Nairobi property developers ride high on low cost housing

Workers mix concrete at a construction site.
Workers mix concrete at a construction site. PHOTE/FILE
A low cost housing boom is gathering pace in Kenya as developers and financiers begin to shift their attention to this segment of the market, which they previously viewed as unprofitable.

As the high-income housing market becomes saturated amid falling demand for high-end homes, many developers are now unveiling low cost housing projects targeting individuals earning less than 30,000 a month.

The Mortgage Company’s managing director Carol Kariuki says the focus on the lower end of the market is a natural shift by developers to generate a new income stream.

“The next market is the lower end of the pyramid. This is where most people who don’t own homes are, and many of these developers have realised that there is money in the numbers,” says Ms Kariuki.

Mortgage financier Housing Finance recently launched an initiative that will make it possible for individuals to own homes for as little as Sh1.6 million.

The Makao housing project, introduced in 2007, will now offer land owners with a selection of 57 different home designs with the price ranging from Sh1.6 million to Sh27 million. The price will cover professional fees of architects, legal advisers, project managers, engineers, quantity surveyors and consultants.

“Makao seeks to address the key challenges home owners face during the construction period, which include poor supervision, cost over-runs, fluctuating prices of materials, delay in completion of project, poor quality materials, theft and unqualified fundis,” said Housing Finance boss Frank Ireri.

He said the initiative will save its potential customers up to 30 per cent in costs, adding that the lender will offer entire financing.

Housing Finance joins a growing list of companies that are eyeing the low-cost housing market. In 2012, Jamii Bora Makao, managed by Urbanis Africa, launched several low cost housing projects in Kisaju on the outskirts of Nairobi.

Phase one of the project involved construction of 950 low cost housing units, with a two-bedroom house going for as low as Sh1.5 million.

In the second phase, which was launched towards the end of 2012, the firm is building an additional 1,250 low cost homes in Isinya, Kajiado County. The project comprises three and four bedroom houses going for Sh2.5 million and Sh5.4 million respectively.

READ: Kenya to set up low cost housing centres

And in February 2013, Urbanis Africa rolled out another low-income housing project in Kisaju plains – some 55km from Nairobi. The development sits on a 115-acre piece of land.

Rafiki Deposit Taking Micro-finance, a subsidiary of Chase Bank, is also betting big on the low-end market. In 2012 the lender unveiled a mortgage product targeting low-income earners.

The micro-finance lender funds homes built using low cost technologies with prices ranging between Sh1 million to Sh3 million on loans payable over a 10-year duration.

The lender funds 100 per cent of construction costs for landowners and a further 70 per cent of the cost of land for individuals without land.