What Nakuru City holds for real estate investors
One of the apartments next to the Bondeni slum in Nakuru City. [Harun Wathari, Standard]
Even before Nakuru officially received city status last year, companies – including real estate companies – were already using the slogan “city” to advertise their products and services.
Although the city status was confirmed by President Uhuru Kenyatta on December 1, some investors are still waiting to see if the status will affect the cost of doing business in the region.
The Kenyan real estate sector is known for its explosive reaction to such news, where the mere unveiling of a development such as a road or railway in the area would see land and house prices triple.
Johnson Ndege, a development consultant, says it could be a year before any major price changes are seen.
“Kenya is a speculative market. So if you have fallow land (in Nakuru), with all these upcoming lawsuits, it’s likely to get investors. Demand will be high, hence the rise in price,” he says.
He says the change in real estate prices would be felt once the district submits a city plan and begins rezoning or reclassifying areas if there are no speculative tendencies.
According to Ndege, zoning depends on which area you are entering, bearing in mind that this will result in price changes.
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He said a city attracts more funding from development partners like the World Bank and also from interest rates once conferred with city status.
“More properties are likely to come in installments. They will also likely revise their rating role to reflect the city’s status, and as that happens, those funds will then go towards infrastructure development, rezoning and replanning,” says Ndege.
According to Ndege, the huge amount of money being invested in infrastructure will automatically drive up property prices.
Replanning and rededication also change the use of the property. For example, a residential property can be converted into offices. Some areas will also be reclassified, which Ndege says will increase property values.
“Now that it’s a city, it’s going to be marketed to the world as such, and it’s going to start attracting investors who will see it as a city and not a city,” he says.
Developers with a keen interest in Nairobi and its satellite cities in Machakos, Kajiado and Kiambu counties are among those eyeing investments in Kenya’s newest city.
Optiven Group chief executive George Wachiuri says the company recently opened an office in the Rift Valley region and has a presence in Nakuru, where they plan to invest in affordable housing.
And that’s despite knowing that the market in Nakuru is smaller than in metropolitan Nairobi, which has a huge population of over nine million and an extensive infrastructure. Nairobi alone has around five million inhabitants.
Wachiuri says Nakuru’s declaration of the city is indicative of drastic changes in development, infrastructure, prospects and the general emotional attitude of the population.
“This means land prices will increase drastically, especially in the areas close to the city. The zoning will come in handy as the city takes shape.”
He says his company plans to make it big in affordable housing.
“Demand for land from different users, both government and private, will push up land prices,” says Wachiuri.
The price change is expected in the medium term, Wachiuri said, as the government works on various regulations and city ordinances.
He explains that this may not be a priority this year and points to the upcoming polls, which are due to take place on August 9th. says Wachiuri.
“City development requires good income to fix infrastructure.”
According to an analysis by Username Properties, another real estate company, land prices in Nakuru are up 12.7 percent.
“That means speculative land buyers in Nakuru are enjoying 12.7 percent per year without developing the vacant land,” Username said in an analysis released in August 2021, ahead of the city status announcement.
The analysis cites projects such as the expansion of the Nakuru-Mau Summit Road, the upgrading of the Nakuru airstrip to international standards and the upgrading of roads within the city by the Kenya Urban-Rural Authority as some of the factors that could affect the real estate sector in the county .
Username Properties notes that there is a demand for office space in the county. Compared to Nairobi, where it costs Sh15,000 to get a license for a small shop, it costs Sh4,000 to open in Nakuru.
“Also, transportation costs in Nairobi are higher than in Nakuru. All of this has increased demand for office space in Nakuru as business people search for the best location,” the company says.
While mortgage costs are high across the country, Nakuru has the advantage of having relatively affordable property prices compared to Nairobi, the company says.
“As such, the average Kenyan can take out a mortgage or home loan and invest in a real estate product in Nakuru and pay it off in a couple of years compared to Nairobi.”
Nakuru City Nakuru City Status