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Land costs hamper realisation of Big 4 housing agenda

Land in Nairobi accounts for 40 per cent of the cost of putting up a building as opposed to 10 per cent in other parts of the world.

The high cost of land in Nairobi has discouraged property developers to provide affordable housing thus leading to mushrooming of informal settlement areas, government admits.

Research and land property firm HassConsult says that land value has increased by 6.26 fold since December 2007.

“The average value per acre in all the major Nairobi suburbs has increased by 7.51 fold and 9.33 fold to stand at between Sh59.4 million and Sh559.7 million,” says Hass Property Index –land price index Quarter two report.

Within the county, land is the cheapest in Karen at Sh59.4 million an acre while it is highest in Upper Hill at Sh559.7 million, a trend that is worrying the government even as it intends to facilitate supply of 500,000 housing units by 2022.

HassConsult head of development, consulting and research Sakina Hassanali said that even though prices cooled in the 2018 second quarter, land continues to offer the best returns over the long term.

“Investments made over the last 10 years yielded as much as 10 times the return in land than in equities and offered more than triple the return of investment in bonds,” said Hassanali.

Housing principal secretary Charles Hinga recently in Nairobi said there is low production of cheap houses within Nairobi and its satellite towns owing to high cost of land as the government and speculators continue holding on to land. Cost of construction materials largely cement, roofing materials and labour continue to strangle the process.

“The challenges inhibit the country’s efforts to provide affordable housing to the surging population. This has led to an increased annual housing deficit which currently stands at 1.8 million housing units,” said Hinga.

Under the housing component of the Big Four agenda, the government intends to facilitate increased investment in the housing sector so as to bridge the huge supply gap which is feared might increase to a demand of 300,000 housing units annually by 2050.

Nairobi land prices increased marginally at 0.23 per cent in the second quarter of the year compared to an increase of 2.5 per cent in a similar quarter of 2016.

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