These measures undertaken by the government will provide strategically located land for the housing project.

But experts aver that it is infrastructure that will be a game-changer in the attainment of affordable housing. Real estate is mainly about location, says Mr Daniel Kamau, the CEO of Fusion Capital, a private equity firm focused on real estate investment and fund management. It operates in Kenya, Uganda, Tanzania, Rwanda and the United Kingdom.

“By providing infrastructure such as good roads, power connections, water and sewer lines, the government will make it cost-efficient for the private sector to cut on development costs,” he said.

He noted that the move would make underdeveloped locations more desirable.

Mr Kamau explained that traditionally, and particularly in real estate, infrastructure is always followed by developments and not the other way round, which has been the case in Kenya, especially in satellite cities/gated communities.

The targeted market for the affordable housing project are working Kenyans in the middle to low-income categories.

“These are populations that are concerned with the availability of good, affordable schools, adequate security – such as a place being served by a police post – and accessibility to public transport. It is, therefore, imperative that the government provide this,” added Mr Kamau.

FINAL COSTS

He noted that provision of infrastructure by the government will go a long way in ensuring that developers deliver units at affordable rates since they will most likely not run into additional costs and transfer them to the end buyer.

Another governance aspect that will drive the attainment of affordable housing is reducing the time taken to gain approvals.

Returns on real estate investment are time-sensitive and the turnaround time is critical from planning to the sale of the property. Real estate investment involves several statutory approvals and the process of getting projects fully approved has been slow and frustrating to most developers, said Mr Kamau.

There is no systematic way of getting approvals such as the change of user on titles, the National Environment Management Authority approvals, county government approvals, building plan approvals and title transfer process.

It normally takes three months for construction-related approvals in the counties. However, since 2016, Kiambu County reduced the time taken for building approvals to 3 days after digitising the system.

Known as the Electronic Development Application Management System, the application has increased efficiency and transparency since all construction-related applications are now done electronically through a customised online portal.

The Web-based system, which was developed in partnership with the World Bank, has speeded up approval time and it enhances the planning and inspection of workflow.

“Before the introduction of the system, it took months for an approval to go through, with documents sometimes disappearing. But since the system came into being, it normally takes two to three days,” said Mr Kamau.

The applications supported by the Web-based management information system include physical planning proposals, architectural building proposals, and associated civil and structural engineering designs.

Others include applications for change of use, sub-division, regularisation for change of use and sub-division, extension of lease and use applications.

Architects and planners submit building proposals for evaluation and approval online while payments are made through an automated revenue-collection system, further cutting on time and increasing efficiency.

If duplicated in other counties, the system would support the affordable housing pillar as it will reduce the time taken to deliver housing projects, which has a cost to it, he noted.

“Delays in the approvals end up increasing the cost of the project. These costs are pushed to the final buyer,” Mr Kamau noted.

The CEO noted that the government can set times for statutory approvals. He further said the government must support the private sector by committing to timelines while managing approvals.
He said Kenya can learn from Kigali, Rwanda, on how to efficiently manage construction approvals.

SUPPORTIVE GOVERNMENTS

“They have a one-stop centre where you get all your approvals done within a very short period. Supportive governments, both at the county and national level, ensure investors remain committed,” said Mr Kamau.

In Rwanda, Fusion Capital has invested in Kigali Heights, a mixed-use commercial development that features office space and retail. Still on governance, corruption in the government is seen as a possible impediment to the achievement of the “Big Four” agenda, and more so, affordable housing.

“In an economic class, they teach us that there are only four factors of production; land, labour, capital and entrepreneurship. But it appears that in some of our African countries, corruption is a factor of production,” Mr Kamau observed.

When corruption is allowed to penetrate the real estate sector, the cost is passed on to the buyer, he noted. “For developers like ourselves who adhere to non-bribery and or high ethical standards, we suffer delay or miss out on opportunities, which becomes a put-off to investors. The government has the capacity and machinery to decisively deal with cartels in real estate approval bodies or institutions,” Mr Kamau noted.

He said this would reduce the cost of development and speed up processes, and the final beneficiary is the Kenyan who wants a reasonably priced home.

In the last five years, Kenya’s GDP has been growing between 5 and 6 per cent every year. Mr Kamau says the affordable housing project can accelerate growth in key development sectors.

For instance, it is likely to provide employment, and push growth in the local manufacturing sector. “This will spur local manufacturing for economic growth, especially steel and cement,” he said.