Across the globe, Real estate and Infrastructure have always had close ties. Infrastructure developments often open up dormant areas and attract developers, which potentially generates high yields on investments.
Case in point, the construction of the Machakos People’s Park and the refurbishment of the town’s once grass thatched ‘stadium’ into a functional entity with decent amenities. Kenyans, and mostly those from the affluent Nairobi, Nakuru and Mombasa neighbourhoods have repetitively flocked to the ‘almost capital’ to enjoy the new attractions. A drive down to the town and it’s not difficult to notice the emergence of hotels, restaurants, tarmac roads and lots of other complimentary infrastructure.
Developers are integrating infrastructure facilities in their development plans, creating traffic to their property. In developments such as gated communities and large scale housing estates, it’s common place to find, as standard features, proximity to malls, or upcoming malls, shopping complexes, green areas and parks, gyms and swimming pools, amongst a host of other amentities. Infrastructural development lures real estate developments due to the appeal of the area. Roads infrastructure, for instance, has opened up areas influencing property value, prompting the appreciation of prices in adjacent areas.
This would explain the high density effect the construction of by-passes across Nairobi has had on once exclusive and pristine neighbourhoods as Kileleshwa, Runda, Lower Kabete and Lavington. The roads that traverse these landscapes now have adversly opened up areas that were once inaccessible and reserved.
Lamudi MD Dan Karua says, “Projects like Lamu Port Southern Sudan Ethiopia (LAPSSET), the Thika superhighway, bypasses like Eastern, Southern and Northern, and the restoration of other roads have made the property prices in these areas appreciate drastically. Developers are benchmarking value of their property based on proximity to these areas.”
Airports aren’t being left behind, also undergoing development, with the major example of this being Jomo Kenyatta International Airport. Here the opening of Terminal 1A and the construction of the Greenfield Terminal which kicked off construction late last year, is set to boost the Airport’s status as an international hub: As Kenya is the major economic hub in East Africa many international firms will set their base here.
Development of the Commuter Railway System around Nairobi and the construction of the standard gauge line from Mombasa to Kisumu will widen the catchment area of real estate developments. Often perceived as far-flung and difficult to reach, areas like Kitengela, Athi River and Mlolongo have now experienced unprecedented growth with the Syokimau Railway line.
Developments in the ICT sector have also facilitated the development of these areas as Konza City is to be constructed in this region. In addition, over 90 percent of Kenya’s population now live within GSM signal range: one of the highest rates in Africa, a good indicator for the telecommunications sector in the country.
“The Ministry of Energy and Petroleum plans to inject 5,000MW-plus into the national grid increasing Kenya’s power capacity to over 6,700MW, by the end of 2016. The result is expected to be cheaper electricity and increased capacity in the grid,” Karua noted.
The Power Sector has undergone reforms that have led to efficiency gains of 1 percent of GDP. Part of Kenya’s Vision 2030 is to enhance the production of affordable and reliable electricity of energy generation of 23,000 MW from the current 1,735MW. A nuclear energy plant is to be set-up by 2022 which is expected to generate 1000 MW, coal mining is about to be started, geothermal energy is being boosted this is to deviate from the dependence of hydroelectricity which isn’t reliable. In the case of the water sector, Kenya has already established a Water Resource Management Authority.
Expansion and growth of infrastructure is imperative to real estate developments. The high property prices are reflective of the valuation property investors are taking to determine the value of their land or rent charged.