Nairobi Needs 2 Million Housing Units, Will it Ever be Met?

As the government continues to deliberate on the kickoff of the affordable housing project, where a total of 500,000 affordable houses are expected to have been constructed by 2022, the project might just be a drop in the ocean.

According to a research done by Cytonn Investments Limited, Nairobi alone has a deficit of 2 million housing units as at the start of 2018, something that has led into the mushrooming and expanding of the informal settlements.

According to Cytonn, 70.7 percent of housing demand is in the lower middle-income segment of persons whose average monthly rent is 18,112 shillings.

26.4 percent of the housing demand, on the other hand, is in the low-end income segment of persons whose average monthly rent is 6,734 shillings.

As the demand for housing in Nairobi increases, Cytonn established that the prices appreciated by 2.8 percent compared to a 3.8 percent appreciation in 2017. The rental yield, at the same time, declined marginally to 5.4 percent compared to 5.6 percent in 2017 indicating a sluggish growth of the sector

The best-performing markets such as Kilimani have returns of up to 13.9 percent and Upper Kabete with 11.9 percent. These are areas that potential investors in the sector should focus.

For those looking forward to investing in the sector, opportunities in detached units lie in areas such as Karen and Runda Mumwe which have high annual uptake of 27.7 percent and 24.3 percent respectively

The opportunity in apartment’s lies in areas such as Kilimani and Upper Kabete, also driven by the high uptake of 25.6 percent and 27.4 percent respectively.

To help private developers construct more affordable houses for Kenyans, the government continues to offer incentives such as 15 percent tax for firms that build 100 affordable units annually to boost development of housing for lower income segments, as well as land to developers in a PPP model.

The move by the government has resulted to the growth of satellite towns, with bantamweight developers opting to provide infrastructure where land is cheap.

All is not lost according to real estate experts. With a relatively stable economy whose growth has averaged at 5.3 percent over the last 5 years, household incomes have increased driven by the fact that most households especially within the middle-income class have both partners working and earning a steady income.

As per the KNBS Economic Survey 2018, the average wages salary came in at 57,008 shillings in 2017, a 6.1 percent increase from 53,733 shillings reported in 2016. This has resulted in increased demand for formal housing, thus pushing prices up.