The Crucial Role of Infrastructure in Shaping Kenya’s Real Estate Sector
According to the Cytonn Q3’2023 Markets Review, serviced land in satellite towns within the Nairobi Metropolitan Area (NMA) recorded an average selling price of Kshs 18.3 million, outperforming unserviced land, which averaged Kshs 16.4 million. The difference highlights the value addition brought by reliable infrastructure.
Infrastructure plays a pivotal role in the growth and success of Kenya’s real estate sector. Roads, water, and sewer networks significantly influence property values, urban development, and the quality of life in communities. The availability or absence of these key elements determines the ease of investment, development costs, and the quality of housing stock delivered to the market.
The establishment of robust infrastructure, particularly road networks, has been instrumental in opening up areas for property investment. Improved accessibility through projects such as the Nairobi Expressway and the Thika Superhighway has spurred the development of notable real estate ventures. Developments such as the Global Trade Centre, Mi Vida Homes, and Garden City Business Park showcase how infrastructure stimulates property investments. Residential estates like Pinecourt, located near the Nairobi Eastern Bypass, further exemplify the trend of real estate growth around accessible areas.
Properly maintained roads, water supply systems, and sewer networks play a crucial role in enhancing property values. According to the Cytonn Q3’2023 Markets Review, serviced land in satellite towns within the Nairobi Metropolitan Area (NMA) recorded an average selling price of Kshs 18.3 million, outperforming unserviced land, which averaged Kshs 16.4 million. The difference highlights the value addition brought by reliable infrastructure.
The availability of essential amenities such as sewer systems and piped water connections reduces construction costs for developers. The Center for Affordable Housing Finance Africa (CAHF) estimates that infrastructure costs constitute about 11% of total development costs. With infrastructure already in place, developers can allocate resources more efficiently, ultimately lowering the cost of housing for buyers.
Infrastructure not only drives property development but also bolsters commercial activities. Reliable utilities, including electricity, water, sewer systems, and drainage, create an environment conducive to business operations. In contrast, areas lacking these amenities face significant challenges that hinder trade and economic growth.
Attracting Tourism and Foreign Investment
Kenya’s robust infrastructure development has positioned it as a regional investment hub. High-profile investors such as Carrefour, Artcaffe, and the Pan Pacific group of hotels have entered the market, attracted by well-established roads, airports, and utilities. These investments not only boost the real estate market but also contribute to tourism by improving accessibility to key destinations.
The availability of adequate infrastructure significantly improves the quality of housing delivered to the market. Reliable water supply, sewer networks, and road access enhance living standards, creating sustainable communities and better housing stock.
A Cytonn report ranking counties based on infrastructure availability placed Nairobi and Kiambu at the top, with an average score of 3.3 out of 4. These counties benefit from completed road networks, adequate water connectivity, and functional sewer systems. Areas in Nairobi such as Westlands, Karen, and Kilimani, and towns in Kiambu like Thika and Ruiru, present attractive real estate investment opportunities. Kajiado, with limited infrastructure, ranked lowest, highlighting the need for focused development efforts.
Despite notable achievements, Kenya’s infrastructure development faces challenges. Budgetary cuts in FY’2023/24 have reduced funding for infrastructure projects, which could lead to a slowdown in the completion of new roads and utilities and an increase in stalled projects. Public-Private Partnerships (PPPs) have emerged as a viable solution to bridge financing gaps. By leveraging private sector resources and expertise, PPPs can ensure sustainable infrastructure growth while driving economic development.
Infrastructure remains a cornerstone of Kenya’s real estate sector, influencing property values, development potential, and overall quality of life. To sustain growth, a strategic focus on infrastructure investment through government initiatives and PPPs is essential. With adequate infrastructure, Kenya can continue to attract local and foreign investments, elevate living standards, and foster sustainable urban growth.
Disclaimer: The views expressed in this article are for informational purposes only and should not be considered financial advice. Readers are encouraged to seek guidance from registered investment advisors.
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