Construction costs are set to go higher in the coming months following the decision by the government to reintroduce levies payable to the National Environment Management Authority (NEMA) effective this month.
Contractors will part with between Ksh10,000 and Ksh40 million for environmental audits, depending on the risk levels of their projects.
Developers warned that the new charges compounded with the high cost of living, the aftermath of the pandemic and the Ukrainian invasion will hurt the affordable housing drive. Prices for houses on sale and rentals are also expected to hit a record high.
“Considering that affordable housing is part of the Kenyan government’s Big Four agenda, the re-introduction of these fees will make it difficult for developers to deliver on the housing agenda,” Ken Luusa, chair of Kenya Property Developers Association (KPDA), cautioned.
Developers, home buyers and tenants thus have to seek cheaper but safer options in their projects. Among the options to be considered are;
In 2021, EFG Hermes, a financial services firm, indicated that real estate in middle-class (satellites) neighbourhoods recorded the highest growth in land value.
Satellite towns, Ruaka, Donholm, Ruiru, Juja and others recorded a surge in land prices than rich suburbs including Karen and Kileleshwa.
The real estate industry also witnessed a high demand for land rather than house ownership with the later being inflated by construction prices.
“Punitive taxation regimes, land laws, restrictive compliance, listing costs, and other government policies also affected the developers' efforts to promote investments in the property market through Real Estate Investment Trusts (REITs),” the Kenya Bankers Association (KBA) stated on June 28.
Gladys Situma, Branch Manager at Fanaka Real Estate, also noted that land does not attract many levies as compared to constructing houses. Owning homes also limits the buyer.
“Land can be reinvested from agriculture to real estate or leasing. One can generate income from different avenues. As the real estate reports state, the satellite areas are attracting land buyers with the promise of future profits and redevelopment. We thus focus on assisting buyers make better decisions on land ownership,” Situma stated.
Purchase Construction Materials in Bulk
Purchasing in bulk aids in managing a budget and cutting down costs. Contractors can also buy at a discount when purchasing wholesale.
Financing material purchases comes with several benefits. It relieves cash flow stress, giving you up to 120 days to make payment in full. It also allows you to exceed credit limits from a supplier, offering you more space to take on projects.
You can also lock in pricing early and save costs when prices surge further.
Subletting occurs when an existing tenant lets all or part of their home to someone else who is known as a subtenant.
This option is mostly for those who are unable to foot rental bills on their own. A majority of these are students residing in hostels and rentals and jobseekers relocating to new towns.
Knight Frank, a real estate firm, in its latest report, dubbed The Africa Report 2022/23, says: “The growing number of undergraduates, a youthful population and an undersupply of formal student housing has resulted in the increased development of purpose-built student accommodation (PBSA) as well as co-living schemes.”
Consider Other Cost-Effective Construction Techniques
Here, technology comes in handy.
Alternative prefabrication building technologies expedite the construction process as they are cost-effective and eco-friendly.
Prefabrication reduces wastage and operates with more efficacy. Materials are constructed by other companies and what is only needed is purchased and used.
These techniques include, just to mention a few, Precast Flat Panel Modules/Cross-wall Construction, Thin-Joint Masonry Technique, Hybrid Concrete Construction, Flat Slab Technology, Expanded Polystyrenepanels (EPS Panels) and 3D Volumetric Technology.
Other technologies include Insulating Concrete Formwork (ICF) Technique, Prefabricated Housing Technology, Insulating concrete formwork (ICF) technique, and Precast foundation technique.
You can read more on all the above techniques here: Building Houses: 9 Cheapest Ways That Save Money & Time