The real estate sector is witnessing a paradigm shift in buyers' priorities and purchasing power, with more Nairobi city dwellers opting not to buy or rent apartments in the metropolitan suburbs, rather focusing on developing satellite areas.
HassConsult Head of Development Consulting and Research, Sakina Hassanali, underlines that the demand for detached units is one of the major reason that necessitates Nairobians to prefer buying land rather than renting and purchasing apartments.
Realtor HassConsult in the 2021 Q4 reports released on Monday, January 31, indicated that satellite town continued recording a rise in land prices, recording a 6.65 per cent growth compared to a drop of 1.1 per cent in 2020.
This is the fastest growth recorded in more than seven years notably for Ruaka, Kamakis, Ruiru, Juja, Athi River, Kiambu, Kitengela, Kiserian, Limuru, Mlolongo, Ongata Rongai, Ngong, Ruaka, Ruiru, Syokimau, Thika, and Tigoni.
Suburbs in the city, on the other end, rose by an average of 1.16 per cent from a drop of 2.56 per cent in 2020. These are Karen, Runda, Langata, Upperhill, Donholm, Kileleshwa, Gigiri, Kilimani, Kitisuru, Lavington, Loresho, Muthaiga, Nyari, Parklands, Ridgeways, Riverside, Spring Valley, and Westlands.
“In Nairobi’s satellite towns, house sale price gains have been more modest largely because most people settling in those areas prefer to build their own units. The house sale market was largely driven by higher demand for detached units, whose supply in the market has fallen in the past two decades.
“A few years ago, it was the exception for a residential building to have a lift but today it is the norm. The new developments are high-density units including studio apartments which is a shift from the ample apartments and detached houses that characterized the suburb a decade ago and it is not clear if the present infrastructure will adequately cater for all stock coming through,” Hassanali noted.
This observation clearly coincides with realtor Knight Frank’s report released in early 2021 detailing that homeowners were moving away from suburbs in search of more privacy, outdoor space and areas they can acquire at lower prices.
Suburbs like Kilimani and Kileleshwa have recorded a higher number of apartment developments forcing residents to move to court to file suits against real estate companies, arguing that they are abusing community policies.
In January 2022, the Nairobi Metropolitan Services (NMS) stopped a Chinese company from proceeding with the construction of 870 bedsitter units in Kilimani. NMS Director for Lands, Housing, and Urban Planning, Stephen Mwangi, stated that the project, a 15 storey building, had exceeded the required ground coverage listed for leafy suburbs.
HassConsult in its 2021 Q4 concurs that these litigations and controversies surrounding the suburbs force tenants and homeowners to prioritise buying land in satellite areas.
“Suburb continues to cool as investors go slow on the area due to uncertainty on whether the present infrastructure will support the new wave of developments the area is now attracting, thus weakening its appeal,” Sakina Hassanali explains.
Why detached houses and not apartments?
Gladys Situma, Branch Manager at Fanaka Real Estate, details that most houses being constructed in Nairobi suburbs are smaller due to high demand.
These are single-rooms, bedsitters and one-bedroomed houses that are affordable to tenants. However, the low supply of detached houses has created a demand and crisis in real estate.
"As you have noticed, satellites towns are still rising and this can be witnessed through the HassConsult which has pinpointed Ruaka, Kamakis, and others such as Kitengela and Juja. Most landlords concentrate on building smaller houses because of high land rates in suburbs and towns.
“In satellites areas, the land is affordable and people are moving towards settling there early for various reasons, from seeking their own space to enjoying infrastructure,” Situma told Kenyans.co.ke.
Hassanali, through the HassConsult 2021 Q4 report, adds that land in most suburbs remains prohibitively expensive while the availability of land to buy in upmarket suburbs is also limited, thus the high increase in demand for satellite areas.
Just as Situma also noted the need to enjoy infrastructure, Hassanali highlights that existing water and sewerage utilities in suburbs are being strained by high-rise developments which have seen prices in these areas suffer.
Arnania Ogutu, a Nairobi-based architect and real estate surveyor, further told Kenyans.co.ke that buying land and building one’s own house offers homeowners the security of tenure.
In the suburb areas with controversies marring construction and home owning, those who build their own houses in satellites have the freedom to either sell or rent the premises in the future.
“They can also modify and personalise their houses to their advantage,” Ogutu added.
Another issue prompting Nairobians to move to satellite towns is the mortgage effect. A mortgage is a loan from a financial institution or lender that can be used to buy a home. They are, however, offered with collateral and the individual only takes ownership of the home once payments are completed.
“Mortgages demoralise Kenyans who want to feel they own their projects. Nairobians want to avoid extra costs - they only want to purchase land and build their own houses through other different funding avenues.
“These mortgages come with high property prices, hiked initial transaction costs, high initial deposits, unclearly explained risk information and high-interest rates which discourage one from accessing the service loans,” Gladys Situma, Branch Manager at Fanaka Real Estate explained.
Land prices according to HassConsult’s 2021 Q4 report
The realtor noted that an acre of land in the mentioned satellites costs between Ksh26.9 million and Ksh89.1 million.
In satellites, an acre trades between Ksh191.1 million and Ksh509.7 million. Prices vary depending on the location, infrastructure and other factors.