Money making and the Nairobi housing boom

It’s seven o’clock in the evening. In Ngong Road trucks drive past, returning masons and laborers to the slums on the outskirts of Nairobi. Meanwhile, on the terrace of a cafeteria, a man in a suit flips through a property magazine. The headline reads: “The fastest way to get your money back”.

Nairobi is one of Africa’s most important business hubs and is home to the headquarters of some of the largest multinational corporations. In recent years, it has transformed from a “garden city” to one of the top property hotspots among global cities. Buildings are lined with wooden scaffolding and the noise of excavators and drilling machines fills the city space. Here, “brick fever” has seized the housing market. Welcome to the Kenyan building boom.

History of a lucrative sector

In the 90s land privatization and liberalization, imposed by the IMF and World Bank, significantly affected living conditions in Kenya.

Before the Structural Adjustment Programs, land was owned by the government and then sold to middle-income earners, explains Juma Assiago, Urban Safety Expert with the UN-Habitat’s Global Network on Safer Cities. “Those days, a quarter acre in the neighborhood of Kileleshwa (a middle-class neighborhood in Nairobi) could have been sold for as cheap as 200,000 to 300,000 Kenyan shillings ($2310 to $3470), but they changed the models of bungalows to large apartment blocks,” he says.

At the time of independence the city was working with the 1948 Master Plan, which has never been holistically revised, says Assiago. Nairobi has been running without a master plan over the past 20 years since the last one expired, spinning development out of control at the whims of speculation, he says.

The lack of a cohesive plan helps explain how the current land acquisition model appears to be an heir of the colonial scheme. Without a revised and concrete plan, land ownership in Nairobi has become concentrated in the hands of a few. Today, Nairobi has more buyers than sellers. But plans to alleviate the lack of a cohesive plan are in the pipeline, including Vision 2030, the Urban Areas and Cities Act of 2011 and others.

Elites and the boom

One of the factors fueling the construction boom is the number of expats living in Nairobi, which is ranked among the top ten emerging global cities, along with the presence of a large group of super-rich individuals. Elite buyers have contributed to driving an increase in land and house prices, which have spiked along with urban speculation.

Today, an acre of land in Kilimani (another residential quarter in Nairobi), for example, sells for up to Sh 350 million (about $4 million). The emergence of megaprojects, such as Tatu City and Konza Techno City, are symptoms of the tremendous construction boom in the Kenyan capital. These megaprojects have been criticised for being “utopian fantasies” that will serve the elites.

Land speculators, cement manufacturers, transport companies and interior designers are thriving in a real estate market driven by quick paybacks from residential buildings. “So you have the new millionaires [gaining] ownership of land over the last 20 years” says Assiago.

Nairobi is not the easiest place for investors, though. The World Bank’s Doing Business 2014 report highlights that factors such as delays in building permits, increasing fees, and Nairobi’s status as the most expensive city in Africa not only slow down foreign investment in the real estate sector, but make it difficult for most of Nairobi’s citizens to find affordable housing.

Nonetheless, it doesn’t seem to affect local investors since more localsare investing in these markets as opposed to international investors. The UN-Habitat expert sets the typical buyer’s profile as “a Kenyan who is middle to upper class, who has access to mortgages, and who is really into the business of profit-making”.

He explains that most of the people who are buying houses today just want to make more money.

“It is now when the housing market is good, so it’s a matter of buy, buy, buy,” he says.

Assiago also draws attention to investment in the housing market from neighbouring war torn country Somalia, that has contributed to the housing boom. Much of this money comes from what he refers to as a “banditry economy” – generated from the sale of weapons, piracy, and other matters involving so-called Somali war lords.

An unequal system

Despite the housing boom, the majority of Nairobi’s residents live in slums on the outskirts of the city. And many of these residents wind up providing services to the wealthy through the informal economy.

In the shadow of the great buildings populated by the middle and upper classes, the ‘other Nairobi’ springs up like mushrooms around any housing project, to offer the services inhabitants need, says Assiago.

The cleaning women, nannies, babysitters, gardeners, caretakers and housekeepers that service the rich, along with the construction workers ferried to city building sites on trucks, will probably live in informal communities right outside any new district erected in the city. They pass most of their days working inside buildings and compounds inhabited by the higher classes and return to the slums in the evenings. And it’s likely they dream of one day living in those tall buildings that are changing the face of the city. But it seems unlikely they’ll get that opportunity.

Image via wikimedia.

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