Private Investors Likely to Cherry Pick Locations for Affordable Housing Project
Private developers who will partner with the government in the delivery of affordable housing are likely to cherry pick locations to invest their resources, and this is according to the latest report by Cytonn Investment.
The report indicates that the private sector players will be looking to invest in areas with proper infrastructural developments that can guarantee them returns.
Cytonn says that Nairobi areas such as Jogoo Road, Mavoko, Ngara, and Shauri Moyo are more likely to attract housing projects due to reliable infrastructures like roads and sewerage system. Remote areas in the Nairobi metropolitan are, however, unlikely to attract the investors as they don’t promise better returns.
“Investors are likely to align their projects with infrastructural projects given the expected benefits including higher demand, price appreciation and savings on construction costs,” said Cytonn.
The report further reveals the government’s responsibility in developing proper infrastructure ahead of the start of the project in which it expects high participation of the private sector.
“Infrastructural costs in Kenya account for approximately 25.6 percent of construction costs. By providing infrastructure, therefore, the government provides an impetus for real estate developers to develop more affordable units, as the cost of construction reduces considerably,” said the report.
President Uhuru Kenyatta has laid down an ambitious plan to deliver at least 500,000 affordable housing units by the end of his second term in 2022. He expects to partner with the private developers who have taken a keen interest in real estate.
Traditionally, these private developers have tended to flow into locations where the government has established proper infrastructure. Since the completion of the Thika Superhighway, for instance, the road line has experienced increased development of malls, flats, schools, health centers among other facilities.
The Cytonn report, however, reveals a dismal state of affairs, regarding sewerage coverage, at the Nairobi metropolitan areas. It shows that Nairobi has a coverage of 50% followed by Machakos, Kiambu, Murang’a and Kajiado at 17%,15%3% and less than 1% respectively.
The report, however, reveals initiatives by different county governments to improve the sewerage coverage, which is promising for the implementation of the large-scale housing project.
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