High cost of land in Nairobi scaring away developers

Land is a great investment because they don't make it anymore
Land is a great investment because they don’t make it anymore. PHOTO/ACE REAL ESTATE
Super high land prices in Nairobi are pushing housing developers out of the Kenyan capital, leading to the rise of gated community developments away from the city.

According to Jenga Web managing director Nathan Luesby, many developers seeking to meet the rising housing demand are being priced out of the city property market – forcing them to develop commuter estates on the outskirts of Nairobi.

“Over the last four years land cost in parts of Nairobi has shot up by a thousand per cent, which is why we are seeing the rise of “super developments” where a developer buys a big chunk of land outside the city and puts a huge number of houses on it,” said Luesby.

An acre of land in Kilimani, for example, is selling for up to Sh350 million – a figure that most developers find unreasonable and almost impossible to make a substantial return.

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Developments in the outskirts of the city are therefore looking more sensible and attractive to both developers and home buyers, especially now that there have been major improvements to road networks.

Latest market data indicates that there has been an upsurge in construction of new housing units in Syokimau, Kiambu, Thika, Kajiado, Naivasha and other smaller towns – a trend that is expected to increase land prices in these areas.

“Recent investments in infrastructure are opening up outlying areas, lowering the costs to developers and raising the value of property in smaller towns,” Luesby said.

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Property analysts however say Nairobi remains the best bet for investors looking for high returns from resale or rental income while the city outskirts are suitable for individuals looking for retirement or holiday homes.

“Investors buying property for the purposes of reselling or collecting rents look at the possible profit margins that set Nairobi far apart from other towns,” said Peter Mwathi, a Nairobi-based property dealer.