Why city has very few new constructions
Construction of new houses in the city has slowed down, a trend that is worrying developers. Only 15,000 houses were built in the county last year against a target of 200,000 annually.
Recent statistics showed that developers were facing problems such as rise in construction permit fees from 0.006 per cent to 1.25 per cent by the county government as well as expensive mortgages.
Kenya Property Development Association vice chairman Muchai Kunyiha said if the current growth rate was maintained, it could aggravate the housing shortage.
“We are seeing an annual increase in the city’s population and this will result in a housing crisis if the current trends are maintained. Already developers are witnessing an acute shortage in housing because of the high demand from the urban middle class who can access financing,” he said.
“The increase in construction costs by the county government, refusal by banks to lower their interest rates as recommended by the Central Bank and the high land costs are slowing down construction,” Kunyiha said.
A recent report by the Kenya Property Development Association and HassConsult also showed that apartments were the most built developments in the city.
In 2013, Nairobi City Council received 15,337 plans for approvals of which 628 were for detached houses, 795 semi-detached and 13,914 apartments.
Currently, more than a quarter of employed Kenyans work in Nairobi, which generates more than 60 per cent of the country’s gross domestic product.
The city’s population is growing at an average seven per cent per annum and has been projected to rise further.
Land availability is uneven across the city with Runda having over 470 vacant plots suitable for development while Kilimani has just 12.
The areas currently enjoying the greatest levels of development are Kilimani, Kileleshwa, South B and Embakasi, but land availability is now set to see attention shift to other areas with more space to develop.
From the report, the best performing areas in terms of house sales were South B, South C, Upper Hill, Kilimani and Embakasi with an average of 10 percentage increase.
The worst performing were Muthaiga, Lavington, Brookside and State House, with Muthaiga being the biggest loser at 4.5 per cent.
The Central Bank Annual Supervision report of 2013 showed that the construction sector was now robust with cement consumption, a key indicator of building and construction performance, increased from 3,858,402 metric tonnes in July-June 2011/12 to 4,007,226 metric tonnes in July-June 2012/13.
The report also showed that the value of building plans approved by Nairobi City Council also increased significantly from Sh191 million in July-June 2011/12 to Sh211 million in July-June 2012/13.
According to the report, the average commercial banks’ lending rate declined from 20.30 per cent in June 2012 to 16.97 per cent in June 2013.
In 2012, the average mortgage loan size increased to Sh6.4 million, up from Sh5.6 million in 2011.
The figures for 2013 are yet to be made available.