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Low demand for houses hurts landlords in Kisii

Low demand for commercial and residential houses in Kisii county has slowed down housing developments due to low rents.

Racheal Otundo, a land economist and real estate developer, says private developers had invested in properties in the last 10 years hoping to cash in on devolution.  However, those who were lucky to get jobs from the county and national governments and even in the private sector have opted to invest in residential homes, lowering the demand for rental houses.

Landlords, says the developer, charge between Sh12 and Sh30 per square feet for office and shop space in Kisii town’s CBD while tenants pay Sh14,000 to Sh18,000 for two-bedroomed houses. She noted that tenants in houses located in the town’s estates pay Sh10,000 to Sh15,000 for two-bedroomed units.

Rent tribunal

However, few tenants can afford to pay the rent owing to the poor economy.  “Construction of houses has slowed down for the last two years due to lack of funds. People are no longer buying land for development,” says Otundo.

A certified valuer, Otundo says the cost of residential land measuring 50m by 100m metres in areas located the outskirts of Kisii town currently ranges from Sh1.5 million to Sh3 million.  “Few developers are willing to buy land and develop it when prices are that high only to earn low returns,” she says. 

She predicts that if real estate developers from within and in the Diaspora continue putting up residential flats in Kisii town and its environs, the demand for houses and rent will drop further and many houses will remain unoccupied.

Arvind Tailor, an experienced real estate developer who specialises in constructing commercial buildings, says tenants often complain of high rent. “Once they occupy space, some of them shun paying rent and it is difficult to eject them,’ he says.

Tailor, 70, says tenants sue landlords at the Rent Tribunal where cases drag for too long, forcing landlords to give tenants a six-month notice to look for alternative space. “Cases at the Rent Tribunal take up to three years. So landlords negotiate with defaulters to vacate the premises unconditionally to pave way for other tenants,” Tailor told Boma.

The investor, who sells hardware materials, says demand for the materials is irregular due to the competition from other businessmen. Tailor, who owns Imperial Building in the town, has been forced to be cautious in buying more land for investments due to the challenges from tenants.

Cooperative societies

“I started my business in 1990 and I only invest in commercial buildings. Our parents settled in Kenya in 1955 and we followed their footsteps in business careers,” Tailor said.

A survey by Boma in Kisii town’s CBD showed several investors have acquired contracts from cooperative societies to construct highrise buildings for them. According to Tailor, many societies lack funds to demolish old buildings to pave way for construction of skyscrapers and have embraced the idea. “They are given some little money from rent from the new building as they wait for the investor to recoup his investments,” he says.

He said his brother, Dr Anil Tailor, who owns several buildings including the Nile and The Place­ ­— one of the newest commercial buildings­—acquires land from cooperative societies. He develops it,  then reverts the ownership back to the cooperative after recovering his money from rent collections.

As Kisii town expands, investors in residential and commercial buildings have ventured into estates where they construct storey buildings and engage caretakers to manage them. Areas the investors are eyeing include Kiogoro, Nyakoe and Kemera.

Otundo hopes that  the government’s housing project under the Big Four agenda will enable locals own houses through mortgage and force landlords reduce rents lest they lose tenants.  “It will be difficult for investors in real estate sector who secured bank loans to service them since they will not raise adequate rent to pay,” says Otundo.

A major concern is houses being built on riparian land and the issuance of fake title deeds. Dozens of houses built on riparian land in Kisii town have been demolished by a multi-agency task force this year. 

The demolitions occurred just a month after the National Land Commission revoked 10 fraudulently acquired title deeds.   This followed NLC’s public land audit in 2018, which showed that at least 600 parcels of public land had been exchanged fraudulently in Kisii town alone.

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