With affordable housing projects in Kenya, what next for Nairobi landlords?

Nairobi is currently under construction, literally, with high-rise residential buildings being erected nearly all over the capital city. Much as the buildings will meet the ever-rising demand for residential housing in Nairobi, landlords might need to change their business models to either attract new or retain their current tenants.

In this regard, affordable housing program by the National Government is expected to give landlords, developers and investors a competitive edge in terms of pricing, and hence occupancy. Against this backdrop, the loading of extra costs onto developers, as soaring land prices and sky high finance costs, has served in shifting developers to create smaller apartments with lower price tags to allow buyers to continue to access their products at a price that works in the market.
This shift in supply has led to suburb wide apartment re-pricing and developers to shift to the construction of smaller housing units as the city adjusts to a rapidly rising population and high cost of living. As such, developers are building houses with fewer rooms to attract tenants faster compared to bigger family homes. Besides, economic recession and shrinking family sizes have forced people to rethink over-sized mansions and focus on small better houses.

According to the housing data from the Kenya National Bureau of Statistics (KNBS) for 2020, 3,940 one-room units were built in Nairobi in 2019, an 84 per cent increase from the 2,135 developed in 2015. Each year, according to the KNBS, developers visited the county’s planning department seeking to build more one-bedroom houses, signifying growing demand. On the other hand, the city had 692 new residential buildings with six rooms or more in 2015, but the number shrunk to 442 units in 2020.

In conclusion, affordable housing is going to change the real estate market business models in the long-term. As such, real estate players need to think through a real estate business model before implementing for risk management and to increase occupancy in the long term, and hence income.

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