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Developers warn of severe shortage of houses to cater for enlarging middle class.

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By Ben Kinyanjui

The Kenya Property Developers Association (KPDA) has warned of a severe shortage of houses to cater for the growing middle class especially in major urban centres.Shortage of housing in Nairobi looms large Shortage of housing in Nairobi looms large

The association that together with HassConsult has launched Kenya's first ever annual report on the state of development in Nairobi says housing shortage in Nairobi is acute and deteriorating.

The country's aim was to be building 200,000 housing units a year in Nairobi to create a world class middle-income city by 2030. But in 2013, just 15,000 housing units were planned.

The report says sharp increases in land rates and the city council construction fees has added increased financial disincentives to development.

The construction permit fees were raised by between 200 times and 1,250 times their previous level. By the fourth quarter of last year, these newly increased charges generated Sh114m, or 23 per cent of the city council's revenue.

At the same time, the gap between lending rates and the Central Bank of Kenya's base rate further widened, impacting interest rates for the financing of both development and property buying.

“Nairobi has declared its intention to emerge as a world class city, but this depends on a sharp increase in construction, where current trends are instead slowing down the development industry's rate of growth,” said Mr Robyn Emerson, Chief Executive Officer at KPDA.

The report comes as the government and the industry work to deliver a master plan for the city's development, which may never be realized without a shift in gear: from exploitation of construction activity as a source of public revenue, to facilitation of a 13-fold increase in construction to reach the plan's goals.

"We are keen to work with government to come to workable solutions for development goal achievement and a better Nairobi, better Kenya for all,” says Emerson.

The report says in Kilimani, which was one of the most heavily developed suburbs in 2013, only 12 vacant plots are remaining, compared with 470 in the much more static area of Runda.

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.

The Jones Lang LeSalle Global Real Estate Transparency Index, used by investors globally to assess the safety and appeal of regional real estate investments currently rates Kenya at 67 of 97 countries for the quality of information on its real estate industry.

“The production of an annual report in this kind of detail and depth is a key plank in the criteria for getting Kenyan property re-graded as a transparent investment asset,” said Ms Emerson.

 

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